VALUE CREATION CO.,LTD.

It came to light that the Company had continuously recorded operating losses since prior fiscal years due to the discovery of fictitious circular transactions (the GP Transactions), and the Company recorded an operating loss of ¥423,841 thousand and negative operating cash flow of ¥179,225 thousand for the fiscal year under review. While it is recognized that events exist that raise material doubt about the going concern assumption, taking into account cash and cash equivalents of ¥1,124,643 thousand at the end of the fiscal year, the Company has determined that there is no material concern regarding funding for the following 12 months. As countermeasures, the Company intends to maintain profitability in the Marketing DX Business and pursue cost reductions.

Securing and developing excellent personnel is essential to providing high-value-added services, but if this does not proceed as planned due to intensifying competition for recruitment or other factors, it could lead to a decline in competitiveness and constrain business expansion. The Company strives to secure personnel through active recruitment and to enhance its education and training systems in order to quickly develop inexperienced personnel into productive contributors and retain talent, but such risk is ever-present. If personnel shortages persist over the long term, this could affect operating results and financial position.

Although the internet advertising market is expanding at 110.8% year on year, the introduction of legal regulations and the emergence of innovative ad delivery technologies could impede market development. In addition, tightening of domestic Cookie regulations influenced by GDPR and CCPA is expected to reduce the proportion of browsers that can utilize 3rd-party Cookies, posing a risk of hindering customer acquisition through internet advertising. The Company continues to monitor market trends closely while striving to build a system capable of responding flexibly.

The Marketing DX Business handles advertisements subject to regulations such as the Pharmaceuticals and Medical Devices Act and the Act against Unjustifiable Premiums and Misleading Representations, while the Real Estate DX Business is subject to regulations under the Building Lots and Buildings Transaction Business Act and the Construction Business Act; if administrative dispositions such as revocation of a specific construction business license were imposed, business activities could be constrained. Furthermore, under the amended Act on the Protection of Personal Information, Cookies are now subject to regulation as "personal-related information," and violations could give rise to risks such as claims for damages. The Company is responding through measures including promoting acquisition of the YMAA and KTAA certification marks, developing an advertisement handling manual, and establishing risk and compliance regulations.

In the course of conducting business, the Company has occasion to handle confidential customer information and personal information, and if an information leak occurs due to unauthorized access or unforeseen circumstances, unexpected costs such as damages could arise. While the Company has established information system management regulations and implemented security measures for its internal network, it is difficult to fully address new attack methods and similar threats. In addition to affecting operating results and financial position, an information leakage incident could also damage the Company's credibility.

The Company provides all of its services via the internet, and if services are disrupted due to software malfunctions, natural disasters, computer virus infections, attacks exploiting system vulnerabilities, or similar causes, this could affect operating results and financial position. Although the Company implements security measures and vulnerability countermeasures and strives to establish a system for rapid recovery, it is difficult to completely eliminate such risk. Service disruption also carries the risk of directly leading to customer attrition and diminished credibility.

In the Real Estate DX Business, demand for demolition work and real estate may fluctuate due to economic downturns, significant interest rate increases, or changes in housing tax systems, posing a risk of affecting operating results and financial position. The Company strives to build a system capable of responding flexibly while closely monitoring real estate market trends, but changes in the macroeconomic environment are an external factor that cannot be controlled by the Company alone.

If a bad debt occurs due to an unforeseen bankruptcy of a business partner or similar event, this could result in delayed collection or non-collection of sales proceeds, affecting operating results and financial position. The Company conducts transactions with thorough credit management, but it is difficult to completely prevent sudden changes in the financial condition of business partners.

The pace of technological innovation and changes in customer needs in the internet advertising market and real estate market is rapid, and a delayed response could result in a decline in competitiveness. There is also a risk that if substantial expenditure is required for the development of new services, this could affect operating results and financial position. The Company is engaged in continuous development of new services and securing of excellent personnel.

The market capitalization of the Company's tradable shares may approach a level close to the formal requirement of ¥500 million set by the exchange, posing a risk of failing to meet the listing maintenance criteria. If delisting were to occur, this could lead to the loss of fundraising means and a decline in corporate credibility. The Company intends to work toward expanding the market capitalization of its tradable shares through growth in business scale and profits, as well as consideration of capital policy.