BroadBand Security,Inc.

In the information security market, selling prices have continued to decline due to competition with rivals and customer demands. The Company is pursuing cost reductions through improved engineer productivity and migration to cloud-based services, but if these measures fail to succeed, it may become difficult to secure profitability, which could adversely affect business performance and financial condition.

Attack methods for information theft, such as targeted email attacks and ransomware, are evolving daily, and security companies are required to continuously develop and update their defensive services. If the Company falls significantly behind competitors in responding to the latest technologies, it may lose customers, which could affect business performance and financial condition. The Company addresses this by devising new services as needed and incorporating the latest technologies.

The platforms for the security equipment managed service and secure email service employ overseas products, and while the Company provides these services after sufficient verification and testing, there is a risk that serious bugs or defects may occur after service launch. If a defect causes significant damage to a customer, a decrease in sales due to contract termination or other factors could affect business performance and financial condition.

The Company's services depend on the provision of services by engineers, and securing and developing human resources is essential for the Company's growth. Amid a severe engineer shortage across the IT industry as a whole, demand for engineers with security expertise is particularly high, making it difficult to secure such talent. If the Company is unable to sufficiently secure and develop human resources, it may affect its medium- to long-term business plans.

Engineers' expertise is an important management resource for the Company, and the loss of personnel is a risk directly linked to the continuity of services. The Company has designed compensation, including performance-linked bonuses and annual salary revisions that take individual goals into account, to be comparable with competitors, but if personnel leave, it could affect business development, business performance, and financial condition.

Because the Company handles important customer information in the course of providing its services, information leakage constitutes a significant risk to its business operations. The Company has implemented measures such as internal training, access rights management, locked storage of documents, and entry/exit management, but should customer information nonetheless be leaked, loss of trust, contract termination, and other consequences could significantly affect business performance and financial condition.

Fluctuations in exchange rates may affect business performance in transactions at the Korea branch. The Company addresses this by gathering information and consulting with various financial institutions in response to increases in transaction volume, but it is difficult to completely eliminate foreign exchange risk.

The Company provides services specialized in the security business, and diversification of its operations is limited. If demand for security services declines due to a deterioration in the economic environment or other factors, the absence of alternative revenue sources could significantly affect business performance and financial condition.

There is a risk that business activities and service provision could be suspended due to natural disasters such as earthquakes, terrorist activities, nationwide or regional power outages, or insufficient power supply at the building occupied by the Company or at data centers. The Company has taken measures to store important data at data centers, but should a power outage or similar event occur, it could significantly affect business performance and financial condition.

The Company's revenue is affected by factors such as customers' budget allocation and tends to be concentrated in the final month of each quarter (September, December, March, and June). During periods of weak demand, fixed cost burdens may cause temporary deterioration in profit and loss, and if sales planned for June, the fiscal year-end month, shift to a different month due to delays in acceptance inspection or other factors, it could affect business performance and financial condition.