Our group's business is influenced by the markets in which it operates, including the gaming market, amusement equipment market, internet-related services market, and IP content-related market. Additionally, we recognize that the interconnection between these markets has strengthened in recent years due to the online expansion of game software, the proliferation of social media, and the spread of social applications. In response to these market trends, our group aims to strengthen existing businesses, capture new customer needs, and promote business expansion by enhancing cooperation between different business segments.

However, our group may be affected by trends in these markets. Additionally, if sufficient synergy between different business segments cannot be achieved, it could hinder the business development we anticipate and, as a result, potentially impact our group's performance.

Our group provides various outsourcing services primarily to software development companies and internet site operators. Traditionally, the services we offer were conducted within our client companies. However, due to the limitations of nurturing specialized personnel and accumulating know-how internally, the need to focus management and human resources on improving and enhancing product and service quality, and the goals of reducing costs and improving operational efficiency, outsourcing operations have become widely adopted in recent years.

Our group recognizes that the demand for outsourcing services among client companies will continue to be maintained and expanded in the future. However, there are uncertainties in predicting the future, and if the demand for outsourcing services among client companies does not expand or decreases, it could impact our group's performance. Additionally, even if certain processes within client companies become systematized, we believe that there will still be a need for outsourcing services involving human checks, testing, monitoring, and inspections. Nevertheless, we cannot deny the possibility that advancements in AI and other technologies may reduce the demand for some of the services we provide, which could also impact our group's performance.

As a pioneer in the fields of debugging, third-party software verification, and monitoring, our group has built a substantial track record with numerous client companies since our establishment. We strive to differentiate ourselves from competitors by accumulating know-how and diversifying our services in these areas. Additionally, by investing in new ventures such as media and content, we are accelerating our growth.

However, in the industries where our group operates, multiple companies have entered the market, leading to increased competition. If we fail to sufficiently differentiate ourselves in the face of this intensified competition, it could impact our group's future business development and performance.

In our group's business operations, a significant portion of the work is carried out by temporary employees. Therefore, it is essential to continually secure a substantial workforce of temporary employees.

While we are fully committed to securing and developing our workforce, if for any reason it becomes difficult to secure the necessary personnel, it could impact our operations and order-taking activities, potentially affecting our group's performance.

The execution of practical tasks such as debugging is carried out by utilizing contract workers (sole proprietors) registered with our group, based on work plans formulated by our group's managers. We heavily rely on these individuals for a significant portion of our operations. To ensure proper management, we establish and maintain necessary contracts and operational frameworks with these contract workers. Additionally, we strive to secure sufficient personnel at each location by promoting their transition to formal employment where possible.

However, if any factors cause disruptions in these operations or if there is a shortage of personnel in the future, it could impact the execution of tasks and order-taking activities in this business, potentially affecting our group's performance.

Our debugging and third-party software verification services primarily involve debugging and verifying software developed by client companies. Generally, after our group completes these services, the client companies conduct their own final inspections of the software before releasing the product. However, defects may still occur after the product is released. If the occurrence of defects increases in the products we handle, the reliability of our service quality may decline, potentially impacting our group's performance.

Additionally, we make considerable efforts to explain to our client companies beforehand that it is generally impossible to completely eliminate all defects from software, and that our services focus on identifying defects rather than guaranteeing the overall quality of the product. We also include certain indemnity clauses in our contracts. However, there remains a possibility that we could be held liable for warranty or damages under certain circumstances, which could impact our group's performance.

In our debugging and overseas expansion support services, we assist domestic game software companies with their global expansion and provide services to overseas companies. We recognize that expanding our services to overseas markets, which often have larger game software markets than Japan, is a critical management challenge for achieving sustainable growth.

Our group is committed not only to supporting domestic companies in their overseas expansion but also to actively developing local companies in those regions. However, the form of debugging services and other operations may differ in some regions. Therefore, there is a possibility that our business development may not progress as planned. Additionally, we may face various local regulations, market trends in the regions where we operate, and the impact of currency fluctuations.

For monitoring operations, etc., we provide services 24 hours a day, 365 days a year support based on contracts with client companies.To this end, we have established a system to promptly notify client company representatives in case of detected issues or signs of potential problems.

