YA-MAN LTD.

The beauty and health-related industry market is expanding rapidly, and new entrants such as home appliance manufacturers as well as existing competitors are engaging in aggressive marketing activities. If the competitiveness of the Group's products declines relatively due to the emergence of strong competing products, this may affect the financial position and operating results. The Group is pursuing differentiation through enhanced after-sales service and strengthened product planning and development.

Advertising activities such as infomercials have a significant impact on revenue, and advertising expenses have increased in line with the expansion of business scale. If the increase in sales expected from advertising activities falls short of the initially assumed level, or if the timing of the sales increase is delayed compared to expectations, this may affect the financial position and operating results. The timing, method, and scale of implementation are determined for each product based on projected sales and economic conditions.

The Group's business is subject to a wide range of legal regulations, including the Product Liability Act, the Pharmaceuticals and Medical Devices Act, the Act on the Protection of Personal Information, the Specified Commercial Transactions Act, and the Act against Unjustifiable Premiums and Misleading Representations. Should any violation of laws and regulations occur or should there be deficiencies in the response thereto, this could result in loss of customers due to diminished social trust, liability for damages, and restrictions on business activities such as suspension of operations, thereby affecting the financial position and operating results. The Group thoroughly disseminates legal compliance throughout the group and conducts regular verification through internal audits.

The Direct Sales Segment sells to individual customers via TV shopping, the internet, and other channels, and as a result holds a large volume of personal information. Should an unforeseen event result in the leakage or improper use of personal information, this could lead to diminished social trust and the burden of monetary compensation, thereby affecting the financial position and operating results. The Group has established and operates a personal information management system compliant with JIS Q 15001:2017 and conducts regular audits.

The Group does not own its own manufacturing facilities and outsources all product manufacturing externally. Therefore, a stoppage of production lines at outsourced factories due to a major accident, natural disaster, infectious disease, or similar event would directly result in lost sales opportunities. Additionally, if the partnership relationship with an outsourcing partner cannot be maintained, this could affect the entire production system. Securing alternative measures is a challenge, and responses such as diversifying production outsourcing partners are required.

Many of the products sold by the Group are manufactured in overseas countries such as China and the United States, and the Group plans to continue importing and selling such products going forward. Should unexpected changes in laws and regulations, exchange rate fluctuations, or disruption of social conditions due to natural disasters or terrorism occur in the producing countries, this would directly affect the distribution of products, thereby potentially affecting the financial position and operating results.

The Group engages in import and export transactions denominated in foreign currencies and is therefore exposed to foreign exchange fluctuation risk. If exchange rate fluctuations cause selling prices and purchase prices to increase or decrease beyond expectations, this may affect the financial position and operating results. Given the high proportion of imported products manufactured overseas in countries such as China and the United States, the pressure of rising procurement costs becomes particularly significant during periods of yen depreciation.

The beauty and health-related products sold by the Group include items that customers use in direct or indirect contact with their bodies. Should a product cause harm to a customer's body, this could result in cost burdens from compensation and recall responses, as well as damage to the product image, thereby affecting the financial position and operating results. The Group addresses this through meticulous product checks and appropriate labeling of usage instructions.

The Group possesses confidential information such as specialized technology and know-how related to research and development, and works to avoid dependence on specific individuals and to establish systems to prevent leakage. Should confidential information regarding new technologies under development or consideration leak to competitors due to personnel turnover to other companies or other unforeseen events, the Group's competitive advantage could be undermined, thereby affecting the financial position and operating results.

Under basic transaction agreements with mail order operators, returns of unsold products are permitted, and the Direct Sales Segment also operates its own return guarantee program. If returns occur beyond expected levels, this may affect the financial position and operating results. The Group takes measures such as determining appropriate sales quantities based on analysis of past sales conditions, and having customer service conduct interviews regarding reasons for returns and provide explanations of proper usage methods.