IMAGE MAGIC Inc.

Cab Co., Ltd. accounted for 28.9% of purchases in the fiscal year ended December 2025, supplying mainly T-shirts and other apparel. Although the company is also a shareholder of the Company and stable continuation of the business relationship is expected, if the relationship could no longer be continued for any reason, this could affect the Company's financial position and operating results. The Company is working to reduce this risk by diversifying the products it handles and diversifying its sourcing.

The Company has obtained Privacy Mark certification and strictly manages confidential information and personal information; however, in the event of an information leak, the resulting loss of trust could have a material impact on the Company's financial position and operating results. Given the nature of its EC business, the Company holds large volumes of customers' personal information and must continue to address risks such as unauthorized access.

The Company's business depends on communication networks and computer systems, and if system trouble occurs due to natural disasters, accidents, unauthorized access, or other causes, service provision could be halted, affecting the Company's financial position and operating results. The Company maintains stable service operations by strengthening server infrastructure and implementing security measures.

Makoto Yamakawa, the founder and Representative Director and President, plays a key role in formulating and deciding management policy and business strategy, and if he were to become unable to continue his duties, this could have a material impact on business activities and operating results. The Company is working to build a management structure that eliminates excessive dependence on him, but at present the degree of dependence remains high.

There are multiple competing operators in the domestic on-demand print service market, and while the Company is pursuing differentiation through the use of IT, the entry of superior competitors and other factors could give rise to price competition or a decline in sales volume. The Company's policy is to respond by continuing to enhance service functionality, improve printing efficiency, and pursue proactive marketing activities.

The Company's policy is to proactively pursue new businesses that leverage its existing know-how, and spending on capital investment, system investment, personnel recruitment, and other items is expected to result in a temporary decline in profit. If revenue is not generated as initially anticipated, this could affect the Company's financial position and operating results.

If stock acquisition rights granted as incentives to directors and employees are exercised, the value of shares held by existing shareholders and their voting rights ratio may be diluted. As of the end of the fiscal year under review, the number of potential shares was 24,037, equivalent to 0.9% of the total number of issued shares of 2,572,235.

Designs submitted by customers may potentially infringe third parties' copyrights, trademark rights, or other rights, and if such infringement occurs without the Company's knowledge, this could result in loss of trust and claims for damages, affecting the Company's financial position and operating results. The Company addresses this through cautionary notices on its service site, prohibitions under its terms of use, and screening based on internal standards.

If the purchase prices of materials such as T-shirts and mugs and printing supplies such as ink rise, or delivery costs increase, and it is difficult to pass these increases on through selling prices, profitability could decline, affecting the Company's financial position and operating results. The Company continues to search for suppliers offering superior price and quality, and has adopted a policy of separately billing customers for delivery charges on orders below a certain amount.

The Company is subject to various laws and regulations, including the Act on Specified Commercial Transactions, the Act against Unjustifiable Premiums and Misleading Representations, the Product Liability Act, and the Act on the Protection of Personal Information. If regulations are tightened in the future, this could expand constraints on business activities and increase compliance costs, having a material impact on performance. The Company thoroughly complies with laws and regulations, but continued response to changes in the regulatory environment is necessary.