Densan Signs Capital and Business Alliance Agreement with ITSO for AI Business

Densan Co., Ltd. (Headquarters: Nagano City, Nagano Prefecture; President: Kazutaka Todoroki; hereinafter 'Densan') announced that it has acquired shares in ITSO Inc. (Headquarters: Minato-ku, Tokyo; CEO: Shinichi Kitagawa; CTO: Yasuhiro Fukano; hereinafter 'ITSO') and signed a capital and business alliance agreement concerning the AI business between the two companies.

1. Background and Purpose

In the service market for local governments, where functional differences are diminishing due to system standardization, proposals that significantly promote operational efficiency for municipalities and hands-on services that support operational reform have become sources of competitiveness.

For many years, Densan has provided foundational systems for local governments, private companies, financial institutions, and medical and welfare organizations, establishing a strong customer base through its accumulated achievements.

Meanwhile, under its mission to 'provide hyperautomation end-to-end and support change for individuals and organizations to achieve greater results,' ITSO possesses cutting-edge AI technology and implementation capabilities, leveraging advanced technologies centered on AI to support everything from business process visualization and improvement to implementation and establishment.

We believe that the collaboration between the two companies will enable us to enhance our competitiveness by providing customers with speed and value that other companies cannot imitate. We have repeatedly considered the possibility of collaboration for the commercialization of new services. Through these considerations, we confirmed the high feasibility of creating synergy through collaboration. Therefore, we have decided to proceed with more concrete discussions and implement this capital and business alliance to strengthen our collaborative structure and further deepen our relationship.

In conjunction with this capital and business alliance, Densan will acquire 12,550 common shares of ITSO's 100,000 total issued shares.

*Hyperautomation is an advanced business automation concept that combines multiple advanced technologies such as AI, RPA, and machine learning to automate and streamline entire business processes.

2. Details of Share Acquisition

Details of the counterparty, number of shares acquired, and share ownership before and after the acquisition.

We will acquire shares corresponding to 12.55% of the total issued shares from ITSO's shareholders. There are no capital, personal, or business relationships between Densan and the said shareholders.

(1) Number of shares owned before acquisition 0 shares (Number of voting rights: 0) (Percentage of voting rights: 0%)

(2) Number of shares owned after acquisition 12,550 shares (Number of voting rights: 12,550) (Percentage of total issued shares: 12.55%)

Schedule (1) Board of Directors resolution date: June 17, 2026 (2) Agreement signing date: June 18, 2026 (3) Share acquisition execution date: June 18, 2026

3. Contents of the Capital and Business Alliance (Image of Envisioned Synergies)

Purpose To establish a cooperative framework between the two companies to realize 'co-creating the future of public and regional industries with hyperautomation,' thereby enhancing the corporate value of both companies.

Image of Joint Business ① Creation of New AI Business by Fusing Densan's Services with Generative AI We will create new, high-value-added AI services by combining Densan's proprietary products/services for local governments, financial institutions, and private companies with ITSO's advanced AI implementation capabilities. - Achieving differentiation from other companies by incorporating AI functions into package systems. - Advancing inquiry response, form processing, document creation, screening operations, and data analysis using generative AI. - Expanding ITSO's AI implementation know-how, cultivated for major corporations, to the public and regional industry sectors through Densan's customer base. - Establishing next-generation BPO by increasing the automation of routine work with AI from labor-intensive BPO, creating an environment where people can focus on creativity and new ideas. *BPO (Business Process Outsourcing) is a method of outsourcing part or all of a company's business processes to specialized external companies to improve efficiency and reduce costs.

② Promotion of DX through Joint LLMOCR Business for Municipalities We will provide solutions centered on specialized LLMs to address issues faced by municipalities such as labor shortages and increasing workloads, powerfully promoting front-yard reform and municipal DX. - Realizing efficiency in input and confirmation work through reading, item extraction, and structured data conversion of paper forms. - Advancing counter and screening operations by using specialized LLMs to understand the context of applications and support the confirmation of deficiencies and missing information. - Supporting front-yard reform towards 'no-writing, no-visit counters' and automating back-office tasks for staff. *LLMOCR is ITSO's product that utilizes Large Language Models (LLM) to achieve high-precision document reading, data extraction, and structuring. *LLM, or Large Language Model, is an AI model trained on vast amounts of text data. It is capable of diverse language processing tasks such as generating natural sentences, answering complex questions, and translation.

③ Building a track record of 'AI-Native' transformation within Densan Through collaboration, we will automate tasks, enhance decision-making, and generate new ideas, aiming to improve the overall productivity and competitiveness of the organization. - Introducing AI into internal operations to resolve the concentration of specialized knowledge and dependency on individuals. - Utilizing AI to reduce development and support man-hours. - Turning internal success stories into use cases and converting them into customer services.

④ Next-Generation Utilization of Data Centers By combining Densan's data center infrastructure with ITSO's AI technology and implementation capabilities, the two companies aim to provide a secure AI utilization platform in the public, financial, and regional industry sectors. - Realizing the provision of a secure AI platform using Densan's data center. - Making aggressive capital investments in next-generation data centers to meet the rapidly growing demand for GPUs. - Linking AI products, business automation solutions, and data utilization platforms.

4. Future Outlook As stated in the key measures of its 'Mid-Term Management Plan for FY2026-2028' (announced May 15, 2026), Densan is promoting the strengthening of alliances with companies that can meet customer needs and is undertaking initiatives to accelerate growth. The impact of this share acquisition and capital and business alliance on the financial results for the fiscal year ending March 2027 is expected to be minor.