AIRTECH JAPAN,LTD.

Of net sales of ¥14,151 million, the electronics industry field accounted for 52.4% (¥7,416 million) and the biological field for 36.9% (¥5,224 million), with the two fields together accounting for approximately 90% of sales. Since capital expenditure trends in each field, both domestic and overseas, directly affect business performance, there is a risk that sales could decline significantly during an economic downturn or a phase of investment restraint. The vulnerability is heightened by the single-segment structure, which means diversification effects do not apply.

Competition with other companies has arisen in the Clean Air System market, and there is a possibility that declines in selling prices could put pressure on business performance. The Company seeks to secure profits through in-house production of core components, strengthening relationships with distributors, and efficient material procurement and productivity improvements; however, if competition continues to intensify, price pass-through may become difficult, creating a risk of declining profitability.

Large orders for the electronics and pharmaceutical industries tend to involve complex specifications, frequent specification changes, and strong pressure for price reductions, resulting in a high risk of costs exceeding initial estimates. The Company conducts prior screening at board meetings at the time of order receipt and manages costs and progress at board meetings after order receipt; however, if the excess costs cannot be passed on to the selling price, business performance may be adversely affected.

As a result of the Company's focus on manufacturing special products since its founding, low production efficiency and the risk of defect occurrence are recognized issues. The Company aims to secure profit margins by increasing the ratio of standard products and selectively accepting orders for special products; however, if the standard product ratio does not increase as planned, or if the selection of special products does not function as expected, business performance may be adversely affected.

The Company relies on partner companies for the majority of its sheet metal processing and painting processes, and there is a risk that a sharp rise in material costs, increases in labor costs, or increases in outsourcing costs due to labor shortages at partner factories could put pressure on business performance. The Company seeks to mitigate the impact through expanding in-house production and developing new partner companies; however, if cost increases cannot be passed on to product selling prices, profitability may decline.

The Company procures all parts and raw materials, including steel sheet, blowers, filters, and semiconductor control boards, from external suppliers, and if supply is disrupted due to tight market supply-demand conditions, industry restructuring, natural disasters, or other factors, production stoppages or delivery delays may occur. The Company is taking measures such as securing multiple suppliers and strategically increasing inventory, but the risk of a production halt for a certain period remains.

There is a risk that natural disasters such as earthquakes, outbreaks of emerging infectious diseases, accidents, terrorism, or other events could damage production sites and facilities, disrupting sales and production activities. If combined with shortages of raw material supply or a decline in societal functioning, in addition to a decrease in net sales, restoring or replacing production sites may require substantial costs and time. The Company is working on BCP development, including addressing the risk of abnormal weather associated with climate change.

In handling a wide range of products from Clean Rooms to Clean Supply Products, there is a possibility that equipment malfunctions or defects in components used could impede customers' production or experiments. The Company implements quality control based on ISO-9001; however, if litigation related to product liability or warranty liability occurs, there is a risk that declining product reliability and claims for damages could affect business performance.

The Company handles personal information and customer information in its internal systems, and there is a risk of information leakage or destruction due to computer virus intrusion or technical and human factors. If an information security incident occurs, business performance may be adversely affected through loss of customer trust, legal liability, and business suspension, among other consequences.

Since intellectual property applications are mainly filed domestically, with limited applications filed overseas, the Company may not be able to effectively prevent the manufacture of similar products overseas. On the other hand, there is also a risk that the Company could become a party to litigation if it uses third-party intellectual property without authorization, unaware of its existence, and damages, lost profits, and litigation costs resulting from rights infringement could affect business performance.