Kinjiro Co.,Ltd.

The majority of HRM Business sales depend on the Kinjiro series, with dependence on work management system-related sales in particular exceeding 80%. If technological innovation or low-priced competing products/services emerge in the work management field, there is a risk that sales could decline significantly. In addition to "Kinjiro Enterprise" launched in 2004, the company has expanded its product line to include "Universal Kinjiro Work and Attendance Management" released in December 2021, but this has not resolved the underlying dependence structure.

Approximately 60% of sales are indirect sales via sales partners, with a highly concentrated dependence structure in which the Otsuka Corporation group in particular accounts for about 40%. If relationships with sales partners deteriorate, if competitors strategically capture partners, or if a partner's financial condition worsens, this could have a direct and material impact on sales. The Group positions the maintenance of ongoing trust relationships as an important issue, but there is no specific description of diversification measures.

In the software and hardware fields, the pace of technological innovation is notably fast, and there is a risk that the Group's technology and products could become obsolete if intensifying competition, including from new entrants, leads to product price declines, or if competitors introduce superior new products or form strategic alliances. The Group continuously works on analyzing market and technology trends and on research and development of new technologies and products, but if it becomes difficult to respond to technological change or if it fails to secure market advantage, this will affect its business results and financial condition.

The Group acquires and stores confidential information of customers and personal information of customer companies' employees and individual users, and if an information leak occurs, there is a risk of loss of social trust and the burden of costs such as damages. As countermeasures, the Group has obtained ISMS certification (ISO/IEC 27001), completed migration to the latest version in May 2025, and has also obtained ISMS Cloud Security certification (ISO/IEC 27017) to strengthen its systems. However, the risk of information leakage due to unforeseen events such as computer virus attacks cannot be completely eliminated.

If a system failure causes a prolonged cloud service outage, there is a risk of loss of trust from customer companies, a significant decline in cloud service sales due to contract terminations, and claims for damages. As countermeasures, the Group conducts vulnerability assessments by a specialized security company, has implemented redundancy for networks, equipment, and servers, has introduced an operation monitoring system, and has established and conducts drills for early recovery procedures based on its BCP (Business Continuity Plan). However, the risk of significant recovery delays due to software or related equipment failures cannot be completely eliminated.

Development projects for the next-generation Kinjiro series and the electronic medical record system "Health x Life Karte" are underway, and there is a risk that if upfront-investment-type R&D expands, if post-release sales revenue falls short of expectations, or if unforeseen circumstances such as development delays or discontinuation occur, additional costs or losses could be incurred. The electronic medical record system in particular requires compliance with medical-related laws and regulations, making development highly complex. If these risks materialize, they could affect business results and financial condition.

Due to a business structure with a high level of fixed costs, such as personnel expenses and depreciation, and a low ratio of variable costs, fluctuations in sales tend to result in larger fluctuations in profit compared with other business models. When sales decline, the magnitude of the resulting profit decrease is large, and there is a possibility that risks related to impairment of fixed assets such as land and buildings, and the recoverability of deferred tax assets, could materialize. This structural characteristic is a factor that amplifies the impact on financial condition when sales decline due to an economic downturn or intensifying competition.

In connection with amendments to laws such as the Labor Standards Act and the Industrial Safety and Health Act, the company is obligated to provide the latest amendment-compliant programs to companies under Premium Support contracts, and there is a risk that if the content of the amendments is complex or cumbersome, this could result in delayed responses or increased development cost burdens. In addition, in the electronic medical record business, compliance with medical-related laws and regulations (including guidelines published by supervisory authorities) is also required, and failure to respond to legal and regulatory amendments could affect business results and financial condition. There are cases where the Group's own development resources alone may be insufficient to respond.

The Group is strengthening its workforce through new graduate hiring and mid-career hiring of engineers with specialized technical skills and knowledge, but if it is unable to smoothly secure personnel or if existing engineers leave the company, there is a risk of disruption to business expansion and product development. Given the nature of the business, which is centered on software and hardware development, the quality and quantity of technical personnel form the foundation of competitiveness, and a shortage of personnel directly leads to delays in product development and quality deterioration. The current staffing structure is said to be commensurate with the scale of operations, but there is a latent risk of personnel shortages during phases of business expansion.

Representative Director Minoru Kamura and his asset management companies (NE System Service Co., Ltd. and MK Co., Ltd.) hold 51.3% of the total voting rights, resulting in a control structure in which important management matters can effectively be decided unilaterally. If these shares are sold for some reason in the future, this could have a material impact on the market price and trading conditions of the company's shares. Although the company has stated a policy of giving consideration to the interests of minority shareholders as a stable shareholder, an inherent governance risk exists from the perspective of minority shareholder protection.