MIGALO HOLDINGS Inc.

Asset-management-type investment condominiums, the mainstay of the DX Real Estate Business, inherently carry investment risks such as deteriorating occupancy rates, falling rents, and rising interest rates. If customer litigation arises from insufficient explanation by sales staff, or involvement in fraudulent lending occurs, this could lead to severed relationships and loss of trust with partner financial institutions. In addition, in a rising interest rate environment, the investment returns of customers using loans could deteriorate, leading to reduced purchase intent, which may have a material impact on business performance and financial condition. As countermeasures, the Group is thoroughly implementing compliance training, unifying management of investment simulation materials, and establishing a contract and financing management structure independent from the sales department.

Real estate sales in the DX Real Estate Business are strongly affected by economic trends, interest rates, and housing tax systems. If there is a significant decline in personal consumption or a substantial drop in sales prices due to oversupply, this would lead to reduced purchase intent and deteriorating profitability. In addition, as land acquisition is concentrated in central urban areas such as Tokyo's 23 wards, Yokohama, and Kawasaki, intensified competition could result in difficulty acquiring land, soaring construction costs, or bankruptcy of outsourcing partners, any of which would reduce profitability. As countermeasures, the Group is formulating land acquisition plans based on future market outlook, diversifying information sources, and managing credit and diversifying orders among construction outsourcing partners.

Since the DX Real Estate Business recognizes revenue at the time of property delivery, quarterly performance tends to be uneven. If unforeseen events such as changes in completion timing, natural disasters, or construction delays occur, revenue may not be recognized within the planned period, affecting business performance and financial condition. The impact is particularly significant when multiple projects are delayed simultaneously. As countermeasures, the Group thoroughly manages construction schedules through monthly regular meetings with construction companies, design firms, and construction supervisors, and has established a system to promptly implement alternative measures when delays occur.

Due to the nature of the DX Real Estate Business, which requires two to four years from land acquisition to fund recovery, a large portion of acquisition funds is procured through long-term borrowings from financial institutions, resulting in a relatively high ratio of borrowings to total assets. Rising market interest rates and expanding risk premiums increase interest expenses, and if stable financing becomes unavailable due to deterioration of the external environment or a decline in creditworthiness, this could have a material impact on financial condition. As countermeasures, the Group is working to diversify funding sources by maintaining relationships with numerous financial institutions and maintaining appropriate levels of financial indicators such as the equity ratio and DER.

The Group holds large amounts of confidential and personal information of customers and business partners through its business activities. If an unforeseen event causes external leakage, this could result in liability for damages and loss of trust, affecting business performance and financial condition. As DX promotion progresses, the volume of electronic information held is expanding, and the potential scale of this risk is on an increasing trend. As countermeasures, the Group is continuously improving firewall settings, data access authority management, communication encryption, and security systems.

Under the DX promotion policy, the Group is transitioning to a structure holding diverse and vast amounts of electronic information. If cyberattacks result in theft, leakage, or falsification of electronic information, or cause operating sites and systems to go down, this could significantly affect business operations, result in liability for damages, and raise issues of social responsibility. A distinctive risk factor is that the scope of potential cyberattack targets is expanding as DX progresses. As countermeasures, the Group is implementing the three principles based on the Cybersecurity Management Guidelines, building a risk management structure, and securing resources (budget and personnel) for countermeasures.

The DX Real Estate Business is subject to numerous legal regulations, including the Building Lots and Buildings Transaction Business Act, the Building Standards Act, and the City Planning Act, and holds licenses such as a real estate brokerage business license (valid until June 2029). If there are major changes in legal regulations or intensified regulation of studio condominiums by local municipalities' ordinances, this could hinder key business activities and affect business performance and financial condition. While the Group currently recognizes no matters that would impede business continuity, continued monitoring of changes in the regulatory environment is necessary.

As a growth strategy for the DX Promotion Business, the Group actively executes M&A every fiscal period and plans to continue doing so going forward. If contingent or unrecognized liabilities or compliance issues come to light after an M&A transaction, or if the expected earnings or effects are not achieved due to deterioration of the market environment or significant changes in the competitive environment, this could result in impairment of goodwill and affect business performance and financial condition. Although detailed due diligence is conducted by dedicated departments and outside experts, it is difficult to completely eliminate post-transaction risks.

Representative Director and President Sei Nakanishi has driven the business since its founding and possesses extensive experience and knowledge in real estate development and sales, playing a critical role across all Group business activities, including decisions on management policy and business strategy. If for any reason he becomes unable to carry out his duties, this could affect business activities. As a countermeasure, the Group is working to expand and develop its management executives and build an execution structure through delegation of authority.

Securing and developing personnel with specialized knowledge in IT, real estate sales, land acquisition, and design and construction management, as well as licensed professionals such as real estate transaction specialists and architects, is a critical precondition for business growth. If personnel cannot be secured as planned due to changes in the employment environment or other factors, this could hinder key business activities and affect business performance. The Group is addressing this through continued recruitment activities and enhanced education and training opportunities, but the risk continues to exist given the competitive labor market environment.