Interspace Co.,Ltd.

Web services such as "Access Trade," "MW Security Store," and "Mamastar" require stable operation as a precondition for business continuity, and if a system failure occurs due to unauthorized access, ransomware attacks, natural disasters, or other causes, it could have a material impact on the business and results of operations. The company has established a failure-prevention framework through continuous network monitoring, maintenance management, and ongoing capital investment, but unforeseen events cannot be completely eliminated. This is ranked as the highest-priority item in the Annual Securities Report in terms of importance, considering frequency of occurrence and estimated damage amount.

The performance marketing business and media business are strongly affected by changes in internet technology and trends as well as changes in business models, creating a risk that services could become obsolete if the company's response to such changes is delayed. The company strives to strengthen existing services and develop new ones through hiring excellent personnel, gathering the latest technological information, and supporting certification acquisition, but if it fails to respond in a timely manner, this could have a material impact on the business and results of operations.

Media sites such as "Mamastar," "4MEEE," "saita," and "Yoga Journal" earn revenue from ad network advertising provided by major advertising platform operators, and in recent years advertising unit prices have already declined due to policy changes and other factors. Although the company is working to maintain revenue by developing new advertising platform partners, if further constraints arise due to future policy or technical specification changes, this could have a material impact on the business and results of operations.

The performance marketing business and media business handle users' personal information and are subject to obligations under the Personal Information Protection Act. The company has established a framework including TRUSTe certification, establishment of a privacy policy, and internal audits, but if an unforeseen leak of personal information occurs, this could lead to claims for damages or loss of credibility, having a material impact on the business and results of operations.

At present, the company does not believe there are legal regulations that would materially affect business continuity, but if new laws, regulations, or administrative guidance targeting internet users and businesses are enacted, this could have a material impact on the business and results of operations. In particular, if technologies used for ad delivery, performance tracking, and fraud prevention become subject to regulation or restriction, there is a risk of substantial investment being required to develop alternative technologies and of opportunity losses during the transition period.

The company utilizes generative AI to improve operational efficiency, but risks such as leakage of personal information and trade secrets, infringement of copyrights and other intellectual property rights, and the spread of misinformation are anticipated. The company seeks to mitigate these risks through the formulation and dissemination of usage rules and guidelines, but given the uncertain regulatory environment, including the enactment of AI regulatory legislation in the EU, if unforeseen risks materialize, this could have a material impact on the business and results of operations.

Sales through agencies in the affiliate service account for 46.6% of the total, indicating a high degree of dependence on agencies. If transactions with agencies decline significantly due to changes in agency circumstances or policies, or due to a decline in the competitiveness of the company's services, this could have a material impact on the business and results of operations. The company strives to maintain good relationships, but risks arising from external factors cannot be completely eliminated.

The company has established local subsidiaries in Indonesia, Thailand, Vietnam, Singapore, and Malaysia and operates businesses there, so political risks such as war and terrorism, economic risks such as sudden exchange rate fluctuations and trade imbalances, and social risks such as labor issues arising from cultural and customary differences could occur at levels exceeding expectations. In addition, since the financial statements of overseas affiliated companies are prepared in local currency and then translated into yen, fluctuations in exchange rates could have a material impact on consolidated results of operations and financial statements.

Shinichiro Kawabata, the founder and Representative Director, Executive Officer and President, plays a critical role in determining and executing management policy and business strategy. The company is working to reduce this dependence through information sharing with executive staff and delegation of authority via the executive officer system, but if he becomes unable to perform his duties for any reason, this could have a material impact on the business and results of operations.

The company is actively considering and promoting M&A and business alliances for projects expected to generate synergies with existing businesses, but there is no guarantee that these will proceed as originally planned, and if a project does not progress as expected due to external factors or changes in the environment, this could have a material impact on the business and results of operations.