Sokensha Co.,Ltd.

Group brand products, which account for approximately 64% of net sales of approximately ¥3.0 billion, depend on contract manufacturing with reputable manufacturers in Japan and overseas. Poor weather in production areas, contamination with radioactive substances, conflicts, or the bankruptcy, fire, earthquake, or infectious disease outbreak affecting contract manufacturers could render product manufacturing and supply impossible. Although the Group seeks to reduce this risk by diversifying raw material production areas and contract manufacturers across various regions in Japan and partially overseas, if problems occur, they could have a material impact on business performance.

Contamination of food with radioactive substances is subject to shipment and consumption restrictions under laws and regulations, which could lead to suspension of supply of Group brand products. The Group has set internal handling standards of a detection limit of less than 3Bq/kg each for Cesium-134 and Cesium-137, and conducts voluntary inspections using germanium semiconductor detectors through an external food analysis specialist institution. However, if radioactive substances exceeding these standards are detected, it could affect business performance.

The food industry has experienced issues such as false labeling of production origin, violations of food additive labeling, use of fertilizers non-compliant with Organic JAS standards, and use of unauthorized pesticides, and the Group is also exposed to these risks through its raw material suppliers and contract manufacturers. Although the Group strictly requires its business partners to comply with relevant laws and regulations such as the Food Labeling Act, if issues arise that undermine food safety or reliability, this could damage the Group's brand and affect business performance.

The Group is subject to a wide range of public regulations, including the Food Labeling Act, the Product Liability Act (PL Act), the Act against Unjustifiable Premiums and Misleading Representations (Premiums and Representations Act), and the Containers and Packaging Recycling Act. Failure to comply with these regulations could restrict business activities or increase costs. If a regulatory violation occurs, it could have a material impact on business performance.

Food allergies can cause serious life-threatening symptoms such as anaphylactic shock, and labeling is mandated by law. The Group conducts voluntary inspections through an external food analysis specialist institution for the 9 specified raw materials (eggs, milk components, wheat, buckwheat, peanuts, shrimp, crab, walnuts, and cashew nuts), but if problems related to allergenic substances occur, it could affect business performance and corporate reliability.

Unforeseen natural disasters, accidents, the outbreak of serious infectious diseases, and escalating instability in international affairs could have a wide-ranging impact on overall economic activity, including economic downturns, changes in consumer behavior, and delays or suspensions in product supply. These events could directly affect the Group's raw material procurement, contract manufacturing, and sales activities, potentially worsening business performance.