Life Intelligent Enterprise Holdings Co.,Ltd.

In the fiscal year under review, the Company recorded an operating loss of ¥1,649 million, marking the third consecutive year of operating losses, mainly due to the withdrawal from the Food Distribution Business associated with the full transfer of shares in its major subsidiary Bonsante Co., Ltd. (effective July 1, 2024). The Company recognized an impairment loss of ¥1,302 million on fixed assets and goodwill, but secured net income attributable to owners of parent of ¥194 million, aided by gain on sale of shares, among other factors. Although the Company recognizes that a material event exists that raises substantial doubt about the going concern assumption as of the fiscal year-end, it has determined that there is no material uncertainty, as it holds ¥2,830 million in cash and cash equivalents at fiscal year-end and has no concerns regarding near-term cash flow.

The Company was notified by the Tokyo Stock Exchange that, effective March 27, 2025, it was designated as a Securities on Alert and would be subject to a penalty for breach of listing agreement. If problems are found in the internal control system review conducted in principle one year after the designation, the Company will in principle be delisted, creating a risk of loss of liquidity for investors. To pass the review, submission of an internal control system confirmation report and improvement of the establishment and operation of the control system are required, and the designation may continue for up to three fiscal years.

If an economic downturn occurs in the regional markets to which the Company Group's customers belong, demand for products and services may decline through a reduction in personal consumption, potentially making it impossible to maintain sales and profitability. In a recession, intensifying price competition may also proceed simultaneously, creating a dual downward pressure on profitability. Specific countermeasures by the Company Group are not disclosed in the Annual Securities Report.

If the markets in which the Company Group operates fall into a state of oversupply, this could lead to a decline in selling prices and adversely affect business performance. There is also a risk of additional losses arising from being forced to dispose of excess or obsolete equipment or adjust production in order to balance supply and demand. Because market supply-demand trends are influenced by the external environment, complete control by the Company Group is difficult.

The Company Group's business activities depend on third-party suppliers providing appropriate quality and quantity of raw materials and merchandise, and in times of excess demand, suppliers may be unable to meet the requirements of all customers. Fluctuations in the prices of raw materials and merchandise are factors that increase manufacturing costs and cost of sales, and could adversely affect business performance. The Company Group strives to build close relationships with suppliers, but explicitly states that there is no guarantee that supply shortages or delivery delays can be completely avoided.

The Company Group conducts inspection and shipment in accordance with client specifications under strict quality control; however, should a claim develop into a compensation issue, this could result in a burden of damages as well as a loss of corporate credibility, affecting business performance. Product liability risk is linked to litigation risk, encompassing a compound financial and reputational risk.

Some of the Company Group's businesses depend heavily on business alliances with other companies, and if collaboration with partners does not proceed smoothly or fails to achieve the initially expected effects, this could impede business development. If a partner makes decisions contrary to the interests of the Company Group or changes its business strategy, there is a risk that maintaining the alliance relationship could become difficult. Alternative measures in the event of termination of an alliance are not disclosed in the Annual Securities Report.

In the course of its business activities, the Company Group faces risks of being subject to a wide range of litigation, including matters related to intellectual property rights, product liability, the environment, and labor affairs. Should major litigation be brought, it could adversely affect business performance and financial condition. Litigation risk is diversifying alongside the expansion of business areas, and details of preventive countermeasures are not disclosed in the Annual Securities Report.

If natural disasters such as earthquakes, disease, war, terrorism, strikes, or similar events occur, delays or suspensions may arise in the purchasing of raw materials and parts, production, sales, logistics, and service provision. If such events are prolonged, they could have a material impact on the Company Group's business, financial position, and operating results. This is a broad-ranging risk that also includes geopolitical risk and infectious disease risk, and details of the Business Continuity Plan (BCP) are not disclosed in the Annual Securities Report.

The Company Group holds securities such as stocks, and a decline in their prices could adversely affect its financial position and business performance. In addition, since the Company Group raises funds from capital markets, it is also exposed to risks arising from interest rate fluctuations and credit risk. The scale of securities holdings and the details of the fundraising structure are not disclosed in this section.