AI,Inc.

The Voice Business operates in a field where global competition in AI technology development is intense, while the CRM Business continues in-house development based on a microservices architecture. If groundbreaking technologies or services expand rapidly, the competitiveness of existing products and services may decline depending on the direction of technological development, potentially affecting the Group's business and results of operations. As countermeasures, the Group engages in in-house development of new technologies, adoption of technologies from the market, and collaborations effective for improving technological capability.

Strong competitors exist both domestically and internationally, and intensifying competition with existing operators as well as new entrants may affect the Group's business and results of operations. The Group aims to differentiate its products through the development of proprietary technology and collaboration with other companies, and to differentiate itself in management through business model innovation. It is also working to strengthen its system for maintaining competitive advantage through regular surveys of competitor trends.

It is practically impossible to completely prevent disputes with third parties over intellectual property rights, and if a dispute arises, it could result in a significant human and financial burden. The Group may be subject to claims for damages, requests for payment of license fees, or requests for product injunctions, which could affect its business and results of operations. The Group strives to prevent disputes through prior art searches, collaboration with lawyers and other specialists, and the acquisition of patents and other intellectual property rights.

Although the Group thoroughly conducts quality checks such as code reviews and testing in software development, it is not possible to completely prevent the occurrence of bugs and other defects. If a defect occurs, the resulting cost burden for resolution and the decline in credibility due to impact on customers could affect the Group's business and results of operations. As of the end of the current consolidated fiscal year, no major defect events attributable to the Company have occurred.

Officers, including managerial personnel, and engineers with advanced skills are essential to executing business strategy; however, as demand for engineers increases across all fields, recruitment of desired personnel may not proceed as planned. If securing and developing necessary personnel is delayed, it could hinder the expansion and strengthening of the Group's operational capabilities and adversely affect the business. The Group is addressing this by actively promoting recruitment and talent development initiatives.

The Group is strengthening itself through corporate acquisitions, establishment of new companies, and business alliances involving capital investment aimed at technology development and market acquisition; however, if these initiatives do not proceed as planned, they could affect results of operations. The Group seeks to reduce risk through sufficient prior investigation and consideration, but uncertainty cannot be completely eliminated.

The Group holds confidential information related to research and development, sales, and accounting, as well as customer-related personal information, as electronic data, and information leakage or service interruption may occur due to increasingly sophisticated and complex cyberattacks, infrastructure failures, natural disasters, and other causes. Should such an event occur, it could result in the interruption of critical operations, leakage of confidential data, liability for damages, and other consequences that affect results of operations. The Group has obtained ISMS and Privacy Mark certifications and strives to strengthen its information security systems, but the risk from unforeseen events cannot be reduced to zero.

The Group ensures thorough legal compliance across the entire Group through quarterly reviews by the Internal Control Committee, compliance education, and internal audits; however, if unforeseen violations of laws and regulations or misconduct occur, this could affect results of operations.

In speech recognition technology, the Group has received software usage licenses from NTT Technocross, ATR-Promotions, NICT, and others, and in speech synthesis technology, it has formed alliances with overseas companies such as Cerence. If a material breach occurs that would trigger contract cancellation, these usage licenses and alliances could become invalid, potentially causing significant disruption to the continuity of the Voice Business. The Group strives to build solid relationships with each partner company.

The Group holds goodwill arising from business combinations, and the balance of goodwill at the end of the current consolidated fiscal year increased from the end of the previous consolidated fiscal year. If future excess earning power is impaired due to changes in the business environment or other factors, impairment accounting would be required, which could have a significant impact on results of operations and financial condition. At present, the Group has determined that the goodwill appropriately reflects future excess earning power, but continuous monitoring is necessary.