TENTIAL Inc.

Advertising and labeling of the Company's products are subject to regulation under the Act against Unjustifiable Premiums and Misleading Representations and the Pharmaceutical and Medical Device Act. If advertising expressions lacking sufficient substantiation or expressions suggesting pharmaceutical efficacy are found to be in violation, there is a risk of corrective orders, penalties, damages lawsuits, and the like. The Company obtained a Class II Medical Device Manufacturing and Marketing Business License in August 2024 and is proceeding with switching to in-house filings, but if the license is revoked or suspended, this could have a material impact on business activities. The Company manages this risk through the establishment of an internal review system, regular training, and collaboration with external specialist organizations.

Representative Director and President Yutaro Nakanishi, as founder and Chief Executive Officer, plays a central role in management policy and business strategy, and there is a risk that if he becomes unable to perform his duties, this could have a material impact on business continuity. The Company is working to reduce this dependence through the development of internal management systems, delegation of authority, and human resource development, but the degree of dependence currently remains high.

The EC ratio (combined proprietary EC and EC mall) for the fiscal year ended August 2025 reached 74.1%, indicating an extremely high degree of dependence on communication networks and computer systems. If the system stops due to unpredictable factors such as natural disasters, sudden surges in access, or power outages, this could result in lost sales opportunities and other adverse effects. The Company has established a failure response system under the direction of the Head of the Technology Division and has obtained ISO27001 (ISMS) certification, but the risk cannot be completely eliminated.

In the fiscal year ended August 2025, the BAKUNE Recovery Wear series accounted for over 80% of net sales, resulting in an extremely high degree of dependence on a specific product. If sales trends of the BAKUNE series change due to new entrants into the recovery wear market or intensifying competition, this could have a direct and material impact on business performance. The Company is working to reduce this dependence through continuous planning, development, and sale of new products.

The Company relies on internet advertising and mass media advertising as a primary driver of customer acquisition for growth, and if the cost-effectiveness of advertising expenses deteriorates, this could impact business performance through a decline in the number of customers acquired. The Company responds to this risk through conservative planning based on recent performance, but there remains a risk that results could fall significantly short of expectations due to changes in the external environment.

The Company's products tend to see higher demand in winter, and gift demand (for occasions such as Mother's Day, Father's Day, and Christmas) accounts for a certain proportion of sales, giving rise to a risk of seasonal fluctuations in business performance. If sales measures during gift seasons do not proceed as planned, this could impact business performance. The Company strives to level out sales through outlet sales and the launch of new spring/summer and autumn/winter products, but has not been able to fully eliminate this skew.

The Company imports most of its products from overseas manufacturing plants, and if sharp exchange rate fluctuations occur, procurement costs could rise, potentially having an adverse effect on business performance. The Company strives to mitigate this impact through requests for forward exchange contracts with its main supplier, Toyoshima & Co., Ltd., and appropriate price pass-through on products, but it may be difficult to respond to sudden fluctuations exceeding expectations.

The manufacturing of products using the special material "SELFLAME," including the flagship product BAKUNE, is entirely outsourced to Toyoshima & Co., Ltd., and the proportion of purchases attributable to this company reached over 80% of total purchases in the fiscal year ended August 2025. If Toyoshima changes its business policies or an unforeseen event occurs at its manufacturing plant, this could cause significant disruption to the manufacturing of the Company's flagship products. The Company strives to reduce this risk by diversifying manufacturing subcontractors and maintaining relationships of trust with business partners, but the degree of dependence remains high.

As the Company relies on its EC site as a primary sales channel and stores a large amount of customers' personal information, there is a risk that unauthorized access or other incidents could result in the leakage or loss of information, leading to reputational damage or the payment of damages. The Company has established a management system through the formulation of a privacy policy based on ISO27001 (ISMS) certification, the development of personal information handling regulations, and the implementation of internal training, but threats such as cyberattacks cannot be completely eliminated.

As of the filing date of this document, the number of potential shares from stock acquisition rights stands at 549,400 shares, equivalent to 7.2% of the total number of issued shares of 7,645,041 shares. If these rights are exercised in a concentrated manner during the exercisable period, the increase in the total number of issued shares could dilute the value per share. The allotment agreement includes staged exercise restrictions allowing exercise of one-third of the allotted number each year following listing, introducing a mechanism to curb sudden dilution.