Cybertrust Japan Co., Ltd.

In the digital certificate market, compliance with WebTrust and the WebTrust EV Program is an essential requirement for certificate authorities. Should the Company fail to receive assurance of compliance from an audit body, significant constraints would arise in the issuance of EV certificates. The Company has established a secretariat within its certificate authority to respond to WebTrust audits and also conducts self-audits; however, because trustworthiness forms the very foundation of the business, the impact on operating results should this risk materialize would be significant. The Annual Securities Report recognizes this as a risk that may materialize over the medium to long term.

The server certificate business is subject to self-regulatory rules established by various industry bodies and browser vendors, and the formulation or revision of such rules may force significant constraints or changes to service provision. The Group strives to gather information early and promptly provide services compliant with such regulations, but delayed responses could affect operating results and financial condition. The Annual Securities Report recognizes this as a risk that may materialize over the medium to long term.

Recurring services such as EMLinux within the platform services business anticipate increased demand amid the global trend toward strengthening economic security; however, delays in the implementation of standards and regulations in various countries, or changes in circumstances, could hinder the acquisition of new projects, having a certain impact on operating results and financial condition. The Group strives to gather information early and promptly provide services compliant with relevant standards and regulations, but a risk dependent on policy trends remains. The Annual Securities Report recognizes this as a risk that may materialize over the medium to long term.

The Group has obtained ISO/IEC 27001 and JIS Q 27001 certifications and implements multi-layered information security measures, including access restrictions and ethics training. However, should information be leaked or misused, the Company could be held liable for damages and lose social credibility as a digital certificate provider, significantly impacting its business and operating results. Because the reliability of digital certificate services is fundamental to the business, the damage would be particularly severe should this risk materialize. The Annual Securities Report recognizes this as a risk that may materialize over the medium to long term.

Rapid technological innovation in the information services industry could render the technologies and know-how currently held by the Group obsolete. The Group is working to strengthen its R&D foundation and develop human resources in cutting-edge technologies including post-quantum cryptography, blockchain, and AI; however, failure to respond appropriately and promptly to technological innovation and changing customer needs could lead to changes or termination of outsourcing contracts, significantly impacting business development, operating results, and financial condition. The Annual Securities Report recognizes this as a risk that may materialize over the medium to long term.

The Group terminated its contract with DigiCert in September 2019 and is promoting migration to its own root certificate authority; however, because widespread adoption of a root certificate authority takes several years, during the transition period the Group depends on a public CA signing service agreement utilizing the root certificate authority of SECOM Trust Systems Co., Ltd. Should a significant change occur in the relationship with this company that impairs service provision, it could have a certain impact on operating results and financial condition. The Annual Securities Report recognizes this as a risk that may materialize over the medium to long term.

SB Technology Corp. holds 57.99% of the Company's voting rights, and could exert influence over fundamental matters such as the election and dismissal of directors, organizational restructuring, amendments to the articles of incorporation, and dividends of surplus, regardless of the wishes of other shareholders. There is also a risk of conflict-of-interest transactions; however, the Company has appointed three outside directors to ensure effective oversight. It should also be noted that SB Technology Corp. was delisted as of September 6, 2024, and attention should be paid to resulting changes in the group structure.

In FY2025 (ended March 2025), sales to SoftBank Corp. accounted for 7.4% of consolidated net sales (the largest customer), and sales to SB Technology Corp. accounted for 6.1% (the second-largest customer). Significant fluctuations in transactions with either company could impact operating results and financial condition. The Group currently maintains good relationships with both companies, and transactions with each account for less than 10% of consolidated net sales; however, there is a risk that dependence could increase if transaction volumes grow in the future.

The Group has recorded goodwill arising from the acquisition of Lineo Solutions (Embedded/IoT Contract Development) as a subsidiary, as well as continuously developed software, as intangible fixed assets. Should significant changes in the business environment or deterioration in earnings make it impossible to expect sufficient future cash flows, an impairment loss may be recorded. The Group strives for early detection through careful review of plans at the time of investment and regular monitoring of earnings thereafter, but should this risk materialize it would impact performance. The Annual Securities Report recognizes the likelihood of this materializing in the near term as low.

As of May 31, 2025, potential shares from stock acquisition rights totaled 597,200 shares, representing 7.3% of the 8,189,000 total shares issued. Exercise of these stock acquisition rights could dilute the value per share and affect share price formation. The Company grants stock options as incentives to officers, employees, and outsourcing contractors, and the Annual Securities Report recognizes this as a risk that may materialize in the short to medium term.