Finatext Holdings Ltd.

The Group holds multiple licenses (registrations) under the Insurance Business Act, the Financial Instruments and Exchange Act, and the Money Lending Business Act, and maintaining these licenses is fundamental to business operations. If facts constituting grounds for disqualification or revocation arise, business continuity may become difficult due to business suspension, registration revocation, etc., which could materially affect the Group's financial condition and operating results. There is also a risk that the establishment, amendment, or abolition of related laws and regulations may restrict the provision of services.

The subsidiary Smart Plus, Inc. is registered with the Kanto Local Finance Bureau as a Type I and Type II Financial Instruments Business operator, and requirements for revocation of registration are stipulated under Articles 52, 53, and 54 of the Financial Instruments and Exchange Act. If any violation of laws or regulations occurs, the company may be subject to administrative guidance, business suspension, registration revocation, or other administrative dispositions, which would significantly damage the Group's overall creditworthiness and materially affect its operating results and financial condition.

The Group's business is provided via the internet, making stable system operation extremely important for business execution. If a system failure or information leakage occurs due to program defects, human error, unauthorized access, natural disasters, or other causes, it could damage trust and corporate image and result in significant costs, potentially affecting the business and operating results. The Group implements continuous measures such as network monitoring and the establishment of a system management framework.

The Group holds various types of personal information through the Financial Infrastructure Business and other operations, and regards the prevention of external leakage, improper use, and tampering as an important matter. If personal information is leaked due to unauthorized external access or deficiencies in internal management systems, it could result in claims for damages and substantial response costs, as well as loss of social credibility, potentially affecting the business and operating results. The Group has established Basic Regulations for the Protection of Personal Information and thoroughly conducts internal training for all employees.

Securities Infrastructure "BaaS" is a service that utilizes the stock distribution market, and if the number of market participants decreases due to a decline or stagnation in stock prices, the revenue share generated from brokerage commissions may decrease. The retail securities service operated by the subsidiary Smart Plus similarly faces the risk of reduced brokerage commissions due to a contraction in trading volume. Such market fluctuations directly affect the Group's business, operating results, and financial condition.

The subsidiary Smart Plus has entered into a business alliance with Daiwa Securities Co. Ltd., which holds general trading participant qualifications, for order routing to the Tokyo Stock Exchange, resulting in a high degree of dependence on this alliance. If the partner chooses to terminate the alliance due to financial issues, strategic changes, or other reasons, and a prompt switch to an alternative partner cannot be made, it could adversely affect operating results and financial condition.

Financial instruments business operators are required to maintain a capital adequacy ratio of 120% or higher, and the subsidiary Smart Plus complies with this requirement. If this ratio significantly declines in the future due to losses arising from a deterioration in the business environment or other factors, the company could be ordered to suspend business or have its registration revoked, and it could also result in lost revenue opportunities, affecting the Group's overall business activities, operating results, and financial condition.

The Financial Infrastructure provided by the Group is large-scale enterprise SaaS, characterized by the fact that a single deployment can significantly affect revenue. If project delivery is delayed by a month or shifts to a different fiscal period due to man-hour overruns, if contracts with partner companies are not concluded, or if a transaction is terminated, it could directly affect the Group's business and operating results.

The Group regards M&A as an effective means of business expansion and will continue this policy going forward. If events not identified or anticipated during due diligence occur after the completion of an M&A transaction, or if integration or business development does not proceed as planned, the expected contribution to earnings may not be achieved, and impairment of the investment value of the target company may become necessary, potentially affecting operating results and financial condition.

Along with business expansion and the development of new businesses, timely securing and development of specialized personnel, including engineers, is essential. If competition for talent intensifies due to changes in the employment environment, if personnel development is delayed relative to plan, if personnel leave the company, or if labor costs increase, it could become a constraining factor on competitiveness and business expansion, potentially affecting operating results.