CHUKYOIYAKUHIN CO.,LTD.

The Retail Division accounts for 59.3% of the Company's segment sales, representing more than half of total sales, resulting in high dependence on a single division. Although the Company is focusing on developing the Wholesale Division and Water Sales Division, the structure in which deterioration of the Retail Division's performance directly and significantly impacts overall company performance continues.

The Haichi Sales business follows the traditional business format of "Toyama no Kusuriuri" (Toyama medicine peddlers), under which sales are recognized only for the amount used through regular visits to general households. If the acquisition of new customers or their retention as ongoing business partners is delayed, growth in sales may be impeded. Although the Company is undertaking company-wide efforts such as employee training and establishment of a code of ethics, maintaining and expanding the customer base remains fundamental to determining business performance.

Most of the products handled by the Company are produced under contract by external manufacturers as in-house brands. If deterioration or expiration of products increases, or if customer complaints are handled inappropriately, this could damage the Company's credibility and adversely affect its business performance. Strengthening the quality control system and prompt handling of complaints remain ongoing challenges.

If a business partner in the Wholesale Division defaults, collection of trade receivables may become difficult, potentially adversely affecting the Company's business performance and financial condition. The Company seeks to avoid this risk by establishing credit and receivables management regulations and setting aside provisions for bad debts, but the maintenance of business partners' sound financial condition is not guaranteed. In addition, since direct-shipment transactions do not pass through the Company's departments, there is a risk that active confirmation and control may be difficult to achieve.

In the Water Sales Business, which involves free rental of water servers and sale of mineral water, if problems occur with the products or production plants, this could adversely affect the Company's business performance. Although the Company is committed to thorough control and quality improvement of its products, there is a risk to business continuity in the event of equipment trouble or a quality-related incident.

The Company holds various assets, including operating real estate, and if fair value declines or future cash inflows decrease due to the number of customers or sales falling short of the business plan, the Company may become subject to impairment accounting. Recognition of impairment losses poses a risk of directly and adversely affecting business performance and financial condition.

Because the Company conducts Haichi Sales and wholesale sales of pharmaceuticals, it requires permits and registrations (valid for 6 years) from each prefecture under the Pharmaceutical and Medical Device Act, and as a door-to-door sales business format, it is also subject to regulation under the Act on Specified Commercial Transactions. If the Company is unable to comply with regulations in the future, or if regulations are strengthened, changed, or newly established, this could adversely affect business continuity and business performance and financial condition. The Company addresses this through thorough employee training and business development in accordance with a compliance-oriented spirit.

Due to the nature of the Haichi Sales business, the Company holds a large volume of customers' personal information and falls under the category of a personal information handling business operator. In the event of a leak of personal information, this could damage the Company's credibility and adversely affect management. The Company is working to develop its organizational structure through the establishment of personal information protection management regulations and information management training for employees.

Although the Company operates nationwide with a focus on the Chubu region, if a major natural disaster such as an earthquake occurs in the Chubu or Kyushu regions, where the concentration of sales offices is high, damage to sales offices and customers could make business continuity difficult and adversely affect business performance. The structure results in a relatively high disaster risk due to regional concentration.