Nextgen,Inc.

In the telecommunications services field, price competition and differentiation among major telecommunications carriers and new entrants are intensifying, and the pace of technological innovation continues to accelerate. Although business opportunities are expanding in the voice communication market that the Company has cultivated since its founding, driven by the growing integration of voice communication with various services, the Company's business results may be affected if it is unable to keep pace with changes in the market environment.

In developing new businesses and new services, upfront investments in personnel recruitment, research and development expenses, capital expenditures, and advertising expenses may be incurred, potentially reducing profit margins. If business expansion does not proceed as initially projected, or if rapid changes in market and technology trends force a revision of the business plan, the investment burden incurred up to that point may adversely affect business results and financial condition. Delays in product development and system construction due to personnel shortages also pose a risk of delayed monetization.

The Company positions M&A, business transfers, and business investments as means of its growth strategy, but if business development does not proceed as expected, there is a risk that investments may become unrecoverable. In addition, impairment losses on goodwill and other assets recorded in connection with investment activities may occur, potentially affecting business results and financial condition. Although the Company has a policy of conducting sufficient prior due diligence, there is no guarantee that all risks can be avoided.

Investigating and confirming intellectual property rights in the information and communications industry is a complex undertaking, and there is a possibility that claims may be made alleging that technology used or provided by the Company infringes on the intellectual property rights of third parties. Should such a situation arise, litigation costs and damages payments may be incurred, potentially affecting business results. The Company strives to minimize infringement risk by strengthening its organizational structure and personnel in the intellectual property field, and held 11 patents as of the end of the fiscal year under review.

The Company develops and capitalizes software related to telecommunications systems, but if changes in the business environment significantly reduce the profitability of such software and the investment amount becomes unrecoverable, an impairment loss may occur, potentially affecting business results. Although the Company currently believes its asset capitalization is appropriate, there is a risk that this premise could be undermined by future changes in market and technology trends.

The Company's business structure is such that sales scale and profit margins differ from project to project, causing business results to fluctuate significantly depending on the timing of revenue recognition. If specification changes or inspection delays occur due to customer circumstances, or if delivery timing is delayed due to system defects, quarterly business results may fluctuate significantly.

For the Company, whose business is founded on advanced information and communications technology, securing personnel with highly specialized knowledge and experience is a critical management issue. Due to an emphasis on efficiency, the number of employees in each organization has been kept to a minimum, resulting in dependence on specific individuals for certain tasks. If unexpected personnel vacancies occur, business activities may be disrupted, potentially affecting business results.

The Company states that it currently has secured sufficient funds to meet ongoing capital needs for research and development investment, M&A, system investment, and other purposes. However, if changes in the environment make it difficult to raise additional funds, the Company may miss business opportunities, potentially affecting business results.

In the event of a large-scale natural disaster or the spread of an infectious disease, business activities of the Company and its business partners could be disrupted, and procurement could be hindered due to stagnation in social production and logistics. The Company promotes telework during normal times and is working to establish a business continuity system, but there is no guarantee that all effects can be avoided, and business results may be affected.

In the telecommunications services field, efforts by various companies toward product development and technological innovation are accelerating further, and the integration of voice communication with various services is also expanding rapidly. If the Company is unable to respond to rapid changes in technology trends in developing new businesses and new services, it may be forced to revise its business plan, making it difficult to recover upfront investments and potentially affecting business results and financial condition.