Kudan Inc.

The Group positions the spatial perception market as its primary business domain. If this market does not develop as anticipated, it could materially impact the Group's business performance. The Group provides automation technology support across a wide range of industries including logistics, manufacturing, construction, and retail, covering robotics, autonomous driving, AR/VR, and other fields, and seeks to diversify risk through global markets in Japan, Asia, Europe, and North America.

The information and communications industry experiences extremely rapid technological innovation, and the Group's technological advantage may not be continuously maintained due to rapid advances in alternative technologies, the emergence of competing technology providers, or changes in the technology standards and platforms on which the Group depends. In response, the Group continuously monitors technology trends in the spatial perception market and promotes management strategies including M&A, business investments, and business alliances, while also advancing R&D and investment in Deep Tech areas beyond spatial perception.

The Group's revenue depends on customers' R&D plans, productization plans, and capital investment plans, and there is a risk that development support, licensing, royalties, and other revenue streams may not progress as anticipated due to changes in customers' policies, budgets, or deployment schedules. The Group is also advancing its transition to a high-gross-margin software business, but if the proportion of hardware sales or individual development support temporarily increases during the initial stages of customer adoption, this could affect the revenue mix, profit margins, and stability of earnings. The Group is promoting monetization through the expansion of business opportunities in both digital twin and robotics.

The Group has entered into contracts with long lead times from order receipt to delivery, and delays in project progress may cause the timing of revenue recognition to deviate from the original plan. This creates a risk of unstable periodic performance, making it difficult for investors to forecast business results. The Group's policy is to appropriately manage the progress of each project through increases in business development personnel and engineers who support customer development projects.

In actively expanding business overseas, differences from Japan in local laws and regulations, business practices, economic conditions, corporate culture, and consumer trends create a risk of unexpected cost increases or losses. Events not anticipated at the time of business commencement may also occur, potentially affecting business performance. The Group aims to mitigate this risk by increasing management personnel with extensive overseas business experience and by entering into advisory agreements with lawyers, tax accountants, and other experts in each country.

As the Group actively pursues business expansion in overseas markets, there is a potential risk that significant fluctuations in foreign exchange rates could affect the Group's business performance. In particular, as transactions in multiple currencies increase, the impact of exchange rate fluctuations on revenue and expenses may expand. The Group monitors exchange rate fluctuations and considers risk hedging measures such as forward exchange contracts as appropriate.

There is a possibility that the Group may infringe on third parties' intellectual property rights beyond its awareness, and if subjected to lawsuits such as claims for damages or injunctions, the Group may be required to pay damages, which could affect business performance. There are concerns that the risk of rights infringement may increase as the Group expands its technology domains, including SLAM, semantic 3D recognition, photorealistic 3D representation, and AI fusion technologies. The Group works to mitigate this risk in cooperation with its legal advisors and the Audit and Supervisory Committee, among others.

Acquiring and developing excellent globally capable talent is an important factor for continued growth, but competition for highly specialized personnel in the Deep Tech field is intense, and failure to sufficiently recruit and develop such talent could hinder growth. Given the Group's small organizational scale, the departure of key personnel could have a significant impact on business continuity. The Group's policy is to continuously strengthen its workforce, including through talent development and new recruitment.

The Group holds confidential customer information (including information important to management strategy) and personal information obtained through its business activities. If an information leak occurs due to human operational error or unforeseen circumstances, the Group could be held liable for damages, or its relationships with customers could deteriorate due to loss of trust. The Group has established information security management regulations and strives for their appropriate operation.

The Group is a small organization, and if the development of its internal management structure and business execution structure fails to keep pace with business expansion and diversification of operations, this could affect business performance. As the Group has a short corporate history of approximately 12 years since its founding, past financial results may not provide sufficient material for period-to-period performance comparison, potentially resulting in insufficient information for investment decisions. The Group is working to strengthen its personnel and enhance its internal management and business execution structures, while also promoting active information disclosure through timely disclosure and IR activities.