ACMOS INC.

The core businesses are linked to trends in information technology investment by client companies, creating a risk that performance could fluctuate in the event of an economic downturn or deterioration in the economic environment. IT investment is highly sensitive to economic conditions, with a structure in which deterioration in clients' business sentiment tends to directly translate into reduced orders. The securities report does not explicitly describe countermeasures, and the high degree of dependence on the external environment is recognized as a challenge.

In the IT Solutions Business, sales are concentrated among a specific comprehensive electronics manufacturer and its group companies, creating a risk that deterioration in that customer's performance or changes in contract terms could directly cause fluctuations in sales. Although the industries served are diversified, the structure of dependence on a specific customer could undermine the stability of earnings. No specific countermeasures toward customer diversification are explicitly stated in the securities report.

If trouble arises during the term of a large-scale contract, there is a risk that contract cancellation or early termination could prevent the company from obtaining the originally expected revenue. Furthermore, it may become difficult to recover expenses invested in the contracted work, which could have a significant impact on performance. While the company handles work of various scales from small to large, the impact is particularly high when such issues occur in large-scale projects.

The company handles important customer information through system development and verification testing, and its business activities involve handling large amounts of personal information, creating a possibility that compensation issues could arise in the event of information leakage or personal information disclosure. While the company states it makes every effort to protect information, should such an event occur, there is a risk of damage to the relationship of trust with customers and of liability for damages. This is a risk directly linked to the credibility foundation of an IT service company.

Because the scale of each group company is small, there is a tendency for duties to be concentrated on management or specific business/operations promoters, creating a risk that the departure of such individuals or unforeseen circumstances could affect business continuity. If successor development and organizational distribution of duties are insufficient, dependence on specific individuals could become a vulnerability in management. No specific countermeasures are described in the securities report.

While the company plans to continue business investments aimed at group synergies, there is a risk that if the performance of invested companies falls below plan, goodwill amortization could pressure profitability. Furthermore, if shares of subsidiaries, investment securities, or goodwill become subject to impairment losses, losses arising from the write-down of asset valuations could occur, potentially having a material impact on performance. As the M&A strategy continues, this risk is expected to persist going forward.

In the event of a natural disaster such as an earthquake or storm/flood damage, or a pandemic such as COVID-19, there is a risk that damage to assets, difficulty commuting to work, power outages, and similar factors could make it difficult to carry out business operations. In particular, the system operation business depends on a stable power supply, and a power outage could cause significant disruption to operations. Water supply interruptions and reduced power supply are also recognized as factors that could affect business continuity.

The company works to secure and develop IT engineers through new graduate and career hiring, internal and external education and training, and cooperation with partner companies; however, if it becomes difficult to secure and develop capable engineers, this could hinder order receipt and work execution, potentially affecting performance. Against the backdrop of intensifying competition in the IT talent market, securing human resources has become a structural challenge for the industry as a whole, and the company's group is no exception.

In contract development within the IT Solutions Business, the company implements risk assessment at the time of order receipt and strengthens project management; however, if man-hours exceed expectations or additional costs arise from rework due to defects in deliverables, projects could become unprofitable, potentially affecting performance. In fixed-price contract development, the risk of exceeding estimated man-hours creates a structure that directly pressures profit margins.

In the Third-Party Maintenance Service business, the company secures maintenance parts corresponding to customer systems; however, the turnover period tends to become prolonged, and because these are used parts, they are characterized by low circulation volume and difficulty selling to third parties. As a result, periodic disposal and reassessment of asset valuation become necessary, and the recording of valuation losses could affect performance. Given the nature of maintenance parts, inventory management is highly difficult, requiring continuous monitoring.