Cacco Inc.

In FY2025 (ending December 2025), fraud detection services accounted for 83.6% of net sales, and given that the majority of clients are EC operators, dependence on a specific market is extremely high. Although the EC market is expected to grow in the future, if unforeseen changes in the environment cause problems with market growth, this could have a direct and significant impact on the Company's business performance. The Company is currently developing new businesses to diversify revenue, but resolving this dependence will take time.

Representative Director Hiroyuki Iwai, the founder, also serves as a major shareholder and plays a central role in formulating and deciding management policy and business strategy as well as in creating new business models. If, for any reason, he becomes unable to continue his duties, there is a risk of significant disruption to the continuity and stability of management. The Company is working to reduce this dependence through delegation of authority, but the establishment of a substitute framework is still in progress.

In providing fraud detection services, the Company receives hashed screening data from client companies and has implemented measures such as a management framework equivalent to the Personal Information Protection Act and acquisition of the Privacy Mark. However, if information leakage or misuse occurs due to intentional or negligent acts by related parties or business partners, this could result in legal liability including damages claims, as well as damage to the service brand, potentially undermining the business foundation. The Company continues to develop information management regulations and provide internal training, but it is difficult to completely eliminate this risk.

The Company's services depend on internet infrastructure, and thus carry the risk of service interruption due to cyberattacks or system failures. While the Company has obtained Information Security Management System certification and implemented preventive measures such as strengthening server infrastructure and operational monitoring, a large-scale failure could disrupt service provision, potentially leading to customer attrition and loss of trust. Given the high dependence on fraud detection service revenue in particular, the impact on business performance in the event of a failure would be significant.

All of the Company's services are provided on Amazon Web Services (AWS), and the stable operation of AWS is essential to the Company's business operations. While AWS operates across multiple regions and availability zones that meet FISC security standards, if service disruption occurs due to unforeseen events such as acts of deliberate destruction or natural disasters, this could lead to lost revenue opportunities and loss of social trust. There exists a structural vulnerability arising from dependence on a single cloud provider.

Part of the Company's business recognizes net sales based on customer acceptance, and changes in delivery schedules due to project progress may delay the timing of acceptance. In particular, if acceptance scheduled for the end of a quarter or fiscal year is pushed into the following quarter or fiscal year, this directly affects the Company's financial position and operating results for that period. While the Company manages progress on a per-project basis, delays caused by customer circumstances cannot be completely controlled.

The EC market, security market, and data science market are all still developing, and an increase in competing services is expected as more companies enter these fields going forward. If the Company fails to achieve sufficient differentiation or functional improvement, or if competition intensifies due to new entrants, it may become difficult to acquire and retain customers, adversely affecting business performance. The Company's policy is to strengthen its services through the proactive incorporation of technology and know-how, but maintaining a competitive advantage requires continuous investment.

In the EC, security, and data science fields, the pace of technological innovation is rapid, and delays in responding directly lead to a decline in service competitiveness. If unexpected development costs arise or there are delays in responding to technological changes, this could lead to service functions becoming obsolete and a deterioration in profitability. While the Company's policy is to proactively incorporate new technologies and know-how, there is a risk that resource constraints arising from its small organizational scale may limit its ability to respond.

As of the end of FY2025 (ending December 2025), the Company had tax loss carryforwards, which currently suppress the effective tax rate. If, going forward, business performance improves at a pace exceeding the business plan and the loss carryforwards are exhausted, corporate tax, resident tax, and enterprise tax will be recorded at the standard tax rate, which could affect net income and cash flow for the period. An increased tax burden during a growth phase could constrain the Company's capacity for investment.

As of December 31, 2025, the Company is a small organization with 7 directors and 36 employees, and its internal management structure remains commensurate with this scale. If personnel reinforcement and enhancement of the internal management structure accompanying business expansion do not proceed in a timely and appropriate manner, this could impair operational capability and the effectiveness of internal controls, potentially constraining business growth. In addition, if it becomes difficult to secure the technical capabilities and number of engineers at outsourcing partners, or if outsourcing costs rise sharply, this could disrupt service provision and order-taking activities.