GALILEI CO.LTD.

The Group procures materials such as steel and components from both domestic and overseas sources. Large-scale natural disasters, wars, conflicts, geopolitical tensions, disruptions to logistics networks, and changes in import/export regulations could prevent the timely procurement of necessary materials in sufficient quantities. In addition, sharp increases in market prices for raw materials and fuel could spill over into procurement costs, and if these cannot be absorbed through productivity improvements or price pass-through to products, this may affect business results and financial condition. Measures being taken in response include diversifying suppliers, securing certain inventory levels, and ongoing price negotiations.

In business activities in overseas markets, the Group may face a variety of risks, including political instability (wars, civil unrest, terrorism, etc.), uncertainty in economic trends, changes in investment restrictions, import/export regulations, and tariff policies, international taxation risks (such as transfer pricing taxation), and differences in overseas business customs. Should these risks materialize, they could lead to decreased demand, increased costs, and other operational issues, potentially affecting business results and financial condition. This also inherently includes foreign exchange risk.

Demand for refrigerators/freezers and refrigerated & frozen showcases is highly dependent on the business environment of the distribution and food service industries, among others. Business results may be affected by slowing consumption due to economic downturns, deteriorating profitability in the food service industry, and market deterioration due to food safety concerns. There is also a risk of decreased demand in the event of a pandemic caused by a new infectious disease, as well as a risk of non-collection of trade receivables due to deterioration in customers' financial condition. These factors may directly affect the Group's business results and financial condition.

In the course of handling information from business partners and trade secrets, the Group faces the risk of information leakage due to unauthorized access, cyberattacks, or negligence. With the increasing use of the internet in products and services, there is a possibility of information leakage, service disruption, or impact on manufacturing processes due to unauthorized intrusion or manipulation via networks. Should such risks materialize, they could affect business results and financial condition through loss of credibility, occurrence of liability for damages, and decreased demand.

The market for refrigerators/freezers and refrigerated & frozen showcases faces extremely severe competition from rival manufacturers. While the Group works to provide high-value-added products and reduce costs, if low-price competition intensifies beyond what these corporate efforts can offset, it may become difficult to maintain and secure profits. As a result, this could affect the Group's business results and financial condition.

The Group's product lineup includes refrigerants such as fluorocarbons that are subject to environmental legal regulations. While the Group is working to expand its lineup of products using natural refrigerants, its business operations could be affected if environmental regulations become stricter in the future. In addition, strengthening of legal regulations or changes in regulatory interpretation by authorities in Japan and other countries could restrict part of business operations. At present, the Group states that there are no legal regulations that impede its business operations.

As of the end of March 2026, the Group held marketable securities valued at ¥12,765 million, primarily in business partners, and thus bears market price fluctuation risk. Unrealized gains as of the same date stood at ¥10,019 million, but this figure will fluctuate depending on future stock price trends and other factors. Should stock prices decline, this could affect the Group's financial condition.

While the Group makes every effort to ensure quality control of its products and construction work, including establishing a provision for product warranties and taking out product liability insurance, significant expenses may arise from liability for damages or countermeasure costs due to non-conformity with contracts or product liability. In addition, should such incidents damage the Group's corporate image and lead to decreased demand, this could affect business results and financial condition.

Securing talented personnel in each field is essential to future business activities. However, amid the current trend of a declining working population, if recruitment competitiveness declines or the outflow of personnel becomes more serious, this could affect business results and financial condition. The Group is addressing this by continuing to maintain and cultivate an attractive corporate culture, but structural changes in the labor market remain a challenge.

Based on its "Charter of Corporate Behavior," the Group works to comply with relevant laws and regulations and international rules both in Japan and overseas, and to thoroughly enforce compliance throughout the year. However, should a violation occur, it could become subject to administrative sanctions such as fines, criminal penalties, or claims for damages. In addition, should a decline in corporate image lead to decreased demand, this could affect business results and financial condition.