Branding Technology Inc.

The Group's core services—Internet Advertising Operation, Content Marketing, and Owned Media Construction—depend on search results from search engines such as Yahoo! and Google. Business continuity may become difficult if the operators of these platforms shift their business strategies or if technological innovation gives rise to substitute services. A decline in the number of search users or in the value of search as a marketing medium would also directly affect performance. No particular alternative means have been identified at present, and this is recognized as a structural dependency risk.

While the internet-related market is expected to expand, there is a risk that changes in how companies use the internet, or unforeseen technological innovation and tightening of regulations, could render the Group's products and services obsolete and unable to meet market needs. Because the Group's main customers are mid-sized and small to medium-sized enterprises, an economic downturn or a consumption tax hike that worsens customer performance could reduce success fee amounts or make receivables collection more difficult. Market trends are highly uncertain, and if factors impeding business expansion materialize, the impact on performance could be significant.

There are multiple competitors in the Digital Marketing Business, and intensifying competition may lead to a decrease in customers or lower unit prices. The Group strives to secure a competitive advantage by utilizing its proprietary framework and building a one-stop provision system, but if this differentiation cannot be maintained, profitability may decline. In the digital marketing domain, where market entry barriers are relatively low, maintaining a sustained competitive advantage is a challenge.

Because the Group selects specific partner companies for each specialized business area and builds cooperative relationships with them, unforeseen circumstances at a partner company, or increased outsourcing costs due to market tightness, could affect performance. In addition, if a hidden defect is found in the deliverables of a partner company, this could lead to claims for damages from customers or a loss of social credibility. Although the Group rigorously supervises partner companies' work, inspects deliverables, and evaluates quality, it states that these risks cannot be completely eliminated.

In the course of its business operations, the Group handles confidential information and personal information belonging to client companies, and bears obligations under the Act on the Protection of Personal Information. Although the Group has established a personal information management policy and a management framework including compliance training, if client information were to leak, this could lead to claims for damages or a loss of credibility that affects performance. Suspension of computer systems due to system failures, natural disasters, terrorism, or similar events also poses risks of lost business opportunities and claims for damages.

In the internet-related field, laws such as the Act on the Provision of Specified Telecommunications Services, the Unauthorized Computer Access Law, and the Act on Specified Commercial Transactions exist, and tightened regulation could impose constraints on the business. In the internet advertising field, laws such as the Act against Unjustifiable Premiums and Misleading Representations, the Copyright Act, the Medical Practitioners' Act, and the Pharmaceuticals and Medical Devices Act apply, and if the Group is deemed to have facilitated an advertiser's illegal act, there is a risk of a loss of social credibility. Although the Group has established advertising handling regulations and a legal compliance checklist and built a verification framework, it must continue to respond to changes in the regulatory environment.

The owned media constructed by the Group, or deliverables supplied by partner companies, may infringe the intellectual property rights of third parties, creating a risk of claims for damages, injunctions, or demands for royalty payments. It is impossible to comprehensively investigate the intellectual property rights that arise daily, and the Group states that completely eliminating the risk of infringement is extremely difficult. Should an infringement occur, there is also a possibility that services provided by other companies, such as Yahoo! and Google, could become unusable, which could hinder the continued provision of the Group's core services.

Acquiring and developing excellent talent is a key challenge for business expansion, and while the Group is working to strengthen its recruitment activities, training programs, and personnel systems, performance may be affected if it is unable to secure or develop the necessary talent, or if the number of resignations increases. In addition, if the internal management framework fails to keep pace during periods of rapid business expansion, there is a risk of delays in transaction management and internal controls. The Group also recognizes its management dependence on President and Representative Director Yuki Kimura, and there are concerns about the impact should any unforeseen circumstance befall him.

Efforts to develop new services and new businesses in line with market trends may result in additional expenditures such as system investment and personnel costs, potentially lowering profit margins. If the expansion and growth of a new business do not proceed as originally planned, recovering the investment may become difficult, posing a risk of adverse impact on performance. While there are expectations for expansion of the digital marketing market, uncertainty regarding investment decisions remains high.

The Group seeks to reduce costs and improve operational efficiency through outsourcing arrangements with its Vietnamese subsidiary, VIETRY CO., LTD., but if a significant divergence arises between the assumed exchange rate and the prevailing market rate due to substantial currency fluctuations, this could affect performance. In addition, should a serious outbreak of an infectious disease such as COVID-19 occur and the government request that people refrain from going out, advertising demand could disappear broadly and over a prolonged period, causing a severe impact on performance and financial condition. These external environmental risks are factors beyond the Group's control, and there are limits to the countermeasures available.