GENOVA, Inc.

The Group specializes in the medical advertising market, medical system market, and dental distribution market, and there is a risk that these markets could stagnate or shrink due to fundamental changes in the medical system, revisions to medical service fees, or unpredictable changes in the social environment. If service development fails to respond in a timely manner to the rapid evolution of technology, competitiveness may decline, potentially affecting business performance. As countermeasures, the Group is strengthening staffing in its service departments, monitoring generative AI and medical DX developments, and promoting strategy formulation based on multiple risk scenarios through collaboration with external specialized institutions.

The rapid spread of generative AI has created new challenges, including ensuring the accuracy and ethical expression of medical information, risks of personal information leakage, and copyright infringement. If competitors advance low-cost operations utilizing generative AI, the Group could be placed at a competitive disadvantage. The Group is currently at the stage of formulating internal rules and guidelines, and if these measures do not function sufficiently, there is a risk of reduced service reliability and diminished market competitiveness.

There are competitors offering similar services in each of the Medical Platform, Smart Clinic, Dental Distribution, and DX business areas, and new entrants and intensified competition are expected against the backdrop of market growth driven by the advancing aging society. Intensified competition could affect the Group's business and performance. As countermeasures, the Group is working to understand needs through dialogue with medical practitioners, strengthening its proprietary services by combining a robust distribution network with DX technology, and enhancing brand value by strengthening relationships with existing customers.

Securing and developing excellent personnel with advanced specialized knowledge related to healthcare is essential for sustainable growth, but early turnover centered on sales positions (due to mismatches before and after joining, etc.) has been a longstanding issue. If competition for recruitment in the labor market further intensifies, or if the organizational reform toward the "strategic HR structure" transitioned to in April 2026 does not proceed as planned, the Group may be unable to sufficiently secure and develop the personnel necessary for business execution, which could affect operating profit and other financial results and financial condition. As countermeasures, the Group is promoting reforms to its evaluation system, recruitment of next-generation leaders, direct recruiting, and base pay increases, among other measures.

The Group handles important information including customers' personal information, and there is a risk that information leakage, destruction, or tampering, or system outages, could occur due to increasingly sophisticated cyberattacks, negligence or misconduct by officers and employees, or defects in hardware/software. If such an event occurs, it could seriously affect business performance and financial condition through loss of public trust, suspension of transactions with customers, and the occurrence of substantial damages compensation costs. As countermeasures, the Group conducts security audits and vulnerability assessments, continuously reviews internal education programs, introduces the latest security technologies through collaboration with external specialized institutions, and develops and trains on emergency response manuals.

The Group positions M&A as an important growth strategy and has recorded a substantial amount of goodwill on its consolidated balance sheet. If a sudden change in the business environment after an acquisition or a failure to achieve profit plans necessitates an impairment test resulting in a reduction of book value, this could seriously affect business performance and financial condition. As countermeasures, the Group established the "M&A Business Office" in April 2026 to build an integrated management structure covering everything from deal sourcing to execution and PMI, and has established a system for early detection of signs of performance deviation through regular monitoring by the Investment Committee.

The Group has continued to expand into new areas, including the business transfer from ASANO Co., Ltd. during the current consolidated fiscal year and the making of Akasaka Shizaisha Co., Ltd. a subsidiary in April 2026, and there are risks that existing business know-how may not be sufficiently utilized, and risks related to responding to industry-specific business practices and regulations. If the parallel progress of multiple integration processes results in dispersed management resources, the departure of key personnel, or delays in system integration, the expected synergies may not be achieved, adversely affecting operating results and financial condition. As countermeasures, the Group is working to build a highly specialized business management structure through the appointment of external experts and to conduct rigorous investment evaluations, including exit criteria.

The main products of the Smart Clinic Business depend on manufacturing outsourced to APOSTRO Co., Ltd., and if a decrease or stagnation in supply occurs due to changes in APOSTRO's order status or business strategy, this could affect business performance. In addition, amid the continuing global semiconductor shortage, rising raw material prices, and increasing logistics costs, if increases in procurement costs cannot be appropriately passed on to selling prices, there is also a risk that gross profit margin could decline. As countermeasures, the Group concluded an exclusive sales agency agreement with APOSTRO in February 2024, established a system for real-time sharing of sales plans and production/delivery status, and is working to fix procurement costs through large-lot bulk procurement in line with annual plans.

The Group is subject to regulations under various laws and guidelines from supervisory authorities, including the "Pharmaceuticals and Medical Devices Act" and "Medical Advertising Guidelines," and consolidated subsidiary ASANO operates a licensed business. If various regulations are revised or newly established, or if ASANO is unable to maintain or renew necessary licenses and receives administrative dispositions, this could affect business and performance; however, the Company currently judges that this risk is not high. As countermeasures, the Group has established a system for continuously monitoring regulatory trends centered on the Legal Department, and conducts compliance management based on regulations, manuals, and checklists.

In the procurement of dental precious metals (such as palladium) and hygiene products, there is a risk that supply could stagnate due to sudden changes in the international situation, including heightened geopolitical risk, or disruptions to logistics networks. If a sharp rise in purchase prices or a shortage of supply occurs and the pass-through to selling prices is delayed, this could adversely affect business performance through a decrease in net sales and a decline in profit margins due to rising cost of sales and lost opportunities. As countermeasures, the Group is working to diversify procurement routes, optimize inventory management, and build a flexible pricing revision process responsive to market conditions.