Risk factors that may impose an impact on the management results and financial condition of the Acrodea Group include the following. Items that do not necessarily reflect operational risks are also actively disclosed when considered to be material to investment decisions by the investor.
The Acrodea Group recognizes the possibility of these risks occurring, and places efforts to avoid occurrence and to respond to any occurrence as policy. Nonetheless, careful study of the following provided items and items provided beyond this section is thought necessary in making investment decisions regarding the company’s stock.
Forward-looking items in the text refer to judgments made by the company as of August 31, 2018, although these matters do not cover all risks pertaining to Acrodea Group operations and investment in the company’s stock.

• (1)Impact from Associated Market Trends
• The Solution Business of the Acrodea Group provides services and solutions mainly associated with mobile terminals like smartphones, and security-related services, to its customers.
• The Acrodea Group keeps watch over changes in the business environment and makes efforts to respond, but if the business models, trends in the trade, user preferences and needs, market environment trends, etc., differ largely from our projections, these factors may have an impact on our performance and financial condition.

• (2)Changes in Customer Preferences and Fleeting Trends
• In the Solution Business of the Acrodea Group, certain products and services are of a high entertainment quality that target general consumers and end users who are directly billed. Consequently, sales sustain a large impact from consumption trends by our end users. Thus, changes in individual preference and fleeting trends may have an impact on our performance and financial condition.

• (3)Development of New Products and Services
• In the Solution Business of the Acrodea Group, timely development and provisioning of products and services that squarely meet user needs and respond to market environments changing rapidly alongside innovations in the IT industry are considered crucial.
• The Acrodea Group keeps watch over market trends and makes efforts to respond, but if the business models, trends with the trade, user preferences and needs, product or service life cycle, market environment trends, etc., differ largely from our projections, these factors may invite a decline to future growth and profitability, and impose an impact on our performance and financial condition.

• (4)Joint Development, Collaboration, and Alliance
• For parts of the Solution Business, the Acrodea Group engages in joint development, collaboration, alliance, etc., with other companies to mitigate development costs and risk burden, and to improve services.
  Nonetheless, if a misalignment were to occur among the parties due to unforeseen circumstances in future business advancement, synergy could no longer be expected, and the situation might impose an impact on performance of the Acrodea Group.

• (5)Product Quality Control
• In the Solution Business of the Acrodea Group, the occurrence of a fault in a developed program, other software, or hardware may cause interruption to or stoppage of services using our products, or otherwise may lead to damage of content and user data.
• The Acrodea Group conducts intensive testing and inspecting internally prior to delivery of these products, but the occurrence of such an event may cause damages or opportunity costs to accrue and may impose an impact on our performance and financial condition.

• (6)Cyber Attack and System Malfunction
• The Acrodea Group delivers its services primarily through Internet telecommunications, and interruption in telecommunication networks through natural disaster or accident may impose an impact on our performance and financial condition.
  In addition, servers of the Acrodea Group or Internet service providers may be thrown into operational dysfunction through fraudulent external access or unforeseen circumstances, and in short, network failures may occur.
  In the event of such failures, the Acrodea Group incurs direct damages, while pauses in transactions arising from server dysfunction or defect may lead to lawsuits or damages against us, or possibly impairing our trust and imposing an impact on our performance and financial condition.
• The Acrodea Group arranges its business organization to constantly provide optimum products and services to customers. Nonetheless, regardless of whether responsibility lies with the Acrodea Group, in an incident occurring in association with information leakage of a customer such as a cyber attack against customer information assets, decline in social credibility and possibility of facing claims for damages may arise and impose an impact on our performance and financial condition.

• (7)Competition
• The Solution Business of the Acrodea Group provides services and solutions mainly associated with mobile terminals like the smartphone. With changes to the market environment, newly competing companies may arrive and cause the superiority of the Acrodea Group to decline and price competition to emerge.
  Consequently, the competitiveness of the Acrodea Group may decline, while the cost increases to counter competitors may impose an impact on our performance and financial condition.

