COVER Corporation

The Company's business performance depends on seasonal factors related to consumers' long holiday periods and the timing of major events, making it difficult to judge full-year performance forecasts based solely on the results of a specific quarter. The likelihood of this risk materializing is explicitly stated as "high," indicating a high possibility of short-term fluctuations in performance. Investors need to take seasonal factors into account when interpreting quarterly results.

The Company provides live streaming content through external video streaming platforms such as YouTube, and there is a risk that continued content provision may become difficult due to significant changes in the business strategies or economic terms of the platform operators. If this risk materializes, revenue from customers via the relevant platform may decline, potentially affecting business performance and financial condition. As countermeasures, the Company aims to mitigate dependence risk by diversifying revenue through Merchandising, events, licensing-out, and other means, and by expanding activities across multiple platforms.

As the Company's main revenue sources are VTuber live streaming and sales of related merchandise, it faces the risk that growth in the related market may slow due to laws and regulations, economic trends, changes in individual preferences, and other factors. If a decline in the number of viewers or a slowdown in sales growth occurs, it may become difficult to maintain the business model over the long term. The Company intends to mitigate this risk by diversifying its business areas and expanding into various regions.

The Company operates hololive English and hololive Indonesia, among others, targeting English- and Indonesian-speaking regions, and faces potential risks such as differences in culture and business practices, exchange rate fluctuations, legal and tax systems in each country, political instability, and competition from local competitors. If these risks are not adequately addressed, they may adversely affect the performance and financial condition of overseas operations. The Company aims to mitigate these risks through collaboration with external experts well-versed in local culture and laws, as well as diversification of the regions in which it operates.

There are multiple domestic and overseas competitors engaged in video streaming-related businesses, including the VTuber Business, and there is a risk that the emergence of more competitive rivals could lead to viewer attrition. If it becomes difficult to continuously secure attractive content and creators, this may also affect business performance and financial condition. The Company plans to maintain its market advantage and enhance competitiveness through the development of superior IP and technological improvements.

Various laws and regulations, including the Act on the Protection of Personal Information, the Specified Commercial Transactions Act, and the Act against Unjustifiable Premiums and Misleading Representations, apply to the Company's business activities. There is a risk that, due to business expansion, diversification of transaction forms, or revisions to laws and guidelines, service operations or transaction practices may be deemed non-compliant with laws or the judgment of administrative authorities. In such a case, the Company may need to respond to guidance, recommendations, orders, or public announcements from administrative agencies, potentially affecting business performance and financial condition. The Company is working to develop internal regulations and contract formats, conduct internal training, and strengthen its verification systems.

The Company's business performance depends to a certain extent on the popularity of its affiliated VTubers and the frequency of content supply. If continued support from viewers is lost due to scandals, online controversies, defamation, health reasons, or other factors, or if continuation of activities becomes difficult, this may reduce the added value of related IP and merchandise, potentially affecting business performance and financial condition. The Company is addressing this through promoting sound content distribution, establishing monitoring systems, collaborating with industry organizations, and stabilizing content supply through a diverse range of popular VTubers.

If content or creators violate public order and morals or infringe intellectual property rights, this could lead to reputational damage to the Company and its affiliated creators or result in disputes, potentially affecting business development, financial condition, and business performance. Given the nature of daily live streaming, it is difficult to completely eliminate the occurrence of unforeseen incidents. The Company strives to prevent such occurrences in advance by expanding guidelines, providing guidance to creators, and monitoring streamed videos, among other management measures.

Securing content creators, specialized engineers, corporate staff, and other personnel is essential for business expansion and service improvement. However, if intensifying competition for talent or changes in market needs prevent recruitment as planned, or if existing personnel leave the Company, this may affect business performance and financial condition. The Company plans to address this through continued active recruitment activities, but there is no guarantee that sufficient personnel can be secured.

The Company grants stock acquisition rights as incentives to directors and employees. As of the filing date of this document, the number of potential shares outstanding is 1,443,000 shares, equivalent to 2.1% of the total of issued shares and potential shares (67,093,100 shares). Exercise of these rights may dilute the share value and voting ratio of existing shareholders, and if a large number of shares are released into the market at once, this may affect appropriate share price formation. The Company may issue additional equity incentive plans in the future to secure talented personnel.