FINDEX Inc.

The Company handles a large amount of information requiring advanced security management, such as hospital patient information and public administrative documents, and there is a risk that an information security incident may occur amid an increasing frequency and sophistication of cyber attacks. In the event of an incident, in addition to loss of corporate credibility and deterioration of corporate image, there is a possibility of revocation of ISMS certification, which could have a material impact on the business and results of operations. As countermeasures, the Company continuously implements physical, technical, and administrative security measures, and has obtained ISMS certification for all information system maintenance operations.

In the process of providing medical system implementation services, the Company may temporarily hold patient personal information stored by medical institutions, and there is a risk of personal information leakage due to unforeseen circumstances. In the event of a leakage, there is a possibility that substantial damages claims, revocation of Privacy Mark certification, or fines may be imposed, which could affect the business and results of operations. As countermeasures, the Company has established personal information protection regulations, published its personal information protection policy, and thoroughly implemented education and training, and obtained Privacy Mark certification in January 2008.

If a defect caused by negligence in the Group's products causes damage to a user, there is a possibility that monetary compensation claims or loss of trust may affect business results. In addition, if medical institution information, including patient personal information held during data migration work, is leaked externally due to a defect in the internal control system or other cause, there is a risk of monetary compensation and loss of social credibility. Note that the Company has taken out relevant liability insurance to cover damages and cost losses related to the IT business.

If new technologies or services not anticipated by the Group become widespread, existing products may become obsolete, potentially affecting business results. In addition, downward pressure on product prices due to intensifying competition in the market may also be a factor affecting business results. The Company addresses this by continuously working on improving existing products and researching and developing new products in its development department.

Since employees of the Group are required to have advanced knowledge of medicine and IT as well as proposal capabilities, securing and developing specialized personnel is an important issue for business continuity. If planned recruitment and development cannot be achieved, this may affect business expansion and future prospects. The Company strives to expand its workforce through continuous recruitment activities and education and training programs.

As a research and development-oriented company, the Group supplies products and pursues a policy of expanding sales through sales partners, so maintaining relationships with partners is directly linked to the stability of the business foundation. If a sales agency agreement is terminated due to a change in a sales partner's management strategy or a switch to another company's products, monetary and time burdens related to supporting users in regions far from sales offices may arise, potentially affecting business results. Currently, the Company maintains good relationships with its sales partners.

Due to the marked progress of technological innovation related to software, there is a possibility that the Group's software may inadvertently infringe on third-party intellectual property rights, or that patent rights of which the Company is unaware may exist, potentially resulting in claims for damages or injunctions against use. In addition, patent rights and other intellectual property rights obtained by the Group may be invalidated or circumvented due to objections raised by third parties, and there is no guarantee of a competitive advantage. The Company strives to protect its independently developed logic and products by acquiring patent rights and other intellectual property rights both domestically and internationally.

The outbreak of infectious diseases has a significant impact on the operations of medical institutions, which are the Group's main customers, and if the impact becomes severe, it may affect the Group's business results due to delays or postponements in system implementation at medical institutions. Given the business structure's high dependence on medical institutions, the outbreak of infectious diseases can directly affect the timing of revenue recognition through fluctuations in demand timing. The securities report does not describe specific countermeasures.