Global Security Experts Inc.

The Group specializes in Cybersecurity Services for mid-sized companies, and while demand in this market is currently robust, a significant decline in demand due to changes in the economic environment or other factors could affect business operations, operating results, and financial condition. Since customer companies span multiple industries, the impact of any specific sector is limited; however, if a deterioration in the economic climate leads to reduced security investment, there are concerns about declining sales, lower profit margins, and lengthened collection periods. At present, no specific countermeasures are described, and the high degree of dependence on market conditions is a risk factor.

The Group has established a unique service position in the cybersecurity market for mid-sized companies, and currently believes there are no competitors specializing in this same segment. However, if competitors emerge—such as security companies serving large enterprises entering the mid-sized company market—intensified price competition and customer acquisition competition could affect business operations, operating results, and financial condition. While providing services optimized in content and price for mid-sized companies is the source of the Group's competitive advantage, there is an inherent risk that this advantage could be lost.

A shortage of personnel with specialized knowledge is a common challenge across the cybersecurity industry, and if the Group is unable to secure sufficient personnel as its business expands, delays in service provision or reduced productivity may occur. The Group has built a system for securing personnel from partner companies through its education course business, and has adopted a policy of developing specialized personnel through post-hire training, while also working to prevent employee attrition through free access to in-house training courses and workplace environment improvements. However, as the structural challenge of an industry-wide personnel shortage persists, risks remain in both recruitment and retention.

The cybersecurity field is characterized by rapid environmental changes due to new threats and technological innovation, with customer needs prone to shifting. Although the Group strives to gather information, if it falls significantly behind other companies in responding to technological innovation, this could result in a loss of competitiveness and affect business operations, operating results, and financial condition. Rapid response is particularly required in new technology areas such as AI utilization and zero trust, making it essential to maintain a continuous research and development and information-gathering framework.

Because the Group obtains important customer information in the course of providing its services, information leakage is a significant risk to business operations. Although measures such as ISMS certification, access rights management, locked storage of documents, and entry/exit management have been implemented, in the event a leak were to occur, loss of customer trust, contract termination, and claims for damages could seriously affect operating results and financial condition. The reputational damage is particularly severe when a company providing security services itself causes an information leak.

The security equipment and devices used in the managed services provided by the Group are essentially procured products, and while sufficient verification and testing are conducted, if a serious bug or defect is discovered after service provision has begun, it could cause significant damage to customers. This could result in reduced sales due to contract terminations and claims for damages, posing a risk to operating results and financial condition. Given the characteristics of a business model dependent on procured products, product quality control is a challenge that cannot be completed by the Group alone.

Business Brain Showa-Ota Inc., the largest shareholder, holds 39.60% of the Company's voting rights and is in a position to influence the Group's management through the exercise of voting rights and other means. If this company were to transfer its shares to a specific party, the transferee's policies could affect the Company's business strategy, and there is a possibility that the interests of this company may not align with those of other shareholders. That said, the Group's management decisions are made independently, centered on the Board of Directors, which includes independent directors, and prior approval from the largest shareholder is not required.

The Company grants stock acquisition rights as incentives to directors and employees, and intends to continue utilizing this system going forward. As of May 31, 2026, the number of potential shares was 3,600 shares (0.02% of the total issued shares of 15,309,600 shares), which is currently minor; however, future additional grants and exercises of stock acquisition rights could dilute the share value and voting rights ratio of existing shareholders. Although the current dilution rate remains at a low level, attention should be paid to the fact that the impact could expand depending on the scale of future grants.

The Group does not currently recognize any specific legal regulations that directly restrict its business; however, if new regulations related to cybersecurity are introduced in the future, or if the application of existing regulations changes, business operations could be constrained. While the Group intends to continue strengthening its legal compliance framework and internal training, changes in the regulatory environment are difficult to predict, posing a risk of increased compliance costs or the need to change the business model.

If unforeseen troubles or issues arise in the course of business operations, the Group could face claims for damages or litigation regardless of whether any fault lies with the Group. Depending on the content of such litigation and the amount of damages claimed, this could lead to a decline in social credibility as well as a serious impact on operating results and financial condition. Given the nature of a security services company, the risk of being held accountable for a causal relationship with a customer's system failure or security incident is particularly high.