Hybrid Technologies Co., Ltd.

The proportion of revenue from the top five customers reached 42.4% in FY2025 (ended September 2025), with dependence on the parent company, Airtrip Group, rising to 28.4% in the same period (up from 24.7% in the prior period). There is a risk that changes in Airtrip Group's business strategy or a deterioration in its performance could directly impact the Group's business results. While the Company is working to reduce this dependence by developing new customers, the extent of the impact may expand depending on the progress of these efforts.

Soltec Investments Pte. Ltd. (34.5% voting rights) and Airtrip (30.3% voting rights) together hold substantial control, and as of October 1, 2025, Airtrip has become the parent company based on the substantial control criteria. If significant changes occur in the future to Airtrip Group's business strategy or the Company's positioning, this could affect the Company's financial condition and business performance. At present, no specific events such as business competition have occurred.

In the business model centered on Vietnam offshore development, securing and developing human resources in both Japan and Vietnam is positioned as the most critical management issue. The Company conducts referral hiring within the Vietnamese community in Japan and engages in industry-academia collaboration with multiple universities; however, if recruitment plans are not met or personnel attrition occurs, this could lead to a decline in development capability and cost competitiveness, potentially resulting in lost orders or deteriorating profit margins. The recruitment environment is becoming increasingly severe amid intensifying competition.

In some cases, development work is performed directly on customer systems, resulting in access to various types of confidential information. The Vietnamese subsidiary has obtained ISMS certification and has implemented information security software, along with internal regulations and employee training; however, if a leak of confidential information occurs due to unauthorized access, operational error, computer viruses, or similar causes, it could lead to reputational damage or claims for damages, significantly affecting business operations and performance.

The IT environment is changing rapidly due to technological innovations including generative AI, and there is a risk that increased technology development costs or delays in responding to these changes could reduce competitiveness. In addition, the introduction of new laws and regulations restricting internet use could hinder the development of internet-related markets. If these factors occur concurrently, they could have a material impact on the Group's business operations and performance.

The Vietnamese subsidiary plays a central role in development operations, and there is a risk that rising labor costs, legal reforms, or revisions to tax incentives in the country could erode its advantages as an offshore destination. While the Company's policy is to pursue global risk management not limited to Vietnam as an offshore location over the long term, dependence on Vietnam is expected to continue for a certain period, meaning that deterioration in the country's business environment would directly affect performance.

In preparing consolidated financial statements for overseas operations centered on Vietnam, local currencies must be converted into yen, and fluctuations in exchange rates may affect business performance and financial condition. While the Company's policy is to use hedging measures such as forward exchange contracts to address extreme foreign exchange risk, complete hedging may be difficult in the event of sudden exchange rate fluctuations.

Since making Hybrid Tech Agent, whose main business is staffing, a subsidiary in April 2023, the Company has needed to comply with related laws and regulations such as the Worker Dispatching Act, the Act against Delay in Payment of Subcontract Proceeds, and the Act on Improving Transparency and Fairness in Trading Involving Specified Freelancers. While business flows and manuals are being developed with advice from legal counsel, if new regulations arise from future legislative developments and the response is delayed, this could have a material impact on business operations and performance.

The Company strives to comply with transfer pricing taxation rules in intra-group cross-border transactions between Japan and Vietnam; however, if tax authorities determine that transaction prices are inappropriate, additional taxation or double taxation could occur, potentially having a material impact on performance and financial condition. This is an area requiring continuous monitoring as an international tax risk.

In Flow Services (Contract-Based Services), estimation accuracy directly affects performance, so the Company thoroughly manages profit and progress on a project-by-project basis; however, unforeseen circumstances leading to increased man-hours or delivery delays could result in unprofitable projects. In addition, while the Company bears no liability for non-conformance with contracts under Stock Services (Quasi-Delegation / Staffing Contracts), which account for the majority of revenue, if service quality falls below customer standards, this could damage the Company's reputation and have a material impact on performance.