AXIS CO.,LTD.

If the Company fails to adequately respond to the rapid evolution of IT technology, or if client companies reduce IT investment due to an economic downturn, orders received may decline, potentially affecting business results and financial condition. The Company has expanded its business activities while continuing to respond to daily-evolving IT technology, but there is a risk that it may not be able to keep pace with the speed of technological innovation.

The Company is subject to laws and regulations including the Worker Dispatching Act (License No. Hai 13-040363, valid until September 30, 2030), and if it falls under disqualification grounds or violates relevant laws, it may be ordered to suspend business or have its license revoked. There is also a risk that business activities could be affected by the enactment, amendment, or reinterpretation of laws and regulations. The Company strives for legal compliance, but changes in the regulatory environment could directly impact business continuity.

If competitors improve their service capabilities or price competition intensifies, resulting in a relative decline in the Company's competitiveness, profitability may decline. The Company is working to strengthen its planning, proposal, and human resource capabilities, enhance competitiveness through nearshore development and utilization of business partners, and provide high-value-added services, but the competitive environment in the IT industry remains challenging.

While the Company has strengths in system development and large-scale project management for the financial sector, it has a high degree of dependence on this sector. If conditions in the financial industry deteriorate or investment is curtailed, this could directly affect the Company's business results and financial condition. The Company is working to reduce this dependence by expanding transactions in the public sector and other areas, but diversification remains a work in progress.

The proportion of net sales attributable to the top three major system integrator groups (NTT DATA Corporation, Fujitsu Limited, BIPROGY Inc. and their group companies) reached 38.7% of net sales for the fiscal year under review, indicating a high degree of dependence on specific customers. If these customers change their business policies, this could have a material impact on the Company's business results and financial condition. The Company is working to reduce this dependence by expanding transactions with other customers, but concentration risk currently remains.

The Company manages project profitability through cost forecasting based on work processes and estimates that incorporate appropriate profit margins, but if unexpected events lead to additional costs, or if delivery delays or system defects caused by negligence result in liability for damages, profitability could deteriorate significantly. In addition to deteriorating profitability, there is also a risk of loss of social credibility, raising concerns about the impact on business results and financial condition.

The Company's business activities are heavily dependent on human resources, and securing, retaining, and developing excellent personnel forms the foundation of business continuity. If personnel acquisition and development do not proceed as planned, or if excellent personnel leave the Company, this could affect business results and financial condition through a decline in service quality and reduced order-taking capacity. Given the ongoing tight supply-demand balance in the IT talent market, the importance of this risk is high.

The Company handles a large amount of confidential information and personal data in the course of its business, and has obtained ISO/IEC 27001 certification (Tokyo Head Office: IS 557224, valid until March 9, 2028; Fukuoka Branch: IS 649173, valid until November 28, 2028) and the Privacy Mark (No. 17001300(07), valid until September 17, 2026) to ensure thorough information management. However, if confidential information or personal data is leaked externally for any reason, this could result in a material impact on business results and financial condition due to loss of social credibility and liability for damages.

Hirofumi Ogura, Representative Director, Chairman and CEO, held 44.64% of the total number of issued shares (excluding treasury shares) as of the end of the fiscal year under review, resulting in a concentration of voting rights in a specific individual. While Mr. Ogura maintains a policy of acting as a stable shareholder with consideration for the interests of minority shareholders, if his shareholding were to decrease for any reason, this could affect the market price of shares and the exercise of voting rights.

The Company positions M&A as one of the options for business expansion, aiming to expand its business scale and diversify revenue sources, but there is a possibility that the initially anticipated synergies or business expansion effects may not be achieved. If business performance deteriorates after a company becomes a subsidiary, or if goodwill amortization or impairment occurs, this could affect business results and financial condition. Careful assessment of investment effectiveness is required when carrying out M&A.