YUMEMITSUKETAI Co.,Ltd.

The Company recorded an operating loss and significant negative operating cash flow in the previous consolidated fiscal year, and negative operating cash flow has continued in the current consolidated fiscal year, giving rise to material doubt about the going concern assumption. As countermeasures, the Company is promoting revenue generation through renewal of its mail-order catalog, sale of real estate properties, increasing users in the nursing care business, and reducing fixed expenses, while also planning to raise funds from financial institutions by pledging owned assets as collateral and to obtain loans from companies affiliated with the president.

As of March 31, 2026 (Reiwa 8), the Company does not meet the tradable share market capitalization criterion of the Tokyo Stock Exchange Standard Market, and is in an improvement period through March 31, 2027 (Reiwa 9). If, upon review after the improvement period ends, compliance with the criterion is not confirmed, the Company may be designated as a stock under supervision for delisting and delisted on October 1, 2027 (Reiwa 9), which would have a significant impact on shareholders and investors.

Mail-order retail has low barriers to entry, and with the spread of internet mail order, a wide variety of companies have entered the direct-to-consumer mail-order market, leading to an increasing number of competitors. There is also a growing trend toward direct sales from manufacturers to consumers, which could affect the Group's business performance. As a countermeasure, the Company's policy is to maintain its uniqueness and respond to change.

The real estate business is susceptible to economic trends, interest rate trends, trends in new property supply, real estate sales price trends, housing tax system, and other factors, and business performance may be affected if these change rapidly. The Company carefully decides on purchases and sales with board of directors' approval, and seeks to secure liquidity and reduce risk by diversifying its owned real estate.

Funds for real estate acquisition are mainly procured through borrowings from financial institutions, resulting in a high degree of dependence on interest-bearing debt. Future fluctuations in borrowing interest rates could impede new fund procurement and affect business performance and financial condition. The Company approaches multiple financial institutions for each individual deal to avoid dependence on any single financial institution.

The Company holds vast amounts of customer data on its host computer, and when outsourcing direct mail issuance operations, customer address and name data is temporarily entrusted to the outsourcing contractor, creating a risk of information leakage from inside or outside the company. If a leak occurs, it could affect business performance through customer claims for damages and deterioration of corporate image. As countermeasures, the Company implements both software and hardware security measures, concludes contracts with outsourcing contractors, mixes in dummy data, and conducts irregular on-site inspections.

In the mail-order industry, holding a certain amount of inventory is necessary to shorten delivery times, and errors in demand forecasting may increase inventory value and affect business performance. As a countermeasure, the Company basically purchases in minimum lot units, and re-lists inventory items exceeding appropriate levels in the catalog to promote their sale.

The Company sells various products, mainly general merchandise, directly to consumers, and if a large-scale product liability claim arises due to a product defect, it could result in substantial losses not fully covered by insurance and deterioration of corporate image, affecting business performance. The Company requires suppliers to guarantee compliance with the Product Liability Act through basic product sales agreements, and has taken out product liability insurance.

The mail-order business is subject to a wide range of legal regulations, including the Act on Specified Commercial Transactions, the Personal Information Protection Act, the Pharmaceutical Affairs Act, the Food Sanitation Act, and the Act against Unjustifiable Premiums and Misleading Representations, and violations could result in administrative dispositions from regulatory authorities that restrict business activities. In the real estate business as well, changes to regulations such as the Building Lots and Buildings Transaction Business Act and the Building Standards Act could affect business performance; the Company responds through information gathering by relevant departments and development of internal control systems.

In selling branded products and character merchandise, if issues of trademark, design, or utility model right infringement arise, losses could occur due to recall of sold products. There is also a risk that patent infringement related to internet business models could lead to the suspension of sales plans or payment of damages. The Company seeks to reduce risk by concluding contracts with suppliers and conducting prior confirmation each time a new product is listed.