INABA DENKI SANGYO CO,LTD.

The Group is exposed to intense price competition from competitors, including new entrants, and there is a risk that competition will intensify further if the market environment deteriorates, such as through a sharp decline in construction or capital investment. Although the Group strives to strengthen its competitiveness, intensifying price competition could adversely affect its business results and financial condition.

If bankruptcies among small and medium-sized business operators increase due to a deteriorating market environment, the risk of uncollectible trade receivables will rise. Although the Group takes measures such as regular investigation and analysis of customers, appropriate provisioning of allowances for doubtful accounts, receipt of business deposits, and use of trade credit insurance, if unexpected bankruptcies occur frequently, this could adversely affect the Group's business results and financial condition.

Sales volumes of air conditioning components and other products are affected by domestic shipment volumes of air conditioners and tend to be influenced by summer weather, the peak demand season. If unusual weather conditions such as a cool summer persist, sales of air conditioning-related products may decline, potentially affecting the Group's business results and financial condition.

Although the Group has established a dedicated quality assurance department to manage product quality, there is no guarantee that all products are free of defects and that losses will not occur in the future. Depending on the nature of any defect, this could lead to increased external costs and a decline in product reputation, potentially adversely affecting the Group's business results and financial condition.

The Group conducts research and development in the air conditioning, housing, and industrial fields and has obtained patents and other industrial property rights, but there is a risk of damage from counterfeit products due to illegal infringement of rights, or of existing industrial property rights becoming obsolete due to superior technology developed by competitors. If a significant problem related to such intellectual property arises, it could adversely affect the Group's business results and financial condition.

The Group may conduct M&A as part of its growth strategy, but there is no guarantee that the acquisition price will always be appropriate and reasonable. If post-acquisition earnings fall significantly short of the future earnings projections estimated at the time of acquisition, this could adversely affect the Group's business results and financial condition through goodwill impairment and other effects.

Copper, iron, stainless steel, resin, and other materials used in the manufacture of air conditioning components and other products are subject to international price fluctuations, which may cause manufacturing costs to vary. In addition, stable procurement may become difficult due to supply-demand tightness or supply chain disruptions; if cost increases cannot be fully absorbed or passed on to product prices, this could adversely affect the Group's business results and financial condition.

The Group conducts business under a variety of legal regulations, including risks that revisions to the Building Standards Act, the Fire Service Act, and other laws could cause its products to lose competitiveness, as well as effects from new introductions or changes to accounting standards and tax systems. If unpredictable regulatory changes or regulatory changes disadvantageous to the Group occur in the future, this could affect the Group's business results and financial condition.

If customer information, trade secrets, or confidential information is leaked, there is a risk of claims for damages and damage to social credibility. In addition, if internal systems are shut down due to system failures or cyberattacks from outside parties, the affected operations may become unable to be processed, potentially adversely affecting the Group's business results and financial condition.

If social disruption occurs due to natural disasters such as earthquakes and floods, fires, epidemics, terrorism, war, climate change, or other events, there is a risk of business suspension, lost opportunities from postponed construction or capital investment, and significant recovery costs from facility damage. These events could adversely affect the Group's business results and financial condition.