W TOKYO Inc.

TOKYO GIRLS COLLECTION accounts for a large proportion of overall sales, resulting in a structure where net sales and operating income are concentrated in the first and third quarters, which include the event months. In the fiscal year under review, net sales were ¥1,309,580 thousand in the first quarter and ¥1,052,243 thousand in the third quarter, while the second quarter saw a significant decline to ¥545,620 thousand, resulting in an operating loss (¥48,057 thousand). If the timing of the event changes, the timing of recognition of sales and profit may shift to the preceding or following quarter.

TOKYO GIRLS COLLECTION (TGC) is a flagship brand built through continuous investment since 2005 and forms the foundation of the Group's earnings. If brand value declines due to the loss of investment opportunities from unforeseen circumstances or the spread of negative reputation, this would directly affect the Group's overall business performance. The Company strives to maintain and enhance brand value and social credibility, but risks arising from external factors cannot be completely eliminated.

TGC (including Tokyo and regional events) involves venue setup using large amounts of equipment and large-scale audience gatherings, inherently carrying high safety management risks. In the event of an accident at a venue, not only could equipment and facilities be damaged, but physical harm to staff and attendees could occur, potentially causing serious impact on both business performance and credibility. The Company addresses this through manual preparation for each event and thorough adherence to conduct guidelines, but a short-term risk of materialization exists.

The Group's business depends on personnel with advanced production skills, and due to its small organizational size, it has a high degree of dependence on specific individuals. If the Company is unable to secure necessary personnel as planned, or if existing personnel leave the Company, this could reduce business execution capability and affect business performance. While the Company's policy is to recruit and develop personnel in line with business expansion, this is recognized as a short-term risk of materialization.

In the period immediately preceding TGC events, unexpected developments are prone to occur amid coordination with various stakeholders, creating a structural challenge whereby temporary long working hours arise in order to ensure creative quality and meet deadlines. If this develops into employee health problems or labor issues, it could lower morale and damage the Company's credibility, potentially affecting business operations and performance. The Company works to curb long working hours, but this is positioned as a short-term risk of materialization.

As of the end of the fiscal year under review, goodwill of ¥84,874 thousand and trademark rights of ¥271,154 thousand were recorded, together accounting for 13.8% of total assets. Since the value of these assets depends on TGC's operational know-how and brand value, if the business plan and actual performance diverge significantly due to major changes in the external environment or other factors, recognition of impairment losses could have a material impact on business performance and financial condition. Depreciation is carried out each period under Japanese GAAP, but the risk of additional losses remains in the event of a deterioration in the business environment.

For regional events, production costs and other fees are received from local governments and local companies, and content is provided according to the scale of the budget; however, whether an event is held and the amount of revenue depend on the opinions and decisions of the local governments involved. If unforeseen circumstances arise due to individual factors on the part of local governments, this could result in cancellation, postponement, or reduction in scale of the event, potentially affecting the Group's business performance. The Company maintains a system for thorough consultation with local governments when holding events, but risks arising from external factors cannot be eliminated.

The Group is a small organization, and its business execution structure remains commensurate with this scale. While the Company recognizes strengthening corporate governance as an important issue, occurrences of legal violations or misconduct could affect business operations and performance. The Company's policy is to enhance its systems through personnel recruitment, capability development, and use of outsourcing partners, but there is a medium-term risk that these initiatives may not proceed as planned.

In the course of conducting business, there are occasions where the Company uses third parties' intellectual property rights, such as portrait rights and trademark rights, and in the event of infringement, there is a risk that this could lead to suspension of product sales or service provision, or claims for damages. In addition, if a third party holds an event using the TGC name in a country or region where trademark rights have not been obtained, this could damage the brand image. While the Company is proceeding with securing trademark rights and other rights domestically, risks may materialize in regions where such rights have not yet been obtained as overseas expansion proceeds.

The Company is considering overseas expansion, starting with an event held in Jakarta (Indonesia) in July 2025, which entails business investment risks such as foreign exchange risk and country risk. If overseas business expansion does not proceed as planned, this could affect business performance. The Company's policy is to pursue expansion in a manner that minimizes risk through collaboration with government agencies such as the Ministry of Economy, Trade and Industry and with support partners.