Dawn Corporation

The main customers for cloud services and system development are public-sector entities such as local governments, while private-sector customers are limited to infrastructure operators such as electric power companies, resulting in high dependence on the public market. Should local governments' fiscal conditions deteriorate (e.g., due to infection-control measures) or should budget allocations change due to shifts in government priority policies, the Company's business performance could be affected. Although the Company is working to develop the private-sector market, high dependence on the public-sector market is expected to continue for the time being.

Of the cloud usage fees, which accounted for 50.1% of net sales in the fiscal year under review, usage fees for the flagship service "NET119 Emergency Reporting System" account for a large proportion, resulting in high dependence on a specific service. If customers switch to other companies' systems, or if alternative methods are adopted for supporting the hearing impaired, the number of contracts could decline, affecting business performance. In addition, although license sales of software for building geographic information systems (GeoBase, etc.) have declined to around 5% of net sales, dependence in terms of profit remains high, and there is a risk that a shift by major customers to competing products or a sharp decline in orders could affect business performance.

The Company's cloud services specialize in disaster prevention and crime prevention and leverage first-mover advantage, but barriers to new entry are not necessarily high, and intensifying price competition due to the development of similar services by competitors could affect business performance. Although the Company is actively pursuing patent acquisition, this cannot completely prevent competitor entry.

The Company conducts product development and contract development in accordance with quality control standards based on ISO9001 and strives to prevent defects, but if a customer suffers damage due to a product defect, there is a risk of being subject to a claim for damages. In addition to the occurrence of damages, business performance could be affected by a decline in trust in the Company.

Cloud services are provided via communication networks, and there is a risk that service provision could become impossible due to communication disruption caused by disasters or accidents, server outages, computer virus damage, software defects, and the like. Although measures such as server redundancy and geographically distributed placement have been implemented, in the event of a failure, business performance could be affected by the burden of recovery costs and a decline in trust.

In contract development, discrepancies in understanding of business specifications with the client may arise after the fact. Although thorough specification discussions are held before accepting orders, if a discrepancy nonetheless occurs, redevelopment and repair costs borne by the Company after delivery could arise, affecting business performance.

As of the end of the fiscal year under review, the organization is small in scale, with 6 directors (including audit and supervisory committee members) and 65 employees, and business execution may in some cases depend on specific individuals. If specific officers or employees were to leave the Company, this could affect its financial position and business results. The Company plans to promote delegation of authority, standardization of operations, and the securing and development of substitute personnel.

Amid the trend toward digitalization, securing IT personnel is difficult across the information services industry as a whole. If the Company is unable to acquire the necessary personnel or if excellent employees resign, business performance could be affected by delays in product/service development or contract development leading to unmet sales targets, as well as increased recruitment and training expenses. The Company is working to secure personnel by utilizing diverse recruitment methods such as online internships and direct recruiting.

The Company works to protect its own intellectual property through trademark and patent registration, but if it infringes on a third party's intellectual property rights, it may be required to cease use, face a claim for damages, or pay patent usage fees. Should such a situation arise, it could affect business results and future business development.

The Company conducts rigorous internal management of personal information, specific personal information, and customer information, as well as management of outsourcing partners, based on its Privacy Mark (obtained December 2006) and ISO/IEC27001 (obtained October 2013) certifications, but the risk of information leakage due to unauthorized access or inadequate management of outsourcing partners cannot be completely eliminated. Although the Company has taken out insurance covering personal information leakage incidents, this may not cover all losses, and in the event of a leak, claims for damages and loss of credibility could affect business results and business development.