• (8)Subsidiary Business Operations
• 1) Shibuya Nikuyokocho, Inc.
  • (a) Sublease Business With respect to the sublease business conducted by Shibuya Nikuyokocho, Inc., the selection of new sites or increased vacancy rates of properties, such as worsened tenant business performance leading to withdrawals from premises as a consequence of a poorer economic climate may impose an impact on performance of the Acrodea Group. The execution of long-term lease agreements is the basic premise with property owners, but the termination of lease agreements may occur.
  • (b) Legal regulatory matters Regarding the dining business operations conducted by Shibuya Nikuyokocho Inc., operating outlets must acquire restaurant operation permits from the health offices in their jurisdiction, according to provisions of the Food Hygiene Law. Hygiene control comprises one of the top priorities for the Acrodea Group. Nonetheless, in the event of food poisoning or an accident pertaining to food hygiene, an impact may be imposed on our performance and financial condition.
  • (c) Recruiting trends in the dining industry The dining industry faces a chronic shortage of human resources, even as the market foresees gradual expansion. Consequently, it is thought that the industry will continue to experience demand in recruitment. Nonetheless, fluctuation in the business climate and changes in the corporate appetite for hiring may impose an impact on the directly operated dining businesses of the Acrodea Group. Moreover, if the “Reforms on Ways of Working” fostered by government towards the purpose of rectifying long labor hours lead to a material change in the workplace environment or recruitment trends of the dining industry, an impact may be imposed on our performance and financial condition.
• 2) InterPlan Co., Ltd.
  • The education business conducted by InterPlan Co., Ltd., maintains revenues principally through grant subsidies to educational and training institutions under the job-placement support policy underwritten by the Ministry of Health, Labour and Welfare. A review of this policy by MHLW may cause business revenues to vary upward or downward. If certification as a job-placement support training academy were to be revoked as a consequence of significant declines in hiring rates of students completing the IT school, such an event may affect the business to continue operating. Fluctuation in demand in the IT labor market may cause business revenues to vary upward or downward.
• 3) Crypto Financial System, Inc.
  • The system development for bingo being advanced in the Solution Business conducted by Crypto Financial System, Inc., may experience and increase or decrease in business revenue, in the event that expected turnout is not attained as a consequence of changes to popular trends in Guam or of entry by competing entities. Bingo gaming is authorized by the Government of Guam; however, an impact to performance may arise in the event that bingo games become difficult to operate through reasons relating to a shift in governmental policy in Guam or otherwise.
  • Development of a new system is planned, but commercialization according to the initial plan may be delayed in the event of any reason delaying development, such as changes to the business environment.

• (9)Handling of Personal Information
• The Acrodea Group provides services and the like to registered members through the operation of Internet sites for mobile terminals like the smartphone, and is thus in a position to know personal information of registered members.
• In order to prevent leakage to third parties, inappropriate exploitation, and tampering of personal information, the Acrodea Group has established rules concerning the protection and management of personal information for internal edification, and places steady efforts in employee education, security enhancement, and operational control.

• (10)Intellectual Property Rights
• The Acrodea Group files patents and registers trademarks to protect its own intellectual property rights such as technology and knowhow; however, these actions do not necessarily assure protection for intellectual property rights of the company. Consequently, we may not be able to effectively prevent a third party developing an analogous product using our intellectual property rights.
• The Acrodea Group also expends efforts as much as possible to avoid infringing situations on third-party intellectual property rights. Nonetheless, application of intellectual property rights associated with our business operations in the future is extremely difficult to predict. Though highly unlikely, in the event of the Acrodea Group infringing on third-party intellectual property rights, payment of consideration associated with said intellectual property rights may accrue on obligations charged for damages from said third parties, and an impact may be imposed on our performance and financial condition.

• (11)Software Assets
• The Solution Business of the Acrodea Group develops software, whose cost of manufacture related to development is booked as software assets. We conduct careful reviews of our projections for attaining the sales of the respective products whose software is booked as an asset, and the asset nature is evaluated internally. In the event that the sales are determined to be unattainable, we promptly expense the software. In this event, an impact may be imposed on our performance and financial condition.

• (12)Lead Shareholder as Principal Shareholder
• The lead shareholder who is also a principal shareholder, Mr. Katsumi Tanabe, was also party to the issuance of our ninth round of stock subscription rights. We have confirmed Mr. Tanabe’s basic intention of a long-term holding policy, but if circumstances arise for this policy to change course, an impact may be imposed on share price and business expansion.

• (13)Reliance on Certain Officers
• Hiroshi Shinohara, Representative Director and President, fulfills a vital role generally across the business activities of the Acrodea Group, including devising and deciding on our management strategies.
• The Acrodea Group is engaged in enhancing the management organization, but if Mr. Hiroshi Shinohara ever experiences difficulty in conducting his duties, this situation may impose an impact on our performance.

