CONSEC CORPORATION

Cutting and demolition of structures using seismic-resistant and base-isolation construction methods with diamond cutting equipment constitutes specialized work involving the transport and movement of heavy materials, and since the content of each project differs, safety cannot be guaranteed in all respects. Although the company carries casualty insurance, if damages arise that fall under exclusions or exceed coverage limits, this could adversely affect operating results. As a countermeasure, the company is working to raise safety awareness through regular employee training.

A shortage of construction site supervisors has become a problem across the entire construction industry, and rising labor costs and delays in construction progress due to worker shortages could adversely affect operating results. The Group is working to secure personnel through broad-based recruitment activities and encouragement of qualification acquisition, but this is a structural issue within the industry and remains an ongoing risk.

Two subsidiaries established in Nantong City, Jiangsu Province, China, manufacture and sell diamond cutting-related equipment and cutting consumables. If manufacturing delays occur due to insufficient quality of parts procured domestically in China, or due to political changes or legal and regulatory restrictions, this could adversely affect operating results. As a risk countermeasure, the company is considering changing parts suppliers or switching production to companies in Japan or other countries.

The company holds industrial property rights related to diamond cutting equipment and has registered these in the United States, Taiwan, South Korea, and other countries. However, if applications and registrations in China and other emerging regions and countries do not proceed smoothly due to circumstances at the relevant authorities, this could adversely affect future operating results. Insufficient protection of intellectual property could increase the risk of technology imitation and leakage, potentially leading to a loss of competitive advantage.

The company holds customer information in the course of manufacturing and selling products and merchandise and conducting specialized construction operations. Should such information ever be leaked externally, this could adversely affect operating results due to a decline in the Group's credibility. In the event of a leak, the company's policy is to investigate the cause and work to prevent recurrence and optimize its protective systems.