CINC Corp.

With the rapid evolution of generative AI technologies such as OpenAI's "ChatGPT" and Google's "Gemini," the competitive environment in the digital marketing domain of the Group is undergoing dramatic change. Unexpected technological advances or the emergence of new platforms may make it difficult for the Group to maintain the competitive advantage of its services. The Group is addressing this by continuously acquiring the latest information and reflecting it in its services, and by focusing on recruitment, training, and technology acquisition of personnel.

Major search platforms such as "Google" and "Yahoo! JAPAN" have introduced new AI-driven specifications and display formats such as "AI Overviews" and "AI Mode," reflecting a significant shift away from mechanisms premised on conventional search result displays and evaluation criteria. In addition, generative AI conversational services such as "ChatGPT" and "Gemini" have begun to play an important role in the purchase decision-making process, and changes in the specifications and behavior of these services also affect the business environment. If the Group's response to specification changes is delayed, or if unexpectedly major changes occur, this may affect business performance through a decline in customer satisfaction.

In the digital marketing market, new entrants and new products are continuously emerging. If new customer acquisition platforms emerge, or if the Group experiences delays in development, or if existing marketing methods deteriorate or weaken, this may have a material impact on business results. In addition, since services are provided in a SaaS format that makes cancellation easy for customers, there is a risk of customer attrition if competitors offer superior services. The Group addresses this by obtaining the latest information from various information sources and incorporating it into its services, as well as improving products based on customer interviews.

Against the backdrop of the evolution and spread of AI technology, customer expectations for greater efficiency and precision in analysis and decision-making in marketing operations are rising, and the information gathering and purchasing process is also changing with the spread of generative AI and AI search services. If the Group is unable to respond appropriately and in a timely manner to such sophisticated and diversifying customer needs, this may affect business performance through a decline in competitiveness and lost order opportunities. The Group addresses this by providing analysis and support services across various digital marketing domains.

The Group collects and analyzes big data on the internet and provides it to customers, handling information that is extremely confidential in terms of customers' management strategies. If a system outage or leakage of confidential information occurs due to computer virus infection, unauthorized intrusion, cyberattacks, or similar causes, this may have a material impact on the business and financial results through a loss of social trust. The Group implements preventive measures through the establishment of server management and monitoring systems by external contractors, backups, system redundancy, and the development and operation of security management systems.

Against the backdrop of an increasing number of cases of data misuse and privacy infringement due to the spread of social media, there is a possibility that collected information containing personally identifiable data could become subject to regulation, or that stricter self-regulation could result from new legislation or amendments to existing laws. In addition, changes in policy by operators of SNS and other platforms may impose restrictions or bans on data acquisition, which may affect business performance through a decline in service quality and increased data collection costs. The Group has adopted a policy of securing alternative data acquisition methods.

In the internet industry, characterized by rapid technological progress and environmental change, securing personnel with high technical skills who can leverage big data and technology is extremely important. If the Group is unable to secure talented personnel and upskill existing personnel, this may have a material impact on the Group's business results. The Group is strengthening its organizational structure by focusing on recruitment and training and by actively delegating authority.

Tomonori Ishimatsu, the founder and Representative Director and President, plays an important role in determining and executing management policy and business strategy, resulting in a high degree of dependence on him. If some unforeseen circumstance were to occur to him, or if he were to step down for any reason, this could affect business results and business development. As the Group's business expands, it is actively delegating authority and working to build a management structure that does not rely excessively on a specific individual.

The Group intends to continuously roll out new services in the digital marketing domain; however, these are currently at the conceptual stage, and there is a possibility that they may ultimately not be realized, or that even if realized, sufficient profitability may not be achieved, leading to withdrawal. If a new business fails, only costs would be recorded, which may affect the Group's financial position and business results. The Group has adopted a policy of conducting sufficient prior verification before commencing development and other activities.

If stock options granted as incentives to officers, employees, and external collaborators are exercised, the issuance of new shares may dilute the share value and voting rights ratio of existing shareholders. As of the end of the current consolidated fiscal year, the number of potential shares from stock acquisition rights was 168,735 shares, equivalent to 4.92% of the total issued shares of 3,432,865 shares. There is a possibility of additional grants in the future, and the dilution risk will continue to exist.