However, all internet services we manage rely on communication networks, and their proper functioning depends on both our own infrastructure and third-party communication equipment. While we have implemented measures such as server and line redundancy, in the event of network disruptions caused by disasters, accidents, or if there are damages from computer viruses, unauthorized external access, or any operational issues leading to service downtime, we may be unable to continue the commissioned operations. Furthermore, if the cause of the disruption or network disconnection is attributed to our company, it could lead to a loss of trust from our client companies, potentially impacting our group's performance.

Our group recognizes the importance of generating revenue through royalties from patent licenses, leveraging our owned IP. We focus on acquiring these royalties and reinvesting them into research and development for both existing and new businesses. Additionally, in our media and content operations, we are expanding our business based on the "IP 360° Development" strategy, which involves extending our IP into various domains such as anime, games, music, theater, apparel, and the metaverse.

While we strive to plan, produce, manage, and operate more attractive anime works, the popularity of each work can vary greatly, and not all works are guaranteed to be hits. Similarly, in game publishing and development, we aim to attract and retain users by developing new content and enhancing the features of existing content. However, due to the shortening life cycles and the diversification of user preferences, there is a possibility that we may not be able to provide services that are widely and continuously supported by a broad user base. Furthermore, while we respect the IP of third parties and strive to avoid infringements, focusing on the importance of IP in our business operations and strengthening our internal management systems, there is a possibility that we may face lawsuits or injunctions from third parties alleging IP infringement. These factors could potentially impact our group's performance.

In some areas of our business, our group engages in the dispatch of practical workers, and we have obtained approval for "General Worker Dispatch Business" from the Minister of Health, Labour and Welfare for each business location, in accordance with the "Act on Securing the Proper Operation of Worker Dispatching Undertakings and Protecting Dispatched Workers." As such, our operations are subject to the regulations of this law.

While our group conducts its business operations in strict compliance with all applicable laws and regulations, any incident of legal violation could lead to a loss of trust from our client companies and potentially impact our group's performance.

In recent years, various legal regulations have emerged in the internet industry, many of which aim to ensure the proper operation of telecommunications operators and site administrators. While these regulations do not directly restrict our group's business activities, the introduction of new laws and regulations in the future could create new service demands to support our client companies' compliance efforts. On the other hand, if our client companies' operations are restricted by these regulations, or if our group's business activities become subject to legal restrictions, it could potentially impact our group's performance.

Our group aims to develop and grow as a competitive corporate group in the future, and we are committed to strengthening our workforce as needed. However, if our group's management system does not function adequately, it could potentially impact our group's performance.

Additionally, as we seek to expand our business in the future, we recognize the need to continuously secure talented personnel. Our policy is to appropriately secure talented individuals and focus on their development. However, if we fail to secure talented personnel as planned, or if there is a significant outflow of existing employees, it could lead to decreased competitiveness and constraints on business expansion, potentially impacting our group's performance.

In our group's business operations, we handle confidential information related to unreleased game software as well as confidential information concerning internet sites, some of which include personal information. As such, a high level of information management and operational protocols is required.

To prevent any external leakage of client companies' confidential information, our group has established and signed confidentiality agreements with all related parties. We also emphasize the importance of confidentiality obligations through training and strive to prevent information leakage. Additionally, we have implemented various security measures, such as access control systems and surveillance cameras.

However, if confidential information obtained in the course of our operations were to leak externally for any reason, it could lead to a loss of trust from our client companies and potentially impact our group's performance.

Our group considers M&A and equity investments both domestically and internationally as one of the options for strengthening existing businesses, accelerating global expansion, and entering new business areas.

When conducting M&A, we strive to mitigate various risks by performing due diligence on the financial condition and contractual relationships of target companies, including advice from external experts such as lawyers, tax accountants, and certified public accountants. However, due to the nature of these transactions, it may be challenging to conduct sufficient due diligence within time constraints, and there is a possibility that contingent liabilities, unrecognized liabilities, or defects may be discovered post-acquisition.

Additionally, in business development through M&A and equity investments, there is a possibility that the expected synergies and business expansion effects initially envisioned by our group may not be realized. Furthermore, new business areas may bring inherent risk factors specific to those businesses. Combined with potential post-acquisition performance deterioration of subsidiaries, goodwill amortization or impairment, or impairment of investment stocks, these factors could impact our group's performance.