Medical Net, Inc.

The internet advertising market in which the Group operates is highly competitive, with numerous competitors including major internet-related companies. There is a risk that the Group's competitiveness may decline due to the emergence of superior competitors, service improvements, or the appearance of high-value-added business models. The Group continues to work to maintain and strengthen the competitiveness of each business, but changes in the competitive environment may affect business results.

While the internet advertising market has been on an expanding trend, there is a risk that changes in economic sentiment or new innovations could slow this expansion or cause it to contract. In particular, because the Group's business is centered on the dental industry, if the willingness of dental clinics and others to advertise on the internet declines, the impact on business results may be concentrated. The high degree of dependence on a specific market segment represents a vulnerability.

The listing advertisement management outsourcing service and the newspaper insert advertisement placement agency service may be subject to the Medical Care Act and medical advertising guidelines, and the Media Platform Business is also subject to the Act on the Provision of Specified Telecommunications Services. If new laws are enacted, existing laws are reinterpreted, or self-regulatory rules are established in the future, the business could be restricted. The Group currently recognizes the regulatory impact as minor, but operates under its own rules established in accordance with medical advertising guidelines.

The majority of site traffic acquisition in the Media Platform Business comes through the search engines of Yahoo! JAPAN and Google, and search results are also the most critical factor for the SEO service. There is a risk that changes in the ranking policies of each search engine operator could directly affect traffic acquisition capability and the quality of the SEO service. Since the Group cannot control policy changes by search engine operators itself, the structure entails a high degree of external dependence risk.

The Group handles personal information of clients and internet users, as well as IDs and passwords for managing clients' websites. If information leakage, tampering, or unauthorized use occurs, there is a risk of increased costs, claims for damages, loss of credibility, and suspension of transactions. The Group has established information management regulations and PC management regulations, and is working on internal education for all employees and the establishment and operation of a management framework. However, the risk of information security incidents due to unpredictable factors such as cyberattacks cannot be eliminated.

If the computer system goes down due to unpredictable factors such as overload from a surge in access, power outages, software defects, computer viruses, unauthorized external intrusion, or natural disasters, business activities may be disrupted. There is also a risk that server malfunction or defects could lead to loss of trust, suspension of transactions, and claims for damages. The Group exercises the utmost care and has established a system to restore operations quickly, but complete prevention is difficult.

The Group has made Okamura Co., Ltd., NU-DENT Co., Ltd., D.D.DENT Co., Ltd., and AVision Co., Ltd. consolidated subsidiaries (sub-subsidiaries), and as of May 31, 2025, recorded goodwill of ¥394,187 thousand. If profitability declines due to a significant deterioration in economic conditions or the business environment, an impairment loss on goodwill may occur, affecting business results. Although the Group conducts prior investigations into profitability and investment recoverability when carrying out M&A, there is a risk that the initially expected investment effects may not be achieved due to sudden changes in the post-acquisition business environment or unforeseen circumstances.

The licenses purchased and sold in the Cloud Integration Business rely on a long-standing business relationship and collaboration with Microsoft Regional Sales Pte., Ltd., and maintaining and strengthening this relationship is an important requirement for sustainable growth. If the company changes its management policy or there are significant changes to contract terms or trading conditions, it could affect the Group's operating results and financial condition. Although the Group currently maintains a stable trading relationship, dependence on a single major supplier constitutes a structural risk.

One of the Group's strategies is to expand its business in overseas markets, primarily in Asia, but if problems arise in overseas financial markets or economies, or social or political problems occur in the relevant countries, there is a risk of a significant decline in demand from related customers. In addition, there is inherent foreign exchange risk, as fluctuations in exchange rates could affect the yen-converted amounts of assets and liabilities arising from foreign-currency-denominated transactions. Country risk and foreign exchange risk unique to overseas business may combine to affect business results and financial condition.

As of May 31, 2025, the Group is a small organization with 296 employees, and its internal management structure is scaled accordingly. If a significant number of employees were to leave within a short period due to some circumstance, or if the Group is unable to secure and train personnel as planned, the efficiency of business operations may decline, affecting business and results. While the Group intends to strengthen personnel development, staffing, and internal management systems in line with business expansion, vulnerabilities remain due to its small organizational scale.