HOGY MEDICAL CO.,LTD.

The majority of medical kit products, medical non-woven fabric products, etc. are subject to regulation under the Act on Pharmaceuticals and Medical Devices, etc., and their manufacture and sale require approval from the Minister of Health, Labour and Welfare and licenses from prefectural governors. If a license or permit is not granted by the supervisory authority, or if an already-obtained license or permit is revoked, the manufacture and sale of the relevant products may become impossible, potentially having a material impact on business performance. The annual securities report does not contain any specific description of countermeasures.

As the majority of the Group's products and merchandise are sold to medical institutions, there is a risk that revisions to medical service fees or advances in surgical techniques could lead medical institutions to change their purchasing policies or the products they use. If demand undergoes a structural change due to changes in healthcare policy, this could directly affect net sales and profitability. The annual securities report does not contain any specific description of countermeasures.

If a manufacturer supplying components used in medical kit products becomes unable to supply them, manufacturing of the medical kit products using such components would become impossible. Since medical kit products are one of the Group's core product lines, a supply disruption could have a direct and material impact on business performance. The annual securities report does not contain any specific description of countermeasures such as securing alternative supply sources.

If defects occur in the products or merchandise handled by the company, this could lead to medical accidents or product/merchandise recalls. Given the nature of products used in medical settings, defects are directly linked to patient safety, and could affect business performance through loss of social trust, recall costs, and damages, among other factors. The annual securities report does not contain any specific description of countermeasures related to the quality control system.

The Company has a manufacturing subsidiary in Indonesia, and there is a risk that the supply of materials and products could be temporarily disrupted in the event of force majeure events such as unexpected changes in laws and regulations, political instability, terrorism, riots, war, natural disasters, or infectious disease outbreaks. A supply disruption originating from the Indonesian site could also spread to domestic manufacturing and sales activities, potentially affecting business performance. The annual securities report does not contain any specific description of a business continuity plan (BCP).

The Company's manufacturing and distribution sites are concentrated in the Miho and Ushiku areas of Ibaraki Prefecture, and it does not have alternative sites in other regions. If these sites suffer significant damage due to natural disasters such as earthquakes, fires, or wind and flood damage, manufacturing and supply could be temporarily halted, potentially having a material impact on business performance. The geographic concentration of these sites is recognized as a structural vulnerability lacking risk diversification.

In providing services and products that contribute to the rationalization and labor-saving of medical institution operations, the Company handles information belonging to medical institutions. If a leak of such information occurs, it could develop into a matter of social trust or lead to claims for damages, potentially affecting business performance. While the Company states that it exercises the utmost care in managing information, specific details of security measures are not described in the annual securities report.

As the Company has a manufacturing subsidiary in Indonesia and procures raw materials both domestically and internationally, significant fluctuations in crude oil and raw material prices as well as foreign exchange rates affect procurement costs. If cost increases cannot be passed on through sales prices, profitability could deteriorate, potentially affecting business performance. The annual securities report does not contain any specific description of risk management measures such as hedging.

If impairment accounting becomes necessary for assets held by the Group due to a decline in their substantive value or other factors, this could affect business performance for the relevant period. Fluctuations in the value of Group assets, including the Indonesian manufacturing subsidiary, are envisioned as the main source of this risk. The annual securities report does not contain any specific description of the target assets or the scale of amounts involved in impairment risk.