NS Group, Inc.

Business operations and growth are highly dependent on capable executives and employees with specialized knowledge, management experience, and decision-making ability. If key personnel leave, recruitment plans are not met, or development is delayed, business operations may be disrupted. There is also a risk that, in the event of the early departure of key executives, an appropriate successor may not be secured in a timely manner.

As of the end of the current consolidated fiscal year, the Company holds goodwill of ¥36,039 million and customer-related assets of ¥7,041 million, together accounting for 56.6% of consolidated total assets. If profitability deteriorates, a substantial impairment loss may be recognized. Although the Board of Directors and other bodies continuously monitor monthly business performance, there is also a coexisting risk of increased loss valuation provisions due to worsening economic conditions.

The Company centrally manages rent guarantee contracts, deposits and withdrawals, tenant information, rent collection, and other operations using the core system SIONS (Core System), resulting in high dependence on IT systems for its business. If a serious failure occurs due to cyberattacks, virus infection, disasters, or other causes, there is a risk that smooth business execution could be hindered. Although information security measures and business continuity plans are in place, they do not guarantee complete protection.

The Company handles large volumes of customer information and confidential information, including personal information, and must constantly respond to increasingly sophisticated cyberattacks and evolving unauthorized access methods. If an information leak occurs, there is a risk of liability for damages, sanctions under the Personal Information Protection Act, and reputational damage. There is also a risk of leakage due to non-technical factors, such as internal misconduct.

There is currently no legal regulation specifically governing the rent guarantee business, but the introduction of new regulations or amendments to existing laws could constrain demand for rent guarantees or the Company's business activities. Although a registration system was launched by the Ministry of Land, Infrastructure, Transport and Tourism in October 2017, registration is not mandatory, and the future direction of regulatory tightening remains uncertain. Depending on the content of any regulatory changes, the Company could be forced to fundamentally review its business model.

Rapid technological advances such as AI could enable competitors to develop faster and more effective screening processes, requiring continuous technology investment to maintain competitiveness. If investment costs become excessive, or if the returns on investment are insufficient, there is a risk of an adverse impact on financial position and business results. The Group continuously improves its screening processes and conducts research and development, but keeping pace with the speed of technological change remains a challenge.

The rent guarantee business requires no license and has low barriers to entry, and competition is particularly intense in the market for small-scale rental real estate companies over sales commissions, screening approval rates, and screening speed. If a competitor with larger-scale customer data than the Company enters the market, there is a risk that the Company may fall behind in screening speed and accuracy. This could adversely affect the profitability of the expansion strategy, including business-use guarantees.

As of the end of December 2025, outstanding borrowings totaled ¥25,868 million (34.0% of consolidated total assets), and since these are variable-rate, there is a risk that interest expense will increase if interest rates rise. The loan agreements include financial covenants, and if these are breached, the Company could lose the benefit of the term and be required to immediately raise repayment funds. While the Company currently judges there is no risk of breach, there is also a possibility of additional borrowing associated with future business expansion.

Akihiro Otani, BV Asset Co., Ltd., and BiVa Holdings Co., Ltd. collectively hold 50.1% of total issued shares, which may exert significant influence over shareholder meeting resolutions such as the appointment/dismissal of officers and organizational restructuring. Although the management agreement with BiVa Holdings Co., Ltd. was terminated on June 30, 2025, a listing success fee of ¥412.5 million (tax included) was paid in December 2025, creating interests that differ from those of general shareholders. Going forward, the Company's policy is, in principle, not to conduct related party transactions except those deemed reasonable.

Due to the nature of the Rent Guarantee Service business, the Company makes subrogated payments when a tenant fails to pay rent and subsequently collects the amount, so an unexpected increase in non-payment could lead to a deterioration in cash flow. In the event of changes in domestic or overseas political conditions, economic crises, or large-scale natural disasters, accumulated know-how may no longer function adequately for risk prediction. For long-term lease contracts, changes in economic and social conditions may also increase the risk of being unable to collect subrogated receivables.