DEMAE-CAN CO.,LTD

The Japanese food delivery market grew rapidly from ¥418.3 billion in 2019 to ¥862.2 billion in 2023, but is projected to decline 7.6% year-on-year to ¥796.7 billion in 2024, marking a turn toward market contraction. If this is compounded by factors such as reduced consumption of value-added services due to economic deterioration, it will directly affect the Company's business and results. The Company is promoting measures to revitalize the market, but it is difficult to fully control changes in the external environment.

Multiple competing companies exist that intermediate delivery orders over the internet, and there is a risk that the Company's market share could be eroded by intensifying competition or new market entrants. Moves by member merchants to strengthen their own proprietary delivery services pose a similar threat. The Company is working to improve its competitiveness through enhanced service quality, usability, and call center capabilities, but the likelihood of occurrence is assessed as medium and the impact as high.

The management plan aiming to become the No.1 delivery service sets out targets for increasing active users, expanding order volume, and accelerating Sharing Delivery®, but it contains numerous inherent risk factors, including stagnation in market expansion, failure to gain market share against competitors, difficulty securing talented personnel, and the ineffectiveness of sales strategies and cost-reduction measures. If the plan's assumptions do not unfold as expected, the targets may not be achieved; the likelihood of occurrence is assessed as medium and the impact as high.

The Company's business depends on infrastructure such as personal computers, smartphones, and communication networks, and system outages caused by sudden traffic surges, computer viruses, hacking, and similar events threaten business continuity. The Company has implemented measures such as firewall installation, access log monitoring, server redundancy through cloud migration, and 24/7/365 status monitoring, but the likelihood of occurrence is assessed as medium and the impact as high, and any outage that occurs would have a direct impact on results.

The majority of the Group's sales are generated by the "Demae-can business," and if this business experiences a decline in order volume or the number of member merchants, system failures, leakage of personal information, or changes in legal regulations, it would have a direct and significant impact on the Group's overall results. The Company is working to reduce this dependence through the development of new businesses, but alternative revenue sources remain limited at present. The likelihood of occurrence is assessed as low, but the impact is assessed as high.

The Company is a personal information handling business operator that acquires and uses personal information such as addresses, and if an information leak were to occur, it would have a material impact on results through damage claims, loss of credibility of the operated sites, and deterioration of corporate image. The Company has implemented measures such as establishing an information security committee, developing internal regulations, conducting employee training, and managing access authority by confidentiality classification, but the likelihood of occurrence is assessed as low and the impact as high.

The Company has entered into a capital and business alliance agreement, a platform usage license agreement, and an outsourcing agreement with LINE Yahoo Corporation, an other affiliated company, which is also a major shareholder holding 35.3% of the Company's shares. If the agreement is terminated or changed on unfavorable terms due to a change in LINE Yahoo's business strategy, or if there is a significant change in its voting rights holding ratio, this could affect the Company's business operations, decision-making, and share price. The likelihood of occurrence is assessed as low and the impact as high.

Business operations may be affected by amendments, changes in interpretation, or enactment of new laws such as the Act on the Protection of Personal Information, the Consumer Contract Act, the Act on Specified Commercial Transactions, the Act against Unjustifiable Premiums and Misleading Representations, the Act against Delay in Payment of Subcontract Proceeds, and the Antimonopoly Act. The Company addresses this through a system in which the legal affairs group checks each legal amendment as it occurs, the establishment of compliance and risk management regulations, and the implementation of compliance training, but the likelihood of occurrence is assessed as medium and the impact as medium.

The Group is a small organization consisting of 6 directors, 3 auditors, and 356 employees (including consolidated subsidiaries), and securing talented personnel is a key challenge for stable growth. If the Company is unable to secure necessary personnel in a timely and appropriate manner, or if capable personnel leave, it would hinder business operations and development. The Company is actively promoting new graduate recruitment, mid-career recruitment, and employee promotion, but the likelihood of occurrence is assessed as medium and the impact as medium.

The Company has tax loss carryforwards, and at present is not subject to corporate income tax and other taxes at the normal tax rate. If these loss carryforwards are used up or expire in the future, the normal corporate income tax burden will arise, potentially affecting the Company's financial position and operating results. In addition, the Company has not paid dividends since the fiscal year ended August 2020, and if results do not progress as planned, it is expected to remain difficult to pay dividends. The likelihood of occurrence is assessed as low and the impact as small.