Nulab Inc.

Revenue from Backlog, the company's flagship service, was ¥4,041,631 thousand, accounting for 92.0% of total net sales. A significant decline in Backlog revenue would have a severe impact on the business and results of operations. In addition to maintaining and strengthening Backlog's competitiveness, the Company's policy is to reduce this dependence by expanding sales of other services and creating new cross-sellable products.

The collaboration tools market already has multiple competitors, and as the SaaS/cloud market expands, new entrants of various sizes are expected. Advances in AI technology also increase the likelihood of entry from companies in other industries. If intensifying competition makes planned business development difficult, it could affect the Company's operating results and financial condition. The Company strives to maintain and strengthen its competitiveness through enhanced service development capabilities, continuous improvement, and active use of AI technology.

In the internet industry, the pace of development of new technologies, including AI, and the emergence of new services is rapid, and customer needs are also changing quickly. If the Company is slow to respond to technological innovation or changing customer needs, or if investment exceeding expectations becomes necessary to address new technologies, it could affect business operations, operating results, and financial condition. The Company actively works to gather information on the latest technology trends and accumulate know-how by securing and training talented personnel.

Since the Company handles confidential customer information and personal data in providing its services, an information leak could result in damages, litigation costs, and loss of social credibility, affecting the business and results of operations. The Company must also comply with overseas laws and regulations, including the GDPR, which entails a risk of legal violations. While the Company has implemented measures such as obtaining ISMS certification, vulnerability assessments by external specialists, and information security training, complete prevention is difficult.

All of the Group's services operate on Amazon Web Services (AWS) as their infrastructure. If AWS experiences a failure or insufficient processing capacity, service access interruptions or delays could damage customer trust. Changes in the business strategy or pricing of Amazon Web Services, Inc. could also affect the business and results of operations. Dependence on a single cloud provider limits available alternatives, and disclosure of risk mitigation measures is limited.

Service provision may be interrupted due to failures in internet communication networks caused by large-scale natural disasters, terrorism, or war, server downtime from access volumes exceeding expectations, or unexpected service malfunctions. Service outages could lead to loss of customer trust and increased cancellations, and under the annual prepayment contract model, may also give rise to refund obligations. The Company has implemented measures such as system and server redundancy, operational monitoring, and strengthened quality control.

Securing, developing, and retaining talented personnel is essential for business expansion. However, intensifying competition for talent in the IT industry may make it difficult to secure and develop sufficient personnel when needed, or attrition may hinder business operations and expansion. In addition to ongoing recruitment and training activities, the Company implements various measures to improve retention rates, but the risk of a deteriorating competitive environment persists.

The Company pays service usage fees and other costs to overseas providers, including AWS, in foreign currencies. A greater-than-expected depreciation of the yen could increase procurement costs, affecting operating results and financial condition. Although the Company hedges through forward foreign exchange contracts, a risk remains that it may not be able to fully address exchange rate fluctuations exceeding expectations.

Since many of the Company's services are provided under annual contracts with upfront lump-sum payment models, if a large number of customers request cancellation, or if an accident or other event makes it impossible to provide the service, future scheduled revenue would be lost and obligations to refund prepaid amounts would arise. Given the high concentration of revenue in Backlog in particular, the impact on business performance from concentrated cancellations would be significant.

The number of potential shares from stock acquisition rights granted as incentives to officers and employees is 655,784 shares, equivalent to 10.11% of the 6,484,101 total shares issued. If these rights are exercised, the share value and voting rights ratio of existing shareholders may be diluted. The Company currently has no track record of dividend payments, and continues its policy of prioritizing internal reserves for growth investment.