Globee Inc.

The Company depends on its core service "abceed" for the majority of its net sales, and any unforeseen change in the operating environment could have a significant impact on its business and financial results. As risk mitigation measures, the Company is strengthening its deployment to corporate clients and expanding its coaching service "ABCEED ENGLISH," but the degree of dependence remains high at present.

If there is a significant decline in the number of language learners or a decrease in the learning population due to the declining birthrate, the market targeted by the Company may shrink. The Company is promoting sales activities and product/content development aimed at diversifying its target customer base and markets, but a significant change in the environment could affect its business results.

Although the Company listed on the Growth Market of the Tokyo Stock Exchange in June 2023, the tradable share ratio as of the filing date of this document remains at only 30.12%. If liquidity declines, trading in the market could stagnate, adversely affecting the supply-demand balance of the Company's shares. The Company intends to improve liquidity by requesting partial secondary offerings from officers and increasing the number of tradable shares through the exercise of stock options.

Since the Company adopts a subscription model with revenue centered on paying members, a stagnation in new member acquisition or a greater-than-expected increase in cancellations would directly affect business results. Users tend to cancel within a relatively short period once they are satisfied with their learning in a particular area, and the Company is working to improve retention rates by adding new content such as movie content, but depending on changes in the competitive environment, it may become difficult to maintain membership as planned.

Since the Company's core service is a smartphone application, there is a risk that changes in the store operation policies of Apple Inc. and Google LLC could cause fluctuations in service deployment, revenue, and profit margins. As countermeasures, the Company is collecting information on trends among the various platform operators, while also diversifying its revenue sources through corporate services and coaching services.

If similar services newly enter the market, existing services incorporate similar functions or content, or other services implement significant price reductions, the Company's competitive advantage could be undermined. The Company aims to differentiate itself through proprietary product development and service deployment, but if it is unable to respond to sudden changes in the competitive environment, its business and financial results could be affected.

If the Company is unable to secure licenses for highly important content, or if transactions with major business partners are suspended, the quality and appeal of its services could decline. In addition, for movie content, the Company operates under contracts that require payment of a fixed license fee regardless of sales performance, creating a risk that license fees cannot be recovered if sales do not progress as expected. The Company aims to mitigate this risk by diversifying contracts across numerous publishers and producing its own content.

If personal information such as users' email addresses or confidential information is leaked or misappropriated due to virus infection or unauthorized external access, this could lead to a loss of social credibility or the occurrence of civil liability. The Company has implemented measures such as obtaining Privacy Mark certification and introducing anti-virus software and device control tools, but it is difficult to completely eliminate the risk of malicious hacking and similar threats.

Representative Director and President Kenzaburo Ikushima plays an important role in determining management policy and business strategy, while Director and CTO Kazuma Kamiaka plays an important role in product development and service operations. Should any unforeseen circumstances arise involving either individual, or should either of them leave the Company, this could affect the Company's business and financial results. The Company is working to build a structure that reduces this dependence, but some degree of dependence remains at present.

Since the first quarter of the fiscal year ended May 2023, the Company has capitalized software and content development costs as assets. If the expected results are not achieved due to changes in the business environment or competitive conditions, an impairment loss may occur and affect business results. The Company is working to improve profitability, but depending on changes in the external environment, impairment risk could materialize.