PIXELA CORPORATION

The Group has recorded operating losses for eight consecutive periods and negative operating cash flow for twelve consecutive periods, giving rise to material doubt about the going concern assumption. As countermeasures, the Group raised ¥1,500 million through the exercise of the 20th series of stock acquisition rights allotted to EVO FUND and issued ¥300 million of the 13th unsecured straight bonds; however, it is explicitly stated that there remains a possibility that earnings will not improve as planned, and material uncertainty is recognized at the present time.

The digital equipment market, including PC peripherals, digital AV home appliances, and mobile devices, is subject to significant supply-demand fluctuations. If product demand falls substantially short of forecasts, the personnel, materials, and products arranged in advance may become surplus, affecting business performance. The Group seeks to respond to sudden fluctuations and curb excess inventory through adjustments to outsourced production, but there is a risk that it may not be able to fully respond to abrupt changes in the business environment.

The digital equipment market is highly competitive, with large and small companies from around the world participating, and is constantly exposed to the risk of declining selling prices. Although the Group works to reduce costs and add higher value, if downward price pressure from the market or cost reduction demands from OEM customers exceed these efforts, it may become difficult to set prices that secure sufficient profit, potentially affecting business performance.

Digital equipment has a very short product life cycle due to rapid technological innovation and the introduction of new products by competitors. If the Group fails to make investments comparable to and as timely as competitors, this could lead to obsolescence of technology and products and a decline in competitiveness. The Group claims an advantage particularly in digital broadcasting-related technology, but it also recognizes the possibility of losing this advantage due to intensifying competition.

Three U.S. companies—Microsoft, Apple, and Google—dominate the majority of the OS market, and if functions similar to the Group's products become standard features of these OSs, the Group could lose market share. The Group is working to support various OSs, but depending on OS development trends, there is a risk of a material impact on business performance.

Maintaining and expanding sales in the digital equipment market requires aggressive and substantial development investment, but if market trends change or alternative technological innovations occur beyond expectations, there is a risk that development costs cannot be sufficiently recovered due to abandonment of commercialization, significant deviation from sales forecasts, or prolonged development periods. This risk is particularly likely to materialize at present, as the Group is in the process of transitioning to new business areas (wellness/healthcare × Web3).

The smartphone advertising market, on which EveryPoint's point-program app business depends, is highly susceptible to economic conditions, and advertising demand may decline sharply in the event of a rapid economic downturn. In addition, if the media value of smartphone advertising declines due to the expansion of other advertising media or excessive competition, this could affect the Group's business and performance.

If products or programs developed and sold by the Group are found to infringe on the intellectual property rights of other companies (inventions, designs, copyrighted works, know-how, etc.), the Group may incur liability for damages or be required to pay patent royalties, which could significantly affect development activities and business performance. In particular, in digital television broadcasting technology, the Group pays patent royalties to comply with standard specifications such as broadcasting standards, encoding technology, and copyright protection standards, and there is also a risk that the Group's own intellectual property rights could be infringed upon or invalidated by third parties.

The app "EveryPoint" provides services via the internet, and if a system failure occurs due to a natural disaster, unauthorized access, or other causes, service provision could be suspended, affecting business performance. In addition, if personal information or confidential information obtained in the course of business is leaked externally, this could result in liability for damages, loss of social credibility, and customer attrition.

The Company holds shares in two subsidiaries and one affiliated company, of which one subsidiary and one affiliated company are in a state of negative net worth (excess of liabilities over assets). A deterioration in the business performance or financial condition of these affiliated companies could affect the performance of the Group as a whole, constituting an important risk factor in terms of group governance.