Notice regarding deficiencies in internal controls related to financial reporting and submission of corrective reports

Background and overview of deficiencies

The company has already submitted correction reports for past financial statements and has now submitted a corrected internal control report to the Kinki Finance Bureau. The correction targets are the items concerning evaluation results in internal control reports for the fiscal years ended September 2021 through September 2025, where it is alleged that deficiencies substantially affecting financial reporting were identified. Major deficiencies span revenue recognition, closing and financial reporting processes, business processes, and control environment, with emphasis on newly identified deficiencies even after prior-year corrections.

Prevention of recurrence and strengthened governance

Based on the third-party committee's findings, the company is implementing fundamental reforms to corporate culture and authority structure, strengthening the board's supervisory function, appointing a reform-officer director, operating the board with outside directors, enhancing the whistleblowing system, and establishing a risk information escalation framework. Key pillars include eliminating the representative's influence, increasing involvement of outside directors and auditors, enhancing transparency of actual vs budget management, and strengthening a three-line defense in auditing.