Risks

(1)Risks related to the business environment

(Weak M&A market)

Likelihood: Low
Impact: Large

We expect that the M&A market will continue to grow spurred by expanding needs for business succession M&A associated with an increasing number of companies without successors, strategic M&A to divest non-core businesses, and M&A as a medium- to long-term growth strategy. With that being said, if acquisition needs shrink or the number of companies without successors decreases due to economic downturns, natural disasters, etc., the M&A market may slump, which may affect the Company’s operating results and financial position.

(Competition with other companies in the same industry)

Likelihood: High
Impact: Large

As M&A brokerage services do not require licenses, qualifications, or large capital investments, the barriers to entry are believed to be relatively low. The Company is taking various measures to deal with the risk, such as increasing the speed at which new employees produce results by developing in-house systems to share knowledge and know-how accumulated through past experience. However, intensified competition with other companies in the same industry may affect the Company’s operating results and financial position.

(Legal regulation)

Likelihood: Medium
Impact: Large

Currently, there are no laws or regulations that directly regulate M&A brokerage services, and no licensing or qualification is required, either. Nevertheless, if any laws or regulations are enacted or revised going forward that impose restrictions on M&A brokerage services, the Company’s operating results and financial position may be affected.Meanwhile, the Small and Medium Enterprise Agency has established a registration system for M&A support organizations, and brokers and advisory firms that meet certain requirements are open to the public. The Company is a registered business operator, but if it ceases to be a registered business operator in the future due to changes in registration requirements or system revisions, the Company’s operating results and financial position may be affected.In addition, if laws related to M&A are revised, the M&A needs in society may also change, which may affect the Company’s operating results and financial position.Moreover, if revisions to the Companies Act, the Financial Instruments and Exchange Act, tax laws, and other laws related to M&A transactions and schemes affect the promotion of M&A transactions, the Company’s operating results and financial position may also be affected.At present, we are not aware of any specific legal revisions that would cause the risk to materialize, but we plan to take necessary measures as soon as possible in the event that the risk may materialize.

(2)Risks related to business activities

(Changes in business performance)

Likelihood: Medium
Impact: Large

The M&A brokerage services the Company provides are based on a fully contingent fee system for companies that wish to sell their shares, meaning that the Company receives the majority of the compensation at the time of closing the project. As a result, business performance may fluctuate significantly depending on the closing date of the project.In addition, as contingency fees vary depending on the size of the commissioned projects, the Company is working to ensure that business performance does not fluctuate significantly by increasing the number of commissioned projects. However, business performance may fluctuate significantly due to temporary fluctuations in the number of projects closed and the size of the projects closed, which may affect the Company’s operating results and financial position.

(Technological innovation)

Likelihood: Low
Impact: Medium

AI technology related to the Company’s business is an area in which R&D is advancing every day and the pace of technological innovation is extremely rapid. The Company will also respond to these technological innovations and strive to strengthen its business foundation through the use of AI. However, if the Company is slow to respond to these technological innovations, its competitiveness may deteriorate, which may affect the Company’s operating results and financial position.

(Lawsuit)

Likelihood: Low
Impact: Medium

The Company strives to improve the quality of its services and establish a compliance system, and no lawsuits have been filed as of the date of submission of this document. However, there is a possibility that lawsuits may be filed in the future due to certain reasons, which may affect the Company’s operating results and financial position.

(Dependence on M&A brokerage business)

Likelihood: Low
Impact: Medium

The Company relies on the M&A brokerage business for the majority of its revenues. The M&A market is expected to continue to grow going forward supported by the increasing need for business succession and M&A for growth strategies. However, any significant changes in the M&A market caused by changes in economic conditions or occurrence of social problems may affect the Company’s operating results and financial position.

(Natural disasters, etc.)

Likelihood: Low
Impact: Large

Because the Company stores most of its data on external servers, if the data stored on these servers becomes unavailable or the Company itself suffers significant damage owing to natural disasters, etc., the Company’s operating results and financial position may be affected.

(3)Risks related to the organizational structure

(Recruitment and development of human resources)

Likelihood: Low
Impact: Large

The M&A brokerage business relies heavily on human resources, and we consider the acquisition and training of human resources to be one of our most important management issues. However, if the Company is unable to acquire human resources in a timely manner due to changes in the employment situation, if there is a large outflow of human resources, or if the development of human resources does not progress as planned, the Company’s operating results and financial position may be affected.

(Information security management)

Likelihood: Low
Impact: Large

As the Company often handles confidential corporate information, it has confidentiality agreements with its customers and is obligated to maintain confidentiality. The Company has established internal rules and carries out thorough information management to ensure that customer information is not leaked. However, if customer information subject to confidentiality is leaked due to unforeseen circumstances, the Company’s operating results and financial position may be affected by claims for damages or loss of credibility.The Company may obtain personal information when customers register their M&A needs or subscribe to the Company’s e-mail newsletter. The Company strictly manages personal information by establishing rules and regulations concerning the protection of personal information in accordance with the Act on the Protection of Personal Information and other related laws and regulations. However, in spite of these measures, if, due to unforeseen circumstances, leakage or unauthorized use of personal information were to occur, the Company’s operating results and financial position may be affected by a loss of trust in the Company.

