NIC Autotec, Inc.

The core product, the Alpha Frame System, may be affected by low-price selling from domestic competitors in the small-lot single-unit sales field that does not require specialized expertise. Furthermore, market entry by low-priced overseas products cannot be ruled out, and countermeasures against intellectual property rights infringement may take time to become effective against overseas products. As a result, sales of the company's aluminum frames may come under pressure.

The Alpha Frame System has a high proportion of sales to companies related to electronic components, digital home appliances, machine tools, and FPD manufacturing equipment, while the Equipment Division and Trading Division are mainly aimed at the automotive-related industry. Capital expenditure trends in these diverse industries do not necessarily move in sync, and the company's business performance may fluctuate significantly depending on business partners' product launch plans and sales trends for their core products. There is a risk that a downturn in the capital expenditure cycle of a specific industry could lead directly to a decline in sales.

The purchase price of aluminum structural components, the main raw material for the Alpha Frame System, is negotiated and determined quarterly based on domestic aluminum spot prices and other factors, so fluctuations in global aluminum ingot prices directly affect manufacturing costs. If it becomes difficult to promptly pass on sharp price increases to selling prices, profit margins may come under pressure, potentially adversely affecting the company's business performance.

The company has a high degree of dependence on specific business partners, resulting in a structure in which sales in a given fiscal year can fluctuate significantly depending on whether large-scale machinery and equipment investment orders are received. The company strives to develop new major users and diversify its customer base through collaboration among sales, design, and manufacturing, but if it becomes difficult to continue transactions with specific business partners, this could have a significant impact on business performance.

The company prepares for product liability risk through thorough quality control and enrollment in PL insurance, but the possibility of serious claims or liability for damages arising from unforeseeable product defects cannot be completely ruled out. Should such an event occur, in addition to the burden of compensation and litigation costs not covered by PL insurance, a decline in social credibility could affect the company's business performance.

The company's main production and research facilities are concentrated in and around Toyama City, and natural disasters such as earthquakes, floods, and typhoons, or the spread of infectious diseases, could force a reduction or suspension of production activities. The company has established a business continuity framework by diversifying production and shipping sites to Aichi, Saitama, and Fukuoka, and by securing production outsourcing partners in Nagano, Saitama, and Kanagawa; however, the risk remains that large-scale disasters, terrorism, or war, whether domestic or overseas, could make procurement of materials and components difficult, causing prolonged disruption to product supply to customers.

Material procurement from the Kingdom of Thailand occupies an important position in the company's business expansion, and risks exist such as unexpected changes in laws and regulations, unfavorable changes in the tax system, political instability, social disruption due to terrorism, war, infectious diseases, or natural disasters, and rapid changes in the labor environment. If these risks materialize and disrupt material procurement, it could hinder production activities and product supply to customers, potentially affecting the company's business performance.

In material procurement from the Kingdom of Thailand, unexpected changes in laws and regulations or unfavorable changes in the tax system may occur. Such institutional changes could raise procurement costs and complicate procurement procedures, potentially affecting the company's manufacturing costs and business performance.