bBreak Systems Company,Limited

The Company's products are specialized in ERP, and both the revenue per new sale and flow-type revenue account for a certain proportion of total net sales. If the Company is unable to secure orders as planned due to a decline in market competitiveness in the target industry or other factors, this may have a material impact on its financial position and operating results. As countermeasures, the Company is promoting the expansion of stock-type revenue through increased sales of the SaaS version and the securing and development of sales channels for the System Integration Business.

There are approximately 20 ERP product sales companies that target the same primary customer base as the Company, and there is a risk that competition will intensify due to improvements in competitors' sales and technical capabilities. Intensifying competition may lead to the loss of order opportunities and price pressure, which could affect the Company's financial position and operating results. As a countermeasure, the Company continues to develop packages that reflect customer needs.

The Package Business and the System Integration Business primarily target corporate customers, and a downturn in the domestic economy or a reduction in customer companies' capital expenditure related to core business systems would directly affect business development. As a risk diversification measure against a decline in demand, the Company is promoting diversification of industries and the number of adopting companies through expanded sales of the SaaS version, as well as developing sales channels for the System Integration Business.

Stock-type revenue, such as maintenance fees from companies that have introduced ERP products, has been on an increasing trend along with the commencement of operations from newly acquired orders; however, if cancellations increase due to a decline in the market competitiveness of products or other factors, the stable revenue base could be impaired, potentially affecting the Company's financial position and operating results. As a countermeasure, the Company strives to understand customer needs and improve customer satisfaction through regular visits and interviews.

In ERP customization projects, if development man-hours increase due to major specification changes or unforeseen defects, revenue and profit recognition may be delayed to the following quarter or fiscal year. If final delivery ultimately cannot be made, this may result in non-collection of order amounts and liability for damages, which could also damage the Company's credibility. As a countermeasure, the Company has established a system of confirmation by senior staff at the estimation stage and progress monitoring by a PMO.

The Company specializes in Java and open-source software technologies, and if demand for these decreases due to technological innovation, there is a risk that the Company's business foundation could be significantly shaken. Technological obsolescence directly leads to a decline in competitiveness for orders, which may affect the Company's financial position and operating results. As countermeasures, the Company is establishing a system for grasping the latest trends by encouraging the submission of internal technology reports, and is working to secure and train excellent personnel.

Software development is a knowledge-intensive business, and securing, developing, and retaining engineers and sales staff with specialized technical skills and knowledge forms the foundation of business continuity. If the Company is unable to sufficiently secure the necessary personnel, this may affect its financial position and operating results through a decline in development and sales capabilities. As countermeasures, the Company is promoting the development of a comfortable working environment, the establishment of human resource systems, and the enhancement of education and training systems.

Jiro Shiraiwa, Representative Director and founder, is also a major shareholder and plays a central role in formulating and deciding management policy and business strategy, as well as in creating new business models. If, for any reason, he becomes unable to continue his duties, there is a risk of significant disruption to management continuity, which could affect the Company's financial position and operating results. As a countermeasure, the Company is strengthening its management organization through the expansion and development of its manager tier and delegation of authority.

Given the nature of the business, which involves handling customers' confidential information and personal data, there is a risk of information leakage due to human error or cyberattacks, among other causes. If such an incident occurs, it may affect the Company's financial position and operating results through a loss of social credibility. As countermeasures, the Company has obtained Privacy Mark certification, established an information management system, conducted regular security training, entered into confidentiality agreements with all partner companies, and obtained written pledges from all employees and partner engineers.

The Company is subject to laws such as the Act against Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors and the Worker Dispatching Act. If violations of legal obligations occur due to inadequate operational practices or other causes, this could lead to a loss of social credibility. The Company is also exposed to the risk of becoming a party to lawsuits or other legal proceedings involving business partners, employees, or others, which could result in significant costs and affect business activities. As countermeasures, the Company has established a legal compliance system and internal management structure in cooperation with its retained attorney and labor and social security attorney (there are currently no lawsuits in which the Company is involved as a party).