JAPAN CASH MACHINE CO.,LTD.

The Bill Validator Unit is a core product that accounts for a large portion of the Group's total net sales, with a high proportion directed toward the gaming market. The rapid global progress of cashless transition (electronic transactions) poses a risk of significant future fluctuation in demand for the Company's products. There is no guarantee that the Company can maintain its current high market share amid intensifying technology development and price competition, and it may become difficult to maintain appropriate selling prices.

In the gaming industry, including casinos, the sale of Bill Validator Units requires permits from authorities in each country and state, and in some U.S. states, regulations similar to those applied to gaming machines apply. Both the Company and its individual officers undergo strict screening, and if a violation of laws or regulations occurs, there is a risk that revocation of licenses could make it impossible to sell products. Changes in laws and regulations governing gaming machines in various countries may also affect business performance and financial condition.

The Company has a high dependence on overseas sales as a proportion of total net sales, and fluctuations in exchange rates directly affect business performance. While the Group strives to reduce this risk through optimization of intra-group overseas trade flows and the use of forward exchange contracts, complete avoidance is difficult, as differences at period-end in foreign-currency-denominated assets and liabilities are recorded in non-operating income and expenses. The effects of exchange rate fluctuations extend to both sales and profit.

Demand for Bill Validator Units for the gaming market is greatly affected by the economic conditions of the countries and regions in which they are sold. Should events that reduce individual consumer sentiment occur, such as conflicts, terrorism, large-scale disasters, or infectious diseases, the overall business climate of the gaming industry could deteriorate, potentially affecting the Group's business performance and financial condition.

Demand for electronic components, a key material, can change significantly due to trends in the semiconductor market, potentially affecting procurement. Although the Company secures multiple procurement channels, there is a risk that rising crude oil and material prices, combined with a high proportion of overseas production, could push up costs due to rising labor costs in various countries.

Pachinko halls are subject to the Entertainment Business Law, and the mandatory introduction of new standard machines has historically led to a contraction in industry-wide sales, resulting in a significant decline in the Group's sales to this market. Future changes to gaming machine standards or amendments to the Entertainment Business Law could further affect business performance and financial condition. Amid the ongoing decline in the gaming population and the number of halls, the risk of bad debt on accounts receivable is also increasing.

The Group holds confidential information, including business information and personal information of business partners and itself, and there is a risk of information leakage or loss due to external cyberattacks or unauthorized access. Should an information leak occur, it could lead to suspension of business activities and loss of social credibility, potentially having a material impact on business performance and financial condition.

The Company actively promotes M&A and business/capital alliances as part of its growth strategy, but even after conducting due diligence, there is a risk that the target company's performance could deteriorate due to changes in the business environment or unforeseen contingent liabilities. If the initially anticipated results are not achieved, impairment losses on stock valuation or goodwill may occur, potentially affecting business performance and financial condition.

The Group's Bill Validator Units support currencies from over 140 countries worldwide, but in recent years, counterfeit banknotes and fraudulent tampering with devices have become more sophisticated and rapid. Although the Company responds with prompt software updates, increased countermeasure costs and compensation costs to customers may arise, potentially affecting business performance and financial condition.

In conducting business overseas, the Group is exposed to country risks such as political conditions, trade issues, changes in various laws and regulations, and currency revaluations in various countries. Should country risk suddenly intensify, significant problems could arise in production and sales activities, potentially affecting business performance and financial condition.