ASO INTERNATIONAL, INC.

To improve the quality of orthodontic dental prosthetics and respond to increasing demand, the Company is promoting digitalization and mechanization utilizing 3D printers and other equipment, and is working on the development of virtual construction of normal dental alignment using AI technology and data integration services utilizing a cloud platform. However, if these initiatives fail to achieve the expected effects, they will not contribute to quality improvement or operational efficiency, which could affect business development, financial position, and operating results.

Given the nature of the Orthodontics Business, securing and training dental technicians is the most critical issue, and the Company recognizes securing and developing human resources for future business expansion as an important management challenge. Although the Company conducts continuous recruitment activities, if it is unable to secure human resources as planned, this could affect business development, financial position, and operating results.

The maintenance of dental technician licenses, dental laboratory notifications, medical device manufacturing business registration, and licenses for sales of controlled medical devices, etc., based on the Dental Technicians Act and the Act on Pharmaceuticals and Medical Devices, is a prerequisite for business continuity. If a license is revoked due to disqualification grounds or violation of laws and regulations, this could have a material impact on business continuity. The Company states that no factors impeding continuity have arisen at present, and it has established a legal compliance framework through the Risk Management Committee.

The handling of orthodontic appliances is related to a wide range of laws and regulations, including the Dental Technicians Act, the Act on Pharmaceuticals and Medical Devices, and the Subcontract Act, and the enactment or amendment/abolition of new laws and regulations may affect business performance. If unintended legal violations or litigation arise, this could affect business development, financial position, and operating results. Although the Company strives for management that always takes compliance into consideration, it states that such risks cannot be completely eliminated.

The Company has an important manufacturing subsidiary in the Republic of the Philippines, a manufacturing and sales subsidiary in Hawaii, USA, and a subsidiary in California, USA that collects patient data and receives product orders. If changes in laws and regulations, political instability, terrorism, natural disasters, pandemics, etc. occur in the Philippines, there is a risk that the supply of materials and products could be temporarily disrupted. This could affect business development, financial position, and operating results.

In the fiscal year under review, the proportion of purchase transactions denominated in US dollars was 25.0%, and the proportion denominated in euros was 35.9%, making the Company subject to the effects of exchange rate fluctuations. In addition, since the foreign-currency-denominated assets, liabilities, revenues, and expenses of overseas consolidated subsidiaries are translated into yen based on foreign currency translation rules, sudden exchange rate fluctuations that give rise to foreign exchange losses, etc., could affect financial position and operating results.

In the clear aligner orthodontic device market, new entrants among competing dental laboratories are increasing, raising the possibility that customers of products such as AsoAligner DIGITAL could be lost. The Company seeks to differentiate itself by raising awareness of applicable and non-applicable cases and responding to customer needs, but if effective differentiation cannot be achieved, this could affect business development, financial position, and operating results.

Representative Director and President Toshimasa Aso, as the founder, plays an important role in overall management, including management policy, strategic planning, and sales strategy, and if he becomes unable to perform his duties, this could affect business development, financial position, and operating results. The Company is working to strengthen its organizational structure through the sharing of know-how and the recruitment and development of personnel, and is building a management system that eliminates excessive dependence on a specific individual. Note that the combined shareholding ratio of Mr. Aso and his asset management company reaches 65.4% of the total number of issued shares.

The Company handles personal information, including patient information (name, age, case details, etc.), and is required to comply with the Act on the Protection of Personal Information and the GDPR. If an information leak occurs due to misdelivery or mix-ups in the tens of thousands of delivery operations conducted each month, or due to unauthorized access by computer viruses, hackers, etc., this could damage the Company's social credibility and affect business development, financial position, and operating results. The Company has established personal information protection regulations and information system management regulations, as well as a multi-person check system.

The Company has entered into a sales agency agreement, including exclusive distribution rights in Japan, with FORESTADENT Bernhard Förster GmbH of Germany, and purchases from this company accounted for 35.2% of total purchases in the fiscal year under review. If the agreement with this company is terminated or supply is disrupted due to unforeseen circumstances, this could affect business development, financial position, and operating results; however, the Company believes that since the raw materials purchased from this company are generic products, securing alternative suppliers would be relatively easy.