I would only be guessing, that is where your ring gap is on the piston.
To me its in kind of a bad spot , ya know, it is where the exhaust valve is an all.
But, no damage to the wall and looks to be no damage to the piston.
However, you can't see if its causing any damage at the ring gap / slot area.
If you want to be sure, I'd pull the side cover, remove the piston and check.
if all is good, put your gap away from the valves.
To me its in kind of a bad spot , ya know, it is where the exhaust valve is an all.
But, no damage to the wall and looks to be no damage to the piston.
However, you can't see if its causing any damage at the ring gap / slot area.
If you want to be sure, I'd pull the side cover, remove the piston and check.
if all is good, put your gap away from the valves.
Bikebudy is probably correct. I've had far worse on some of my rebuilds. Cylinder wall looks great from the pic. Take some PB Blaster and a rag and clean up the carbon. If you can pop the valves out, give them a good cleaning on the face and seat, lap them in if you've got the compound and a suction cup tool (or reasonable substitute). See the L-Head shop manual link for more guidance. HS50s are nice little motors.
