monoAI technology Co.,Ltd.

In the fiscal year under review, sales to the top four customers by sales amount accounted for 53.39% of total sales, indicating a high degree of dependence on specific customers. Should changes occur in the IT investment behavior, business environment, or regulatory systems of these specific customers, this could have a direct impact on the Group's operating results and business activities. The Group is working to reduce this dependence by acquiring new business partners, but on the risk map this item is positioned at "high" impact and "medium" likelihood of occurrence.

The XR market in which the Group operates is characterized by rapid service development and intense competition due to the entry of many companies. If competitors develop more attractive or groundbreaking new services, or if price competition intensifies further, the competitiveness of the Group's virtual space sharing technology platform "XR CLOUD" could decline, potentially affecting the Group's financial position and operating results. On the risk map, this item is positioned at "high" impact and "medium" likelihood of occurrence.

Due to the declining birthrate and aging population, the shrinking labor force, and increasing demand for engineering talent, the labor market is becoming depleted, making it difficult to secure talented personnel and maintain and develop the environment for existing personnel. If personnel acquisition and development do not proceed as planned, this could affect the Group's business and operating results. The Group is addressing this through diversification of recruitment channels and the development of career advancement support programs, but on the risk map this item is positioned at "high" impact and "medium" likelihood of occurrence.

The Group handles personal information in the course of its business and has obtained and operates under Privacy Mark, ISO27001, and ISO27017 certifications; however, in the event an information leak were to occur, this could affect the Group's financial position and operating results through customer claims for damages or loss of trust. On the risk map, this item is positioned at "high" impact and "low" likelihood of occurrence, and is recognized as the risk with the highest impact. The Group continues to provide information security education and training for officers and employees and to strengthen its management system, including with respect to outsourcing partners.

When undertaking system development projects, significant specification changes, unexpected trouble, or delays in customer decision-making can result in changes to delivery timing or delays in acceptance inspection, causing the timing of revenue recognition to shift to the following quarter or the following consolidated fiscal year. This could affect results for each quarter or consolidated fiscal year, with the impact potentially being greater for projects concentrated toward the end of the fiscal period. On the risk map, this item is positioned at "medium" impact and "high" likelihood of occurrence.

Kataro Honjo, who is scheduled to return as Representative Director and President in March 2026, is expected to leverage his extensive experience and knowledge in the gaming industry to lead the Group's transition into a new growth phase centered on "Industrial AX," resulting in a high degree of dependence on him. Should he become unable to continue in this role for any reason, this could affect the Group's operating results and future business development. The Group is working to transfer his knowledge to senior management and optimize the allocation of authority, but on the risk map this item is positioned at "medium" impact and "medium" likelihood of occurrence.

The XR industry is a highly volatile sector in which new technology development and new service introductions occur frequently, and customer needs are constantly changing. If unexpected rapid industry changes occur due to technological innovation and the Group's response is delayed, this could affect its financial position and operating results. The Group has established systems for information gathering, customer needs analysis, and responding to new technologies, but on the risk map this item is positioned at "medium" impact and "medium" likelihood of occurrence.

The Company experienced negative net worth in the fiscal year ended December 2020 and currently raises operating funds through borrowings from financial institutions and a third-party allotment of new shares under a capital and business alliance with DNP. If fundraising costs rise in the future due to increases in interest rate levels or a decline in the Company's creditworthiness with financial institutions, this could affect its financial position and operating results. On the risk map, this item is positioned at "medium" impact and "medium" likelihood of occurrence, and the Company discloses that its current borrowings are not subject to financial covenants or other special provisions.

The Group has recorded operating losses, ordinary losses, net losses attributable to owners of parent, and negative operating cash flow for three consecutive fiscal years, giving rise to material events that raise significant doubt about its going concern assumption. As a countermeasure, the Group has decided to transition to a new management structure under which founder Kataro Honjo will return as Representative Director and President in March 2026, and is pursuing a recovery in profitability through cost structure reform—including the rationalization of unprofitable businesses, in-house development, and reduction of SG&A expenses—together with the launch of external sales of "Industrial AX Solutions." The Group holds cash and deposits of ¥1,188,903 thousand and judges that there is no concern regarding cash flow over the next year; however, if the return to profitability does not proceed as planned, this could have a material impact on the Group's financial position.

The XR market in which the Group operates is still in its infancy, and future amendments to laws or the enactment of new laws could impede business activities. In addition to responding to existing regulations such as the Telecommunications Business Act, the Unauthorized Computer Access Law, and the Personal Information Protection Act, the introduction of new regulations specific to XR would require additional compliance measures. The Group has established a collaborative framework with its retained legal counsel to obtain up-to-date information on laws and regulations and conducts compliance training, but on the risk map this item is positioned at "low" impact and "low" likelihood of occurrence.