PRINTNET INC.

Although the sales dependency ratio on Raksul Inc. declined from 24.3% in FY2024 (ended August 2024) to 16.6% in FY2025 (ended August 2025), it remains a major customer. If Raksul changes its management policy or its orders decrease significantly, the Company's business results could be directly affected. The Company is working to reduce this dependency through new member acquisition, the launch of the PRINT PRO service, and development of major clients.

The domestic online printing mail-order market has multiple operators, and the Company faces intense competition in terms of products, services, and price. If competitors offer higher value-added services or further reduce prices, the Company's business competitiveness could relatively decline, or intensifying price competition could affect the Company's business results. The Company continues to promote its business operations to respond to various forms of competition.

The Company's sales are concentrated in the Online Printing Mail-Order Business (PRINTNET and PRINT PRO), and while the domestic printing mail-order market has expanded from ¥117.6 billion in FY2019 to ¥123.7 billion in FY2021, there is a risk that market growth could stagnate due to Japan's declining population or economic downturn. A decrease in users or contraction of the market size would directly affect the Company's financial position and operating results. The Company aims to expand its user base by enhancing its products and services.

Printing paper costs account for the majority of product material costs, and if increases in procurement prices due to fluctuations in market conditions or supply volume for paper and other materials cannot be passed on to selling prices, profitability will be squeezed. Similar risk exists if delivery costs rise or delivery contractors' capacity becomes insufficient. Since the Company adopts a pricing structure that includes delivery fees within product prices, it is structurally susceptible to the direct impact of cost increases.

The Company's business is highly dependent on communication networks and computer systems, and if system malfunctions or unauthorized access to the order-receiving site occur due to natural disasters, power outages, human error, or surges in access, business continuity could be disrupted. Although the Company implements system enhancements and security measures, it is difficult to completely eliminate unexpected failures. Should a failure occur, it could result in lost order opportunities and damage to customer trust.

The Company has obtained Privacy Mark and ISMS certifications and has implemented measures such as access restrictions and the establishment of personal information management regulations. However, if information leakage or misuse by employees or outsourcing partners, or unauthorized access by hackers or others occurs, the Company could face legal liability, including damages claims. Information leakage would also directly damage the Company's credibility, raising concerns about the impact on business results.

Securing and developing skilled technical personnel for printing plants (operators of plate-making machines, printing presses, cutting machines, etc.) and management personnel is a critical challenge, but the hiring environment is severe due to the declining birthrate, aging population, shrinking labor force, and the image of the printing industry as physically demanding work. If personnel acquisition and development do not proceed as planned, this could affect the Company's long-term business development, results, and growth outlook. The Company is addressing this through proactive recruitment of new graduates and experienced personnel and by establishing fair evaluation and treatment systems.

Representative Director and CEO Yoichi Odawara plays a critical role in business planning, and if he becomes unable to perform his duties or if a successor cannot be secured, management could be significantly affected. The Company aims to build a framework for delegation of authority and development of management personnel, but as of the end of the fiscal year under review, concrete framework building remains at an early stage of progress.

To prevent the submission of print materials that infringe third-party intellectual property rights or violate public order and morals, the Company has established terms of use, implemented cross-checks by multiple personnel, and developed a review manual utilizing external experts such as retained attorneys. However, the Company could still be held liable due to rights infringements it fails to recognize or shifts in societal norms regarding public order and morals. There is a risk that injunctions could lead to temporary business suspension, damages claims, and damage to social credibility, affecting business results.

The Company's head office is located in Kagoshima Prefecture, and its main production sites are located in Yamanashi Prefecture and Kagoshima Prefecture. If a large-scale disaster such as a major earthquake, tsunami, storm, or flood occurs, the head office or production sites could be damaged, potentially leading to a halt in production activities. If an event exceeding expectations occurs, such as large-scale damage to social infrastructure, it could significantly affect business results. The concentration of production sites in specific regions heightens this geographical risk.