Twenty-four seven Holdings Inc.

Due to the impact of the COVID-19 pandemic and changes in consumer behavior, the Company has recorded declining net sales and ordinary losses/net losses for six consecutive fiscal periods through the current consolidated fiscal year, giving rise to events that raise material doubt about the going concern assumption. As of the end of the current consolidated fiscal year, the Company held cash and deposits of ¥505,459 thousand against a borrowings balance of ¥45,544 thousand, and management has determined that there is no material concern regarding cash flow; however, if a fundamental recovery in business performance is not achieved, this could affect the stability of the financial base. As countermeasures, the Company is implementing "expansion of measures to increase the number of new customers," "retention and expansion of existing customers and sales growth through new products," and "expense reduction through cost control," while also seeking financial support and credit enhancement through capital and business alliances with ICP and NOVA.

The personal training gym market is still growing but has low barriers to entry, and increasing new entrants are expected to intensify competition. The Group is pursuing differentiation through clarifying its training concept and introducing new service plans; however, if competition intensifies further, rising customer acquisition costs and customer attrition could affect operating results and financial condition. The Group aims to minimize such impact by promoting efforts to diversify its revenue base.

The Group relies on internet advertising as its main means of acquiring new customers, positioning advertising as an important management factor. The Group is pursuing "development of cost-effective web advertising methods" and "optimization of customer acquisition methods"; however, if the expected effects are not achieved, the acquisition of new customers may stagnate, affecting operating results and financial condition. The Group treats marketing strategy as an important management issue and continuously works on improvements.

The Group is subject to a wide range of laws and regulations, including the Act against Unjustifiable Premiums and Misleading Representations, the Specified Commercial Transactions Act, the Pharmaceuticals and Medical Devices Act, the Building Lots and Buildings Transaction Business Act, and the Personal Information Protection Act, and is required to avoid unjustified representations and excessive premiums in its advertising activities. Should the Group violate any of these laws and regulations, it may become subject to administrative sanctions and suffer damage to its brand image and loss of customer trust, which could affect operating results and financial condition. The Group is working to strengthen its management system for legal compliance, employee training, and its compliance framework.

The Group holds a large amount of personal customer information through its mail-order and in-store services. Should information leakage occur due to unauthorized external access or other causes, this could result in claims for damages and loss of social trust, potentially having a material effect on operating results and financial condition. The Group has taken out personal information leakage insurance, but if the amount of damages claimed exceeds the insured amount, the Group would be responsible for the excess. The Group has established a strict management system based on the Personal Information Protection Act and ensures appropriate handling of information.

The Group operates a merchandise sales business through EC sites, and is exposed to the risk of increasingly sophisticated and elaborate unauthorized access and cyberattacks in recent years. The Group addresses this through security measures and liability insurance, but preventive measures may not be perfect; if the Group is attacked, leakage of customer information or business suspension could affect operating results and financial condition. The Group continuously implements measures to enhance its security level.

The Group imports fixed assets such as training machines from overseas, and since purchase prices are directly linked to foreign exchange rates, a weaker yen could raise procurement costs and affect operating results and financial condition. There is also a risk that unforeseen events such as natural disasters, terrorism, war, or epidemics in the countries or regions from which imports are sourced could disrupt the procurement of fixed assets. To minimize this impact, the Group strives to build relationships with multiple suppliers, including domestic ones.

New store openings are an important growth strategy; however, even after conducting location surveys covering passenger traffic, population, competing stores, and lease terms, the Group may fail to find properties that meet its conditions, which could cause store opening plans to fall behind schedule and prevent the achievement of planned sales and profits. There is also a risk that, after a store opens, changes in transportation access or new entry by competitors could prevent the store from achieving the originally planned profitability. The Group seeks to minimize this impact by promoting efforts to diversify its revenue base.

Acquiring and developing excellent personnel is an important issue for business expansion and continued growth, and the Group is working on recruitment activities, education and training, and reviewing its personnel system. If personnel acquisition and development do not proceed as planned, or if key personnel leave the Group, this could reduce competitiveness and constrain business expansion, affecting operating results and financial condition. In particular, in the Personal Training Business, the quality of trainers directly affects customer satisfaction, making the impact of human resource risk significant.

Many of the Group's stores are concentrated in the greater Tokyo metropolitan area, and if a large-scale earthquake, typhoon, or other natural disaster occurs, this could significantly disrupt store operations and affect operating results and financial condition. Geographic diversification to mitigate risk concentration remains limited. The Group is working to establish a business continuity plan (BCP), including a satellite office structure, system backup arrangements, and guiding customers to nearby stores with less damage.