Fundely Co., Ltd.

The Company recorded substantial operating losses and ordinary losses in prior fiscal years, primarily due to the CID Business failing to reach its breakeven sales level, and as of the end of the current fiscal year, it remains in breach of certain financial covenants attached to long-term borrowings. Although a risk of loss of the benefit of time exists, the Company has already obtained consent from its lending financial institutions not to exercise their rights, and it has determined that there is no material concern regarding cash flow over the next 12 months. However, conditions giving rise to material doubt about the going concern assumption continue to exist.

The MFD Business's flagship product "Meal Time" depends on procurement from a single company, Tokatsu Foods Co., Ltd., which accounted for 56.6% of merchandise purchases in FY2026 (ending March 2026). If this company were to change its management policy or encounter difficulties continuing production, manufacturing could be interrupted until an alternative contractor is selected, potentially having a material impact on the Company's business and financial condition. The Company is pursuing development of new relationships with multiple contract manufacturers, but alternative means remain limited at present.

Sales of the Health Food Delivery Service "Meal Time" accounted for 77.1% of FY2026 (ending March 2026) net sales, with a cumulative membership of 321 thousand, while the meal delivery service "Shun wo Sugu ni" accounted for 4.5%, with a cumulative membership of 48 thousand; membership numbers are thus directly linked to business performance. If new member acquisition measures do not proceed as planned, or if repeat rates decline due to reduced customer satisfaction, net sales could be significantly affected. Catalog distribution through referral networks is the primary means of member acquisition, and a sharp increase in network cancellations poses a similar risk.

The CID Business holds substantial fixed assets such as plant and equipment, and if future cash flows deteriorate or the fair value of fixed assets declines significantly, application of impairment accounting could result in the recognition of substantial impairment losses. The CID Business has continued to fail to reach its breakeven sales level, making the likelihood of impairment risk materializing relatively high. Although the Company has indicated a policy of striving to improve performance, details of specific mitigation measures remain limited.

The Company has borrowed funds from financial institutions for plant construction, resulting in a high degree of reliance on interest-bearing debt; in addition, since these borrowings carry floating interest rates, a sharp rise in interest rates could result in substantial interest expense. Furthermore, if the Company breaches financial covenants attached to its loan agreements, it risks losing the benefit of time and being required to repay the loans in full. At present, the Company has obtained consent from financial institutions not to exercise such rights through consultation, but the risk could materialize depending on changes in economic conditions.

In the MFD Business, the Company purchases products from contract manufacturers, while in the CID Business, products are manufactured at its own plant; increases in raw material costs, labor costs, and packaging material costs affect business and financial performance. Raw material costs face upward pressure from poor weather and exchange rate fluctuations, packaging materials from crude oil prices, and labor costs from population decline and labor shortages, with such pressures continuing. If the Company is unable to pass on cost increases to selling prices, profitability may deteriorate.

The MFD Business sells nutritionally controlled foods, and the CID Business sells foods manufactured at its own plant; if incidents such as foreign object contamination or false labeling occur, this could damage customer trust and reduce sales. The Company enforces strict hygiene, quality, and expiration date management in compliance with the Food Sanitation Act and other regulations, and has established a system of periodic audits of contracted plants and cooperation with the Saitama plant; however, it is difficult to completely eliminate risks arising from producers and distribution processes.

The Company is subject to a wide range of legal regulations, including the Basic Act on Food Safety, the Food Sanitation Act, the Act against Unjustifiable Premiums and Misleading Representations, the Act on Specified Commercial Transactions, and the Act on the Protection of Personal Information; future legal amendments or the enforcement of new laws could restrict business activities. If doubts arise regarding the appropriateness of catalog articles or advertisements, this could raise concerns about reduced creditworthiness and impact on business development. The Company has established a management framework through compliance training for officers and employees and guidance received from relevant authorities, but continued response to changes in the regulatory environment is required.

Storage, sorting, and shipping of MFD Business products are outsourced solely to Shonan Toyo Co., Ltd., while customer delivery for both the MFD and CID Businesses is outsourced solely to Yamato Transport Co., Ltd. If either contractor were to suspend operations, shipment of products could become difficult until an alternative provider is selected, potentially disrupting business continuity. There is currently no description of specific measures for securing alternative contractors.

The market capitalization of the Company's tradable shares is close to the listing maintenance criteria of the Tokyo Stock Exchange Standard Market; if the market capitalization declines further, the Company could fall below the listing maintenance criteria, potentially resulting in stagnation of trading in its shares. The Company has indicated a policy of improving liquidity through a combination of enhancing corporate value via sales and profit growth and requesting sell-offs by major shareholders, but if performance improvement is delayed, the risk of delisting increases.