Techno Mathematical Co.,Ltd.

The electronic device market, including mobile devices and digital cameras, has a short life cycle and rapid technological innovation. If market changes exceed the Company's expectations, net sales and profit may be affected. The Company seeks to diversify risk by expanding into multiple markets, including set-top boxes and in-vehicle information systems, but the risk of dependence on specific markets has not been completely eliminated.

The Company's core technology, DMNA, applies mathematical algorithms, and since publication of the specification through patent filing would carry the risk of other companies understanding and implementing its content, the Company does not file patents except for peripheral patents. If other companies obtain related patents, the Company's business performance may be affected. The Company's policy is to counter this through academic presentations and by maintaining records to substantiate prior use rights.

Advances in image and audio/acoustic processing technology are significant, and if the business environment changes rapidly due to the development and spread of new technologies not anticipated by the Company, prompt response may be difficult. If competitors develop technology surpassing the Company's, the Company's technology may become obsolete, potentially requiring substantial research and development expenses to respond.

Since the Company's royalty income is linked to the shipment volume of customers' electronic devices and semiconductor products, net sales and profit are directly affected if customers delay new product launches, fail to meet sales forecasts, or change sales strategies. Initial income may also be subject to timing shifts between periods depending on the timing of contracts, delivery, and inspection, which could have a significant impact on results for a particular accounting period.

Masafumi Tanaka, Representative Director and President, is the developer of the Company's proprietary algorithms and plays a central role in management policy, strategic decision-making, and technology development. If, for any reason, he becomes unable to perform his duties, this could have a material impact on the Company's business performance and business development. Although the Company is promoting the training of engineers and delegation of authority, dependence on him remains high.

The Company is a small organization, and if a certain number of officers and employees leave the Company, business operations may be disrupted. The Company's small size may also be a concern for customers, and this cannot be denied. Although the Company is developing its personnel and compensation systems, securing and developing excellent human resources may constrain business expansion.

Core technologies, including DMNA, are central to the Company's business expansion. If such technology leaks outside the Company due to personnel turnover or information leakage, this could seriously affect business operations. The Company has implemented measures such as confidentiality agreements, ID card access control, and computer security, but these do not guarantee complete prevention.

Due to the budget execution cycles of major customers, which are weighted toward the second half in line with their fiscal year-end in March, and product development cycles centered on the summer and year-end sales seasons, the Company's sales plan is weighted toward the second half. Although the Company is working to level this out through strengthened sales activities toward overseas companies and expansion of its product lineup, this trend is expected to continue for the time being, creating a risk that first-half performance may be weak.

The Company has not paid any dividends from its first fiscal year of establishment through the current fiscal year, and since retained earnings, the source of dividend funds, are negative due to accumulated losses, the Company has no distributable profit. Although the Company's basic policy is to eliminate accumulated losses, the timing of resolution is uncertain, which is a risk factor for investors expecting dividends.

Because the market capitalization of tradable shares did not satisfy the listing maintenance criteria (¥1.0 billion) of the Standard Market of the Tokyo Stock Exchange, the Company's shares will be delisted effective October 1, 2026, and were designated as a securities to be delisted from June 3, 2026 through September 30, 2026. The Company resolved at its Board of Directors meeting on June 12, 2026 to apply for listing on the main market of the Fukuoka Stock Exchange, aiming to continue providing shareholders with opportunities to trade its shares; however, risks such as reduced liquidity associated with the market change remain.