PALTAC CORPORATION

There is a risk that the declining working population will lead to rising labor costs and difficulty in securing personnel as planned. The Company conducts its business activities with a large number of employees, and this is a structural issue that significantly affects the entire industry. The Company is responding by building an attractive workplace environment and developing new logistics models, but if labor market tightness exceeds expectations, it may affect business activities and performance.

There is a risk that the driver shortage at outsourced delivery companies handling product delivery may worsen further due to legal amendments and other factors. Concerns exist regarding increased delivery costs and disruptions to the stable supply of products. The Company is addressing this through efficiency improvements in cooperation with partner companies such as delivery companies and retailers, but a fundamental solution has not yet been achieved. Worsening labor shortages may affect both the Company's profitability and customer service levels.

In the cosmetics, daily necessities, and OTC pharmaceutical industries, competition that transcends industry and business format boundaries continues to intensify, along with scale expansion through M&A, creating a risk that business terms may be significantly altered due to corporate restructuring among business partners. In addition, rising geopolitical risk may lead to surging energy and raw material prices and supply chain disruptions, which could affect performance. The Company is responding by building an organization capable of promptly adapting to environmental changes, but there are limits to its ability to respond to sudden shifts in the competitive environment.

The Company utilizes proprietary information systems for the operation and management of RDCs (Regional Distribution Centers), and if a system outage caused by a natural disaster or a system failure or information leak caused by a cyberattack occurs, it may significantly disrupt sales and logistics operations. The Company has established a data distribution and storage system through cloud migration of its core systems and an emergency response framework centered on a CSIRT, but there are limits to its ability to respond to situations exceeding expectations. Information security incidents carry a risk of directly affecting business activities and performance.

If unforeseen events occur, such as large-scale natural disasters, disruption of lifelines or transportation networks, or lockdowns associated with the spread of infectious diseases, the provision of logistics services may be disrupted, potentially affecting performance. The Company has established numerous business locations and distribution centers nationwide and has developed a BCP that includes backup arrangements from other locations, but responding to widespread, large-scale disasters may prove difficult in some cases.

There are physical risks such as increased natural disasters due to climate change causing damage to supply networks and rising procurement costs due to surging raw material prices. In addition, transition costs toward a decarbonized society, including the introduction of carbon taxes, may also affect performance. The Company positions climate change as an important issue and is incorporating it into its medium- to long-term strategy, but there remains a risk of incurring additional costs due to stricter regulations and more frequent extreme weather events.

The Company is making active capital investments to enhance and expand its logistics and information system functions for sustainable growth, and if significant changes in the business environment or deteriorating profitability necessitate recording an impairment loss on fixed assets, it may affect performance. Investment decisions are made by the Board of Directors following estimates of business profitability and cost-effectiveness, but there is a risk of investment obsolescence due to rapid advances in digital technology and changes in the competitive landscape.

The handling of OTC pharmaceuticals and related products is subject to regulation under laws such as the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices, and if licenses are revoked due to legal violations or other reasons, sales of all or part of the products, which account for approximately 10% of the Company's revenue, may be restricted. The CSR Promotion Headquarters strives to obtain necessary licenses and maintain a compliance environment, but if the Company's response to stricter regulations or legal amendments is delayed, there is a risk of a material impact on business activities and performance.

If a customer defaults due to bankruptcy or civil rehabilitation proceedings, bad debt losses on trade receivables may affect performance. In addition, if a supplier undergoes bankruptcy or civil rehabilitation proceedings, there is a risk that a decline in inventory value and an inability to return goods may occur simultaneously. The Company addresses this through trade credit insurance and thorough receivables management, but if the financial deterioration of business partners occurs in a chain reaction, losses may expand.

It was announced on May 11, 2026 that, following a tender offer by the parent company, Medipal Holdings Corporation (with a shareholding ratio of 52.40%), and subsequent procedures, the Company's shares are scheduled to be delisted and the Company is to become a wholly owned subsidiary. After delisting, the framework for protecting minority shareholders will change, and there may be changes in the degree of freedom regarding independent fundraising and decision-making. Currently, independent outside directors hold a majority of the Board of Directors, and a special committee has been established, but changes in the governance structure following full subsidiarization pose a risk of affecting business operations.