TECMIRA HOLDINGS INC.

In the information and communications market, entry barriers are low and technological innovation is rapid, raising concerns about further intensification of competition due to new entrants and the leveling of technological capabilities among competitors. Combined with the progress of globalization, competition with overseas vendors is also intensifying, which may make it difficult for the Group to maintain its competitiveness and advantages. Although the Group has established a framework for developing and acquiring new technologies, unexpected technological advances or the emergence of new platforms beyond expectations could impact business performance.

Amid drastic technological innovation, including generative AI as represented by ChatGPT and others, responding to new technologies, new services, and new businesses has become an urgent priority. If changes in the market environment, intensified competition, development delays, or the circumstances of collaboration partners lead to changes or discontinuation of business plans, this could result in significant expense recognition or impairment of investment amounts, thereby affecting business performance and financial condition. The Group is actively pursuing entry into new businesses, but uncertainty remains high.

With the increase in large-scale projects such as long-term contract software development, large-scale contract hardware manufacturing, and large-scale game and application development, advanced project management is required. If projects do not proceed as planned, there is a risk of increased costs, unprofitability due to project interruption, delivery delays, and defect compensation liabilities. In consumer-facing businesses, changes in market competitive conditions and user preferences during the development period may also lead to excess inventory and obsolescence of software assets, which could result in deteriorating business performance.

The risk of information leakage due to computer viruses or unauthorized external access and hacking cannot be completely eliminated. Although the Group has implemented measures such as obtaining ISMS certification (ISO/IEC27001), Privacy Mark certification, and enrolling in insurance for information-handling businesses, if personal information leakage occurs, this may impact business performance through damage to brand and reputation, loss of customers, and expenses exceeding insurance coverage.

Securing and developing personnel with specialized skills is a critical issue in business operations, and if the Group is unable to secure the necessary personnel due to changes in the market or environment, or if personnel attrition occurs, this may impact business performance. The Group is implementing measures to enhance motivation and incentives, and has strengthened its personnel acquisition framework by making Retool Inc., which operates HRTech and recruitment businesses, a subsidiary.

For the purpose of rapid business expansion, the Group may make strategic investments or conduct M&A involving business partners. If the management condition of such companies deteriorates or the value of their shares declines, this may impact the Group's business results and financial condition. While the Group aims to understand the management conditions of its partners and maintain close partnership relationships, risks arising from changes in the external environment remain.

In the IoT & Devices Business, many products and components are procured from external suppliers. If procurement is disrupted due to deterioration in the suppliers' management or production conditions, this may make sales difficult and impact business performance. In addition, if a sharp rise in component prices due to supply-demand tightness or market fluctuations becomes prolonged, this poses a risk of reduced profits. Although the Group implements risk hedging measures such as strengthening process management and securing components under a multinational division of labor system for production and development, these risks cannot be completely eliminated.

In conducting overseas business, risks exist related to the laws and tax systems of the countries concerned, economic and foreign exchange fluctuations, and political, military, religious, and ethnic issues. If problems arise on a scale or at a speed exceeding expectations, this may impact business performance and financial condition. The Group strives to minimize risk related to foreign currency-denominated transactions through means such as passing on exchange rate fluctuations to selling prices and using forward exchange contracts; however, in the event of significant exchange rate fluctuations, an impact on business results and financial condition cannot be avoided.

Even if new product development is successful, there is no guarantee that patents will be protected as intellectual property rights, and protection of proprietary technical know-how may be limited. In addition, there is a risk that technologies the Group uses in the future may be deemed to infringe on the intellectual property rights of other companies, as well as a risk that licensing agreements for copyrights and software the Group is licensed to use may not be renewed. Although the Group has taken measures such as establishing a legal department and coordinating with retained legal counsel, if these events occur, they may impact business performance.

The Group may grant stock acquisition rights as incentives to officers and employees, and may issue new shares or stock acquisition rights to third parties for the purpose of raising funds. If these are carried out, the value of shares held by existing shareholders and their voting rights ratio may be diluted, which may impact the share price.