COLOPL, Inc.

If the growth pace of the smartphone game market slows, or if market share shifts dramatically due to new entry by major companies, it could affect the Group's business and performance. The Group is working to enhance its competitiveness through distinctive location-based services, full-scale game applications, and enhanced customer support, but the risk of intensifying competition with existing companies and new entrants offering similar services continues to exist.

In the internet-related field, where new technologies such as blockchain, AI, and XR/metaverse are emerging one after another, if the Group's response is delayed, it could lead to a decline in competitiveness and service quality. There is also a risk that additional expenditures for system costs and personnel expenses will expand in association with responding to new technologies. The Group is focusing on recruiting and developing engineers, establishing a creative workplace environment, and acquiring related technologies and expertise.

The Group's sales are heavily weighted toward smartphone-dedicated game application services, resulting in a high degree of revenue dependence on the two platform providers, Apple Inc. and Google Inc. Changes in the business strategies of these platform providers or fluctuations in their fee rates could affect the Group's business and performance. At present, no specific measures to reduce this dependence are disclosed, and this remains an ongoing structural risk.

In the development of GameFi services utilizing blockchain, crypto assets, and NFTs, changes in the interpretation of existing laws or the enactment of new laws could significantly restrict the business. In addition, if crypto assets held by the Group are used for terrorist financing or money laundering, this could also affect the Group's business and performance. The Group strives to reduce risk through detailed prior investigations regarding accounting, tax, legal, and business matters.

In the mobile internet industry, the inducement of excessive gambling-like impulses has been raised as a social issue; in 2012, the Consumer Affairs Agency expressed the view that "complete gacha" violated the Act against Unjustifiable Premiums and Misleading Representations. If, going forward, changes in social conditions lead to changes in the interpretation of existing laws or the enactment of new laws, the Group's business could be significantly restricted, potentially having a major impact on performance. The Group has already implemented countermeasures and plans to continue voluntary responses and measures.

The Group's business is entirely dependent on communication networks and computer systems. If the systems go down due to natural disasters, accidents, surges in access, power supply outages, computer viruses, unauthorized access, or other causes, it could affect the Group's business and performance. Furthermore, if the system processing related to sales aggregation malfunctions, there is a risk that it could also affect the appropriate financial reporting system. The Group has taken measures such as installing servers at data centers, using cloud services, and establishing appropriate security measures.

The Group handles important personal information such as users' email addresses, and if such information is leaked externally for any reason, it could result in compensation to affected parties, loss of social trust, and expenditures for building additional information management systems, thereby affecting the Group's business and performance. The Group is working to strengthen its information management system through obtaining ISO 27001 certification, formulating information security policies, and conducting education and training for officers and employees.

The Group implements M&A and investments in IT-related and entertainment companies both domestically and internationally as part of its growth strategy, but the occurrence of contingent liabilities or unrecognized liabilities not identified in prior investigations, or failure to achieve business plans, could make it difficult to recover invested capital. In addition, deterioration in the performance of invested companies or stock price movements could result in investment losses, affecting the Group's business and performance. The Group conducts detailed prior due diligence on the financial condition and contractual relationships of target companies and examines the associated risks.

To respond to the rapid expansion and diversification of business areas, it is necessary to strengthen personnel in technology development, advertising and marketing, and administrative departments; however, if human resource development and appointment do not proceed as planned, or if capable personnel leave, this could become a factor limiting competitiveness and business expansion, affecting the Group's business and performance. There is also a risk of dependence on the founder, Board Chairman Yoshiatsu Baba, and concern about the impact should he become unable to continue his duties. The Group has implemented changes to its management structure, including strengthening its management organization and a change of president, to reduce excessive dependence on a specific individual.

If third-party rights are established in the business fields to which the Group belongs, this could result in damages, injunctions, or royalty payments; conversely, if the Group's own intellectual property is infringed, this could also have a material impact on the Group's business and performance. The Group strives to acquire intellectual property rights related to the services it operates, while also paying sufficient attention to avoid infringing on the intellectual property rights of third parties.