CLUSTER TECHNOLOGY CO., LTD.

Because the required characteristics demanded by customers and the market are constantly changing, there is a risk that development efforts may fail to focus on the right targets, resulting in significant delays or the abandonment of development themes. If R&D expenses cannot be recovered, this may adversely affect business performance. The Annual Securities Report does not disclose specific countermeasures.

Even after a technology has been completed, there is a risk that new products may not be accepted in the market due to price competitiveness, differentiation, timing, or changes in technology trends. Even after market acceptance, orders exceeding production capacity cannot be fulfilled, potentially resulting in opportunity losses.

If new technologies emerge that are entirely different from the technologies the Company holds or is developing, the relative superiority and importance of the Company's technologies may be undermined, potentially leading to a decline in product value and a material impact on business earnings. Particular attention is required in the precision molding and Nano/Micro fields, where the pace of technological innovation is rapid.

There is concern that the entry of major companies from a wide range of industries, including unrelated ones, into the Nano/Micro Technology industry could affect the Company's business. In addition, if low-priced products from Taiwan, South Korea, and China flow further into the Japanese market, there is a risk of significant damage to the Resin Molded Insulators (Epoxy Insulators) business.

There is a possibility that the scope of rights of the Company's patents may be interpreted narrowly, and if the Company is unable to effectively prevent the commercialization of similar technologies and products, competition may intensify and affect business performance. In addition, if other companies obtain patent rights for technologies implemented by the Company, risks such as royalty payments, injunctions against use, and claims for damages may arise.

The Company's proprietary composite materials, which are a source of its competitive strength, use chemical raw materials. If a review of safety regulations renders currently used additive materials unusable, there is a risk of significant disruption to product manufacturing. Developing and procuring alternative materials would require considerable time and cost.

The Company's research and development requires engineers with diverse specialized capabilities in polymer chemistry, inorganic chemistry, precision molding technology, and mold technology. If the Company is unable to secure personnel of the necessary quality and quantity, or if capable personnel leave the Company, this may adversely affect business activities.

As of the end of March 2026, the Company has a small workforce of 6 officers and 76 employees, and its internal management structure remains commensurate with this scale. If personnel reinforcement and enhancement of the management structure accompanying business expansion do not proceed smoothly, business operations may be disrupted.

If defects occur in the Company's products, there is a risk that trust in the products and brand could be significantly diminished or lost. Furthermore, end users may pursue product liability claims against the Company, and damages or other costs could have a material impact on the Company's finances and business.

If the prices of mineral resources such as petroleum, iron, and copper fluctuate sharply, manufacturing costs including raw materials, parts, and electricity rates may rise, resulting in a risk of significant fluctuations in product profit margins. The Company does not disclose specific countermeasures in the Annual Securities Report regarding the feasibility of price pass-through or diversification of procurement sources.