ELEMENTS, Inc.

Revenue from "LIQUID eKYC" and "PolaRify eKYC" accounted for approximately 70% of the Group's total revenue in the fiscal year ended November 2025, indicating a high degree of dependence on specific services. There is a risk that revenue may decline due to the emergence of strong competitors or intensifying competition. As countermeasures, the Group is working to strengthen its competitive advantage by improving authentication accuracy and usability, and to reduce this dependence through the development of new businesses.

Many companies operate in the image analysis and machine learning fields, and the Group's competitiveness may decline due to an increase in competing services or the emergence of superior competitors. Such a decline in competitiveness could affect the Group's business, financial position, and operating results. The Group is pursuing a strategic management approach focused on fields where differentiation can be achieved, fields with high profitability, and fields with fewer competitors.

Image analysis and machine learning technologies, which form the foundation of the AI cloud platform (IoP Cloud), are advancing rapidly, and if the business environment changes due to the unexpected spread of new technologies or services, the Group may not be able to respond promptly. There is also a risk that development costs required to respond could become substantial, or that R&D outcomes may fail to be commercialized or fail to achieve expected revenue. The Group is proactively developing the latest technologies while working to secure talented personnel.

If amendments to the Act on Prevention of Transfer of Criminal Proceeds impose restrictions on the use of eKYC or require system changes, this could lead to a decrease in users and substantial response costs, potentially reducing revenue and profit. Additionally, if new legislation is enacted that includes internet-related businesses as "specified business operators" subject to regulation, business operations could be restricted. The Group has established a framework to promptly obtain information on regulatory changes through lawyers and external organizations.

The Group holds and processes large volumes of personal information, including facial images, identification documents, names, addresses, dates of birth, body shape information, and footprint information. If unauthorized external access or internal intentional or negligent acts result in information leakage, this could lead to loss of trust and losses due to damages. Although the Group has implemented measures such as establishing and operating basic regulations for personal information protection, ensuring safety management at outsourcing partners, and obtaining ISO/IEC 27001 certification, complete prevention is difficult.

Most of the Group's cloud-based services are provided on Amazon Web Services (AWS), creating a risk that service provision could be suspended due to system failures caused by natural disasters, accidents, or unauthorized access, or due to termination of the contract with AWS. Although the Group has secured redundancy through the use of multiple availability zones and implemented various measures against unauthorized access, a large-scale failure could affect the Group's business, financial position, and operating results.

Due to substantial upfront costs recorded for the construction of the AI cloud platform (IoP Cloud), the Group recorded negative retained earnings as of the end of the consolidated fiscal year. If the business does not progress as planned and the Group is unable to record net income, the timing at which retained earnings turn positive could be significantly delayed. The Group is promoting planned initial investment execution together with efforts toward customer acquisition, revenue expansion, and profitability improvement.

If fund procurement through equity finance, public subsidies, or borrowings from financial institutions does not proceed as expected in response to increasing demand for working capital, development investment, and capital expenditure accompanying business progress, this could have a material impact on business activities. Additionally, future capital increases could dilute the value per share due to an increase in the number of shares issued. As of the end of the month preceding the filing date of this document, the ratio of potential shares from stock acquisition rights corresponds to 13.45% of the total number of issued shares.

As a development-oriented company centered on engineers, the Group may be unable to build an adequate development and sales structure if it faces difficulty securing appropriate personnel or if current employees resign. Given its small organizational size, the Group may be unable to adequately respond in terms of personnel and organizational structure during periods of rapid business expansion, and fixed costs may increase in advance of personnel increases. The Group is working to reduce this risk through active recruitment activities, strengthening external networks, and enhancing compensation and treatment systems.

The Group established a joint venture, "PT. Indoliquid Technology Sukses," in the Republic of Indonesia and plans to expand overseas business primarily in Southeast Asia. However, there is a risk that its bases and services could be directly or indirectly affected by terrorism, war, coups, political instability, or similar events. If such damage occurs, it could affect the Group's business, financial position, and operating results. The Group gathers information on political conditions, fiscal conditions, and regulatory changes, and strives to identify early signs of political instability and similar risks.