GLOE Inc.

The revenue structure of the esports market is heavily dependent on client companies' advertising budgets and sponsorship fees, and a slowdown in market growth caused by reduced corporate promotional spending due to an economic downturn or other factors could affect business performance. In addition, as the market matures, close attention must be paid to changes in the competitive environment, such as the sophistication of solutions demanded by clients and differentiation from competitors. As a countermeasure, the Company is strengthening the rollout of proprietary products such as "SCOP" (Live Streaming Ad Platform), the advertising and marketing solution of Haishin Gijutsu Kenkyusho Co., Ltd., which became a subsidiary in 2024, and is promoting diversification of its business portfolio to include stock-type revenue sources in addition to flow-type revenue.

While the Company has a policy of actively pursuing new businesses and services in order to expand its business scale and diversify revenue sources, there are many uncertain factors, and if such initiatives do not proceed as expected, this could have a significant impact on business performance. In addition, additional expenditures such as system investments and advertising expenses associated with new businesses could lower profit margins. The Company seeks to reduce these risks by conducting monitoring at the planning and development stages and managing the balance of its business portfolio.

The Group's esports content is produced based on the game content of various game makers, and if relationships with game makers deteriorate or if a game maker changes its policy toward esports and discontinues the use of esports, this could affect the Group's business and performance. The Company strives to strengthen trusted relationships with game makers and stay up to date on each company's latest policies, while leveraging its strength of "thorough understanding of games and communities."

There are multiple competitors operating domestic esports businesses, and new entrants are also expected as the market grows in scale. If events and tournaments are held that diverge from user preferences, or if the Company loses its content advantage relative to competitors, this could affect its business and performance. The Company strives to build trusted relationships with stakeholders and expand its fan base by providing services from the perspectives of game makers, esports players, and viewers alike.

While direct orders from overseas game makers are expanding and revenue originating from overseas markets has become a key growth engine, there is a possibility that it may become difficult to secure transaction volume or that receivables collection may be hindered due to economic conditions, laws and regulations, geopolitical risks, exchange rate fluctuations, or differences in business practices in the counterpart countries. In addition, changes in overseas manufacturers' strategies regarding the Japanese market could affect business performance. The Company addresses this by diversifying its client base to avoid excessive dependence on specific countries, regions, or manufacturers, and by strengthening its contract management framework in accordance with global business standards.

The esports industry is subject to regulations including the Act against Unjustifiable Premiums and Misleading Representations, the Act on Control and Improvement of Amusement Business, etc., the Penal Code (gambling offenses), the Act on the Protection of Personal Information, and the Act on Promoting Subcontracting Small and Medium Enterprises' Transaction Fairness, among others. Violations of these regulations, administrative dispositions, or the tightening or revision of laws could affect the Company's business and performance. The General Affairs Department takes the lead in coordinating with other departments to establish practical operations for legal compliance, gathering information on trends in the amendment or abolition of relevant laws and regulations, and maintaining a system of cooperation with legal counsel.

In the event of a natural disaster such as a major earthquake, business continuity could be disrupted due to damage to facilities or restrictions on power supply, among other factors. In addition, in the event of the outbreak or spread of a serious infectious disease, the number of large-scale live events held could decrease, which could have a direct or indirect impact on the Company's business and performance. The Company is implementing risk reduction measures such as moving important data to the cloud to prevent trouble in advance and shifting from offline to online events.

The Company handles important information such as users' email addresses, and if important information is leaked externally due to human error or unauthorized access by a third party, this could affect the Company's business and performance through compensation to affected parties, loss of public trust, and additional expenditures to build information management systems. The Company is working to strengthen its information management framework through the formulation of an information security policy, the provision of education and training for officers and employees, and the acquisition of Privacy Mark certification.

The Company utilizes M&A as a means of business expansion, but if problems that could not be identified through prior due diligence arise after an acquisition, such as the emergence of contingent liabilities or the discovery of unrecognized liabilities, or if business development does not proceed as planned, impairment of goodwill may become necessary, which could affect business performance. In addition, when a new business is added through a corporate acquisition, risk factors specific to that business are also added. The Company conducts detailed prior due diligence on the target company's financial condition and contractual relationships, and makes decisions after thorough risk assessment.

As of the end of October 2025, the parent company, Kayac Inc., held 51.4% (1,427,000 shares) of the Company's total issued shares, and its exercise of voting rights on matters requiring shareholder approval—such as amendments to the Articles of Incorporation, the election or dismissal of directors, organizational restructuring such as mergers, and the transfer of important assets—could affect the Group's decision-making. In addition, the ratio of tradable shares stood at only 40.2% as of the end of October 2025, and reduced liquidity could adversely affect the supply-demand balance of the Company's shares. The Company is pursuing measures to strengthen corporate governance by adding independent outside directors and increasing their ratio, as well as measures to improve liquidity, such as cooperation with the parent company on secondary offerings.