Geniee, Inc.

The internet advertising market is highly susceptible to economic conditions, and business performance may deteriorate due to economic downturns or reductions in advertising budgets. In addition, the rapid advancement of generative AI could bring about major transformation to existing business models, and if measures to establish competitive advantage fail to succeed, this may affect the Company's financial position and business results.

In the internet-related field, new technologies and services are being introduced one after another, and support for new devices such as smartphones is also required. If the response to technological innovation is delayed, this may lead to a decline in technical capability, service quality, and competitiveness, and may also result in additional system costs and increased personnel expenses. The Company is addressing this through the recruitment and training of engineers and the development of a creative working environment.

As of the end of the consolidated fiscal year under review, revenue dependence on the core business, GENIEE SSP, remains high. If transaction volume declines due to changes in clients' delivery policies or system failures, the impact on business performance would be significant. The Company is strengthening its revenue base by promoting diversification into GENIEE DSP, Digital OOH, GENIEE SFA/CRM, and the PR field, among others.

Through GENIEE SFA/CRM, GENIEE MA, and GENIEE CHAT, the Company holds information assets such as customer information of client companies, and if unauthorized access from outside or inappropriate work by officers or employees results in system failure or information leakage, there is a risk of loss of social trust and claims for damages. The Company is working to maintain and improve its management standards through the formulation and observance of a privacy policy and the acquisition of Privacy Mark certification.

Services are provided through computer systems centered on servers, and there is a risk of system failure occurring due to equipment malfunction, natural disasters, sudden increases in access, computer viruses, unauthorized access by third parties, and other causes. If a failure occurs, it may result in service suspension, loss of customer trust, claims for damages, and cost burdens such as additional cloud usage fees. The Company strives for stable operation through system enhancement, strengthening of backup systems, and development of security monitoring systems.

Securing and developing excellent human resources is the most important issue for the Company's group, but rapid changes and expansion of the business and the supply-demand balance in the labor market may make it difficult to secure the necessary personnel. If key personnel leave or an unexpectedly large number of employees resign, this may affect the Company's financial position and business results. The Company is making maximum efforts toward recruitment and training while also developing a creative working environment.

Tomoaki Kudo, President and Representative Director, may resign as Representative Director of the Company and become a director without representative authority if he needs to devote himself to business execution as Representative Director of group company JAPAN AI Corporation (JAI), based on a memorandum with JAI's investors. Should any disruption occur in the business execution of the Representative Director, this may affect business results and business development. The Company is strengthening its management organization through the introduction of an executive officer system, delegation of authority, and the development of next-generation management executives.

In July 2024, the Company issued 10,000,000 preferred shares to Mizuho Bank, which carry a right to request acquisition in exchange for common shares. If the right to request acquisition is exercised, up to 42,872 voting rights' worth of common shares may be delivered, potentially diluting the per-share value for existing shareholders. The Company plans to enhance corporate value through the reliable execution of its business plan and to acquire the preferred shares using the acquisition clause providing for cash consideration.

The Company's group acquires users' behavioral history through Cookie technology via platforms such as SSP, DSP, and DMP, and is subject to regulations including the Personal Information Protection Act. If new laws related to internet advertising are enacted, existing laws are amended, or self-regulation is required in the future, service provision may be constrained, potentially affecting the Company's financial position and business results. While this is not currently an impediment to business, continuous monitoring of legal and regulatory trends is necessary.

As part of its growth strategy, the Company has carried out acquisitions and investments in other companies, and is also promoting business expansion into the PR field through the acquisition of Social Wire Co., Ltd. and other means. There is a risk that contingent liabilities or unrecognized liabilities, or fraudulent acts or compliance issues due to inadequate internal controls, may arise after an acquisition, and if an acquired or invested company fails to achieve the expected business performance, this may affect the Company's financial position and business results. The Company strives to avoid business risks through detailed due diligence conducted in advance.