DREAMBED CO.,LTD.

The Home Furnishing Business depends on the furniture and interior industry, while the Contract Business depends on hotel-related projects, making both susceptible to domestic economic conditions, personal consumption, travel demand, and inbound tourism trends. If cooling consumer sentiment due to rising prices or a decline in inbound tourism resulting from overseas conditions reduces market demand, this may affect business performance and financial condition. As a countermeasure, the Company has begun promoting a multi-brand strategy through the license agreement with KING KOIL and expanding overseas through OEM exports, aiming to diversify risk through business diversification.

The Company has entered into license agreements with multiple overseas brands such as Serta, ligne roset, and ruf, and manufactures products in-house. If any of these license agreements are terminated for any reason, or if contract terms such as royalty rates are significantly changed, this may affect business performance and financial condition. The Company has worked to build good relationships of trust over many years, and as of the filing date of the Annual Securities Report, no factors that would impede the continuation of these agreements have arisen. As a countermeasure, the Company is strengthening and expanding its multi-brand strategy, including the start of transactions with KING KOIL, to diversify and reduce the risk of dependence on any specific brand.

The Company handles design development, manufacturing, and sales in an integrated manner. Should a product defect occur, it could result in costs to ensure safety, including recalls, and damage to brand value, which may affect business performance and financial condition. The manufacturing division has established a management system to continuously comply with ISO9001 and conducts regular checks, while the development division conducts tests based on internal standards during product development. For Overseas Exports (OEM Supply), the Company confirms compliance with the quality standards of destination countries, striving to maintain and improve quality.

Raw materials procured domestically and internationally include specialty materials available only from specific suppliers, as well as original raw materials jointly developed with licensors and material manufacturers. If supply-demand changes caused by climate change, expanding international demand, or geopolitical risks such as heightened tensions in the Middle East intensify procurement competition, resulting in soaring purchase prices or delays and disruptions in material supply, this may affect business performance and financial condition. As countermeasures, the Company manages purchase price lists, maintains appropriate prices through procurement from multiple suppliers, and explores and develops new procurement sources to ensure stable procurement.

Because the Company handles large products, freight costs account for a significant portion of operating costs. Freight rate increases are anticipated due to driver shortages and fuel price hikes stemming from tensions in the Middle East, and increases in utility costs at factories and processing fees from partner companies are also expected. In addition, soaring raw material prices and sharp fluctuations in exchange rates associated with the import of raw materials and products from overseas may affect business performance and financial condition. As countermeasures, the Company is working to improve loading efficiency, diversify delivery through a modal shift, pursue energy-saving initiatives, control costs by leveraging the advantages of domestic production, and execute foreign exchange forward contracts as necessary.

If the Company becomes a party to various claims, lawsuits, or disputes involving business partners, or to damage claims arising therefrom, this may result in significant costs and disruption to business activities, and an unfavorable judicial decision could affect business performance and financial condition. In particular, with respect to third-party intellectual property rights, the responsible department conducts monthly checks and works to prevent rights infringement in advance through employee education. The Company has established the "Basic Policy on Internal Control Systems" and "Risk Management Regulations," and is working to strengthen and promote its compliance system as well as strengthen internal systems for handling claims.

If an event occurs that disrupts business continuity, such as a natural disaster, large-scale fire, failure of social infrastructure such as electricity, or the spread of an infectious disease, this may affect business performance and financial condition. The Company has formulated a business continuity plan and is building and maintaining a system to ensure the safety of human life and enable early recovery and continuity of business, through measures such as establishing related manuals, confirming the safety of officers and employees, building a communication system, and conducting regular drills.

In addition to the growing difficulty of securing young talent due to the declining birthrate and aging population, rising labor costs and the outflow of personnel to other companies may affect business performance and financial condition. Under the medium-term management plan "Dreambed2025 Change & Challenge Plan," the Company has set forth the goal of "realizing improved ES, engagement, and sustainability management," and is implementing measures to create a more comfortable working environment, such as introducing a complete five-day workweek and internal communication tools, as well as promoting diversity initiatives. The Company is also focusing on human resource development through enhanced training programs to secure and retain talented personnel.

As the Company holds personal information and important information of customers and business partners and conducts operations using various information systems, unauthorized access, tampering, data destruction, or leakage resulting from cyberattacks or other causes could reduce operational efficiency and damage the Company's reputation. In addition, if confidential information related to technology, contracts, personnel, or other matters is leaked to or misused by a third party, this may also affect business performance and financial condition. Based on the Information Security Management Regulations and Information Security Policy, the Company is strengthening technical measures for virus protection and early detection and response to anomalies, as well as improving employees' information literacy through regular training.