Valuence Holdings Inc.

As of the end of August 2025, interest-bearing debt (including lease obligations) stood at ¥18,502 million, with an interest-bearing debt ratio of 251.3%, a high level. Much of the working capital depends on borrowings from financial institutions, and if funding cannot be secured as planned due to changes in the financial environment, business operations could be hindered. In addition, the interest-bearing debt ratio may rise further as retail sales are strengthened, and in a rising interest rate environment, increased funding costs could pressure business results. Liquidity is secured through commitment line agreements totaling ¥11,000 million with multiple financial institutions.

Many overseas operators participate in the company's own auctions, and in a yen appreciation phase, winning bid amounts tend to be suppressed. In addition, much of retail store sales depend on inbound demand (foreign tourists visiting Japan), and if inbound demand cools due to a sharp appreciation of the yen, retail store sales may decrease, affecting business results. Efforts are being made to mitigate the impact by expanding auction participants from diverse countries and regions, but risk remains depending on the timing of exchange rate fluctuations and the proportion of participating operators by country.

Since the purchase and procurement of reuse items depends on the number of items customers bring in for sale, it is difficult to adjust procurement volume, and stable procurement in both quality and quantity may become difficult due to changes in economic conditions, an increase in competing buyback operators, changes in customer sentiment, and fluctuations in precious metal and other market prices. Efforts are being made to diversify the procurement system through enhanced web marketing, home delivery/on-site/online purchasing, alliances, and overseas purchasing, but a decline in procurement volume directly affects sales and profit margins.

Purchasing staff with specialized knowledge and experience are essential for presenting appropriate purchase prices for reuse items and checking authenticity, and securing such personnel is recognized as an important management issue. If the securing of purchasing staff does not proceed as planned, activities to purchase and procure reuse items and plans to open purchasing stores may be constrained, potentially affecting business results. Demand for highly specialized personnel continues to rise due to changes in brand popularity and the increasing volume of reuse item circulation.

In store operations, online transactions, customer management, and other activities, the company handles a large amount of personal information such as customers' addresses, names, and credit card information, as well as confidential internal information, and there is a risk of information leakage due to malware/ransomware attacks, unauthorized access, and inadequate management by employees or outsourcing partners. If an information leak occurs, it may result in liability for damages, damage to corporate image, and suspension of business activities, potentially affecting business results. Measures such as establishing internal regulations, managing access privileges, encrypting communications, conducting vulnerability diagnostics, and strengthening cyberattack detection and monitoring systems are being implemented.

The Group has obtained permits from prefectural public safety commissions based on the Secondhand Article Dealer Act, and if the Act or related laws and regulations are violated, the public safety commission may suspend business operations or revoke permits. The Group is also subject to the Act on Prevention of Transfer of Criminal Proceeds, and failure to comply may result in guidance, recommendations, or penalties from administrative authorities. Measures such as thorough internal education and compliance with identity verification and secondhand goods ledger management are being implemented, but the risk of permit revocation, which relates to the fundamental basis of the business, could have a significant impact on business results.

Due to the nature of the business of procuring goods from general consumers in the secondary market, there is a constant inherent risk of purchasing counterfeit goods or stolen property. If the purchase and sale of counterfeit goods or the free return of stolen goods occurs, this may result in losses in addition to a loss of trust, potentially affecting business results. Measures such as improving purchasing staff's ability to check authenticity, re-confirmation before sale, cooperation with police authorities, and linking secondhand goods ledgers with business systems are being taken, but complete prevention is recognized as difficult.

Sales trends for the products handled (brand-name goods, precious metals, jewelry, antiques and art, real estate, automobiles, etc.) are greatly affected by economic obsolescence due to changing trends, sharp fluctuations in foreign exchange and stock markets, international trade disputes and tariff increases, and fluctuations in bullion and watch market prices. As a result, if procurement and sales cannot be carried out as planned, sales may decline and gross profit margin may deteriorate. Measures are being taken to prevent prolonged inventory turnover periods by utilizing multiple sales channels including the company's own auctions, but there are limits to responding to sudden changes in market conditions.

In corporate acquisitions and new investments aimed at expanding business areas, if the initial business plan is not achieved due to changes in the post-acquisition business environment or competitive landscape, impairment losses on stock acquisition costs or goodwill may occur, potentially affecting business results. Risk reduction measures such as conducting due diligence, setting hurdle rates above WACC, external expert investigations, and deliberation at management execution meetings and board of directors meetings are being taken, but the occurrence of impairment losses cannot be completely avoided in the event of a significant deterioration in the business environment.

Founder and Representative Director Shinsuke Sakimoto plays an important role in everything from determining management policies, management strategy, and business strategy to formulating new businesses, and if any unforeseen circumstances befall him, this may affect the Group's business results. While efforts are being made to strengthen the organizational structure and develop internal personnel to reduce dependence on a specific individual, dependence on him remains high at present.