Net Protections Holdings, Inc.

Due to the nature of BNPL services, the Group bears the entire risk of credit losses on receivables from purchasers. In particular, "atone," which supports digital goods, carries a heightened risk of fraudulent transactions due to a higher likelihood that actual addresses are not input, and the high proportion of younger users also increases the risk of non-payment. Although the Group addresses this through a credit assessment system leveraging data accumulated since 2002, the occurrence of credit losses exceeding expectations could have a material impact on business results and financial condition.

The Group plans to refinance the full amount of borrowings maturing during the current fiscal year; however, as of the filing date, discussions with financial institutions are still ongoing, and the applicable interest rates and contract terms remain undetermined. Amid the current environment of rising interest rates, the interest rate after refinancing may exceed the previous rate, and changes to financial covenants could impair the flexibility of financial management. If the Group is unable to raise necessary funds in a timely manner and on comparable terms due to sudden changes in financial conditions or a deterioration in business performance, this could have a material adverse effect on cash flow and financial condition.

BNPL services are subject to multiple laws and regulations, including the Money Lending Business Act, the Installment Sales Act, and the Payment Services Act, and changes in laws, legal interpretations, or new legislation could make it difficult to provide services under the current business flow. In addition, in March 2026, a qualified consumer organization filed an injunction lawsuit concerning certain terms of use, and depending on the progress of future proceedings, the Group may be forced to revise its terms of service. While the Company conducts compliance activities through consultations with legal counsel and regulatory authorities as well as participation in self-regulatory organizations, changes in the regulatory environment could affect the business model itself.

Against the backdrop of the global expansion of BNPL payment services, the number of operators offering similar services is increasing, which may lead to pressure to lower fees and customer attrition. The Group has achieved an industry-leading credit approval rate and the lowest level of non-payment rate through its proprietary credit assessment system and payment operation flow built on its track record since entering the market in 2002; however, continued intensification of competition could affect business results and financial condition. The Group also continues to face competition from existing payment methods such as credit cards and QR code payments.

The Group's core service, "NP Atobarai," is dependent on the EC market, and a slowdown in the growth of the EC market due to changes in EC-related laws and regulations could affect business results and financial condition. A similar risk could also arise if alternative payment methods such as cash, prepaid cards, debit cards, credit cards, and QR code payments expand and erode the Group's target market. A general slowdown in domestic economic activity would also directly affect demand for both B2C and B2B services.

The Group holds large volumes of personal and corporate information, including past transaction information and billing information, and if an information leak occurs due to human error or unauthorized access from inside or outside the organization, this could damage the Group's reputation and affect business results and financial condition. While the Group has implemented measures such as compliance with Privacy Mark, PCI DSS, and ISO27001 (ISMS certification), access restrictions, internal regulations, and regular training, risks also exist with respect to outsourcing partners.

BNPL services are provided in a SaaS format, and the credit assessment system is also largely systematized, meaning that system failures caused by cyberattacks, computer viruses, natural disasters, or other events could make it difficult to continue providing services. Although the Group has established distributed and redundant external data centers and cloud infrastructure, backup systems, and real-time monitoring, the occurrence of a failure could damage the Group's reputation and adversely affect business results and financial condition.

Goodwill and intangible assets arising from the share acquisition in July 2016 are recorded on the consolidated statement of financial position, and impairment may be recognized if business plans deteriorate due to worsening economic conditions, changes in the business environment, regulatory changes, or changes in business strategy. Since recognition of impairment directly affects business results and financial condition, the Group is working to reduce this risk by strengthening its earning power through deepening its credit assessment system, enhancing its sales organization, and strengthening alliances.

The Group operates the BNPL service "AFTEE" in Taiwan and Vietnam, and if the securing and training of operational personnel fails to keep pace with business expansion, operational delays and reputational damage due to human error could occur. There are also inherent risks such as deterioration of local economic and political conditions, changes in laws, tax systems, and foreign investment regulations, differences in business customs, and exchange rate fluctuations; if business execution becomes difficult, this could lead to changes in management strategy or affect business results and financial condition.

The development and promotion of BNPL services require skilled personnel with specialized knowledge, and failure in recruitment or the loss of personnel could affect business results and financial condition. The Group has adopted a "Teal organization" model, and selective hiring and development of personnel who fit this organizational culture is a prerequisite for continuous organizational operation; however, there is a risk that the Group may not be able to secure sufficient personnel as its business expands. The Group is also highly dependent on its experienced management team, and the departure of key personnel could affect business continuity.