MAMEZO CO., LTD.

The Group has access to important business and technical confidential information of client companies through outsourced operations. Should an information leak occur, it could materially affect the Group's business, financial position, and operating results through contract termination, damages claims, and loss of credibility, among other consequences. As a countermeasure, all operating companies have obtained ISMS certification and established systems to prevent information leaks.

The Group holds licenses such as the worker dispatching business license and ISMS certification. If renewal is neglected or acquisition is delayed due to legal amendments, this could adversely affect the Group's business, financial position, and operating results. As a countermeasure, the company-wide Risk and Compliance Committee regularly confirms the status of license renewals.

If a disaster of a certain scale occurs in the Kanto or Tokai region, damage to the Group's servers and other facilities or disruption of transportation could render the Group unable to provide services, potentially affecting its financial position and operating results. As a countermeasure, the Group is promoting cloud migration of its systems and enhancing its telework framework to minimize the impact on service provision to customers.

Mamezou K2TOP Holdings holds 67.99% of issued shares and has significant influence over matters resolved at general shareholders' meetings, including the election and dismissal of officers, organizational restructuring, and amendments to the articles of incorporation. In addition, since Integral, the financial sponsor, is a fund, its disposal policy regarding share sales, etc., could affect the Group's business and performance. The Company strives to maintain business operations independent from Mamezou K2TOP Holdings while giving due consideration to the interests of general shareholders.

While the Group's business is centered on Japan, many of its clients operate businesses overseas. If a global economic slowdown, social unrest, regional conflict, or other factors cause clients' IT investment appetite to change rapidly and significantly, the Group's performance could be indirectly affected. The Group monitors the macroeconomic environment while conducting its business operations, but responding to sudden changes remains a challenge.

The Group records a certain scale of sales to Denso Techno Co., Ltd., resulting in a high degree of dependency on a specific customer. Changes in this customer's investment behavior, business environment, or institutional policies could affect the Group's business, financial position, and operating results. The Group is working to reduce this dependency by acquiring new business partners, among other efforts.

In the AI robotics and engineering field, Group companies may act as manufacturers. If product defects or quality issues lead to recalls or claims, this could affect the Group's business, financial position, and operating results through a decline in customer trust and a resulting decrease in orders. The Group carries liability insurance to prepare for product liability claims, but there is no guarantee that the coverage will be sufficient to cover the full amount of damages, and the risk of substantial damages remains.

Expanding the Group's business requires hiring and developing senior engineers with consulting capabilities; however, engineers and outsourcing partners with the desired skills are limited, and if securing and developing such talent does not proceed as planned, this could affect the Group's business and operating results. As a countermeasure, the Group is working to create an attractive working environment, including expanded telework and overtime management systems, and to enhance various training programs.

The Group's competitive advantage is rooted in practical know-how in AI software development technology. If the Group's relative technical capabilities deteriorate due to improvements by competitors, its business could be constrained. As a countermeasure, the Group works to strengthen its overall technical capabilities through study sessions held at each group company, a cross-organizational technical Q&A system, and technology sharing among group companies; however, the risk of delayed response to unexpected and rapid industry changes remains.

In contracted development, if profitability deteriorates due to a discrepancy between initial estimates and actual man-hours, or if payment is delayed due to differing recognition of completion criteria with clients, this could affect the Group's financial position and operating results. As a countermeasure, the Group has introduced an approval process for order changes when profit margins fluctuate significantly, as well as a review system for contract-based projects and a mechanism to confirm completion criteria at the order approval stage.