OMIKENSHI CO.,LTD.

The Group has recorded consecutive negative operating cash flows, and management recognizes that events or conditions exist that raise material doubt about its ability to continue as a going concern. The primary cause is the substantial payment of business withdrawal losses associated with business restructuring; however, the withdrawal phase is nearly complete, and payments for withdrawal losses are expected to decrease from the following consolidated fiscal year onward. In terms of financing, the Group maintains close relationships with its financial institutions and holds real estate that can be additionally pledged as collateral, and it has determined that no material uncertainty exists as of the end of the current consolidated fiscal year.

The Group is pursuing business restructuring aimed at enhancing financial soundness by maintaining and expanding a stable earnings structure based on real estate income and by thoroughly reducing costs. Depending on the progress of the restructuring, financial condition and business performance could be affected. Although the business withdrawal phase is said to be nearly complete, the success or failure of the restructuring remains a critical factor determining the Group's future earnings base.

Production activities at the Group's factories are subject to environmental regulations such as the Water Pollution Control Act and the Air Pollution Control Act. While the Group currently has adequate facility measures in place, if these regulations are tightened in the future, additional capital expenditure may be required, which could affect business performance. Because the scope and timing of any regulatory tightening depend on external factors, this poses a risk in which response costs are difficult to predict.

The Group has operations in Japan and overseas, and if large-scale disasters such as earthquakes and fires, infectious diseases such as COVID-19, or unlawful acts such as terrorism occur, business operations could become difficult, potentially delaying product supply to customers. While the Group is working to establish a framework enabling early resumption of production, complete preparedness against unforeseen events is difficult, and this could affect business performance.

Although the Group is working to reduce its borrowings, it still holds outstanding loan balances, and if interest rate conditions fluctuate significantly, this could affect business performance through increased financial expenses. While efforts to reduce borrowings contribute to mitigating this risk, the interest rate environment is subject to external factors, making complete hedging difficult.

The Group holds substantial business-use land, and real estate leasing income is an important pillar of its earnings base. If leasing contracts are terminated, causing reduced profitability, or if land prices decline significantly in the future, this could materially affect business performance through the recognition of impairment losses, among other effects. Given a business structure with a high degree of dependence on real estate income, fluctuations in the real estate market pose a risk that directly impacts financial condition.

The Group makes investments and loans to domestic and overseas subsidiaries, and if such investments and loans cannot be recovered due to various risks, this could affect business performance. There is an inherent risk of incurring bad debt losses or investment losses due to deteriorating management conditions at subsidiaries, including overseas operations, or changes in the business environment.

The Group's products are manufactured based on quality control standards conforming to international standards, but quality issues may arise in the future. Although the Group has obtained product liability insurance for products deemed necessary, if the amount of damages becomes substantial, this could affect business performance through increased burden or a decline in sales due to loss of credibility.

The Group manufactures, processes, and sells foodstuffs through Umi Foods Co., Ltd., and faces food safety risk in the food industry, where consumer quality demands are increasingly stringent. Even in cases not directly related to the Group's own products, if industry-wide rumors or reputational issues damage the Group's product image, this could affect financial condition and business performance. Responding to unforeseen abnormal situations beyond expectations remains a challenge.