CHIeru Co.,Ltd.

In response to rapid changes in technology and services in the ICT field, delays in research and development or insufficient securing of talented development personnel could make it difficult to respond appropriately to technological innovation, potentially leading to a decline in product development capability. The Company is working to respond to new technologies through active R&D investment, but the chronic labor shortage in the IT industry poses a risk that constrains its responsiveness.

The school education ICT market, which is the Group's core market, is heavily dependent on national policies promoting the use of ICT in education. If such policies are changed, market growth could slow, potentially having a material impact on the Group's financial position and business performance. In addition, sales to schools are significantly affected by the budget scale and budget execution status of the introducing institutions, making trends in public budgets a major factor in performance fluctuations.

In the fiscal year under review (FY2025 (ended March 2025)), the second-half share of net sales reached 63.5% and the share of operating profit reached 65.4%, indicating a pronounced concentration of performance in the second and fourth quarters. If inspection and acceptance scheduled for the fourth quarter (March) is delayed to a subsequent period, there is a risk of direct downward pressure on performance for that period. While seasonal fluctuations have recently tended to narrow due to an increase in transactions recognizing revenue over the contract period, this risk continues to exist.

Most of the Group's products are introduced through a mechanism in which sales partners apply for and win bids from educational institutions and other entities, creating a structural risk in which bid outcomes are influenced by factors outside the Company's control, such as competitive conditions and specification content. If bidding fails, is delayed, or results in unexpected outcomes, this could directly lead to a shortfall in the sales plan, potentially affecting the Group's financial position and business performance.

The Group's primary market is the school education ICT market, and the declining birthrate is expected to lead to a long-term decrease in the number of product users. In the near term, market expansion is expected to continue due to ICT education promotion policies and increased IT investment by educational institutions; however, if the impact of the declining birthrate is greater than expected and IT investment by educational institutions decreases, this could affect the Group's financial position and business performance.

As of the filing date of this document, the Company has a small workforce of 52 employees (excluding temporary employees). If it becomes difficult to secure personnel in line with business expansion, or if officers or employees resign unexpectedly, there is a risk that the internal control and business execution systems may cease to function effectively. Against the backdrop of a chronic labor shortage in the IT industry, stably securing engineers with advanced specialized knowledge is a challenge, and although the Company strives for planned engineer development, there is a possibility that it may not be able to secure the necessary personnel at the necessary time.

Most of the Group's products are sold to end users through sales partners, creating a structure in which changes in the sales conditions or business environment of major sales partners directly affect net sales. Sales partners also handle competing products from other companies, and if a partner changes its policy and reduces its handling of the Company's products, net sales could fluctuate significantly.

The Company has obtained Privacy Mark certification (No. 10823718(08)) and strives for appropriate handling of personal information; however, if a personal information leak occurs for any reason, this could lead to unforeseen damage such as deterioration of corporate image or damages lawsuits. In addition, if a computer virus, unauthorized intrusion, system outage, or similar incident occurs in the cloud service, this could render the service unusable for users and damage credibility, potentially affecting the Group's financial position and business performance.

The Group develops its main products and digital teaching materials in-house and has established a verification system prior to release; however, due to the nature of software, it is difficult to completely eliminate bugs, and if a serious bug occurs, this could cause confusion at educational sites and damage product credibility. There is also a risk of unforeseen damage arising from damages lawsuits or similar claims filed by business partners or end users.

The Group has a policy of considering M&A as a means of business expansion, and conducts due diligence when implementing such transactions; however, issues that could not be identified through prior investigation, such as the emergence of contingent liabilities or the discovery of unrecognized liabilities, may arise after an acquisition. If business development does not proceed as planned, this could affect business performance and financial position.