BASE,Inc.

Multiple competitors exist in each of the fields of online shop creation, shopping apps, and payment agency services, and functional and price competition is becoming increasingly active. There is a risk that the competitive advantage of the Group's services could be lost due to the entry of major companies with strong capital, brand power, and technological capabilities, or the emergence of operators with entirely new business models. As countermeasures, the Group is promoting service function enhancement leveraging know-how accumulated since its founding, and differentiation through the development of unique services not offered by major companies.

There are risks such as server intrusion by malicious third parties, unauthorized acquisition of customer information, tampering with customer sites, and denial-of-service attacks (DDoS). If these occur, they could have a material impact on business and results through the pursuit of legal liability and deterioration of corporate image. As countermeasures, in addition to system measures such as firewalls, the Group is promoting organizational strengthening of information security through a specialized team.

The Group holds large amounts of personal information through its business operations, and PAY Corporation holds credit card information. If leakage of personal information or credit card information occurs due to unforeseen circumstances, it could affect performance and business development through claims for damages and loss of credibility. As countermeasures, the Group has established a privacy policy based on the Act on the Protection of Personal Information, introduced two-factor authentication and passkey authentication for management screens, and implemented compliance with PCI DSS Version 4.0.

There is a risk of default by shop owners or fraudulent use of third-party credit cards by purchasers. If such incidents cannot be prevented, damages could arise, including refunds of sales proceeds to payment agency companies, claims for damages from victims, and loss of credibility, which could affect performance and business development. As countermeasures, the Group has implemented a 365-day internal monitoring system, system-based fraud detection, and two-factor authentication for

In providing services such as "BASE," "Pay ID," "PAY.JP," and "YELL BANK," compliance with numerous laws and regulations is required, including the Act on the Protection of Personal Information, the Installment Sales Act, the Payment Services Act, and the Money Lending Business Act. If the Group fails to respond appropriately and in a timely manner to new regulations or amendments related to the EC industry and online payment industry, or to the movements of regulatory authorities, it could affect business and performance. As countermeasures, the Group has established an internal management structure, clearly stated compliance with laws and regulations in its terms of use, and monitors the movements of regulatory authorities.

Technological innovation in the internet, information security, and AI fields is remarkable, and in the EC market as well, the diversification of payment methods, expansion of smartphone usage, and utilization of AI are progressing. If the Group is slow to respond to new technologies and services, services for shop owners and purchasers could become obsolete, potentially reducing competitiveness relative to other companies. As countermeasures, the Group is promoting the pursuit of robust security, development of new services, and the provision of new value through the utilization of AI technology.

The Group may make investments, loans, M&A, or business alliances domestically and internationally to expand its business, and there is a risk that expected business results may not be achieved due to changes in the business environment of investees, failure to achieve synergies, delays or failures in PMI, and other factors. Inability to recover investment/loan amounts and impairment of acquired assets, particularly impairment of goodwill associated with M&A, could have a material impact on financial indicators and earnings. As countermeasures, the Group's policy is to decide on investments and loans only after thoroughly evaluating risks and recoverability in advance.

Payment agency and online payment services, mainly credit card payments, depend on contracts with specific business partners, and if fees are raised, contracts are terminated, or transaction terms are changed, this could affect business and performance. In addition, if the deposit of online shop sales proceeds from business partners becomes impossible or delayed, it could disrupt cash flow and performance. No specific alternative measures are described in the securities report.

Yuta Tsuruoka, Representative Director, Senior Executive Officer and CEO, plays an extremely important role as founder in determining and executing management policy and business strategy, and if he becomes unable to continue his duties, it could affect business and performance. As countermeasures, the Group is enhancing information sharing at the Board of Directors and developing a management structure that reduces excessive dependence on a specific individual through the introduction of an executive officer system.

As of the end of the 13th consolidated fiscal year, tax loss carryforwards existed, and if performance progresses favorably compared to the business plan and the tax loss carryforwards are eliminated, corporate tax, resident tax, and enterprise tax will be recorded based on normal tax rates. This could affect the Group's performance and cash flow status. In addition, the number of potential shares from stock acquisition rights is 3,888,000 shares (equivalent to 3.3% of the total number of issued shares), and there is also a risk of dilution of existing shareholders' share value upon exercise.