Broadmedia Corporation

A decline in new enrollments due to the declining birthrate and an increase in the number of correspondence high schools, as well as a decrease in enrolled student numbers caused by scandals or other incidents, may threaten the revenue base. In addition, failure to obtain timely approval for increases in enrollment capacity or approval for establishing new schools could result in lost opportunities for student recruitment. There is also a risk that, in the event of a violation of the School Education Act, administrative sanctions or revocation of accreditation could make it difficult to continue the business.

Changes to or abolition of the Courses of Study Guidelines, the student aid payment system, the Special Zones for Structural Reform system, and similar systems could affect the operation of the correspondence high school business. In addition, if "Tech Camp" or the "Registered Japanese Language Teacher Training/Practical Training Course" fail to maintain designation as eligible courses under the Educational Training Benefit system, competitiveness relative to competitors could decline. Amendments to the Act on Comprehensive Support for Persons with Disabilities and revocation of designation as an employment transition support service provider may also affect business performance.

In the Akamai Service within the Technology segment, the Company operates a reseller business for CDN, cloud security, and IaaS (ACC) services provided by Akamai Technologies GK. If the contract with this company cannot be smoothly continued for any reason, it may affect the Group's business performance. The structure entails high dependence on a specific business partner, and unfavorable changes to contract terms or the bankruptcy of the business partner could also affect business performance and financial condition.

In the Cloud Solutions Business, the Company and its overseas subsidiaries utilize G-cluster technology, but the development and commercialization of similar or competing technologies could result in termination of license agreements or a decline in royalties. In addition, if unexpected costs arise from countermeasures against claims of intellectual property infringement by third parties, or if technological innovation renders owned equipment and facilities obsolete, requiring new capital investment, business performance may be affected.

If a system failure or information leakage occurs due to unauthorized access by third parties, system bugs, natural disasters, or other causes, it could disrupt service continuity and damage social credibility, significantly affecting business performance. There is also a risk that leakage of highly confidential content materials or commercial materials, or a determination that security levels do not meet the standards required by rights holders, could lead to contract termination or use suspension. Although measures such as obtaining Privacy Mark certification have been implemented, the risk of personal information leakage due to negligence by officers, employees, or outsourcing partners remains.

In the Japanese Subtitling & Dubbing Production business, there is a risk that order volumes may shrink and unit prices decline due to changes in client policy, program restructuring, or strikes by organizations such as the Writers Guild of America. In the theatrical DCP file duplication business as well, transaction volumes and unit prices could decline due to a reduction in the number of films distributed or a decrease in the number of screening theaters. Rising costs from increased compensation for voice actors and translators and higher prices for production equipment, as well as liability for damages arising from leakage of materials for unreleased works, may also affect business performance.

The Group is pursuing business diversification and new business initiatives, and may make investments in system development, marketing, and other areas prior to the commencement of operations. If a business cannot be launched as planned, or does not grow as expected, recovery of the investment may become impossible. The Group's overall profit margin may temporarily decline during the period before a new business generates stable revenue. In addition, if business transfers or similar strategic options are pursued and the expected consideration is not obtained, business performance may also be affected.

The Company conducts overseas transactions in multiple business segments, and since the majority of overseas transactions, including those with partners, are settled in foreign currencies, fluctuations in exchange rates may significantly affect business performance. In addition, if overseas transactions cannot proceed as expected due to political and economic conditions or changes in laws and regulations, or if issues related to receivables collection or intellectual property rights arise due to differences in business customs, this may also significantly affect business performance.

Each business requires specialized personnel with high creativity, negotiation skills, and advanced technical expertise, and failure to secure such personnel could significantly affect business performance. There is also a high degree of dependence on the continued service of certain executives, and a risk exists if appropriate replacement personnel cannot be secured in a timely manner. If legal violations occur due to excessive workloads or inappropriate labor management, warnings or penalties from regulatory authorities and a decline in corporate image could further hinder the securing of human resources.

There is uncertainty in accounting estimates, including impairment of tangible and intangible fixed assets, valuation losses on investment securities and capital contributions, additional provisions for allowance for doubtful accounts, and reversal of deferred tax assets, and business performance may be affected in the event of a deterioration in the business environment. In addition, because it is difficult to confirm the actual delivery of goods in the sale of intangible assets, there is a potential risk that internal controls could be circumvented, resulting in recognition of revenue that does not actually exist. Future changes to accounting standards may also significantly affect business performance.