GRID Inc.

Although profit and loss are managed on a project-by-project basis, if unforeseen facts not anticipated at the time of estimation come to light or man-hours increase due to unexpected circumstances, project profitability may deteriorate, potentially affecting business performance. The impact is assessed as "high," and the risk of man-hour deviation is particularly likely to materialize in the development of planning optimization systems for social infrastructure. As countermeasures, the Company is promoting clarification of the scope of work and requirements with customers, as well as improving the accuracy of man-hour estimates through the accumulation of project experience.

The AI Development Business has been building up a track record since the fiscal year ended June 2016, but there is a risk that sales may fall short due to delays in progress on new orders or extensions of development periods. In addition, the storage power station-related services launched in August 2024 are still in the process of accumulating development track record and experience, and similarly carry the risk of a downturn in performance. Since delays in new orders also spill over into sluggish growth of stock-type revenue (operation and support), the impact is assessed as "high."

AI technology is a field where research and development is progressing globally and the speed of technological innovation is extremely fast; if the Company's response is delayed, it may lead to a decline in competitiveness and affect its business and performance. The impact is assessed as "high," while the likelihood of occurrence is assessed as "low." As a countermeasure, the Company has established a system to incorporate the latest research technology by collaborating with university researchers specializing in AI and industrial fields, including outside directors.

Due to the nature of its business, the Company has opportunities to access confidential information important to customers' management strategies. If information leakage, data destruction, or falsification occurs due to human operational error, cyberattacks, unauthorized access, computer viruses, or other causes, the Company may bear liability for damages or suffer a loss of customer trust that could worsen business relationships. The impact is assessed as "high," and while the Company addresses this through the development and operation of information security management regulations, complete prevention is difficult.

The Company is considering M&A strategy as a means of business expansion, but if problems that could not be identified through prior due diligence—such as the occurrence of contingent liabilities or the discovery of unrecognized liabilities after an acquisition—arise, or if business development does not proceed as planned, this may affect operating results and financial condition. The impact is assessed as "high," and the likelihood of occurrence is assessed as "low." The Company's policy is to conduct sufficient prior due diligence on the finances, legal matters, and business of target companies.

Although the Company has a first-mover advantage in planning optimization systems specialized for the social infrastructure field, this is a market expected to grow in the future, and there is a possibility that domestic and overseas operators will newly enter the market. If sufficient differentiation is not achieved or if competition intensifies, this may affect the business and performance; both the impact and likelihood of occurrence are assessed as "medium." The Company's policy is to respond by building a track record ahead of competitors and establishing its position in the market at an early stage.

The Company positions securing and developing excellent human resources as an important issue, but if recruitment does not proceed sufficiently, if training is insufficient, or if employees currently in service resign, this may constrain the development of contracted projects, leading to a decline in quality and profit margins. Both the impact and likelihood of occurrence are assessed as "medium." As of June 30, 2025, the number of employees was 109, a small scale, resulting in a high degree of dependence on individual personnel. Although the Company is implementing measures such as expanding recruitment channels, competition to acquire AI specialist talent is intense.

Kanjin Sogabe, the founder and Representative Director and President, plays an important role in formulating and executing management policy and business strategy, and if he becomes unable to perform his duties for any reason, this may affect the business and performance. Both the impact and likelihood of occurrence are assessed as "medium." In addition, his asset management company (We Co., Ltd.) is the largest shareholder, and the Company has established a governance structure requiring board of directors' approval based on the related party transaction management regulations.

The Company has introduced a trust-type stock acquisition rights plan issued at fair value for the purpose of enhancing the motivation of officers and employees. As of June 30, 2025, the number of potential shares was 530,574, representing a potential share ratio of 11.2% relative to the total number of issued shares of 4,750,626. If these stock acquisition rights are exercised, the value of shares held by existing shareholders may be diluted. Both the impact and likelihood of occurrence are assessed as "medium."

The Company is considering future overseas expansion, leveraging the universality of social infrastructure business operations worldwide as a strength; however, there are various risks including exchange rate fluctuations, economic conditions in destination countries, political instability, and changes in laws and regulations, and if these risks materialize, they may affect operating results and financial condition. Both the impact and likelihood of occurrence are assessed as "medium," and the Company's policy is to proceed with business development after taking sufficient countermeasures, including the engagement of local experts.