D&M COMPANY CO.,LTD

Periodic revisions to the compensation system aimed at curbing social security expenditure pose a risk of significant deterioration in the operating results of medical and nursing care providers that are clients of the Group. Deterioration in clients' business performance may necessitate revisions to transaction terms, which could affect the Group's financial position and operating results. The Group addresses this risk through monitoring and management guidance to support performance improvement and business restructuring.

The Group's consolidated balance sheet closely resembles that of a financial institution, with a high ratio of interest-bearing debt, meaning that tightening of financial markets or rising market interest rates directly leads to higher funding costs. Since purchase fees do not automatically rise in line with market interest rates, profitability may be squeezed if renegotiation of terms with customers fails to keep pace. The Group addresses this through diversification of funding sources, including the introduction of direct financing and the establishment of commitment lines; however, a rapid and substantial rise in interest rates could have a material impact on the Group's financial position and operating results.

As global environmental changes increase the frequency of severe natural disasters, there have been instances of serious impacts on the business continuity of medical and nursing care providers that serve as regional infrastructure. Should a large-scale earthquake or other natural disaster occur, this could affect not only the business continuity of the Group's medical and nursing care clients but also the Group's own financial position and operating results.

The Group raises funds from financial institutions to provide financial support to medical institutions and others. If credit extension is reduced due to changes in financial administration or a shift in financial institutions' policies, this could impede the continuation of the Group's business. The Group seeks to promote understanding through close communication with financial institutions while also considering funding methods other than indirect financing. A rapid and substantial reduction in credit extension could affect the Group's financial position and operating results.

The Group purchases future receivables owed by entities such as social insurance and national health insurance programs. If an unforeseen event occurs at a client business, leading to a business downsizing or an inability to continue operations, there is a risk that recovery from social insurance, national health insurance, and similar sources may become impossible, resulting in bad debt losses. While the Group strives to secure such receivables through guarantees obtained from client representatives and through monitoring and management guidance, a sharp increase in payment delays or uncollectible amounts due to changes in Japan's economic conditions or legal systems could necessitate an increase in the allowance for doubtful accounts, affecting the Group's financial position and operating results.

Since management support for medical institutions and others is provided through interviews, emails, phone calls, and similar means, the possibility of fraud or misconduct by employees and others cannot be entirely ruled out. Should fraud or misconduct occur, it could adversely affect business relationships with clients and damage the Group's reputation, potentially making sales activities more difficult. The Group works to reduce this risk through the involvement of multiple employees and officers in client relationships and through compliance training.

In promoting F&I services and C&Br services, the Group frequently obtains confidential information from clients, and its subsidiary D&M Career Co., Ltd. holds a large amount of personal information as part of its staffing business. If information is leaked externally due to system intrusion by a malicious third party or an accident, this could affect the Group's financial position and operating results. The Group seeks to prevent leaks through the establishment of information management regulations, thorough training of personnel involved, and restriction of access privileges.

The Group maintains stable business operations through a division-of-labor and mutually complementary system among experienced officers and employees in each field; however, depending on conditions in the labor market, there is a risk that the Group may be unable to secure and develop personnel commensurate with business expansion. Securing experienced personnel and promoting multi-skilling are essential to responding to business expansion and service diversification, and a shortage of human resources could affect the Group's financial position and operating results.

Sales to Iryo-Hojin-Zaidan Comfort accounted for 18.6% of the Group's consolidated net sales for FY2025 (ended May 2025), indicating a high degree of dependence on a specific client. Should the transactional relationship with this foundation group become difficult to continue for any reason, or should transactions with it decrease significantly, this could have a material impact on the Group's financial position and operating results. The Group's policy is to reduce this dependence by expanding transactions with other existing clients and developing new clients.

As of the end of July 2025, major shareholder Mr. Nobuhiro Matsui and his relatives, together with his asset management company YSY Co., Ltd., held 44.09% of the total number of issued shares. Should Mr. Matsui's shareholding change sharply for any reason, this could affect the market price of the Company's shares and the exercise of voting rights, among other matters. At present, the Group has no personal relationships or transactions with Mr. Matsui, his relatives, or YSY Co., Ltd.