Birdman Inc.

The Company fell into negative net worth in the prior consolidated fiscal year, and although the negative net worth was resolved in the current consolidated fiscal year through fundraising via exercise of stock acquisition rights and other means, net sales decreased significantly, and the Company continued to record substantial operating losses, ordinary losses, net losses attributable to owners of the parent, and negative operating cash flow. Furthermore, significant payments arose after the end of the current consolidated fiscal year, reducing cash on hand, and events and conditions that raise material doubt about the going concern assumption continue to exist. Fundraising is being pursued under new management, but the countermeasures are still being implemented or are under consideration, and material uncertainty remains.

Due to the granting of stock options to officers and employees and the issuance of stock acquisition rights for fundraising purposes, the number of potential shares as of June 30, 2025 reached 7,580,800 shares, equivalent to 37.1% of the total number of issued shares of 20,427,500. If these stock acquisition rights are exercised in the future, the value per share may be significantly diluted. Issuance of stock acquisition rights for incentive plans and fundraising purposes continues to be under consideration, and the dilution risk remains ongoing.

Corporate advertising and public relations budgets tend to be adjusted in line with economic conditions, and since the Group's net sales are highly dependent on these budgets, there is a risk that a deterioration in economic sentiment could directly pressure business performance. As a countermeasure, the Group aims to strengthen its financial structure to withstand short-term economic downturns; however, given the ongoing recording of losses, its financial resilience is currently limited.

As the Group is in a growth phase, its dependence on specific business partners tends to increase when receiving large orders, creating a risk that changes in such partners' policies could directly affect business performance. As a countermeasure, the Group strives to acquire new customers, but if the high level of dependence continues, the trends of a single business partner could become a major factor in performance volatility.

While net sales surge sharply when large-scale concerts are held, the unpredictable nature of this business means that planned investment recovery may not be achieved, and if a concert is cancelled, it could have a material impact on business performance. The concert business is subject to significant fluctuations in revenue, inherently carrying risks that are unique factors in performance volatility. As a countermeasure, the Group strives to mitigate the impact through improving the quality of artist appearances and concert operations.

Because the Group proposes combinations of multiple services with differing prices and profit margins according to customer needs, there is a risk that net sales and gross profit margin may deviate from expected levels depending on the content of orders received. If cases requiring the provision of low-profitability services occur frequently, sufficient gross profit may not be secured, affecting business performance. As a countermeasure, the Group focuses on sales activities that prioritize securing profit and on structuring projects that can secure the target gross profit.

For the Group, which adopts a policy of internalizing its service domains, human resources are the most critical management resource, and securing and retaining talented personnel is key to business expansion. If changes in the human resources market make timely recruitment difficult or if personnel attrition occurs, it could have a material impact on business development and performance. As a countermeasure, the Group aims to secure and retain personnel through active recruitment of new graduates and mid-career hires and by focusing on internal training.

In the course of business operations, there are opportunities to handle clients' confidential information and personal data, and if an unforeseen event causes an information leak, it could affect the financial condition and business performance through a decline in social credibility and brand image and the payment of damages. As a countermeasure, the Company obtained Privacy Mark certification in November 2015 and has implemented necessary measures for information management.

In spot work and similar engagements, industry custom dictates an extremely short period between inquiry and the start of work, and there are cases where operations are carried out without concluding a contract document. If a discrepancy in understanding with a business partner arises and a transaction fails to materialize, it could affect business performance. As a countermeasure, the Group ensures that order records, such as purchase orders and email logs related to orders received, are always retained, thoroughly maintaining a system to prevent discrepancies in order content.

The Group is actively pursuing expansion into related and adjacent businesses, such as the business development business and inbound/outbound branding services centered on Asia, but if changes in the business environment prevent the achievement of results as initially planned, it could affect business performance. In particular, new business investment under the current fragile financial base carries a risk of expanding losses. As a countermeasure, the Group has adopted a policy of proceeding only after careful deliberation.