Retty Inc.

Although the Company recorded operating income of ¥19 million in the current fiscal year, it has continuously recorded operating losses through the previous fiscal year and has continuously negative operating cash flow, leading the Company itself to determine that conditions exist that raise material doubt about the going concern assumption. Net sales increased only 4.4% year on year, and the number of subscriber stores on the higher-priced fixed plan continues to trend downward. As countermeasures, the Company is promoting strengthening of its direct sales organizational structure, improvement of sales productivity, and continued cost control through fixed cost reductions, but there is a risk that the impact on the financial position will continue if the plan is not achieved.

Restaurant Support Services operate on a subscription model, making cancellations a key KPI directly linked to revenue. In addition to irregular cancellations caused by restaurant closures due to labor shortages and rising food ingredient prices, ordinary cancellations at renewal timing are also occurring, and if cancellations exceed the Company's expectations, this will adversely affect business performance. As countermeasures, the Company is implementing measures to enhance customer acquisition effects, such as strengthening the internet reservation function, but if the deterioration of the external environment continues, it may become difficult to curb cancellations.

Multiple competitors exist in the domestic gourmet information service market, and there is a risk that intensifying competition, including new entrants, could reduce the number of participating stores and advertising-related orders. The Company differentiates itself through the accumulation of highly reliable data based on real-name reviews, but if it is unable to sufficiently establish an advantage over competitors, this could affect its business and performance. Because the restaurant and advertising markets are also affected by domestic economic conditions, there is also a risk that customers will cut sales promotion expenses during economic downturns.

The "Retty" website relies heavily on traffic inflow via search engines such as Google, and if changes to search logic render existing SEO measures ineffective, there is a risk that the platform's ability to attract users could decline significantly. The Company is diversifying this risk by, among other means, encouraging app usage, but changes to search engine algorithms are an external factor beyond the Company's control. A decline in user acquisition capability directly damages the value of the advertising medium and could affect both advertising revenue and Restaurant Support Services.

The Company is a personal information handling business operator that holds personal information of users and restaurants, and if unauthorized access from outside or information leakage due to intentional or negligent acts by employees occurs, the Company could bear liability for damages and suffer significant damage to its social credibility. The Company has established personal information protection regulations and security policies and conducts internal audits, but complete defense is difficult given the increasing sophistication of cyberattacks. The Company is obligated to comply with the Personal Information Protection Act and related laws and regulations, and violations carry risks of administrative sanctions and litigation.

The Company provides services via the internet, and stable system operation is a prerequisite for business continuity. If a large-scale system failure occurs due to access volumes significantly exceeding expectations, natural disasters, software malfunctions, computer virus infections, or other causes, service provision could be suspended, affecting the Company's business and performance. The Company has established system and security enhancements and a rapid recovery framework for stable operations, but there are limits to its ability to respond to unforeseen events.

Acquisition of participating stores for Restaurant Support Services is conducted through direct sales as well as via sales agencies, and if agencies reduce or withdraw from handling the service for business reasons, there is a risk that growth in the number of newly participating stores could slow. In addition, if the Company is forced to raise agency commission rates in order to maintain or increase the number of newly participating stores, profitability could deteriorate. While the Company is proceeding with the consolidation of specific agencies with high cancellation rates, the structural dependence on the agency channel continues to be a business risk factor.

Securing engineers in the systems field and management personnel is essential for business expansion and new business development, but if the Company is unable to sufficiently secure the necessary personnel due to intensifying competition in the IT talent market, or if personnel attrition progresses, this could impede continued business expansion. A shortage of engineers could hinder the enhancement of functions of the real-name platform "Retty" and risk spreading to a decline in its value as an advertising medium. The Company is working to secure excellent personnel, but the disclosure of specific measures in the securities report remains limited.

The Company has tax loss carryforwards accumulated through upfront investments, and recognizes deferred tax assets based on estimates of future taxable income. If the business plan is not achieved and future taxable income falls short of forecasts, it may become necessary to write down part or all of the deferred tax assets, and the recognition of income tax adjustment amounts could adversely affect operating results. Given the current situation in which material doubt about the going concern assumption exists, there is uncertainty in estimating the feasibility of realizing taxable income.

The Company is subject to legal regulations such as the Telecommunications Business Act, the Act on Prohibition of Unauthorized Computer Access, the Provider Liability Limitation Act, and the Act against Unjustifiable Premiums and Misleading Representations, and if laws and regulations targeting internet-related businesses are enacted or amended in the future, there is a risk that part of its operations could be restricted or new compliance costs could arise. The Company has established and strengthened its legal compliance framework and conducts employee training, but if it falls behind the pace of change in the regulatory environment, this could affect its business and performance. Given the nature of a word-of-mouth review platform, trends in disclosure of sender information and regulations on misleading representations require particular attention.