Nippon Ichi Software, Inc.

Due to human resource constraints of 154 development staff, the number of titles released annually is limited, causing sales to concentrate around the release timing of major software. In FY2026 (ending March 2026), 38.4% of net sales were concentrated in the fourth quarter, resulting in a full-year ordinary loss of ¥55,417 thousand. Quarterly performance fluctuates significantly, making investment decisions difficult.

There is a high degree of sales dependence on specific titles such as the "Disgaea" series. If user attrition occurs due to changes in user preferences or the occurrence of defects, this could significantly affect performance. There is also a risk that sales plans may not be achieved due to competition with other companies over release timing.

Amid rapidly growing consumer demand for network-based entertainment, the Company has built its strengths around standalone-type games. If the Company falls behind in responding to changes in customer preferences and technological innovation, its relative competitiveness may decline, potentially significantly affecting performance.

As home video game consoles become more sophisticated, development costs have tended to rise and development periods have tended to lengthen. There is no guarantee that the funds and human resources necessary to develop attractive new products can be secured, and if sales plans are not achieved, inventory valuation losses or discontinuation losses may occur, creating a risk that development funds cannot be recovered.

The Company has entrusted sales to four companies: Nintendo, Sega, and Sony Interactive Entertainment domestically, and KOEI TECMO AMERICA CORPORATION overseas. In FY2026 (ending March 2026), combined net sales from these four companies reached ¥1,205,362 thousand (33.4% of net sales). If any of these companies changes its business strategy, this could significantly affect performance.

Through its US subsidiary NIS America, Inc., the Company is engaged in expansion into the US and Europe, exposing it to a variety of risks including local regulations, tariffs, transfer pricing and other tax risks, and foreign exchange fluctuations. Additionally, in line with US and European business customs, there is a refund liability system whereby the Company bears the cost of retailer markdowns; if claims exceed expectations, this could significantly affect performance.

Securing capable development personnel is essential for business development, but there is no guarantee that the Company can continuously recruit and train capable personnel. If the Company fails to secure personnel or experiences significant personnel attrition, this could disrupt business activities and further constrain its already limited development structure.

Home video game software and smartphone game content may contain undetected defects at the time of initial release or when new versions are released. If a serious defect occurs that leads to a large-scale recall or product liability claims, substantial costs will be incurred, adversely affecting sales trends as well.

There is a risk that the Company's intellectual property may be infringed, as imitation or analysis of its products by third parties cannot be completely prevented. In addition, the Company may face lawsuits due to differing views on infringement of other companies' intellectual property rights, and depending on the outcome of such litigation, performance could be significantly affected.

Since the Company relies mainly on bank borrowings for fund procurement, if cost increases due to rising interest rates cannot be absorbed by business activities, this could significantly affect performance. While relationships with financial institutions are currently favorable, there is no guarantee that sufficient fund procurement will remain possible in the future.