BROAD ENTERPRISE CO.,LTD.

The majority of the Company's revenue depends on the Internet Service Business (mainly high-speed internet for apartment buildings, "B-CUBIC"), and if this business contracts due to changes in the business environment, it could have a material impact on the Company's financial position and operating results. The Company is expanding peripheral services such as the IoT intercom "BRO-LOCK" and in-home IoT renovation "BRO-ROOM," but if these new businesses do not grow as expected, this risk could materialize. Diversifying revenue sources remains a challenge.

Since the Company provides services primarily to apartment building owners and management companies, a deterioration in sentiment in the real estate industry due to economic conditions, interest rate trends, land price trends, etc. directly leads to a decrease in new contracts. Because the real estate market is influenced by external factors, it is difficult for the Company to address this on its own, and a significant deterioration in market conditions could lead to a slowdown in sales growth or an increase in cancellations of existing contracts.

There are numerous competitors in the internet service market in which the Company operates, and there is a risk that competition will intensify further due to an increase in new entrants or the actions of existing competitors. The Company seeks to differentiate itself through the number of service areas, service pricing, plans requiring no initial installation fees, value-added services, etc., but if intensifying competition leads to price competition, profitability could decline, potentially affecting the Company's financial position and operating results.

The Internet Service Business has a business model that requires telecommunications equipment investment prior to recognizing revenue, and the amount of such investment tends to increase during periods of business expansion. Funding relies on in-house funds as well as borrowings from financial institutions, and in a rising interest rate environment, increased interest payments could put pressure on the Company's financial position. The Company seeks to fund investments with its own capital through early collection via securitization of accounts receivable, but the same risk arises if such securitization is unsuccessful.

To secure stable funding, the Company has entered into a commitment line agreement with financial institutions, which includes certain financial covenants. If the Company breaches these covenants, it could lose the benefit of the term and be required to repay the borrowings in a lump sum, which could seriously impede its ability to raise funds. Currently, the Company is at a level that does not breach the financial covenants and continuously monitors the situation.

As a telecommunications carrier, the Company acquires and manages personal information such as users' addresses, names, and phone numbers, and faces the risk of information leakage due to unauthorized external access or intentional or negligent acts by related parties or business partners. If an information leak occurs, the resulting response costs, damage claims, and loss of social credibility could affect the Company's financial position and operating results. The Company obtained Privacy Mark certification in September 2007 and has established personal information protection regulations and conducts internal training.

The Company purchases telecommunications equipment necessary for service provision from other companies, and for equipment with a high dependence on specific companies, there is a risk that equipment cannot be procured in a timely manner due to delivery delays or extended supplier shutdowns. If equipment procurement is disrupted, it could hinder the acquisition of new orders and the continuous provision of services to existing customers, potentially leading to contract cancellations and affecting the Company's financial position and operating results.

Innovation in information and communication technology is progressing rapidly, and continued advancement of industry-standard technologies is expected. If rapid technological progress exceeding expectations causes the Company's services to become obsolete relative to competitors, competitiveness could decline, potentially affecting the Company's financial position and operating results. Delays in responding to technological changes carry the risk of directly leading to the loss of existing customers and a decline in the ability to acquire new customers.

The Company is subject to legal regulations such as the Telecommunications Business Act and the Construction Business Act, and has filed a notification with the Ministry of Internal Affairs and Communications as a telecommunications carrier and obtained a special construction business license. If these laws and ministerial ordinances are significantly changed in the future, or if regulations are introduced that impede business development, this could restrict business activities and increase the cost of legal compliance, potentially affecting the Company's financial position and operating results.

Ryosuke Nakanishi, the Representative Director and President, plays an important role as the founder in formulating management strategy and developing new businesses, and if he becomes unable to perform his duties for any reason, this could affect the Company's financial position and operating results. In addition, he and his related parties hold 71.83% of the total number of issued shares, and a significant decrease in his shareholding could affect the market price of the shares and the exercise of voting rights. The Company is working to reduce this dependence through personnel development and strengthening its management structure.