TRADE WORKS Co., Ltd

The Company continues to make aggressive strategic investments, such as data center capacity expansion, to shift its business model from a "development/flow-type" to a "usage-based/stock-type" model. If the Company is unable to secure a sufficient number of users, or if operational standardization requires costs exceeding expectations, it may become difficult to recover these investments, which could adversely affect business performance. As a countermeasure, the Company is working to expand system usage services that meet customer needs and to promote operational standardization.

If malfunctions occur in the systems and services provided due to unpredictable factors such as sudden spikes in access, internet line failures, unknown computer viruses, or natural disasters, this may cause customers to incur lost business opportunities or lost profits. If such malfunctions result from gross negligence on the part of the Group, there is a risk of substantial damage claims and significant loss of credibility. The Group implements security measures such as utilizing cloud infrastructure, dual-redundant equipment, and firewalls, and its System Risk Management Committee establishes and enforces quality control standards.

The Group conducts its business primarily centered on the securities industry. If securities companies' business performance significantly deteriorates due to economic downturns or sharp market fluctuations, this could lead to a substantial decline in IT capital expenditure and a resulting decrease in orders received. Additionally, business performance may also be affected by revisions to laws and regulations surrounding the securities industry or by the implementation of new regulations restricting financial institution systems. As a countermeasure, the Company monitors trends in the securities industry while working to diversify the risk of business deterioration by expanding the scope of its services beyond the securities industry.

Technological innovation is extremely rapid in the information services industry, and customer needs are constantly changing. If unexpected and rapid technological innovation occurs and the Group's response is delayed, this could lead to the obsolescence of its existing technologies and services and a decline in competitiveness relative to other companies, potentially affecting business performance. As a countermeasure, the Company is actively promoting the development of systems and services that incorporate the latest technologies.

As the tendency for customers to request custom specifications increases, unexpected increases in workload due to additions or changes in requirements during the development process may occur, potentially worsening project profitability. If delivery delays occur due to reasons attributable to the Group, there is a risk of facing substantial damage claims, which could lead to a decline in credibility. The Company focuses on flexible personnel allocation through thorough project management and on developing engineers capable of handling large-scale projects.

Because the timing of delivery of development projects is concentrated or dispersed, quarterly net sales are not leveled out; the quarterly composition ratio over the most recent three fiscal years has fluctuated from a minimum of 16.2% to a maximum of 31.4%. Such significant fluctuations in performance may, in some cases, result in an operating loss being recorded for a given quarter. The Company is promoting a shift toward a stock-type business model and working to level out sales by expanding stock-type revenue such as cloud services.

Sales to major customers may account for 50% or more of total sales, and if such a customer terminates the business relationship or reduces transaction amounts due to a change in management policy, this could have a material impact on business performance. There is a risk that the vulnerability of the revenue base due to sales concentration could become apparent. The Company is working to level out sales by focusing on developing new customers and diversifying its customer base.

The Group's business is highly dependent on the number and capabilities of its systems development engineers. If the Group is unable to secure and develop excellent talent as planned, this could affect business performance. As of the end of December 2025, the number of employees was 154 (excluding temporary staff), a relatively small scale, meaning that the impact of officers or employees leaving the Company could be significant. The Company continues to work on active recruitment activities and on developing human resources through enhanced project management skills, financial knowledge, and technical training.

In the course of business operations, the Group holds personal information and confidential information. If important information is leaked, lost, or falsified due to unauthorized external access, intentional or negligent acts by employees, or serious product malfunctions, this could significantly damage the Group's credibility and affect business performance. The Company has established Personal Information Protection Regulations and Basic Information Security Management Regulations, disseminates and provides education on these to all employees, and has continuously maintained its Privacy Mark, obtained in 2013, up to the filing date of the Annual Securities Report.

With respect to goodwill recorded in connection with corporate acquisitions, if the excess earning power originally anticipated becomes unattainable due to deterioration in market conditions or other factors, an impairment loss may be recorded, which could affect the Group's financial position and business results. In addition, with respect to investment securities held for the purpose of building business relationships or maintaining transactional relationships, there is a risk of impairment loss arising from fluctuations in market prices or deterioration in the financial condition of the issuing company. The Group strives to identify early signs of impairment through monitoring the business performance and financial condition of affiliated companies and by periodically assessing the fair value of investment securities.