• (14)Human Resources Knowledgeable about New Fields, and Securing and Training Human Resources for Group Company Management
• The Acrodea Group has engaged in M&A activity of new subsidiaries to achieve sustained growth, and requires human resources knowledgeable about this field and human resources for group management. Nonetheless, acquiring human resources according to plan, training human resources within the company, and draining of human resources outside the company may be unavoidable factors in light of economic conditions and our performance, and thus may impose an impact on our performance and financial condition.

• (15)Securing Out-Sourced Contractors
• The Solution Business of the Acrodea Group out-sources contracting for purposes of complementing any lack of staff within the company and reducing development expenses. We believe that stably securing excellent out-sourced contractors an important matter. In the event we are unable to stably secure excellent out-sourced contractors, this situation may impose an impact on our performance and financial condition.

• (16)Investment Risks
• The Acrodea Group holds fixed assets like goodwill and trademark rights. Decline in profitability through depreciation of market pricing and cash flow generation below expectations, for instance, mean the outlook for investment recovery no longer holds. The need for writing down impairment losses in such an event may impose an impact on our performance and financial condition.

• (17)Driving New Business
• We believe that active promotion of business development into new fields and expanding business operations will lead to improved business revenues of the Acrodea Group. The company, therefore, will continue to engage in new business. Nonetheless, if progress, expansion, and growth of business operations do not advance as initially planned for some reason in the new domain developed, an impact may be imposed on our performance and financial condition. In addition, additional expenditures may arise in the form of advanced investment to systems associated with the new business engagement, and profitability may consequently decline.

• (18)Dilution of Share Value Through Exercise of Stock Options
• In order to unify the company’s interests with individual interests, and to further enhance motivation in their duties, the company grants subscription rights of stock options to officers and employees. In order to secure funding early for business expansion and to acquire businesses that can leverage the company’s developed technology with an outlook for acceleration and synergy, a special resolution at an emergency shareholders meeting held on September 26, 2017 approved the private placement of 689,600 new shares issued to Mr. Katsumi Tanabe and Mr. Kazuhiko Ueda. An ordinary resolution at the same emergency shareholders meeting approved the ninth round of subscription rights issuance of 87,300 rights (100 shares per subscription right) to Mr. Katsumi Tanabe, Mr. Tsuyoshi Kataoka, Mr. Kazuhiko Ueda, and Star Gate Investment Holdings Ltd., of which a portion has been exercised for 690,000 shares of stock. Consequently, the balance of stock for the purposed subscription rights as of the last day of the month before the submission date of the securities report filing was 8,040,000 shares. Exercise of the subscription rights would dilute the share value per share, generate fluctuation in the supply-demand balance on the stock market, and may impose an impact on share price.

• (19)Procuring Funds
• In order to reinforce operating funds and reinforce financial health, the company has engaged in procuring funds as described above. Exercise of subscription rights relies on the decision of subscription rights holders, however. Currently, the amount of investment from assets and the investment timing for the exercise of subscription rights are indefinite. Thus, procurement in line with cash demand may be difficult and this situation may impose an impact on our performance and financial condition.

• (20)Countersuit Filed by Emicia Against the Company
• The company acquired the stock of Emicia, Inc. (“Emicia”), on June 1, 2016, which continued its business operations within the Acrodea Group. Non-performance of obligations, by the original holders E. MIRAI Co. and Ms. Emiko Kadokura, required for the succession of business operations arose, however, and on January 6, 2017 the company filed a lawsuit against the original holders claiming damages in conjunction with cancellation of the stock transfer agreement. In response, on April 4, 2017 E. MIRAI Co. and Ms. Emiko Kadokura filed a countersuit against the company. The complaint of the company demands the return of 90 million yen already paid of the consideration 130 million yen for the stock acquisition, while the countersuit demands the company to pay 40 million yen, the unpaid consideration for the stock acquisition. The dispute is ongoing.

• (21)Natural Disaster
• In the event an unforeseen major disaster or accident occurs and thwarts the operating activities of the Acrodea Group, such an event may impose an impact on our performance and financial condition.

• (22)Material Conditions Pertaining to Premise of Going Concern
• Since the fiscal year ended in August 2009, the Acrodea Group has reported operating losses and negative cash flows. In the prior consolidated fiscal year, we reported an operating loss of 363 million yen and net loss attributable to shareholders of the parent of 891 million yen, but for the current, consolidated fiscal year, the company recorded operating income of 51 million yen, net income attributable to shareholders of the parent of 6 million yen, and operating cash flow of 38 million yen. Although operating management conditions are improving, more time is expected to be required to convert into financial health that secures continual operating income, net income attributable to shareholders of the parent, and positive operating cash flow. Consequently, conditions of material doubt regarding the premise of a going concern remain at this time.