coly Inc.

In FY2026 (ending January 2026), three titles—Stand My Heroes, Mahoutsukai no Yakusoku, and Break My Case—accounted for 58.0% of total net sales (9.7%, 25.2%, and 23.1% respectively). If sales of these titles were to decline sharply due to changes in the market environment or deterioration in user trends, the impact on business performance would be significant. The company has adopted a policy of diversifying revenue through new content releases and media initiatives such as goods, events, and food & beverage offerings, but progress in reducing dependence remains incomplete.

The company's content is provided to users via platform operators such as Apple Inc. and Google LLC, and there is a possibility that content provision could be suspended due to changes in business policy, fluctuations in fee rates, determinations of content non-compliance, or unforeseen circumstances on the platform side. This represents a structural risk whereby a unilateral decision by a platform could have a material impact on business performance and business development. As of the filing date of this document, no situation affecting the continuation of contracts, etc., has occurred.

If competition with other companies intensifies, primarily in the market for mobile online games targeted at women, or if the company is unable to differentiate its titles from those of competitors, this could lead to a decline in the number of users and affect business performance. The company has to date leveraged its accumulated know-how to provide differentiated titles that match user needs, but continuous adaptation to changes in the competitive environment is required.

In the mobile online game industry, concerns about paid items inducing excessive gambling-like behavior have repeatedly been raised, requiring compliance with regulations such as the Act against Unjustifiable Premiums and Misleading Representations and the Payment Services Act. If business operations were to become significantly constrained in the future due to changes in the interpretation of existing laws or the enactment of new laws, this could have a material impact on business performance. The company is proactively addressing this through membership in CESA, consultations with legal counsel, and the collection of information on legal amendments.

The company holds personal information such as the names, usernames, and dates of birth of game service users, as well as the names and delivery addresses of purchasers in mail-order sales of goods. If an information leak were to occur, this could result in compensation to affected parties, loss of social trust, and additional expenditure to strengthen information management systems. The company has implemented measures such as access restrictions and protection against external intrusion, but complete prevention is difficult.

The company is promoting the use of AI for the purposes of improving operational efficiency and developing new businesses; however, risks exist regarding the reliability of AI outputs, the potential for copyright infringement, and information leakage due to the input of confidential information, and improper use could damage the company's credibility. As a countermeasure, the company has established "AI Guidelines" to promote effective use, but new risks may arise as AI technology rapidly advances.

The technological environment is undergoing significant change, including the evolution and diversification of platforms and the emergence of content utilizing AR, VR, AI, and other technologies. If the company is slow to respond to rapid technological innovation, this could affect business performance. The company is working to accumulate advanced and sophisticated technology and know-how, but there is a risk that the pace of change could outstrip its ability to respond.

Development costs based on the policy of releasing high-quality titles and advertising expenses aimed at acquiring new users are major cost factors. If return on investment is not achieved due to rapid changes in user preferences or other factors, or if costs exceed expectations due to intensifying competition to secure advertising space, this could affect business performance. The company strives to optimize costs by managing budgeted versus actual development costs on a per-title basis and by executing advertising in a manner that carefully weighs cost-effectiveness.

Representative Director and President Anna Nakashima and Representative Director and Executive Vice President Mizuki Nakashima, as founders, play important roles in determining and executing management policy and business strategy. If any unforeseen event were to occur to either individual, or if either were to step down, this could affect business operations and performance. The company is working to build a management structure that does not excessively depend on the two individuals, but currently the degree of dependence remains high.

Part of the content production process, such as illustrations and scenarios, is outsourced to external creators. If the cultivation of new creators does not proceed as planned, if contracts are revised or terminated, or if outsourcing costs rise, this could affect business performance. The company seeks to mitigate this risk by outsourcing to multiple creators and cultivating new creators, but there remains a risk of continued dependence on specific creators.