HIMACS,Ltd.

Intensifying competition for talent amid a chronic shortage of engineers is already causing cost increases and impacting profitability at present. In addition to securing and developing project leaders, planned investment is required to train and expand the pool of AI-capable engineers, and failure to proceed as planned could negatively affect net sales and profitability. The Company is promoting enhanced new graduate and career recruitment based on its medium-term management plan, as well as expanding educational curricula including AI utilization and supporting certification acquisition.

Shortened development periods and increasingly complex functionality may lead to man-hour increases exceeding initial estimates or defect repair costs, potentially resulting in unprofitable projects. This risk is particularly elevated for projects involving new business operations or new technologies. The Company has established a system of prior review through order acceptance review meetings and estimate review committees, along with monthly progress management of key projects, and provides for losses on order backlog when losses are anticipated.

In FY2026 (ending March 2026), the top three customers by sales accounted for a high proportion of 51.3% of total net sales, and changes in the sales policies, business performance, or financial condition of these customers could have a direct negative impact on the Group's net sales and profits. The Company currently states that it does not recognize the likelihood, timing, or business impact of this risk materializing. Based on the medium-term management plan and annual budget, the Company clarifies target customers for expanding business and works to diversify its customer base through strategic sales activities.

If a compliance violation occurs involving the Group or its stakeholders, it could result in a loss of social credibility and negatively impact net sales and profits. The Company currently states that it does not recognize the likelihood, timing, or business impact of this risk materializing. Under a Compliance Committee chaired by a responsible executive officer, the Company builds and promotes its compliance framework, and conducts investigations, guidance, education, and awareness activities regarding compliance with various laws and regulations, including labor relations.

If confidential information such as corporate or personal information handled during the system development process is leaked externally due to negligence or malicious intent, it could result in a loss of social credibility and negatively impact net sales and profits. The Company currently states that it does not recognize the likelihood, timing, or business impact of this risk materializing. The Company has obtained Privacy Mark certification, conducts regular information security education and testing, obtains confidentiality agreements and consent forms, and implements security measures for portable information devices.

Even when strategic M&A is undertaken, the anticipated outcomes may not be achieved, and if goodwill has been recorded and actual performance falls significantly below future plans, impairment processing may become necessary, negatively impacting profits. The Company conducts thorough due diligence, including with external experts in legal and accounting matters, and after execution, works to reduce risk through steady promotion of PMI and regular monitoring.

If natural disasters such as earthquakes or the outbreak of infectious diseases prevent securing the necessary development personnel and system development environment, including development equipment, delivery delays may occur, negatively impacting net sales and profits. The Company has established a crisis response headquarters system based on its crisis management regulations, and has implemented cloud migration and dual backup of internal information systems, as well as conducted safety confirmation drills for all officers and employees.

As the industry shifts toward development methods utilizing AI, if the training and expansion of engineers capable of effectively using AI does not proceed as planned, it could lead to a decline in competitiveness and loss of order opportunities, negatively impacting net sales and profitability. Based on its medium-term management plan, the Company is promoting the development of AI-capable personnel through expanded educational curricula for AI utilization and support for acquiring various certifications.