CyberSolutions Inc.

As an internet service provider, the Company is constantly exposed to increasingly sophisticated and advanced cyberattacks, and in March 2024 an information leakage incident actually occurred due to unauthorized access originating from the theft of customer IDs and passwords. If information leakage, tampering, or similar incidents occur due to cyberattacks exceeding expectations, this could result in reputational damage and liability for damages, potentially having a material impact on business results and financial condition. As countermeasures, the Company has obtained ISO27001, 27017, and 27018 certifications, strengthened its 24/7/365 monitoring system, taken out cyber insurance, and implemented multilayered measures including data backups of up to seven generations.

Due in part to compatibility issues with hardware and basic software environments, it is generally considered difficult to completely eliminate the risk that unexpected serious defects may be inherent in products sold. If a serious defect occurs, this could result in additional response work, customer compensation, lost business opportunities, and reputational decline, potentially having a material impact on business results and financial condition. As countermeasures, the Company conducts staging tests prior to release, fully automated defect detection, go/no-go release decisions based on comprehensive judgment by responsible personnel, and has established response procedures in advance for when defects occur.

The Company guarantees a monthly uptime rate of 99.9% as an SLA for its cloud messaging services, and if service interruptions or quality degradation occur due to human error, equipment failure, natural disasters, cyberattacks, or similar causes, this could give rise to compensation obligations under the SLA and potentially have a material impact on business results and financial condition. As countermeasures, the Company conducts continuous monitoring through monitoring systems, has implemented system redundancy, maintains backup storage at multiple remote data centers, and has taken out cyber insurance.

The Company operates its business with a relatively small organizational structure, and if personnel with specialized knowledge, skills, or qualifications leave the Company due to recruitment difficulties, increased labor market mobility, or deterioration of the working environment, this could result in reduced productivity and competitiveness, potentially having a material impact on business results and financial condition. As countermeasures, the Company implements a multifaceted talent acquisition strategy (direct recruiting, referrals, university partnerships, etc.), has introduced a stock option system, pays year-end bonuses, and has rolled out a strategic leadership program, among other measures.

Representative Director and President Lin Chieh-Hung plays a central role in formulating management policy and business strategy, and if he becomes unable to perform his duties due to unforeseen circumstances, this could temporarily affect business operations. As countermeasures, the Company is developing successors centered on the Nomination and Compensation Committee, promoting delegation of authority through the introduction of an executive officer system, and establishing systems such as mutual information sharing among officers and the setting of order of succession for acting duties.

The Company has been granted exclusive sales rights within Japan by Openfind Information Technology, Inc. (OF) of Taiwan, and the ratio of royalties paid to OF relative to total royalty expenses for FY2025 (ended April 2025) reached 80.2%. In the event that the agreement with OF is terminated, the Company would be unable to provide services under new contracts, potentially having a material impact on business results and financial condition, and there is also a risk of increases in license fee rates. As countermeasures, the Company has strengthened the relationship through an agreement effective through December 2027 (automatically renewed every five years), mutual dispatch of officers, and OF's cross-shareholding of 4.8% of the Company's shares as a strategic holding.

The Company's mainstay product, the cloud mail service "CYBERMAILΣ," accounted for more than half of the Company's net sales in FY2025 (ended April 2025), indicating a high degree of dependence on a specific product. If obsolescence or a decline in competitiveness due to technological advances occurs, or if the Company is slow to respond to technological innovation, this could result in sluggish growth in new contracts and increased cancellations, potentially having a material impact on business results and financial condition. As countermeasures, the Company continuously monitors technology trends, improves service quality and expands functionality, and promotes diversification of its sales composition by strengthening the security solutions business.

Against the backdrop of growing interest in corporate social responsibility and the enactment or revision of new legal systems, compliance risk is increasing, and if a situation arises that violates laws and regulations, this could result in a decline in social credibility and brand image and payment of damages, potentially having a material impact on business activities, business results, and financial condition. As countermeasures, the Company holds meetings of the Risk and Compliance Committee, has established an internal whistleblowing hotline, conducts internal audits through the Internal Audit Office, and collaborates with its retained law firm, among other measures.

Representative Director and President Lin Chieh-Hung qualifies as a controlling shareholder, holding, together with relatives within the second degree of kinship, more than 50% of the Company's shares. If he sells shares on the market or if the possibility of such sale arises, this could affect the market price of the Company's shares, and if shares are transferred to a specific party, this could affect the Company's management strategy. At present, he maintains a policy of being a stable shareholder who also gives consideration to the interests of minority shareholders, but no specific countermeasures have been disclosed.

In FY2025 (ended April 2025), the Company recorded goodwill of ¥963,132 thousand and customer-related assets of ¥2,104,741 thousand under Japanese GAAP, with goodwill and customer-related assets accounting for a high proportion of total assets at 62.0% under Japanese GAAP (58.8% under IFRS). If profitability declines due to changes in the business environment or other factors and recovery of the investment amount is no longer expected, an impairment loss may occur, potentially affecting business results. As countermeasures, the Company conducts regular impairment testing in accordance with accounting standards and evaluates the impact on asset value through continuous monitoring of economic conditions, market trends, and industry changes.