CERES INC.

Mercury Inc., a wholly owned subsidiary, and bitbank, Inc., an equity-method affiliate, engage in the cryptoasset exchange business, and the Group's results of operations may fluctuate significantly depending on the economic environment and cryptoasset market conditions. In particular, bitbank, Inc.'s performance has a structural impact on the Group's non-operating income and expenses through equity in gains and losses of affiliates accounted for by the equity method. While the Group regards these businesses as stable sources of earnings over the medium to long term, the short-term volatility risk is high.

The point sites "Moppy" and "Point Income" issue points that can be exchanged for cash or electronic money, and there is a risk of unauthorized access to the systems by malicious third parties seeking to fraudulently obtain such points. In the blockchain-related business as well, cryptoassets, including customer deposit assets, may become targets of attacks. If unauthorized access occurs, it could result in the deletion or unauthorized acquisition of important data related to personal information, points, and cryptoassets, claims for damages, and loss of social trust.

Mercury Inc. and bitbank, Inc. are registered as cryptoasset exchange service providers under the Payment Services Act and are subject to that law, related regulations, and the rules of the Japan Virtual and Crypto assets Exchange Association. They are also subject to AML/CFT obligations as specified business operators under the Act on Prevention of Transfer of Criminal Proceeds, and violations could result in administrative sanctions such as revocation of registration or criminal penalties. Any violation of laws or regulations would have a material impact on the Group's business continuity and results of operations.

The Group makes direct investments in venture companies and other entities, as well as investments in investment partnerships (funds), but investee companies face numerous uncertainties, including insufficient ability to respond to changes in the market environment and inadequate management capabilities. If the performance of investees deteriorates, this could affect the Group's results of operations and financial position through impairment of operational investment securities, among other factors. As of the end of the fiscal year under review, the Group recorded goodwill of ¥2,198 million and marketing-related assets of ¥625 million, and had already recorded an impairment loss on fixed assets of ¥158 million.

The Group acquires and manages a wide range of personal information, including bank account information through "Moppy" and "Point Income," and addresses and names through the blockchain-related, online factoring, and D2C (Cosmetics, Health Foods, etc.) businesses, and bears obligations as a business handling personal information. If personal information is leaked due to unauthorized external access, deficiencies in internal management systems, or other unforeseen circumstances, this could result in claims for damages and loss of social trust. Although the Group has implemented measures such as obtaining Privacy Mark certification (obtained in March 2009 and continuously renewed) and managing access privileges, such risks cannot be completely eliminated.

The domestic internet advertising market reached a record high of ¥4,045.9 billion in 2025 (110.8% year on year), but the pace of change is rapid, and the market is significantly affected by economic conditions and advertisers' advertising placement strategies. Tightening of various regulations and advertisers' increasingly stringent cost-effectiveness requirements are also progressing, and if the Group fails to respond appropriately to changes in the business environment, this could affect its results of operations. The Group's core point site operations are heavily dependent on this market.

The competitive advantage of "Moppy" and "Point Income" depends on media operation know-how such as advertisement ranking, display positioning, and point award rates, and the point site market has low entry barriers and intense competition. Amid intensifying competition for talent in internet-related fields, if employees leave the Group, this could result in the leakage of know-how and disruption of organizational structure, potentially making efficient operations difficult. The success of the business is highly dependent on personnel and organizational structures with expertise in media operations, system development, web design, and other fields.

In the internet-related market, the pace of technological innovation and changes in customer needs is extremely rapid, and if the Group fails to respond in a timely manner, this could reduce its competitiveness and affect its results of operations. There is also a risk that profitability could deteriorate if significant expenses, such as system investments and personnel costs, are required to respond to such changes. While the Group strives to build a system for monitoring the latest technology trends and to secure and train excellent personnel, the risk of being unable to fully keep pace with the speed of change remains.

Various media, cryptoasset exchanges, and cryptoasset trading platforms operate under high system loads, and stable operation is essential to business execution. If services are disrupted due to unforeseen events such as sudden surges in access, software defects, computer viruses, malicious human acts, or natural disasters, this could result in lost revenue opportunities and loss of social trust. The Group has established a system of continuous capital investment and round-the-clock monitoring of servers and networks, and has introduced a mechanism to automatically notify responsible officers and employees by email when signs of failure are detected.

In the Mobile Services Business's "D2C (Cosmetics, Health Foods, etc.)" operations, the Group plans, manufactures, and sells cosmetics, health foods, and other products, and as of the end of the fiscal year under review held inventories of ¥1,627 million in merchandise and finished goods and ¥59 million in raw materials and supplies. If profitability declines due to sudden changes in market conditions or shifts in consumer needs, it may become necessary to record valuation losses; in the fiscal year under review, an inventory valuation loss of ¥119 million was included in cost of sales. Although the Group implements inventory management measures such as order adjustments based on sales forecasts, the risk of being unable to fully respond to sudden changes in the external environment remains.