Beaglee Inc.

The e-book industry has no entry barriers such as licensing or patents, and in recent years numerous companies have entered the market, intensifying competition. If further intensification of competition prevents customer acquisition and retention or maintenance and improvement of average revenue per customer from progressing as expected, it may adversely affect business performance. As a countermeasure, the company is promoting the strengthening of added value through continuous expansion and differentiation of services and content.

Pirate sites exist on the Internet that handle illegally and improperly copied content of publications and other works, and if the distribution of illegal content reaches a substantial volume, it may affect the performance of the Company Group. As a countermeasure, in April 2018 the company established the "Japan E-Bookstore Association" together with four other e-bookstore companies to conduct awareness activities promoting the purchase of authorized versions, while also taking measures against pirate sites in cooperation with publishers, publishing-related organizations, and rights holders.

The Company Group's business operations are premised on copyright usage license agreements with copyright holders and others, but if circumstances arise that impede contract renewal or if copyright usage fees fluctuate, it may affect performance through a decrease in handled content or an increase in costs. As a countermeasure, the company strives to build and maintain strong relationships of trust through continuous and favorable communication to understand business partner needs and enhance value-added proposals.

The smartphone, tablet device, and Internet environments in which the Company Group operates its business are subject to rapid technological progress, and technological innovation exceeding expectations may cause the company's technology and services to lose competitiveness. Loss of competitiveness could lead to a decline in the number of users, posing a risk of adversely affecting business performance. As a countermeasure, the company constantly monitors the latest technology trends and strives not to fall behind other companies in technological capability.

The company seeks to increase membership numbers mainly through advertising activities in the Platform Segment, but if these measures do not proceed as expected, it may affect performance and business development through a decrease in the number of users or an increase in advertising expenses. Advertising expenses have changed from ¥2,653 million in the 9th fiscal year to ¥1,622 million in the 13th fiscal year, and while efficiency is improving, maintaining the effectiveness of measures remains a challenge. As a countermeasure, the company implements optimal measures based on quantitative analysis taking ROAS and other factors into account, and carefully promotes branding activities.

Natural disasters, temporary access concentration, unauthorized access, and other factors may cause communication network disconnection or server inoperability, potentially resulting in service downtime. If system downtime continues for an extended period, it poses a risk of affecting performance through a decrease in the number of users, among other effects. As a countermeasure, the company strives to achieve system redundancy and strengthen security in order to ensure stable service provision.

In providing its services, the company acquires personal information of business partners, customers, and others, and the risk of information leakage due to unauthorized external access or intentional or negligent acts cannot be completely eliminated. If an information leak occurs, it may affect performance through claims for damages or a decline in trust. As a countermeasure, the company has implemented various measures including access restrictions, adoption of unauthorized intrusion prevention systems, development of regulations such as a privacy policy, and compliance with the California Consumer Privacy Act.

The company conducts its business in compliance with copyright usage license agreements, but future legal amendments, changes in interpretation, or the increasing complexity of rights processing due to overseas expansion may result in third parties asserting infringement of intellectual property rights. If such infringement is alleged, resolving the matter may require significant time and expense, posing a risk of affecting business performance. The Company Group maintains contract compliance as its basic policy while addressing the increasing complexity of rights processing associated with overseas expansion.

As of the end of the fiscal year ended December 2025, the company recorded goodwill and publishing rights (identifiable assets) associated with M&A totaling ¥7,265,072 thousand, of which goodwill from the acquisition of the Bunkasha Group accounted for ¥5,114,593 thousand and goodwill from the acquisition of former menue shares accounted for ¥2,032,479 thousand. If value impairment occurs due to future deterioration in profitability or other factors, the implementation of impairment accounting may have a material impact on business performance. The Company Group manages this risk through prior investigation of target companies, but impairment risk continues to exist.

The Company Group has a policy of actively utilizing M&A as a means of business expansion, but after an acquisition, the emergence of unrecognized liabilities or contingent liabilities, or unexpectedly poor progress in the acquired business, may necessitate impairment accounting for the investment target. Additionally, the addition of businesses not previously conducted by the company may give rise to new risk factors. As a countermeasure, the company conducts detailed prior investigation and careful risk assessment of target companies.