Interfactory, Inc.

The Company's core business is EC site construction, and continued expansion of the BtoB and BtoC EC markets is a precondition for growth. If the EC market or the internet market does not grow smoothly due to security threats, legal regulations, or other unforeseen factors, this could adversely affect the Company's business performance. According to the Ministry of Economy, Trade and Industry's "FY2023 Market Survey on Electronic Commerce," the EC penetration rate is on an increasing trend, but continued attention to changes in the external environment is necessary.

The technical barriers to entry for the Company's service "EBISUMART" cannot be said to be extremely high, and entry by competitors including major companies with financial strength and brand power, as well as an increase in similar services, is expected. Intensifying price competition could lead to a reduction in service prices or a decline in market share, or the Company's relative competitive advantage could decline due to the emergence of competing services utilizing entirely new technologies. The Company is working to establish its position in the industry by opening its API and building an environment that facilitates participation by partner companies.

Most of the Company's net sales depend on "EBISUMART" construction revenue (flow) and service fee revenue (stock), creating a risk of concentration of revenue sources. If competitiveness declines and the number of stores acquired decreases due to technological innovation, changes in social conditions, the introduction of legal regulations, or the occurrence of unforeseen events, or if service operation becomes difficult, this could have a material impact on business development and operating results. Diversifying new revenue sources is a challenge going forward.

The Company provides a platform that manages information assets such as personal information held by customers. If information assets are leaked, lost, or falsified due to unauthorized access, data theft, or inadequate security measures, the Company could face large claims for damages, revocation of its ISO/IEC 27001 certification, fines, or other penalties. The Company obtained ISO/IEC 27001 certification in August 2015 and has continuously renewed it, while also developing its "Personal Information Protection Regulations" and providing education and training for officers and employees; however, risks such as cyberattacks exceeding expectations cannot be eliminated.

The Company's services use AWS (Amazon Web Services, Inc.) as a data center, and server costs paid to AWS during the 22nd fiscal period (June 1, 2024 to May 31, 2025) amounted to ¥243,628 thousand. If a failure occurs at AWS and an alternative solution cannot be established, resulting in a prolonged service interruption, this could affect the Company's operating results and financial condition. In addition, since AWS costs are calculated in US dollars, significant exchange rate fluctuations could also have a major impact on the Company's financial condition.

Technological innovation is occurring continuously in the internet field, and strengthening and maintaining the development structure is essential to continuously providing new features and services. If, for some reason, strengthening or maintaining the development structure becomes difficult, the Company may be unable to demonstrate technological superiority, which could affect its business and performance. The Company strives to respond to the latest technology trends and to secure and develop employees, but there is a risk that difficulty in securing talent could lead to a decline in technological response capability.

The Company records newly developed functions and similar items as intangible fixed assets. If the operating environment deteriorates significantly due to technological obsolescence or slowing service sales resulting from technological innovation or changes in market trends, it may be determined that an impairment loss should be recognized. In addition, if developed functions are determined to lack asset value, they will be expensed all at once, which could affect business performance and financial condition. The Company verifies appropriate asset recognition through approval of development plans and progress confirmation by the Board of Directors and other bodies, but the risk of unpredictable changes in the external environment remains.

The Company is deeply involved with multiple laws, including the Act on Regulation of Transmission of Specified Electronic Mail, the Act on Specified Commercial Transactions, the Act on the Protection of Personal Information, the Antimonopoly Act, and the Act against Delay in Payment of Subcontract Proceeds. If amendments to laws reveal deficiencies in the Company's compliance systems, or if the scope of regulations or liabilities the Company is subject to expands, this could affect its business and performance. The Company strives to address compliance through the development of internal systems and service terms of use.

Noboru Kaburagi, Representative Director, President and CEO, who is also the founder and a major shareholder, plays an important role in business creation and the accumulation of know-how, resulting in a high degree of dependence on him. If, for any reason, he becomes unable to perform his duties, this could have a significant impact on the Company's business performance. The Company is working to develop and strengthen executive talent with the aim of moving away from excessive dependence on a specific individual, but a dependency risk remains at present.

Securing, developing, and retaining excellent talent is an important challenge for expanding business scale. If the Company is unable to hire the necessary personnel, if trained officers and employees do not contribute to the business, or if they leave the Company, this could affect business development and operating results. The Company strives to improve retention rates through training for new and mid-career employees, executive training for core employees, and internal training programs, but there is no guarantee that these measures will be effective. From the perspective of maintaining the capability to respond to technological innovation, securing specialized talent such as engineers is a particularly important management challenge.