CHIIKISHINBUNSHA CO.,LTD.

Combined revenue from advertising-related businesses (newspaper publishing, flyer insert distribution, and comprehensive sales promotion support) accounted for 94.0% of total revenue (FY2025, ending August 2025), meaning that a decline in advertising demand due to economic downturn directly affects business performance. The Company is considering diversifying its customer base to avoid concentration in specific industries or company sizes, and cultivating businesses less dependent on the advertising-related market, but if these measures prove insufficient, there is a possibility of adverse effects on its business, results of operations, and financial condition.

With the diversification of advertising media including the web and SNS, the free paper market is shifting from a growth phase to a maturity phase, and the relative value of print media continues to decline. Although the Company offers electronic advertising through "Chiicomi!", if it fails to respond in a timely manner to later-developed electronic media, or if readers and advertisers of "Chiiki Shimbun" decrease due to the rapid development of electronic media, there is a possibility of adverse effects on its business, results of operations, and financial condition.

In Chiba Prefecture, the Company's main trading area, intense competition exists in the free paper market, the flyer insert distribution market, and the comprehensive sales promotion support market, with numerous competitors in each. There is also a risk of new entrants from existing players such as newspaper and publishing companies, as well as businesses from other industries with substantial capital resources. If the Company loses its competitive advantage derived from its unique editorial and distribution policies and its planning and proposal capabilities, continued business expansion could be hindered, potentially adversely affecting results of operations.

Printing paper, a raw material for "Chiiki Shimbun", is procured through printing contractors, and the Company strives to maintain stable procurement and optimal pricing by comparing multiple contractors. However, if printing costs and printing paper procurement prices rise sharply due to unexpected fluctuations in paper raw material prices, there is a possibility of adverse effects on the business, results of operations, and financial condition of the Company, whose main business is the publication of print media.

"Chiiki Shimbun" requires one week from advertisement application to completion of distribution, and printing and distribution are fully outsourced. If irrecoverable system server trouble occurs, or if a large-scale natural disaster such as abnormal weather or an earthquake directly hits the Company or its outsourcing partners, publication delays, suspension of publication, distribution delays, or non-distribution may occur, potentially resulting in a decline in advertising revenue due to loss of trust among advertisers and readers. Although the Company has implemented countermeasures such as backup systems and standardized production environments, complete prevention cannot be guaranteed.

The Company's operational efficiency depends heavily on its business management system, which processes personal information, basic corporate information, and various management data. In preparation for unforeseen events such as system downtime due to a surge in access, or power outages and failures caused by natural disasters or accidents, the Company has implemented measures such as parallel operation of application servers and database servers, daily backups, and distributed storage. However, if these measures prove insufficient, business operations could be disrupted, potentially adversely affecting the business, results of operations, and financial condition.

The Company holds a large amount of personal information, including customer information, obtained through sales and reporting activities, and has established personal information protection regulations, confidentiality agreements with officers and employees, ID/password management, and measures to prevent unauthorized external access. However, if these measures fail to fully prevent information leakage, the Company could become subject to claims for damages and suffer reputational damage related to its information management systems, potentially adversely affecting its business, results of operations, and financial condition.

Although the advertising-related business is not subject to specific industry laws, it is subject to numerous laws and industry self-regulations, including the Act against Unjustifiable Premiums and Misleading Representations, the Copyright Act, the Public Offices Election Act, the Pharmaceutical Affairs Act, the Building Lots and Buildings Transaction Business Act, and the Act on Specified Commercial Transactions. If "Chiiki Shimbun" publishes articles or advertisements containing false information, infringing intellectual property rights, or violating laws and regulations, this could result in a decline in advertising revenue due to loss of social credibility, litigation, or administrative sanctions, and there is also a risk that tightening, revision, or reinterpretation of applicable laws could adversely affect the business.

As of August 31, 2025, the Company had 167 employees (excluding 64 temporary employees), with an average length of service of 8.5 years, which remains relatively short, and the Company is actively recruiting new graduates and mid-career hires in preparation for business expansion. While the Company plans to continue steadily securing and developing personnel, if the acquisition and development of human resources, in terms of both quality and quantity, fail to keep pace with the speed of business growth, there is a possibility of adverse effects on the business, results of operations, and financial condition.

If an infectious disease with a significant impact on social and economic activity, such as COVID-19, spreads, declarations of states of emergency and restrictions on outings could lead to a decrease in advertising placements and flyer inserts as well as a decline in service users. Since the advertising-related business, the Company's core business, accounts for approximately 94% of total revenue, the outbreak of infectious disease could have a direct adverse effect on results of operations and financial condition.