infoNet inc.

There is a risk that uncertainty over the outlook for the domestic economy (interest rate and foreign exchange fluctuations, prolonged price increases) could lead companies and organizations to curtail investment in internet PR activities. A decline in new demand would directly affect the Group's net sales and profits. While the Group is working to strengthen order intake and sales proposal capabilities, it is difficult to completely shield itself from deterioration in the external environment.

The majority of sales depend on the core CMS product "infoCMS," and if new entrants or intensified competition cause this product to lose its competitive advantage, it could have a material impact on operating results. The Group is working to reduce this dependence through new product development, but establishing alternative revenue sources will take time. Although the Group has set a policy of aiming to become the de facto standard in the CMS market, the risk of changes in the market environment continues to exist.

Innovative technologies, including AI-related technologies, are evolving at a rapid pace, and there is a risk that the Group's competitiveness could decline if it fails to accurately grasp market trends and develop new products in a timely manner. If rapid technological innovation occurs in a manner that renders past experience inapplicable, it could lead to the obsolescence of existing products and services. Although the Group is actively promoting technology development, it recognizes that forecasting technological innovation is extremely difficult.

In the Web Contracted Development business, deliveries and development work are concentrated in March (the fourth quarter) due to the fiscal year-end of government agencies and companies, and the fourth quarter accounts for a large proportion of full-year results. In the fiscal year under review, the first and second quarters recorded operating losses (¥66,219 thousand and ¥45,827 thousand, respectively), with fixed cost burdens weighing on the profitability of smaller quarters. If failure to pass inspection on large-scale projects or substantial additional rework were to be concentrated in March, it could have a severe impact on full-year results.

Contracted development projects are managed based on man-hour estimates, and if estimation errors or work delays result in excess costs, project profitability could deteriorate, affecting operating results. In particular, given the structural concentration of large-scale projects in the fourth quarter, there is a risk that profitability could deteriorate simultaneously across multiple projects. While the Group strives to improve the accuracy of man-hour management, the uncertainties inherent in contracted development cannot be eliminated.

There is a risk that unauthorized access or attacks by third parties could result in the leakage or falsification of customer information, or service outages. The Group has implemented measures including obtaining ISMS certification, system safeguards such as firewalls, and the assignment of specialist engineers, but it is difficult to completely prevent malicious attacks. If an information leak were to occur, it could have a material impact on operating results and financial condition due to legal liability, damage to corporate image, and customer attrition.

To transform its business model into a "results-driven, continuous support partner," the Group must secure and develop advanced personnel spanning consulting, development, design, and marketing; however, if recruitment and development fail to keep pace with technological innovation and shifting market needs, there is a risk that the added value of services provided could decline and stock-type revenue could stagnate. As a small organization with 141 employees (as of March 31, 2026), the impact of the loss of core personnel on business operations is relatively significant. The Group is promoting personnel shifts funded by efficiency gains from AI adoption, along with reforms to compensation and evaluation systems, but whether these can be realized in a timely manner is uncertain.

As a telecommunications carrier, the Group bears an obligation to protect the secrecy of communications and holds personal information such as numerous email addresses; if it were to delay responding to amendments to the Personal Information Protection Act or an information leak were to occur, it could have a material impact on operating results and financial condition through claims for damages and loss of social credibility. The Group strives to strengthen personal information management through the activities of its Information Security Office based on ISMS certification (obtained August 2007), employee training, internal audits, and other measures. As the frequency of legal amendments increases, ongoing increases in compliance costs are also anticipated.

Focus Capital Co., Ltd. is a major shareholder holding 43.1% of issued shares (on a voting rights basis), and any significant change in its shareholding ratio or business strategy could affect the Group's business development. Although the Group states that the independence and autonomy of its management policy and business strategy decision-making are currently maintained, there is a personal relationship in that the Chairman of the Board was invited from that company. The risk that future changes in shareholder composition could affect the stability of management cannot be ruled out.

The Group carries out corporate acquisitions and business investments as a strategic measure, conducting detailed due diligence; however, if expected results are not achieved due to changes in economic conditions or the business environment, impairment of goodwill or customer-related assets, or valuation losses on shares of affiliated companies, could occur, affecting operating results and financial condition. It is difficult to completely eliminate future uncertainties, and risks are also inherent in the post-acquisition integration process. As the Group is a small organization, it should also be noted that resources available for managing and integrating acquired companies are limited.