Bengo4.com,Inc.

If the Company Group's response to rapid technological innovation in the internet and digital technology industry, including generative AI, is delayed, there is a risk that its services may become obsolete and its competitiveness may decline. The Company Group is actively working to accumulate and analyze the latest information and incorporate it into its services, but if unexpected rapid changes occur, this could have a material impact on the business and results of operations. The timing of occurrence is expected to be short- to medium-term.

The legal consultation portal "Bengo4.com" has 29,172 registered members, representing 62.3% of the 46,836 lawyers in Japan, and the electronic contract service "CloudSign" boasts over 11 million contract transmissions annually. However, if the Company loses support from the legal industry and corporate users, or if a competitor enters the market and gains a certain level of support, intensifying competition could impede business development. Both services have built barriers to entry through network effects, but continuous monitoring of changes in the market environment is necessary.

The Company Group is subject to a wide range of laws and regulations, including internet-related laws (the Act on the Provision of Countermeasures against Information on the Internet, the Act on Prohibition of Unauthorized Computer Access, the Act on Specified Commercial Transactions, the Act Regulating Transmission of Specified Electronic Mail, etc.), the Practicing Attorney Act, the Certified Public Tax Accountant Act, and the Act against Unjustifiable Premiums and Misleading Representations. Business operations may be restricted by the enactment of new regulations or changes in the interpretation of existing laws. In particular, compliance with Article 72 of the Practicing Attorney Act (prohibition on brokering litigation cases for lawyers) is fundamental to the business, and the Company operates with the utmost care, including confirmation with external law firms.

The Company Group's business is operated over the internet, and if a system failure occurs due to unexpected events such as hardware or software malfunctions, computer viruses, cyber attacks by third parties, or natural disasters, this could significantly disrupt business activities. Although appropriate security measures are in place, the timing of occurrence is unknown, and the degree of impact is assessed as significant.

If inappropriate posts such as defamation, personal information disclosure, or violations of public order and morals occur in the free consultation services of "Bengo4.com" and "Zeirishi.com," the Company could lose trust as a site operator, potentially affecting its business and results of operations. Although a full monitoring system has been established to delete inappropriate posts and take other measures, risk remains if the response is insufficient.

The Company Group holds fixed assets such as goodwill and software, and if it becomes necessary to recognize impairment losses due to significant changes in the business environment or deterioration in earnings, this could adversely affect business results. In accordance with accounting standards related to impairment, if undiscounted future cash flows fall below book value, the value is written down to the recoverable amount.

The Company Group intends to continue diversifying its business and pursuing new business initiatives, which will require additional expenditures for personnel recruitment and service/software development costs. If new businesses do not progress as planned, it may become difficult to recover these additional expenditures, resulting in a temporary decline in profit margins. The timing of occurrence is expected to be medium- to long-term.

The Company Group holds a large amount of personal information in the course of its business operations, and if information leakage or unauthorized use occurs, it could result in a loss of social trust and impede business development. Although strict customer information management rules and sufficient security measures are in place, the timing of occurrence is unknown, and continuous maintenance of the management system is required.

As the business expands, continuous recruitment of personnel will be necessary. If the Company Group is unable to secure and develop excellent talent as planned, this could impede business development and affect results of operations. Although the Company Group has adopted a policy of striving to appropriately secure and develop personnel, reliable achievement of this in a highly competitive labor market is not guaranteed.

Each company in the Authense group, in which Representative Director, President and CEO Taichiro Motoe holds representative authority or a majority of voting rights, qualifies as a related party. During the fiscal year under review, transactions with Authense Law Office (a legal professional corporation) amounted to sales of ¥74,445 thousand and payments of ¥7,043 thousand. Although an approval system based on the "Related Party Transaction Regulations" has been established to ensure the soundness and appropriateness of transactions, continuous management is required regarding conflict of interest risks and the reasonableness of transaction terms.