Corporate Strategy Risk Factors Corporate Strategy Risk Factors

Risk Factors

Listed below are the main factors that could pose a risk to Ateam’s business. Certain matters that do not constitute risk factors but could be important considerations in investors’ investment decisions are also disclosed below from the standpoint of proactively disclosing information. Our policy is to sufficiently recognize the potential for these risks to arise, work to prevent them from arising, and respond swiftly in cases where they do arise.
Among the matters listed below, those that relate to the future, unless otherwise provided, were determined by Ateam as of the date of submission of this report. However, as there is inherent uncertainty, actual results may differ. Also, this is not an exhaustive list of all risks that may arise.

1.Risks Related to the Business Environment

  • (i) External Environment of IT Market

    The mobile game, internet and e-commerce market, the three business areas that we operate in, have continued to grow significantly due to the spread of smartphones and the increase of internet users.
    However, if the growth rates of those markets slow and are affected by deterioration in economic sentiment or actual economic volatility, Ateam’s performance and financial position may be affected.
    In addition, regarding Ateam’s E-Commerce Business, if an increase in raw material prices were to occur in relation to sharp rise in oil prices and insufficient supply of raw materials, Ateam’s business and performance may be affected.

  • (ii) Competition

    Ateam provides various content and services for the internet. To improve competitiveness, we strive to provide unique content and create websites in pursuit of optimal usability, and work to diversify services and enhance customer support, among other efforts.
    However, intensifying competition with corporations providing similar services and/or new up-and-coming business operators may affect Ateam’s business and performance.

  • (iii) Risks Related to Disasters, Spread of Infectious Diseases, and Accidents

    In the event of an earthquake, a typhoon, a tsunami or other natural disaster, a fire, a power outage, an international conflict, or the spread of infectious diseases including COVID-19 occurs, Ateam’s business operations may be severely affected. For example, an unavoidable temporary suspension of services would be a possibility in areas impacted by a large-scale natural disaster.
    Furthermore, in the event of occurrences that hinder the continuation of business such as damage to facilities or power supply restrictions, or in the event of serious material and human losses primarily resulting from various natural disasters or international disputes, the continuation of business itself may become difficult or impossible. If such circumstances arise, Ateam’s performance may be affected.

2.Risks Related to Business

  • (i) Collection of Accounts Receivable

    In developing its business and services, Ateam makes transactions with various businesses. Those businesses may follow through with management decisions such as reviewing business strategies, which, depending primarily on the market environment and the current state of competition for each business, may cause them to withdraw from doing business and prevent integrating their businesses with other companies. Ateam accordingly endeavors to partner with businesses able to stably and soundly operate on an ongoing basis, but if a business partner discontinues its operations for an aforementioned or other reason, receivables due from the business partner may fall into arrears or become uncollectible. In such an event, Ateam’s performance may be affected.

  • (ii) Effect from Foreign Exchange

    For Ateam’s Entertainment Business, content is provided to overseas users through overseas digital distribution services or overseas publishers and proceeds from the sale of in-content items are collected in local currencies by the overseas platform operation businesses.

  • (iii) Product Quality Assurance

    Ateam’s E-Commerce Business is centered around selling various products online. We procure high-quality products and raw materials and select reliable clients for the products we manufacture. We also strive to reinforce partnerships with our clients and manage quality control by attending inspection on the production as necessary, as well as training employees and raising awareness for legal compliance.
    However, there is still a possibility that the use of products that we sell may cause health or other issues for the customer. In addition, if there is an establishment of laws and regulations in relation to Ateam’s E-Commerce Business or changes in social climate, Ateam’s business performance may be affected.

  • (iv) Investment and M&A’s

    Ateam contributes capital in venture investment and investment in limited partnerships with the aim of nurturing and supporting companies with high growth potential from an early stage. Of the recipients of such capital contribution, those companies that have yet to make an initial public offering carry uncertainty with respect to their future, including changes in the market environment, and insufficiencies in their development or management capabilities. If such uncertainties manifest and preclude an investee company from achieving expected results and the company’s operating performance stagnates or deteriorates, such investment may not be recoverable, and Ateam’s business performance may be affected.
    In addition to investment development, Ateam plans to carry out M&A’s in order to grow and expand business. Regarding M&A, the financial details of the targeted company along with possible risks will be examined in advance; however, upon acquisition, if an occurrence of contingent liabilities or determination of unrecognized debt were to emerge after examination, or business development after M&A does not proceed as planned, it may affect the performance and financial condition of the company.

