Silicon Studio Corporation

The Company's middleware sales are centered on domestic game companies, and if domestic game companies reduce the number of games they develop or withdraw from the market, this will have a direct impact on sales. Against a backdrop of rising game development costs, there is a risk that clients' development investment will be suppressed. Although the Company possesses superior technological capabilities compared to overseas competitors and maintains an advantage in the domestic market, it may not be able to withstand a deterioration in market conditions.

The technological environment is changing significantly, including the diversification of platforms and hardware, the sophistication of UX, and advances in high-speed, low-latency communication technology. If it takes time to respond to rapid technological innovation, or if the Company falls behind in the emergence of innovative markets, this may lead to a decline in competitiveness or the loss of business opportunities. The Company is continuously working to catch up with technological trends and accumulate know-how.

If a defect occurs in deliverables provided to a client, there is a risk of a large-scale recall or a claim for substantial damages. The Company addresses this through thorough quality inspection prior to delivery and by clarifying the scope of liability for non-conformity in contracts, but it cannot guarantee the complete elimination of defects. If a claim for damages materializes, it may have a significant impact on business operations and performance.

Since contract development sales are recognized upon completion of services, there is a risk that the timing of recognition may fluctuate due to requests from clients to change delivery dates or due to development delays. Royalty income is also significantly affected by factors such as the extension of clients' evaluation periods. Because both the amount and timing of revenue are subject to changes in client policy, performance may fluctuate significantly.

Against a backdrop of a global shortage of IT human resources, competition for recruitment has intensified, and recruitment costs have also increased. If the Company is unable to secure the personnel necessary to maintain and expand its business, this may result in lost opportunities and a decline in competitiveness. The Company is working to acquire personnel capable of handling the latest technologies from both within and outside Japan, but the recruitment environment continues to worsen.

The recruitment service is subject to regulation under the Employment Security Act, and the staffing service is subject to regulation under the Worker Dispatching Act; if a license is revoked or a business suspension order is issued, it could disrupt the entire core business. The mandatory implementation of equal pay for equal work under the Work Style Reform-related laws may increase the cost of sales ratio and SG&A ratio, potentially making it difficult to maintain and secure the necessary personnel. Labor-related laws and regulations are expected to continue to be revised in the future, and the risk of increased compliance costs is ongoing.

As the Company is obligated to enroll all dispatched workers in social insurance, it faces the risk that the amount of the company's burden could fluctuate significantly due to revisions to social insurance premium rates or an expansion of the scope of those covered. If reforms to the social insurance system are implemented, this would directly affect the cost structure of the Human Resources Business and could have a material impact on performance. The Company complies with the "Guidelines Concerning Measures to be Taken by Dispatching Business Operators" and takes appropriate measures accordingly.

In the Human Resources Business, the Company handles large volumes of personal information of job seekers, and if an information leak occurs, it could result in serious disruption to business operations due to liability for damages to the affected parties and loss of social trust. The Company bears obligations under the Act on the Protection of Personal Information, and there is also a risk of external cyberattacks and similar threats. The Company is working to strengthen its information management system through the development of internal regulations and education of officers and employees.

Since the business infrastructure is heavily dependent on networks, a system failure caused by natural disasters, accidents, external cyberattacks, or similar factors could disrupt business continuity. The Company has implemented preventive measures such as server load balancing and monitoring of operational status, but it cannot completely eliminate the possibility of system outages due to unforeseen factors.

As of November 30, 2025, the balance of interest-bearing debt was ¥339 million, and the Company may continue to raise funds through borrowings from financial institutions in the future. If the Company is unable to raise funds as planned due to a significant rise in interest rates or changes in financial conditions, this may affect its business results and financial position. There is also an inherent risk that increased funding needs associated with business expansion could increase reliance on borrowing.