KOWA CO.,LTD.

40.2% of the Group's net sales (the sum of ¥2,468,254 million from the Nursing Care Products and Wholesale Business Sales Division and ¥94,176 million from the Nursing Care Service Business, totaling ¥2,562,430 million) depend on the nursing care insurance system, resulting in an extremely high degree of dependence on this system. There is a risk that demand trends could change significantly due to changes in the scope of long-term care needs certification, the scope of applicable welfare equipment, or the user co-payment ratio. Discussions regarding the sustainability of the system continue against the backdrop of the declining birthrate and aging population, and if system reforms aimed at curbing benefits are implemented, this could have a material impact on the Group's financial position and operating results.

The Group concentrates mass production at its production subsidiary, Dongguan Xingho Household Daily Necessities Co., Ltd. (China), and therefore bears a geographic concentration risk with respect to its production base. Unforeseen events such as changes in the political and legal environment in China, labor shortages and rising labor costs, strikes, disruptions to logistics networks, and changes in economic conditions could disrupt production activities. Should such events occur, the stable supply of products may become difficult, which could affect the Group's financial position and operating results.

In the consolidated fiscal year ended February 2025, sales to the Group's key business partner, Panasonic Age-Free Co., Ltd., accounted for 20.6% of sales, indicating a high degree of dependence on a specific customer. Although the Group is actively working to develop new business partners, if this company changes its trading policy or reduces transactions, it could have a direct and material impact on net sales. While the Group strives to maintain good business relationships, the risk of dependence has not been completely eliminated.

Although the Group implements quality control in compliance with SG standards, JIS, and ISO9001, there is no guarantee that defects will not occur in any of its products or merchandise. Should a product defect occur or a large-scale recall be implemented, this could result in substantial damages payments and product recall costs, as well as significant damage to the company's brand and a decline in net sales. The product liability insurance the Group carries does not guarantee sufficient coverage of the final amount of damages.

The Group conducts import and export transactions with multiple countries, primarily in Asia, and therefore bears foreign exchange fluctuation risk related to foreign-currency-denominated monetary receivables and payables. It is difficult to completely eliminate exchange rate risk, including indirect effects, and sharp yen depreciation or appreciation directly affects procurement costs and sales revenue. Changes in economic conditions in various countries and changes in the import/export environment due to disasters could also affect the Group's financial position and operating results.

The Group's main raw materials are aluminum pipe and resin, and it is constantly exposed to the risk of fluctuations in resource prices. If raw material costs rise due to an unforeseen surge in resource prices, profitability may deteriorate due to delays in passing on the increased costs to sales prices, which could affect the Group's financial position and operating results. Since resource prices are affected by international market conditions and geopolitical factors, this is an area that is difficult for the Group to control on its own.

The majority of the Group's merchandise and products are imported from overseas, and delivery to customers is also outsourced to logistics providers, resulting in a high degree of dependence on logistics costs. If logistics costs rise sharply due to increases in fuel prices or labor costs, and the Group is unable to pass on the increased costs to sales prices, this could put pressure on profits and affect the Group's financial position and operating results. Structural factors such as the

The Group is working to build a monitoring system in cooperation with external specialized organizations, develop backup systems, and strengthen security measures; however, it is difficult to implement complete defensive measures against cyberattacks and unauthorized access. Should information leakage or system failure occur, this could give rise to multifaceted impacts, including disruption to business continuity, damage to customers and business partners, and harm to the brand. An impact on the Group's financial position and operating results also cannot be ruled out.

The Company holds intellectual property rights created during new product development, but risks exist such as invalidation or imitation by third parties and insufficient protection in certain regions. On the other hand, although the Company conducts prior investigations, if it is found to have infringed a third party's patent as a result, this could lead to restrictions on production and sale of products and payment of damages. Management of intellectual property rights is centrally handled by the General Affairs Department, but ensuring complete protection in the course of global business operations remains a difficult challenge.

The Group carries comprehensive property insurance, but if a large-scale natural disaster, fire, or other accident or disaster, or an infectious disease such as COVID-19 or novel influenza, occurs on a scale far exceeding expectations, facility equipment could suffer significant damage, resulting in partial suspension or halting of operations and delays in production and shipment. Substantial costs for equipment restoration are also anticipated, which could affect the Group's financial position and operating results. The Group's dependence on a single production facility in China further increases the risk of concentrated damage.