Imagineer Co., Ltd.

The mobile content market is undergoing significant changes due to the proliferation of smartphones and rapid technological innovation and shifts in industry standards. If delays in responding to technological innovation lead to service obsolescence, price competition causes revenue declines, or sudden changes in user preferences result in market saturation or decline, it may become difficult to acquire users, which could have a material impact on business performance. As a countermeasure, the Group is expanding into businesses beyond mobile content in multiple directions to reduce its dependence on this market.

Because the mobile content market has low barriers to entry and is highly competitive, competitors continue to expand their businesses and new entrants continue to emerge. If the Group becomes unable to provide services matching customer needs in a timely and appropriate manner, this could lead to a decline in the number of customers, thereby affecting business performance. The Group is working to secure a competitive advantage through differentiation leveraging its know-how and assets.

Revenue dependence on telecommunications carriers such as NTT DOCOMO, KDDI, and SoftBank, as well as platforms such as Apple, Google, and LINE Yahoo, is expanding, and each carrier's collection agency service is also used for payment processing. If changes in the business policies of these platform providers, changes in fees, technical failures, or other factors make it impossible to continue these business relationships, this could have a material impact on business performance. As a countermeasure, the Group is actively expanding services to multiple platform operators to diversify its dependence away from specific operators.

The collection agency agreements with NTT DOCOMO and KDDI include provisions that exempt the collection agency obligation in cases of non-collection not attributable to the information fee collection operator. Because the amount per case is small, direct collection from non-paying users is practically difficult from a cost-benefit perspective, and if the number of non-paying users and the amount of unpaid fees increase, this could affect business performance. The Group regularly checks the amount and ratio of uncollectible fees and continues to evaluate the appropriateness of its outsourced collection agents.

In business operations in China, the economic outlook is uncertain, creating a risk that trade receivables may not be collected as planned. In addition, foreign-currency-denominated trade receivables arising from content sales to China are subject to exchange rate fluctuations, which could affect business performance. As countermeasures, the Group monitors the receivables collection track record of its Chinese business partners and evaluates their appropriateness, while also monitoring exchange rate fluctuations to minimize the impact on results.

Some of the Group's services are provided under licenses for copyrights and related rights obtained from rights holders. If such licenses can no longer be obtained for any reason, or if the rights holder itself begins offering a similar business, it may become impossible to continue providing the relevant service, which could affect business performance. As countermeasures, the Group pays close attention to building relationships with rights holders and continually works to acquire new licensed rights in order to reduce dependence on specific rights holders.

Because the business depends on communication networks, there is a risk that service provision may become impossible due to natural disasters, accidents, traffic overload, or hardware or software defects. Furthermore, if unauthorized external access, hacking, computer virus infection, or data rewriting or destruction due to employee negligence occurs, this could affect business performance through a decline in trust. As countermeasures, the Group works to avoid such risks by using highly reliable, redundant networks and entrusting systems to operators that provide secure environments.

Currently, no legal regulations directly regulate the Group's business activities; however, if new laws are enacted, the application of existing laws is clarified, or self-regulation is required in the future, this is expected to lead to restrictions, changes, or suspension of business activities and increased costs, which could have a significant impact on business performance. The Group forecasts regulatory developments by studying past regulatory cases and considering ethical aspects, and seeks to expand into business areas less likely to become subject to regulation.

Mobile phone numbers and email addresses provided at the time of service application are stored on the system, and if personal information is leaked externally due to unauthorized access or deficiencies in internal management systems, this could affect business performance through increased security enhancement costs, damage claims, and loss of trust. As countermeasures, the Group strictly manages personal information in an environment isolated from external networks, and has established security-related regulations and conducts employee training.

Director Takayuki Kamikura is a major shareholder of the Company and is deeply involved in the overall management of the business. If he were to leave the Group for any reason, this could affect business management. As a countermeasure, the Group strives to mitigate management risk through communication among officers in the Board of Directors and management meetings, among other venues.