APPLIED TECHNOLOGY CO., LTD.

In the IT-related markets in which the Company operates, the pace of technological innovation is accelerating, and industry standards and market needs are changing rapidly. If the Company fails to respond in a timely manner to changes that are more rapid and innovative than expected, the competitiveness of its products and services may decline, which could affect its business performance and business development. As a countermeasure, the Company is strengthening its information-gathering framework for early identification of market trends and is engaged in research and investigation of advanced technologies.

Solution Services, the Company's core business, has a high proportion of contract-based agreements under which the Company bears responsibility for deliverables, and in recent years orders have tended to become larger in scale. If deficiencies in project management result in increased man-hours, delivery delays, or quality deterioration, this could lead to a significant deterioration in profitability or claims for damages from customers, which could affect the Company's business performance and business development. The Company is working to thoroughly manage progress and quality from inquiry, estimation, and order receipt through to delivery, and is building an internal management framework to strengthen project management.

Personnel with specialized expertise are essential for providing Solution Services and Engineering Services; however, demand for such personnel has increased in recent years, intensifying competition to acquire talent. If the Company is unable to secure and develop personnel as planned, this could affect the Company's business performance and business development. As countermeasures, the Company is improving its working environment to accommodate diverse work styles, conducting in-house training, and providing support for self-development, including a qualification incentive program.

The Company holds confidential business information and customer information, and recognizes information management as an important issue. If an event beyond the Company's expectations results in the destruction, tampering, leakage, or system outage of important data, this could affect the Company's business performance and business development. Under the Information Security Committee, headed by the Representative Director and President, the Company thoroughly manages the handling of information and implements comprehensive information security measures.

There is a risk that software and other items the Company introduces in system construction may infringe upon third-party intellectual property rights, and because intellectual property rights in the information technology field have a relatively short history, risks of which the Company is not aware may remain. If a third party files an infringement lawsuit regarding patents or other rights, the Company would need to expend substantial management resources in terms of time and funds, and if the Company loses such a lawsuit, it could be required to pay significant damages or licensing fees, or could become unable to continue handling certain products or services. As countermeasures, the Company conducts intellectual property rights investigations of the software and other items it introduces, and works to raise employee awareness through education and training.