PHYZ Holdings Inc.

The Group holds multiple licenses and permits, including for general motor truck transportation business, worker dispatching business, and fee-charging employment placement business. If a violation of laws or regulations is found, there is a risk of administrative dispositions such as suspension of vehicle operations, business suspension, or revocation of licenses. There is also a possibility that costs may arise in responding to new or revised laws and regulations. The Company states that no grounds for revocation of any of its various licenses have arisen at present.

As the Company operates a motor truck transportation business, rising diesel fuel prices resulting from crude oil price surges directly increase transportation costs. If such cost increases cannot be passed on through freight rates, this could adversely affect the Company's business results and financial condition. No specific countermeasures are described.

The Company competes in the EC market with companies whose main business is business process outsourcing, and there is a risk of losing competitive advantage if differentiation becomes difficult. While the Company seeks to differentiate itself through responsiveness to customer needs and unique proposals, there is a possibility that it may become unable to maintain a competitive edge in the future.

Sales to Amazon Japan G.K., the Company's largest customer, accounted for 69.1% of the Group's consolidated sales in the 13th fiscal year, indicating an extremely high degree of dependence on a specific customer. If there is a change in that company's business strategy or in the terms or termination of the transaction agreement, this could have a material impact on the Company's business results and financial condition. Although the Company continues efforts to maintain and strengthen its competitiveness, this risk has not been fundamentally resolved.

As the Company operates a large number of commercial vehicles for transportation and delivery, a serious vehicle accident or cargo accident could damage customer trust and social credibility, and could also result in administrative dispositions such as business suspension or revocation of business licenses. Although the Company actively engages in safety activities such as thorough operation management and safe driving guidance, the risk cannot be completely eliminated.

As the Company operates numerous distribution centers and handles customer companies' products and information, the occurrence of fire, earthquake, storm or flood damage, power outages, etc. could disrupt transportation and delivery routes or halt logistics systems. This poses a risk of business disruption that could affect business results and financial condition. The Company is working to prevent disasters, formulate response procedures, and build backup systems.

In providing EC Solution Services, the Company handles customer information, and if such information is leaked externally or data is lost, there is a risk of loss of social credibility and claims for damages. While the Company strives to strengthen security and thoroughly manage personal information through internal training, this risk cannot be completely eliminated.

The Company is advancing the systemization of information management, but if the system is shut down for an extended period due to natural disasters, computer viruses, hacking, or other causes, this could affect business results and financial condition. Although measures such as antivirus protection and the establishment of backup center functions have been implemented, complete prevention is difficult.

Securing and developing highly capable personnel with strong management skills is an urgent task for business expansion. If recruitment does not proceed as planned, or if costs associated with employment and utilization of personnel rise, this could affect business results and financial condition. While the Company is promoting direct hiring of part-time workers and utilization of partner companies to secure the personnel needed for client operations, there is a risk that securing personnel may become difficult due to intensifying competition in the labor market.

AZ-COM MARUWA Holdings Inc., the largest shareholder, holds 58.3% (6,264,575 shares) of the total issued shares, and may exert significant influence over resolutions at shareholders' meetings, including the appointment and dismissal of officers, organizational restructuring, and amendments to the articles of incorporation. In addition, if the company sells its shares in the future, there is a risk that this could affect the market price and trading conditions of the Company's shares. The Company has established a system requiring board of directors' approval to ensure the appropriateness of transactions.