CORREC HOLDINGS Inc.

If the Company Group is unable to secure and develop excellent personnel in management, back-office, sales, and other areas, or if compensation and wage levels rise in order to secure personnel, there is a possibility of declining competitiveness and adverse effects on operating results. In particular, there is a risk that business continuity could be disrupted if key personnel move to competitors or if turnover exceeds expectations. The Company Group is working to build up its recruitment and training systems, but disclosure of specific measures remains limited.

Because sales staff at multiple subsidiaries visit individual homes and similar locations alone as part of their work, constant supervision by managers is difficult, and the occurrence of misconduct or scandals cannot be completely ruled out. Should such an incident occur, wide-ranging impacts on business and performance are anticipated, including suspension of operations or contract termination by client companies, unfavorable treatment in new contract negotiations, and difficulty in sales activities due to reputational damage. As countermeasures, crisis management training is conducted monthly for the first three months after joining the company and quarterly thereafter, along with monthly compliance training.

In door-to-door sales visits to individual homes, complaints or disputes may arise from interactions with customers visited. If a serious complaint or litigation develops, there is a risk of impact on performance through reputational decline of the Company Group and adverse effects on contracts with client companies. This is addressed through the implementation of various training programs, prompt reporting to client companies, and the sharing of complaint details among officers and managers along with the formulation and implementation of measures to prevent recurrence.

There are situations in the business where personal information is temporarily stored, and there is a possibility of personal information leakage due to unauthorized access. Should a leak occur, there is a possibility of significant impact on performance through loss of social trust arising from claims for damages, litigation, sanctions and criminal penalties pursued by administrative authorities or client companies, and similar liabilities. The Company states that no problems due to personal information leakage have occurred to date, and it addresses this risk through the establishment of a thorough personal information management system.

Some businesses are premised on the stable operation of information systems and internet connectivity environments, and if system trouble occurs due to natural disasters, accidents, server overload, software malfunction, unauthorized access, computer virus infection, or similar causes, stable provision of services may become difficult, potentially affecting performance. In addition to regular data backups and security measures, the Company strives to build a stable operational system through the distributed placement of systems across multiple data centers.

The Company Group operates businesses utilizing internet advertising, and amid the rapid advancement of technological innovation driven by AI evolution and new usage methods, failure by the Company Group to adapt to this environment could affect performance. Internet-related businesses evolve rapidly day by day, and although continuous research into the latest technologies is being conducted, there is an ever-present risk of being unable to keep pace with the speed of technological change. In particular, delays in AI utilization could lead to a decline in differentiation capability relative to competitors.

The web media and content operated by the Company Group rely heavily on traffic acquisition from search engines such as Google, and if there is a major change in algorithms, traffic could sharply decline, potentially affecting performance. Although SEO and other measures are continuously implemented, changes in search engine operators' policies are an external factor beyond the Company's control. The high dependency of the traffic acquisition base on search engines constitutes a structural risk factor.

The businesses operated by the Company Group face multiple competitors and operate in a severe competitive environment. Although the Company seeks to differentiate itself through its unique strength of combining "web x real" (online and offline), if competition intensifies due to the entry of large corporations in the future, performance could be affected. While the Company continues to develop BtoC-focused services, continuous monitoring is necessary regarding the sustainability of its competitive advantage.

The Company Group has been actively pursuing acquisitions, investments, collaborations, and partnerships toward long-term profit growth, and intends to continue this policy going forward. If the business plans and risks of target companies are misjudged, expected profits or synergies may fail to materialize, and there is a possibility that the investment recovery period may exceed expectations or become unrecoverable. As of the end of February 2025, goodwill of ¥101,796 thousand was recorded, and if the profitability of acquired companies or businesses significantly declines, additional losses may be recorded, potentially affecting performance.

Stock acquisition rights have been granted to officers and employees, and as of the end of February 2025, the number of potential shares was 363,920, equivalent to 4.96% of the number of issued shares. If these stock acquisition rights are exercised, new shares will be issued, potentially diluting the share value and voting rights ratio of existing shareholders. In addition, if performance deteriorates, achieving stable dividends may become difficult, potentially leading to a reduction in dividends or suspension of dividend payments.