Smartrunning

1.      Risk associated with the team's knowledge of the market and the planned commercial adoption

Risk: Partner acquisition and conversion into paying users may develop more slowly than expected.

Consequence: If the team lacks sufficient market knowledge, incorrect objectives may be set. This could lead to a slower growth or lower revenue and thus a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of the SMARTRUNNING, with partial or complete loss of the invested capital. 

Note: There are pilot projects, multiple B2C/B2B2C channels, and a cost structure adjusted according to proven traction.

2.      Risk associated with the size of the team

Risk: Given the company’s development stage, having a suitable team is essential for future growth. If the company is entirely dependent on one key individual, there is a risk that this person may withdraw from the company.

Consequence: If there is only one director or key figure and this person steps down, the company may temporarily be left without leadership. In case of difficulties, there would be no one to represent the company and make decisions.

Note: The company currently consists of three directors. In addition, measures have been implemented such as documentation (runbooks), code reviews, shared project ownership, retention incentives, and a succession plan. 

3.      Risk associated with the need for new financing

Risk: Part of the investment program depends on obtaining external financing in a timely manner. It is also likely that additional financing requirements will arise in the future.

Consequence: On the one hand, there is a risk that the company will not be able to attract new investors. This could lead to delays in recruitment, development, and commercial rollout and, in the worst-case scenario, to the dissolution or bankruptcy of the company, resulting in the investor losing part or all of the invested capital. On the other hand, the company may succeed in attracting new investors, which would result in dilution, particularly if a lower valuation than the current valuation is applied.

Note: On the one hand, attention will be paid to phased spending, diversified sources of funding, and optional financing opportunities through PMV. On the other hand, investors will have the opportunity to invest again in future financing rounds, under the investment terms applicable at that time.

1.      Risk Related to development

Risk: The planned software, data integrations, and adaptive models may require more time or resources than expected.
 Consequence: Product launches may be postponed, and additional financing may be required.
 Note: Particular attention is paid to phased objectives, specialized external support, and continuous validation prior to broader implementation. Type 3 - Risk of insolvency and bankruptcy of the project owner

Risk: The risk of insolvency means that SMARTRUNNING may not have sufficient resources to meet its payment obligations (cessation of payments).

Consequence: If the company fails to secure alternative financing (such as emergency credit), it may go bankrupt. Insolvency or bankruptcy of SMARTRUNNING could result in reduced or no returns, and in the worst-case scenario, a partial or total loss of the invested capital.

1.           Risk associated with the lack of guarantees

Risk: Neither the shares of SMARTRUNNING nor the Participatory Notes of the SMARTRUNNING 2A compartment of Spreds Finance provide guarantees of a return or repayment of the invested capital. 

2.           Risk associated with the lack of a fixed return

Risk: Participatory Notes do not offer a fixed return. The return of the Participatory Notes depends solely on the performance of the Underlying Asset, namely the shares of SMARTRUNNING. 

Consequence for both risks: If the project owner's predictions do not come true (within the predetermined timing), there is a risk of lower or non-existent returns and, in the worst case, partial or complete loss of the invested capital. 

Note for these risks: Investors in Participatory Notes bear the same economic risk as if they were investing directly as shareholders of SMARTRUNNING.

Risk: Although each Spreds Finance compartment is ‘bankruptcy remote’ (meaning that no other creditor can claim a right on or against this compartment) in relation to the others and in relation to the ‘general’ liabilities of Spreds Finance itself, as a result of (i) the terms and conditions of the Notes, (ii) the articles of association of Spreds Finance and (iii) Article 4 of the Law of 18 December 2016 on crowdfunding; there is a subsidiary risk of insolvency of Spreds Finance. 

Consequence: Should such insolvency occur, Noteholders may be exposed to the risk of a significant delay in the recovery of their investment.

