LIFEDRINK COMPANY,INC.

Prices of raw materials such as resin (PET bottle raw material), corrugated cardboard, caps, and tea leaves fluctuate due to weather and supply-demand changes, and electricity costs at each plant also affect business performance. For resin, which carries particularly high price volatility risk, the Group has implemented measures such as long-term procurement contracts and usage reduction; however, if continued price increases cannot be passed on to selling prices, rising costs could adversely affect business performance and financial condition.

As of the end of FY2026 (ending March 2026), the balance of interest-bearing debt (including lease liabilities) stood at ¥22,920 million, with a debt dependency ratio of 48.7%, a high level. If refinancing becomes difficult due to turmoil in financial markets or changes in financial institutions' lending stance, or if interest expenses increase sharply due to rapid rises in market interest rates, this could have a material impact on business performance and financial condition.

Some loan agreements with financial institutions include financial covenants such as maintaining net assets and securing ordinary income. If such covenants are breached due to a significant deterioration in business results or other factors, the Group may lose the benefit of term and be required by the lending financial institution to repay the loan in a lump sum. Details of the financial covenants are described in the notes relating to the consolidated balance sheet.

The Quality Assurance Division leads efforts to maintain FSSC22000 certification and ensure thorough quality and hygiene management of products; however, if a serious quality issue such as foreign object contamination, food poisoning, or mislabeled products occurs, the Group may incur substantial costs or a decline in orders. Even in situations beyond the Group's own control, such as quality issues affecting the industry or society as a whole, an impact on business performance and financial condition is anticipated.

Competitors exist in the beverage markets in which the Group operates, and the Group seeks to maintain competitiveness through differentiation such as selling prices. If differentiation from competitors becomes difficult, or if competition intensifies due to new entrants, sales and profits could be squeezed, affecting business performance and financial condition.

Expanding business operations requires securing and developing human resources, including part-time, temporary, and foreign workers, but intensifying competition for talent and increasing wage pressure are expected due to a shrinking workforce. If labor costs rise significantly or human resource acquisition becomes difficult due to amendments to labor-related laws or the Immigration Control Act, this could affect business performance and financial condition.

Demand for the Group's main products, soft drinks, is concentrated in the summer, creating a risk of decreased sales due to a cool summer or natural disasters. In addition, if a larger-than-expected earthquake or other natural disaster occurs, or if an infectious disease such as influenza spreads widely, disruptions to the Group's head office functions, production, and logistics systems could affect business performance and financial condition.

The Group's policy is to actively utilize capital investment and M&A to enhance production capacity and productivity, and it seeks to mitigate risk through due diligence when conducting M&A. However, if unexpected events occur after execution or business development does not proceed as planned, the Group may fail to achieve the initially expected performance benefits, affecting business performance and financial condition.

The Group operates core systems for production, logistics, and sales, and holds customer information through internet sales, implementing appropriate information management measures. However, if important information is lost or leaked externally due to unforeseen events such as power outages, disasters, unauthorized access, or virus infection, this could damage the Group's credibility and affect business performance and financial condition.

The Group is subject to the Food Sanitation Act, the Product Liability Act, labor-related laws and regulations, personal information protection regulations, environmental laws and regulations, and other rules, and thoroughly enforces compliance. Beverage plants have obtained business licenses and FSSC22000 certification, but if regulations are tightened or changed, or if certification is revoked, increased cost burdens or operational suspensions could affect business performance and financial condition.