Sharing Innovations Inc.

Due to the declining working population from the aging society with fewer children and the trend away from science and engineering fields, it is expected to become increasingly difficult in the medium to long term to hire engineers with specialized technical expertise. Failure to meet hiring plans or a significant decrease in engineers due to turnover would directly affect business performance. As countermeasures, the Company conducts employee surveys to visualize employee conditions and is enhancing internal training programs.

In handling personal information of app users and confidential information of client companies, if a leak or unauthorized use occurs, it could result in claims for damages and damage to the Company's corporate image, potentially having a material impact on business activities, financial position, and business performance. The Company has obtained ISO/IEC 27001:2022 certification and is working to strengthen its information management system through a risk-based approach.

If a system failure occurs due to human error, communication failure, computer virus, natural disaster, or other causes, it could disrupt the provision of services via the internet, potentially affecting business performance and financial position. In addition to regular backups and operational monitoring, the Company has established BCP regulations and put in place a business continuity framework.

If the Company is unable to secure, retain, and develop excellent talent as planned, or if such talent leaves the Company, this could become a constraint on competitiveness and business expansion, potentially affecting business performance and financial position. In addition to active recruitment activities, the Company is enhancing internal systems and training programs and implementing measures to prevent turnover using employee surveys.

If the Company is slow to respond to the rapid technological innovation in the internet business, its competitiveness could decline. In addition, substantial expenditures for developing new technologies and services could affect financial position and business performance; the likelihood of occurrence has been raised from "low" to "medium" compared to the previous year. The Company continues to develop and secure excellent talent while advancing its response to new technologies.

In contracted development work, unexpected additional costs, or damages arising from delivery delays or system defects, could deteriorate project profitability and damage the Company's social credibility. The likelihood of occurrence has improved from "high" to "medium" compared to the previous year, and the Company is addressing this through appropriate order-taking rules, thorough project management, and sufficient prior coordination with clients.

Because the majority of the Cloud Integration services are specialized in Salesforce, changes in salesforce.com's business strategy, market contraction, or deterioration in the relationship with Salesforce Japan would directly affect the Group's financial position and operating results. The Company is working to maintain this relationship by promoting the acquisition of Data Cloud and AI-related certifications and strengthening order-taking activities based on leading use cases.

Orchestra Holdings, Inc., the parent company, holds more than half of the total number of issued shares and thus has decision-making authority and veto power over ordinary and special resolutions at general shareholders' meetings, creating a risk of conflicts of interest with general shareholders. There are also concerns about conflicts of interest in outsourcing transactions with the parent company group. The Company addresses this through the appointment of two independent outside directors and two independent outside audit & supervisory board members, and through a board of directors approval process based on the "Related Party Transaction Management Regulations."

In the event of a violation of the Worker Dispatching Act, there is a risk of business suspension or revocation of licenses, and in the event of a violation of the Act against Delay in Payment, etc. to Subcontractors (protection of small and medium-sized subcontracted business operators), the Company could be subject to recommendations or fines by the Japan Fair Trade Commission. Amendments to laws or changes in their interpretation could also affect business performance and financial position. The Corporate Division has established compliance regulations and set up a whistleblower system to address this risk.

Misleading representations of superiority in fortune-telling services would constitute a violation of the Consumer Contract Act and the Act against Unjustifiable Premiums and Misleading Representations, creating risks of refund obligations, surcharges, and corrective orders. Violations of the Act on the Protection of Personal Information could result in criminal penalties including imprisonment, civil damages claims, and loss of credibility. The Company conducts regular compliance checks through internal audits and reviews of its terms of service.