KAJI TECHNOLOGY CORPORATION

If procurement prices for key raw materials such as steel and components surge due to market fluctuations, this may compress profitability and affect business performance. While the Company does not currently expect a material impact, it is working to reduce this risk by developing new procurement sources and reviewing procurement specifications.

Although a quality control system based on ISO9001 has been established, unexpected defects or malfunctions occurring during the manufacturing process may affect business performance. While no significant defects have been identified at this time, the Company has positioned the strengthening of its quality control system as an important management issue and continues to focus on quality improvement.

Since sales trends for special high-pressure compressors and related services are directly affected by customers' capital expenditure conditions, orders may decrease when customers restrain investment, which may affect business performance. The Company seeks to reduce this risk by monitoring capital expenditure trends across industries while focusing on developing new demand and expanding order volume.

If order prices decline due to price competition with competitors, this may affect business performance. While no significant decline in order prices has been identified at this time, the Company strives to reduce this risk by providing differentiated, high-value-added products tailored to market needs and by focusing on research and development.

For products including compressors subject to the High Pressure Gas Safety Act, there is a possibility that product liability claims for damages arising from defects or other issues may be sought in the future, and if a substantial amount of damages is incurred, this may affect business performance. The Company covers this risk through product liability insurance and seeks to reduce it by strengthening its quality control system.

Given the nature of the business, which requires advanced technological development capabilities and precise skills in machining, polishing, cutting, and other processes, if the recruitment and development of personnel with specialized technical skills, knowledge, and qualifications does not proceed as planned, competitiveness may decline, which may affect business performance. The Company is currently implementing measures to reduce this risk, including promoting reforms to its wage and evaluation systems and initiating reforms to its education system.

If the functioning of information systems is disrupted by computer viruses or other factors, normal business operations may become difficult, which may affect business performance. The Company has implemented information security enhancement measures such as vulnerability countermeasures for PCs and servers and restrictions on the use of information storage media, and while no significant system failures or information leaks have occurred at this time, it aims to further strengthen these measures, including through employee education.

If unforeseen events occur, such as large-scale natural disasters like earthquakes or the spread of unknown infectious diseases such as the novel coronavirus, this may have direct or indirect effects on business operations and may affect business performance. The Company is proceeding with the introduction of an employee safety confirmation system and the development of disaster response manuals, while also striving to reduce this risk by strengthening its management foundation.