ZETA INC.

The domestic BtoC-EC market reached ¥26.1 trillion in FY2024 (up 5.1% year on year) and the BtoB-EC market reached ¥514.4 trillion (up 10.6% year on year), showing a trend of expansion. However, if the industry environment changes due to the introduction of new regulations, technological innovation, or unforeseen factors, this may affect the business performance of the Group. Since the Group's primary business domain is the EC market, it is highly sensitive to changes in the market environment.

Many companies have entered the domestic BtoC-EC market, and competing services may increase further. If the Group is unable to sufficiently differentiate itself or improve its functionality, or if competition intensifies due to new market entrants, this may affect the Group's business and performance. The Group is advancing initiatives in new areas such as listing advertisements in retail media, but maintaining differentiation remains an ongoing challenge.

Technological innovation in internet-related fields is progressing remarkably, and the user environment is expected to change rapidly, as seen with the spread of smartphones and tablets. If the Group takes time to respond to such environmental changes, this could lead to a decline in competitiveness and materially affect its business and performance. In the ad-technology field as well, the pace of change is fast, requiring continuous adaptation to new advertising markets and technologies.

As of the filing date of this document, the Group is not aware of any legal regulations that would have a material impact on the continuity of its business. However, if new laws, regulations, administrative guidance, or other regulations targeting internet users and businesses are newly enacted, this may materially affect the Group's business and performance. The EC market and ad-technology field are areas prone to changes in the regulatory environment, requiring continuous monitoring.

Officers and executive employees, including the Representative Director, who possess specialized knowledge, skills, and experience, play important roles in the management and business execution of each department, and in certain fields there is reliance on the know-how of these individuals. If these officers and employees retire or resign and it becomes difficult to hire successors, this may affect business strategy and performance. The Group is working to build a structure that eliminates excessive dependence on specific individuals by strengthening its management organization and technical staff.

The Group manages transaction data and handles information and personal data of client companies and others, and has implemented measures such as entry/exit management and hardware and network management. However, if information leaks externally due to unauthorized access from outside parties or other causes, this may materially affect the Group's business and performance through claims for damages or loss of social credibility. Although the Group makes maximum efforts, including compliance with laws and regulations, complete defense is difficult given the increasing sophistication of cyber threats.

The "ZETA CX" solution service is required to operate 24 hours a day, 365 days a year. If equipment or networks become unusable due to disasters such as earthquakes or fires, computer viruses, hackers, hardware or software malfunctions, or human error, this could lead to a complete service outage. A service outage could cause a decline in credibility, customer cancellations, and impacts on acquiring new customers, which may materially affect the Group's business and performance. The Group strives to prevent failures through monitoring and redundancy of equipment and networks, as well as regular data backups.

The Group files for and obtains patent rights and registers trademarks, but there is no certainty that unobtained rights will be acquired in the future. If domestic or overseas businesses obtain patents or other intellectual property rights, lawsuits or claims against the Group may arise, and if the Group infringes on the intellectual property rights of a third party, it may be subject to claims for damages or requests for injunctions against use. If such situations occur, this may materially affect the Group's business and performance.

The Group is promoting new business development and expansion of existing businesses through M&A and business alliances, but there may be cases where the expected effects are not achieved, or unrecognized liabilities or reputational risks become apparent after execution. If the profitability of an M&A-acquired company declines significantly from the original plan due to an economic downturn or significant exchange rate fluctuations, it may become necessary to recognize an impairment loss. Such situations may hinder the realization of the strategically intended business expansion and may adversely affect the Group's business activities and performance.

As of the filing date of this document, the Group has substantial tax loss carryforwards, and corporate tax based on the ordinary tax rate is not currently levied. If business performance continues to progress smoothly in the future and the tax loss carryforwards are resolved, corporate tax, resident tax, and business tax based on the ordinary tax rates will be levied on taxable income, which may affect net income and cash flow for the period. It should be noted that this increased tax burden could become a sudden cost-increasing factor during a phase of business expansion.