Magmag, Inc.

As of September 30, 2025, the Company does not meet the listing maintenance standards of the TSE Standard Market with respect to the market capitalization of tradable shares. Although a transitional grace period has been set, there is a risk that the Company will be designated as a security under supervision if the deficiency is not resolved by September 30, 2026. The Company is pursuing various initiatives to meet the standards based on the plan disclosed on December 19, 2024.

The parent company, Airtrip Corporation, holds 69.34% (1,991,200 shares) of the Company's total issued shares outstanding, and its exercise of voting rights may influence the Company's decision-making on matters requiring shareholder approval, such as amendments to the articles of incorporation, appointment and dismissal of officers, organizational restructuring, and disposition of surplus. There is a possibility that the parent company's interests may not align with those of the Company's other shareholders, and changes in the parent company's management policy or deterioration in its business condition may affect the Company's financial position and operating results. The Company has established an independent officers committee to deliberate in advance on the appropriateness of director compensation, officer appointments, and related party transactions.

The Media Advertising Business has a high degree of revenue dependence on Google AdSense, operated by Google Asia Pacific Pte. Ltd., and changes in AdSense's specifications or terms of service could directly affect the Company's business activities and operating results. The Company is working to reduce this dependence by concluding individual business agreements with other ad network operators, but establishing alternative revenue sources remains a work in progress. Depending on the trends of the operating company, there is an inherent risk that revenue could decline sharply.

The Platform Business has revenue concentrated in the newsletter distribution service "Magmag!", and a rapid contraction of the market or intensified competition from new entrants could affect business activities and financial position. If creators migrate away due to the emergence of new information distribution platforms, this could lead to a decline in newsletter subscription revenue. The Company is working to reduce its revenue dependence through the development of new services, but at present the dependence on newsletters continues.

Technological innovation in the internet services industry is accelerating due to advances in generative AI and cloud technology, and the sophistication of data analytics and automation technologies, and a delayed response could reduce competitiveness. In addition, if significant expenditure is required to respond to new technology development, this could affect financial position and operating results. The Company is engaged in continuous technology development and securing talented personnel, but recognizes the risk of being unable to keep pace with the speed of change.

The Company's business is highly dependent on systems in which customer management, payment management, and distribution systems are interconnected, and if a human-caused accident or unauthorized access results in a disconnection of the communication network or server malfunction, this could disrupt email distribution and the management of revenue sharing with creators. The occurrence of a failure could undermine trust in the system itself and affect business activities and financial position. The Company has implemented vulnerability checks and measures to prevent unauthorized access, but states that complete elimination of such risk is difficult.

The Company holds users' personal information through its internet-related services, and if such information is leaked externally or misused due to intentional acts or negligence by related parties or business partners, the Company could be held legally liable, including for damages. A personal information leak could also damage the reliability of its services and its brand, potentially having a significant impact on business activities and operating results. The Company has obtained Privacy Mark certification, established personal information protection regulations, and conducts internal training for officers and employees.

As of the end of the fiscal year under review, the Company had a relatively small workforce of 18 employees, and if internal management structures fail to keep pace with rapid business expansion or other developments, appropriate business operations could become difficult. Due to the small size of the organization, there is also a high degree of dependence on certain members of management, and if such an officer resigns and a suitable replacement cannot be secured, this could affect business activities and operating results. The Company is working to build an organizational management structure and develop human resources, while also establishing and operating a system in which internal controls function effectively.

In addition to existing regulations such as the Telecommunications Business Act, the Act on Regulation of Transmission of Specified Electronic Mail, and the Act on the Limitation of Liability for Damages of Specified Telecommunications Service Providers, new laws and regulations are being developed, including strengthened privacy protection regulations and restrictions on cookie usage, and changes in interpretation or the introduction of new regulations could affect the Company's business activities and financial position. In the Platform Business, the Company reviews newsletter content in relation to the Act against Unjustifiable Premiums and Misleading Representations, the Act on Specified Commercial Transactions, the Pharmaceuticals and Medical Devices Act, the Financial Instruments and Exchange Act, and other laws, but issues of legal interpretation may arise. The Company has established a system for obtaining opinions from legal advisors and other experts, and strives to reduce compliance risk.

The Company is in a difficult business environment, having recorded a net loss for the fiscal year, and the possibility and timing of future dividend payments are currently undetermined. In addition, if stock options granted as incentives to directors, employees, and outside collaborators are exercised, the value per share for existing shareholders could be diluted through the issuance of new shares. The Company may issue additional stock options in the future to secure talented personnel, and this dilution risk continues to exist.