NJ Holdings Inc.

In contract development within the Game Business, changes in market trends or subsequent modifications to the production process may lead to requests from clients to change delivery deadlines or specifications. This could cause fluctuations in the timing and amount of revenue recognition, potentially affecting business performance. The Group strives for appropriate production process management and delivery in accordance with contract development agreements, but the risk of deviation from initial estimates remains.

In the Game Business, a portion of content production is outsourced to external creators. If unforeseen circumstances such as contract revisions or terminations occur, this could disrupt the production system and affect business performance. The Group seeks to reduce dependence on outsourcing by distributing outsourced work among multiple creators and establishing an in-house production department, but the risk of dependence on specific creators has not been completely eliminated.

Revenue related to contract development agreements is recognized over a certain period based on progress, and thus is heavily dependent on estimates of total order value and total cost. If actual results deviate from estimates and profitability deteriorates, it may become necessary to retroactively revise previously recognized revenue or recognize losses. In addition, there is a possibility that additional costs arising from specification changes or extended development periods cannot be billed to the client, which could lead to disputes. The Group addresses this through the development of a project management framework and prompt revision of total cost estimates, but delayed responses could have a material impact on business performance.

Revenue share income in the Game Business is significantly affected by the promotional activities conducted by clients and the regions in which content is sold. Changes in client policies may alter transaction terms or the timing of income, potentially affecting the Group's business performance. As this is an external factor beyond the Group's direct control, it poses a risk to revenue stability.

The Mobile Business derives its main source of revenue from commission income earned by acting as an intermediary for communication service contracts on behalf of mobile network operators. If transaction terms change due to shifts in the management policies of mobile network operators, this could affect business performance. Since the terms for commission receipts differ by operator, the structure makes it difficult for the Group to proactively control changes in these terms.

The majority of the Mobile Business's revenue depends on sales agency agreements with primary agencies. These agreements stipulate that the primary agency may terminate the contract if the Group's subsidiary experiences specified events such as suspension of business, or if there are material changes in shareholder composition or management. If the agreements are not continued, are terminated, or if transaction terms are changed, this could have a material impact on the Group's business performance. The contracts are automatically renewed annually, and their continuation depends on mutual agreement between the parties.

The Group handles personal information and confidential information, and if such information is leaked, it may lead to claims for damages from customers and others, as well as loss of trust, potentially affecting business performance. The Group strives to prevent leaks by strengthening its information management systems and enhancing employee training, but risks such as cyberattacks and internal misconduct cannot be completely eliminated.

The Group actively considers M&A and capital/business alliances as means of complementing and strengthening its businesses. However, if suitable investment opportunities cannot be found or the initially expected strategic effects are not achieved, this could affect business performance. Furthermore, if actual results significantly fall short of the future plans anticipated at the time of execution, impairment of goodwill and other assets recognized in connection with the M&A may become necessary. The Group makes every effort to avoid risk through thorough due diligence, but the risk of failing to achieve plans after the fact remains.

The Group's business operations and expansion require securing excellent personnel with advanced technical skills and know-how. If sufficient personnel cannot be secured or developed, this could affect business performance. Although the Group is working to strengthen its workforce and enhance training, competition for specialized talent in both the Game Business and Mobile Business is intense, creating a risk that recruitment and retention may become difficult.