SPACE SHOWER SKIYAKI HOLDINGS INC.

Events beyond the control of the Group, such as earthquakes, typhoons, or the spread of infectious diseases, pose a risk of suspending or scaling down operations of outdoor music festivals, live houses, and entertainment cafes. Combined with a contraction in economic activity resulting from a slowdown in personal consumption, this could affect the Group's financial position, business performance, and cash flows. The Group addresses this through BCP formulation and various insurance policies, but there is no guarantee that all losses can be covered.

In the pay multi-channel broadcasting industry, the number of subscribers is on a gradual decline, and the market is expected to continue contracting over the medium to long term against the backdrop of Japan's declining population. As dependence on revenue from major MSOs (Multiple System Operators) increases, changes in broadcasters' policies or amendments to laws and regulations could have an adverse impact on the Company. As countermeasures, the Company aims to strengthen the production of content chosen by viewers and to pursue monetization through new windows such as smartphones and tablets.

Businesses such as artist management, labels, and music publishing are heavily influenced by changes in consumer tastes, preferences, and trends in generating hits, making it difficult to predict the maintenance of artist popularity, contract continuation, and the discovery and growth of new artists. These uncertainties may prevent management strategies from proceeding as planned. The Company continuously works on discovering and developing promising artists, but there is no guarantee of results.

In the digital music distribution market, consolidation of operators is progressing on a global scale, and the pricing policies of large-scale platform operators may affect the Group's revenue. SPACE SHOWER FUGA, Inc. operates in a highly competitive environment against competitors affiliated with global major labels, and intensifying competition and increased countermeasure costs could affect the Group's financial position and business performance. The Company aims to enhance its competitiveness by providing differentiated value-added services and strengthening collaboration with FUGA.

The rapid proliferation of generative AI technology poses risks such as relative erosion of the content value of affiliated artists and partner creators, increased difficulty in managing intellectual property rights, a decline in competitive advantage, and business restrictions arising from the development of related legal systems. This could affect the Group's overall key business areas, including artist support, IP business, fan engagement, and digital marketing. The Company is pursuing the utilization of generative AI in parallel with the development of rights protection and governance systems, but the impact on business performance and financial condition arising from technological progress or regulatory trends cannot be ruled out.

"Bitfan PRO" and "Bitfan" provide services via the internet, and if service provision becomes impossible due to system trouble caused by unexpected surges in access or natural disasters, this could lead to a loss of trust among rights holders, business partners, and users, as well as claims for damages. The Company implements countermeasures such as ongoing monitoring by its development department, strengthening of monitoring systems in advance, and server reinforcement and scale-up.

If personal information collected from web service members, fan club members, and entertainment cafe members, as well as specific personal information including My Number data, is leaked due to unauthorized access by third parties or other causes, there is a risk of legal penalties, litigation, and loss of social trust. Specific personal information requires stricter safety management measures than general personal information, and the reputational risk in the event of a leak is particularly significant. The Company is promoting the development of a risk management system and employee awareness through a compliance program.

The Group recognizes deferred tax assets based on reasonable estimates of future taxable income, and these estimates are based on growth assumptions such as the enhancement of the brand strength of proprietary IP in the Content segment and the acquisition of new customers in the Solutions segment. If future uncertain economic conditions cause the timing or amount of taxable income to diverge from estimates, it may become necessary to write off deferred tax assets, which could have a material impact on business performance and financial position.

Future cash flows are calculated based on key assumptions regarding the growth of the live and event business, store business, platform business, and digital music distribution business. If changes occur in the underlying assumptions, such as business plans or the management environment, the Company may recognize impairment losses. The recognition of impairment losses would directly affect business performance and financial position.

The Group may enter into alliances or conduct corporate acquisitions for the purpose of developing and expanding existing businesses, but there is a risk that relationships with partners cannot be maintained due to misalignment of management strategies or business-related issues. There is also a risk that expected objectives may not be achieved due to sudden changes in the business environment or unforeseen problems. The Group addresses this through thorough due diligence, rigorous prior risk assessment, and the maintenance of flexible business plans.