BayCurrent, Inc.

If major clients (leading companies in various industries with global operations) restrain business investment or IT investment due to domestic and overseas economic trends, foreign exchange fluctuations, or changes in tax systems and laws, this may affect the financial position and operating results of the Group. In addition, the global spread of new infectious diseases could have a direct impact on the Group's own business activities, as well as an indirect impact through constraints on client companies' activities.

Due to intensifying competition for talent in the consulting industry, if recruitment, retention, and development of excellent personnel do not proceed as planned, or if excellent personnel leave the company, this may result in a decline in competitiveness, constraints on business expansion, and a decline in service levels. The Group positions the securing of excellent personnel as an important issue in its future business development, but talent competition across the industry as a whole is intense, and this risk continues to exist.

The Group recorded goodwill when it acquired all shares of the former Baycurrent Consulting, Inc. on June 6, 2014, and this goodwill remains on the balance sheet. The Group judges that this goodwill appropriately reflects future earning capacity, but if future profitability declines, it may become necessary to record an impairment loss, which could have a material impact on the Group's financial position and operating results.

The Company borrows from multiple financial institutions, and changes in lending conditions at financial institutions or increases in market interest rates affecting the funding rate may impact the financial position, operating results, and cash flow. In addition, borrowings based on loan agreements are subject to financial covenants, and if these are breached, this may result in the loss of the benefit of time and other consequences that could affect the financial position and operating results.

As the Group holds confidential information and personal information of clients in the course of providing consulting services, if an information leak occurs due to unforeseen circumstances, this could have a significant impact on social credibility as well as affect the financial position and operating results, including response costs. The Group strives to ensure officers and employees comply with confidentiality obligations and thorough information management, but risks such as cyberattacks and internal misconduct cannot be completely eliminated.

There is a risk of being subject to damages claims or litigation arising from defects in developed software, delays in development, or problems occurring with business partners. The Group implements risk management by determining the allocation of responsibility in advance when concluding contracts, but if trouble occurs that was not anticipated at the time of contracting, depending on its content, amount, and outcome, this may affect social credibility, financial position, and operating results.

The Group has established a code of conduct for officers and employees and strives to thoroughly instill compliance awareness, but should an act in violation of compliance occur, this may affect social credibility, financial position, and operating results. If violations of laws and regulations or fraudulent acts become apparent, this could result in compound damages such as administrative sanctions, suspension of transactions, and reputational damage.

If baseless rumors or malicious reputations are intentionally spread regarding the Group's services or officers and employees, this may affect social credibility, financial position, and operating results. The Group strives to ensure the soundness, efficiency, and transparency of management through the provision of high-quality services, the thorough instillation of legal compliance, and rigorous information management, but the risk of information spreading through SNS and other channels cannot be completely controlled as an external factor.