NCXX Group Inc.

Subsidiary Zaif operates as a crypto asset exchange business operator under the Payment Services Act and is under the supervision of the Financial Services Agency, while also being subject to the self-regulatory rules of the JVCEA. Future changes to laws, regulations, taxation, or self-regulatory rules, or administrative guidance, could constrain Zaif's business operations and affect the Group's overall performance and financial condition. Crypto asset regulation tends to be continuously strengthened both domestically and internationally, and an increase in compliance costs is also anticipated.

The crypto asset exchange business is subject to laws and self-regulatory rules concerning anti-money laundering and counter-terrorism financing (AML/CFT) and identity verification (KYC). If compliance is deemed inadequate, administrative sanctions or improvement orders could be issued, which could have a material impact on the Group's credibility and business continuity. As regulatory requirements become more sophisticated, continuous development of systems and organizational structures is required.

Because crypto assets exist as electronic data, there is an inherent risk that customer assets and the Company's own assets could be lost due to cyberattacks, unauthorized access, malware, hacking, or similar incidents. Should an asset outflow occur, the resulting substantial compensation burden and loss of credibility could seriously affect the Group's performance and financial condition. The Group states that it has implemented necessary security measures, but detailed information on the specific content of these measures has not been disclosed.

The crypto asset market is highly volatile, and the value of crypto assets held by the Group could fluctuate significantly depending on market conditions. If market liquidity declines, selling crypto assets could become difficult, resulting in valuation losses that could affect the Group's performance and financial condition. The structural feature of holding crypto assets as business assets means the Group is directly exposed to market cycle effects, representing a financial vulnerability.

Zaif manages fiat currency and crypto assets entrusted by customers separately from its own assets; however, if deficiencies arise in the management system, it may become difficult to return customer assets. This could result in loss of credibility, administrative sanctions, liability for damages, and other consequences that could seriously affect the Group's business continuity. There have been past incidents across the industry of customer asset outflows, making continuous strengthening of the management system essential.

The Group handles large volumes of personal information through its diverse businesses, including e-books, crypto asset exchange, and logistics. Should an information leak occur, the Group could be subject to violations of the Personal Information Protection Act, claims for damages, and loss of credibility. In particular, the crypto asset exchange business holds sensitive information such as identity verification documents required for KYC compliance, making the risk relatively higher in the event of a leak. Establishing and maintaining an appropriate information management system remains an ongoing challenge.

The Group has adopted a policy of making investments, loans, and M&A to expand into growth areas; if the initially expected return on investment is not achieved, this could adversely affect the Group's performance and financial condition. Given the Group's diversified portfolio strategy spanning multiple business areas, the scope of impact could be broad if business environment changes or integration risks materialize in individual investment projects. There is also a latent risk of impairment of goodwill and other assets.

SEQEDGE Japan Holdings Corporation, the Company's parent company, holds 52.66% of the Company's total voting rights, and changes in its management policy could affect the Company's business and performance. Because the parent company holds a majority of voting rights on its own, the structure makes it difficult for minority shareholders' views to be reflected in resolutions on important matters at shareholders' meetings. There is a risk that changes in the parent company's strategy or financial condition could spill over into the Group's management.

The Group operates across diverse areas including digital content, crypto asset exchange, logistics, and solutions businesses, and could be affected in a complex manner by demand trends, competitive conditions, and legal and regulatory factors in each market. Because the business areas are so wide-ranging, there is a risk that grasping and managing the impact of market deterioration in a specific segment on overall performance becomes more complex. If intensified competition or market contraction occurs simultaneously across multiple businesses, the Group's overall revenue base could be undermined.

Natural disasters, epidemics, accidents, logistics disruptions, and similar events could affect the Group's overall business operations, with particular concern for the Agricultural ICT Business and supply chain-related businesses regarding raw material procurement, processing, and distribution. There is also a risk that changes in the business environment could result from policy changes, tax reforms, or changes to subsidy programs by government and local authorities. These external environmental changes are difficult to predict, and the state of business continuity planning (BCP) preparedness will influence the Group's ability to respond.