UNITED&COLLECTIVE CO. LTD.

As of February 28, 2025, the ratio of interest-bearing debt (borrowings) to total assets stood at a high level of 69.1%. The Company primarily procures store opening funds, including store fixture costs and security deposits, through financial institution borrowings, and a rise in interest rates would directly adversely affect its financial position and business results. Although the Company currently maintains good relationships with financial institutions and has not received requests for interest rate increases, its high dependence on interest-bearing debt indicates a structural financial vulnerability.

The Company resolved its negative net worth as of August 31, 2024, and recorded net income of ¥59,751 thousand for the full fiscal year ended February 2025, based on which it judges that the “material events or conditions raising substantial doubt about the going concern assumption” have been resolved. However, given the short period since the resolution of negative net worth and the limited level of profit, there remains a risk that the financial condition could deteriorate again due to worsening external conditions. Continued support from financial institutions is a premise for business continuity, and the impact of a discontinuation of such support could be severe.

The Company leases the buildings for its head office and all of its stores, and the balance of security deposits and similar items as of February 28, 2025 was ¥784,911 thousand, accounting for 19.7% of total assets. If the financial condition of lessors deteriorates, there is a risk that security deposits and similar items become unrecoverable, and continued leasing of the leased properties could become difficult. Although the Company conducts credit investigations, risks on the lessor side cannot be entirely eliminated.

The Company groups cash flows on a per-store basis, and if store profitability deteriorates due to significant changes in the external environment and operating income/loss remains negative continuously, it will recognize impairment losses on fixed assets. The food and beverage business is susceptible to economic and consumption trends, and given the structural concentration of stores in the Tokyo metropolitan area, there is a risk that a localized environmental change could simultaneously affect multiple stores. Recognition of impairment losses would directly affect the financial position and business results.

The Company operates 81 stores (as of February 28, 2025) across Tokyo and three neighboring prefectures as well as Osaka Prefecture, with a particular concentration in the Tokyo metropolitan area. If a large-scale disaster (earthquake, typhoon, flood, spread of infectious disease, etc.) occurs, centered on central Tokyo, there is a risk of a significant decline in customer numbers or difficulty conducting normal business operations. Due to the high degree of geographic concentration, a single disaster event could have a large impact on the entire business.

Although the Company enforces thorough quality control at its distribution center and conducts regular hygiene checks at each store, if a food poisoning incident or an event constituting a violation of the Food Sanitation Act occurs, it could lead to a business suspension order or loss of social credibility, materially affecting the financial position and business results. In the food and beverage business, food safety is fundamental to business continuity, and there is a risk that a single incident could spill over to affect customer traffic at multiple stores.

Securing excellent personnel, including part-timers and part-time workers, is essential for stable store operations, and the Company employs diverse recruitment methods such as new graduate hiring, promotion of part-time staff to employees, mid-career hiring, and use of the specified skilled worker system. However, amid a worsening labor shortage across the food and beverage industry as a whole, if hiring and training fail to keep pace, it could lead to a decline in the quality of store operations or delays in new store opening plans, potentially affecting the financial position or business results. Although the Company has installed educational tablets at all stores to conduct training on its corporate philosophy, maintaining retention rates remains a challenge.

Hideya Sakai, the founder and Representative Director, plays an important role in formulating management policy, determining management strategy, and developing business formats, resulting in a high degree of dependence on a specific individual. Although the Company is working to strengthen its organizational structure and delegate authority, if Mr. Sakai becomes unable to carry out his executive duties during the transition process, it could have a material impact on business results and business development.

As of February 28, 2025, 10.0% of part-time employees were foreign nationals, managed and compliant under the Immigration Control and Refugee Recognition Act. If laws or regulatory content change, it could result in a temporary labor shortage, potentially affecting the financial position or business results. Because the Company utilizes the specified skilled worker system as a means of securing human resources, its structure is susceptible to the effects of system changes.

Although the Company gathers information on properties for new store openings from real estate brokers, management companies, and correspondent banks, acquiring properties suited to the Company's business format is not easy, and there is a risk that expected store sales and profits may not be achieved. If significant environmental changes occur in the vicinity of a store after opening, it could lead to failure to achieve sales and profit plans, potentially affecting the financial position and business results. Store opening investment amid high dependence on interest-bearing debt is also linked to financial risk.