Early resolution of circumstances raising material doubt about the going concern assumption

「(Notes on Going Concern) There are no applicable matters.」

「In the cumulative third quarter of the current consolidated fiscal year, performance improved and the Group returned to profitability, recording an operating profit of ¥227 million and an ordinary profit of ¥179 million.」

「In the previous consolidated fiscal year, the Group recorded an operating loss of ¥933 million and an ordinary loss of ¥1,000 million, resulting in an ordinary loss for 5 consecutive fiscal years. However, in the cumulative second quarter of the current consolidated fiscal year, performance improved and the Group returned to profitability, recording an operating profit of ¥77 million and an ordinary profit of ¥47 million.」

「However, although the economy is moving toward the post-COVID-19 period following the reclassification of COVID-19 under the Infectious Diseases Act to Category 5, the economic outlook remains uncertain due to lifestyle changes such as the spread of teleworking and people refraining from eating out, the weakening yen, higher prices caused by the situation in Ukraine and other factors, labor shortages, and rising costs. Uncertainty remains regarding the extent and duration of the impact on future sales. In addition, the Company is consulting with its lending financial institutions regarding the financial position and funding plan for this business turnaround plan and is working on business revitalization under the plan. However, business revitalization remains under implementation. Accordingly, significant uncertainty regarding the going-concern assumption is recognized at this time.」

「To resolve these circumstances, the Group is steadily implementing business revitalization under this business turnaround plan by fundamentally reviewing its business model for a return to a growth trajectory and achieving renewed growth through the deepening and evolution of its core businesses, while also implementing the following financial measures.」

「As the company that submits consolidated financial statements, the Company is steadily implementing business revitalization under this business turnaround plan by fundamentally reviewing its business model for a return to a growth trajectory and achieving renewed growth through the deepening and evolution of its core businesses, while also implementing the following financial measures.」

「In the previous consolidated fiscal year, the Group recorded an operating loss of ¥1,123 million and an ordinary loss of ¥827 million, resulting in an ordinary loss for 4 consecutive fiscal years. In the cumulative first quarter of the current consolidated fiscal year, the Group also recorded an operating loss of ¥219 million and an ordinary loss of ¥230 million.」

「However, although restrictions such as requests for restaurants to reduce their hours were lifted from October 2021, the quasi-emergency measures to prevent the spread of disease were applied again in January 2022. The outlook for economic recovery remains uncertain, and uncertainty remains regarding the extent and duration of the impact on future sales. In addition, the business revitalization under this business turnaround plan remains under implementation. Accordingly, significant uncertainty regarding the going-concern assumption is recognized at this time.」

「Based on this business turnaround plan, the Company will stabilize its financial position by issuing Class C preferred shares totaling ¥1,500,000,000 to RKD Encourage Fund Investment Limited Partnership and Class D preferred shares totaling ¥4,500,000,000 to Resona Bank, Limited, Mizuho Bank, Ltd., The Bank of Yokohama, Ltd., Sumitomo Mitsui Banking Corporation, and Deutsche Bank AG, Tokyo Branch, and will eliminate its negative net worth.」

「Accordingly, going forward, under the Business Revitalization ADR procedure, the Company will formulate a proposed business turnaround plan while consulting with all lending financial institutions and receiving investigations, guidance, and advice from the Association of Turnaround Professionals, a general incorporated association, in a fair and neutral capacity. The Company intends to have the proposed plan approved with the agreement of all lending financial institutions and, by steadily implementing the business turnaround plan after its approval, reform its income and expenditure structure and stabilize its financial base.」

「To resolve these circumstances, the Group is negotiating with its lending financial institutions to continue its borrowings and improve its cash flow, while advancing measures to raise capital to eliminate its negative net worth and taking the following measures.」

「At the end of the current consolidated fiscal year, the Company was in breach of the financial covenants under term loan agreements and other facilities arranged through syndication with its lending financial institutions. … Significant uncertainty regarding the going-concern assumption is recognized at this time.」

「By entering into an amendment agreement to the relevant contract dated 29 March 2019, the expected breach of the financial covenants at the end of the current consolidated fiscal year was resolved. Based on these circumstances, the Company determined that no event or circumstance that could give rise to significant doubt regarding the going-concern assumption exists at this time.」

「To resolve these circumstances, the Company will implement the following measures to resolve them promptly with a view to future growth and work to improve performance.」