INEST, Inc.

Customer acquisition methods such as obtaining approach lists from business alliance partners, event booths, and in-store sales are highly dependent on external operators, and if a partner raises prices, changes contract terms, or shifts business policy, this could have a direct and material impact on lead acquisition activities. If these risks materialize, they could lead to a decrease in opportunities to acquire new customers, an increase in sales promotion expenses, and a slowdown in sales growth, which could adversely affect the financial position and operating results.

The Group is highly dependent on information systems for call operation management, end-user information management, and other functions, and in the event of a system failure, there is a possibility that this could lead to a complete halt of sales activities or data leakage. Although redundancy of servers and network equipment and regular maintenance are implemented, in the event of an unforeseen failure, litigation and claims for damages could have a material impact on the financial position and operating results.

The Group accumulates customers' business information and personal information on servers, and there is a constant risk of data leakage or corruption due to unauthorized access, computer viruses, natural disasters, human error, and other causes. Although measures such as the development of private networks, installation of high-grade firewalls, employee training, and access restrictions have been implemented, if a problem occurs, loss of trust, claims for damages, and litigation could have a material impact on the financial position and operating results.

In connection with the acquisition of control over Renxa Inc. and ZITTO Co., Ltd., the Group has recognized a substantial amount of goodwill and intangible assets with indefinite useful lives on its IFRS consolidated statement of financial position, requiring impairment testing every fiscal period. Although the Group has determined that recognition of impairment loss is not necessary for the fiscal year under review, if profitability declines due to significant changes in the business environment or operations, the occurrence of impairment losses could have a high impact on the financial position and operating results.

In the internet-related industry, technological innovation is progressing rapidly, and customer needs are constantly changing and diversifying. The Group continues to gather information with an emphasis on stability, safety, reliability, and economic efficiency, but if it falls behind in responding to technological innovation, its competitiveness could decline, potentially affecting the financial position and operating results.

Changes in trends in markets related to smartphones and tablet devices could result in reduced profit margins due to lower sales commission income. The Group strives to improve sales efficiency based on DX and to swiftly reflect market changes in its management strategy, but deterioration in the market environment could affect the financial position and operating results.

The Group's main business partners are Hikari Tsushin, Inc., Premium Water Holdings, Inc., and their respective group companies, and there is a risk that the business relationship may fluctuate depending on trends in the water server agency sales business and the information and telecommunications market. The Group has a policy of diversifying the composition ratio of its sales revenue by expanding transactions with companies other than these, but given the currently high level of dependence, a change in policy by a specific business partner could directly affect the financial position and operating results.

The Group conducts business based on the terms and conditions of contracts with telecommunications carriers, manufacturers, and top-tier agencies, and there is a possibility that business partners may change their policies due to domestic and international economic conditions and business trends, leading to a decline in engagement. This risk cannot be completely eliminated, and in the event of a sudden change in market conditions, it could materialize, making it impossible to achieve the originally planned sales growth.

The Group is subject to legal regulations such as the Act against Unjustifiable Premiums and Misleading Representations, the Act on Specified Commercial Transactions, the Telecommunications Business Act, and the Act on the Protection of Personal Information, and has established a system of legal checks by administrative departments and quality checks utilizing external organizations. However, if these laws and regulations are unpredictably changed or newly established, restrictions may be placed on business activities, potentially affecting the financial position and operating results.

In call center operations and the BPO business, productivity per person is correlated with sales revenue, making it essential to secure a large number of personnel, and retaining staff and maintaining training standards in face-to-face sales and call center operations is directly linked to service quality and operational stability. If the Group is unable to continuously secure sufficient labor due to population decline, the falling birthrate and aging population, changes in the recruitment market, and other factors, this could adversely affect the financial position and operating results.