I.K Co.,Ltd.

If infectious diseases such as COVID-19 spread or expand, there is a possibility of impact on the entire domestic and overseas supply chain. In the event of government guidance or requests accompanying the suspension of economic activity, the Group's business performance and financial condition may be affected by economic deterioration and a decline in consumer sentiment. There is no specific description of countermeasures.

In the sales marketing business, the sales ratio from the consumer cooperative route is high, accounting for over 40% of the Group's overall sales. Depending on changes in the co-ops' policies toward non-store sales business or fluctuations in membership numbers, business performance and financial condition may be affected. Although efforts are being made to reduce dependence through sales expansion in the direct marketing business, the co-op route still accounts for a share exceeding 40%.

The direct marketing business and sales marketing business conduct sales promotion activities through TV infomercials and product catalogs, and a certain level of advertising expense is essential for sales expansion. If cost increases occur, such as rising TV broadcast fees or soaring paper transaction prices, business performance and financial condition may be affected. There is no specific description of countermeasures against cost increases.

The Group falls under the category of a personal information handling business operator, and is working to strengthen internal management systems such as preventing unauthorized external access and virus infection. In the unlikely event that personal information is leaked externally, it could lead to a loss of trust and affect business performance and financial condition. In addition to legal compliance, the Group continuously implements systems to prevent information leakage damage.

The Group is subject to a wide range of legal regulations, including the Companies Act and the Financial Instruments and Exchange Act, as well as the Household Goods Quality Labeling Act, the Food Sanitation Act, the Food Labeling Act, the Act on Pharmaceuticals and Medical Devices, the Act on Specified Commercial Transactions, and the Product Liability Act. The Group strives to comply with these regulations, but in the event of any violation of legal regulations, business performance and financial condition may be affected. Because the scope of regulation is broad, ongoing compliance management is required.

The Group handles miscellaneous goods, food products, and cosmetics, and works to ensure food safety by establishing its own product regulations in addition to those set by the consumer co-ops. If products that do not meet standards are sold to customers—for example, if the use of unauthorized additives in the food manufacturing process is discovered—business performance and financial condition may be affected. It is stated that no major quality problems have occurred to date.

To prevent lost sales opportunities, the Group holds as inventory products with sales track records or expected demand, of which there are two types: general purchased products (returnable) and developed products (purchased outright, non-returnable). Depending on sales trends, inventory valuation losses may occur, affecting business performance and financial condition. In particular, since purchased outright products cannot be returned, the accuracy of demand forecasting has a direct impact on financial results.

Sales of Korean brand cosmetics are conducted based on distributorship agreements and similar contracts with the Korean companies that hold the brands. If such agreements are not renewed or if business continuation becomes difficult due to contract termination or other reasons, business performance and financial condition may be affected. There is no specific description of measures to ensure contract continuity.

The Group has a sales subsidiary in Hong Kong, and if unforeseeable events arise due to local legal regulations or customs, business performance and financial condition may be affected. The policy is to monitor local developments as needed and respond appropriately, but responding to geopolitical risks and regulatory changes remains a challenge. There is no detailed description of specific risk mitigation measures.