SHIGEMATSU WORKS CO.,LTD.

The Company's operating results are structurally susceptible to trends in the performance of private-sector companies and the fiscal condition of government agencies. In the event of an economic downturn or deterioration in the fiscal condition of government agencies, orders and sales may decline, potentially adversely affecting business performance. Due to the high degree of dependence on specific customer segments, sensitivity to changes in the macroeconomic environment is relatively high.

Purchases from Air Water Bosai Corporation account for 71.0% of total merchandise purchases, indicating an extremely high degree of dependence on a specific supplier. This ratio may fluctuate due to changes in sales conditions, and if there is a change in transaction terms with, or a suspension of supply from, this company, it could seriously disrupt the Company's procurement and sales activities. There is currently no disclosure regarding the status of securing alternative procurement sources.

The Company has established a quality management system compliant with ISO 9001 and manufactures and sells products conforming to national certification standards, JIS, and international standards; however, nonconformity with standards or product defects may occur due to unforeseen factors. If a defect occurs, costs associated with product recalls, repairs, and other responses will be incurred, adversely affecting the Company's business performance, and this could also lead to a decline in brand credibility.

The Company has taken out product liability insurance in preparation for product liability lawsuits arising from defects in its products; however, this insurance does not cover liability for damages without limit. If damages arise that are not covered by insurance, this could directly and adversely affect the Company's financial position. It is also explicitly stated that litigation risks other than product liability cannot be ruled out.

If the Company's manufacturing and sales facilities suffer physical or human damage due to disasters such as earthquakes, fires, or terrorist attacks, production and sales activities may be suspended or significantly restricted. Given the business characteristics of a manufacturer of defense and safety protection equipment, which requires a stable supply, a supply suspension due to damage to facilities could also lead to a loss of customer trust. The annual securities report does not provide detailed disclosure regarding the specific status of business continuity planning (BCP).