SecondXight Analytica, Inc.

Due to insufficient market supply of data scientists and engineers, competition for talent acquisition with industry peers has intensified, making hiring according to plan difficult, and outflow of existing personnel may constrain order intake. The Company is promoting proactive recruiting activities and in-house training, but recognizes a high likelihood of materialization in both the short term and medium-to-long term.

In the AI-related industry, proprietary technology is a source of differentiation from competitors, but as competition for talent intensifies, there is a risk that technology and know-how will leak out simultaneously with personnel departures. The Company is addressing this through salary system revisions, enhanced employee benefits, and patent acquisition, but a considerable degree of materialization is anticipated over the medium to long term, and if it materializes, it will become difficult to differentiate from industry peers.

With the advancement of machine learning-related tools, technology use has become easier, leading to an increasing trend of new entrants, and competitiveness may decline due to the emergence of superior competitors, service improvements, or new high-value-added business models. The Company strives to continuously gather the latest information and provide advanced services, but recognizes a corresponding risk of materialization.

The Company primarily uses Amazon Web Services (AWS) as its service delivery infrastructure, and if a communication network failure occurs, disruption to service provision may also occur. This could lead to loss of customer trust and customer attrition, and the Company recognizes a corresponding likelihood of materialization in the short term.

Given the nature of the business, which handles large volumes of customer data, there is a risk of leakage of important information due to human error, unlawful server intrusion, or unforeseen circumstances. The Company has established an information management framework including ISMS certification, but if such a risk materializes, it may result in liability for damages, loss of social credibility, customer attrition, and claims for damages, which could have a material impact on operating results and financial condition.

Because AWS is used as the Company's primary infrastructure, if Amazon Web Services, Inc. changes its business policies or pricing, making service use difficult or increasing usage costs, this could affect business continuity and cost structure. Usage decisions are made by comprehensively weighing safety, stability, and price, but the cost of migrating to alternative means also needs to be considered.

In the AI-related industry, technological innovation is progressing rapidly day by day, and if the Company fails to respond promptly to rapid changes, its existing technology may become obsolete, potentially leading to customer attrition. The Company responds through securing engineers and training activities, but if technological innovation occurs at a pace exceeding expectations, this may affect operating results and financial condition.

The three founding directors (Hirokazu Takayama, Naoki Fukaya, and Ryotaro Kato) possess extensive knowledge, experience, and customer networks related to AI and machine learning services, and if a situation arises in which these three individuals are unable to be involved in the business, it may impede business execution. The Company addresses this through enhanced information sharing among directors and strengthening the management organization by introducing a division system, but the high degree of dependency remains an ongoing challenge.

The proportion of sales through partner companies, which are capital and business alliance partners and agencies, is high, and if a partner company changes its business development or policies, or terminates its contract, this could directly impact sales. The Company formulates and monitors collaboration plans, but the revenue structure's high dependency on partners is a risk factor for business continuity.

As of the end of the fiscal year under review, the Company recorded goodwill of ¥156,156 thousand arising from the consolidation of Break's Inc. as a subsidiary, and if a significant divergence arises between the revenue plan at the time of consolidation and actual results, impairment treatment may become necessary. The Company conducts appropriate impairment assessments, but if this materializes, it will affect operating results and financial condition.