Ureru Net Advertising Group Co.,Ltd.

The Group is required to comply with advertising-related laws such as the Act against Unjustified Premiums and Misleading Representations and the Pharmaceutical and Medical Device Act, as well as industry guidelines, and any violation could lead to a decline in credibility and deterioration in business performance. While primary responsibility lies with the client, the Group also bears a certain degree of responsibility for creative materials produced using Ureru D2C Tsukuru. Although a management framework has been established through checklist development, sample checks, and oversight by the Risk and Compliance Committee, if timely response becomes difficult, this could have a material impact on business performance and financial condition.

The Group's business is heavily dependent on the internet advertising market, which is closely linked to the D2C (Online Retail) market. While the market size expanded to ¥3,651.7 billion in 2024, up 107.8% year on year, corporate advertising budgets may be adjusted depending on economic conditions. If market development is hindered by regulatory environment changes or the introduction of new legal regulations, this could have a material impact on the Group's business and operating results. The Group addresses this through speedy service provision and flexible advertising operation choices.

The Group's core service is marketing support through performance-based advertising, under which revenue is not confirmed unless the client's marketing outcomes are determined. This is a model in which marketing costs and initial expenses for tool and system implementation are incurred upfront. If upfront investments do not lead to the expected results, or if planned revenue is not achieved, this could have a material impact on financial condition, operating results, and cash flows. The Group addresses this through the accumulation of know-how and risk control, but the risk is significant if these measures fail to function effectively.

The Group's services are premised on 24-hour operation, and system failures directly lead to service outages, making the assurance of stability and safety essential. If a system failure occurs due to unforeseen events such as software defects, computer virus intrusion, physical acts of destruction, or natural disasters, this could have a material impact on business performance. The Group has strengthened server equipment and established a load-balancing framework, but complete prevention is difficult.

The Group works to protect its intellectual property by registering trademarks such as "Ureru Net Kokoku Sha" and "Confirmation Screen Upsell," but if infringement by a third party occurs, resolving the matter may require significant time and expense. In addition, the possibility cannot be ruled out that the Group may unknowingly infringe on the intellectual property rights of other companies, which could result in claims for damages, injunctions against use, and loss of social credibility. The Group works with specialists to investigate to the extent possible, but it is difficult to fully identify third parties' intellectual property rights within its business domain.

If natural disasters such as earthquakes, typhoons, or tsunamis, fires, power outages, the spread of unknown infectious diseases, international conflicts, or other events occur, this could seriously affect the Group's business operations. The Group works to prevent and avoid such risks in advance through cloud server distribution, regular system backups, and continuous monitoring of operational status, but complete avoidance is difficult.

In the internet advertising industry, new advertising methods and technologies are continuously being developed, and customer needs are also changing rapidly. If the Group's response to technological innovation is delayed and competitors provide superior services, the Group's competitiveness may decline. The Group strives to continuously monitor technology trends and enhance its own services, but the risk of delayed response is ever-present.

Securing and developing talented personnel has become an important issue amid rapid business expansion, but acquiring the necessary personnel in a timely manner is not easy. If recruitment is delayed, the Group may be unable to respond with an appropriate and sufficient organizational structure, which could hinder efficient business operations and affect the Group's competitiveness. The Group addresses this by combining internal talent development and promotion with external recruitment.

The Group's business domain is not a regulated industry, and barriers to entry in the digital advertising field are low, creating a risk of intensified competition as more companies enter the market. The Group strives to maintain its competitive advantage by leveraging proprietary know-how cultivated through more than 2,600 A/B tests, but if the competitiveness of existing competitors improves or new entrants emerge such that the Group's reputation, credibility, and competitive advantage are undermined, this could affect the Group's business and performance.

The contract term for the cloud service provided by the Group (Ureru D2C Tsukuru) is one year with automatic renewal, and the Group's revenue base relies on monthly usage fees. If a large number of clients request cancellation for some reason, or if service provision to a large number of clients becomes impossible due to an accident or other event, future recorded revenue could be lost, which may have a material impact on the Group's business and performance. The Group works to prevent cancellations by providing robust customer support and continuously improving and expanding functionality.