CRAVIA Inc.

The Group has recorded an operating loss, ordinary loss, and net loss attributable to owners of the parent in the current consolidated fiscal year as well, and events exist that raise material doubt about the going concern assumption. As countermeasures, the Group is pursuing fundraising through the issuance and exercise of stock acquisition rights (11th–13th series) and business portfolio expansion through M&A; however, capital remains fragile and there is a possibility that earnings improvement may not proceed as planned. The consolidated financial statements are prepared on a going concern basis, and the effects of the material uncertainty are not reflected in the financial statements.

In June 2021, inappropriate misappropriation of funds and accounting treatment by a former officer came to light, leading to the company's designation as a Securities on Alert stock; although this designation was lifted as of August 30, 2023, the performance of the Ambassador Marketing business continues to be affected by the lingering impact of the misconduct. While the Group is developing and thoroughly implementing measures to prevent recurrence, if new fraud were to occur, it could damage investor trust and cause stagnation in cooperation with business partners and external institutions, potentially having a material impact on the business and results. The Group is working to strengthen internal controls through the establishment of a Governance Enhancement Committee and Compliance Committee, among other measures.

The Group has actively pursued M&A and business alliances across diverse fields including entertainment, travel, consumer goods, publishing, and reuse, establishing or acquiring more than 12 consolidated subsidiaries and equity-method affiliates. However, if the initially anticipated synergy effects are not realized or if alliances are terminated, the Group may be unable to recover its investment funds, adversely affecting its results. There is also a possibility of changes in the allocation of capital increase funds, which poses a risk of stagnation in business growth.

Since October 2023, tightened regulations under the Act against Unjustifiable Premiums and Misleading Representations targeting stealth marketing have come into effect, creating a regulatory environment that directly affects the Ambassador Marketing business, which utilizes word-of-mouth and social media. The Company has prepared and disseminated stealth marketing countermeasure guidelines and conducted seminars for clients; however, if instances of penalties occur elsewhere in the industry, even if unrelated to the Company, this could lead to a contraction of the social media advertising market as a whole, potentially affecting the Group's business and results.

In the internet-based marketing market, marketing methods and service formats are evolving daily, and the number of competitors offering marketing measures utilizing fans is increasing. The Company seeks to differentiate itself through the ASP system of the Ambassador Platform and its proprietary know-how; however, if competitors establish innovative methods or if intensifying competition necessitates additional spending on system investment and advertising expenses, this could lead to a decline in profit margins and erosion of business advantages.

The Company has issued multiple series of stock acquisition rights (11th–13th series, etc.) for fundraising and stock option purposes, and if these are exercised, the value of shares held by existing shareholders may be diluted. Given that capital remains fragile, additional capital policy measures are expected to continue to be considered, and the risk of further dilution persists. Dividends also remain undetermined at this time, which has a significant impact on investors from the perspective of shareholder returns.

In the internet industry, the pace of technological innovation and changes in customer needs are rapid, and delays in responding could lead to a decline in competitiveness. Additionally, if systems go down due to surges in access, power outages, computer viruses, unauthorized external intrusion, natural disasters, or other causes, this could disrupt service provision as well as lead to loss of trust and claims for damages. While measures such as regular backups and operational monitoring are in place, risks arising from unpredictable factors cannot be eliminated.

The Group acquires and manages personal information of ambassadors and others, and if unauthorized external access or internal information leakage occurs, this could lead to claims for damages and loss of credibility, affecting the business and results. The Group has established personal information protection regulations, strengthened its security environment, and conducted employee training, and obtained Privacy Mark certification in October 2012; however, risks remain due to insufficient employee training or system deficiencies.

The Company's Ambassador Platform acquires data through APIs provided by social media platforms, and there is a possibility that social media operators may change their policies to restrict or prohibit automatic data collection. Additionally, if changes in legal frameworks concerning social media data impose constraints on how information is collected or services are provided, this could lead to a decline in service quality and the incurrence of additional costs, potentially affecting the Group's business and results.

The Company is a small-scale organization, and securing personnel with advanced technical skills as well as sales staff has become an urgent issue amid business diversification and rapid business expansion. If recruitment plans do not proceed as planned due to deterioration in reputation or business performance, or if existing personnel leave the Company, this could lead to a decline in competitiveness and constrain business expansion. While the Company maintains a policy of actively recruiting personnel and promoting in-house training, a shortage of human resources is currently recognized as a risk in business operations.