SOFTCREATE HOLDINGS CORP.

The EC Solutions Business and the IT Solutions Business belong to the software-related IT industry and are affected by trends in demand for IT-related services. The software-related IT market is susceptible to the economic environment, and if the economic situation deteriorates going forward, this could adversely affect the business performance of the Group. In particular, hardware such as personal computers and servers, as well as packaged software, are heavily influenced by corporate earnings and the resulting willingness to invest in IT.

Growth of the Group's flagship product, the EC site construction package "ecbeing," depends on trends in the EC market. Although market expansion continues in both BtoB and BtoC segments, if growth in the EC market stalls or contracts, this could adversely affect business performance. At present, the Company recognizes no changes in social structure or industry environment that would impede growth, but future changes cannot be ruled out.

Because "ecbeing" is a packaged software product, it is constantly exposed to the risk of obsolescence, and as the EC market continues to grow, major software manufacturers and others may newly enter the EC site construction package field. At present, the Company does not recognize sales being threatened by competing products, but if new entrants emerge, this could adversely affect the Group's business performance. The Company is working to maintain competitiveness through product feature enhancements.

The Group has positioned the EC Solutions Business as a growth business and is working to build a revenue structure accordingly. However, if the software-related IT market and the EC market do not grow as expected, growth in the EC Solutions Business may be impeded, potentially leading to a decline in profit margins. If the transformation of the revenue structure does not proceed as planned, there is a risk of adverse effects on the overall business performance of the Group.

In system development operations, customer acceptance inspections tend to be concentrated in September and March, and if acceptance is delayed for any reason, the timing of revenue recognition may shift into the following fiscal period. This seasonal concentration structure could undermine the stability of business performance.

In system development operations, man-hours and costs are estimated and managed on a per-project basis, but delays in work progress or unexpected cost burdens may cause profitability to deteriorate or projects to become unprofitable. In addition, if unforeseen defects occur in a system after customer acceptance, there is a risk of claims for damages and a risk of reduced credibility.

The Company recognizes that securing and developing human resources is a key challenge for strengthening the sales and development structure for "ecbeing," "X-point Cloud," "AgileWorks," "L2Blocker," and other products. Although the Company continuously hires new graduates and mid-career employees, if it is unable to secure the expected level of human resources or if personnel leave the Company, this could adversely affect business development.

The Company protects important operational management information, including personal information of customers, officers, and employees, through ID/password management and measures to prevent external access, and has obtained and maintains ISO/IEC 27001 certification. However, it is difficult to completely prevent information leakage. If an information leak occurs, the Company may become subject to claims for damages, and reputational damage related to its information management system could adversely affect business activities.

The hosting service for "ecbeing" and the cloud business of "SC Cloud" depend on the internet. While the Company has established management systems such as real-time backup arrangements and network security, it is difficult to completely prevent or avoid failures in core systems and networks. If such failures occur, they could adversely affect business development.

The Group may continue to pursue business alliances involving capital participation in leading companies engaged in the development and sale of software products, or acquisitions of companies with promising technology, know-how, or sales channels. While the Company intends to exercise careful judgment, there is no guarantee that such initiatives will be realized as planned, and there is a possibility that costs incurred may not be recovered. In addition, with respect to listed and unlisted securities held by the Company, it may become necessary to record valuation losses due to deteriorating market conditions or poor performance of investee companies.