Core Concept Technologies Inc.

Rapid advances in AI technologies, including generative AI, pose a risk of relatively diminishing the added value of the DX Support Service and IT talent support services provided by the Group. Should the pace of technological innovation exceed the Group's assumptions, this could lead to a loss of competitiveness in existing services. As a countermeasure, the Group is promoting the business application of cutting-edge AI technology through technology verification and human resource development, but the possibility that fundamental responses may not keep pace cannot be ruled out.

Providing end-to-end services in the DX support business requires a diverse range of IT personnel, including consultants, AI engineers, architects, and PMs, and the chronic shortage of IT engineers in the market is a serious risk. If recruitment, retention, and development of core personnel do not proceed as expected, this could constrain business expansion and have a material impact on business performance. As countermeasures, the Group is implementing measures such as securing attractive projects, improving salary levels, establishing a fair personnel evaluation system, and supporting skill development, but the effectiveness of these measures may be limited amid intensifying recruitment competition.

The ratio of outsourcing costs to net sales is high at approximately 60%, and the utilization of outsourcing through the business partner network "Ohgi" forms the foundation of the business model. If outsourcing unit prices rise or the Group is unable to secure business partners as planned, this could lead to a deterioration in the cost structure and a decline in project execution capability, potentially having a material impact on business performance. Although the Group avoids dependence on specific outsourcing partners, the network structure, which is concentrated in the Tokyo metropolitan area, entails regional supply risk.

As part of its growth strategy, the Group has a policy of actively utilizing M&A, and there is a risk that matters not identified or anticipated during due diligence may arise after an M&A transaction is executed, or that business development may not proceed as expected. Should these risks materialize, not only might the initially expected synergies fail to be realized, but impairment of goodwill and other assets recorded at the time of acquisition could occur, potentially affecting the Group's financial position and business performance. The Group seeks to mitigate this risk through detailed prior due diligence, but responding to rapid changes in the business environment may in some cases be difficult.

As the Group is engaged in system development for client companies, it frequently has access to clients' confidential information, and if information leakage occurs due to human error or external attacks, this could result in liability for damages and a loss of client trust or deterioration of business relationships. The Group has implemented measures such as obtaining Privacy Mark certification, obtaining ISMS certification (December 2025), establishing information security management regulations, and conducting regular training, but complete defense is difficult given the increasing sophistication of cyberattacks. Improper handling of confidential information by business partners could also give rise to similar risks.

The subcontracting of work under quasi-delegation contracts to external partner companies entails the risk of being deemed disguised contracting, as well as the risk of revocation of dispatch licenses under the Worker Dispatching Act. Should a violation of laws or regulations occur, this could directly impede business continuity and have a material impact on the Group's business performance and social credibility. The Group strives to prevent such occurrences by strengthening its systems, including establishing a risk management committee, conducting compliance training, holding regular interviews with IT engineers, and conducting internal audits.

In contracted system development, if unexpected defects lead to a significant increase in man-hours, or if major rework requests arise due to contract nonconformity discovered at the time of client acceptance, profitability could deteriorate significantly, potentially affecting business performance. In addition, for projects applying revenue recognition under the input method, there is a risk that a revision of estimated total costs could cause a shift in the timing of revenue and profit recognition. To mitigate this risk, the Group subdivides projects into contract periods of one to three months and implements meticulous progress management and budget-versus-actual management, but the impact on large-scale projects cannot be ruled out.

In the DX support domain for the manufacturing, construction, and logistics industries, the Group competes with major SIers and others, and a decline in the Group's competitiveness could lead to a decrease in orders received. The emergence of alternative technologies or generic competing products, or intensified market entry by competitors with greater financial strength or brand power, could result in the loss of existing clients and a decrease in new orders. The Group is working to maintain its competitiveness through end-to-end service provision from upstream to operation and maintenance, in-house development support, and differentiation based on

Representative Director, President and CEO Takeshi Kaneko plays a critical role in the formulation, determination, and execution of management policy and business strategy, and if he becomes unable to continue his duties for any reason, this could have a material impact on the Group's business and business performance. The Group is working to build a management structure that is not overly dependent on the management, but currently the degree of dependence remains high. The progress of successor development and delegation of authority will be key to business continuity.

As the business expands rapidly, if the development of internal management systems fails to keep pace with the pace of organizational expansion, appropriate business operations could become difficult, potentially having a material impact on business performance. If compliance and information security do not function adequately at subsidiaries, this could also pose a risk of spillover effects on the reputation and business performance of the Group as a whole. The Group is responding through measures such as replacing its core internal systems, strengthening internal audits, establishing a group oversight department, and regularly holding management liaison meetings, but maintaining effective governance amid continued group expansion through M&A remains a challenge.