KANAME KOGYO CO.,LTD.

The Company requires renewal of its industrial waste collection, transport and disposal business permits (valid for 5–7 years) and general waste collection, transport and disposal business permits (valid for 2 years). If the Company is found not to comply with the standards under the Waste Management and Public Cleansing Act, renewal of these permits could be refused, effectively halting business activities. At present, the Company complies with the relevant standards and there are no grounds for refusal of renewal; however, new permits are also required when expanding the scope of business or entering new regions. Should the Company fail to obtain or renew such permits, this could have a material impact on the Group's business results and financial position.

The Waste Management and Public Cleansing Act sets forth requirements for business suspension orders and permit revocation on grounds such as illegal dumping, false statements in manifests, and violations of processing facility standards, and the Company could become subject to administrative sanctions if such grounds arise. If a permit were revoked, the Company would also be unable to obtain new permits for the Recycling Business, potentially forcing management decisions including withdrawal from the Recycling Business. Although no such grounds currently exist, the impact on operations should this occur would be severe.

The Group is required to comply with a wide range of laws and regulations, including the Act on Rational Use and Proper Management of Fluorocarbons, the Air Pollution Control Act, the Offensive Odor Control Act, laws regulating noise and vibration, the Food Recycling Act, the Road Transportation Act, and the Motor Truck Transportation Business Act. Violation of these regulations could result in administrative sanctions such as business suspension orders or permit revocation. The Group operates under the regulatory oversight of multiple authorities, including the Ministry of the Environment, the Ministry of Land, Infrastructure, Transport and Tourism, and the Tokyo Metropolitan Government, and must continuously respond to regulatory tightening.

The Company leases part of the land for its head office (Toshima-ku), the Adachi Branch and Iriya Recycling Center (Adachi-ku), and the Yodosei Wako Office (Wako City, Saitama Prefecture). Circumstances on the part of the lessors, such as a sale of the property, could lead to rent increases or refusal to renew lease contracts. Securing alternative sites for waste management facilities is difficult, and relocation would require a lengthy process involving obtaining various permits and prior consultation with local governments. While relations with lessors are currently favorable, there is no guarantee of stable site availability, and the Company aims to conclude long-term lease agreements.

The waste management market centered on the greater Tokyo metropolitan area is not dominated by a small number of large companies, but rather is characterized by competition on price and service among small and medium-sized regional companies. Going forward, growing demand for advanced waste processing and resource recycling is expected to make large-scale capital investment and the establishment of comprehensive recycling service systems increasingly important, while new entrants from other industries and industry restructuring could change the business environment. Such changes in the competitive environment could affect the Group's business results and financial position.

In the Recycling Business, the Company sells ferrous and non-ferrous metals, plastic resins, paper resources, and other materials, the prices of which are affected by domestic and international supply-demand conditions and speculative trends. A significant decline in resource prices could reduce the profitability of the Recycling Business, potentially affecting the Group's business results and financial position.

In the Government-Contracted Services Business, the Company has continuously won certain bidding projects regularly conducted by various municipal wards; however, if the Company fails to win large-scale bidding projects due to competition from rival companies, sales could decline, affecting business results. As the Government-Contracted Services Business serves as a stable source of revenue, intensifying bid competition could directly affect the Group's business foundation.

In each business, the number of external processing contractors to which waste management can be outsourced is limited, and if the financial condition of these contractors becomes unstable or their processing costs rise sharply, this could lead to increased costs and reduced processing capacity. If it becomes difficult to secure alternative contractors, this could impede business continuity and affect the Group's business results and financial position.

The operation of the waste management and Recycling Business requires the securing and development of capable personnel. If the Group is unable to hire excellent personnel or experiences an outflow of personnel to other companies, the quality of business operations could decline, affecting business results. In addition, if labor relations with the labor union of consolidated subsidiary Yodosei Co., Ltd. become unstable, this could also affect the Group's overall business results and financial position.

At the confidential information processing room of the Iriya Recycling Center, the Company shreds confidential media and documents, and has established an information management system including entry restrictions, surveillance cameras, confidential information management regulations, and regular training. However, if this management system does not function as intended and confidential information is leaked, the resulting liability for damages and damage to the Group's credibility could have a material impact on the Group's business results and financial position.