FUKUDA DENSHI CO., LTD.

In Japan, the official reimbursement prices for medical fees, drug prices, and specified medical materials covered by insurance are revised once every two years. Advances in healthcare cost containment policies may lead to declining selling prices and intensified competition among companies. Changes in healthcare policy direction pose a risk of directly affecting the Group's business results and financial position.

The manufacture and sale of medical devices are regulated under the Act on Pharmaceuticals and Medical Devices, etc., and review and approval processes as well as clinical trials may require a long period of time. If unforeseen changes occur in the future, such as revisions to regulations or the establishment of new regulations, this could disrupt product commercialization schedules and sales activities, potentially affecting business results and financial position.

The Group imports and sells Ventilators, Pacemakers, AEDs (Automated External Defibrillators) & Defibrillators, and other products, and depends on continuous business relationships with specific overseas business partners. If any disruption occurs to the continuity of these transactions, it may become difficult to supply products, potentially affecting business results and financial position. The Group therefore takes care to avoid becoming overly dependent on any specific company.

In order to fulfill its social mission of ensuring stable supply, the Group needs to secure inventory based on forecasts of future demand. However, if actual sales fall short of forecasted demand, excess inventory outside the normal operating cycle may arise. The occurrence of excess inventory poses a risk of adversely affecting business results and financial position through inventory valuation losses and similar effects.

The Group manufactures products under a rigorous quality control system based on ISO international standards; however, if unforeseen product defects or flaws occur, this could result in the suspension of product sales or product recalls. Should a recall or similar event occur, increased response costs and a decline in trust could have a material impact on business results and financial position.

In addition to supplying products to overseas distributors, the Group maintains sales, development, and production bases overseas. If unforeseen enactment or revision of laws and regulations, terrorism, natural disasters, or similar events occur in various countries overseas, this could disrupt business activities and affect business results and financial position.

The Group has overseas subsidiaries and procures and imports raw materials and products from foreign companies. Should sharp fluctuations in foreign exchange rates occur, this could affect business results and financial position through increased procurement costs and the impact on the translation of overseas subsidiaries' financial results.

If it becomes necessary to recognize impairment losses on assets held by the Group due to declining profitability or other factors, a substantial loss may be recorded on a temporary basis, potentially affecting business results and financial position.

Progressing climate change may lead to severe disasters and power shortages, potentially disrupting business activities at domestic and overseas sites. The suspension or restriction of business activities could reduce product supply capability, posing a risk of affecting business results and financial position.

The materialization of geopolitical risks causing supply chain disruptions, or the spread of emerging infectious diseases, could make it difficult to maintain a stable supply of products and goods. If the economic impact becomes prolonged, it could also affect the business activities of business partners and cooperating companies, potentially having a material impact on the Group's business results and other aspects.