Image Information Inc.

The Company has continued to record operating losses, ordinary losses, and net losses attributable to owners of the parent in the fiscal year under review, and material events continue to exist that raise substantial doubt about the going concern assumption. As a countermeasure, in January 2026 the Company implemented a capital increase of approximately ¥600 million through a capital and business alliance with Cybridge LLC and a third-party allotment of shares. In addition, the Company decided to exclude three subsidiaries—Engineer Farm Inc., Vanyans Inc., and TENJIN SYSTEM CONSULTING Inc.—from the scope of consolidation, and plans to achieve profitability in operating income through cost reductions and margin improvement from business structural reform.

In the information services industry, the order-taking environment has deteriorated due to intensifying competition within the industry, as well as the entry of new competitors driven by the development of AI technology. In the credit industry, a major customer segment, the business environment has also changed significantly, including progressing oligopolization by major companies and entries from other industries. If changes in the market environment or intensification of price competition exceed expectations, this could impact business performance.

In the systems development field, sales are highly concentrated among top customers, and changes in the business policies of such customers would directly affect business performance. In addition, security-related software products consist largely of the security platform of Humming Heads Inc., and any changes to or termination of the sales agency agreement with the company, or deterioration in its financial condition, could impact business performance.

In system construction contract operations, it is difficult to accurately estimate the costs of variable factors, and there is a risk of low profitability or losses if actual costs exceed estimated costs. In addition, if delivery or acceptance is delayed beyond the original schedule, this may lead to a loss of credibility and increased expenses. Although the Company strives to mitigate such impacts through thorough project-by-project cost forecasting and man-hour management, these risks cannot be completely eliminated.

In some operations, there are opportunities to indirectly collect personal information from client companies, and if information leakage or misuse occurs, this could impact business performance through damage claims and loss of credibility. Although the Company implements protective measures such as firewalls and other security measures as well as privacy protection responses, risks of unauthorized external access and internal information leakage remain.

In BPO, system operation outsourcing, and internet service provision, if a failure in the processing system or an operational error occurs, it may become impossible to achieve management and operation at the level of accuracy and stability required by customers. Although regular system maintenance and reviews of operational procedures are conducted, the occurrence of a failure would impact business performance.

The Group's services depend on systems including communication networks, and it may become impossible to provide services due to communication disruptions caused by disasters or accidents, server outages, computer virus damage, software malfunctions, and similar issues. If reliability in the services declines due to a failure, this would impact business performance.

In the information services industry, securing and developing human resources is an important factor in improving business performance, and if the Group is unable to secure or develop necessary personnel, this could impact its future growth and business performance. Against the backdrop of intensifying competition within the industry, competition to acquire excellent talent has become even more severe.

The majority of the Group's functions are located in Tokyo, and there is concern that corporate activities could decline if employees or facilities are damaged by natural disasters or infectious diseases such as COVID-19. Although measures such as backing up part of the data to servers in Nagano Prefecture and promoting remote work have been implemented, if an event beyond expectations occurs and recovery takes a long period of time, this could impact business performance and financial condition.

The Group operates a worker dispatching business and is subject to legal regulations such as the "Worker Dispatching Act." Developments such as amendments to related laws and regulations or tightening of regulations could constrain business operations and impact business performance.