Aeria Inc.

In the Asset Management business, the sale and purchase of income-producing properties and the sale of investment condominiums may lead to declines in selling prices or outflows of funds from the real estate market due to economic downturns, rising interest rates, or changes in the tax system. In addition, if intensifying competition for land acquisition and rising construction material costs push up costs that cannot be passed on to selling prices, gross profit will be squeezed. Delays in project progress and changes in delivery timing also have a structure that directly affects business performance and financial condition.

In the Smartphone Games content market, barriers to entry are low, and similar operators continue to expand or newly enter the market, resulting in an ongoing intensely competitive environment. The Group leverages the experience and know-how accumulated since 2004 to build a foothold in niche markets, but if it fails to offer attractive Content and the number of users declines, this may affect business strategy and operating results. Similar risks may also arise if new regulations are introduced for the market.

The Group actively pursues M&A and capital alliances, and strives to identify risks in advance through due diligence; however, unpredictable issues may arise, such as sudden changes in the business environment, subsequent discovery of off-balance-sheet or contingent liabilities, or friction with management or employees of the target company. If the business of the target company does not progress as planned, goodwill impairment may occur, posing a risk of material impact on business performance and financial condition. When borrowings from financial institutions are used as funding for M&A, financial leverage also increases.

The Group utilizes borrowings from financial institutions as funding for property acquisitions and corporate acquisitions in the Asset Management business, and changes in the financial environment may result in increased interest expenses or difficulty in raising borrowings. Some borrowings are subject to financial covenants, and breach of these covenants could result in the establishment of security interests or loss of the benefit of time, posing a risk of impact on operating results and financial condition. In a rising interest rate environment, there is a dual risk of both declining demand in the real estate market and increasing borrowing costs occurring simultaneously.

In operating its web services, the Group holds personal information such as names, addresses, phone numbers, and email addresses, and has implemented measures such as access restrictions and protection against unauthorized external intrusion. However, if personal information is leaked due to unauthorized external access or other causes, this could result in claims for damages or loss of public trust, potentially having a material impact on operating results. There are also cases where personal information collected by client companies is temporarily held by the Group, meaning the scope of risk is not limited to the Group's own customer information.

The mobile and internet-related industry is characterized by rapid technological innovation, requiring continuous changes to service models and development of software and Content compatible with new features as hardware capabilities advance. Services offered by competitors may render the Group's services obsolete and reduce competitiveness, and it cannot be ruled out that substantial research and development expenses will be required to maintain market position. These factors constitute risks that could affect business strategy and operating results.

The Group's businesses rely on the provision of services via servers and other hardware, and system downtime may occur due to concentrated access, natural disasters, accidents, or unauthorized external intrusion. Although measures such as 24-hour monitoring and system redundancy have been implemented, if important data is lost or leaked, or services are suspended, this could impact financial condition and operating results through damages claims or loss of credibility. Since multiple businesses, including Content, e-commerce, and real estate, depend on the system, the scope of impact is broad.

The two founders, Chairman and Representative Director Takayuki Nagashima and President and Representative Director Yusuke Kobayashi, play important roles in determining management strategy, planning and development, capital policy, and sales activities. The Group is working to build a management structure that eliminates excessive reliance on these two individuals, but if, for any reason, they become unable to perform their duties, this could affect business strategy and operating results.

If a property sold by the Group is found to have a significant defect, the Group may bear liability for such defects even if the direct cause was attributable to a third party. This could result in contract cancellation or damages claims from buyers, or additional costs for defect repair, potentially affecting operating results and financial condition. Defects related to real estate rights, structure, and environment are difficult to fully identify in advance, leaving residual potential risk.

If a third party newly registers a patent in the Group's business fields, or if a patent already exists that the Group is unaware of, this could result in claims for damages, injunctions against use, or payment of patent royalties. The internet, mobile, and Content fields are areas prone to patent disputes, posing a risk of impact on financial condition and operating results. The Group strives to ensure thorough compliance and respect for third-party rights, but complete avoidance of such risk is difficult.