S&J Corporation

The cybersecurity field undergoes rapid environmental changes due to new threats and technological innovation, and there is a risk that the Company could lose its technological and pricing advantages if it fails to respond appropriately. The Company strives to maintain its competitiveness through information dissemination by directors and employees, including President and Representative Director Nobuo Miwa, and through collaboration with government agencies, but there is a possibility that its advantages could be eroded by the corporate efforts of competitors.

If a customer suffers damage such as information leakage or data tampering due to a cyberattack within the scope covered by the Company's products and services, trust in the Company's technical capabilities could be lost, potentially leading to a slowdown in product and service sales. As restoring trust would take a long time, the impact on performance could be significant. The Company addresses this by continuously improving its products and services based on insights and experience gained from security incidents.

If a significant bug or defect occurs in the Company's proprietary products used in the SOC Service and causes substantial damage to a customer, it could significantly affect performance through a decline in sales due to contract cancellations, among other factors. Although the Company conducts sufficient verification and testing, it cannot completely eliminate the risk of defects arising after service launch, and it endeavors to prevent such occurrences through continuous product improvement.

Although the Company has established an information management system, including obtaining ISO27001 (ISMS) certification, if important customer information or personal data were to be leaked outside the Company, it could face claims for damages and lose credibility, potentially having a serious impact on its business. As reliability is fundamental to a cybersecurity company, information leakage is a risk directly linked to business continuity.

The Company operates its business on the premise that demand for information security will increase among government agencies and large and medium-sized enterprises, but if such demand fails to grow or the Company is unable to respond adequately, it could affect its business and performance. As the Company operates solely in the cybersecurity business, it is highly susceptible to market changes, and there is a risk that its ability to respond in the event of market contraction may be limited.

Currently, there are few competitors that provide Consulting Service and SOC Service in an integrated manner, but if the number of competitors offering similar services increases, it could affect the Company's business and performance. The Company seeks to differentiate itself by integrating the two services, such as by adding consulting functions to its SOC Service, but the risk from changes in the competitive environment is assessed as moderate.

Stock revenue, which accounted for 84.4% of total sales (actual results for FY2026 (ending March 2026)), is a business model that grows through the accumulation of annual contracts. There is a risk that second-half sales could fall short of plan if the Company fails to secure sufficient new contracts or experiences cancellations exceeding expectations. The Company works to reduce the cancellation rate through proactive sales activities and improved customer satisfaction, but a certain level of cancellation occurs every year due to changes in customers' security environments and other factors.

Securing talented personnel with advanced cybersecurity technology and knowledge is a key challenge for business expansion, and growth could slow if the Company is unable to secure sufficient staff or provide adequate employee training. There is also a risk of know-how loss due to the departure of technical and sales personnel. The Company addresses these issues through the introduction of telework, enhanced employee benefits, and strengthened in-house training, but competition for specialized talent remains intense.

President and Representative Director Nobuo Miwa is deeply involved in overall management and business operations, including technical matters, and if he were unable to perform his duties, it could have a significant impact on the Company's business. The Company strives to mitigate this risk through communication among officers and employees in board meetings and other important meetings, but resolving this personnel-dependent structure remains an ongoing challenge.

Macnica Holdings, Inc. is a major shareholder that indirectly holds 37.72% of the Company's voting rights, and is in a position to influence the Company's management through the exercise of voting rights and other means. Agency transactions with Macnica, Inc. accounted for 24.4% (¥568,126 thousand) of sales in FY2026 (ending March 2026), and changes in the relationship with this company could affect performance, but the Company maintains an independent decision-making structure.