Advanced Media, Inc.

The Company is promoting a BSR expansion phase targeting revenue of ¥10.0 billion and operating profit of ¥1.5 billion in FY2027 (ending March 2027); however, progress may not proceed as planned due to delays in business activities or changes in the speech recognition market and external environment. Because shipment and acceptance of flow business are concentrated in the second quarter (September) and fourth quarter (March), quarterly results are structurally prone to skewed distribution. If a discrepancy arises between budget and actual results, the Company's policy is to promptly disclose revisions to earnings forecasts.

The Company is advancing speech recognition market development across multiple fields, including call centers, medical and nursing care, minutes creation, finance and insurance, and manufacturing and logistics; however, the transition from new business introduction and existing business expansion to a growth phase may not proceed as expected and could become prolonged. As this is a market-creating business, future forecasting is difficult, and it is also susceptible to sudden changes in the external environment. Delays in market expansion could directly lead to a shortfall in the sales plan and may have a material impact on business performance.

While basic development of AI speech recognition has been completed, continuous technological development is required, including enhancement of dialogue functions, recognition of colloquial text, broadening of dictionary/language models, and strengthening of noise resistance, and the funds and time required for development may exceed initial expectations. If the sales plan is not achieved, there is a risk that recovery of research and development expenses incurred in advance may become difficult. As this risk relates to the core of the Group's competitiveness, its impact on business performance is significant.

The emergence and spread of new interface technologies that could replace AI speech recognition may cause the Company to lose its technological advantage. If domestic and overseas competitors with strong technological and development capabilities enter the market, or if competitors gain an advantage through alliance and partner strategies, there is a risk that the Company may be unable to maintain a high market share in the speech recognition market. If intensifying competition causes the Company's differentiating factors (such as high recognition accuracy and noise resistance) to become obsolete, this could have a material impact on business performance.

Certain operations depend on the individual skills, experience, and know-how of employees, and if key personnel leave the Company or take extended leave or absence, business activities may be disrupted. There is also no guarantee that the Company will be able to secure the excellent personnel needed for business expansion at the required timing, and if hiring does not proceed as planned, this may affect management. As a countermeasure, the Company positions the organizational sharing of skills and know-how and the enhancement of a training environment as important management priorities.

Because the Company's speech recognition technology and solutions utilize a broad range of technologies, the possibility that a third party may claim infringement of its intellectual property rights cannot be entirely ruled out. In addition, in newly entered fields, the Company may be unable to obtain the necessary intellectual property rights or licenses from third parties. If such risks materialize, they could result in restrictions on business development and legal dispute costs, potentially affecting business performance.

Although the Company has obtained Privacy Mark certification and ISO/IEC 27001:2022 certification and has implemented company-wide access control and PC operation log management, the risk of external leakage of important information, including personal data, due to intentional acts or negligence by related parties or outsourced contractors cannot be entirely eliminated. If an information leak occurs, it could adversely affect services, damage brand image, and lead to involvement in legal disputes.

As reliance on the stable operation of information systems increases, an information security incident caused by a cyberattack or computer virus infection could result in serious system malfunction or data tampering. This could damage social trust and brand value, posing a risk of adverse effects on business performance and financial condition.

The Company's policy is to actively utilize investments and M&A to accelerate the creation of new businesses and the building of a stock-type business structure; however, even after conducting due diligence, contingent or unrecognized liabilities may be discovered following an acquisition. There is also a risk that changes in the business environment or competitive landscape could disrupt execution of the original business plan, making investment recovery difficult. When targeting overseas companies, additional country risk and foreign exchange risk may also arise.

If restrictions or requests are imposed on business activities due to the outbreak of an infectious disease, including COVID-19, planned business activities may be delayed. If such effects become prolonged or an unforeseen event occurs due to a natural disaster, this could affect business performance and financial condition.