AUN CONSULTING,Inc.

While the inbound tourism market to Japan has continued to trend upward, in addition to challenges such as labor shortages and overtourism, if travel restrictions or requests to refrain from activities are implemented due to the spread of a new infectious disease, a sharp decline in inbound demand could adversely affect the group's business and results of operations. As a countermeasure, the company is focusing management resources on outbound marketing support services for global B2B companies to reduce its dependence on inbound demand.

Since overseas local subsidiaries prepare their financial statements in local currencies, and transactions between the company and its overseas subsidiaries are conducted in multiple foreign currencies, significant exchange rate fluctuations could affect business results and financial condition. Under the Management Support Group, the company has established a foreign exchange risk management framework for each region, monitoring translation impacts and implementing risk mitigation measures.

The internet advertising market is highly competitive, with numerous competitors including major internet-related companies. If the company fails to respond promptly to rapid market changes, it could suffer a decline in competitiveness that affects its business. The company seeks to differentiate itself from competitors by leveraging high-value-added consulting in multilingual fields and its long-accumulated advertising management expertise.

Technological innovation could lead to the rapid spread of new marketing tools that replace search-linked advertising and content-linked advertising, the company's core services, which could materialize as a risk of declining profitability in the internet marketing-related business. The company's policy is to respond swiftly to rapid changes in technology, customer needs, and competition by introducing new marketing tools, conducting training activities, and strengthening service development.

While there are currently no legal regulations directly governing the company's business, discussions concerning the distribution of information on the internet are ongoing, and if existing laws are applied to internet-related businesses or new laws are enacted in the future, this could necessitate changes to service content and increase costs, affecting business results. The company thoroughly gathers information related to legal regulations and has established a system for timely sharing with relevant parties, including management, to secure preparation time for responding to such changes.

Securing and developing excellent talent is a critical issue for maintaining the competitiveness of global services, and if the macro recruitment environment deteriorates or unforeseen circumstances affect core business employees, operations could be delayed, hindering the smooth execution of management activities and affecting business results. The company seeks to reduce this risk by promoting the recruitment of global talent regardless of nationality, gender, or age, and by improving productivity and strengthening organizational capabilities through remote work and the use of digital technology.

The company depends on a sales agency agreement with Google Japan LLC for its search-linked and content-linked advertising services, and the proportion of total sales accounted for by these services is expected to remain high going forward. If the sales agency system is abolished, the agreement is wholly or partially rejected, or the contract terms are changed, this could have a significant impact on operating results and business development. The company aims to reduce its dependence on specific business partners by developing new services that leverage its multilingual global consulting expertise.

The company stores clients' corporate information and advertising management login credentials on servers, and a system failure caused by a cyberattack, natural disaster, power outage, or similar event could force the suspension of advertising management operations. If a leak of corporate information occurs due to unauthorized access or similar causes, there is a risk of claims for damages and loss of social credibility, which the company addresses by conducting an information security assessment once a year and thoroughly implementing internal training.

The company positions M&A as one method of business expansion, but if plans fail to be achieved due to changes in economic conditions or the business environment, it may become difficult to contribute to earnings, and impairment losses could result. In addition, regarding net investments made mainly overseas, deterioration in the business environment of investee companies could result in valuation losses on investment securities, affecting business results. In making investment decisions, the company conducts evaluations by internal and external experts from the perspectives of strategic fit, feasibility of plans, appropriateness of investment amount, and risk response.

The company recorded an operating loss of ¥92,673 thousand in the prior consolidated fiscal year and an operating loss of ¥105,017 thousand in the current consolidated fiscal year, giving rise to material doubt about the going concern assumption. The primary causes are the delayed recovery of inbound demand and the ongoing process of group restructuring, and full-scale expansion of sales and profit has not yet been achieved. As of the end of the current consolidated fiscal year, the company holds cash and deposits of ¥442,955 thousand and states there is no material concern regarding cash flow at present; however, there is a risk that the financial condition could deteriorate further if profitability does not improve.