TDSE Inc.

The big data utilization technology and AI technology fields constitute a rapidly changing industry with successive development of new technologies, and the emergence of alternative services from competitors may affect the Company's competitiveness. The Company focuses on recruiting and developing human resources and acquiring technology and know-how, but there is a risk that failure to keep pace with the speed of technological innovation could adversely affect its business and financial results.

While the AI-related market is expected to expand rapidly, if the business environment or performance of client companies deteriorates due to changes in economic conditions or industry trends, orders placed with the Company may decrease, potentially affecting its performance. Since demand for the Company's services is influenced by the business conditions of client companies, the structure is such that the risk of declining sales is likely to materialize during periods of macroeconomic deterioration.

The Company's business depends on internet communication networks and large-scale computer server clusters, and there is a risk that service interruptions caused by system failures or cyberattacks could hinder the provision of services to customers. Although the Company implements preventive measures such as operation monitoring, redundancy, and security measures, if a large-scale failure occurs, it could have a material impact on the Company's business and financial results.

The Company provides services by acquiring large volumes of data from social media, but revisions to or new enactments of the Copyright Act, the Act on the Protection of Personal Information, and other related laws and regulations, as well as domestic and international regulations and guidelines, may impose constraints on data collection and service provision methods. In addition, there is a risk that changes in policy by social media operators could increase data acquisition costs or lower service quality.

In FY2026 (ending March 2026), sales to Fast Retailing Co., Ltd. and Recruit Co., Ltd. accounted for 18.1% and 15.5% of total sales, respectively, resulting in a high dependence with the top two companies accounting for approximately 33.6% of total sales combined. If either company changes its management policies or reduces transactions, this could have a direct and material impact on the Company's business results.

Securing personnel with specialized information technology and business knowledge is essential for business expansion in the AI and big data fields, but if recruitment does not proceed as planned in a highly competitive labor market, or if existing personnel leave the Company, this could become a factor constraining competitiveness and business expansion. As a result, this could adversely affect the Company's business results.

The Company receives orders based on man-hour-based project estimates, but since the actual volume of work varies depending on the content and quality of data received from customers, it is difficult to accurately forecast man-hours in advance. If man-hours significantly exceed expectations due to unforeseen circumstances, projects may become unprofitable or acceptance timing may be delayed, potentially adversely affecting business results.

Securing appropriate subcontractors is necessary for project execution, but as the degree of involvement of subcontractors increases, there is a risk of additional costs arising from failure to meet quality standards, as well as a risk of project delays due to subcontractors' poor business performance, among other factors. The Company is working to strengthen relationships with subcontractors, but if it is unable to select appropriate subcontractors, this could affect its business results.

If NetBase Solutions, Inc. and LangGenius, Inc., the Company's major suppliers of software products purchased and resold, change their management policies or business plans, this could disrupt the provision of products and services to customers. If changing suppliers or securing alternative procurement proves difficult, this could adversely affect the Company's business results and relationships with customers.

In the event of a natural disaster such as a major earthquake, fire, or flood, the Company's business activities may be interrupted, resulting in delays in service provision. In addition to a decline in sales, if substantial costs are incurred for business recovery, this could significantly affect the Company's business results.