MARUSHO HOTTA CO.,LTD.

In the fiscal year under review, the Company recorded an operating loss of ¥462 million, an ordinary loss of ¥482 million, and a net loss attributable to owners of the parent of ¥537 million, marking the 8th consecutive fiscal year of operating and ordinary losses. The Company recognizes that conditions exist that raise material doubt about its ability to continue as a going concern, and there is significant risk to its financial sustainability. As countermeasures, the Company plans to pursue new business initiatives and profitability improvement measures for existing businesses, while securing near-term working capital and investment funds through capital raised via exercise of stock acquisition rights and cash on hand.

The Company holds bitcoin, the price of which can fluctuate significantly due to various factors including supply and demand trends, announcements by regulatory authorities, media influence, technological changes, and broader economic trends. A sharp decline in price could have a material impact on the Company's financial soundness and operating results. The Company states that it aims to minimize risk, but no specific hedging measures are disclosed.

Changes in regulations or new government measures could adversely affect the Company's ability to invest in bitcoin, market prices, use of bitcoin in business operations, and convertibility into fiat currency. The regulatory environment surrounding cryptoassets remains fluid across jurisdictions, and there is a risk that unexpected regulatory tightening could directly impact the Company's business strategy. The Company states it will consider countermeasures based on the situation, but the predictability of regulatory changes is low.

The Company's bitcoin custody relies on an external service provider, and if a failure occurs at that provider, the bitcoin held could be lost, stolen, or destroyed, potentially having a material impact on the Company's assets. Operational risk arising from this external dependency is difficult for the Company to control on its own, and the provider's reliability and security standards are a direct risk factor. No specific alternative custody methods or redundancy measures are disclosed in the securities report.

The Group aims to achieve medium- to long-term earnings through investments in growth areas, but there is a risk that deterioration in the performance, corporate value, or stock value of investee companies could make it difficult to recover invested funds. In particular, investments in illiquid assets such as unlisted companies have limited exit opportunities, creating a risk that recovery may not occur at the expected timing or price. Material changes in investees' business plans, technology development, laws and regulations, or the competitive environment could also prevent the Company from achieving the originally expected profitability.

As of March 31, 2026, BAKKT OPCO HOLDINGS, LLC held approximately 24.09% of the Company's total voting rights, making it a major shareholder. Although the Group operates independently from this company, any change in its basic policy toward the Company could affect the Group's business operations and the supply-demand balance of the Company's common stock. The risk of a change in the major shareholder's policy is difficult for the Company to control on its own and represents a governance consideration.

There is a risk that net sales could decline due to changes in economic conditions, consumption patterns, and product trends. Factors such as soaring crude oil prices, unusual weather (typhoons, cool summers, warm winters), natural disasters such as earthquakes, and the impact of infectious diseases such as novel viruses could cause performance during peak seasons to stagnate. These external factors are beyond the Group's control, and the impact on performance is particularly significant in businesses handling highly seasonal products.

Amid intensifying low-price competition in the domestic market for the Fancy Yarn (Novelty Twisted Yarn) business, the relocation of apparel manufacturing overseas, and a shrinking domestic production share due to a surge in imported knit products, the Company is promoting overseas expansion through its Chinese local subsidiary, Hotta (Shanghai) Trading Co., Ltd. As overseas business expands, there are risks related to foreign exchange fluctuations and exposure to local legal regulations. Currency fluctuations and tightening of regulations in China could directly affect the Group's profitability.

Recognizing that securing and developing personnel with sufficient knowledge and management expertise in each field is essential for business expansion, the Company is actively pursuing mid-career hiring regardless of industry background, experience, or age. However, ongoing recruitment of personnel is not guaranteed, and if the Company is unable to secure sufficient qualified personnel, this could affect its operating results and future business development. In particular, a shortage of specialized personnel could constrain business progress at a time when efforts to accelerate new business initiatives are intensifying.

The Company may pursue strategic alliances, including M&A and capital alliances, to expand its existing business base or enter new businesses. Although the Company states it will conduct thorough due diligence, if the business plan following an M&A or capital alliance does not proceed as originally planned, this could affect performance. Conducting M&A under the current financial condition of 8 consecutive years of losses carries an additional risk of financial burden. If impairment of goodwill or investment securities occurs, it could further worsen the Company's financial condition.