Taka-Q Co., Ltd.

In addition to trends in personal consumption and market changes involving competitors, if appropriate product planning and procurement are not carried out in response to changes in fashion trends and customer preferences, this may affect the Company's financial position and operating results. The Company seeks to reduce this risk by developing materials and styling that reflect customer needs and building a merchandise assortment system tailored to each store type.

Since the fashion apparel handled by the Company is classified as discretionary spending (a luxury item category), it is prone to being cut back when households become more defensive in their spending, and a deterioration in the domestic and overseas economic environment may have a material impact on earnings. A similar risk arises if a global slowdown in economic activity spreads to the Japanese economy. The Company works to reduce this risk by gathering information on policy trends and other factors affecting consumption and responding appropriately to the situation.

Private brand products are manufactured through a limited number of suppliers, and if defects occur in production or planning, it may become difficult to display merchandise at the appropriate time and in the appropriate quantity. Since production locations span multiple countries, primarily China as well as Bangladesh, Myanmar, Vietnam, and Indonesia, political instability in each country or issues with import procedures may disrupt the supply of merchandise. The Company aims to reduce this risk through quality control guidance for suppliers and diversification of production locations by coordinating with multiple suppliers.

Many of the Company's products are manufactured in foreign countries such as China, Bangladesh, Myanmar, Vietnam, and Indonesia, exposing the Company to the risk of rising costs due to increases in raw material prices, local labor costs, freight charges, and other factors. If cost increases exceed the extent to which they can be passed on to selling prices, this may lead to deterioration in profitability.

If the profit and loss condition of stores deteriorates, an impairment loss may be recognized upon impairment testing of fixed assets, which may affect business results. As countermeasures, the Company continuously monitors profit and loss conditions, including through monthly financial closings, and implements profitability improvement measures at each store.

At the Board of Directors meeting held on January 25, 2024, the issuance of the 1st Series Stock Acquisition Rights was resolved, with an exercise period from May 23, 2025 to May 23, 2029. As of the end of February 2025, 322,000 units of these stock acquisition rights remained outstanding, and if all are exercised, 32,200,000 new shares will be issued. This may affect stock price formation through dilution of share value and effects on the supply-demand balance of share trading.

The Company holds customers' personal information through customer management in partnership with credit card companies and through its proprietary members card, and in the event of a leak or leakage, this may affect business results through the occurrence of damage compensation liabilities and a decline in social credibility. The Company implements measures such as establishing internal systems, ensuring the security of information infrastructure, and providing employee training.

As systemization has progressed extensively across operations, including POS systems, procurement management, receivables management, and personal information management, if stable system operation becomes difficult due to accidents, fires, natural disasters, power outages, human error, software malfunctions, unauthorized access from outside parties, or other causes, this may disrupt business activities and affect business results and financial condition. The Company has established emergency response systems, including backup plans, and implements appropriate security measures.

If the customer-drawing power of a commercial facility in which the Company operates as a tenant declines, this may affect business results, and if the facility operator's management deteriorates, there is a risk that it may become difficult to recover deposits and security deposits paid. For the Company, which operates numerous stores as a tenant, the management condition of facility operators is an important external factor directly linked to its earnings base.

Kenji Ito, Representative Director, President and Executive Officer, possesses extensive knowledge and experience regarding the apparel fashion business and plays an extremely important role across the Company's business activities, including determining management policy and business strategy. If, for any reason, he becomes unable to perform his duties, this may affect business results and financial condition. The Company is working to build a system that avoids excessive dependence by fostering management executives and delegating authority.