gumi Inc.

The Group's Mobile Online Game Business provides content to users via platform operators such as Apple Inc. and Google Inc., and there is a risk that changes in these companies' business policies could make it difficult to provide game content. Since agreement to content provision contracts and terms of service with platform operators is mandatory, unilateral changes to terms or contract termination directly affect business performance. The Group maintains contractual relationships with each platform operator as a countermeasure, but the underlying structural dependency has not been eliminated.

Numerous competitors exist in the mobile online game market, and there is a possibility that changes in user preferences or intensifying competition could significantly reduce the number of users and item-based revenue for the Group's game content. Expanding the user base is essential to establishing a stable revenue foundation, and if it does not increase as expected, this will affect business performance and business development. The Group addresses this through planning informed by industry trends, development leveraging advanced technical capabilities, and operations based on analysis of user usage patterns, but the risk of changes in the market environment continues.

The Group has entered the blockchain and XR domains early with the aim of building a future revenue foundation, but if growth in these markets slows or shrinks, or falls short of the Group's growth projections, this could affect business performance and business development. These are emerging markets in an environment prone to differing interpretations of legal regulations. If upfront investments cannot be recovered, there is a risk of increasing financial burden.

As native apps become higher quality, development periods tend to lengthen and development costs tend to rise, and intensifying competition with rival companies is increasing the number of cases requiring substantial advertising expenditure. If further cost increases are forced due to changes in the market environment or other factors, securing working capital capable of withstanding upfront investment becomes necessary. The Group strives to strengthen its financial foundation through budget-to-actual management of development costs by game content unit and by executing advertising with a focus on cost-effectiveness, but upward cost pressure remains a structural challenge for the industry as a whole.

The Group holds crypto assets in electronic wallets, and in addition to the risk of loss of crypto assets due to unauthorized access, there is a possibility that a significant decline in the fair value of held assets due to sharp short-term fluctuations in crypto asset prices could affect business performance. Although cybersecurity measures have been implemented, there is a possibility that crypto assets cannot be recovered in the event of unauthorized access. Accounting treatment follows PITF No. 38, but the risk of fair value fluctuation cannot be structurally eliminated.

Because the Mobile Online Game, XR, and Blockchain industries to which the Group belongs are new business forms, differing interpretations of legal regulations are likely to arise, creating a risk that business could be constrained by changes in the interpretation of existing laws or the enactment of new laws. Compliance with various laws such as the Act on the Protection of Personal Information, the Unauthorized Computer Access Law, the Act on Specified Commercial Transactions, and the Payment Services Act is required, and if administrative dispositions are received, this could have a material impact on business performance and business development. The Group strives to develop its business in compliance with the guidelines of supervisory authorities and by incorporating the views of industry associations, but the risk of changes in the regulatory environment continues.

If system troubles occur, such as server outages due to natural disasters or excessive access, disruptions to game distribution could occur, affecting business performance. The Group has implemented measures such as server load balancing, operational status monitoring, and regular backups, but complete elimination of failures is difficult. In addition, there is a risk of crypto asset loss due to unauthorized access to electronic wallets, and although cybersecurity measures have been implemented, responding to increasingly sophisticated cyberattacks remains an ongoing challenge.

The Group began establishing overseas subsidiaries in 2012, and overseas sales accounted for approximately 30% of total consolidated sales in the fiscal year under review, creating a possibility that smooth business operations could become difficult if country risks (laws, systems, regulations, social conditions, etc.) in each location materialize. In addition, when translating foreign-currency amounts into yen for the preparation of consolidated financial statements, significant fluctuations in exchange rates could affect business performance and business development. As the Group intends to continue pursuing global business expansion, these risks may increase further going forward.

The Group conducts M&A, capital and business alliances, and investment activities through funds (mainly in the Mobile Online Game and Blockchain domains), but the occurrence of unforeseen events or a significant decline in the share value of investees could affect business performance. The Group conducts detailed due diligence covering financial, tax, legal, and business aspects to reduce risk, but the risk of loss in cases where investment returns fail to materialize cannot be eliminated. In particular, investments in the blockchain domain involve a high degree of market uncertainty, and the outlook for investment recovery remains unclear.

The Group considers securing and developing talented personnel to be an extremely important issue in expanding its business, and if it is unable to secure or develop sufficient personnel, this could affect business performance and business development. Despite efforts to strengthen recruiting activities and enhance training systems, competition in the market for specialized personnel in areas such as Mobile Online Games, Blockchain, and XR is intense, making it difficult to secure such talent. In addition, unforeseen incidents (such as information leaks, intellectual property infringement, or internal misconduct) arising from deficiencies in personal information management, intellectual property management, or internal control systems also exist as risks that could affect business performance.