Sapeet, Inc.

Most of the Company's services are provided via internet communication networks, and there is a risk that services could be suspended due to natural disasters, cyber attacks, unexpected overloads, or other causes. In the event of a failure, business operations could become difficult and confidential information could be leaked, which is assessed as having a significant impact on business performance and financial condition. The Company has implemented security enhancements and redundancy measures, and while no large-scale failure has occurred to date, complete elimination of this risk is difficult.

AI Products handle personal information, and AI Solutions handle customers' confidential and personal information, creating a risk of information leakage due to human error or unauthorized access. Should a leak occur, it could result in damages claims from customers and loss of social trust, potentially having a material impact on the business and business performance. The Company obtained ISO/IEC 27001:2013 certification in May 2022 and continues to strengthen its information management systems.

Since the beginning of the 9th fiscal period, the Company has capitalized software related to AI Products as intangible fixed assets. If rapid changes in the market or competitive landscape eliminate the expected usage, or if declining profitability makes investment recovery difficult, retirement or impairment may become necessary. This is assessed as having a significant impact on business performance and financial condition. While the Company makes development investments while carefully assessing market conditions, this risk cannot be completely eliminated.

With the commencement of software capitalization, depreciation expenses are expected to increase incrementally over the coming several periods, and the likelihood of this occurring is assessed as high. If revenue growth does not proceed as expected to exceed the fixed depreciation expenses, gross profit margin could decline, affecting business performance and financial condition. The Company aims to strengthen its earnings power, but the risk may materialize depending on business progress.

In the in-house research and development of AI Products and the development of AI Solutions, there is a risk that each phase could require more man-hours than anticipated. Development delays directly affect business progress and performance, and could also disrupt delivery schedules to customers. The Company works to reduce this risk through commonization of infrastructure, algorithm modules, and development personnel, as well as thorough project management.

Expanding AI Products requires upfront investment such as software investment, R&D expenses, and advertising expenses, and the Company intends to continue making such upfront investments going forward. Due to rapid changes in the business environment or the materialization of other risks, these investments may not generate the expected results. If the investment returns are not realized, it could adversely affect business performance and financial condition.

PKSHA Technology Inc. is the largest shareholder, holding 35.97% of the Company's total issued shares. As collaboration with PKSHA, which operates the AI Research & Solution business, expands, there is a risk that dependence on the group could increase and impair the Company's independence. Transactions with the PKSHA group during the fiscal year under review accounted for approximately 8% of sales and approximately 0.4% of total cost of sales and SG&A expenses, which is currently minor, but influence could increase as collaboration deepens going forward. Governance is maintained through regular confirmation by the Board of Directors and focused audits by the Audit and Supervisory Committee members.

As of September 30, 2025, the Company is a small organization with 6 directors and 53 employees, creating a risk that the development of internal management systems may not keep pace with business expansion. If the Company is unable to secure and develop excellent personnel as planned, this could constrain business growth and make organizational responses difficult. The Company strives to secure resources through active recruitment activities, talent development, and strengthened collaboration with external outsourcing partners.

Given the growth potential of the AI/wellness-related field, numerous companies have entered the market, creating a risk of declining competitiveness. The AI Products Monthly Gross Revenue Churn Rate remained at a low level of 1.37% on average from October 2024 to September 2025 (up 0.55 points year on year), though it has risen slightly due to increased cancellations and closures among multi-store operators. The Company strives to maintain competitiveness through the utilization of accumulated AI algorithms and enhancement of its onboarding program.

In the fiscal year under review, the top three customers accounted for 26.9% of total sales, presenting a risk of dependence on specific customers. In addition, approximately 80% of AI Products sales come from "Shiseikarute," meaning that any trouble with this service could significantly impact business performance. The Company is working to reduce this dependence by actively pursuing new customer acquisition and expanding sales of products such as "Kartier Role-Play."