NAGAOKA INTERNATIONAL CORPORATION

In FY2025 (ended June 2025), overseas sales accounted for 65.5% of total sales, and there exist risks such as changes in the economic, political, and social conditions of counterpart countries, changes in trade, commerce, and financial policies, and wars, terrorism, infectious diseases, etc. If these risks materialize, project delays, suspensions, or cancellations, defaults, and other issues may occur, which could have a material impact on business performance and financial condition. Although measures are being taken to accelerate collection of receivables, there remains a risk that collection may not proceed smoothly due to differences in commercial practices.

Manufacturing of Screen Internal and other products in the Energy-related Business may involve long-term, large-scale projects, and unforeseen circumstances such as a surge in material prices could prevent the achievement of planned profit margins, resulting in losses. In addition, if customers decide to postpone, cancel, or significantly change the specifications of plant construction due to economic trends or fluctuations in crude oil prices, this could have a substantial impact on profit plans and production plans. Furthermore, delays, defects, or failures attributable to the Company's responsibility may give rise to repair obligations, liability for damages, and adverse effects on future order intake.

The Group conducts some transactions denominated in foreign currencies, giving rise to foreign exchange fluctuation risk. Although hedging measures such as forward exchange contracts are implemented, complete elimination of the risk is not possible, and a sudden fluctuation in exchange rates could affect business performance and financial condition. Given the business structure in which overseas sales account for 65.5% of total sales, sensitivity to exchange rate fluctuations is at a high level.

Stainless steel materials, such as plate and wire materials, which are principal raw materials, are subject to price fluctuations depending on market conditions. When prices surge, measures such as streamlining production lines, passing costs on to selling prices, and procuring overseas are implemented; however, if these measures do not proceed as planned or if the price surge becomes prolonged, this could affect business performance and financial condition.

The Company has established manufacturing and sales subsidiaries in China and Vietnam to reduce manufacturing costs through lower local labor costs and to expand sales channels; however, if changes in local laws and regulations, unforeseen economic or political factors, rising labor costs, or difficulties in securing personnel occur, this could affect business performance and financial condition. There is particular concern about the risk of events occurring beyond the scope anticipated by the Group.

Although a quality control system has been established through ISO 9001 certification and product liability (PL) insurance, if for some reason a large indemnity payment or significant indirect damage due to poor quality occurs, this could affect business performance and financial condition. If a serious quality-related issue occurs and damages the relationship with a process owner, there are also concerns about an adverse impact on order intake.

Due to their specialized nature, procurement sources for some raw materials and parts are limited, and switching suppliers is difficult for certain items. If quality issues, supply shortages, or delivery delays occur with respect to these materials, this could disrupt production activities and affect business performance and financial condition.

Domestic sales in the Water-related Business and the water treatment plant construction of the consolidated subsidiary Yazawa Ferromite Co., Ltd. require a specific construction business license under the Construction Business Act. If such a license is revoked due to misconduct or the absence of a full-time engineer, or if a business suspension order or suspension of designation by a business partner occurs, this could have a material impact on the Group's business performance and financial condition. The Company is not aware of any facts as of the present that would constitute grounds for revocation or disciplinary action.

Although information management regulations have been established and employee training is conducted to thoroughly manage important confidential information related to business management, if an information leak occurs due to unforeseen circumstances such as external hacking, this could lead to a loss of trust, a decline in sales, and the occurrence of damages compensation expenses, thereby affecting business performance and financial condition.

Hamada Group Co., Ltd. directly holds 52.7% of the Company's voting rights (as of June 30, 2025), and Hamada Co., Ltd. and Hamada Com Co., Ltd. also indirectly hold the same proportion. Although the Company recognizes that it maintains a certain degree of independence, there is no guarantee that management policies and interests will always align with those of the parent company group, and the exercise of voting rights and the disposition status of held shares, among other factors, could affect the Company's business operations and the supply-demand balance of its common stock.