GiG Works Inc.

In the contact center segment, there is a persistent threat from oligopolistic existing companies with large-scale facilities and new market entrants, while in the sales promotion segment, education and recruitment costs are increasing alongside technological changes in the IT industry, and unit price competition is intensifying. In the field engineer segment, a contraction in the market is also anticipated due to a decline in domestic PC shipment volumes resulting from the reaction to the GIGA School Initiative and improvements in end-user IT literacy. If competition intensifies further, this may adversely affect business performance through rising costs of acquiring talented personnel and declining order unit prices.

In addition to the amended Labor Contract Act and Worker Dispatching Act, equal pay for equal work, and the amended Personal Information Protection Act, the Group has already completed compliance with the Freelance Protection Act, which came into effect in November 2024. However, legal amendments related to the labor environment are made periodically, and depending on the content of future legal amendments, it may become necessary to review business processes and contract forms, potentially affecting business performance. Given the characteristics of a business model that utilizes a large number of freelancers and sole proprietors, the Group's structure is susceptible to the effects of tightened regulation.

The Group holds confidential information and personal data of numerous gig workers, clients, and end users, and has obtained ISO/IEC 27001 certification to strengthen its security framework. However, if personal information is leaked externally due to intentional or negligent acts by employees or other unforeseen circumstances, this could result in claims for damages and loss of social credibility, potentially having a material impact on the Group's financial position and business performance. Given the nature of operations handling large volumes of customer information, such as in the contact center business, information management risk is structurally high.

The Group connects gig workers with client companies through its proprietary platform, GiGWorks Basic. If there is a shortage of skilled gig workers or insufficient applications, the supply-demand balance may collapse, leading to lost sales opportunities and rising cost ratios. Similarly, if system troubles occur, the functionality of the platform may be impaired, potentially affecting business performance. Although the Group continues its recruitment activities and support for education and self-development, its dependence on changes in the labor market is high.

The Group relies on its business systems for gig worker deployment, progress management, billing, and sales management. If program bugs, system obsolescence, intrusion by malware, ransomware, or other malicious programs, or disruption of communication lines due to natural disasters occur, business continuity may become difficult. Although upgrades are being carried out as needed, delays in system failure recovery may affect business performance. In a business model built on a digital platform as its operational foundation, system stability forms the very basis of business continuity.

The Group positions M&A as a pillar of its growth strategy. In 2022, it acquired two mail-order businesses, but Nihon Chokuhan Co., Ltd. continued to post segment losses and was sold and deconsolidated in April 2025. The execution of M&A entails substantial funding requirements and goodwill amortization, and if the acquired company's performance does not progress as expected, impairment losses on goodwill or valuation losses on shares may arise, potentially affecting business performance and financial position. Although external valuation firms are utilized in due diligence, the realization of synergy effects is not guaranteed.

The Group assesses indicators of impairment for tangible and intangible assets on a semi-annual basis, and where such indicators exist, conducts impairment tests based on recoverable amounts. If deterioration in the business environment or significant changes in business conditions cause book value to exceed recoverable amount, substantial impairment losses may need to be recognized, potentially having a significant impact on financial position and business performance. Against the backdrop of accumulated intangible assets from M&A, impairment risk is an issue requiring ongoing management.

Subsidiary GALLUSYS operates the Snap to Earn app SNPIT, and has been pursuing adoption initiatives, including the listing of its in-game token SNPT on the domestic crypto asset exchange Zaif in December 2024. However, losses associated with upfront investment continue at present. The blockchain gaming and crypto asset markets are subject to significant fluctuations in the regulatory environment and market sentiment, and if initiatives do not proceed as planned, this may affect business performance. There is a risk that continued investment at a stage where the outlook for monetization remains uncertain could put pressure on the Group's overall earnings.

If a gig worker in an employment relationship with the Group suffers death, injury, or illness while performing duties, the Group is subject to obligations for accident compensation under the Labor Standards Act and other laws, and may also bear liability for damages on the grounds of breach of the duty of care for safety. There is also a risk of facing litigation or claims due to accidents caused by gig worker errors or breach of contract with client companies. Although the Group has established safety and health training programs, regular safety and health committee meetings, and a legal risk management framework staffed by legal personnel, depending on the content and amount of any litigation, business performance may be affected.

The Group, which has group companies and business locations nationwide, faces the risk that business operations could be broadly affected in the event of a large-scale earthquake, flood damage, pandemic, or similar event. Although the Group has established crisis management manuals and dispersed the functions of its business locations and information systems, if a disaster of a scale far exceeding expectations occurs, this may affect financial position and business performance. As demonstrated by the fact that the sales promotion segment has not fully recovered even after the reclassification of COVID-19 to a Category V infectious disease in May 2023, there is a risk that the effects of a pandemic could persist over the long term.