Nextware Ltd.

The Company has recorded continuing operating losses, and events exist that raise material doubt about the going concern assumption. As part of its revenue structure reform, the Company is promoting a shift from contracted system development to a business structure centered on next-generation AI utilization, along with new customer acquisition and fixed cost reductions. While the Company currently judges that there is no impediment to fund procurement, if the reform does not progress as planned, it could have a material impact on the financial position.

Even for projects expected to be profitable at the time of order receipt, if unexpected defects or other issues cause costs to exceed estimates, project profitability may deteriorate and affect business performance. As a countermeasure, the Company strives to avoid the occurrence of unprofitable projects through highly accurate estimate presentation based on thorough functional requirements interviews and by concluding contracts in stages for each development process.

To meet diversifying customer needs, it is necessary to stably secure engineers with advanced specialized skills; if such securing is insufficient, it may affect business performance through decreased orders received, deterioration of service quality, and reduced operational efficiency. The Company Group is engaged in planned engineer development, including implementing skill education on the latest technologies and specialized fields.

The Company Group manages multiple types of customer information and confidential information, including personal information. Should an information leak occur, in addition to the impact on business activities due to loss of trust, an obligation to pay damages may arise, potentially affecting the financial position and operating results. The Company is working to strengthen information management, including conducting training for all employees.

For large-scale contracted projects under lump-sum contracts in the Solutions Business, delivery deadlines tend to concentrate at the end of the consolidated fiscal year due to customer circumstances, and sales and profits may become concentrated in the fourth quarter. This concentration creates a risk of large quarter-to-quarter performance fluctuations, making it difficult to evaluate performance during the interim period.

Research and development of the services and software provided may require substantial costs, and investments in servers and other infrastructure may be made ahead of order receipt. If commercialization is not achieved due to poor sales or unforeseen circumstances, significant cost recognition or impairment processing may occur, affecting business performance. The Company seeks to reduce this risk by conducting investments based on thorough research and analysis.

If the fixed assets held by the Company Group, such as operational equipment, fail to generate the expected cash flows and profitability declines, recovery of the investment amount may become unlikely, potentially resulting in the recognition of impairment losses. If impairment processing becomes necessary, it will affect the financial position and operating results.

The Company Group's technologies and services may potentially infringe upon the intellectual property rights of third parties. If unrecognized intellectual property rights already exist, the Company may face litigation or claims for damages, which could affect business performance. Additionally, there is no guarantee that the Company's own intellectual property rights will necessarily be protected, and unauthorized use by other companies may not be effectively prevented.