TENDA CO., Ltd.

The DX Solutions Business and Techwise Consulting Business depend on the IT investment trends of client companies, and if clients' willingness to invest in IT declines due to a deterioration in the economic environment or an economic slowdown, there is a risk of decreased orders or cancellation of maintenance and operation contracts. The Group conducts its business operations while closely monitoring market trends, but a deterioration in the macroeconomic environment may have a direct impact on business performance.

In the IT services industry, technological innovation is continuously advancing, and new services are frequently introduced. If, for any reason, the Group's response to technological innovation is delayed, or if unexpected new technologies or services become widespread, there is a risk that the Company's products may become obsolete or lose competitiveness. The Group constantly monitors market trends and takes measures to respond to technological innovation, but a delayed response could have a material impact on business performance.

The Group records intangible fixed assets, including goodwill, on its consolidated balance sheet, and goodwill exists as a result of past M&A activities, including the acquisition of shares in Intelligent Systems Corporation and Almondo Co., Ltd. If business plans deteriorate due to a sudden downturn in economic conditions, changes in the business environment or competitive landscape, changes in laws and regulations, or changes in business strategy, recognizing an impairment loss could have a material impact on the Group's business results and financial position. The Group strives to mitigate this risk by strengthening its profitability, improving service quality, and enhancing its sales structure and alliances.

In contract development operations, the required man-hours and costs are estimated for each project, but it is difficult to estimate all projects accurately, and if the actual amount exceeds the estimated amount due to increased man-hours or other factors, there is a risk of low profitability or losses. In addition, if delivery cannot be made by the date agreed with the client, liquidated damages may be incurred, and if delivery ultimately cannot be completed, liability for damages may arise, which could affect business performance.

In product development, it is difficult to completely eliminate defects due to compatibility issues with hardware environments and frameworks, and if a system defect caused by the Company's negligence causes damage to a client, there is a risk of liability for damages and loss of social credibility. The Group strives to improve quality by conducting thorough testing from the development stage and careful inspection at the shipping stage, but the risk cannot be completely eliminated.

Securing and developing excellent human resources is extremely important for continued business expansion, but due to intensifying competition for talent in the IT industry, the Group may not be able to secure sufficient necessary personnel. There is also a risk that the departure of core personnel could affect business performance, and the Group is addressing this by promoting active recruitment activities and expanding training and evaluation systems, among other measures.

The Group positions the management of confidential information and personal information obtained in the course of business as an important management issue, and has established and operates an internal information management system with the President and Representative Director serving as the Chief Information Security Officer. However, if an information leak occurs due to unauthorized access or other causes, business performance could be affected by claims for damages, apology payments, and loss of social credibility.

Some operations of the DX Solutions Business fall under worker dispatching business (License No.: Haken 13-301767) and fee-charging employment placement business (License No.: 13-Yu-304584), and compliance with related laws and regulations is required. If, as a dispatching business operator, the Company falls under grounds for disqualification or license revocation and receives a business suspension order or similar disposition from the supervisory authority, it could have a material impact on the Group's business performance. The Group strives to comply with relevant laws and regulations, and currently recognizes no facts that violate such laws and regulations.

Two lawsuits are pending between the Company's subsidiary Sanyu Technology Corporation and KPI Solutions Co., Ltd. regarding an EC development project: a claim for contract payment (main action) and a claim for confirmation of non-existence of obligation (counterclaim). The Company believes it has grounds for its claim to payment, but depending on the outcome of the litigation, future business performance could be affected, and it is currently difficult to predict the impact.

The Group operates the Techwise Consulting Business through its subsidiary in China, and may face risks of unforeseen changes in laws and regulations related to import/export controls, investment restrictions, repatriation of profits, and transfer pricing taxation due to political and economic factors. In addition, the Group may face difficulties in securing personnel and managing operations at overseas locations, and if these risks materialize, they could affect the Group's business performance.