FORLIFE Co., Ltd.

The cost of the Condominium/Housing Development Business is heavily dependent on the acquisition price of business-use real estate and construction costs, and if acquisition prices and construction costs rise due to fluctuations in economic conditions or the real estate market, profitability may deteriorate. In addition, excessive inventory may also affect business and financial results. As countermeasures, the Company is reviewing design, construction, and technical standards, reducing costs by leveraging scale merits, and striving to comply with standard construction periods and shorten completed inventory holding periods.

If the net realizable value of real estate for sale falls below book value due to a deterioration in economic conditions or the real estate market, a valuation loss associated with the write-down of inventory book value may arise, potentially affecting business and financial results. The risk increases particularly when inventory holding periods become prolonged. As countermeasures, the Company focuses its business on Yokohama City, Kawasaki City in Kanagawa Prefecture, and the Jonan area of Tokyo, areas less prone to price collapse, and works to maintain quality and secure profitability by strengthening its internal supply chain.

Since the sales and profit of the Condominium/Housing Development Business depend on the scale and profit margin of each project, and revenue is recorded at the time of delivery to customers, changes in sales plans or delays in construction work that shift delivery timing can be a factor causing fluctuations in business results. Concentration or dispersion of deliveries in specific periods increases the volatility of performance. As a countermeasure, the Company aims to shorten completed inventory holding periods through appropriate pricing based on market research and periodic price reviews.

The core Condominium/Housing Development Business operates in a limited area of the Tokyo-Kanagawa region where entry barriers are low, resulting in intense competition among competitors. Changes in the business environment, such as deregulation or entry by companies from other industries, could make it impossible to maintain competitiveness, and significant fluctuations in land acquisition prices or sales prices could affect business and financial results. As countermeasures, the Company is pursuing differentiation through design and construction know-how for small-lot properties cultivated over more than 20 years of business history, diversifying procurement routes, and diversifying its revenue base through renovation and detached housing businesses in the Kyoto area.

If the number of properties handled increases, the sales area expands, or there is a decrease in construction contractors or a shortage of workers, the Company may be unable to secure construction contractors that meet its required standards. If appropriate control cannot be maintained and problems occur, this could affect business and financial results. As a countermeasure, the Company positions quality maintenance as its top priority, and adopts a policy of not increasing the number of properties handled or expanding its sales area when maintaining quality becomes difficult.

The Company is subject to regulation under various laws such as the Building Lots and Buildings Transaction Business Act, the Building Standards Act, and the Construction Business Act, as well as local government ordinances, and if a violation of law occurs, the revocation of licenses or registrations or administrative dispositions could have a material impact on business activities. In addition, amendments to or new enactment of related laws could restrict business activities. As countermeasures, the Company continues compliance education and training led by the Compliance Committee, and the development and thorough implementation of regulations and operational manuals.

Under the Act for Promotion of Housing Quality Assurance, the Company bears a 10-year defect liability for the structural components and water infiltration prevention components of newly built houses, and if hidden defects or non-conformity with the contract are discovered in properties sold or contracted, repair costs may increase and the Company's credibility may be damaged. Although the Company has taken measures to secure financial resources through insurance contracts with insurance corporations designated by the Minister of Land, Infrastructure, Transport and Tourism, this risk cannot be completely eliminated. The Company also strives to ensure thorough process management and quality control in construction work.

Kenji Okumoto, the founder and Representative Director, plays an important role in management policy, business strategy, investment decisions, and other matters, and if an unforeseen event occurs that makes it difficult for him to perform his duties, this could affect business and financial results. The Company is currently in a transitional stage toward an organizational management structure. As countermeasures, the Company is promoting the delegation of authority to directors and executive staff and developing human resources.

As a building lots and buildings transaction business operator, the Company bears a duty of confidentiality regarding transaction information and strives to manage information in accordance with the amended Act on the Protection of Personal Information; however, if personal information is leaked externally due to an unforeseen event, this could result in a decline in sales due to loss of credibility or the incurrence of costs due to damages claims. As countermeasures, the Company is committed to compliance with its basic internal control policy and to corporate management that prioritizes compliance above all else.

Some housing construction materials depend on imports from overseas, such as China, and if difficulties arise in importing from overseas or a global pandemic or other crisis occurs, a stable supply of construction materials may not be available, potentially affecting business results and business promotion. Since the Condominium/Housing Development Business requires approximately 8 months from procurement to delivery, and the Custom-Built Housing Business requires 9 to 10 months from order receipt to delivery, the effects of changes in economic conditions materialize with a time lag. As countermeasures, the Company is working to diversify procurement routes, including responses using substitute products, and to reduce risk by adjusting construction progress and sales plans.