Boutiques,Inc.

The Long-Term Care Insurance Act and long-term care fees are revised every three years, and substantial fee revisions could force our major customers, care service providers, to change their business operations. If the operating environment for care service providers deteriorates, this could affect their willingness to exhibit at trade shows and demand for M&A, which may impact our operating results and financial position. We conduct our business operations while closely monitoring these regulatory developments.

Currently, no laws or regulations directly regulate M&A brokerage operations, but regulatory discussions have been intensifying, such as the Ministry of Economy, Trade and Industry's formulation of guidelines on fair M&A practices in 2024. If regulations are imposed on M&A brokerage operations in the future due to legislative enactment or revision, or changes in legal interpretation, this may affect our operating results and financial position. We have established a compliance framework through registration under the M&A Support Institution Registration System and membership in the Japan Association of M&A Support Institutions.

The Exhibition Business has a revenue structure in which net sales and operating income are recorded predominantly in the month of the event, and the first quarter of FY2026 (ending March 2026) recorded an operating loss of ¥268,132 thousand. If venue securing does not proceed as planned, or if a venue becomes unusable due to a natural disaster or infectious disease outbreak, the exhibition may not be held, which could affect our operating results. Since the impact on business performance is particularly significant when a postponed event carries over into the following fiscal year, we are working to level out this impact by diversifying venues and expanding into additional host cities.

In the M&A Brokerage Business, the timing and scale of deal closings can fluctuate due to difficult contract negotiations or delays in due diligence, which may cause significant period-to-period fluctuations in business performance. There is also a risk that the overall M&A market could shrink if future demand for business transfer as a solution to succession issues declines or if acquisition demand contracts. We manage deal progress in a timely manner and are diversifying demand by expanding our target market beyond the care, medical, and disability welfare industries into the construction and IT industries.

We hold large-scale databases of active buyer and supplier information, information on companies seeking to transfer or acquire businesses through M&A, and student job-seeking information, which constitute a source of our competitive advantage. If an unforeseen incident results in information leakage or loss, in addition to monetary compensation such as damages claims and a decline in creditworthiness, a significant decrease in the value of our databases could impair our business foundation itself. We strive for thorough information management through restricting access rights, establishing internal regulations, and educating officers and employees.

Acquiring, developing, and retaining personnel with specialized knowledge and experience in exhibition organizing, as well as personnel expected to grow as M&A consultants, is an important challenge for business expansion. Since we operate our business with a relatively small organization, the impact on business performance from the loss of employees is recognized as relatively significant. We actively recruit and train both new graduates and mid-career hires, and in the M&A Brokerage division, we are working to establish a new training system and new KPI management methods.

In the internet industry, new technologies and services such as the spread of smartphones and cloud services and the use of AI are constantly emerging, and our online exhibition business must also respond to these changes. If technological innovations occur that we do not anticipate, costs may be incurred for improving existing systems or new development efforts, which could affect our operating results and financial position. We work to continuously improve our services and conduct our business operations in compliance with relevant laws and regulations as a registered telecommunications carrier.

We have a unique business model that provides M&A brokerage services by leveraging a database of decision-makers obtained through exhibitions as an entry point, but on an individual business basis, there are companies that provide similar services in exhibition organizing or M&A brokerage alone. If these companies pursue combined business development in the future, they could become direct competitors, creating a risk that exhibitors' willingness to participate could be dispersed to competing exhibitions. We intend to maintain our competitive advantage through high barriers to entry built on accumulated industry expertise and exhibition management know-how.

Representative Director and President Yuzo Shinmura is the founder, and important aspects of management, including the determination of management policies and business strategy, are dependent on him. If an emergency situation arises that makes it difficult for him to carry out his duties, this could affect our operating results and financial position. We are working to strengthen our management organization by expanding and developing the number of executive officers and employees and by building a structure through delegation of authority.

We grant stock options as incentives to directors and employees, and as of the filing date of this document, the number of potential shares was 803,900 shares, equivalent to 7.9% of the total number of issued shares of 10,160,400 shares. We are considering continued use of the stock option system, and if stock acquisition rights are exercised, the value per share and voting rights ratio may be diluted. We operate this system while balancing incentive design with shareholder value.