KURADASHI. CO.,Ltd.

The food loss market, which constitutes the Company's business foundation, sees an estimated 2,000 thousand tons of food waste occur annually according to estimates by the Ministry of Agriculture, Forestry and Fisheries and the Ministry of the Environment, and the Company's share of loss reduction remains below 1%. While market expansion is expected against a backdrop of social demand, if the market does not expand as projected, this could affect the Company's financial position and business results through a decline in net sales, among other factors. As a countermeasure, the Company is working to expand the size of the food loss market by creating a 1.5th-hand distribution channel.

At present, the Company recognizes that no company with substantial capital strength and brand recognition exists that clearly competes with "Kuradashi," but if such a company were to enter a similar service in the future, member attrition and increased customer acquisition costs could be expected. This could affect the Company's financial position and business results through a decline in net sales or an increase in customer acquisition costs. The Company is differentiating itself by leveraging its long-cultivated customer base, quality, and employee training system as strengths.

The distribution formats for "Kuradashi" consist of two types: shipment via the Company's own warehouse and direct shipment by partner companies, with the former incurring costs for outsourcing inventory storage to warehouse companies. The Company's policy is to increase the direct-shipment ratio in the future to reduce storage costs, but if this transition does not proceed as planned or if delivery outsourcing costs rise, increased logistics costs could raise the expense burden and affect the Company's financial position and business results. The Company is currently working to stabilize outsourcing prices.

The Group holds personal information such as member registration data and also handles confidential information entrusted by clients. Although the Company has obtained ISMS certification and repeatedly conducts employee training, if an information leak or misuse occurs due to an employee or an outsourced company, this could lead to a loss of social credibility and a decline in net sales, among other effects, thereby affecting the Company's financial position and business results. The Company addresses this through the development of personal information protection regulations and the establishment of a management framework.

The Company has a small organizational scale, and if it is unable to secure the human resources it seeks at the appropriate time, or if officers or employees responsible for key operations depart, this could affect the Company's financial position and business results through a decline in net sales, among other factors. Securing and developing capable human resources is essential for business growth, and the Company is focusing on continuing recruitment activities and enhancing in-house training programs and organizational capabilities.

The Group intends to expand its revenue base through new business development, including M&A, but new businesses involve many uncertain factors, and if they do not proceed as planned and sufficient investment recovery cannot be achieved, this could affect the Company's financial position and business results through the recording of losses, among other factors. The Company conducts information gathering and examination to mitigate risk prior to commencing operations, and continuously monitors business profitability.

As a company involved in food products, if a force majeure-type serious error in product labeling occurs due to food safety troubles or misrepresentation of origin, this could damage the brand image and affect the Company's financial position and business results through a decline in net sales, among other factors. With the cooperation of partner companies, warehouses, and shipping companies, the Company is focusing on developing and strengthening its internal framework for quality control and appropriate product labeling.

The Group holds tangible and intangible fixed assets, and expects an increase in fixed assets going forward due to system development, acquisition of business-use assets, and recognition of goodwill through M&A. If profitability declines due to significant changes in the management environment or business conditions, and it is determined that sufficient cash flow cannot be generated, this could affect the Company's financial position and business results through the recording of impairment losses. Prior to asset acquisition, the Company thoroughly verifies necessity and profitability in advance.

Representative Director and Chairman Tatsuya Sekifuji is a major shareholder holding 46.19% of the outstanding shares (excluding treasury shares), and if his shareholding were to decrease for any reason, this could affect the market price and the exercise of voting rights. In addition, the number of potential shares from stock acquisition rights (stock options) is 572,010 shares (equivalent to 5.25% of the total number of outstanding shares), and if exercised, this could dilute the share value of existing shareholders. Note that in June 2024, a transfer reservation rights grant agreement was concluded between SocialGood and management executives, but the Company recognizes that this does not have a material impact on the stable shareholder ratio.

The Food Platform Operation Business is subject to multiple laws and regulations, including the Act against Unjustifiable Premiums and Misleading Representations, the Food Labeling Act, and the Act on Specified Commercial Transactions, while the renewable energy business (Grid-Connected Battery Storage Business) is subject to the Electricity Business Act and other regulations. If future enactment of new laws or strengthening of existing laws restricts business operations, this could affect the Company's financial position and business results. The Company strives to comply with laws and regulations through internal education and framework development.