OVERLAP Holdings, Inc.

The IP market for manga, anime, and related content has been expanding against the backdrop of internet penetration and the internationalization of content consumption. However, there is a risk that market growth could slow due to legal and regulatory changes, economic trends, and shifts in individual preferences. Because a decline in the number of users would directly lead to a slowdown in revenue growth, the impact is assessed as significant. The Group continuously works to identify needs and trends and to expand the number of IPs it handles.

As of the end of August 2025, goodwill amounted to ¥7,679 million and intangible assets with indefinite useful lives (trademark rights) amounted to ¥3,885 million, together accounting for 62.3% of total assets. Since the Group applies IFRS, no periodic amortization expense arises; however, if the profitability of the relevant businesses declines, recognition of an impairment loss could have a material impact on the Group's financial position and operating results. Based on current impairment test results, the Group recognizes that the likelihood of this risk materializing is not high, but it continues to work to maintain profitability and soundness.

If a compliance violation were to occur, it could significantly damage corporate trust, and the impact is assessed as significant. The Group has established internal regulations and conducts training for all officers and employees at least once a year, but it recognizes that this risk cannot be completely eliminated. If an event in violation of laws or regulations were to occur, it could have a material impact on the Group's financial position and operating results.

In the business model of turning web novels and manga into published books, major hit titles have continued to emerge one after another from various companies, and new entrants into similar businesses are expected to continue. The Group continues efforts to raise service brand recognition and improve creator and user satisfaction in order to secure a competitive advantage; however, if these efforts do not achieve the expected effect, the Group's financial position and operating results could be affected. The timing of this risk materializing is assessed as medium-term.

Securing excellent talent is essential to respond to the rapidly changing business environment, but if the Group is unable to secure the necessary personnel in a timely manner, its financial position and operating results could be affected. The timing of this risk materializing is assessed as medium-term. The Group is working to foster an attractive corporate culture, maintain competitive compensation terms, and operate a fair and equitable personnel evaluation system.

If disputes regarding copyrights, trademark rights, or other intellectual property rights were to arise with creators or other companies, they could develop into litigation and significantly damage corporate trust. The Group works to prevent such disputes by retaining an advisory contract with an attorney specializing in intellectual property rights; however, significant amendments to or enactment of related laws and regulations could also affect the Group's financial position and operating results. At present, no litigation that would have a material impact on the business or performance has been filed.

The Group's websites and applications are operated over the internet, and if a system failure were to occur due to a sudden surge in access, server outages caused by disasters, or intrusion by computer viruses or crackers, it could disrupt service provision and affect the Group's financial position and operating results. The Group strives to conduct thorough testing when introducing new systems and features and to secure sufficient personnel for stable system operation, but it is difficult to completely eliminate this risk.

The resale price maintenance system under Article 23 of the Antimonopoly Act is recognized for copyrighted works such as printed books, but the Japan Fair Trade Commission has expressed the view that abolishing this system would be desirable from a competition policy perspective. If the system were abolished, it could lead to price competition, affecting the financial position and operating results of the industry as a whole and of the Group. At present, no national consensus has been formed on this matter, and the system is expected to be maintained for the time being, so the likelihood of this risk materializing is assessed as low.

The number of potential shares from stock acquisition rights granted as incentives to directors, employees, and others was 1,887,400 shares as of October 31, 2025, representing 8.62% of the total of 21,887,400 shares comprising the number of shares issued and outstanding plus potential shares. Exercise of these rights would dilute the ownership and voting rights of existing shareholders, and if the resulting shares were to flow into the market all at once, it could affect the appropriate formation of the share price. The Group may issue additional equity incentive plans in the future in order to secure excellent talent.

The loan agreement dated March 15, 2024 includes financial covenants requiring total equity to be maintained at 70% of the larger of the immediately preceding fiscal year-end or the end of FY2024 (ending August 2024), and at least ¥3.0 billion, as well as a requirement not to record an operating loss or net loss. If these covenants were breached, the Group could be required to repay the borrowings in full, which could affect its financial position. The Group is strengthening budget controls and negotiating revisions to the financial covenants, and judges that the likelihood of this risk materializing at present is low.