INCLUSIVE Inc.

The Group's services are deeply linked to Japan's domestic advertising market and consumption trends, and if companies reduce advertising budgets due to a deterioration in economic sentiment, this will directly impact business performance. Japan's total advertising expenditure in 2025 grew to ¥8,062,300 million (up 5.1% year on year), but in the internet advertising market there is a risk that demand for native advertising could shrink due to the introduction of legal regulations or the emergence of innovative advertising methods. The Group operates advertising products focused on native advertising, and responding to changes in the market environment is key to maintaining business performance.

Since the Group's business domains are not regulated industries and have low barriers to entry, an increase in market entry by competitors, including AI-utilizing vendors, is expected. In the internet services domain, the Group competes with advertising agencies that provide SNS operation support, and in the food-related domain there is a risk of innovative services emerging from other companies. The Group seeks to differentiate itself by optimizing services individually and by offering high-price, high-value-added services leveraging the Shimogamo Saryo brand, but if such strategies do not align with client intentions, business performance may be affected.

In the internet industry, the pace of technological innovation is rapid, with new advertising methods and technologies being developed one after another. The Group utilizes generative AI technologies such as ChatGPT for media operations, content production, demand forecasting, and marketing optimization, but if it fails to respond appropriately to these changes, its competitiveness may decline, potentially affecting business performance. A delayed response to technological changes carries the risk of loss of competitive advantage, particularly in the internet advertising and media businesses.

The Group provides targeted advertising utilizing cookie information and proprietary identifiers, and if a leakage of personal information occurs, it could damage the Group's social credibility and incur substantial expenses, thereby affecting business performance. Although the Group has taken measures such as obtaining Privacy Mark certification and developing internal regulations, there is a possibility that domestic regulation of user data usage could be strengthened with reference to European regulations, which could force changes to advertising delivery methods. Such regulatory tightening would affect the internet industry as a whole and could also compel changes to the Group's business model.

In the Brand Consulting domain, compliance is required with laws such as the Act against Unjustifiable Premiums and Misleading Representations, the Pharmaceuticals and Medical Devices Act, the Copyright Act, and the Trademark Act, while in the food-related domain, compliance with the Food Sanitation Act and other regulations is required. If content or advertising violates laws or public order and morals, or if a food poisoning incident occurs, the Group could be subject to business suspension, license revocation, damages claims, and other sanctions, potentially resulting in reputational damage and impact on its financial position. The Group has implemented measures such as building management systems and thorough hygiene control, but these do not guarantee complete prevention.

The Group positions new business ventures and M&A/business alliances as important growth strategies for expanding its business domains, but if the initially expected results are not achieved, there is a risk of goodwill impairment or losses associated with business divestiture or liquidation. Such losses could directly affect the Group's business performance and financial position. Managing the costs and integration risks associated with business restructuring has become an important management issue.

Founder and Representative Director and Chairman Makoto Fujita plays an important role in determining management policy and strategy, and dependence on him constitutes a business continuity risk. Effective January 27, 2026, Miki Kimura assumed the position of Representative Director and President, and the Group is advancing the establishment of an organizational management structure by clarifying the division of roles between the two. However, if an unforeseen event occurs to either individual or if either departs early, this could affect business development and performance.

The Group requires a diverse range of specialized personnel, including media production directors, editors, branding planners, and food-related specialists, and continuous recruitment of personnel is essential as the business expands. If intensifying competition for talent or changes in market needs make it difficult to secure excellent personnel, or if existing personnel leave the company, this could affect the Group's business, operating results, and financial position. While no significant disruption is currently recognized, this is identified as a risk in future business expansion phases.

The Company's internet-related services are premised on 24-hour operation, and a system failure directly leads to service outages. Although measures such as utilizing AWS and server redundancy have been implemented, if facilities or networks become unavailable due to external attacks such as computer viruses or hacking, or due to software malfunctions, this could affect the Group's financial position and operating results.

In the food-related domain, the Group procures a wide variety of raw materials, including ingredients and packaging materials, and strives for stable procurement by securing multiple suppliers. However, if procurement becomes difficult or purchase prices rise sharply due to abnormal weather, large-scale disasters, soaring crude oil prices, geopolitical risks, or exchange rate fluctuations, this could affect the Group's business, operating results, and financial position. The food-related domain provides high-price, high-value-added services centered on the Shimogamo Saryo brand, and the quality and stable supply of raw materials is a critical risk directly linked to brand maintenance.