JENOBA CO.,LTD.

The Company's services are established using GNSS data from the Geospatial Information Authority of Japan's electronic reference points, and if GNSS malfunctions or issues on the part of the Geospatial Information Authority of Japan make data acquisition impossible, service provision would be suspended, leading to decreased sales. Although a system has been established to prevent distribution suspension through server redundancy, there is a structural dependence that cannot be addressed in the event of a failure of GNSS itself.

The electronic reference point real-time data used by the Company to calculate correction data is provided solely by the Japan Surveying Association, resulting in an extremely high degree of dependence. If the Japan Surveying Association or the Geospatial Information Authority of Japan changes the pricing of, or halts, data distribution, it may become difficult for the Company to continue its services, which could have a material impact on its financial position and business results. The Company strives to minimize this risk by building a cooperative relationship through routine visits and communication.

The GNSS Correction Information Distribution Service is provided via a communication network, and there is a risk that the service may be suspended due to large-scale disasters, server outages, computer viruses, software malfunctions, and the like. Although a robust system has been established through server redundancy, events exceeding expectations may not be fully addressed, which could result in financial impacts such as decreased sales.

The Company is required to obtain annually the "Approval for Use of Survey Results" based on Article 30 of the Survey Act, as well as approval of its "Correction Data Distribution Business Plan" based on the Japan Surveying Association's "Real-Time Data Distribution Contract Terms." If future changes in laws and regulations occur, or if license/approval renewals are not appropriately obtained, business operations could be hindered, and additional licensing costs may arise when expanding into new business areas. The Company strives to gather information and respond appropriately through routine communication with regulatory authorities and industry associations.

As demand for high-precision positioning correction information expands, competitor entry is progressing, and barriers to new entry are not necessarily high. If quality and price competition intensifies, this could lead to decreased sales and loss of market share for the Company. The Company strives to secure competitiveness by maintaining an advantage in quality and reliability through its patents and long track record.

The Company is a small organization in which department heads, including officers, play important roles in business execution, while the internal control system remains commensurate with the size of the organization. If the internal control system and business execution structure cannot be flexibly adapted to the expansion of business scale or diversification of services, this could affect the Company's competitiveness and ability to drive business growth. Going forward, the Company plans to strengthen its structure through personnel reinforcement, business automation, and IT adoption.

At present, satellite positioning technology using GNSS is fully established and in use, and the likelihood of alternative technologies emerging is judged to be low. However, if an alternative technology emerges in the future, significant development costs would be required to respond, and the competitiveness of the Company's services could relatively decline. The Company continuously monitors industry trends and plans to review its business strategy as necessary.

The Company holds personal information of users and client companies, and if unauthorized access or information leakage occurs, this could affect business results and business development through claims for damages or loss of trust. In January 2022, the Company obtained certification under the ISMS international standard "JIS Q27001:2014 (ISO/IEC27001:2013)" and works to ensure the confidentiality, integrity, and availability of information assets, but the risk of unauthorized access cannot be completely eliminated.

As the Company's services are widely used at civil engineering and construction sites, sales tend to fluctuate on a quarterly basis due to the influence of the budget execution cycle of public works projects by national and local governments. With a fiscal year ending in September, the Company tends to see higher sales in the first quarter (October to December) and somewhat lower sales in the spring, in the third quarter (April to June). While the Company aims to expand the proportion of sales to industries not linked to public works budgets, near-term improvement is difficult to expect.

The proportion of potential shares related to stock options granted as incentives to officers and employees reached 8.50% of the total number of issued shares as of the end of the current fiscal year. If these stock acquisition rights are exercised, the value of shares held by existing shareholders and their voting rights ratio may be diluted.