MERCURY INC.

The Company's customers are concentrated in the real estate industry (new condominium developers, new detached housing operators, real estate brokerage operators, etc.), creating a structure in which a downturn in the overall real estate industry or a contraction in system investment directly impacts business performance. In addition, changes in the regulatory environment for the real estate industry and changes in the responses of companies within the industry constitute similar risk factors. Because of the high degree of dependence on a specific industry, it is difficult to avoid industry-specific cyclical risks, which is a challenge.

There is a risk that the relative value of listing advertisements, display advertisements, and other products handled in the Digital Marketing Service business will decline due to the daily evolution of advertising methods. As a countermeasure, the Company has begun handling smartphone advertisements and SNS advertisements such as Facebook and YouTube; however, if the Company's response to new advertising products is significantly delayed, it may affect its business and performance.

The Company's business is operated on the internet, and while measures such as obtaining ISO27001 certification, server redundancy, firewall installation, and utilization of AWS have been implemented, system failures may occur due to hardware or software malfunctions, cyberattacks, AWS outages, natural disasters, or other unforeseen events. If a system failure occurs, the stable provision of services may be impaired, potentially having a material impact on business activities and performance.

The Company holds personal information of users through its services and has implemented protection using highly reliable external servers as well as the development of personal information protection flows. However, if an information leak occurs due to intentional acts or negligence by related parties, the Company may be held legally responsible, including for damages, and the reliability of its services may be undermined, potentially affecting its business and performance.

At present, it is recognized that there are no laws directly regulating the Company's business; however, given the rapid pace of change in the information services industry, new legislation may be enacted in the future. In particular, if display items on the internet in the real estate field become subject to regulation, part of the Company's business may be restricted, potentially affecting its financial position and operating results.

In expanding new services aimed at growing the scale of business and diversifying revenue sources, a certain period of time and investment is required before achieving stable profitability, which may reduce the Company's overall profit margin. If new businesses do not progress as planned due to future changes in the business environment or other factors, the Company may be unable to sufficiently recover its investment, potentially affecting its financial position and operating results. The Company seeks to mitigate this risk by grasping customer needs and setting priorities through customer interviews and research.

The Company capitalizes software related to its platform business as an asset, and conservatively sets the expected useful life at three years in consideration of the rapid pace of technological innovation. If the effects of revenue generation or cost reduction are significantly impaired due to major changes in future plans, changes in usage conditions, obsolescence of services, or other factors, impairment of the software may become necessary, potentially affecting the Company's financial position and operating results.

As the business expands, it is necessary to continuously secure human resources; if the Company is unable to secure and develop excellent personnel as planned, it may face difficulties in business development, which could affect its performance. As countermeasures, the Company is promoting diversification of recruitment channels and utilization of external resources; however, given its small organizational size, there is also a coexisting risk that the enhancement of its internal management and business execution systems may not keep pace with business expansion.

The Company is a subsidiary of GA technologies Co., Ltd., and the parent company has influence over management by directly holding a majority of voting rights. To ensure the fairness of transactions, the Company has established mechanisms such as excluding related directors from voting and having deliberations conducted by the Audit and Supervisory Committee, which is composed of three independent outside directors. However, if such mechanisms fail to function properly, the Company's interests may be harmed.

As of the filing date of this report, the ratio of potential shares (stock acquisition rights) to the total number of issued shares is 10.72%, and if these rights are exercised, the share value and voting ratio of existing shareholders may be diluted. In addition, the tradable share ratio remains at only 25.52%, and if liquidity does not improve, trading in the market may stagnate, potentially adversely affecting the supply-demand balance of the Company's shares. As measures to improve liquidity, the Company has adopted policies such as requesting secondary offerings from major shareholders and utilizing the exercise of stock options and the employee stock ownership plan.