Pole To Win Holdings, Inc.

Business performance is affected by trends in the game market, amusement equipment market, internet-related service market, IP content-related market, and other markets. As online expansion and the spread of social media strengthen the interrelationships among various markets, if sufficient synergy cannot be achieved between businesses, this may hinder the intended business development. The Group is addressing this through strengthening existing businesses, capturing new customer needs, and enhancing collaboration between businesses.

The Group's primary source of revenue is outsourcing services provided to software development companies and internet site operators, and business performance would be affected if demand from customer companies fails to expand or decreases. In particular, technological advances such as AI may reduce demand for some debugging, testing, and monitoring services. While the Group recognizes that the need for checking, testing, and monitoring by "people" will continue, the risk of substitution due to technological innovation cannot be denied.

Multiple companies have entered the business areas of debugging, software testing, monitoring, and other services, resulting in competition. As a pioneer in the industry, the Group seeks to differentiate itself through accumulated know-how, service diversification, and investment in Media & Content, but if sufficient differentiation cannot be achieved amid intensifying competition, this may affect business performance.

The Group relies on temporary employees and contract workers (sole proprietors) for much of its operational work, and must continuously secure a commensurate scale of personnel. If securing personnel becomes difficult for any reason, this would hinder business execution and order-taking activities, affecting business performance. The Group strives to secure personnel through establishing appropriate contract frameworks and operational systems and promoting conversion to employee status, but risk remains.

In debugging and software testing operations, if defects occur after a product is released, this could undermine confidence in the reliability of the Group's service quality and affect business performance. While the Group addresses this through contractual exemption clauses and thorough advance explanations, the possibility of being held liable for warranty or damages cannot be denied. An increase in the number of defect occurrences could also adversely affect order-taking activities.

The Group is promoting support for the global expansion of domestic game software companies and expansion into overseas companies, but because debugging operations and service formats differ by region, business development may not proceed as expected. There is a risk of being affected by various local laws and regulations, changes in market trends, exchange rate fluctuations, and other factors. Overseas expansion is positioned as an important management issue for sustainable growth, and the Group is actively pursuing development of local companies.

Monitoring operations, among others, provide services on a 24-hour, 365-day basis, resulting in high dependence on communication networks. If communication networks are disrupted due to disasters, accidents, computer viruses, unauthorized external access, or other causes, continuation of outsourced operations may become impossible. While measures such as server and line duplication and redundancy have been implemented, if the cause of a failure lies with the Group, this could lead to a decline in trust from customer companies.

The Group conducts worker dispatching operations in some businesses, obtaining permission from the Minister of Health, Labour and Welfare for each business location based on the Worker Dispatching Act, and is subject to regulation under this law. If a violation of laws or regulations occurs, this could reduce trust from customer companies and affect business performance. In addition, if new laws and regulations are enacted in the internet industry that restrict the businesses of customer companies, or if the Group's businesses are directly regulated, this could also affect business performance.

The Group handles confidential information such as pre-release game software and internet site-related confidential information including personal information, requiring a high level of information management systems. While measures such as concluding confidentiality agreements, thoroughly instilling confidentiality obligations through training, and installing entry/exit control systems and surveillance cameras have been implemented, if confidential information were to leak externally for any reason, this could reduce trust from customer companies and have a significant impact on business performance.

The Group considers M&A and equity investments aimed at strengthening existing businesses, global expansion, and development of new business areas as options for business development, but due to time constraints and other factors, sufficient due diligence may sometimes be difficult, and contingent liabilities, unrecognized liabilities, or defects may be discovered after acquisition. If the initially anticipated synergies or business expansion effects are not achieved, or if there is a deterioration in performance after making a company a subsidiary, amortization or impairment of goodwill, or impairment of investment securities, this could affect the Group's business performance. The Group strives to reduce risk through due diligence utilizing external experts such as lawyers, tax accountants, and certified public accountants.