Material Event Related to the Going Concern Assumption Due to Operating Losses for 4 Consecutive Periods

「As a result of continuing the fundamental management-scheme reforms implemented since the previous fiscal year, the company achieved profitability for the second consecutive fiscal year, following the previous fiscal year's return to profitability, the first after eight consecutive fiscal years of losses.」

「The return to profitability in the previous fiscal year, the first in nine fiscal years, has eliminated the circumstances that could raise substantial doubt about the going-concern assumption. The company will continue to promote improvements to its business structure and strengthen its financial position.」

「The return to profitability in the previous fiscal year, the first in nine fiscal years, has eliminated the circumstances that could raise substantial doubt about the going-concern assumption. The company will continue to promote improvements to its business structure and strengthen its financial position.」

「However, in the third quarter of the fiscal year ending August 2023, the company achieved operating profitability of ¥54 million for the nine months ended the third quarter. Factors contributing to the improvement included improved margins resulting from revised transaction terms and cost reductions. In terms of funding, sufficient liquidity has also been secured using funds raised through the capital increase conducted in May of the year before last and the refinancing in June of the same year of borrowings from existing financial institutions to 株式会社ＡＦＣ－ＨＤアムスライフサイエンス. Given current revenue trends and the improving earnings structure, liquidity over the next year is expected to remain stable, and the company has determined that its financial position remains stable.」

「However, in the second quarter of the fiscal year ending August 2023, the operating loss of ¥130 million in the previous year improved by ¥175 million, resulting in a profit of ¥45 million for the six months ended the second quarter. Factors contributing to the improvement included maintaining revenue growth of slightly more than 4% year on year, as well as improved margins resulting from revised transaction terms and cost reductions. In terms of funding, sufficient liquidity has also been secured using funds raised through the capital increase conducted in May of the year before last and the refinancing in June of the same year of borrowings from existing financial institutions to 株式会社ＡＦＣ－ＨＤアムスライフサイエンス.」

「However, in the first quarter of the fiscal year ending August 2023, the operating loss narrowed by ¥66 million from the previous year's operating loss of ¥125 million to ¥59 million, or ¥20 million before applying the received-at-destination accounting basis, compared with ¥78 million before application in the previous year. Factors contributing to the improvement included maintaining revenue growth of slightly more than 1% year on year, as well as improved margins resulting from revised transaction terms and cost reductions. In terms of funding, sufficient liquidity has also been secured using funds raised through the capital increase conducted in May of the year before last and the refinancing in June of the same year of borrowings from existing financial institutions to 株式会社ＡＦＣ－ＨＤアムスライフサイエンス. Given current revenue trends and the improving earnings structure, liquidity over the next year is expected to remain stable, and the company has determined that its financial position remains stable. Based on the foregoing, as in the previous consolidated fiscal year, the company has determined that no material uncertainty exists regarding the going-concern assumption.」

「At the reporting date of the previous consolidated fiscal year, the Group remained in a situation where operating losses continued, and circumstances existed that raised substantial doubt about the going-concern assumption. Despite this situation, revenue began to recover in the first quarter of the fiscal year ending August 2022 after the lifting of the priority preventive measures for COVID-19 in Kanagawa Prefecture on 22 March, and the company expects this trend to continue. In addition, revenue from purchase commissions for gold, jewelry and other items, which the company had strengthened as a new initiative, contributed to improved earnings. Together with cost reductions, this resulted in a small profit for the quarter.」

「As losses below operating income continued as of the reporting date for the current consolidated fiscal year, circumstances exist that raise substantial doubt about the going-concern assumption.」

「As losses below operating income continued as of the reporting date for the current consolidated fiscal year, circumstances exist that raise substantial doubt about the going-concern assumption.」

「Revenue has remained firm despite the more conservative revenue forecast used in the downward revision to the earnings outlook. In addition, liquidity over the next year is expected to remain stable. Accordingly, the company has determined that its financial position remains stable. Based on the foregoing, as in the previous fiscal period, the company has determined that no material uncertainty exists regarding the going-concern assumption.」

「In addition, the ¥500 million raised through the third-party allotment approved at the 89th Annual General Meeting of Shareholders held on 24 May 2021, with AFC-HD as the subscriber, was paid in on 26 May. Further, as stated under “Significant Subsequent Events” below, cash on hand increased by ¥514 million on 30 June 2021 through a loan from the parent company. In light of these and other factors, the company has determined that there are no concerns regarding its liquidity and that no material uncertainty exists regarding the going-concern assumption.」

「For the current consolidated fiscal year, the Group recorded an operating loss of ¥639 million and is currently in a situation where it has recorded operating losses for five consecutive fiscal years. Accordingly, circumstances exist that raise substantial doubt about the going-concern assumption.」

「As a result, cumulative third-quarter sales were ¥10,636 million, a decline of ¥3,039 million from the same period of the previous year; operating loss was ¥536 million (compared with operating profit of ¥0 million); ordinary loss was ¥594 million (compared with ordinary loss of ¥95 million); and net loss attributable to owners of the parent was ¥654 million (compared with net loss attributable to owners of the parent of ¥96 million).」

「As a result, cumulative second-quarter sales were ¥6,521 million, a decline of ¥2,655 million from the same period of the previous year; operating loss was ¥439 million (compared with operating loss of ¥1 million); ordinary loss was ¥466 million (compared with ordinary loss of ¥65 million); and net loss attributable to owners of the parent was ¥528 million (compared with net loss attributable to owners of the parent of ¥66 million).」

「In estimating future cash flows for the impairment loss on property, plant and equipment and the assessment of future funding under the going concern assumption, the company has considered, in addition to the assumptions above, the impact of the Yokosuka store closure on sales.」

「During the consolidated fiscal year, our group recorded an operating loss of ¥18 million and is currently in a position of recording operating losses for 4 consecutive periods, creating circumstances that raise substantial doubt about the going concern assumption.」