Buisiness Risks

Safety of Food

Fundely is selling food products with controlled amounts of energy, salt, protein, etc., in our main business of "mealtime," a healthy food delivery service. With the rapid rise of consumers' awareness regarding the safety of food, we are managing sanitation, quality, etc., in compliance with the Food Sanitation Act and other regulations thoroughly when we manufacture our food products in a continued effort to prevent food poisoning.

However, if there is an accident or incident of label falsification or contamination with foreign substance by the producers or during the distribution stage, the customers' distrust of food in general or the damage to the trust and reliability of our products may affect the company's performance, financial standing and other aspects.

Management of Personal Information

Fundely retains many personal information of customers. We have built an internal system for protecting and managing personal information properly by setting up and complying with the Regulation for Protection of Personal Information when handling personal data to ensure that laws concerning personal information and related regulations are observed. In addition, we strive to reinforce the systems for preventing data leakage and information management by obtaining and renewing the right to display the "PrivacyMark."

However, if data leakage or misuse of personal data occurs, the damage to our company's image or the financial compensation we are required to pay may affect the company's performance, financial standing and other aspects.

Number of Members

Sales of our main business, "mealtime," a healthy food delivery service, account for 89.3% of all sales (for the term ended March 2020). The total number of "mealtime" members is 259,000 people as of the end of March 2020. Since the number of "mealtime" members can influence our entire sales, we are making concentrated efforts to add new members in addition to improving the repeat customer rate by enhancing customer satisfaction.

However, if measures for increasing the number of "mealtime" members do not work as planned, or the repeat customer rate declines as customer satisfaction falls, the company's business and performance may be affected.

Number of Network of Promoters

We are acquiring members for "mealtime," a healthy food delivery service, mainly through brochures distributed by our network of promoters, which will introduce our service to new customers.

If measures for expanding our network of promoters do not make progress as planned, or the network of promoters do not distribute brochures to customers, or cancellations of the network of promoters increase due to our brand image falling, the company's business and performance may be affected.

Competition

People are very health-conscious today. There are many companies providing home delivery for heathy food, and the number of companies entering the industry continues to grow. Fundely works to maintain its uniqueness by selling food products that have controlled amounts of energy, salt, protein, etc., to people who wish to be healthy. We also support health improvement by offering phone consultation on nutrition with registered dietitians and dietitians, who comprise a majority of our workforce, thereby expanding the sales of our products and eventually, increasing the corporate value.

However, if we do not maintain a competitive edge in terms of product quality, pricing, etc., the company's performance, financial standing and other aspects may be affected.

Laws and Regulations

When conducting business, Fundely is subject to laws and regulations including the Food Safety Basic Act, the Food Sanitation Act, the Act against Unjustifiable Premiums and Misleading Representations (Undue Premiums Act), the Health Promotion Act, the Food Labeling Act, the Act on Specified Commercial Transactions, the Act on Regulation of Transmission of Specified Electronic Mail (Specified Electronic Mail Act), and the Act on the Protection of Personal Information.
Although we make efforts to comply with these laws and regulations by implementing measures, such as making officers and employees fully aware of compliance and educating them, our business activities may be restricted if laws and regulations to which we are subject change or a new law or regulation is enacted in the future.

In addition, we have built internal management systems by proactively working with related organizations to receive instructions concerning compliance with laws and regulations.
However, if an event occurs that raises doubt over the appropriateness of articles or advertisements carried in the mail order catalog of our healthy food, "mealtime," or there is media report of such an occurrence, we may lose the consumers' trust in the company, which may then affect the company's business development and performance.

Dependence on Specific People

Kosuke Abe, the President of Fundely, plays a central role in presenting the management vision and policies; formulating business strategies based on the above; making and implementing a medium-term management plan; and planning and developing new businesses.

We are implementing measures to establish a management system that does not overly depend on the President, such as delegating authorities, as business expands. However, if the President becomes unable to continue executing his duties for some reason, the company's business and performance may be affected.

Small Organization

Fundely is a small organization with eight board members (five directors and three audit & supervisory board members) and 77 employees as of June 24, 2020, and its system for business operation corresponds to its size. We have a policy of developing and recruiting employees as well as reinforcing the system for business operation in order to accommodate the rapid expansion of the business going forward. However, if these measures do not work in a timely or appropriate manner, the company's business and performance may be affected.

Securing and Developing Human Resources

As mentioned above, Fundely is a small organization at the moment, but it will be necessary to secure sales staff to meet the size of received orders if the expansion of the business in the future increases our opportunities to win orders. Although we have a policy of securing and developing human resources as necessary depending on future business expansion, if we cannot secure the necessary personnel as planned, or if staff members resign, it can reduce our competitiveness or limit business expansion, thus affecting the company's business and performance.

Computer System Fault

"mealtime," an online healthy food sales site that we run on the Internet, plays an important role in the healthy food delivery business, so we are reinforcing the IT system and its security for the stable operation of the business.
However, if our facilities or networks are compromised due to unexpected events, such as earthquake, fire and other natural disasters, accident and power cut, the company's business activities may be affected significantly.

