(Page 14 of “M&A announced today,” disclosed on April 9, 2025)

The impact is still limited at present, and we plan to minimize the impact through further management efforts.

Assuming a tariff rate of 104% by the U.S. on China, there could be an impact of up to 360 million yen in the current fiscal year.

The impact on each stage of earnings in this fiscal year target will be 0% for EBITDA, since there is no impact from the increase or decrease in depreciation and amortization. For EBITDA before amortization of goodwill, which corresponds to operating income under IFRS, it will be 360 million yen, or about 2.6%. For operating income, it will be 360 million yen, or about 3.4%. For net income before amortization of goodwill, it will be 270 million yen, or about 3.3%, after taking tax effects into account. In contrast, as the participation of PLAYER ONE will increase the number of machines purchased as GENDA’s whole business in North America, we believe that it will be possible to lower the unit purchase price.

The impact of the tariffs is also analyzed in the report by Capital Growth Strategy released today.

Page 3 of Capital Growth Strategy Report dated April 30, 2025

On the other hand, the key risk factors for the ROI of this acquisition are the potential failure to achieve the anticipated synergies and the impact of tariffs between the US and China. Here, we will delve into the impact of US-China tariffs. Currently, GENDA’s North American business imports the majority of Kiddleton’s game machines and prizes from China. Therefore, US tariffs on Chinese goods affect the CF through Capex for game machines and the PL through depreciation and the cost of prizes, both for sales in the US (approx. 60% of sales). Our recent discussions with GENDA’s management have confirmed that the impact of tariffs on prizes can be passed on to the play price due to the low-cost business model ($1 per play). However, the more important risk for investors is the impact on Capex for game machines, which ultimately affects Player One’s invested capital and could alter the acquisition ROI forecasted above. As of April 25, the US President Trump was reported to have said, ‘(the high tariffs on Chinese goods would) come down substantially, but it won’t be zero,’ and the Wall Street Journal reported that White House officials mentioned a range of 50-65% tariffs (35% for items not considered national security threats). Thus, at this stage we assumed that US tariffs on Chinese goods settle at around 65% as reported and estimated the impact on the acquisition ROIC in Ex. 2. Specifically, we apply a 65% tariff to the portion of Kiddleton-style game machine imports related to US sales (60%). In conclusion, the impact on Player One’s Cash ROIC on an FCF basis is approx. 1%pt, which we think is minimal and a limited impact.

Furthermore, GENDA is considering changing its manufacturing value chain to import only game machine components from China and assemble them in the US to minimize the impact of tariffs. Therefore, the actual impact of tariffs on the acquisition ROI could be even more negligible than the figures estimated in Ex. 2. CGS expects the company’s management to execute swiftly in response to these external risk factors.

As you can see, the impact is limited and the impact on the overall PL is well under control. We will strive to further minimize the impact by implementing countermeasures.

In addition, the pillar of GENDA’s growth story in North America is “Kiddleton-style mini-crane machines and the Japanese IP of the prizes inside.” This business is characterized by a very fast recoupment period of 12 to 24 months per location, and in fact, Kiddleton has opened approximately 600 stores in the U.S. over the past four years. The reason for the fast recoupment is that the cost of the mini-crane machines (imported to the U.S.) and the prizes they contain is low relative to sales. This time, the cost portion is subject to the tariff, but the impact will be limited because the cost is low in relation to sales.

(Page 15 of “M&A announced today,” disclosed on April 9, 2025)

The first measure to address this issue is a shift in emphasis to efficiency in replacement with Kiddleton-style. Until now, we had planned to introduce PMI measures for basically all locations with a sense of speed. However, from now on, we will pursue efficiency by strictly analyzing the ability of each location to attract customers and sequentially introducing PMI measures starting with locations where sales per unit can be expanded more. In addition, for PLAYER ONE, we will implement PMI measures starting with Canada, where tariff hikes have no impact.

The second is a review of our manufacturing structure. NEN has a manufacturing facility in Dallas, the U.S. and we have been manufacturing machines there by ourselves. To utilize this facility, we will start a system to import parts from China and assemble them in the U.S. We will minimize the amount of impact by making parts, not finished products, subject to tariffs. In addition, the transportation of “finished products” of mini cranes requires a lot of “air” because they take up a lot of space. However, by exporting parts, we will streamline the transportation and contribute to reducing transportation costs.

Third, we will review our price costs. We will continue to negotiate with manufacturing plants in China and strengthen our cost reduction efforts. We will also consider procurement from third countries with low tariffs to reduce the risk of tariff hikes against China.

The fourth is to optimize the placement of mini-crane machines and prizes. Although it is assumed that we will be able to recover its investment and generate cash flow even if tariffs are added, we minimize the impact of tariffs by optimizing the placement. Since tariffs have not been finalized at this time, for the time being, we will make effective use of mini crane machines and prizes with low book value that have already been imported to the U.S. and are not subject to tariffs. Furthermore, we will focus on placing mini game machines with high book value, which are subject to tariffs, in more profitable locations in order to improve the profitability of each location as well as the overall revenue and expenditure.