Kids Star Inc.

Approximately 80% of total revenue is derived from listing fees for the social experience app "Gokko Land" (Gokko Land), resulting in an extremely high degree of dependence on a specific service. Should a significant change occur in the revenue structure due to the establishment or amendment of new laws and regulations or other unforeseen factors, this could materially affect operating results and financial condition. The Group intends to continue expanding other core services, including consideration of new businesses.

If information leakage or system destruction occurs due to human error or external cyberattacks, the Group may become liable for damages or suffer a loss of trust among users and customers. While a rigorous security framework has been established through measures such as the introduction of MDM tools and cyberattack countermeasure software, the Group plans to continue enhancing its information security governance framework, including strengthening vulnerability management and access rights management.

If the Group is unable to secure human resources as planned due to economic conditions or changes in the labor market, this could affect operating results and financial condition. In particular, as competition to acquire specialized talent intensifies amid business expansion, the departure of personnel in key positions or delays in hiring could hinder organizational operations and business promotion. The Group plans to secure and retain excellent talent through measures such as revising its personnel system and strengthening incentive design.

In holding and operating real-world events, including EXPO, safety incidents such as injuries, falls, or contact accidents involving visitors—particularly children—may occur due to factors such as venue setup, flow management, crowd control, and hygiene management. Should a serious accident occur, this could affect operating results and financial condition through liability for damages, reputational damage, or the cancellation or scaling-down of events. The Group strives to prevent accidents through the development of safety management manuals, advance formulation of operational plans, clarification of role divisions among stakeholders including outsourced partners, and establishment of on-site monitoring systems.

The competitive environment is intensifying, with cram school operators entering the educational app market and major telecommunications companies entering the education market, among other developments. If differentiation from similar services becomes difficult, this could affect operating results and financial condition. In addition, if the growth of the primary target market falls short of expectations due to the continued decline in Japan's birthrate, order intake and net sales could be affected as customers review their listing and promotional budgets. The Group plans to address this through diversification of service offerings, including promoting overseas expansion and expanding the target age range.

The Group provides its apps through app stores operated by Apple Inc. and Google LLC, and uses the development engine of Unity Software Inc. for content development. Should the policies, business strategies, or terms of these operators change significantly, materially altering the conventional method of service provision, this could affect operating results and financial condition. The Group plans to consider measures for acquiring fans and revenue that do not rely solely on the platforms currently in use, including the holding of real-world events.

The Group has been promoting overseas expansion, having launched "Gokko World" in August 2023 and resolved to establish a subsidiary in Vietnam in January 2025. However, political instability in various countries, the enactment or amendment of laws and regulations, misconduct by local partners, violations of anti-bribery regulations, foreign exchange remittance restrictions, geopolitical factors, and similar issues may necessitate delays or revisions to business plans. The Group plans to mitigate these risks through information sharing with local companies and outside experts, and by establishing regulations and conducting compliance training for overseas subsidiaries.

Should rapid advances in cutting-edge digital technologies such as AR, the metaverse, and AI give rise to major shifts in demand unanticipated by the Group, this could diminish its technological advantage and service competitiveness, thereby affecting operating results and financial condition. The Group continuously conducts research on the latest technologies and regards their incorporation into business processes and services as essential to business expansion.

Kufu Company Holdings Inc. holds 33.42% of voting rights, and combined with Mr. Yoshiaki Akita's 26.96% voting stake, the total exceeds a majority, making Mr. Akita a controlling shareholder. Should there be a significant future change in the company's business strategy or the Group's positioning, or should the company or Mr. Akita sell shares of the Group, this could affect the market price and liquidity of the Group's shares as well as its operating results and financial condition. While the Group currently recognizes no business competition, personal relationships, or constraints on management that would compromise its management independence, it plans to have the Board of Directors deliberate on the appropriateness of transactions from the standpoint of protecting minority shareholders.

Development of digital content for "Gokko Land" typically takes approximately six months. However, if development man-hours increase significantly due to unforeseen defects or large-scale modification requests from customers, the cost of sales may exceed initial estimates, or the timing of revenue recognition may be delayed, potentially affecting operating results, financial condition, and earnings forecasts. The Group strives to mitigate this risk through monthly confirmation of development progress and the expansion of its project management framework.