ROBOT PAYMENT INC.

The Payment business handles credit card information, while the Financial Cloud business handles confidential information such as corporate information and transaction information, creating a risk of information leakage due to unauthorized external access or intentional/negligent acts by internal personnel. Should a leak occur, a significant decline in customer trust and the payment of damages could have a material impact on business performance and financial condition. As countermeasures, the Company has obtained PCI DSS certification (obtained in 2010, renewed annually) and Privacy Mark certification, and has established basic regulations for personal information protection and conducts training for officers and employees.

The Company has entered into comprehensive merchant agreements with credit card companies and acts as an agent for merchants' settlement operations, and thus bears chargeback risk that may be difficult to recover if fraudulent sales claims or bankruptcy of a merchant are discovered. In addition, if a merchant providing prepaid continuous services goes bankrupt, the Company bears the risk of covering the amount equivalent to customers' prepayments for services not yet provided. As risk mitigation measures, the Company conducts site existence verification and confirmation of Specified Commercial Transactions Act disclosures at the time of contracting, as well as monthly management of delinquent receivables.

Revenue is concentrated in a single service in each business—"Subsc Pay" in the Payment business and "Seikyu Kanri Robo" in the Financial Cloud business—resulting in a structure in which fluctuations in the sales of these services directly affect business performance and financial condition. If differentiation from competitors and the development of new services do not proceed as planned, there is a risk that performance could deteriorate without resolving this dependence. The Company has indicated a policy of actively working to expand transactions in existing services and to plan and develop new services.

Barriers to entry into internet-related businesses are not necessarily high, and there is a possibility that the Company's competitive advantage could decline due to the development of similar services by competitors—including major companies with financial strength and brand power—intensifying price competition, or the emergence of more innovative new services. The Company seeks to maintain its competitive advantage through the continuous development of services suited to customer needs, but the risk that changes in the competitive environment will affect business performance persists on an ongoing basis.

The Company's services presuppose the use of public lines, dedicated lines, and the internet, creating a risk of service outages due to network disconnection or application malfunction caused by natural disasters, unauthorized external access, computer viruses, cyberattacks, or system downtime at payment processors. Should a service outage occur, it could lead to claims for damages, lost business opportunities, and loss of service credibility, potentially affecting the business and performance. As countermeasures, the Company maintains a 24-hour system monitoring framework, redundant system configurations, and intrusion prevention measures.

"Subsc Pay" and "Seikyu Kanri Robo" manage all corporate information and systems on public clouds such as AWS, making stable cloud operation a precondition for business operations. Should a service outage occur due to unforeseen events such as cloud deficiencies, malicious acts, errors by officers or employees, or natural disasters, this could result in lost revenue opportunities and loss of social credibility. The Company continuously monitors cloud operating status and has established a framework for prompt recovery in the event of a failure.

The Payment business is subject to the obligation to appropriately manage credit card numbers and other data under the amended Installment Sales Act (effective April 2021), and the Company has already complied through PCI DSS compliance. Meanwhile, the credit card companies that are the Company's business partners are subject to the Act on Prevention of Transfer of Criminal Proceeds, and merchants are subject to the Specified Commercial Transactions Act; should these business partners face business restrictions due to legal violations or administrative guidance, this could affect the performance of the Payment business through fluctuations in the number and amount of settlement transactions. The Company has established a framework for immediately obtaining legal and regulatory information through lawyers and external organizations.

Representative Director Kenya Kiyoku plays a central role in decision-making on important matters and in promoting core businesses, creating a risk that business performance could be affected should he become unable to perform his duties. In addition, because the organization is small, individual business areas and internal controls depend on a small number of personnel, creating a risk that performance could also be affected if employees are unable to perform their duties or leave the Company. The Company is working to develop and strengthen a organizational management structure and to recruit and train personnel, but it remains difficult to fully eliminate this risk.

The number of potential shares from stock acquisition rights granted as incentives to officers, employees, and external collaborators reached 278,922 shares (equivalent to 7.6% of total issued shares) as of the end of the fiscal year under review, and there is a possibility that the value of shares held by existing shareholders could be diluted if these rights are exercised. In addition, venture capital firms and others hold shares equivalent to 7.0% of total issued shares (258,612 shares), and the sale of these shares could temporarily worsen the supply-demand balance of the stock and cause the share price to decline. Partial sales by existing venture capital firms and others have already occurred following the listing.

The provision of "Subsc Pay" presupposes the use of CARDNET (a settlement data relay network between merchants and credit card companies) operated by Japan Card Network Co., Ltd., creating a risk that service provision could become difficult in the event of a failure in this network. The Company assesses the likelihood of such difficulty as extremely low, given that CARDNET has over 20 years of operational track record and high reliability, and is used by many credit card companies and payment agency companies. However, since no alternative means exist, the impact of any failure that does occur could be substantial.