Nihon Enterprise Co., Ltd.

Against the backdrop of DX promotion, a rapid increase in new entrants into the IT-related market and business expansion by existing companies are anticipated, and there is no guarantee that the Group can maintain the superiority of the services it provides. If competition with rival companies intensifies, it may adversely affect the Group's operating results. Rapid changes in the market and uncertainty over growth are also further complicating the competitive environment.

In investment activities such as M&A, capital expenditure, and research and development, although market conditions and customer needs are examined in advance, there is a risk that the Group may not be able to fully recover its investment if business development does not proceed as expected. In addition, impairment losses may occur on goodwill and other fixed assets arising from investment activities, which could affect the Group's operating results and financial position.

Services may be suspended due to a variety of factors, including failures at data centers caused by natural disasters or accidents, server malfunctions caused by unexpectedly sharp increases in access, and intrusions using viruses. If such events occur, they will cause damage to general users and corporate customers, and will also affect the continuity of the Group's business.

In providing Content Services, the Group depends on transactions with mobile network operators and platform operators, among others, and changes in these operators' content provision terms or business strategies may lead to changes in transaction terms or make it difficult to continue transactions. The Group strives to maintain good relationships, but if transactions are interrupted, it could have a material impact on operating results.

The Group outsources the collection of information fees for Content Services to mobile network operators such as NTT DOCOMO and the KDDI group, but under the contract, these operators are exempted from their collection agency obligations if information fees cannot be collected for reasons not attributable to them. If the amount of information fees that mobile network operators are unable to collect increases, the Group's recorded sales may decrease, potentially affecting its operating results.

Due to technological innovation in IT and changes in usage needs, the life cycle of services provided by the Group is not necessarily long. If the Group falls behind in responding to new technologies, or if it provides services that diverge from usage needs, its services may become obsolete, potentially adversely affecting operating results.

In its information and communication services, the Group stores general users' personal information and image data on servers, and although it employs various network security measures, the possibility of personal information leakage due to unauthorized access cannot be eliminated. If a leak occurs, in addition to being held liable through damage claims, litigation, administrative sanctions, and criminal penalties, it could lead to a loss of social credibility.

Content Services depend mainly on the planning, development, and provision of apps and services for smartphones, but as general users' preferences change rapidly, if the Group is unable to provide attractive content in a timely manner, or depending on the competitive landscape, adoption and monetization may not progress as expected. This could affect the Group's operating results.

The Group provides corporate clients with contracted development and operation services, business support by highly skilled personnel, and services related to smartphone peripherals, but in entering new business areas, there are risks such as developed products and services not being accepted by customers, being unable to differentiate from competitors, or development not progressing. Although the Group aims to expand its business amid growing DX demand, if the anticipated growth is not achieved, it could affect operating results.

The Group strives to protect its proprietary technology and know-how and to prevent infringement of third parties' intellectual property rights, but if a third party newly obtains a patent in the Group's business field, or if there exist patents held by others of which the Group is unaware, this may result in claims for damages, injunctions against use, or the obligation to pay royalties. This could affect the Group's operating results and financial condition.