Amifa Co.,Ltd.

In the fiscal year under review (FY2025, ending September 2025), sales dependence on Seria Co., Ltd. was 51.6% (¥4,559,443 million) and on Daiso Industries Co., Ltd. was 21.5% (¥1,898,562 million), with the top two customers accounting for approximately 73% of net sales. If these companies were to change their trading policies or terminate their contracts, the impact on business performance would be severe. The Company strives to maintain close relationships and respond to their needs, but the high degree of dependence itself constitutes a structural risk.

Overseas companies account for approximately 94% of the amount of products, raw materials and other purchases and procurement, and there is a risk that required quantities may not be delivered at the required time due to country risk, disease/disaster, changes in trade policy, and other factors. If procurement disruptions or increased logistics costs occur, this could lead to supply disruptions to customers and lost sales opportunities. The Company seeks to reduce procurement costs by obtaining quotations from multiple partner companies to create a competitive environment, but where the number of partner companies capable of meeting quality standards is limited, forming such a competitive environment becomes difficult.

Due to the characteristics of products such as gift wrapping, design stationery, and kitchen goods, sales are concentrated around demand for events such as Halloween, Christmas, and Valentine's Day, resulting in a concentration of net sales and operating income/loss in the first half of the fiscal year (October to March). In the previous fiscal year, operating loss for the third and fourth quarters was ¥169,776 million and ¥210,774 million, respectively, and in the fiscal year under review, the third quarter also recorded an operating loss of ¥62,596 million. While the Company is expanding its lineup of items sold year-round, the structural seasonal skew continues.

Settlement of import transactions is conducted mainly in US dollars, and there is a risk that procurement prices will rise due to sudden changes in exchange rates, such as a weakening yen. If increases in procurement costs cannot be appropriately passed through to selling prices, profitability will deteriorate. Since the overseas procurement ratio is extremely high at approximately 94%, the impact of exchange rate fluctuations tends to spread across overall business performance.

The Company's products are characterized by designs that match trends and consumer preferences, creating a risk that business performance will deteriorate if changes in preferences cannot be predicted or responded to. As a fabless-type manufacturer, in-house planned products are in principle purchased outright, so if demand forecasts are mistaken, excess inventory occurs and returns become difficult. While the Company continues to develop approximately 1,900 new items annually, there is a possibility that response to rapid changes in consumption trends may be delayed.

NB Products (National Brand) sales volume accounts for over 70% of total one-price product sales, and dependence on warehouse operators handling these products reaches approximately 70% of total leased floor area (tsubo). If the business operations of such warehouse operators are disrupted by natural disasters, fire, or other events, there is a risk that product supply will be significantly delayed. In addition, increased warehouse demand in surrounding areas or market fluctuations could make it difficult to secure warehouse space or lead to rent increases.

If problems arise with the quality or safety of products handled, there is a risk of incurring recall costs for defective products and substantial expenses based on product liability and damages liability. There is also a possibility of decreased sales due to a decline in social credibility, or being affected by serious complaints or negative rumors regarding similar products of competitors. The Company strives to establish its own quality control standards and comply with related laws and regulations, but it is difficult to completely eliminate such risks.

Changes in trends related to laws and regulations such as the Food Sanitation Act, the Containers and Packaging Recycling Act, the Product Liability Act, the Act against Unjustifiable Premiums and Misleading Representations, and the Subcontract Act may affect business performance. In addition, there is a risk of infringing third-party intellectual property rights such as design rights and copyrights with respect to product designs, and if a rights dispute arises after a product has been offered for sale, this could result in legal costs and impacts such as suspension of sales. The Company confirms intellectual property rights at the product planning stage, but the risk of subsequent disputes remains.

There is a risk that increasingly diverse and sophisticated cyberattacks could threaten the stable maintenance of supply chain functions and the appropriate retention of information assets, including personal information. If computer virus infection, information leakage, data tampering, system failure, or other incidents occur, there is a possibility of a significant impact on business continuity and customer trust. The Company strives to manage information through the establishment of regulations for handling customer information and personal information, but continuous response is required to address increasingly sophisticated threats.

The Company raises funds through bank borrowings, and if market interest rates rise or if financial institutions with which it transacts change their lending policies due to turmoil in financial markets, fund-raising costs could increase, potentially adversely affecting business development, financial position, and operating results. In a rising interest rate environment, there is a risk that increased borrowing costs will squeeze profits. No specific hedging measures have been disclosed at this time, leaving the Company highly sensitive to changes in the interest rate environment.