Fixstars Corporation

The Group specializes in the software acceleration field and plans business expansion on the premise that this market will continue to grow. If the market fails to grow as forecast for any reason, this could affect the Group's business and performance. The Group intends to continue concentrating investment in this field going forward, and diversification of its business to spread risk is limited.

The pace of innovation in IT technology is remarkably rapid, and since the Group's deliverables are exposed to global competition through client companies, the Group is constantly required to maintain world-leading technical capabilities. If the Group fails to respond swiftly and adequately to cutting-edge technologies, it may lose its competitive advantage, which could affect its business and performance. The Group positions its response to cutting-edge technology as a key differentiating factor and addresses this by concentrating management resources accordingly.

In the fiscal year under review, sales to Kioxia Corporation accounted for 17.1% of total net sales, indicating a high degree of dependence on a specific customer. If projects for this customer are changed or discontinued, resulting in a significant decline in sales, this could have a material impact on the Group's business and performance. The Group is working to enhance its technical capabilities to become indispensable to this customer, while also striving to expand sales into new fields and to new customers.

Satoshi Miki, the founder and Representative Director and President, plays a critical role in everything from determining management policy and business strategy to developing new businesses, resulting in a high degree of dependence on him. If, for any reason, he becomes unable to perform his duties, this could affect the Group's business and performance. The Group is working to build a management structure that does not rely excessively on any single individual, through delegation of authority, human resource development, and information sharing at Board of Directors and management meetings.

Most of the Group's business depends on human resources such as engineers, and as the business expands, it is expected that further specialization and sophistication will be required. If the Group is unable to secure sufficient appropriate personnel, or if a large number of employees resign at once, its technical and development capabilities could decline, constraining business expansion. The Group strives to secure talent through the introduction of stock option plans and employee stock ownership plans, capability improvement through on-the-job training and in-house education, and the provision of an attractive working environment.

As its business expands, the Group carries out projects by building collaborative relationships with partners such as subcontractors, but if it is unable to secure excellent partners in a timely and appropriate manner, its development capabilities could decline, constraining business expansion. Because reliance on external resources directly affects project execution capability, failure to secure partners directly impacts performance. The Group continues to promote the building of collaborative relationships, but this does not guarantee that such partners can be secured.

The Group prepares estimates based on projected man-hours and difficulty levels when accepting projects, but it is difficult to fully anticipate development man-hours and outcomes in advance. If unforeseen circumstances cause development man-hours to increase and project profitability to deteriorate, this could affect performance and financial condition. The Group calculates development man-hours and manages project progress to prevent discrepancies in understanding with customers, but it cannot completely eliminate this risk.

The Group positions intellectual property rights as an important management resource and works to acquire and protect such rights through the establishment of employee invention regulations and deliberation by an employee invention review committee. However, if a third party infringes on the Group's intellectual property rights, resolving the matter could require significant time and expense, potentially affecting the Group's business, performance, and financial condition. The response costs incurred and the impact on business continuity in the event of infringement may not be minor.

The Group investigates potential infringement of third-party intellectual property rights in cooperation with retained attorneys and patent attorney firms, but it is difficult to fully identify third-party intellectual property rights, particularly with respect to new products, and the possibility cannot be denied that the Group may unknowingly infringe on another company's patents or other rights. In such cases, the payment of royalties or claims for damages could affect the Group's business, performance, and financial condition. Because the Group's response is limited to the extent investigation is possible, this risk cannot be completely eliminated.

The Group conducts its business activities primarily in the greater Tokyo metropolitan area, and if a large-scale disaster such as an earthquake or fire, or a serious infectious disease outbreak, occurs in the metropolitan area, this could damage social infrastructure such as communications and transportation systems, as well as business sites and employees. If such damage occurs, all or part of operations could be suspended, affecting the Group's business and performance. The Group has established systems aimed at ensuring business continuity, but the concentration of its business in the greater Tokyo metropolitan area leads to a concentration of risk.