TOKYO KOKI CO. LTD.

If a natural disaster such as an earthquake or heavy rain, or an accident such as a fire occurs, there is a risk that production activities will be suspended or delayed due to damage to facilities, disruption of power supply, or malfunction of surrounding infrastructure. Although the Group implements disaster prevention measures and equipment inspections, in the event such an occurrence does take place, it could have a material impact on the Group's business performance and financial position.

The Group's operations include the purchase and sale of goods overseas, and there is a risk that earnings will be affected by fluctuations in exchange rates at the time of conversion into yen. Exchange rate fluctuations affect both net sales and procurement costs, and constitute a factor that influences business performance and financial position.

In overseas business activities, there is a risk of social and economic disruption arising from unexpected changes in laws and regulations, infrastructure vulnerabilities, regional conflicts, the spread of infectious diseases, and other factors. These factors may make it difficult to continue operations and could affect the Group's business performance and financial position.

Although the Group is strengthening its quality control system, there is a possibility that unexpected defects in products, goods, or services, or recalls, may occur. If this develops into a large-scale recall or product liability compensation, substantial costs may be incurred, posing a risk to business performance and financial position.

If domestic or global financial or economic disruption occurs, there is a risk that the various markets in which the Group operates will contract significantly, leading to decreased net sales and prolonged collection of receivables. Such deterioration in the external environment could have a direct impact on business performance and financial position.

The Group positions new product development as the optimal means of business expansion and continues to develop a diverse range of products; however, delays in the timing of new product launches, among other factors, may prevent it from responding to market needs. As a countermeasure, in the Testing Machine Business, the Group has entered into sales agreements with leading overseas manufacturers to build a system for supplying cutting-edge products; however, if these agreements are not continued due to unforeseen circumstances, this also poses a risk to business performance and financial position.

In the Testing Machine Business, the Group has entered into product sales agreements with leading overseas manufacturers to build a system for responding promptly to market needs; however, if these agreements are not continued due to unforeseen circumstances, product supply capability may decline, potentially affecting business performance and financial position. Securing alternative means is a challenge for the Group.

The Group recognizes securing and developing human resources as an important management issue, and seeks to develop personnel through a human resources system based on the principle of employees' independent growth, among other measures; however, if recruitment and development of personnel do not proceed as planned at a pace commensurate with the speed of business expansion, this may affect business performance. Enhancing the human capital that supports the strengthening and expansion of the business foundation remains an ongoing challenge.

The Group has adopted a stock option system aimed at providing incentives to directors and employees, and as of the end of the current consolidated fiscal year, the total number of potential shares from stock acquisition rights was 124,337 shares (equivalent to 1.7% of the total number of issued shares of 7,133,791 shares). If these stock acquisition rights are exercised, the value of shares held by existing shareholders and their voting rights ratio may be diluted.