ISHII HYOKI.CO.,LTD.

If market trends diverge from development content or if new product development is delayed, this may affect business performance. Although the Group carefully selects customer requirements, market fields, and products to develop while striving for efficient research and development activities, it is not easy to timely develop new products that meet future needs. The development department is responsible for grasping market conditions and resolving technical issues, thereby working to reduce this risk.

If deterioration in business performance due to changes in the business environment necessitates a review of the estimated future cash flows of held assets, an impairment loss on fixed assets may occur, potentially affecting the financial position and business performance. The occurrence of impairment carries the risk of temporarily and significantly worsening financial figures.

If rapid changes in the environment lead to tight supply of materials and parts, resulting in soaring raw material prices or temporary difficulty in securing supplies, this may affect the financial position and business performance. As countermeasures, the Group diversifies its purchasing sources by utilizing multiple suppliers and secures inventory through advance bulk purchases, thereby working to spread the risk.

The balance of interest-bearing debt at the end of the fiscal year under review (January 31, 2026) was ¥1,276 million (total assets of ¥15,917 million, interest-bearing debt ratio of 8.0%), an improvement from ¥2,008 million (ratio of 12.8%) in the previous fiscal year. However, changes in financial policy or a decline in creditworthiness may restrict fundraising. In addition, the commitment line agreement and term loan agreement with major financial institutions include financial covenants, and if these are breached, immediate repayment of borrowings may be required, which could have a material impact on the financial position. The Group strives to maintain and strengthen good relationships with its financial institutions.

As most of the Group's manufacturing capacity and research and development are concentrated around the head office plant in Hiroshima Prefecture, if the production and development sites suffer severe damage due to natural disasters such as earthquakes or typhoons, this may have a serious impact on the financial position and business performance. The Group has a structural vulnerability due to this concentration of sites, resulting in a high business continuity risk. As countermeasures, the Group implements preventive measures such as obtaining insurance coverage to the extent possible and reasonable, regular equipment inspections, and employee health management.

In exports of machinery and equipment, there are contract forms in which part of the sales proceeds is received after installation and inspection, and if the installation and inspection process is prolonged, receipt of the sales proceeds may be delayed, potentially affecting the financial position and business performance. The Group carefully manages the progress of installation work and strives to complete inspections early, thereby working to reduce this risk.

For Electronic Equipment & Parts Manufacturing Equipment, a free warranty period is set for a certain period after acceptance inspection, and warranty costs are estimated and recorded at the fiscal year-end based on past results; however, for products with specifications different from conventional ones, such as new products, warranty costs exceeding the estimated amount may occur. The occurrence of excess costs would affect the financial position and business performance. The Group strives to reduce this risk through close communication with customers and thorough quality control.

The Group is subject to various laws and regulations, including those related to the environment, labor, accounting standards, and tax law, and if problems arise in its management systems, this may affect the financial position and business performance through the application of penalties or restrictions on business activities. The Group addresses this by working to raise employees' awareness of compliance and reviewing its internal systems in a timely manner.

Although the Group implements strict quality control, it cannot completely eliminate the occurrence of serious product defects, and if a large-scale product liability compensation incident occurs, this could seriously affect product reliability and result in substantial costs not fully covered by insurance, potentially affecting the financial position and business performance. The Group strives to reduce this risk through enrollment in product liability insurance and continuous quality improvement.

The Group holds numerous information assets, including customer information and technical information, and if cyberattacks, unauthorized access, or computer virus infections occur, this could cause serious disruption to business continuity through information leakage or the suspension of core systems, potentially having a material impact on business performance and financial position. The Group strives to reduce this risk through the development of information security regulations, the establishment of management systems, the implementation of technical measures, and education and training for employees.