PIXTA Inc.

A certain proportion of PIXTA Business revenue comes from the use of content for various advertising purposes, including internet advertising, and changes in the advertising market or reductions in advertising production budgets due to economic downturns directly affect earnings. The Company is working to enhance its content offerings and optimize its pricing structure and service plans to meet a wide range of needs, but there is a risk that changes in the external environment may prevent it from securing the initially expected revenue.

The fotowa Business generates most of its revenue from on-location photography services for children and families, and while the market is growing steadily despite the declining birthrate, there are multiple competitors in the photo studio and on-location photography service space. If the Company's competitiveness declines due to changes in consumer trends or intensifying competition, its business and results of operations may be affected. The Company is working to differentiate itself by improving photographer quality, enhancing the usability of its service site, and adding value to peripheral services.

The creative industry is undergoing rapid technological innovation and changes in customer needs, with particularly rapid progress in production technology innovation such as automatic image generation using AI. The Company is working to enhance service value through the active use of AI technology, but if it fails to respond in a timely manner to unexpected rapid changes, this could lead to a decline in competitiveness and affect its business and results of operations.

The Group provides its services via the internet, and if unexpected events occur, such as large-scale system malfunctions, access concentration far exceeding expectations, computer viruses, or cyberattacks, significant damage may occur to development operations, system equipment, backup data, and other assets. The Company promotes system and security enhancements for stable operation and has established a recovery framework for rapid restoration, but risks to business continuity and results of operations remain.

The PIXTA Business is based on receiving and selling content from an unspecified large number of creators through crowdsourcing, while the fotowa Business is based on photography services provided by photographers who have passed the Company's proprietary screening process; securing high-quality creators and photographers is fundamental to service quality in both businesses. If unexpected circumstances make it difficult to secure a sufficient number of high-quality creators and photographers to meet the needs of purchasers and users, this could affect the Company's business and results of operations. The Company continuously implements measures such as establishing an exclusive creator program, holding events, and developing guidelines for photographers.

In the fotowa Business, if equipment malfunctions prevent a shoot from being completed, or if accidents such as injuries or property damage occur during a shoot, or if troubles arise between photographers and users, this could lead to increased response workload and costs, as well as a decline in the credibility and image of the Company's services. The Company has established a safe and smooth photography framework through independent screening at the time of photographer registration and the development of photographer guidelines and regular provision of information, but it is difficult to completely eliminate such risks.

The Group intends to develop and cultivate new services and new businesses that leverage the strengths of its existing platforms, which may result in additional expenditures for system investment and marketing, leading to a decline in profit margins. If circumstances differ from forecasts and the development of new services and new businesses does not proceed as planned, there is a risk that the Company will be unable to recoup its investment, which could affect its business and results of operations.

The Group's business areas are subject to laws and regulations such as the "Act on Specified Commercial Transactions" and the "Payment Services Act," and discussions continue regarding legal regulations related to privacy protection amid the spread of internet use. If new laws are enacted or existing laws and regulations are revised to strengthen regulation in internet-related fields in the future, this could affect the Company's business and results of operations.

The Group is a personal information handling business operator that records and manages the personal information of service users through electromagnetic means, and if an information leak occurs, this could lead to a loss of social credibility and the incurrence of substantial expenses for responding to the incident, which could affect the Company's business and results of operations. The Company strives to comply with the "Act on the Protection of Personal Information" and prevent leaks through the development of internal rules and regulations, strengthening of management systems, thorough employee education, and enhancement of information system security.

Appropriate management and licensing of intellectual property rights, such as copyrights related to digital content, are fundamental to the Group's services, and if rights infringement occurs and leads to litigation or other disputes, this could lead to a loss of social credibility and the incurrence of substantial expenses for responding to the incident, which could affect the Company's business and results of operations. In the PIXTA Business, rights verification at the time of upload and obtaining consent for the use of portrait rights are mandatory, and the Company also pays close attention to preventing rights infringement in the development of new businesses by consulting with experts such as lawyers.