Issues to be addressed, business risks, etc.

Items that may affect our group's business performance, stock price, and financial position include the following.
Forward-looking statements in the text are based on the judgment of the Group as of the date of submission of the Annual Securities Report.

The Group's core business deals in confectionery and other luxury goods, which, due to the nature of their uses and other factors, are subject to seasonal fluctuations and tend to be affected by weather fluctuations. However, extreme weather conditions such as a hot summer or mild winter, large-scale disasters, or infectious disease outbreaks such as a new strain of influenza that exceed expectations and cause drastic fluctuations in consumption trends could affect our business performance. However, the Company's business performance may be affected by extreme weather conditions such as a hot summer or warm winter, which can cause sharp fluctuations in consumption trends, large-scale disasters, or infectious diseases such as a new type of influenza.

In the event of an outbreak or spread of a serious infectious disease such as the new coronavirus, our group's business performance could be affected by a sharp reduction in consumption activities due to voluntary restraint in various activities, such as reduced travel due to voluntary restraint in going out and temporary closure of facilities where stores are opened.

In the event of the spread of infection by a new strain of influenza or norovirus among the Group's employees, the Group's operations and business could be temporarily suspended, which could affect the Group's business results. In response to these risks, our group is taking measures to prevent infection.

In Japan, where our group operates, we are vulnerable to natural disasters such as earthquakes, typhoons, torrential rains, and volcanic eruptions, the frequency and severity of which are difficult to predict. In addition, our business strategy is to decentralize our production and sales bases to various regions in Japan to avoid concentration of production and dependence on sales in specific regions.
 

However, in the event of a major natural disaster that causes these business bases to suffer extensive damage and become inoperable for an extended period of time, or in the event that production or sales activities are severely disrupted, or in the event of products that can no longer be sold because the production system is basically one product, one factory, with the exception of certain products, If such a situation were to occur, the Group's business performance could be affected.

Consumers are becoming extremely concerned about food safety. In addition, the confectionery and food industry is experiencing problems related to food quality and safety, such as mislabeling of food products and management of consumption and expiration dates of raw materials and products.
 

Based on the recognition that ensuring food quality and safety is the most important management issue, the Group complies with various laws and regulations, including the Food Sanitation Law, the Law Concerning Standardization and Proper Labeling of Agricultural and Forestry Products (commonly known as the JAS Law), and the Law Against Unjustifiable Premiums and Misleading Representations (the Unjustifiable Premiums Law), and maintains manuals to deal with such issues, However, in the event of unexpected problems with raw materials or manufacturing processes, or in the event of quality or hygiene problems that cannot be avoided by the Group alone and that affect society and the industry as a whole, the Group's business results may be affected. However, unexpected problems with raw materials or manufacturing processes, or quality and hygiene issues that cannot be avoided by the Group alone, may affect the business performance of the Group.

In conducting its business activities, the Group is subject to various legal regulations, including the Food Sanitation Law, the JAS Law, the Food Labeling Law, the Act Against Unjustifiable Premiums and Misleading Representations, the Unfair Competition Prevention Law, and the Product Liability Law, and has obtained the permits and licenses listed in the table below. The Group is committed to complying with the conditions and laws and regulations to obtain these permits and licenses , and as of this point in time, there have been no cases of revocation of these permits and licenses. However, if these permits and licenses are revoked or the Group is ordered to suspend operations due to violations of laws and regulations, the Group's business continuity and operating results could be severely affected.
 

In addition, the Group's business continuity and operating results may be affected in the event that business activities are restricted and each operation is delayed due to stricter regulations or the introduction of new regulations in the future.

Our group has been operating a health food business since October 2012 as a new business. In this business, we are subject to various legal regulations such as the Food Sanitation Law, JAS Law, Food Labeling Law, Pharmaceutical Affairs Law, and Health Promotion Law. Although the Group is committed to strict compliance with such legal regulations, the Group's business performance could be affected by a loss of social credibility in the event of a violation of these laws and regulations, or in the event that the laws are revised and regulations are tightened.

Confectionery ingredients mainly consist of flour, azuki beans, sugar, oils and fats, and many other agricultural products. Prices may soar and stable procurement may become difficult due to unseasonable weather in producing regions, the impact of natural disasters , and changes in global supply and demand conditions, and in the case of imported ingredients, purchase prices may also fluctuate due to currency fluctuations. In addition, soaring crude oil prices may increase the prices of fuels such as heavy oil and petroleum products such as packaging materials and containers.
 

However, if we are unable to secure stable procurement due to unforeseen circumstances, or if procurement prices rise suddenly and significantly beyond our expectations, our group's business performance may be affected. However, if we are unable to procure stable supplies due to unforeseen circumstances, or if procurement prices rise sharply and beyond expectations, the Group's business performance may be affected.

With regard to measures against leaks of corporate and personal information, the Group has established an internal system, including "Information Management Regulations" and "Personal Information Management Regulations," and is working to further strengthen security, including hardware. In particular, since we hold personal information of many customers in our mail-order business, we comply with the Act on the Protection of Personal Information (hereinafter referred to as the "Personal Information Protection Act") and strictly enforce the Act on the Protection of Personal Information. In particular, since we hold personal information of many customers in our mail-order business, we comply with the Act on the Protection of Personal Information (hereinafter referred to as "Personal Information Protection Law") and make efforts to strictly manage such information. However, in the unlikely event of an information leakage or an event that violates the Personal Information Protection Law for some reason, not only would we have to pay compensation for damages and incur response costs, but it could also have a serious impact on the credibility of our group and affect our business performance.

The Group conducts its business activities mainly in Asia through exports of products, local subsidiaries, and franchise partners. Unexpected adverse economic or political factors, legal restrictions, or other events in the regions where we operate, such as earthquakes and other natural disasters, terrorist conflicts, and epidemics of infectious diseases, could impede our overseas business activities and affect our group's operating results.

Our group owns various assets related to factories and stores used in our business activities. If impairment losses were to be recorded against subject assets due to a decline in profitability caused by significant changes in the business environment or business activities, future cash flows, or other factors, the Group's operating results could be affected.