circlace Inc.

As a result of focusing on specific technology domains such as Salesforce, there is a risk that competitive advantage may relatively decline due to the maturation of the CRM market and expanding entry of competitors. As countermeasures, the company is promoting enhanced value provision in the utilization phase for existing customers, expanding multi-cloud support such as ServiceNow and Databricks, and diversifying its portfolio through collaboration with arcbricks Inc.

There is a risk that IT investment demand will stagnate due to deteriorating economic conditions or customer companies' review of business policies, leading to cancellation, postponement, or scale reduction of ordered projects. In addition, changes in SaaS license billing models due to the progress of AI utilization are recognized as a potential risk, and the company addresses this through early detection of market changes via participation in events such as Dreamforce and continuous monitoring.

The rapid spread of generative AI may cause a structural shift away from the conventional headcount-based business model, potentially manifesting as profitability volatility risk. As a countermeasure, the company is promoting the commercialization of AI-related services utilizing Salesforce Agentforce and Databricks, and has also introduced its own AI agent "AGENA"; however, the number of projects that can transition to full production implementation remains low.

Due to intensifying competition for recruiting IT talent, there is a risk of depletion or shortage of personnel with knowledge, experience, and business skills in cutting-edge technologies. The company strives to maintain a stable supply chain through continuous review of systematic education and training curricula and the establishment of medium- to long-term strategic partnerships with external vendors.

If service quality declines due to internal personnel shortages, there is a risk of leading to reduced earnings, litigation, and loss of market trust. In addition to measures to improve employees' technical skills, such as promoting qualification acquisition, the company is working to maintain and improve quality by building an organizational mechanism that reflects the opinions of the internal PMO and external experts up to the management level.

The Consulting Business utilizes outsourcing to partner companies, but if partner companies face difficulty securing engineers or if outsourcing costs rise, smooth service provision may be hindered, potentially affecting financial position and business results. The company strives to maintain long-term, stable business relationships with strong partner companies through relationship building via regular meetings.

While handling information assets of numerous client companies, if an information leak occurs for any reason, it could result in loss of social trust and claims for damages, potentially having a material impact on financial position and business results. The company is working to strengthen its information management system through the development of basic information security regulations and the acquisition of ISMS certification.

Pasona Group Inc. holds 32.89% of the total issued shares as an equity-method affiliate; while there is currently no competitive relationship, there is a possibility that competition may arise in the future if the Company's group or Pasona Group changes its management policy or business development. The total transaction amount in FY2026 (ending March 2026) was ¥3,842 thousand (mainly ¥3,037 thousand in comprehensive group term insurance premiums), and the transaction scale is limited.

TQUILA LIMITED is the largest shareholder, holding 35.04% of the total issued shares, and has appointed one outside director from its company. Consulting fees in FY2026 (ending March 2026) amounted to ¥7,250 thousand, and the company has maintained a relationship of receiving advice regarding the Salesforce business since its founding. While there is currently no competitive business relationship, continuous relationship management is necessary as a related party with influence over the shareholder structure.

New businesses, including multi-cloud support and in-house developed SaaS, require a certain period of time and investment costs before generating stable revenue, which may adversely affect financial position and business results during that period. There are also risks that progress may not proceed as initially planned due to numerous uncertainties, and careful progress management is required to achieve business expansion and diversification of revenue sources.