TOHOKU CHEMICAL CO.,LTD.

The Company and its consolidated subsidiaries conduct sales activities as pharmaceutical wholesalers under the "Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices," with each business location having obtained permits, registrations, designations, or licenses from the relevant prefectural governor. If the Company fails to comply with these regulations, its business activities may be restricted. As a countermeasure, the Company thoroughly manages filings and permits/licenses with the competent government authorities at each business location.

Prescription pharmaceuticals, the Company's main products, are listed under the drug price standard, which functions as an upper limit on selling prices. Because the drug price standard is revised in principle once every two years to reflect actual market prices, and is lowered with each revision, there is a risk that net sales will be continuously pressured downward. No specific individual countermeasures by the Company are disclosed in the Annual Securities Report, and this is recognized as a structural and ongoing risk.

For specific receivables such as doubtful receivables, the Company individually assesses collectability and records the expected uncollectible amount as an allowance for doubtful accounts. However, if collectability is deemed unlikely due to future deterioration in the financial condition of customers, additional allowances may be required, potentially leading to a deterioration in earnings. Currently, the Company responds through individual assessment-based allowances, but this inherently carries the risk of insufficient allowances depending on customers' business conditions.

Large equipment is shipped directly from suppliers to customers without passing through the Company's warehouses, and installation and adjustment are also performed by suppliers. This creates a risk that net sales could be recorded despite no actual sale having occurred, or that the period to which net sales are attributed could be misapplied. As a countermeasure, employees track the manufacturer's equipment delivery schedule and directly confirm, on-site at the delivery location, everything from installation through operational status. However, if confirming the equipment's operation takes time, this may affect the timing of net sales recognition.