WOLVES HAND Co., Ltd.

As of the end of FY2025 (ended June 2025), shares of the Company held by venture capital firms and other investors totaled 2,852,000 shares (38.2% of total shares issued). If these holders sell their shares on the market following listing, the balance of supply and demand may be temporarily disrupted, potentially affecting share price formation. The likelihood of this risk materializing is assessed as high, making its impact on share price an important risk for investors.

Since 2013, the total number of pets kept (particularly dogs and cats) has been on a gradual downward trend, and depending on demographic and economic conditions, this decline may continue going forward. A decrease in the number of pets kept affects business development, financial condition, and operating results through a decline in the number of hospital visits. The Company seeks to mitigate this risk by continuing to provide high-quality medical services and improving per-visit treatment fees.

Against a backdrop of global increases in raw material and transportation costs, manufacturers have successively raised prices for pharmaceuticals, medical consumables, and medical equipment used in Animal Hospital Operations, and the resulting cost increases may affect financial condition and operating results. The Company responds by revising drug prices and per-visit treatment fees in line with rising price levels.

Business development, financial condition, and operating results may be affected by the abolition or amendment of, or introduction of new regulations under, a wide range of laws, including the Veterinarians Act, the Veterinary Medical Care Act, the Act on Welfare and Management of Animals, the Radio Act, the Act on the Regulation of Radioisotopes, and the Certified Veterinary Nurse Act. The degree of impact varies widely, from minor to significant, depending on the content of the legislation. The Company has established a compliance framework through the operation of a Risk Management Committee and Compliance Committee, along with internal audits.

The Company has a track record of recording an impairment loss of ¥2,054,303 thousand in FY2020 (ended June 2020) on goodwill arising from a past LBO transaction, and as of the end of FY2025 (ended June 2025), goodwill accounts for 27.3% of consolidated total assets (¥1,653,138 thousand). If the business environment changes or expected investment returns are not achieved, additional impairment losses may occur, affecting financial condition and operating results. The Company has established an M&A process involving due diligence using external experts and careful deliberation by the Board of Directors to prevent recurrence.

Funds for acquisitions in past organizational restructurings and for hospital sites and construction costs have been primarily raised through borrowings from financial institutions, resulting in a consistently certain level of interest-bearing debt as a proportion of total assets. Rising interest rates or changes in financial institutions' lending stance may increase funding costs, and if the Company breaches financial covenants attached to certain borrowings, lump-sum repayment may be required, which could affect cash flow. The Company strives for stable fundraising through regular monitoring of interest rate trends, arrangement of credit lines, and fixing of interest rates.

Continuous provision of advanced medical care, including secondary care, requires securing, developing, and retaining veterinarians with high levels of clinical experience and specialized knowledge, but competition for recruiting veterinary students is intensifying. If the Company fails to hire necessary personnel or if trained personnel leave for other companies, this may affect business development, financial condition, and operating results. The Company seeks to improve retention rates through collaboration with veterinary universities and recruiting agencies, educational initiatives such as regular training, on-the-job training, and free access to VMN, and enhancement of its internal evaluation system.

If unauthorized access, tampering, or leakage of pet owners' personal information acquired and managed through the provision of medical services occurs due to cyberattacks or other causes, this may affect financial condition and operating results. The Company works to mitigate this risk by establishing a Systems Management Office to strengthen its security systems and by developing regulations concerning personal information management.

There is a seasonal pattern in which the number of hospital visits increases significantly from March to June (the fourth quarter), a period concentrated with rabies vaccinations and purchases of flea and heartworm medications, resulting in a tendency for net sales and operating profit to be concentrated in the fourth quarter. If fourth-quarter trends differ from forecasts for any reason, this may affect financial condition and operating results. The Company strives to formulate performance forecasts and profit plans that take into account seasonal factors and past results.

Masashi Kitai, Representative Director, CEO and COO, has exercised leadership in management strategy, business planning, and clinical operations as the Company's chief executive since its founding, and if he becomes unable to be involved in business development, this may affect the business and operating results. The Company is working to develop a management structure that does not depend excessively on the chief executive by promoting information sharing, delegation of authority, and division of duties among officers and senior staff.