OPTiM CORPORATION

In the Information Systems AX Service, as the market continues to mature, competitors are continuing to expand functionality and engage in price competition, and alternative solutions such as cloud service providers and integrated IT management services are also expanding. If competitors offer similar integrated services, or if customer needs change, it may become difficult to achieve expected expansion of usage and maintain price levels as planned. In the AX Services for various industries as well, there is a risk that intensifying competition could delay monetization and result in failure to achieve planned recovery of upfront investments.

In the AX Service Platform (OPTiM Biz), sales to KDDI Corporation accounted for 28.5% of revenue in the current consolidated fiscal year, indicating a high degree of dependence on a specific business partner. If an OEM partner or sales partner switches to a competitor or discontinues handling the Company's products due to a change in sales strategy, this would have a direct impact on revenue. The Company strives to confirm needs and rapidly strengthen support systems to maintain relationships, but it is difficult to eliminate this risk completely.

The Group actively pursues M&A, investments in new businesses, and R&D investment, but these activities entail uncertainty, and if the expected results are not achieved, this could affect business performance. If post-acquisition business integration does not proceed as planned, if the performance of invested businesses falls short of expectations, or if the direction of R&D diverges from user needs and business strategy, it may become difficult to recover upfront investments. There is also a risk that R&D expenses recorded in advance in connection with new business and new service development could put pressure on business performance.

The Group capitalizes software (including software in progress) when future revenue generation or cost reduction is considered certain, but if changes in plans or reviews of usage status impair the expected revenue generation or cost reduction effects, amortization or impairment of the assets may become necessary. Given that the Group undertakes large-scale software development, the impact on business performance in the event of impairment could be significant. Rapid changes in technology trends and market needs are factors that heighten this risk.

The Group's service infrastructure depends on internet communication networks, and services may be disrupted by server downtime caused by natural disasters, accidents, or sudden surges in access, as well as by hardware or software defects. In addition, if computer viruses infiltrate the system, unauthorized external intrusions occur, or important data is erased or improperly obtained due to errors by officers or employees, this could lead to direct and indirect damages as well as a loss of trust in the services. These risks are a critical issue directly linked to the business continuity of the Group, whose core business is SaaS-type services.

The Group operates drones and various agricultural machinery as business equipment, and unexpected behavior due to crashes, equipment malfunctions, operational errors, or external environmental factors could result in personal injury or damage to crops and surrounding property. In the event of an accident, the Group could incur significant compensation payments, equipment repair and replacement costs, suspension of service provision, and loss of social trust, all of which would affect business performance. The Group treats ensuring safety as an important priority, but it is difficult to eliminate this risk completely.

For the Smart Agriculture Service, market conditions vary significantly depending on regional characteristics, crop characteristics, and the business customs of existing operators in the agricultural and agricultural product distribution markets, and there is a risk that business development may not proceed as planned. Since the purchase price and production volume of agricultural products are affected by external factors such as weather, profitability fluctuates, and there is a risk that recovery of initial investment in agricultural machinery may not proceed as planned if the utilization rate of such machinery falls below expectations. If these factors act in combination, this could affect the overall performance of the AgriTech Business.

The Group's business is subject to a wide range of laws and regulations, including the Act on Specified Commercial Transactions, the Act on the Protection of Personal Information, the Civil Aeronautics Act, the Medical Practitioners' Act, the Act on Pharmaceuticals and Medical Devices, the Agricultural Chemicals Regulation Act, and the Telecommunications Business Act. Violations of these laws or the introduction of new regulations through legal amendments could constrain business operations. As the Group expands overseas, it must respond to the laws, regulations, and social conditions of each country, and since products are provided in a license format, there is also a possibility that users could become subject to local laws and regulations when moving overseas. The Group strives to develop and strengthen its compliance system, but there is a risk that responding to changes in the regulatory environment could affect business performance.

Software development and system construction require personnel with advanced technical skills, and while the Group conducts recruitment and development activities through internships and study sessions, if it is unable to secure and develop talented personnel as planned, this could hinder business development. The Group supplements necessary staffing through the use of temporary staff, but business performance could also be affected if it is unable to secure excellent temporary staff or if temporary staffing fees fluctuate. Amid rapid technological innovation in areas such as AI and IoT, the risk of skill obsolescence also complicates the challenge of securing talent.

In software development and system construction, the Group often delivers and completes inspection of products in line with customer companies' annual budget cycles, resulting in a tendency for inspection timing to be concentrated in the second half of the fiscal year. If the timing of inspection completion is delayed, causing revenue recognition to be postponed, there is a risk that quarterly and full-year business performance could fall short of plans. This seasonality makes it difficult for investors to forecast performance and is also a structural issue that affects cash flow management and cost control in the first half of the fiscal year.