(Dependence on the President and Representative Director)

Likelihood: Low
Impact: Medium

Representative Director Shunsaku Sagami is the founder and CEO of the Company, and is a major shareholder holding 72.55% of the Company’s shares as of September 30, 2022. He also plays an important role in formulating, determining, and implementing management policies and business strategies. To avoid excessive dependence on him, the Company is promoting the development of a management system that does not rely heavily on him by sharing information with officers and senior employees at meetings of the Board of Directors and other management meetings, strengthening the management system, and developing senior management. However, the Company is said to be highly dependent on the President and Representative Director at present. Therefore, if for some reason he becomes unable to manage the Company, or if there is no progress in the recruitment and training of his successor, the Company’s operating results and financial position may be affected.

(Rapid organizational expansion)

Likelihood: Low
Impact: Medium

As of September 30, 2022, the Company had 4 Directors, 3 Audit & Supervisory Board Members, and 110 employees. The Company is determined to continue to actively recruit and expand the organization. The Company’s policy is to recruit and develop human resources to build an internal management system and business execution system that are considered to be optimal in the future personnel structure. However, if these measures cannot be implemented in a timely manner or if human resources are discharged from the Company, the internal management system and business execution system may not function effectively, hindering the Company’s business development and affecting the Company’s business performance.

(4)Other risks

(Dilution of share value due to exercise of stock acquisition rights)

Likelihood: High
Impact: Small

The Company grants stock options to Directors, employees, and others with vesting over a five-year period after listing in order to incentivize them to increase the corporate value of the Company over the long term. In addition, the Company issues trust-type stock options to secure excellent human resources in the future. If the stock acquisition rights are exercised, the value of the Company’s shares per share may be diluted, which may affect stock price formation. As of September 30, 2022, the number of shares to be issued upon exercise of stock acquisition rights was 2,284,944 shares, equivalent to 12.36% of the total number of outstanding shares of 18,480,000 shares.For details of stock acquisition rights, please refer to “4. Status of Submitting Company, 1 Status of Shares, etc., (2) Status of Stock Acquisition Rights, etc.”

(Liquidity of the Company’s shares)

Likelihood: Medium
Impact: Medium

The ratio of the Company’s shares in circulation was 27.45% as of September 30, 2022.The Company’s policy is to improve liquidity by raising funds for growth in line with its business plan through a public offering, requesting Representative Director Shunsaku Sagami to sell a part of shares he owns, and increasing the number of shares in circulation through the exercise of stock options. However, if liquidity declines from the time of listing due to any reason, trading of the Company’s shares in the market may stagnate, which may have an adverse effect on supply and demand of the Company’s shares.

(Relationship with major shareholder)

Likelihood: Medium
Impact: Medium

Shunsaku Sagami, President and Representative Director of the Company, is a major shareholder of the Company and held 72.55% of the voting rights of all outstanding shares as of September 30, 2022. As a stable shareholder, he continues to hold a certain number of voting rights. He has a policy of pursuing the common interests of shareholders and also considering the interests of minority shareholders when exercising his voting rights. The Company also recognizes that he is a stable shareholder. However, if the number of shares held by him, the major shareholder, decreases in the future due to some reason, the market price of the Company’s shares and the status of exercise of voting rights, etc., may be affected.

(Impact of COVID-19)

Likelihood: Medium
Impact: Medium

In response to the spread of COVID-19, the Company is taking measures to prevent infection among employees and related parties through staggered working hours, teleworking, and active use of online interviews. However, if the economic situation deteriorates or we are forced to temporarily suspend business activities, the progress of commissioned projects may be delayed, leading to postponement of project closing dates or suspension of the projects and affecting the Company’s operating results and financial position.

(Use of funds raised)

Likelihood: Low
Impact: Small

The funds raised through the public offering made when the Company was listed on the Tokyo Stock Exchange Growth Market on June 28, 2022, are slated to be used for personnel recruitment expenses. However, even if the funds are used in accordance with the Company’s plan, the expected investment effect may not be obtained.

(Dividend policy)

Likelihood: Low
Impact: Small

The Company considers the return of profits to shareholders to be an important management issue. However, believing that the maximum return of profits to shareholders is achieved at present through the active investment of capital toward business expansion and sustainable growth, the Company has not paid dividends since its foundation.The Company’s policy is to implement measures to return profits to shareholders, taking into consideration the status of retained earnings and the business environment in which the Company operates. However, at this point, the possibility and timing of dividend payments have not yet been determined.