HABA LABORATORIES,INC.

Squalene and squalane derived from deep-sea shark liver oil are used in a wide range of products, but procurement may be constrained by fishing restrictions aimed at resource conservation or changes in the supply environment. If procurement becomes impossible, a review of raw materials will be required, which may affect business performance. As a countermeasure, the Group is working to secure alternative raw materials, including the development and commercialization of plant-derived squalane.

The naturally derived Chishima bamboo grass water used in the flagship products "Yakuyou White Lady" (medicated) and "G Lotion" may face supply disruptions due to changes in the natural environment or circumstances at the supplier. If it becomes necessary to consider alternative raw materials or revise product specifications, this may affect business performance. Currently, a stable procurement system is being built through cooperation with an approved supplier.

The cosmetics and quasi-drugs business is subject to regulation under the Act on Pharmaceuticals and Medical Devices, Etc. (formerly the Pharmaceutical Affairs Act), and violations may result in administrative dispositions such as business suspension orders, revocation of permits, surcharge payment orders, and product recalls. Legal amendments or tightened regulations may also affect business performance and financial condition through restrictions on advertising activities, damage to brand value, and decreased sales. The company strives for thorough legal compliance through the establishment of an internal review system and confirmation with regulatory authorities.

All health food products are manufactured through outsourcing and are subject to regulations under the Food Safety Basic Act, the Food Sanitation Act, the Health Promotion Act, the Food Labeling Act, and other laws. Violations of advertising and labeling regulations under the Act against Unjustifiable Premiums and Misleading Representations, the Act on Specified Commercial Transactions, and other laws may result in administrative dispositions or decreased sales due to loss of credibility. The company addresses this through the establishment of an internal review system and confirmation with regulatory authorities as needed.

Since mail order and EC are the main channels, the company holds a large amount of customer personal information, and there is a risk of information leakage, loss, or damage due to cyber attacks, unauthorized access, human error, and other causes. In the event of such an incident, response costs, damages compensation, administrative response, and decreased sales due to customer attrition may occur, affecting business performance. The company has implemented measures such as the use of highly secure external data centers, access rights management, employee education, and supervision of outsourcing partners.

With intensifying competition in the EC market and diversification of advertising media, customer acquisition cost (CPA) is trending upward, which may constrain sales growth due to reduced efficiency in acquiring new customers and insufficient returns on advertising investment. If the retention rate of existing customers declines due to changes in customer needs or the competitive environment, this may affect business performance through a decline in customer lifetime value (LTV). The company is working to enhance marketing measures based on customer data analysis and to improve products and services.

Due to heightened geopolitical risk and fluctuations in energy and resource prices, there is a possibility of rising procurement costs for containers, packaging materials, and other supplies, longer procurement lead times, and constraints on the procurement of certain materials. If manufacturing costs increase or product supply delays and lost sales opportunities occur, this may affect business performance. The company is addressing this through diversification of suppliers and optimization of inventory levels.

The company applies accounting standards related to impairment of fixed assets, and depending on the profit/loss and cash flow situation of group companies, impairment accounting may become necessary. If an impairment loss occurs, it may affect operating results and financial condition. At present, no specific countermeasures are described, and continuous monitoring of business performance trends will be important.