Mobile Factory, Inc.

The company relies on specific location-based games for the majority of its sales, so changes in business strategy, fee rates, or contract terminations by telecommunications carriers, social game platforms, or app market operators could directly impact business performance. A similar risk exists if the performance of a specific service deteriorates sharply. As countermeasures, the company is promoting diversification of distribution channels, consideration of proprietary payment methods, development of new titles, and expansion of business areas through collaboration with other companies.

The mobile game market is heavily influenced by technological innovation, new devices, and changes in communications infrastructure, and business and performance could be affected if market growth slows due to saturation, decline, or legal regulation. In addition, delays in responding to AI technology could result in lost business opportunities, while hasty adoption carries the risk of violating legal regulations or leading to erroneous management decisions. As countermeasures, the company collects and analyzes information on the latest technologies, market trends, and legal regulations, and conducts trial introductions of AI tools, guideline development, and compliance tests.

The company's core location-based games have an inherent business vulnerability in that sales prospects become uncertain if a natural disaster suspends transportation or an infectious disease outbreak prompts requests to refrain from travel. Since the game design presupposes users going out and moving around, this could undermine the stability of revenue. As a countermeasure, the company is developing and expanding features that allow gameplay without requiring movement, establishing a system that maintains play opportunities even in situations where going out is difficult.

In the Mobile Games and Content Business, in addition to direct competitors such as content providers and SNS operators, the entire entertainment industry, including video streaming, television, and film, competes for users' leisure time. If competition intensifies further due to the emergence of competitors offering groundbreaking services or new entrants from other industries, the competitiveness of the company's services could be undermined. As a countermeasure, the company is pursuing differentiation by leveraging its many years of operational know-how in location-based games and its technology and expertise in content distribution such as ringtone melodies.

The pace of technological innovation in mobile games, content, and AI-related services is extremely fast, and delays in responding to new technologies or increased costs such as capital expenditure could affect business and performance. In particular, responding to innovation including AI technology is regarded as an important management issue. As a countermeasure, the company treats the recruitment and development of engineers as a key management priority and promotes skill improvement across the organization through technical training and knowledge sharing.

Due to the misuse of generative AI technology and the commercialization of ransomware attacks, cyberattacks are becoming more sophisticated and elaborate, creating the risk of large-scale system outages or leaks of personal or confidential information. There is also the possibility of financial losses from misdirected payments due to sophisticated impersonation fraud using generative AI (such as business email compromise), which could have a significant impact by making it difficult to continue services. As countermeasures, the company has introduced multi-layered defense measures, conducts regular vulnerability assessments, and provides security education to all employees.

Due to the nature of its business, the company holds large volumes of important information that can identify individuals, such as users' names, addresses, and email addresses. If such information were leaked, it could result in claims for damages from affected parties and loss of trust, potentially having a significant impact on business and performance. As a countermeasure, the company has established a strict management system based on its personal information protection regulations, and implements minimization of drive access privileges and identity verification through OTP authentication and other means.

When employees use external generative AI services for business purposes, there is a risk that confidential information, such as unpublished game specifications or technical information related to communications infrastructure, could be entered into such services and used as training data, resulting in unintended leakage of information outside the company. As a countermeasure, the company uses corporate contract plans configured so that input data is not used for AI training, and works to improve employee literacy through regular compliance tests.

The mobile internet industry is subject to various legal regulations, including the Act against Unjustifiable Premiums and Misleading Representations, and if the current legal system is revised or new regulations are introduced, this could significantly constrain business operations and have a material impact on performance. Regarding intellectual property rights, there is also a risk of resolution costs if the company's own IP is infringed by third parties, as well as risk of damages claims if the company's content infringes third-party rights. As countermeasures, the legal department collects and analyzes information on legal amendments, coordinates with external experts such as retained attorneys, and maintains intellectual property management regulations and trademark registrations.

If the recruitment and development of personnel needed to expand the business does not proceed as planned, or if capable personnel leave the company, this could affect business and performance. In particular, the recruitment and development of engineers is regarded as an important management issue in responding to technological innovation, and a shortage of personnel would directly lead to a decline in competitiveness. As countermeasures, the company emphasizes empathy with the corporate culture and values in its recruitment selection process, improves the work environment, and focuses on enhancing employee engagement and retention.