TMH Inc.

Due to intensifying competition for talent within the semiconductor industry and reduced recruiting competitiveness stemming from the Company's location outside major metropolitan areas, securing, developing, and retaining capable personnel may not proceed as planned. A shortage of personnel could constrain business expansion and pose a risk to operating results, financial position, and cash flow. The Company continues active recruiting activities while also working to improve retention through culture-building, HR systems, and workplace environment improvements.

Representative Director and President Daisuke Enami substantially holds 56.77% of the Company's total issued shares and functions as a stable shareholder. If his ownership ratio were to decline for any reason in the future, this could affect the Company's share price and the exercise of voting rights, among other matters. Mr. Enami has a policy of giving consideration to the interests of minority shareholders, and the Company addresses this through management of the ownership ratio and ongoing communication with investors.

In the equipment sales service, many projects have long lead times from order receipt to revenue recognition, and advances received (contract liabilities) are sometimes collected to hedge credit and cancellation risk. If advances received become substantial, the divergence between operating profit and cash flow may widen, and partial refunds arising from contract cancellations could affect cash flow and operating results. For large projects, the Company seeks to avoid sudden cancellations by setting penalty clauses for cancellation and maintaining close communication with customers.

Sales of semiconductor manufacturing equipment involve larger order values than component sales but carry lower profit margins, and the amount and profit margin vary from project to project. The Group's overall profit margin may fluctuate depending on the mix of projects secured. The Company works to avoid taking orders for projects with extremely low profit margins and to suppress low-margin projects through internal controls that include approval rules in the order acceptance process.

In the fiscal year under review, the top customer (New Eastech (Shanghai) Co., Ltd.) accounted for 62.4% of net sales, meaning that the Company's performance is heavily influenced by this customer's investment trends. As restructuring and consolidation progress within the semiconductor industry, if the major customer restrains capital expenditure or changes its business relationship with the Company, this could have a material impact on the Group's operating results. As a countermeasure, the Company continues close dialogue with major customers to track their trends and continues to develop new customers.

The Company imports components from Taiwan, South Korea, the U.S. and other countries and sells them to domestic semiconductor plants, and is therefore directly affected by economic fluctuations, technological innovation, and geopolitical risks (such as a Taiwan contingency, U.S.-China trade friction, and the Russia-Ukraine situation). Fluctuations in semiconductor demand could spill over into customers' capital expenditure plans and affect the Company's sales activities. The Company addresses this through comprehensive management by the Risk Compliance Committee and continuous research and analysis of market trends and the competitive landscape.

Since the Company imports components mainly denominated in U.S. dollars from Taiwan, South Korea, the U.S. and other countries, procurement costs rise when the yen depreciates. If passing these costs on to selling prices is difficult due to timing mismatches in settlement, profit margins may deteriorate, and even where pass-through is achieved, there is a risk that customers may curtail or postpone purchases. The Company works to hedge exchange rate risk through a basic policy of yen-denominated transactions and the use of advance payments at the time of contract, but if it is unable to cope with sharp fluctuations, operating results may be affected.

The Group does not manufacture products but sells products procured from suppliers; in particular, the equipment sales service relies heavily on procuring used equipment and parts from specific major semiconductor manufacturers. If a supply disruption occurs due to a disaster, accident, deteriorating relationship, or bankruptcy affecting a supplier, sales activities could stagnate and affect operating results. The Company works to reduce dependence on specific suppliers by building relationships with over 200 suppliers worldwide and continuously gathering inventory information.

The Company operates a business subject to various laws and regulations, including the Foreign Exchange and Foreign Trade Act, the Export Trade Control Order, and the Act on Specified Commercial Transactions; if there are legal amendments, new regulations, or unexpected interpretations and applications, it may become difficult to continue business operations or transactions with customers. In particular, tightened export controls related to semiconductors could directly affect the Company's procurement and sales activities. The Company has established a Risk Compliance Committee to ensure legal compliance, gather information on regulatory revision trends, and quickly determine company-wide response policies.

In the course of handling customers' confidential information, information leakage may occur due to human error or unauthorized access. If information leakage occurs, it could damage customer trust and give rise to legal liability, posing a risk of a material impact on business operations. The Company addresses this through the establishment of its Personal Information Handling Regulations and Information Security Regulations, strict management of access restrictions, regular vulnerability assessments, and continuous verification of its systems by the Risk Compliance Committee.