SRE Holdings Corporation

In the AI and IT industry, companies providing solutions utilizing advanced technology and AI are increasing, intensifying competition. The Group is working to expand its user base through customer interviews and the development of new services and existing service enhancements, but intensifying competition may affect the Group's financial position and operating results.

In the AI Cloud & Consulting business, the pace of technological innovation is rapid, and there is a high risk that existing technologies and knowledge will become obsolete. In addition, there is a risk that ethical issues associated with AI utilization—such as privacy infringement, personal information leakage, and bias amplification—could become apparent. While the Group addresses these issues through alliances with cutting-edge companies and the establishment of AI ethics regulations, there is a possibility that competitiveness could be lost due to the emergence of alternative technologies or insufficient ethical verification.

The real estate market in which the Group operates is supported by tax incentives such as mortgage tax deductions and low-interest-rate policies. However, if market interest rates rise due to changes in tax systems or monetary policy, the real estate market could deteriorate, potentially affecting the Group's financial position and operating results. Since the Group provides services across the entire real estate transaction process, the impact of a market downturn would be extensive.

In the Smart Property business, if the real estate market deteriorates, there is a risk that inventory properties could become stagnant, forcing below-cost sales or write-downs. The Group seeks to mitigate this risk by selecting properties with multiple exit options in mind, but if a downside occurs that cannot be absorbed, it could have a material effect on the Group's financial position and operating results.

The Group holds various licenses and registrations required under laws such as the Building Lots and Buildings Transaction Business Act and the Financial Instruments and Exchange Act (real estate brokerage license, financial instruments business registration, bank agency license, etc.). There is a risk that an inadvertent violation of laws could result in the revocation of licenses, rejection of renewal, or suspension of operations. Although there has been no history of administrative penalties or guidance to date, the enactment or revision of related laws could also result in additional compliance costs.

In the course of conducting business, the Group obtains customers' personal information and confidential information, and has established management systems such as locked cabinets and access-restricted folders. However, if an unforeseen information leak occurs, it could damage the Group's reputation and result in damages claims, potentially affecting the Group's financial position and operating results.

The Group actively considers and executes M&A and business alliances, and strives to avoid risk through detailed due diligence. However, if unrecognized issues come to light after an M&A transaction, or if business development does not proceed as planned, it may become necessary to record impairment on the target company's share value or business assets, potentially affecting the Group's financial position and operating results.

Currently, major real estate portal sites specialize in the advertising business and do not provide services covering the entire real estate transaction process. However, if these companies begin offering services similar to the Group's cloud solutions in the future, the Group's competitive advantage could be undermined, potentially affecting its financial position and operating results.

In the AI Cloud & Consulting business, securing specialized personnel with advanced technology and AI expertise is a top priority, and the Group continuously engages in recruitment and training. However, if the Group is unable to secure sufficient personnel, or if highly specialized officers and employees leave for other companies, the Group's operational capability could decline, potentially affecting its financial position and operating results.

The Group grants stock acquisition rights to officers and employees in order to increase their motivation to improve performance. As of the end of the current consolidated fiscal year, the number of potential shares outstanding was 989,600 shares, equivalent to 6.08% of the total issued shares of 16,251,235 shares. If the exercise conditions are met and these rights are exercised, it could affect share price formation through dilution of share value and impact on supply-demand balance in share trading.