SIOS Corporation

There is a risk of claims for damages or injunctions on the grounds that OSS or software developed in-house infringes upon third parties' copyrights, patents, or other intellectual property rights. It is difficult to fully grasp the entirety of intellectual property rights in the business field, and there is a possibility that new third-party intellectual property rights may be established in the future. Should these risks materialize, the Group may be forced to reconsider its OSS business, which could affect its financial position and business performance.

In the IT industry, system integrators of various sizes, computer manufacturers, and software vendors compete in their respective specialized fields, resulting in a severe competitive environment. There is a risk that the Group's competitive advantage may decline due to intensifying competition with existing rivals or the emergence of competitive new entrants. Although the Group is working to strengthen its development and sales structure, a decline in competitiveness could affect its financial position and business performance.

In the IT market, where new technologies emerge daily, it is necessary to actively pursue new business creation, new product development, and the establishment of subsidiaries. However, if changes in the internal or external business environment prevent progress according to plan, there is a possibility that plans may need to be revised or suspended. New businesses require upfront investment, and if the necessary funds cannot be secured, it may become difficult to carry out the plans. These factors could affect the Group's financial position and business performance.

Some products and merchandise involve sales and purchases denominated in foreign currencies, and in preparing consolidated financial statements, the revenues and assets of overseas subsidiaries are translated into yen, meaning that fluctuations in exchange rates affect business performance. Although the Company implements risk mitigation measures, if exchange rate fluctuations exceed expectations, it may not be possible to fully avoid the impact. In such cases, this could affect the Company's financial position and business performance.

In the information services industry, where rapid technological innovation such as generative AI is progressing, securing and developing development engineers, project managers, and system implementation personnel has become an important issue. If personnel recruitment and development cannot be carried out as planned, the business structure may become fragile, potentially adversely affecting business strategy and performance. The Group treats securing human resources as a top priority and strives to maintain an appropriate personnel structure.

Nobuo Kita, President and Representative Director, plays a major role in determining overall management policy and strategy, resulting in a high degree of dependence on him. While the Company is working to reduce this dependence through the establishment of an executive officer committee, delegation of authority, and expansion of personnel, if he were to become unable to be involved in management before the organizational structure is fully established, this could adversely affect business strategy and performance.

In pursuing corporate acquisitions and strategic alliances aimed at business expansion, the Company conducts detailed due diligence; however, there remains a possibility that contingent or unrecognized liabilities may arise after an acquisition, that performance may deteriorate unexpectedly, or that measures may not achieve the results planned. Should these risks materialize, they could affect the Company's financial position and business performance.

The Company's business depends on computer systems, cloud services, and communication networks, creating risks of system outages or the leakage, destruction, or falsification of important data due to cyberattacks, ransomware, unauthorized access, computer viruses, and the like. Although preventive measures such as system redundancy, backups, various security measures, and internal training are implemented, a large-scale failure, if it occurs, could affect the Company's financial position and business performance.

In the system development and implementation support business, thorough screening is conducted before accepting orders; however, if project progress is delayed after an order is received, there is a risk of increased costs, opportunity costs, and late payment penalties. Should these risks materialize, they could affect the Company's financial position and business performance.

The Company maintains a close business relationship with Otsuka Corporation, its largest shareholder (holding 17.96% of issued shares), and intends to further expand this business relationship going forward. If problems were to arise in the collaboration with Otsuka Corporation for any reason, or if the cooperative structure were to change due to a shift in Otsuka Corporation's management policy, this could affect the Company's financial position and business performance. It should be noted that there are no constraints on the Company's fundraising or business operations, and its management independence is maintained.