SECURE,INC.

Increasing new entrants into the AI, IoT, and security fields raise concerns about declining market share and intensifying price competition. Although the Group claims to have established a competitive advantage through cutting-edge AI-based solutions, changes in the competitive environment could reduce sales and profits. As a countermeasure, the Group is working to continuously deploy cutting-edge technology.

The AI and IoT fields experience extremely rapid technological innovation, and there is a risk that delayed responses to new technologies or obsolescence of solutions could lead to a decline in competitiveness. The same impact could occur if newly adopted technologies fail to gain market acceptance. The Group is working on the development of new products and services by gathering the latest information from customers, partners, and external organizations.

Purchases under the sole distributorship agreement with IDIS Co., Ltd. of South Korea accounted for 40.3% of total purchases for the fiscal year ended December 2025, and any change in that company's business strategy or contract terms could have a material impact on the Group's business and results. There is also a risk of defective products or recalls involving that company's products. The Group strives to avoid excessive dependence by diversifying its suppliers.

The top five customers accounted for 54.8% of net sales in the fiscal year ended December 2025, and any change in the sales policies of these partner companies or deterioration in their business performance could affect the Group's business and results. Delays or discontinuation of customer development due to infectious diseases or natural disasters constitute similar risk factors. Although the Group strives to maintain good partner relationships, concentration risk remains high.

Since many of the products handled are imported from overseas and settlements are made in US dollars, a trend toward yen depreciation poses a risk of increased procurement costs. Sudden exchange rate fluctuations could affect operating results and financial condition. The Group implements risk hedging through unification of US dollar-denominated transactions and forward exchange contracts.

Because the Security Solutions Business requires advanced knowledge and technical skills, an inability to secure capable personnel could make it difficult to continue providing high-level technology and solutions. In addition to active recruitment activities, the Group is pursuing multifaceted human resource policies including advanced talent development, improved working environments, and enhanced employee engagement, but competition for specialized talent remains intense.

The Group handles clients' confidential business and personal information as well as internal important intellectual and insider information. If leakage or disclosure occurs due to external cyberattacks or internal misconduct, it could result in claims for damages or loss of social credibility, causing serious disruption to business continuity. The Group is working to establish personal information protection regulations, conduct internal training, and strengthen information management systems across the entire supply chain.

Camera-related devices are mainly procured from South Korea, and any deterioration in relations with technologically advanced countries due to US-China trade friction, Japan-Korea political and diplomatic issues, or developments in North Korea could reduce trading opportunities or constrain supply. The Group is working to expand the breadth of its solutions by developing relationships with advanced manufacturers outside of China, South Korea, and Taiwan.

Mr. Tatsunari Taniguchi, Representative Director and President, is the founder and a major shareholder, and plays an important role in determining management policy and business strategy. If he becomes unable to continue his duties, it could affect operating results and financial condition. The Group is working to reduce this dependence by strengthening information sharing among directors on the Board and reinforcing the management organization, but the degree of dependence remains high at present.

The Group has adopted stock acquisition rights and restricted stock compensation plans, and the total number of potential shares as of the end of the month preceding the filing date of this document reached 261,800 shares (equivalent to 4.64% of the 5,639,420 total issued shares). If these rights are exercised or new shares are issued, the value of shares held by existing shareholders and their voting ratio could be diluted. The Group intends to continue utilizing these plans going forward for the purpose of enhancing incentives for officers and employees.