TAKAMISAWA CYBERNETICS COMPANY,LTD.

Product delivery and installation timing to major client industries tends to concentrate in the second half of the fiscal year (particularly at the end of the consolidated fiscal year), with the second-half sales composition ratio reaching 55.7–70.4% over the past three years. If delivery timing is delayed, sales may shift to the following consolidated fiscal year, potentially having a direct adverse effect on that year's business performance. The Group has stated a policy of striving to avoid such occurrences and to respond appropriately when they occur, but specific details of countermeasures are not disclosed.

The Group continuously works on product development and technological innovation to meet market needs in the fields of ticket, banknote, coin, and card processing equipment. However, prolonged development periods or the emergence of alternative technologies or products may prevent the Group from bringing the optimal product to market at the optimal time. In such cases, there is a risk of impact on business performance and growth prospects.

In the fields where the Group offers its products, there continues to be a tendency toward stronger demands from customers for reductions in delivery prices, leading to intensifying price competition. If price declines significantly exceed expectations and persist over a long period, there is a possibility of a major impact on business performance. There is no specific description in the securities report regarding countermeasures for price competition.

The Group works company-wide to maintain and manage product quality, but unforeseen circumstances may cause defects in products. If defects occur, this could lead to the incurrence of high repair costs and loss of market trust, potentially affecting business performance. Although the Group continues to develop its quality control systems, it is difficult to completely eliminate this risk.

There exists both the risk that third parties may use the Group's intellectual property rights without authorization to manufacture similar products, and the risk that the Group's products may be alleged to infringe on third parties' intellectual property rights. In either case, if the Group's claims are not upheld, this may affect future business development and performance. The Group works to acquire and manage intellectual property rights, but complete protection is difficult.

The Group conducts OEM business supplying units to customers such as equipment manufacturers, but the volume of supply to customers is significantly affected by external factors beyond the Group's control, such as customers' business performance or changes in management policy. Reduced or discontinued orders due to circumstances on the customer side could lead to deteriorating business performance or excess inventory. When OEM dependency is high, the impact of trends at specific customers on overall business performance becomes larger.

The Group's business requires securing and developing personnel well-versed in advanced specialized technologies related to ticket, banknote, coin, and card processing equipment. If the Group is unable to secure and develop excellent personnel as planned, this may affect future business performance and growth prospects. Because this is a highly specialized technical field, it is also not easy to secure immediately effective talent from the external labor market.

The Group's product manufacturing is based on procuring materials at the appropriate time and price, but procurement could become unstable due to accidents at material suppliers, among other factors. If dependency on a specific supplier is high, it may become difficult to obtain substitute materials in a timely manner, leading to delays in product supply and a risk of impact on business performance. There is no specific description in the securities report regarding countermeasures such as diversification of the supply chain.

The Group has business locations established throughout Japan, and if a large-scale disaster occurs, there is a possibility that product supply to customers could be delayed due to paralysis of logistics functions, among other effects, impacting business performance. In addition, if a continued global economic slowdown occurs due to the spread of various infectious diseases, there are concerns about the impact on business performance. There is no detailed description in the securities report regarding specific countermeasures such as a Business Continuity Plan (BCP).

If the assumptions used to calculate retirement benefit expenses and obligations (such as the discount rate) deviate due to actual changes in economic conditions, this may affect business performance and financial condition. In addition, fund procurement through borrowing is strongly affected by market conditions such as interest rates and fund supply-demand balance, so there is a risk that changes in market conditions could impact financial condition. Both of these financial risks stem from fluctuations in the external environment, and the scope over which the Group can exercise control is limited.