Kitazato Corporation

If claims arise related to medical devices manufactured and sold by the Company, this may result in repair losses, damages, loss of customers, and patient harm, in addition to the possibility of administrative dispositions such as business suspension under the Pharmaceuticals and Medical Devices Act, as well as reputational damage. The Company has implemented measures such as compliance with procedural manuals, corrective actions, and liability insurance enrollment; however, if such measures fail to function due to abrupt regulatory changes, this could have a material impact on the Company's financial position and business results.

Representative Director, President, and founder Taiju Inoue plays an extremely important role in determining management policy and business strategy, and if he becomes unable to continue his duties, delays in management decision-making and business promotion could occur. As he is also a major shareholder, dependence is high in both management and ownership. The Company is proceeding with the development of executives and knowledge sharing, but a high degree of dependence continues at present.

The top three sales destinations (Biomedical Supply, S.L., Biomedical Supply US, Inc., and Shanghai Yongyuanxing Medical Technology Co., Ltd.) accounted for 52.8% of consolidated net sales in the 19th fiscal year, indicating a high degree of dependence on specific business partners. If transactions were to cease due to a competitor acquiring a distributor or similar events, this could have a severe impact on net sales. The Company is implementing measures such as strengthening engagement with distributors, securing alternative distribution channels, and enhancing sales capabilities.

In Japan, registration and certification of each product category is required under the Pharmaceuticals and Medical Devices Act, and administrative dispositions such as business suspension may be issued in the event of legal violations. Overseas, registration compliance with the MDR (European Medical Device Regulation) and the FDA (U.S. Food and Drug Administration) is required, and delays in responding to tightening regulations in various countries could affect business continuity. The Company is gathering information and taking preemptive measures through participation in relevant associations and organizations; however, responding to regulatory changes or strengthening may require significant time.

Information leakage, alteration, or loss may occur due to external cyberattacks, virus infections, or human error by employees. In FY2025 (ended March 2025), a remittance fraud impersonating an overseas supplier actually resulted in a loss of ¥25 million, demonstrating that this risk has materialized. The Company has implemented measures such as strengthening IT security, introducing two-factor authentication, and revising business workflows; however, unexpected attacks could damage the Company's image and impact its financial position.

The majority of production functions are concentrated at the Shizuoka head office plant, and if a large-scale natural disaster such as a Nankai Trough earthquake, fire, or accident exceeds expectations, this could result in the suspension of manufacturing and sales operations or damage to facilities. The Shizuoka head office plant is projected to experience a seismic intensity of lower 6 on Fuji City's disaster prevention map, indicating a high risk of single-site concentration. The Company has implemented seismic resistance measures, established cooperative relationships with outsourcing partners, and maintained stockpiles of products and raw materials; however, if widespread impact occurs, this could result in a significant burden of recovery costs.

If difficulty in recruitment due to changes in employment conditions or unexpected loss of personnel progresses, this could result in a decline in production capacity, product shortages, loss of sales opportunities due to delivery delays, and reduced competitiveness due to difficulties in technology succession. In the highly specialized business of medical device manufacturing, the loss of skilled personnel could have a particularly serious impact. The Company implements measures such as regular interviews, improved treatment, operation of personnel evaluation systems, and active recruitment of new graduates.

With the expansion of overseas business, smooth business operations may be hindered by country risks such as political instability, trade sanctions such as retaliatory tariffs imposed in response to reciprocal tariffs, differences in culture and legal systems, and unique labor relations. In particular, the risk of retaliatory tariff measures materializing has increased under the current geopolitical environment. The Company aims to minimize risk through verification of legal issues at the start of services, geopolitical risk research, and collaboration with local partners.

While the Company maintains a high profit margin in a relatively niche market, if new entrants engage in low-price sales or competitors adopt a low-margin, high-volume strategy, the Company may be forced to reduce its selling prices. High barriers to entry currently support profitability, but changes in the competitive environment could deteriorate the profit structure. The Company implements measures such as strengthening customer relationships and promoting the preparation of alternative products for sales expansion.

Sales transactions with Biomedical Supply, S.L. and Biomedical Supply US, Inc., managed by outside director Ignacio Vamejo, account for 46.6% of net sales combined, constituting related party transactions, which carry the risk of distorted transaction terms or impairment of shareholder interests. Additionally, Hokuri Shoji Co., Ltd., the asset management company of the Representative Director and President, holds 55.8% of the Company's shares and has been determined to be a parent company. While the Company strives to ensure fairness through procedures such as related party transaction management regulations, deliberation by a special committee, and Board of Directors approval, this continues to be recognized as a governance-related risk.