ANAP HOLDINGS INC.

The Group has recorded operating losses, ordinary losses, and net losses for six consecutive fiscal periods since FY2020 (ending August 2020), giving rise to circumstances that cast material doubt on the going concern assumption. In FY2024 (ending August 2024), the Group fell into negative net worth of ¥2,077,147 thousand, but through the establishment of the business revitalization ADR procedure, debt forgiveness, and the issuance of new shares and stock acquisition rights, net assets reached ¥12,644,935 thousand at the end of the fiscal year under review, resolving the negative net worth. However, the countermeasures are still in the process of implementation, and the company itself has explicitly stated that material uncertainty regarding the going concern assumption remains at this point in time.

As of the filing date of December 1, 2025, the number of potential shares was 34,000,000, equivalent to 85.1% of the total issued shares of 39,954,400. If these stock acquisition rights are exercised, significant dilution of share value and effects on the supply-demand balance of share trading may occur, potentially having a material impact on share price formation. Investors need to note this as one of the most critical risks in the company's capital policy.

The investment-related business subsidiary "ANAP Lightning Capital Co., Ltd." held 1,017 BTC as of August 31, 2025, with unrealized valuation gains reaching ¥1,218,561 thousand. Since bitcoin prices fluctuate substantially due to a wide range of factors including supply and demand, regulations, policy, technological change, and economic and political trends, this may cause significant fluctuations in the Group's financial soundness and business results. As dependence on crypto assets increases, the risk of increased earnings volatility grows.

As of August 31, 2025, 18 of the 30 stores operated by the Group are located within shopping malls and other facilities of the AEON Group, accounting for 60% of the total. If changes occur in the business environment surrounding the AEON Group, industry restructuring, or changes in management policy or store-opening policy, this could directly affect the Group's new store opening plans and the operation of existing stores. A high degree of dependence on a specific tenant partner could also lead to reduced bargaining power and withdrawal risk.

The Group procures and produces merchandise from overseas, mainly China, and is affected by exchange rate fluctuations, including with respect to direct overseas purchasing. In addition to significant exchange rate fluctuations, rising local raw material costs and labor costs may affect production costs and merchandise supply, potentially worsening business performance through changes in procurement prices and quantities. If a yen depreciation phase continues, profit pressure is likely to become apparent in the casual fashion market, where cost pass-through is difficult.

In addition to the opening of competing stores near roadside stores, fashion buildings, and shopping malls, competition is intensifying with the expansion of the internet mail-order market. If new entrants offer high-value-added services, the Group's competitiveness may decline, affecting business performance. The company is attempting to differentiate itself through the parallel development of multiple brands, unique store concepts, and strengthening of e-commerce, but these countermeasures are still in the process of implementation.

The Group operates all of its stores under lease agreements, some of which extend beyond five years. Breach of withdrawal restrictions under such contracts requires payment of penalties for early termination, making it difficult to flexibly consolidate stores during a downturn in business performance. As of August 31, 2025, the balance of lease deposits and guarantee deposits with fashion buildings and shopping malls was ¥187,135 thousand (1.0% of total assets), and the balance of accounts receivable was ¥84,809 thousand (0.5% of total assets), with the concurrent risk of bad debt due to deteriorating financial conditions of lessors.

The Group holds and manages a large amount of customer personal information and confidential information, and is exposed to risks such as unauthorized external access, computer viruses, and intentional leakage, loss, or falsification by employees. If an information leak occurs, it could result in reputational damage and losses from damage claims, potentially affecting business performance and business development. The company conducts training for all employees, establishes internal rules, and implements system countermeasures, but complete prevention is difficult.

The Group procures and produces merchandise from overseas, mainly China, and is exposed to region-specific market risk, credit risk, and geopolitical risk. If geopolitical developments such as heightened tensions in US-China relations, export restrictions, or tariff increases occur, this could lead to supply chain disruptions and sharp increases in procurement costs, potentially having a material impact on business performance. There is no specific description in the securities report regarding countermeasures such as diversification of production bases.

The Group applies impairment accounting for fixed assets and recorded impairment losses in the fiscal year under review as well. If additional impairment losses arise in the future due to changes in the business environment or declining profitability, this may affect business performance and financial condition. The company states that "the risk of applying impairment accounting is limited for the time being," but given the earnings environment of six consecutive years of losses, continued monitoring is necessary.