eXmotion Co., Ltd.

In the 18th fiscal year of consolidated operations, sales to the automotive industry accounted for approximately 73% of net sales. If technology development in that industry reaches a plateau or on-site support needs decrease, orders could decline substantially, which may have a material impact on business performance. The Group is working to mitigate this risk by acquiring new customers in other fields such as medical equipment and industrial equipment, but resolving the revenue concentration is expected to take time.

In the 18th fiscal year of consolidated operations, sales to the top two customers accounted for 55% of total net sales, both of which belong to the automotive industry. If technical support and on-site support needs at these two companies decrease, business performance could be significantly affected. The Group is addressing this through diversification of sales, but resolving the concentration will take time.

In hiring personnel with theoretical knowledge and practical skills in software engineering, it has become increasingly difficult to secure the necessary workforce due to intensifying competition with major manufacturers and others, as well as the mid- to long-term decline in the new graduate population. If the personnel shortage continues, the Group may be unable to respond to additional requests from new and existing customers, resulting in lost order opportunities. Because the organization operates with a small, elite workforce, the resignation of individual employees directly affects service delivery. The Group is working toward retention through year-round hiring, budget allocation for skill improvement, and setting up in-office days twice a month, but complete avoidance of this risk is difficult.

Due to the nature of its business, the Group frequently handles confidential information related to customers' software development and new products and technologies. If an information leakage incident occurs, it could result in contract termination, lost orders, and loss of credibility, potentially having a material impact on business performance. The Group is working to mitigate this risk through data encryption, prohibition of storing customer data on personal PCs, BIOS password settings, ISMS certification, and thorough implementation of its basic information security policy, but complete avoidance is difficult.

The Group's Consulting Business is based on software engineering technology specialized in architecture and development processes, and the Group believes it currently holds a competitive advantage that meets customer requirements. However, if new technologies or methodologies are introduced in the software engineering field, or if advanced AI- and tool-based solution services become established, the Group's competitive advantage could decline, potentially having a significant impact on business performance. The Group addresses this by allocating a certain percentage of working hours to skill improvement activities.

If a contract is terminated or cancelled midway due to a change in a customer's management policy or deterioration in business performance, previously expected revenue may not be recognized, potentially having a significant impact on business performance. The Group addresses this by exchanging contracts and purchase orders for each project, but the risk of sudden contract termination due to circumstances on the customer's side cannot be entirely eliminated.

Some of the Group's Consulting Business activities fall under worker dispatching business. If the Group becomes subject to disqualification grounds or violates relevant laws and regulations, it could be ordered to suspend business or have its license revoked. In addition, the enactment or revision of new laws and regulations, or changes in judicial or administrative interpretation, could have a significant impact on business performance. The Group addresses this by striving to comply with relevant laws and regulations.

Hiroyuki Watanabe, the founder and Representative Director and President, has extensive experience and knowledge in modeling and plays an extremely important role in determining and executing management policy and business strategy. If he becomes unable to continue his duties for any reason, it could affect business results. The Group is working to reduce this dependence through enhanced information sharing at board meetings and strengthening the management organization, but the degree of dependence remains high at this time.

As of the end of November 2025, the Group had 88 employees, a small scale, and its internal control system remains commensurate with this size. If personnel reinforcement and enhancement of the internal control system fail to keep pace appropriately with business expansion, this could affect the Group's financial position and business results. The Group plans to develop its systems in line with its future expansion policy.

The Company has Solxyz Co., Ltd. as its parent company and operates independently, maintaining its own corporate culture and management autonomy. However, if the parent company's management policy changes, it could affect the Group's business operations. A total of two individuals—the Chairman of the Board and a Director who is also an Audit and Supervisory Committee Member—concurrently hold positions as officers of the parent company, having been invited to serve in order to strengthen collaboration and reinforce the management foundation.