3.Risks Related to the Organizational Structure

  • (i) Over-Reliance on the Company’s President

    The President of the Company, Takao Hayashi, is the founder of the Group, and has played an extremely important role in Ateam’s growth and corporate strategy, among other areas, since the company’s establishment. His abundant experience as an engineer has been invaluable in this regard. Ateam is striving to create a management structure that doesn’t rely too heavily on him. However, if for any reason he was no longer able to participate in the management, Ateam’s performance and future business development may be affected.

  • (ii) Internal Control Management System

    Ateam recognizes that effective corporate governance is indispensable for sustainable growth and enhancement of corporate value over the medium to long term. Therefore, we will continue to strengthen our management base in line with the expansion of our business scale and promote the development and enhancement of internal control systems to ensure more efficient and appropriate management.
    However, in the event that an adequate internal control management system is not established in time following rapid business expansion, Ateam’s performance and business development may be affected.

  • (iii) Securing and Training Personnel

    While continuing to carry out smooth business expansion and execution of corporate management, it is extremely important for us to secure excellent personnel. However, in the event that it is not possible to secure the necessary personnel in a timely and appropriate manner or in the event that skilled personnel leave Ateam, ordinary business operations and business development may be hindered, and Ateam’s performance may be affected.

4.Risks Related to Compliance

  • (i) Laws and Regulations

    The main laws and regulations applicable to the business areas in which Ateam operates include the Act Against Unjustifiable Premiums and Misleading Representations, the Act on the Protection of Personal Information, the Act on Specified Commercial Transactions, the Act on the Settlement of Funds, the Act on Quality, Efficacy and Safety of Pharmaceuticals and Medical Devices, etc., and the Act on the Proper Transmission of Specified Electronic Mail, etc.
    Such enactment or revision of laws and regulations, administrative actions by supervisory authorities, or the formulation or revision of new regulations may result in restrictions on the content and services provided by Ateam. In such cases, Ateam’s business, performance, and corporate image may be affected.

  • (ii) Intellectual Property Rights

    Ateam strives to protect intellectual property rights related to the businesses it operates and takes sufficient care not to infringe on the intellectual property rights of third parties. In addition, there are cases in which Ateam licenses intellectual property rights owned by the company to a third party or receives a license to use intellectual property rights owned by a third party for services provided by us. In such cases, Ateam works to strengthen its management structure by, for example, entering into trademark license agreements.
    However, in the event that Ateam unintentionally infringes on the intellectual property rights of a third party due mainly to discrepancy in the interpretation of the scope of intellectual property rights or contract terms, we may be sued by the third party regarding the infringement of intellectual property rights or receive a demand to cease the use of said intellectual property. As a result, resolving such an issue could take a large amount of costs and time, and Ateam’s performance and future business development may be affected.

  • (iii) Management of Personal Information

    Ateam, at times, will obtain personal information from the users of the services and content that it provides. To prevent external leakage or falsification of personal information, Ateam is thorough regarding workflow and authorization systems when handling personal information and strictly maintains such information in compliance with the “Act on the Protection of Personal Information”.
    However, in cases such as an information leak or unauthorized use of personal information due to a computer virus, unauthorized access, intentional actions or an accident, we may receive a claim for compensation for damages, the perceived trustworthiness of Ateam may decrease, and its corporate image may be negatively impacted. As a result, Ateam’s performance and business development may be affected.

  • (iv) Safety and Integrity of Services

    Using the service content that Ateam provides, an indeterminably large number of private users can communicate with each other independently. To protect youth, we strive to ensure the safety and integrity of services by clearly indicating in the user agreement that inappropriate use is prohibited, acquiring EMA certification, and continuously monitoring our services. Ateam also responds to those who breach the user agreement with measures such as requesting improvement or cancelling subscriptions.
    However, when the number of people using our services suddenly increases, it is difficult to be fully aware of what users are doing or how they utilize our services. Regardless of the details of our user agreement, if a problem were to occur due to inappropriate actions committed by a user using our services, our legal liability may come into question. Also, even if there is no legal liability, the business and its performance may be affected by factors such as damage to the content’s brand image.

  • (v) Litigation

    Ateam strives to prevent legal violations by promoting compliance that is based on adhering to laws and regulations. However, regardless of whether or not legal violations have been made by Ateam’s officers or employees, we believe there is a risk of unforeseen trouble and litigation, involving users, business partners, and other third parties and litigation regarding the above-mentioned intellectual property rights, personal information, and safety and soundness of services.
    Depending on the content and result of such litigations, Ateam’s business and performance may be affected. Ateam may also be affected as a result of the large amount of costs for responding to litigations or the damage to our corporate image.

