Ubiquitous AI Corporation

The Group, which develops software products for electronic and electrical equipment development, operates in an environment where the pace of technological innovation is rapid and product functionality continues to advance. The emergence of unexpected new technologies or the development of superior technologies by competitors could render the Group's technologies obsolete. Responding to such changes may require substantial research and development expenses, which could affect business performance and business development.

Competition, particularly in the middleware product group, is intensifying due to the expansion of free software platforms such as Linux, Android, and FreeRTOS, as well as the trend of semiconductor manufacturers providing comprehensive packages of devices and software. The Group seeks to differentiate itself through quality assurance, technical support, and vulnerability response, but if it is unable to secure sufficient market share, business performance may be affected.

The majority of the Group's business revenue is related to the automotive industry, and a decline in automobile sales volume directly affects manufacturing royalty revenue centered on in-vehicle information terminals. In addition, if automotive-related companies curtail their development investments, this would also affect software development support tools, SDKs, and development outsourcing operations. The high degree of dependence on a specific industry is a risk factor for revenue stability.

The Group's primary source of revenue is manufacturing royalties based on the sales volume of customers' semiconductors and products, and there is a risk that revenue may decline due to delays in customers' new product launches, failure to meet sales projections, or changes in sales strategy. In addition, if the music database license agreement with Gracenote, Inc. of the United States is not renewed due to changes in the counterparty's management policy or other factors, this could affect business performance and financial condition.

The Group receives highly confidential information from DTLA (DTCP specification) and DCP (HDCP specification), which serves as fundamental information underlying content protection technology and a source of product competitiveness. Under agreements with each organization, if an information leak occurs due to the Group's responsibility, a penalty of up to USD 8 million may be claimed for each, resulting in a potential total financial risk of up to USD 16 million across the two agreements.

In the Software Distribution and Data Analytics domains, the Group imports and sells products based on distribution agreements with overseas software vendors. If a supplier is acquired by a third party or its distribution policy is revised, changes to commercial rights may occur, potentially affecting business performance. Although the Group strives to maintain good relationships, risks exist arising from external factors beyond the Group's control.

The Group holds copyrights to its self-developed software, but if a third party achieves equivalent functionality without infringing on such copyrights, or obtains a patent, the Group may become liable for damages. In addition, when undertaking development work using source code disclosed by another company, there is a risk of facing copyright infringement lawsuits concerning copyrighted works other than the resulting deliverables.

If a defect occurs in the Group's software, the Group endeavors contractually to limit the upper limit of damages to the contract consideration received; however, in addition to direct losses from the cancellation of sales, damage to reputation could affect business performance and business development. Quality control of software products is an important issue for business continuity.

The Group plans to expand its business globally going forward, but various risks exist, including changes in laws and regulations in each country, changes in social, political, and economic conditions, credit risk arising from differing business customs, differences in the treatment of intellectual property rights, and exchange rate fluctuations. If the outcomes of business expansion differ from initial forecasts due to these factors, business performance may be affected.

The Group invests in new businesses and products that leverage its proprietary technologies and know-how, but changes in market conditions or unforeseen circumstances may prevent it from recovering the initially planned investment. When launching new businesses or services, additional hiring and research and development expenses may temporarily arise, potentially affecting business performance.