WirelessGate, Inc.

WiMAX, part of the WirelessGate Wi-Fi Service that is the mainstay of net sales, continues to account for a high proportion of revenue, and much of the growth in new subscribers depends on specific business partners. If there is a change in policy or a deterioration in the business relationship with such partners, it could have a material impact on the overall business. As a countermeasure, the company is diversifying its sales channels by expanding into new business areas, deepening collaboration with existing distributors, strengthening sales through its own group EC sites, and enhancing sales of peripheral products and subscriptions.

The Group does not own its own telecommunications infrastructure; WiMAX is procured from KDDI Corporation, and other services rely on telecommunications lines procured from various telecommunications carriers and public wireless LAN operators. Similarly, the subsidiary FREEDiVE Inc. also depends on external telecommunications carriers. If the business relationship with an external telecommunications carrier deteriorates or a long-term interruption of telecommunications lines occurs, provision of the Wireless Remote Service and Mobile WiFi Service could become impossible, impacting business results and financial condition. As a countermeasure, the company continues to strengthen cooperation by maintaining good relationships and exchanging information with external telecommunications carriers.

In the information and telecommunications industry, changes in technology, customer needs, and the industry environment occur rapidly, and service development based on new technologies is conducted frequently. If the company is unable to acquire rights to use important new technologies or develop services that meet customer needs, this could hinder the provision of telecommunications services and impact the business. As a countermeasure, the company maintains a telecommunications service provision structure that does not rely on a single technology, and deploys personnel to gather information on technological changes and address related issues through relevant departments.

Goodwill recorded in connection with the acquisition of shares in FREEDiVE Inc. may be affected by changes in market competition and the business environment that impact the key assumptions of the business plan at the time of the share acquisition. If business performance significantly deteriorates compared to the business plan at the time of the share acquisition, this could have a material impact on the amount of goodwill in the consolidated financial statements for the following consolidated fiscal year and on the amount of affiliated company shares in the non-consolidated financial statements for the following fiscal year. As a countermeasure, the company continues to monitor the progress of the business plan and synergy effects, and works to reduce impairment risk through a consistent process from due diligence to PMI and monitoring.

The Group applies tax effect accounting, and the recoverability of deferred tax assets is judged based on estimates of future taxable income and scheduling of temporary differences, etc. If the timing and amount of actual profit and taxable income differ from estimates, this could have a material impact on the consolidated financial statements and non-consolidated financial statements. As a countermeasure, the company carefully examines the feasibility of its business plans and records deferred tax assets only for taxable income estimated reasonably and conservatively.

The company outsources the majority of its credit card payment collection to GMO Payment Gateway, Inc., while its subsidiary FREEDiVE Inc. outsources this to ROBOT PAYMENT, Inc. If there is a change in collection agency fees or termination of the contract due to some unforeseen circumstance, this could impact business results and financial condition. As a countermeasure, the company works to understand the situation through regular exchange of information with its outsourcing partners and to diversify risk by expanding payment methods other than credit cards.

If a system failure occurs due to unauthorized system intrusion from cyberattacks, network failures, or other unforeseeable events, it could become difficult to provide services, and a prolonged service outage could impact the business. As a countermeasure, the company has adopted a design that emphasizes fault tolerance, including dual redundancy of telecommunications lines, access restrictions requiring robust authentication procedures, installation of security equipment, and enhanced data backup.

Active engagement in new business initiatives may result in additional expenditures such as system investments and advertising expenses, which could reduce profit margins. If, due to unforeseen circumstances, it takes time for a new business to generate stable revenue, or if the business does not proceed as planned, the company may be unable to recover its investment, impacting business performance. As a countermeasure, the company makes decisions on new business initiatives, including M&A, only after comprehensively and carefully examining risks such as investment recoverability, and works to reduce risk through monitoring at important meetings.

The Group acquires and stores customer information, and if unauthorized access from outside parties or leakage or misuse of personal information by outsourcing partners occurs, this could negatively impact the business through reduced service reliability and loss of social credibility, thereby affecting business performance. As a countermeasure, the company implements cyberattack countermeasures, email security checks, monitoring of unauthorized operations, and access restrictions, while maintaining Privacy Mark certification, conducting information management education and awareness activities for all officers and employees, and confirming the personal information protection status of outsourcing partners.

The Group has filed a notification with the Ministry of Internal Affairs and Communications as a telecommunications carrier and is subject to regulation under the Telecommunications Business Act. If the Minister of Internal Affairs and Communications issues an order for improvement of business methods or other measures on the grounds that there is an impediment to ensuring the secrecy of communications, this could negatively impact business performance through loss of social credibility and other adverse effects on the business. As a countermeasure, the company discusses necessary business changes resulting from legal amendments at the Board of Directors and Management Committee meetings, and strives to comply with relevant laws and regulations through legal checks by legal personnel and legal reviews by outside counsel.