NorthSand, Inc.

The personal computers and mobile devices essential to business operations are constantly exposed to the risk of virus infection, and security risks from external cyberattacks are increasing. In the event of a virus infection, business operations could be significantly affected. The Company strives to prevent infection by implementing security measures on all devices; although the likelihood of occurrence is assessed as low, the potential impact is assessed as high.

The Company is subject to regulations including the Worker Dispatching Act, the Act on the Protection of Personal Information, the Act against Delay in Payment of Subcontract Proceeds, and the Act on Proper Trade of Freelance Workers and Business Operators. If officers or employees violate laws or regulations, this could result in serious consequences such as loss of social credibility, decreased sales, and the application of penalties. The Company strives to raise compliance awareness through the establishment of a code of conduct and regular internal training; although the likelihood of occurrence is assessed as low, the potential impact is assessed as high.

Amid intense competition for talent in the consulting industry, there is a risk that the Company may be unable to secure and develop human resources as planned, as well as a risk of talent outflow to other companies. This could result in reduced competitiveness, constraints on business expansion, and deterioration in service quality for clients, potentially affecting business performance. As countermeasures, the Company continues to hold recruitment events, strengthen its branding, and implement measures to improve employee engagement.

In FY2025 (ended January 2025), the top 20 clients by sales accounted for 62.7% of total revenue, indicating a high degree of dependence on specific clients. If a major client changes its management policy or experiences a deterioration in business performance, this could have a direct impact on the Company's financial condition and results of operations. To diversify its client portfolio, the Company is pursuing a balanced approach of maintaining relationships with key clients while developing new business relationships.

In its medium-term management targets and long-term targets for the period from FY2026 (ending January 2026) to FY2028 (ending January 2028), the Company has set goals for revenue growth and improvement in operating margin, focusing on three key indicators: number of consultants, utilization rate, and average unit price. However, external factors such as the socio-economic environment, competitive landscape, and technological innovation may prevent the Company from achieving these targets. The Company aims to enhance the recurring nature of its business by strengthening recruitment, organizational management, and sales activities utilizing the "Fan-Building Cycle."

In providing consulting services, the Company handles clients' confidential information and personal data. In the event of an information leak, the Company could suffer a loss of social credibility and face claims for damages, potentially affecting its business and performance. The Company has obtained ISO27001 certification and strives to strengthen its information management system through thorough access privilege management and regular training for officers and employees.

Tomohiro Maeda, the founder, major shareholder, and Representative Director, has played a key role in driving the business since its founding. Should he become unable to continue his management duties, this could affect the Company's business and performance. The Company is advancing the development of a management structure that eliminates excessive dependence on any single individual by promoting information sharing and delegation of authority to officers and senior staff through the Board of Directors and the Management Executive Committee.

Representative Director Tomohiro Maeda is a major shareholder holding 62% of the Company's shares, including holdings through his asset management company, Goonies Inc. Should the Company's shares be sold for any reason in the future, this could affect the market price and trading conditions of the Company's shares. Mr. Maeda has adopted a policy of exercising his voting rights as a stable shareholder with due consideration for the interests of minority shareholders.

The Company's clients span a wide range of industries. If clients' business conditions deteriorate due to external factors such as domestic and overseas economic trends, exchange rate fluctuations, or changes in tax systems and regulations, this could lead to reduced business and IT investment, potentially affecting the Company's business and performance. The Company strives to mitigate this risk by deepening relationships with existing clients and developing new clients, although structural vulnerability to changes in the external environment remains.

The Company has introduced a stock acquisition rights program for officers and employees as a long-term incentive. As of the filing date of this document, the number of potential shares stands at 3,000,000 shares (equivalent to 5% of the total issued shares of 60,000,000). The exercise of these rights would increase the number of issued shares of common stock, potentially diluting the value of shares held by existing shareholders. The likelihood of occurrence is assessed as high, and the Company's policy is to offset this dilution through improved business performance.