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Risk Factors

Among the business and financial status described in our annual business report, the following risk factors may significantly affect investor's decisions. Any forward looking matters described here are based on our forecast as of December 31st 2010
It is our policy to be aware of these risk factors, prevent their occurrences , and mitigate it when it occurs. It is our opinion , however, any investment in us should be made after careful consideration of these risk factors and other information provided here. Please note that these risk factors may not cover all possible investment risks in our stock.

(1)Our main customer's in-house engineering trend

Our main customers are manufactures of printers, copying machines and MFPs. Some of them possess technical capabilities to develop network software and have started doing so in-house.
In the meantime, we place top priority in meeting customer needs by promptly providing quality engineering services and reliable network software, and we , as an expert in network software development, have been optimizing the engineering structure, applying new technologies, nurturing engineers as well as enhancing technical support to make customer's product more competitive.
Despite the above efforts, when our customers have acquired network technologies and knowhow, and thus our competitiveness can be compromised, more customers may start in-house development. This may affect our business significantly .

(2)G rowth in our strategic product markets

Our strategic products are USB device servers, wireless LAN modules and AV networking products as we expect more and more devices should require networking or wireless connectivity , and the AV networking market including digital signage should grow. If the growth is hampered by the emergence of alternatives or low demands, our growth may also be affected.

(3)Interference and breach of intellectual property rights

It is our policy to study other company's or individual's patents and trademarks prior to product development or release to prevent interference or breach and take preventive measures for a possible case. It would be impossible , however, to eliminate every possibility of interference or breach as law and regulations can be different from country to country, capacity of database research can be limited, or our product may be released before a certain patent is issued. In such cases, we may receive a complaint or sued. This may affect our business if the extent of a complaint and its progression is significant.

(4) Events or situations to cause a going concern

We posted operating loss in two consecutive years with 731 million yen in FY2009 and 218 million yen in FY2010. This caused a going concern at the end of FY2010. Our business, however, has been on a recovery track with higher consolidated sales in FY 2010 on the year . We are determined to improve business by pursuing the growth strategy in new strategic business areas with streamlined operations and effective use of labor costs and other expenses. We recorded group operating profit in the 4th quarter of 2010, for the first time in 8 quarters with US, EU and China subsidiaries generated operating profit. We believe that the refinancing plan and implementing the above mentioned measures will erase uncertainties about our business.

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