5.Risks Related to Information Security

  • (i) Computer Systems and Communication Networks

    Ateam’s business includes providing services to users through communication networks that connect computer systems such as mobile devices and PCs. To promote stable system operations, Ateam strives for early prevention and avoidance of system trouble primarily by decentralizing servers, making periodic backups and monitoring the operational status of systems. However, in the event of a communication network outage or disruption due to an unforeseen incident (including human error on the part of employees or non-employees of Ateam) or any other reason, Ateam’s business and performance may be significantly affected.
    Also, in the event that systems become inoperable for various unforeseeable reasons, such as servers being overloaded by a sudden increase in traffic to our sites, or interruptions in the power supply, it is possible that services will be suspended. As a result, Ateam’s performance and the brand image may be affected.

  • (ii) Cyber Security

    A cyber-attack could pose a significant risk to the Ateam’s business continuity. System malfunction or unauthorized access from outside can lead to business stoppage, leakage of customer data, and financial loss. Cyber-attack methods have become more sophisticated and sophisticated in recent years, with targeted attacks and ransomware posing serious threats to businesses.
    Ateam has introduced Identity as a Service (IDaaS) and is thoroughly implementing identity management operations in line with its security policy, as well as controlling preventing impersonation of our employees through multi-factor authentication. In addition, based on the concept of the Zero Trust Model, we have introduced a wide range of security products such as EDR (Endpoint Detection and Response) and SSE (Security Service Edge). However, even with these measures in place, thethe risk of cyberr-attacks cannot be completely eliminated.
    In the unlikely event of a serious cyber-attack, it may take time for the companyto to recover, and business activities may be halted. In addition, leakage of customer information or trade secrets could cause a loss of public trust and have a serious impact on business performance.

  • (iii) Information Security System

    Inadequate response to an information security incident could have a serious impact on our business activities, and we are continuously working to strengthen our information security system. Specifically, the Ateam CSIRT (Computer Security Incident Response Team) has been established to strengthen the governance of cyber security for the entire Group and to build a comprehensive and multifaceted system operation system to respond to cyber-attacks. We also provide security training for all employees and security incident exercises for security personnel.
    However, information security risks cannot be completely eliminated, and risks such as information leaks and unauthorized access due to system vulnerabilities and human error still exist. Recognizing these risks, Ateam is committed to further strengthening its security measures.
    In the unlikely event that a serious incident involving information security occurs, our business and performance could be significantly affected.

  • (iv) IT Investment

    IT investment is an essential element for strengthening a company's competitiveness and improving operational efficiency, but it also entails various risks. Since a large investment is required, it may not be commensurate with the investment, or it may take some time before the expected effect is achieved. In addition, IT technology advances rapidly and may require continuous system updates and additional investment.
    Ateam is fully aware of the risks associated with IT investments, and we are committed to maximizing the benefits of its investments through a variety of measures, including careful examination of IT investment plans and in-depth evaluations prior to system implementation. However, if problems or system failures occur during installation, Ateam's business and earnings could be significantly affected.

6.Other Risks

  • (i) Risks Related to Impairment Loss of Goodwill

    As of the end of the fiscal year, Ateam recorded a 152 million JPY goodwill of Links Inc. (now Ateam LifeDesign Inc.) which operates the recruitment media service “CAREER PICKS”, as well as a 1,492 million JPY goodwill of microCMS Inc. which operates “microCMS”. By utilizing the digital marketing skills and know-how that these acquired companies and Ateam have, these services have grown remarkably compared to the scale when first acquired. Thus, we determined that there is no indication of impairment. In the future, when we conduct M&A as necessary, although we will thoroughly examine the financial condition and future profitability of a target company in advance, the goodwill might be impaired if there is a significant deviation from the earnings plan at the time of acquisition due to rapid changes in market conditions, etc.

  • (ii) Risks Related to Dilution of Share Value Due to Exercise of Share Acquisition Rights

    The subscription rights to shares and unsecured convertible bonds with share acquisition rights, based on the underwriting agreement between Ateam and AASC II P, L. P., are expected to be exercised multiple times in stages until June 26, 2029. Therefore, unlike the issuance of new shares in which dilution occurs immediately, we believe that it is easier to avoid a situation in which the supply of Ateam’s shares to the stock market becomes temporarily excessive, and that the impact on the interests of existing shareholders can be limited to a certain extent. The number of shares of Ateam’s common stock to be issued upon exercise of the share acquisition rights and convertible bonds with share acquisition rights is fixed, unless adjusted, at 7,776,000 shares. As such, the maximum number of shares to be delivered will be limited regardless of stock price movement, which will result in a steady dilution ratio that will not fluctuate from the originally planned level.