ZIGExN Co., Ltd.

The internet advertising market has grown steadily to ¥4,045.9 billion, up 10.8% year on year, but the advertising market is sensitive to corporate business conditions, and there is a risk that advertising demand could decline due to sudden economic fluctuations. If the number of listings decreases or unit prices fall, this would directly affect the Group's revenue. Changes in client companies' budget allocation policies by advertising medium constitute a similar risk factor.

Of the ¥29,221 million in revenue for FY2026 (ending March 2026), approximately 98% is attributable to the Life Service Platform Business, resulting in a high degree of business portfolio concentration risk. Should there be a deterioration in advertising spending trends, intensified competition, or damage to customer trust due to a decline in site soundness in this business, the impact on the Group's overall performance would be severe. This dependency structure is expected to continue until business diversification progresses further.

There are multiple competitors with business models similar to that of the Life Service Platform Business, and there is a risk that competition to acquire customers and users will intensify due to new entrants by major media operators or the expanded scale of existing competitors. While the Company is pursuing differentiation through matching technology, changes in the competitive environment could undermine the Company's market advantage.

With the rapid rise of AI technologies including generative AI, the pace of technological innovation in the internet-related market is extremely fast, requiring rapid expansion of systems and swift revision of business strategies. Unexpected technological innovation or progress at a faster pace than anticipated could increase system development and environment enhancement costs. Furthermore, if the Company's response to security risks and legal/ethical risks associated with AI technology is delayed, the competitiveness of its services could relatively decline. The Company established the "AX/AI and Security Promotion Office" effective July 1, 2026 to strengthen its response framework.

The Group's business depends on smartphones, PCs, and communication networks, and if systems go down due to unforeseeable factors such as natural disasters, cyberattacks, or cloud service outages, business continuity could be impaired. While measures such as system redundancy, cloud utilization, operational status monitoring, and establishment of incident response flows have been implemented, complete prevention is difficult.

The Group holds users' personal information through the provision of internet-related services, and there is a risk of legal liability, including damages claims, if information leakage or misuse occurs due to intentional acts or negligence by related parties, business partners, or outsourcing contractors. Information leakage could also directly damage the Company's brand and undermine trust, potentially having a material impact on the business and financial results. The Company implements security measures such as clarifying operational workflows and authority structures, internal training, and access control.

Representative Director, President, and Executive Officer CEO Jo Hirao has served as representative since January 2008 and plays an extremely important role in determining and executing management policy and business strategy. If he becomes unable to perform his duties for any reason, this could affect the Group's business and financial results. The Company is promoting enhanced information sharing at Board of Directors meetings and regular meetings, as well as delegation of authority, to establish a management structure that avoids excessive dependence on a single individual.

With business expansion and the development of new businesses, the Company needs to continuously secure personnel with business development and management capabilities, personnel with expertise in systems technology, and highly specialized corporate personnel. If sufficient personnel cannot be secured or developed in a timely manner, or if there is significant attrition of personnel, this could impede ordinary business operations and expansion of new businesses, potentially affecting financial results. The Company strives to retain personnel and enhance their capabilities through the development of personnel systems and training frameworks.

The Group recorded goodwill of ¥13,483 million as of the end of March 2026, and if the profitability of an acquired company significantly declines, additional impairment losses may need to be recognized. The recognition of impairment losses could directly and adversely affect the Group's financial results. As the Company positions M&A as a pillar of its growth strategy, this risk may expand in the future as the goodwill balance increases.

The Group's business is subject to laws and regulations such as the Act against Unjustifiable Premiums and Misleading Representations, the Employment Security Act, the Consumer Contract Act, and the Telecommunications Business Act, and significant amendments to these laws or the introduction of new regulations could constrain business operations. The Company also bears obligations under the Act on the Protection of Personal Information, and there is a risk that the cost of responding to stricter regulations could increase. While the impact at present is considered limited, the Company must continue to closely monitor developments in internet-related regulations.