Gyet Co., Ltd.

The Company has recorded operating losses for seven consecutive periods, and there exist events that raise material doubt about the going concern assumption. The Company has reached an agreement with its lender, Chiyoda Co., Ltd., to extend the repayment deadline for borrowings until August 2027, and currently judges that no material uncertainty exists. However, should concerns arise regarding future cash flow, the Company states that it will consider support from the G Fund (G Future Fund No. 1 Investment Limited Partnership) and fundraising through various other methods. While the Company is promoting improvement measures such as core item development, withdrawal from unprofitable stores, and conversion of stagnant inventory to cash, there is a risk that the financial condition could deteriorate further if the business recovery does not proceed as planned.

The apparel products handled are highly seasonal, and sales are affected by weather fluctuations such as cool summers and warm winters, as well as changes in fashion trends and customer preferences, and competitors' pricing policies. While merchandise planning and procurement are conducted taking these factors into account, if the Company is unable to fully respond to changes in demand trends, there is a possibility that excess inventory or decreased sales could adversely affect business performance. In particular, given the current situation of seven consecutive periods of operating losses, a failure in demand forecasting carries a risk directly linked to further deterioration of the financial condition.

Much of the apparel handled by the Company depends on imports from China and other Asian countries, and changes in the political and economic conditions of the producing countries, exchange rate fluctuations, changes in legal systems, and the occurrence of large-scale natural disasters may lead to increases in product costs or disruptions in product supply. In particular, concentrated dependence on China is susceptible to geopolitical risk and trade friction, and there is a risk that a sharp rise in procurement costs could lead to deterioration of the gross margin. The Company has set thorough purchasing control and maintenance of appropriate inventory levels as countermeasures, but no specific alternative procurement measures for supply disruption have been disclosed.

Most stores are leased from developers or landowners, and a portion of the security deposits/guarantee money paid at the time of opening a store will not be refunded until the end of the contract term. In the event of the lessor's bankruptcy, etc., there is a possibility that part of the guarantee money or the entire security deposit could become unrecoverable. Additionally, for stores under fixed-term building lease agreements, there are cases where the contract cannot be renewed after the contract term ends due to the other party's decision, which may hinder the maintenance of the store network and affect business performance.

The Company has a high proportion of part-time employees, and if personnel costs increase due to increases in employment insurance premium rates, health insurance association rates, or pension system revisions, there is a possibility of an adverse effect on business performance. While fixed cost reduction is set as one of the pillars of profit improvement measures, increases in statutory welfare expenses are difficult to avoid through corporate efforts alone, and there is a risk that this could directly impact the cost structure in a store operation model with high dependence on part-time employees.

While the Company is strengthening internal systems, including establishing personal information protection policies and manuals and conducting employee training, if a leak of personal information occurs, there is a possibility of an adverse effect on business performance and financial condition due to loss of social credibility and liability for damages. In a situation where the financial base is already fragile, damages compensation and customer attrition resulting from an information leak carry a risk of dealing a serious blow to management.

The Company applies the "Accounting Standard for Impairment of Fixed Assets," and there is a possibility that additional impairment losses may occur on certain business-use assets in the future due to deterioration in store performance. Under the current business environment of seven consecutive periods of operating losses, an increase in unprofitable stores tends to make additional recognition of impairment losses more likely, carrying a risk of further deterioration of the financial condition through erosion of net assets. The Company is working to reduce the balance of fixed assets by proceeding with the withdrawal of unprofitable stores, but it should be noted that withdrawal costs also arise.

If a large earthquake, tsunami, typhoon, flood, or other natural disaster, or an unforeseen accident occurs in the areas surrounding stores, physical damage to store facilities or human casualties may occur, making sales activities difficult and possibly affecting business performance. While geographic dispersion through multi-store operation contributes to risk mitigation, there is a risk that multiple stores could be affected simultaneously in the event of a widespread disaster.

With the rapid spread of social media, if reputational damage arises and spreads due to posts on the internet, regardless of the accuracy of the content, there is a possibility of an adverse effect on business performance and financial condition. In an era where the speed of information diffusion is increasing, damage to brand image carries a risk directly linked to customer attrition and decreased sales, and given that the Company's performance is already sluggish, the severity of this risk is heightened due to limited recovery capacity.

As part of the business recovery measures, the Company plans to generate synergy effects by utilizing the resources and know-how of each group company, including its business alliance partner GF Holdings Co., Ltd. Additionally, dependence on the G Fund (G Future Fund No. 1 Investment Limited Partnership) is anticipated for cash flow support, and there is a risk that changes in the management conditions of group companies or in the alliance relationship could directly affect the Company's business recovery plan and fundraising.