Link-U Group Inc.

In FY2025 (ended July 2025), dependence on manga apps remains high, resulting in a structure where trends in the electronic manga distribution market directly affect business performance. If there is a rapid change in user preferences or the service becomes subject to regulation due to legislative amendments, the Group may be forced to change its management policies and strategies. Because the content distribution market has a short history and contains many uncertain factors, the Group continues to focus on it while inherently bearing market fluctuation risk.

The Group's smartphone apps are provided through the app markets of Apple Inc. and Google Inc., and the proportion of revenue derived from smartphone apps is high. If either company changes its terms of use or shifts its business strategy, this could directly affect the Group's revenue structure. The high degree of dependence on these platform operators represents a structural vulnerability.

In FY2025 (ended July 2025), revenue from the top three major customers accounted for 24.6% of total revenue. Although this dependence has been trending downward from 37.0% in FY2022 (ended July 2022), concentration risk remains. If any of these customers change their policies or experience deteriorating business performance, this could affect revenue and the financial position, including advertising expenses. While the Group is promoting the development of new customers, there is a risk that progress could be delayed due to competitors enhancing their added value.

The content distribution market has low barriers to entry, and publishers and others provide content on a non-exclusive basis, resulting in intense competition. If sufficient differentiation cannot be achieved in content lineup or distribution systems, or if the Group falls behind in adopting advanced technologies, this could lead to service obsolescence and a decline in the number of users. The Group aims to differentiate itself through content expansion and strengthening its distribution systems, but there is no guarantee that this will be achieved.

The Group is working to create efficient business models and provide added value by utilizing new technologies such as AI and IoT. In this field, where the pace of technological innovation is extremely fast, if the Group is slow to respond to change or fails to make sufficient use of such technologies, this could result in a decline in competitiveness and affect its financial position and operating results. Continued technology investment and securing human resources are key to maintaining competitiveness.

There is a risk that service provision could become impossible due to a temporary surge in access load or defects in hardware or software. If important data is lost or unlawfully obtained due to unauthorized external intrusion or errors by personnel, this could result in direct damages as well as a decline in social credibility and trust. While the Group has established intrusion prevention measures and error prevention systems, complete prevention cannot be guaranteed.

A wide range of laws and regulations, including the Act on the Protection of Personal Information, the Act on Specified Commercial Transactions, and the Payment Services Act, are related to the business. If new regulations are applied due to future legal amendments, this is expected to result in constraints on business development and additional compliance costs. If user personal information is leaked or third-party copyright infringement occurs, this could result in liability for damages and a decline in social credibility. The Group is working to strengthen its compliance system, but this does not eliminate the risk entirely.

In the content business, the distribution of pirated content may result in lost revenue opportunities that content holders, copyright holders, and vendors should otherwise receive. This is recognized as a risk that could directly affect the Group's financial position and operating results. This is an industry-wide issue, and it is a structural risk that cannot be fully addressed by any single company's efforts alone.

As of July 31, 2025, the Group had 193 employees (excluding temporary employees), a relatively small workforce, making the securing of highly skilled and globally capable personnel an important condition for business growth. If the Group is unable to secure sufficient appropriate personnel, or if personnel turnover exceeds expectations, this could constrain business expansion. While the Group is working on active recruitment, enhancing employee benefits, and conducting training, this does not guarantee the continued securing of human resources.

The Group makes capital contributions and investments in other companies to enhance corporate value, targeting IT companies with affinity to the server platform business and companies considering entry into electronic content distribution. If, following such investments, changes in the business environment lead to a determination that the initially expected results will not be achieved, the Group may recognize impairment losses on intangible assets such as goodwill or on investment securities, which could affect its financial position and operating results. Although the Group conducts prior reviews of financial and contractual details and examines the associated risks, this does not guarantee future results.