MEDLEY,INC.

The Company Group regards revenue growth through M&A as one of its important management priorities, and recognizes that a rapid increase in the number of group companies or rapid business expansion could result in the development of internal management systems failing to keep pace. The Annual Securities Report explicitly states that "unless appropriate measures are taken, the likelihood of this risk scenario materializing will increase," and that appropriate business operations could become difficult, potentially affecting the business and financial results. As countermeasures, the Company is actively working to secure excellent personnel in its administrative departments and to promote the appropriate development of internal controls and internal management systems.

The Healthcare Platform Business, including "MEDLEY AI CLOUD" and other services, constitutes critical social infrastructure supporting the daily medical treatment and dispensing operations of healthcare institutions. If services are suspended due to unexpected system failures or cyberattacks, there is a risk of significant disruption to the provision of medical care to patients. This could result in customer claims for damages and loss of social credibility, potentially adversely affecting the business and financial results. As countermeasures, the Company has implemented redundant AWS configurations, continuous monitoring systems, and obtained ISMS international certification (for CLINICS, MEDIXS, MALL, DENTIS, and @link).

The Company acquires and uses job seekers' personal information in the HR Platform Business and patients' sensitive personal information in the Healthcare Platform Business. Intentional or negligent acts by officers and employees, or attacks by malicious third parties, could result in leakage, tampering, or loss of information. Should such an event occur, it could lead to loss of social credibility, decreased competitiveness, damages claims, and substantial costs for improving the security environment, potentially affecting the business and financial results. As countermeasures, the Company conducts employee training, improves security systems, strengthens access management, and has established reporting and response procedures in the event of an incident.

The HR Platform Business's "Job Medley" adopts a success-fee model based on placement, but the abolition of the "continued employment support payment" system, implemented in response to revisions to ministerial ordinances and guidelines under the Employment Security Act, has created an environment relatively more conducive to fraudulent activity such as concealment of placements and failure to report placements. If the incidence of such occurrences increases in the future and cannot be detected in a timely manner, this could directly affect "Job Medley"'s revenue and, in turn, the Group's business results. As countermeasures, the Company prohibits such conduct and conducts awareness activities through its terms of use, takes strict measures such as claiming penalties, and promotes the systemization of the hiring process through the adoption of ATS.

The Healthcare Platform Business is subject to a wide range of laws and regulations, including the Medical Practitioners' Act, the Pharmacists Act, the Medical Care Act, the Pharmaceuticals and Medical Devices Act, and the Health Insurance Act, while the HR Platform Business is regulated as a recruitment information provision business under the Employment Security Act. Changes to the content of these laws, ordinances, and guidelines could result in additional system development costs or stagnation in customer acquisition, potentially affecting the business and financial results. As countermeasures, the Company continuously maintains an information-gathering framework led by its legal department, secures advisory arrangements with outside experts, and engages in ongoing information exchange with government authorities.

The Company actively utilizes new technologies such as AI in providing services like "MEDLEY AI CLOUD" and in improving internal operational efficiency. However, if competitors introduce innovative AI functions ahead of the Company, or if the Company fails to secure specialized personnel or retrain existing staff as planned, there is a risk of declining competitive advantage. Furthermore, the introduction and operation of generative AI technology entails technical and ethical risks, including system vulnerabilities, generation of inaccurate information, and infringement of intellectual property rights. Delayed response to new or revised regulations restricting AI use could lead to a decline in product and service quality and loss of social credibility. As a countermeasure, the Company is working to strengthen its governance framework, including establishing internal guidelines on AI use.

The Company Group has recorded goodwill and intangible fixed assets in connection with past M&A transactions. If the profitability of a group company declines significantly and it becomes unlikely that the business plan established at the time of the acquisition will be achieved, an impairment loss would need to be recorded, potentially affecting the business results and financial position. Should this risk materialize, the extent of the impact would be limited to the total amount of goodwill and intangible fixed assets recorded in each accounting period. As countermeasures, the Company conducts appropriate due diligence and ensures appropriate staffing and organizational structures to achieve the strategic objectives of group companies.

The Company Group generates much of its revenue from the healthcare field, and the promotion of the utilization of ICT, AI, IoT, and other technologies presented in the FY2026 medical fee schedule revision constitutes an important government policy direction. If future policy shifts significantly change trends in the digital utilization of patients' medical experience, this could result in certain changes to the profitability of the Healthcare Platform Business. As countermeasures, the Company continuously strengthens its information-gathering framework regarding policy trends and works to provide appropriate information to government authorities, and assesses that, given the current direction of policy, the likelihood of this risk materializing is relatively low.

The terms of use for "Job Medley" include a provision requiring a partial refund of the success fee if a placed candidate resigns early for personal reasons, with such refunds recorded as a deduction from revenue. If the early resignation rate rises higher than expected due to factors such as increased labor mobility in the healthcare field, "Job Medley"'s revenue may not grow as expected, potentially affecting the business and financial results. The early resignation rate of placed candidates is expected to remain at a certain level going forward, and this is recognized as an item requiring continuous monitoring.

Securing and developing excellent personnel is a key challenge for the expansion of the Company Group's business. If this does not proceed as planned due to intensifying competition for talent, or if existing excellent personnel leave the Company, this could have a considerable impact on the business and financial results. In particular, securing engineering personnel, personnel with specialized medical knowledge, and AI specialists is essential to maintaining competitiveness. As countermeasures, the Company is strengthening incentive plans, considering the introduction of HR systems to accommodate continued business expansion, and increasing investment in recruitment expenses.