The amusement device market , which is the primary market for the Company’s business at present, began to show positive signs in some segments, as exemplified by the reversal of the downtrend in the population of players due in part to the popularization of one-yen pachinko and other low-price sales initiatives, and the modest recovery trend in the pachislot machines sector that had continued to face a harsh climate attributable to the impact of the revision of regulations over the past years and other such factors. However, the amusement device market on the whole continues to face a tough climate, as reflected in the further reduction in the number of amusement facilities and the number of installed amusement devices, etc. Furthermore, the Company’s business environment was extremely harsh in the first quarter, due to such factors as the concentration of demand on some dominant amusement device models and inventory adjustments of amusement device components arising from some amusement device manufacturers failing to manufacture as many units as planned associated with the concentration of demand. Under such circumstances, the Company concentrated its efforts on promoting the sale of various products, focusing on “AG301”, a graphics LSI product for larger LCDs installed in amusement devices, and “AG333”, an integrated LSI product that fulfills multiple functions on a single chip including graphics-rendering, sound-generating and LED driver functions, followed by sound LSI products, LED driver LSI products and memory-module products. As for graphics LSI products targeted at the amusement device market, the migration from “A301” (which was the Company’s core product in the first quarter of fiscal 2009) to “AG333” (LSI with integrated functions) has been progressing steadily. Nevertheless, the climate during the first quarter of fiscal 2010 turned out to be harsh as initially expected by the Company, as a result of which the sales volume of the Company’s graphics LSI products decreased by 410,000 units from the previous corresponding period to 290,000 units. The sales volume of sound LSI products targeted at the amusement device market declined year-on-year due to the impact of sales of products with integrated functions and the demand trends among customers, while the sales volume of other products targeted at the amusement device market fell year-on-year invariably to the impact of customers’ demand trends. In contrast, sales of graphics LSI products targeted at the embedded system market other than the amusement device market exceeded the level in the previous corresponding period, due in part to the completion of the inventory adjustment cycle for various embedded systems, especially industrial equipment. As a result, for first quarter of fiscal 2010, the Company recorded net sales of 1,738 million yen, down 55.7 % year-on-year.   Gross profit decreased 60.1% from the previous corresponding period to 937 million yen, due in part to the fall in sales stemming from the aforementioned factors and the deterioration of the gross margin ratio attributable to changes in the lineup of products sold. Selling, general and administrative expenses on the whole increased 31.4% year-on-year to 811 million yen, as R&D expenditures increased 35.6% year-on-year due in part to aggressive R&D investments made with a vision for future growth. Consequently, for the first quarter of fiscal 2010, the Company posted operating income of 125 million yen (down 92.7% year-on-year), ordinary income of 130 million yen (down 92.5% year-on-year), and net income of 79 million yen (down 92.5% year-on-year).   Income Statement (¥1 million)   2011/3 1Q Sales ratio 2012/3 1Q Sales ratio yoy Net sales 3,928 100% 1,738 100% -56% Gross profit 2,348 60% 937 54% -60% Operating income 1,731 44% 125 7% -93% Ordinary profit 1,735 44% 130 7% -93% Net profit 1,067 27% 79 5% -93% Balance Sheet (¥1 million)   2011/3 1Q Compo -nent ratio 2012/3 1Q Compo -nent ratio yoy Current assets 12,533 94% 12,895 95% 3% Fixed assets 802 6% 659 5% -18% Current liabilities 1,566 12% 1,019 8% -35% Long-term - - 12 0% - Net assets 11,769 88% 12,523 92% 6% LIabilities and Net assets 13,335 100% 13,554 100% 2%