The main risks that management recognizes as potentially having a significant impact on the financial condition, business performance, and cash flow of the consolidated company are as follows.

 

The following descriptions do not cover all risks related to investment in our company's stock. Furthermore, future-related matters mentioned in the text are based on the judgment of our group as of the end of the current consolidated fiscal year.

 

Our group recognizes the possibility of these risks occurring and will strive to prevent them from occurring to respond appropriately if they do occur.

The environment surrounding our group is rapidly advancing in technology, and we are constantly striving to develop cutting-edge manufacturing equipment. However, if we fail to keep up with development or changes in needs, it may affect our group's performance.

Our group procures part of its business funds as loans from financial institutions. While we strive to repay interest-bearing debt as planned and enhance our equity capital.

However, any changes in the business environment, including future interest rate fluctuations, may affect our group's performance and financial condition.

Our group’s sales to overseas customers, particularly in China and the Asia region, account for over 20% of our total sales.

Therefore, any changes in political, economic, and social conditions, various regulations, exchange rate fluctuations, and other sudden external factors in China and Asia may affect our group's performance.

While our group strives to reduce procurement costs, if the prices of raw materials and components rise suddenly due to supply chain disruptions or a week Japanese yen depreciation, it may affect our group's performance.

Although our group conducts credit investigations on business partners, if the conditions of business partners deteriorate rapidly and it becomes difficult to collect accounts receivables, it may affect our group's performance and financial condition.

In the display-related business, our group mainly manufactures and sells various equipment to Chinese LCD panel manufacturers. In export transactions where our group is obligated to install equipment under the contract with the customer, we recognize revenue separately for "delivery of equipment" and "installation and adjustment work on-site" as independent performance obligations. We collect 70% to 90% of the contract amount after the delivery of the equipment and the remaining amount after the completion of the on site installation work. If the collection of the remaining amount is delayed due to the business customs of the business partners or delays in the inspection of the equipment, it may affect our group's performance and financial condition.

Our group manufactures and sells various equipment to many customers. We estimate the total cost of the equipment, obtain appropriate approval, and then start manufacturing based on a letter of intent or a purchase order from the customer. We also regularly review the estimated total cost until the equipment is completed.

 

There may be cases where specification is changed in order to sell equipment to another customer after an order for that equipment has been cancelled due to change in a customer’s capital investment plan, or defects may occur in the manufacturing process of equipment based on new development projects or special specifications. In such cases, additional costs may be incurred, which may result in an increase in the provision for losses on orders, and this may affect our group’s performance.

Since the establishment of our company in 1973, Chairman and President Takefumi Momose has played an important role in promoting our group's business, including determining management policies and business strategies. While we are building and transitioning to a system that does not overly depend on him, if he becomes unable to perform his duties, it may affect our group's business performance and future business operations. To mitigate this risk, we are promoting the establishment of a management system that does not overly depend on him, such as adopting an executive officer system.

Our group strengthens its compliance system to avoid infringing on the interests of others or causing losses to others in its management decisions and business execution. However, if a lawsuit is filed against us and we lose, it may affect our group's performance.

Our group believes that the direct impact of natural disasters such as earthquakes is relatively low because much of our production is outsourced, and many of our business sites are in areas with low risk of wind and flood damage. However, if changes in customers' capital investment plans, delays or stoppages in the supply of materials and components from production contractors or suppliers occur due to natural disasters, it may affect our group's performance and financial condition.

While we actively engage in new business development for future business expansion, there are many uncertainties in the development of new businesses. Various factors, such as market environment changes beyond expectations, may make it difficult to establish new businesses, delaying or preventing the recovery of investments.