Adways Inc.

In the Advertising Business, the proportion of clients from the three industries of games, comic apps, and finance is high, and fluctuations in advertising placement volume and compensation unit prices in these industries directly affect the Group's operating results and financial position. The Group is working to reduce this dependency risk by strengthening sales activities toward clients in other industries and through product development, but resolving this dependency structure will take time.

The internet advertising industry has low barriers to entry, and the Group competes with multiple competitors under similar fee structures and other conditions. In particular, there is a possibility that the threat to the Group could increase if well-capitalized major companies acquire competitors with similar business models through M&A and leverage synergies within their group. While the Group strives to maintain competitive advantage, the creation of new business models by new entrants and other factors may have a material impact on its business performance.

If new advertising methods that are more cost-effective than the advertising services provided by the Group are developed, the costs incurred in responding to them may put pressure on profitability. If the Group is slow to respond to technological changes or if its existing services and technologies become obsolete, this may have a material impact on its business performance. The Group also makes system development investments in preparation for sudden changes in the business environment, but there is a coexisting risk that recovering such investments may become difficult.

The "Act on Promotion of Competition for Specified Smartphone Software" (Smartphone Competition Promotion Act), which came into effect in December 2025, mandates a prohibition on obstructing the use of other companies' app stores and payment systems on the App Store and Google Play. As this law becomes established and future legislative developments occur, clients' marketing strategies may change and the specifications of advertising effectiveness measurement technology may be modified. If the Group fails to respond appropriately to such changes, this may have a material impact on its business performance.

The Group acquires and manages a wide variety of personal information from media operators, advertisers, and others, and if an unforeseen leakage to outside parties occurs, this may affect business performance through loss of trust or claims for damages, among other consequences. The Group exercises the utmost care in management by establishing internal regulations and conducting awareness and education activities for officers and employees, but this does not guarantee complete prevention.

If a failure occurs in the advertising delivery and performance aggregation management systems, this could cause serious business impact through interruption of service provision or the occurrence of fraudulent results. Causes of such failures are wide-ranging, including hardware and software defects, human error, malicious access, and natural disasters. While the Group recognizes stable system operation as an important issue and has taken countermeasures, if a failure occurs due to an unforeseeable cause and the Group's response is delayed, this may affect business performance through loss of trust or claims for damages, among other consequences.

The Group positions M&A as an effective means of business expansion and intends to continue pursuing it, but there is a possibility that events not confirmed or anticipated during due diligence may occur or come to light after an M&A transaction, or that business development may not proceed as planned. In such cases, in addition to failing to achieve the initially expected contribution to business performance, impairment of the investment value of the target company may become necessary, which may affect business performance and other results. In addition, with respect to marketable and non-marketable securities held by the Group, impairment may also become necessary due to a significant decline in stock prices or deterioration in the financial condition of the issuing company.

The Group has subsidiaries in China, Hong Kong, Taiwan, South Korea, Singapore, the Philippines, Thailand, and North America, and conducts internet marketing and other businesses there. Changes in the national conditions, legal amendments, enactment of new laws, business practices, and various regulations of each country may have a material impact on business performance. This risk is structurally increasing as the Overseas Business expands.

Executive members, including Representative Director and President Sho Yamada and Director and Chairman Haruhisa Okamura, as well as senior executive officers and other management personnel, play important roles in driving business operations, and if these individuals become unable to perform their duties for any reason, this may affect business promotion and performance. Since the change in representative director in July 2021, the Group has been strengthening the board of directors' supervisory function and introducing an executive officer system, among other measures, but the risk of dependence remains.

When acquiring clients through agencies, the speed at which the Group's sales strategy permeates may slow down, making it more difficult to reflect clients' requests. As dependence on agencies increases, the bargaining power of agencies also increases, creating a risk that changes to sales strategy become more difficult. While the Group has a policy of avoiding excessive dependence on agencies, depending on the business environment, this dependence may increase further and have a material impact on business performance.