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Business Risks

The following are important items considered potential risk factors to the development of the businesses of the Gurunavi Group.
The following items are listed in order to actively disclose information to investors and shareholders and include items deemed necessary for investment decisions or for general understanding of the Group's business operations. Risks not of critical importance to investment decisions or general understanding of business operations have also been included. The Group recognizes that these risk events may occur, and has policies in place to contain them or respond to their occurrence. In order to properly evaluate the Group's operating status and future business, it is important to pay careful attention to the following items. The forward-looking risk items outlined below are those identified by the company as of update date. Furthermore, the following is not an exhaustive list of the risks governing an investment in Gurunavi, Inc. shares.

1.Sales performance

Restaurant promotion service account for 91% of the Group's consolidated sales, and because growth is highly dependent on the number of member restaurants and contract fees of each restaurant, our business performance is influenced by the business environment in the food service industry and changes in sales promotion policies of major accounts. Operating results may therefore be adversely affected in the event of events such as declines in the growth in number of member restaurants, or lower contract fees for each restaurant.

2.Competition

The Group has established two original and unique items of business infrastructure: an official online search service for restaurants, providing the latest, detailed and accurate information on member restaurants, and a 1,000-person strong support system through which the Group builds strong relationships with restaurants. By providing support from multiple angles, the Group aims to fulfill its mission to preserve, grow, and expand the restaurant culture in Japan and contribute to improving productivity in the food service industry. The Group will continue aiming to retain its competitive position. Nevertheless, as the service to provide information through the internet has a low barrier for entry and many new businesses are emerging, it is possible that trends or the emergence of a new business model among competitors could adversely affect operating results.

3.Number of users

The Group aims to increase revenues by increasing the appeal of the Gurunavi website contents to attract more website visitors, and by increasing the value of Gurunavi as a marketing tool for restaurants to increase the number of members restaurants. However, if the number of Gurunavi users decrease due to trends among competitors or the emergence of new business models, and we do not increase the number of member restaurants because of a decrease in the value of Gurunavi as a marketing tool for restaurants, operating results could be adversely affected.

4.Top Management

If something unforeseen were to happen to representative director, chairman, and founder Hisao Taki, the Group’s business development could be adversely impacted.

5.Development structure

As the Group is continuously creating new services, it actively seeks to secure staff and external contractors so that it can develop the system required to support this effort (for outsourcing Group planning system development, restaurant webpage creation, etc.). However, in the event that the Group was unable to secure contractors and staff in accordance with plans, business progress could be delayed and this could adversely affect operating results. It is also possible that investment in development may not be realize the results anticipated.

6.System failure risks

The Group's services are provided over the Internet and the Group's operations are heavily reliant upon the quality of infrastructure including access to the Internet and internal and external computer networks. The Group has implemented a wide range of measures for all aspects of our computer network-related systems, including enhancing the backup center, strengthening and duplicating each type of server, using a personal identification certification system for entry into server rooms, and an internal computer network usage monitoring system. However, damage to the infrastructure could be incurred from an external event, an internal human error or natural disaster and our operating results could be adversely affected.

7.Investments in response to changes in the operating environment

The Group's businesses are based on IT, and the Group therefore introduces technology that is likely to enhance the value of its services. IT is developing rapidly, and new, valuable technologies could emerge that could lead to a devaluation of the Group's services. As a result, investment costs related to the development or introduction of network-related tools, software, and suchlike could be higher than anticipated and this could adversely affect operating results.

8.Securing human resources

The Group considers recruiting and training human resources in line with business development an important issue and promotes and trains staff internally, as well as recruiting external staff. However, should it be unable to recruit, train, retain and ensure appropriate human resources in accordance with plans, or should core staff resign, operating results could be adversely affected.

9.Future business development

The Group aims to expand its core and related operations in food-related business. However, there is no guarantee that the expansion will progress as planned, and additional costs, such as an increase in investment in facilities or additional staff recruitment beyond the capacity initially envisaged for the new businesses, may be incurred that could adversely affect operating results. In the event that the Group chooses to expand its business through a corporate merger or acquisition, the investment might not yield the results anticipated.

10.Current and future legal framework concerning the Internet

There is limited legal framework concerning Internet-related businesses. However, once a legal framework for internet users and related businesses has been established, the Group may be responsible for liabilities on issues that occur between the restaurants and users, and this could adversely affect operating results.

11.Issues between member restaurants and site users

In instances where a Gurunavi site user contacts the Group with problems that have arisen with a member restaurant caused by accuracy of the information, the appropriate person-in–charge at the Group contacts the member restaurant to confirm the situation and request improvements to address issues as appropriate, while also explaining matters to the site user. Various other measures may be taken at the discretion of the Group, including termination of the member restaurant contract. However, this could cause damage to our reputation that impacts business performance.

12.Risk about contents

The Group commissions chefs, experts, specialists, celebrities, and others to create contents about food and dining and provides them to users. To ensure that the Group provide highly trustworthy information content is carefully checked and queries from stakeholders regarding posted content are promptly addressed.
However, it is not always possible to reach agreement with stakeholders, and depending on the circumstances damage compensation may be sought, significant expenses may arise, and a decline of the Group’s brand image may affect business results.

13.Personal information

The Group has accumulated a wide range of registered users, accumulating extensive personal information through the user registration process. The Group is therefore deemed a business that handles personal information as prescribed by the Act for the Protection of Computer Processed Personal Data and is subject to regulations for handling of personal information. In addition to ongoing efforts to strengthen computer system security, a number of regulations governing the protection of personal information have been put into effect and our privacy policy has been posted on the Group website to provide clarity for the user. However, should a user's personal information be leaked externally through an external party, a company affiliate, operations vendor, or other party, the Group will be fully responsible and its reputation may be effected, which could adversely affect its operating results.

14.Intellectual property rights

The Group applies for patents and commercial rights when it is possible to secure intellectual property rights on newly developed services. However, there is no guarantee that rights will be granted. If a competitor secures a patent or commercial right on a service name, or a service that is related to the Group's technology and expertise, sales and service development could be impeded and this could have an adverse effect on operating results. The Group is currently aware of no claims of infringement on intellectual property rights made by a third party. However, should litigation or other proceedings arise citing intellectual property right infringement, operating results could be adversely affected.

15.Concerning foreign businesses and subsidiaries

For foreign businesses and subsidiaries, the political or financial situation in that country could have a negative effect on business performance or the speed of returns.

16.Litigation

In the event of a lawsuit from a third party, including a stakeholder, the Group’s business development could be adversely effected and our brand image damaged. Furthermore, the financial burden could affect business performance.

Last updated :June 1, 2017

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