GRAPHITE DESIGN INC.

Carbon fiber, the key raw material, is expected to face a stronger sense of tightening supply going forward as increased production for aircraft applications begins, potentially leading to rising raw material prices or supply instability. This could affect the Company's business results and sales policies. At present, no specific alternative procurement measures are described, and it should be noted that the scope for responding to supply constraints is limited.

The production contractors for products destined for the U.S. market are located in China, and if a significant appreciation of the Chinese yuan or a substantial rise in labor costs occurs, manufacturing costs would increase, potentially affecting the Company's business results, etc. Given geopolitical risks and the trend of rising wages in China, there is a risk that changes in the cost structure could put pressure on profitability. The securities report does not explicitly disclose countermeasures such as securing alternative production bases.

Golf club manufacturers and distributors in Japan and the United States are the Company's major sales customers, resulting in a high degree of sales dependence on specific customers. If these customers change their sales strategies or expand adoption of products from competing golf shaft manufacturers, it could have a material impact on the Company's business results, etc. While the Company aims to maintain stable business relationships based on its track record and development capabilities, the high degree of dependence itself remains a risk factor.

Competition among golf club manufacturers is intense both domestically and internationally, and the segmentation by price range among golf shaft manufacturers is becoming more fluid, resulting in competition. If the golf club manufacturers that are the Company's major sales customers fail to respond appropriately to market needs, adoption of the Company's products could decline, affecting business results, etc. A similar competitive environment exists in the U.S. market, posing a risk that a global market contraction and intensifying competition could directly impact earnings.

The Company manages its accounts receivable by setting credit limits according to the credit risk of its sales customers, etc.; however, should a sales customer, etc. go bankrupt, accounts receivable could become uncollectible, potentially affecting business results, etc. Although a credit management system has been established, given the structurally high dependence on specific sales customers, the impact of deteriorating creditworthiness of a major client would be relatively significant.

The Company's reporting currency is the Japanese yen, but receipts and payments related to business activities are also conducted in currencies other than the Japanese yen, meaning fluctuations in foreign exchange rates could have a material impact on business results, etc. A rise or fall in the value of foreign currencies against the yen could result in substantial gains or losses associated with transactions, and given that sales to the United States are a major revenue source for the Company, the impact of foreign exchange risk is significant. The securities report does not describe specific hedging measures.

Capital expenditures and ordinary working capital are funded through the Company's own funds and bank borrowings; if long-term and short-term interest rates rise due to government economic and monetary policies, etc., the burden of interest payments on borrowings would increase, potentially affecting business results, etc. In addition, if fund procurement becomes difficult due to sudden changes in the domestic or international environment, there is also a risk that business continuity could be hindered.

Should a large-scale natural disaster such as an earthquake or typhoon, or an accident such as a fire occur, the resulting suspension of production activities or damage to equipment and assets could have a material impact on the Company's business results, etc. The Company has implemented measures such as regular equipment inspections, establishment of emergency communication systems, and disaster prevention drills, but the impact of a large-scale disaster cannot be completely eliminated.

The Company's domestic and overseas businesses involve intellectual property rights such as patents, copyrights, and trademarks, and if the Company is unable to obtain necessary rights or appropriate licenses for use, product development and provision could become difficult. As business activities become more complex and diverse and competition intensifies, disputes over intellectual property rights may increase, and if the Company receives claims for damages, injunctions, or royalty payments from third parties, this could affect business results, etc. As of the filing date of the securities report, the Company has not received any infringement lawsuits or notices from third parties.

The Company records deferred tax assets for deductible temporary differences on the premise that it can stably secure sufficient future taxable income. If, due to internal or external factors, it is determined that securing the assumed taxable income has become difficult, a reversal of deferred tax assets could occur, potentially affecting the Company's business results, etc. This inherently carries the risk that a deteriorating earnings environment could directly impact the valuation of deferred tax assets.