Foodison, Inc.

A large portion of the business is conducted via the internet, and if sophisticated cyber attacks such as ransomware or targeted attacks, increased load from surges in access, or system downtime due to natural disasters occur, service provision may be halted, directly affecting the financial position and operating results. While efforts are made to ensure stable operations through the strengthening of server equipment and the establishment of internal systems, risks arising from unpredictable factors remain.

As business expands, the continuous recruitment and development of highly motivated and talented personnel is essential. However, if the Company is unable to sufficiently secure and develop the desired personnel, or if there is significant turnover, business growth may be hindered, potentially affecting the financial position and operating results. Although active recruitment activities are being promoted, there is a risk that securing personnel will become more difficult amid intensifying competition in the labor market.

The core BtoB Commerce Service premises its growth on a rising e-commerce penetration rate in the food e-commerce sector. However, according to a survey by the Ministry of Economy, Trade and Industry, the e-commerce penetration rate in the food sector remains at only 4.5% (compared to 43.0% in other industries). If market expansion does not proceed as forecast, growth in business indicators may slow, potentially affecting the financial position and operating results. The impact would be substantial if the premise of market expansion collapses, and this risk relates to the fundamental basis of the long-term business strategy.

The Company Group handles fresh food products centered on seafood, and if an unforeseen quality incident occurs, it may result in large-scale product recalls and product liability compensation, leading to substantial cost burdens and loss of credibility. While a quality assurance system has been established through hygiene management incorporating HACCP concepts and compliance with labeling obligations under the Food Labeling Act and the Measurement Act, such risks cannot be completely eliminated.

The Ota Market wholesale dealer license (Tokyo Metropolitan Government) held by subsidiary Foodison Ota, and the paid employment placement business license (Ministry of Health, Labour and Welfare) held by the Company, form the foundation of business operations. If either is revoked for any reason, it would cause serious impediments to business continuity. Food Jinzai Bank (HR Service), despite accounting for only 4.3% of net sales in FY2026 (ending March 2026), has a significant impact on operating income/loss, making the impact of license revocation particularly severe. While there are currently no facts corresponding to disqualification or revocation grounds, there remains a possibility that business restrictions may be imposed due to tightened regulations.

The proportion of sales to restaurants within the consolidated net sales of the BtoB Commerce Service reached 81.2% in FY2026 (ending March 2026). If the food service market contracts due to economic downturn, natural disasters, infectious disease outbreaks, or other factors, this would directly impact the Company Group's business performance through a decline in average customer spending. The food service market is highly susceptible to domestic economic trends, and the downside risk is particularly significant if restrictions on dining out, such as those experienced during the COVID-19 pandemic, were to persist for an extended period.

Fresh food ingredients, primarily seafood, carry the risk of surging procurement prices due to fluctuations in catch volumes caused by irregular weather or ocean current changes, fishing or import/export restrictions, changes in trade policies by various countries (such as tariff increases), foreign exchange fluctuations, and rising fuel and energy prices. While efforts are being made to diversify procurement products and procurement routes, a significant deterioration in market conditions could affect the financial position and operating results.

In the food e-commerce industry, technological innovations utilizing generative AI and AI matching platforms—such as dynamic pricing, automated ordering, and demand forecasting—are rapidly advancing. If the Company Group's technology investments are delayed, its competitive advantage relative to competitors may decline. If capital expenditures and personnel acquisition costs associated with building an AI utilization infrastructure exceed expectations, or if service malfunctions occur due to AI errors, this could also affect the financial position and operating results.

As a physical risk, rising seawater temperatures and changes in ocean currents due to global warming may affect marine resource ecosystems and procurement volumes. As a transition risk, delays in responding to tightened regulations concerning greenhouse gas emission reductions, food loss reduction, and sustainability information disclosure, as well as increased response costs, may affect the financial position. A Sustainability Committee was established in May 2023 to continuously monitor greenhouse gas emissions, but depending on the pace of regulatory tightening, response costs may exceed expectations.

Dependence on Daito Gyorui Co., Ltd., a major supplier, reached 20.6% of consolidated purchases in FY2026 (ending March 2026). If the trading relationship with this company becomes difficult to continue due to grounds for contract termination such as a suspension of bank transactions, or due to business restructuring, this could cause serious disruption to product procurement. Due to the Company's holding of the Ota Market wholesale business license, products passing through the Marine Products Department are structurally more likely to be procured from this company, and there are certain constraints on securing alternative procurement sources.