The servers of the company or Internet service providers may also stop functioning for some reason, or the network may break down due to human error or a criminal act, such as the servers being hacked through illicit methods from outside.
If any of these faults occurs, in addition to direct damage to the company, lawsuits or claims for compensation may be filed against us, which may affect the company's business and performance as well as the society's trust in us as a company.

Impacts from Large-Scale Disasters, etc.

If a large earthquake or the like hits the metropolitan area where the company is headquartered and paralyzes our head office functions, we may have difficulty continuing our business.

If a social infrastructure is suspended, such as a large-scale blackout and suspension of water supply, due to factors other than natural disasters, the company's performance and financial standing may be affected.

Procurement Based on Demand Forecast

In order to avoid missing sales opportunities because a product is out of stock and to reduce costs by purchasing in bulk, we procure goods based on our past sales results or demand forecasts and manage them as inventory.

If the actual orders received perform below demand forecasts, there will be excess inventory and we will record a loss on product valuation, which may affect the company's performance and financial standing.

Surge in Purchasing Prices

In the MFD Business, we procure goods that are manufactured by external contractors. The prices of raw materials used in manufacturing may rise due to poor crop caused by bad weather conditions and so on. Japan's declining population or recent labor shortages may also cause an increase in labor costs when securing personnel for manufacturing. Furthermore, due to rises in oil prices and so on, the prices of packaging materials or containers for lunch boxes, etc., which are petrochemical products, may rise.

If purchasing prices surge for these reasons, the company's performance and financial standing may be affected.

Dependence on Manufacturing Contractors

We procure goods mainly from two manufacturing contractors (Tokatsu Foods Co., Ltd. and Asahi Wellness Foods Co., Ltd.) for products that we are selling. Procurement from these two companies accounts for 88.6% of our entire purchase for the term ended March 2020. We will continue pursuing the policy of maintaining and retaining good relationships with all suppliers including the two companies above. Basic trading agreements with both contractors allows either party to terminate the contract with a six-month notice and specifies the following events as causes for instant termination:

As of the date of submission, there are no events that fall under the termination clause specified in the agreements.
However, if changes in the management policy of manufacturing contractors or other circumstances make it difficult for them to continue manufacturing our products, the temporary suspension of manufacturing in order to select or change contractors, etc., may significantly affect the company's performance and financial standing.

Dependence on Storage and Shipping Contractors

Fundely has outsourced the receipt, inspection, storage, sorting, packaging and shipping of products to a warehouse company (Shonan Toyo Co., Ltd.) and has outsourced the delivery of products to customers to a delivery company (Yamato Transport Co., Ltd.).

In the event that the suspension of operations by contractors prevents the above work from being executed, it may be difficult to ship our products until replacements are selected, which may affect the company's business and performance.

Supply of Electricity

Fundely handles frozen products and has a system for storing them in freezer warehouses after manufacturing until they are shipped out.

In the event that unexpected electricity shortages disrupt power supply, the storage of products may become difficult, which may affect the company's business and performance.

New Businesses

Fundely aims to become a comprehensive health-care company and will keep pursuing the policy of proactively exploring new businesses going forward.

However, it can take more time than expected to establish a new business, and there is a possibility that business promotion or recouping investments cannot progress as initially planned.

Dividend Policy

Fundely recognizes the distribution of profits to shareholders as an important management issue, and intends to decide a policy for distributing profits in consideration of the management performance and financial conditions.

Although we have continued recording profit, we do not have sufficient internal reserves, leading us to distribute no dividends since the company was established. Furthermore, we believe that our company is still growing, so increasing internal reserves to invest in launching new businesses or further expanding existing businesses will lead to maximum profit for shareholders.

Going forward, we are considering distributing profits to shareholders by taking the management performance and financial conditions for each term into account, but the possibility of distributing dividends and other matters, such as its timing, remain undecided at the moment.

Procuring Funds by Issuing New Shares

Fundely is highly motivated to grow and is likely to implement fund procurement flexibly mainly through capital increase as the business scale expands rapidly in the future. In such a case, an increase in the number of issued shares may dilute the stock value per share.

Dilution of Share Value by Exercising Stock Acquisition Rights

Fundely has adopted a stock option system with the aim of increasing the incentive for our directors and employees to improve their performance. Pursuant to provisions in the Companies Act, we received approval at the general shareholders meeting or board of directors meetings to grant our directors and employees stock acquisition rights.

The total number of issued shares for the company as of June 24, 2020, is 6,455,100 shares. When these stock acquisition rights are exercised, 79,800 shares will be newly issued, which may dilute the stock value per share.

In addition, there is the possibility that similar incentive plans like this will be continued in the future. Therefore, when stock acquisition rights that may be granted in the future are exercised, the stock value per share for the company may be diluted.