Ridge-i Inc.

Intensifying competition for talent in the IT/AI industry creates a risk that the Group may be unable to secure necessary excellent personnel in a timely manner, or that existing excellent personnel may leave. Since the Group's core business is AI consulting and development, human resources are fundamental to business continuity, and any shortfall in securing personnel would directly constrain business development. The Group is working on external recruiting activities, in-house training, and improving the working environment to prevent talent attrition, but uncertainty remains regarding the effectiveness of these measures given the intensity of the competitive environment.

The pace of technological innovation in the AI industry is extremely rapid, and if the Group is unable to respond promptly to technological changes, it may lose its competitive advantage and this may affect its business results and financial position. In particular, if technological innovation occurs at a scale or in a direction that the Group finds difficult to address, the risk of existing services becoming obsolete increases. The Group strives to grasp technology trends and develop new services through participation in various events and seminars as well as regular in-house study sessions, but delays in response would directly threaten the business foundation.

The number of new entrants into the AI Utilization Consulting & AI Development Service market is on an increasing trend, and the competitive environment is intensifying further due to rapid technological innovation and changes in customer needs. If large expenditures such as system investment and personnel costs become necessary to maintain competitiveness, profitability could be squeezed. The Group is responding through establishing a system to continuously monitor the latest technology trends and by securing and training excellent personnel, but delays in responding to change would directly affect business performance.

Takashi Yanagihara, the founder and Representative Director and President, has extensive experience and knowledge spanning service planning, development, and operation, and plays a central role in determining and executing management policy and business strategy. If he becomes unable to continue management execution for any reason, this could have a material impact on the business and business results. The Group is working to reduce this dependence through information sharing and delegation of authority via the Board of Directors and management meetings, but it will take time for an organizational succession framework to mature.

Due to the nature of its business, the Group has opportunities to come into contact with customers' confidential management strategy information, and if information leakage or improper use occurs, this could affect the business and business results through monetary compensation such as damages and deterioration of corporate image. The Group has obtained ISO27001 certification and has established basic information security regulations and personal information protection regulations, and conducts internal training, but complete prevention is difficult. In a business model founded on trust relationships with customers, information incidents are a risk directly linked to business continuity.

Regarding Star Music Entertainment Co., Ltd., which became a subsidiary in June 2024, if business performance falls below initial expectations due to changes in the business environment or other factors, impairment of goodwill or similar measures may occur, which could affect the Group's business results and financial position. In addition, for future M&A and capital/business alliances, risks exist where monetization does not progress or business plans do not proceed as scheduled when expanding into fields different from the Group's current business areas. The Group's policy is to proceed only after thoroughly examining revenue prospects, but the risk of failing to meet plans due to changes in the external environment cannot be eliminated.

As of July 31, 2025, the Group is a small-scale organization with 9 directors (including 3 audit and supervisory committee members) and 74 employees, and its internal control system remains commensurate with this scale. If the development of the internal control system fails to keep pace with rapid business expansion, appropriate business operations may become difficult, which could affect the business and business results. The Group is working to enhance its system through increasing personnel and employee training, but risk remains if such measures do not proceed in a timely and appropriate manner.

A deterioration in domestic and overseas economic conditions or an economic downturn accompanied by weakening corporate capital investment appetite could slow growth in the AI market. If AI investment by the Group's key corporate customers is curtailed, this would directly affect business results and financial position through a decline in orders received. Although the AI industry is expected to expand over the medium to long term due to demand for corporate management efficiency amid a declining labor population, its resilience to short-term economic fluctuation risk is limited.

It is difficult to fully grasp third parties' intellectual property rights in the AI business domain, and if the Group unknowingly infringes another company's intellectual property rights and this leads to litigation or other disputes, this could affect the business and business results through loss of social credibility and the incurrence of substantial expenses in dealing with such matters. The Group has established a checking system and, depending on the matter, requests investigations from retained attorneys and patent attorneys, but in the fast-moving field of AI, there are limits to fully grasping the state of rights.

As stock options for directors and employees, as of the filing date of this document there exist stock acquisition rights corresponding to 104,420 potential shares (equivalent to 2.4% of the total issued shares of 4,307,720 shares), and upon exercise, the share value and voting rights ratio of existing shareholders would be diluted. The Group anticipates continued use of stock option and other equity-based incentives going forward, and dilution may progress through additional grants and exercises. Balancing the need to secure personnel and provide incentives against the protection of shareholder value is a challenge.