abc Co., Ltd.

In the consolidated fiscal year under review (a five-month period due to a change in fiscal year-end), although ordinary income and net income turned positive, the Company recorded a significant operating loss for the second consecutive consolidated fiscal year, and concerns over cash flow continue. Circumstances exist that raise material doubt about the going concern assumption. Although the Company is working to improve its financial position, including through a third-party allotment capital raise implemented in January 2025, the measures are still in the process of implementation or under consideration, and material uncertainty remains at this time. The consolidated financial statements do not reflect the impact of this uncertainty.

Since demand for real estate, the primary business target of the Company Group, is influenced by economic trends, deterioration in domestic and overseas economic conditions could affect the business. In addition, if the value of real estate serving as collateral for loans declines, this could directly and adversely affect the Company Group's financial condition. No specific countermeasures are described.

If interest rates rise sharply in the future, increases in funding costs, higher expected investment yields for real estate, and reduced purchasing intent among home-buying customers, among other factors, could affect the Company Group's business and lead to a decline in the value of owned assets. This is a risk that spreads across both the Financial Services Business and the real estate business, and the business structure has high sensitivity to it. No specific countermeasures are described.

The real estate liquidation/securitization-related business and real estate investment business are subject to the Financial Instruments and Exchange Act, the Building Lots and Buildings Transaction Business Act, and the Act on Specified Joint Real Estate Ventures, while the Investment & Financing Business is subject to the Money Lending Business Act, among others. Amendments, abolitions, or new enactments of these laws, or changes in the interpretation of existing laws, could affect the relevant businesses. This could also lead to a decline in the value of owned assets. No specific countermeasures are described.

If real estate and financial-related tax systems change in the future, this could affect the Company Group's business through increased costs of holding, acquiring, and selling assets, and reduced purchasing intent among home-buying customers, among other factors. This is a risk that could also lead to a decline in the value of owned assets, requiring continuous monitoring of tax policy trends. No specific countermeasures are described.

If natural disasters, environmental issues, soil contamination, or defects in real estate are discovered, this could affect the Company Group's business through damage to owned assets or the fulfillment of compensation obligations arising from brokerage or seller liability, potentially leading to a decline in the value of owned assets. For the Company Group, whose primary business target is real estate, there is direct exposure to physical risks. No specific countermeasures are described.

When undertaking real estate development, in addition to outsourcing work to third parties such as construction companies, the business is subject to external factors such as rising land prices and development costs, and construction defects, which could result in unexpectedly large expenses or force delays or cancellations of development plans. As a result, there is a risk of material impact on the profitability and achievement of plans for the relevant business. No specific countermeasures are described.

Due to the nature of the business, the amount per transaction in each operation accounts for a high proportion of total net sales, and performance may fluctuate significantly depending on the order status and completion timing of each transaction. The loss or delay of a specific transaction has a large impact on overall performance, resulting in a structure with low stability and predictability of earnings. No specific countermeasures are described.

Although the number of consolidated subsidiaries has increased, each company remains a small-scale organization, and internal management systems remain commensurate with the organization's size. With limited human resources, there is high dependence on the individual capabilities of officers and employees, and if officers or employees encounter obstacles in performing their duties or leave the Company, business operations could be disrupted. While the policy is to review the organization and personnel in line with the increase in consolidated subsidiaries, if the system is not built in a timely and appropriate manner, business development could be affected.

Some of the Company Group's products and services are sold under licenses received from third parties or licenses of intellectual property rights, and there is a possibility that necessary licenses cannot be obtained or renewed. In addition, in cases where a competitor serves as the main contracting party and incorporates the Company Group's solutions, there is a risk that the Company Group's solutions may cease to be used due to competition or other factors. These risks directly affect the continuity of product and service provision and competitiveness.