OSG CORPORATION CO.,LTD.

The Group holds a large volume of personal information through its consumable replacement operations, and there is concern about information leakage due to unforeseen circumstances. If a leak occurs, in addition to the cost burden of liability for damages, a decline in social credibility could affect the Group's business and financial results. While the Group states that it is taking thorough management measures across the entire group, specific details of the countermeasures have not been disclosed.

The manufacture and sale of Electrolyzed Hydrogen Water Generators (medical electrolyzed water generators) and household electrotherapy devices (medical devices) are subject to regulation under the Pharmaceuticals and Medical Devices Act, requiring the acquisition of manufacturing and marketing business licenses and manufacturing business licenses from the governor of each prefecture. Notification of sales locations and advertising regulations are also imposed, and if activities are temporarily restricted due to future legal amendments, this could affect the Group's business and financial results. The Group addresses this by complying with obligations such as establishing regulations and appointing responsible persons, but the risk of legal amendments remains.

In the Maintenance Business division, employees directly visit end users to exchange and sell consumables. When products other than consumables are sold during the annual visit, this constitutes door-to-door sales under the Act on Specified Commercial Transactions and is subject to the cooling-off system. The Company has introduced a voluntary one-month cooling-off system for contracts exceeding the statutory period and is working to strengthen its compliance framework, but sales activities may be restricted due to legal violations or the introduction of new regulations. Failure to comply with laws and regulations could affect the Group's business and financial results.

The overseas subsidiary Ou Ai Water (Shanghai) Environmental Protection Technology Co., Ltd. sells Electrolyzed Hydrogen Water Generators for the Chinese market, but there is a risk that unpredictable changes in laws and regulations, delays in infrastructure development, terrorism, political upheaval, and other social disruptions could make sales activities difficult. If such events occur, they could affect the Group's business and financial results. Geopolitical risks and regulatory uncertainty unique to overseas operations may become barriers to business continuity.

The main manufacturing subsidiary, OSG Water Tech Co., Ltd., produces based on international quality standards, but there is no guarantee that defects will not occur in all products. Although the Company has product liability insurance, there is also no guarantee that the insurance will cover the total amount of compensation ultimately required. If a product defect occurs, this could affect the Group's business and financial results. The Group addresses this through the establishment of a quality control system and insurance coverage, but residual risk cannot be eliminated.

The Group holds and thoroughly manages intellectual property rights such as patents, trademarks, and design rights, but there is a risk of infringement by third parties, or a risk that the Company's products may unintentionally infringe on the intellectual property rights of others. If a dispute arises, prolonged litigation and claims for damages could affect the Group's business and financial results. Although the Group has established an intellectual property management system, it is difficult to completely eliminate the risk of infringement.

The mineral water delivery (HOD) business operated by the domestic subsidiary Water Net Co., Ltd. adopts a strategy of nationwide expansion through the Area License Chain format, and securing franchisees is directly linked to the expansion of business scale. If franchisee acquisition does not proceed as planned, business growth may stagnate, which could affect the Group's business and financial results. Given the nature of the business model, expanding the franchise network is essential for maintaining and expanding the revenue base.

Water Net Co., Ltd.'s HOD Business manufactures and delivers mineral water using tap water as raw water. If the supply of tap water is halted due to an earthquake or other disaster, manufacturing becomes impossible. If such an event occurs, it could affect the Group's business and financial results. Given the nature of the business, it depends on the stability of raw water supply, and securing alternative procurement methods is a challenge.

If a large-scale earthquake, natural disaster, fire, or other accident or disaster, the spread of an infectious disease, or other social disruption occurs, the business activities of the Group and its major business partners may be suspended or become difficult to continue. If such an event occurs, it could affect the Group's business and financial results. There is no disclosure in the securities report regarding specific countermeasures such as a Business Continuity Plan (BCP), and residual risk is recognized.