BPLATS, INC.

In the fiscal year under review, the Company recorded an operating loss of ¥126,351 thousand, an ordinary loss of ¥142,265 thousand, and an impairment loss of ¥772,505 thousand, resulting in a net loss attributable to owners of the parent of ¥925,575 thousand and a capital deficiency of ¥447,251 thousand as of fiscal year-end. Cash and deposits of ¥291,602 thousand fell below the total of short-term borrowings and current portion of long-term borrowings, and the Company was also in breach of financial covenants attached to its convertible bond-type bonds with stock acquisition rights. These conditions give rise to material events that raise substantial doubt about the Company's ability to continue as a going concern. As countermeasures, the Company is pursuing improvements in profitability, cost reductions, and equity financing; however, since these measures remain in progress and are not assured, material uncertainty exists.

In April 2025, the Company issued stock acquisition rights and unsecured convertible bond-type bonds with stock acquisition rights through a third-party allotment to a fund managed by Growth Partners Co., Ltd. The total of 958,800 shares issuable upon full exercise of the stock acquisition rights and 993,300 shares issuable upon full conversion of the convertible bonds at the lower conversion price, totaling 1,952,100 shares, represents 67.04% of the total number of issued shares of 2,911,799 shares. Furthermore, the issuance of the 7th series of stock acquisition rights (with exercise price adjustment provisions) was also resolved in May 2026. Future exercise or conversion may significantly dilute the equity value of existing shareholders. It should be noted that fundraising to strengthen the financial base and dilution of shareholder value are in a trade-off relationship.

The Company Group's net sales are concentrated in the core Subscription Business, and usage contracts for its flagship product "Bplats®" are basically for a one-year term, with renewal or cancellation left to the customer's discretion. If the number of cancellations increases due to changes in customers' businesses or if usage-based fees linked to customers' sales do not increase as expected, this will have a direct impact on business performance. The Company is working to continuously understand customer needs and improve product functionality, but the highly concentrated business structure remains a risk factor for revenue stability.

As a result of recording net losses for three consecutive fiscal years, tax loss carryforwards of ¥588,838 thousand existed as of the end of the fiscal year under review. While tax loss carryforwards can be deducted from future taxable income, there are restrictions on the amount and period of utilization for tax purposes. If taxable income does not arise as planned, corporate taxes will be levied at the standard tax rate, which could adversely affect net income and cash flow. If the recovery of profitability is delayed, there is a risk that effective utilization of the tax loss carryforwards will become difficult.

In providing services, the Company has opportunities to handle personal information and confidential information of client companies, and there is a risk that information leakage due to computer viruses, unauthorized access, human error, or other causes could result in claims for damages and loss of credibility. The Company has established an information security framework by obtaining ISO/IEC 27001:2022 certification (obtained in February 2025) and ISO/IEC 27017:2015 certification, but these measures do not guarantee complete protection. The financial and reputational impact in the event of an information leakage incident could be significant relative to the scale of the business.

Kenji Fujita, the founder and Representative Director and President, plays an important role in determining management policy and business strategy as well as in external negotiations. If he becomes unable to perform his duties for any reason, this could have a significant impact on business development and operating results. The Company is working to systematize its organization, develop human resources, and delegate authority, but as a small-scale organization, the establishment of a substitute framework remains a work in progress. In particular, there are many situations in which top management judgment is essential, such as in responding to financial crises and developing new businesses, making this a high dependency risk.

"Bplats®" is a cloud service highly dependent on the internet, and if a system outage occurs due to natural disasters, unauthorized access, communication failures, or other causes, this could result in the suspension of customer transactions and a decline in system reliability. The Company has implemented measures such as system redundancy, vulnerability testing, and protection against unauthorized access, but technical issues in the cloud infrastructure environment and unexpected cost increases due to rising cloud communication fees could also affect operating results. Maintaining a framework for stable operation of environments for numerous customers remains an ongoing challenge.

In response to rapid technological innovation and changing market needs in the information services industry, the Company faces a risk that its financial condition and operating results could be affected if it fails to predict or recognize the direction of technological change, or if customers' IT investment needs change suddenly. The Company is working to address new areas such as "AI × Monetization" for generative AI service providers, but the pace of technological change is fast, entailing possible delays in development plans and increased costs. The Company utilizes multiple outsourcing partners in product development, but there is also a risk that the expected productivity and quality may not be maintained.

Due to domestic business customs where many companies have a fiscal year ending in March, demand for the Company's products tends to concentrate in the fourth quarter (January to March), particularly in March, creating a structure in which it is difficult to judge the full-year outlook based solely on performance in a specific quarter. Projects planned to be recorded in March, the final month of the fiscal year, may be delayed until after April due to operational factors on the part of sales partners or customers, resulting in significant quarterly performance fluctuations. Under the current financial crisis, the risk that delays in recording sales at fiscal year-end will directly impact cash flow has increased.

Because the Company is a small-scale organization, it is highly dependent on human resources in its business activities. If it is unable to secure and develop excellent personnel as expected to respond to business expansion, this could affect business development and operating results. While the Company is implementing selective hiring and cost reductions through organizational integration and personnel reassignment, there is also a risk that a shortage of personnel could lead to a decline in development and sales capabilities. Recruitment activities under financial constraints may put the Company at a disadvantage in the competition to acquire excellent personnel.