Note: The probability of this risk occurring is extremely low given the structure and organization of Spreds Finance, in particular the compartmentalization mechanism and the "bankruptcy-remoteness" described above. Each participation taken or loan granted to a project owner is recorded in a separate compartment and is appropriately accounted for in the accounts, taking into account the fact that the accounts are kept by compartment. As a result of (i) the conditions attached to the issue of Participatory Notes, (ii) the articles of association of Spreds Finance and (iii) article 10 of the law regulating the recognition and delimitation of crowdfunding and containing various provisions relating to finance and notwithstanding articles 7 and 8 of the Mortgage Law of 16 December 1851, the assets of a particular compartment serve exclusively to guarantee the rights of investors with respect to this compartment.

1.               Risk associated with the absence of an organized exchange market for Participatory Notes

Risk: Neither the project owner nor Spreds Finance organizes an exchange market for Participatory Notes. It is thus up to the investor himself to find a buyer for his Participating Notes. Given the absence of an exchange market for Participatory Notes, there is no way to adequately establish a comparative pricing methodology for Participatory Notes.

Consequence: A holder of Participatory Notes may not be able to find a buyer for the Participatory Notes it wishes to sell (at the price at which it wishes to sell).

Note: The intention is not to sell the Participatory Notes but to sell the Underlying Asset, often on the occasion of the sale of the Company itself.

2.           Risk associated with the vote by the general meeting of holders of Participatory Notes to sell

Risk: Any decision by Spreds Finance to sell shares of SMARTRUNNING is subject to the approval of the holders of Participatory Notes representing at least 75% of the outstanding Participatory Notes, unless Spreds Finance is required to sell them under a contractual or statutory provision. 

Consequence: Investors thus bear the risk that the general meeting of the holders of Participatory Notes may refuse to approve the sale of the participation, in which case all investors are bound by this decision and thus must wait to obtain redemption of the Participatory Notes.

3.           Risk associated with an investment in a young company

Risk: Investing in shares of young companies entails the risk that a buyer for the shares will not be found, or not at a fair price yielding a market return, or that a buyer will not be found within a reasonable period of time. 

Consequence: If no buyer is found for the holding, redemption of the Participatory Notes is not possible.

Note: Spreds Finance will make every effort within its powers to obtain the best possible price.

1.               Risk associated with the absence of analysis by Spreds Finance

Risk: Spreds Finance has not conducted an analysis of the proposed project or of the financial situation of the Company.

Consequence: Any investor considering subscribing to Participatory Notes should make its own analysis of SMARTRUNNING 's solvency, activity, financial situation and prospects.

Note: Any decision to invest in Participatory Notes should be based on a comprehensive analysis of the project and of this sheet of essential investment information. Spreds Finance's model does not provide for the presentation of analyzed projects to investors but allows investors to invest based on the information made available to them, after making their own analyses.

2.               Risk associated with the lack of (periodic) reporting

Risk: There is no obligation for periodic reporting in unlisted companies (except for the cases provided by law, such as the annual general meeting of shareholders and an alarm bell procedure). While some entrepreneurs proactively communicate good and bad news (with a certain periodicity), others do not. As a (minority) shareholder, one cannot enforce reporting (other than in cases provided by law).

Consequence: If an entrepreneur does not do (periodic) reporting, there can be long periods during which investors have no insight into the (financial) state of the company. The lack of reporting does not in itself change the (financial) state of the company but can create a sense of unease among investors. If at some point a company has to file a procedure of judicial reorganization or bankruptcy, this can be a (big) surprise for the investor. 

Note: Investors in Participatory Notes bear the same risk as if they invested directly in SMARTRUNNING and became shareholders. However, Spreds, as a crowdfunding service provider, tries to encourage each project owner to report at least 2x per year.

3.               Risk associated with the tax treatment of capital gains - government tax on capital gains

Risk: Starting January 1, 2026, a capital gains tax will apply to the sale of assets. SMARTRUNNING shares will be subject to this tax in the event of an exit.

Consequence: If the capital gain realized from the sale of SMARTRUNNING shares exceeds the exemption threshold (currently €10,000, which may be increased to €15,000), investors will be required to pay tax on the excess gain. 

Note: As mentioned above, an annual exemption of €10,000 is foreseen (indexed based on inflation). 

To the best of the project owner's knowledge, there are no other material risks associated with its activities.