INTERTRADE Co.,Ltd.

The Financial Solutions Business is required to comply with the Financial Instruments and Exchange Act, the Business Solutions Business with the Worker Dispatching Act, and the Healthcare Business with the Pharmaceuticals and Medical Devices Act, the Food Labeling Act, the Act against Unjustified Premiums and Misleading Representations, and other wide-ranging laws and regulations. If the business environment changes suddenly due to amendments to these laws or changes in their interpretation, this could have a material impact on business performance. The Company faces regulatory risk spanning multiple businesses, and there is also a risk that a specific legal amendment could simultaneously affect multiple segments.

The Securities Dealing System, the Company's core product, depends on the securities business field, and changes in securities companies' IT capital expenditure policies driven by stock market fluctuations directly affect order trends. In a market downturn, customers may restrain their investment, which could significantly impact the Group's sales and business performance. The revenue base of this business has a structural vulnerability of being easily affected by sentiment in the securities industry.

The Company undertakes large-scale system development projects for financial institutions and business corporations, and customer requirements continue to become more sophisticated due to changes in laws and information technology. If requests beyond expectations are received, delivery delays and increased costs may occur, potentially leading to deteriorating profitability and damaged customer relationships. Although the Group strives to mitigate such risks, it is difficult to completely eliminate unforeseen events.

If defects occur in the systems or services provided to customers, this could result in lost business opportunities or lost profits for customers. If a defect arises due to gross negligence, this could lead to claims for damages and a significant loss of credibility, potentially causing severe impact on business performance. Although the Company strives to maintain and improve quality control, the risk of defects always exists in the field of financial systems, which requires high reliability.

In the course of business operations, the Company holds personal information and confidential information, and if unforeseen events such as unauthorized access or equipment defects occur, the loss, leakage, or falsification of internal confidential information, including customer information, could significantly damage the Company's credibility. Although measures such as establishing an information security policy, restricting access, and providing security training to employees have been implemented, the risk continues to exist due to the increasing sophistication of cyber threats. In addition to the impact on business performance, this also entails risks of legal liability and customer attrition.

Digital Asset Markets Co., Ltd., an equity-method affiliate, aims to provide encrypted, distributed services based on blockchain technology and to build a Web3 financial platform in the FinTech field, but it is currently in a stage of continued investment to build its business foundation. As this is a new business field, there are many uncertain factors, such as the possibility that it may take longer than expected to achieve profitability, and if the plan is not achieved, this will affect the Group's business performance. The Company seeks to mitigate this risk by monitoring the progress of the business and fundraising in a timely manner and implementing various measures as necessary.

Securing and developing excellent human resources is an important issue for continued business development and growth, and the Company is working to build an organizational structure that eliminates excessive dependence on specific individuals. If, for some reason, it becomes difficult to secure and develop human resources, this could reduce system development capabilities and the ability to provide specialized services, potentially affecting business performance. Since this field requires a high degree of specialized expertise in financial systems, securing replacement personnel requires considerable time and cost.

The Financial Solutions Business is a highly specialized field combining systems and finance, and if transactions with hardware suppliers or development outsourcing partners are suddenly disrupted or changed, it is expected to take several months to secure alternative business partners with equivalent specialized knowledge. This could disrupt business continuity during that period, potentially leading to delivery delays for customers and the loss of order opportunities. Due to the high degree of specialization, it is difficult to select alternative partners, and there is a latent risk of supply chain concentration.

In the Healthcare Business, health foods and cosmetics made from Hanabiratake are produced on a forecast basis, and inventory risk may arise if demand trend forecasts significantly miss the mark. In addition, if unexpected hygiene or health issues occur, this could adversely affect consumption trends and significantly damage business performance. Although a thorough quality control system has been established, there is also an inherent risk of reputational damage and stricter regulation specific to the food and health food fields.

The Healthcare Business has expanded into the Asian region, and it is exposed to country risks such as deteriorating political and economic conditions, unexpected changes in laws and regulations, and worsening security in the countries where it operates. If these risks materialize, it may become difficult to continue local operations, potentially affecting business performance. Foreign exchange fluctuation risk and risks related to relationships with local partners, which are specific to overseas operations, also exist in combination.