Bizmates, Inc.

The Group's consolidated net sales are heavily dependent on the Language Solutions Business, and until the Talent Solutions Business establishes a stable revenue base, the performance of the Language Solutions Business will directly affect the Group's operating results. If the growth of this business slows due to changes in the business environment or other factors, the impact on the Group's overall performance could be severe. The Company is focusing on developing the Talent Solutions Business into a second pillar of earnings to diversify this risk.

The Company's systems store personal information of students and job seekers, and if an unforeseen event results in the loss or external leakage of such information, it could damage the Company's credibility and corporate image, thereby affecting business performance. Although the Company has implemented measures to prevent unauthorized access, such as firewalls, intrusion detection, and database encryption, complete protection is difficult to achieve. Both the Company's domestic operations in Japan and its Philippine subsidiary are subject to legal regulations such as personal information protection laws.

The Company is subject to a wide range of laws and regulations, including the Employment Security Act, the Act on Specified Commercial Transactions, the Consumer Contract Act, and the Act on the Protection of Personal Information. If the Company were to violate these regulations due to unforeseen circumstances, or if new regulatory tightening were to occur, the Company's business could be restricted through administrative sanctions or other measures. The Philippine subsidiary is also subject to local regulations, including personal information protection laws. Although the Company has established and strengthened its internal management systems to ensure legal compliance, this risk cannot be completely eliminated.

The Talent Solutions Business operates as a paid employment placement business licensed by the Minister of Health, Labour and Welfare under the Employment Security Act. If this license were revoked for any reason, the continuation of this business would become impossible, causing a material impact on business performance. Changes in legal requirements resulting from amendments to the Employment Security Act could also affect business operations. The Company strives to maintain its licenses and permits through periodic verification of its legal compliance status.

While the market is expected to continue expanding steadily due to the spread of high-speed communication environments and growing awareness of online language learning, a slowdown or contraction in growth would significantly affect the Group's business performance. In addition, the spread of language learning services utilizing generative AI and the evolution of highly accurate AI-based simultaneous interpretation and translation tools could reduce demand for English conversation learning itself. The Company continues to focus on maximizing customer satisfaction through the expansion of its services.

Since the Company's business specializes in providing business English lessons, securing highly skilled trainers based in the Philippines is essential. If the Company is unable to recruit and retain trainers as planned due to changes in the Philippine economic environment or intensifying competition for talent, this could lead to a decline in lesson quality and affect business performance. The Company strives to strengthen its training system and maintain and improve lesson quality through lesson feedback and quality improvement sessions.

The Company relies heavily on its founder and Representative Director and President, Nobuaki Suzuki, for key aspects of management. If he were to become unable to perform his duties for any reason, this could significantly disrupt business operations. Although the Company is working to build a system that does not depend on a specific individual by developing executive staff, sharing information, and delegating authority, the degree of dependence remains high at present.

To establish the Talent Solutions Business as a second earnings base, the Company continues to incur additional expenditures for system development, marketing costs, and personnel expenses, which may temporarily reduce profit margins. If progress does not proceed as planned, it may become difficult to recover the invested funds, affecting business performance. Although the Company carefully verifies the future revenue impact and validity of development plans for each project, uncertainty remains high because this is a new business area.

The Philippine subsidiary, Bizmates Philippines, Inc., handles trainer recruitment and management as well as system development. If changes occur in local laws, tax systems, or policies, in the political and economic situation, in infrastructure vulnerabilities, or if labor costs rise, or terrorism or natural disasters occur, local business activities could be disrupted, affecting business performance. The Company has established a system to appropriately and promptly identify and respond to local legal changes and shifts in the business environment through enhanced coordination with its overseas subsidiary.

In addition to the yen conversion required when preparing consolidated financial statements for the Philippine subsidiary, the Company pays outsourcing fees to trainers based in the Philippines in Philippine pesos. As a result, when the yen depreciates, foreign exchange losses may occur, affecting business performance and financial position. Furthermore, a weaker yen relatively reduces the benefits of working in Japan for foreign residents, which could also negatively affect the number of job seeker registrations in the Talent Solutions Business. The Company hedges against foreign exchange fluctuations as necessary through forward exchange contracts to minimize this risk.