JTEC CORPORATION

High-precision mirrors and equipment-related products are fundamentally based on individual custom order contracts for each user, with high unit prices and a long period from order receipt to revenue recognition. Internal factors such as increased development elements during the manufacturing process or manufacturing delays, and external factors such as specification changes by users, may cause fluctuations in the timing of revenue recognition, potentially having a significant impact on business performance. While the company strives to recognize revenue as planned, given the high unit prices, the impact of a single delay on business performance can be substantial.

The manufacturing technology of the Optical Business is based on Osaka University's proprietary nano-processing technologies (EEM, RADSI, MSI), achieving shape precision at the 1-nanometer level. If a new manufacturing method achieving equivalent precision is established in the future, price competitiveness may decline, potentially affecting the business and performance. Currently, the company judges that achieving precision beyond this technology is extremely difficult, but it continues to closely monitor trends in technological innovation.

Major products such as X-ray Nano-focusing Mirrors (OsakaMirror) for synchrotron radiation facilities have customers including public research facilities, public projects, and universities both domestically and internationally, and are directly affected by government research policy directions and institutional changes. Domestically, NanoTerasu began operation in April 2024, and overseas, construction and upgrade plans for fourth-generation synchrotron radiation facilities are progressing, with demand expected to expand for approximately the next 20 years; however, if public institutions change their policy direction, this could affect business performance. Changes in the political and economic conditions of export destinations constitute a similar risk factor.

The front-end processes (grinding, polishing, etc.) of the Optical Business, as well as equipment manufacturing in the Life Science & Equipment Development Business and Electronic Science, are outsourced to external partners. When special component procurement or processing is required, alternative suppliers are limited, resulting in a high degree of dependence on specific outsourcing partners. While business continuity, manufacturing capacity, and quality are evaluated annually, quality defects or delivery delays could affect the business and performance. The company seeks to reduce this risk by continuously developing new outsourcing partners.

The company has significant overseas exports of its products, and revenue from foreign-currency-denominated direct transactions is affected by exchange rate fluctuations. If exchange rate fluctuations exceed expectations, this may affect operating results and financial condition. The securities report does not describe specific hedging measures, and details of countermeasures against foreign exchange risk are not disclosed.

The company protects its proprietary nano-processing know-how through patent acquisition and confidentiality, but there is a risk that legal protection may not be obtained in certain regions, and a risk that technology and know-how may leak externally due to personnel transfers or information leaks. Additionally, if a court determines that the company has infringed on a third party's intellectual property rights, this could result in restrictions on production and sales, or the payment of damages. Should these occur, they could have a material impact on operating results and financial condition.

The company holds tangible fixed assets such as land, buildings, and machinery and equipment, as well as goodwill related to shares in affiliated companies. If the recoverability of these assets declines due to a decrease in expected future cash flows, impairment treatment becomes necessary. While recoverability is evaluated periodically, if impairment occurs due to deterioration in the business environment or other factors, this may affect operating results and financial condition.

The company holds technical information, insider information, customer information, and other data, and if data failures or information leaks occur due to cyberattacks or other causes, this may affect its credibility and business performance. The company has implemented measures such as establishing an Information Security Committee, conducting internal training, and obtaining IPA's "SECURITY ACTION" two-star certification, and is further strengthening its systems with a view to obtaining third-party assurance. As cloud adoption progresses, continuous response to security risks is required.

As the company aims to become a global niche top player, securing highly specialized personnel with expertise in physics, engineering, and other scientific fields is essential, and competition for personnel handling advanced specialized technologies is particularly intensifying. If the company falls behind in acquiring R&D personnel, the pace of technological innovation may slow. While the company strives for employee education and smooth transmission of technology and skills, intensifying competition in the recruitment market represents a structural challenge.

The company itself recognizes that its disclosure of non-financial information is insufficient, including the identification of materiality (key issues) and KPI targets, as well as the setting of management indicators and targets. If this situation continues, it may result in unfavorable conditions in stock price and financing. While the company is developing systems for information disclosure, this is explicitly identified as a risk that could affect evaluations by ESG investors.