ABHOTEL CO., LTD.

In future new development, if candidate sites or necessary personnel cannot be secured, or if a competitor enters the vicinity after opening, this may affect business performance and financial condition. The Company positions continuous new store openings as a pillar of its growth strategy, and these obstacles risk spreading to the entire expansion plan. No specific countermeasures are currently disclosed.

Funds for facility construction are mainly sourced through borrowings from financial institutions, and the outstanding loan balance is expected to increase with new development. While long-term funds are mainly at fixed interest rates, the Company also intends to incorporate variable rates, and future interest rate increases may raise interest expenses, adversely affecting business performance and financial condition. Borrowings are classified into short-term (approximately 1 year), medium-term (3 to 6 years), and long-term (8 to 10 years), and are procured based on the revenue plan.

Of the 38 stores in total, 23 are concentrated in the Tokai region, with particular focus on Aichi Prefecture. If a large-scale earthquake, flood, or other natural disaster occurs in the Tokai region, damage to facilities could make it difficult to provide services, and business suspension could have a material impact on business performance and financial condition. While the Company is expanding into the Kanto and Kansai regions, dependence on the Tokai region remains high at present.

In the hotel business, if profitability and valuation decline significantly, impairment of tangible fixed assets may become necessary, potentially affecting business performance and financial condition. The Company applies accounting standards for impairment of fixed assets, and significant accounting estimates are disclosed in the notes to the financial statements. The hotel business is susceptible to economic fluctuations, and a decline in occupancy rate carries the risk of triggering impairment.

Based on land and building lease agreements, lease and guarantee deposits placed with lessors amounted to ¥555 million as of the end of March 2026. If a lessor's financial condition deteriorates and repayment becomes impossible, a bad debt loss may arise to the extent it cannot be offset against rent and demolition costs, which may affect business performance and financial condition. No specific risk mitigation measures are currently disclosed.

The Company manages a wide variety of personal information and is working to strictly manage information security and prevent leakage in advance. Should information leakage or unauthorized use occur, loss of trust and other effects may affect business performance and financial condition. Because the hotel business handles large volumes of guests' personal information, there is a latent risk from cyberattacks and internal misconduct.

The hotel industry is susceptible to trends in the economy and personal consumption; a decline in business travel demand due to stagnant corporate activity or a decline in tourism demand due to sluggish personal consumption can affect business performance. In addition, a decrease in inbound foreign visitors due to exchange rate fluctuations or changes in diplomatic policy may also affect business performance and financial condition. These external environmental factors are outside the Company's control, and the impact could be significant if they occur in combination.

Each hotel provides meals, and the Company pays attention to food hygiene and quality control, with head office personnel conducting regular checks of hygiene management status. Should a food hygiene incident such as food poisoning occur, revocation of business licenses, suspension of operations for a certain period, or a decline in brand image may affect business performance and financial condition. Simultaneous occurrence at multiple stores poses a risk of spreading to the entire business.

The parent company, Toshow Co., Ltd., holds 52.8% of the Company's voting rights and has rights related to management, including the right to nominate directors. When exercising voting rights, the parent company's interests may not align with those of the Company's other shareholders. The Company makes its own management decisions independently without requiring prior approval from the parent company, and there are no concurrent officer appointments; however, the influence of the controlling shareholder remains.

As of the end of the fiscal year under review, the organization is relatively small, comprising 5 directors, 3 auditors, and 103 employees (excluding temporary staff), and the internal control system is scaled accordingly. Securing and developing sufficient human resources in line with business expansion is uncertain, and if inadequate, this may affect the execution of operations. The Company plans to strengthen and enhance its organizational structure through the recruitment and development of excellent personnel, but details of specific measures are not disclosed.