internet infinity INC.

Since the Company Group's core businesses, the Record Book Business and the Home Care Services Business, are subject to the Long-Term Care Insurance Act, they are strongly affected by the triennial revisions of long-term care fees and the quinquennial reviews of the system. The reform scheduled for April 2027 may consider reductions in long-term care fees and increases in the co-payment ratio, creating a risk that profitability could deteriorate through reduced utilization or fewer service uses of long-term care services. The Company Group conducts its business operations while closely monitoring system trends, but depending on the content of the system reform, there is a possibility of a material impact on its financial position and business performance.

Providing services based on the Long-Term Care Insurance Act requires securing qualified personnel such as care managers, nurses, certified care workers, and home helpers, and securing appropriate personnel is essential as the business expands. If it becomes difficult to secure sufficient personnel during future business expansion phases, or if there is an outflow of existing personnel, there is a risk of a decline in the quality of long-term care services, difficulty in continuing to provide services, and an increase in personnel acquisition costs. While no material impediment is currently recognized, this is recognized as a medium- to long-term risk amid the intensifying personnel shortage across the long-term care industry as a whole.

Operating a business under the Long-Term Care Insurance Act requires each business location to obtain designation as a designated business operator from the prefectural governor or the mayor of the city, town, or ward, and to continuously satisfy the personnel, facility, and operational standards stipulated by ordinances of the Ministry of Health, Labour and Welfare. If these standards can no longer be met, there is a risk of administrative dispositions such as business suspension or reductions in long-term care fees, which is a material risk directly linked to business continuity for the Company Group, which operates numerous business locations. The Company Group positions the strengthening of its compliance framework as an important management priority and provides guidance and training to employees.

The barriers to entry in the long-term care welfare and preventive care markets are not necessarily high, and multiple operators have already entered the market, and the possibility of full-scale entry by major companies in the future cannot be ruled out. If competition to acquire users of long-term care services intensifies due to the expansion of competing operators, there is a risk of an adverse impact on the Company Group's profitability and market share. The Company Group strives to secure a competitive advantage through its proprietary area marketing system, superior exercise programs, and a brand strategy leveraging its care manager network, among other measures.

The Record Book Business's primary strategy is multi-store expansion through a franchise format, and there is a risk that deterioration in the operating conditions of franchisees, or increases in labor costs and rent, could lead to decreased royalty income, increased accounts payable, or withdrawal from the chain. In addition, if guidance to franchisees does not function adequately, or if complaints or negative reputation arising from franchisees occur, the Company Group's brand image could be damaged. Changes to franchise contract terms and failure to achieve expansion plans are also risk factors that affect the revenue structure.

In the DX Solutions Business, the Company Group is advancing ICT solutions and various software development for long-term care providers, but if development does not proceed as planned due to mid-development requirement changes or development delays, there is a possibility that the software will not be completed, or that the investment amount will become substantial with no prospect of recovery. In such a case, there is a risk that a significant amount of expenses will be incurred at once, affecting the financial position and business performance. The Company Group verifies the reasonableness of project duration, cost estimates, and profitability, but complete elimination of development risk is difficult.

The Company Group handles important personal information of long-term care service users and their families in the course of its operations, and if personal information leakage occurs from systems or otherwise, there is a risk of significant impact such as claims for damages and loss of credibility. In addition, the DX Solutions Business provides services via an internet environment, and system failures caused by human error, network failures, computer viruses, and the like may impede the continuation of services. The Company Group has implemented measures such as establishing various regulations, company-wide employee training, enhancement of server equipment, and strengthening of security, but risks arising from unpredictable factors remain.

The Company Group relies heavily on borrowings from financial institutions and other sources for fundraising, and interest-bearing debt accounted for 30.0% of total assets as of the end of FY2026 (ending March 2026). If fundraising cannot be carried out as planned due to changes in financial conditions, business development may be hindered, and if fundraising costs increase due to rising interest rates, there is a risk that profits will be squeezed. For the Company Group, which continues to open new locations and expand its business, maintaining a stable fundraising environment is an important issue from the standpoint of financial soundness.

The Company Group operates numerous business locations in the Record Book Business and the Home Care Services Business, and if the profitability of individual locations declines due to changes in the business environment or other factors, there is a risk that loss processing associated with the application of impairment accounting will occur. If the number of unprofitable locations increases or closures increase, a significant impairment loss may be incurred at once, potentially having a material impact on the financial position and business performance. The Company Group thoroughly manages the profitability of each location and takes proactive measures against locations with poor profitability, but it may be difficult to respond to sudden changes in the business environment.

Users of long-term care services are elderly individuals certified as requiring support or long-term care, and there is an inherent risk of accidents arising from characteristics specific to the elderly, such as falls, food aspiration accidents, and outbreaks of infectious diseases. In the event that a serious accident or infectious disease outbreak occurs, in addition to a decline in the Company Group's credibility, there is a risk of being subject to claims for damages through litigation, which could affect the financial position and business performance. The Company Group pays close attention to health and safety management during service provision and strives to prevent accidents by thoroughly providing education and guidance to employees.