Soiken Holdings Inc.

Against a backdrop of maturing development of general health-labeled FOSHU products addressing blood pressure, blood glucose levels, etc., new development projects are on a declining trend. The number of companies capable of developing FOSHU and Foods with Function Claims is itself limited, and order intake is affected by client companies' management policies and budget trends, so the evaluation testing business may continue to be affected in its performance. The Group intends to pursue selection and concentration of businesses and focus on building a comprehensive healthcare platform.

The development of biomarker and biological evaluation systems as well as new proprietary foods, cosmetics, and functional materials requires substantial costs and time, but there is no guarantee of successful commercialization, and even if successful, there is no guarantee of achieving the expected profitability. Research and development expenses may increase against a backdrop of business diversification and expanding research areas, which could affect performance. In addition, there is a risk that business operations could be adversely affected if the Group is unable to obtain research results originating from universities or if excessive compensation is demanded for them.

Other companies may be conducting similar research and development, and the possibility that the Group could infringe on other companies' intellectual property rights and be subject to litigation cannot be completely ruled out. The Group conducts patent searches through patent firms and is not currently aware of any infringement on other companies' patents, but as a research and development-oriented company, it recognizes that complete avoidance of intellectual property infringement is difficult. Furthermore, there is no guarantee that patents applied for by the Group will necessarily be granted, and there is a possibility that the Group's research results could be superseded if superior research results are produced by other companies.

Masao Tsunoda, who became Representative Director and President in September 2024, concurrently serves as the head of launching the Healthcare Support business and as the business head of the functional materials development business, playing a central role in the management policy of building a comprehensive healthcare platform. If, for any reason, he becomes unable to carry out his duties, this could have a material impact on the Group's business strategy and operating results. There is currently no specific disclosure regarding the establishment of a succession framework.

Founder and Director Nobumi Kajimoto plays an extremely important role in building and maintaining networks with universities and university researchers and in lending authority to the Group's outputs, underpinning the foundation of the Group's academic business base. The Group is working to reduce this dependence by strengthening its organizational response, but if he becomes unable to carry out his duties, this could have a material impact on the Group's business strategy and operating results.

The Group conducts business by incorporating research results from universities, making relationships with universities an important business foundation. Amendments to or abolition of laws such as the National University Corporation Act and the National Public Service Act, or changes in the operational practices of relevant authorities, could result in changes to the relationship between private companies and universities. In addition, there is a risk that the Group may not necessarily benefit from research results in cases where funds are provided to university researchers in the form of donations, since such donations are formally treated as gifts.

The flagship product "Imida Peptide" relies on customer acquisition through mail-order sales driven by advertising expenditure as a growth driver, but if customer acquisition does not proceed as planned due to intensifying competition from rivals or fluctuations in consumer demand, this could adversely affect performance. In addition, since the main ingredient is extracted from chicken breast, a sharp rise in the purchase price of chicken breast or a supply shortage could increase manufacturing costs and adversely affect performance. There is also a risk of performance deterioration if new product development aimed at strengthening the self-medication support mail-order business does not progress as planned.

BB Laboratories Co., Ltd.'s cosmetics business is scheduled to cease operations by the end of March 2026, but it currently also sells in overseas markets such as China, Russia, Taiwan, and Hong Kong, with products for the Chinese market accounting for the majority of sales. There is a risk of unforeseen losses arising from differences in local laws, regulations, and business customs, as well as limitations in gathering credit information, and if sales for the Chinese market decline, the performance of this business could deteriorate significantly. The cosmetics business also faces increased working capital requirements, credit risk, and inventory risk.

In the functional materials development business conducted by NRL Pharma, Inc., lactoferrin raw materials are purchased from overseas companies in foreign currency, and fluctuations in raw material purchase prices, product sales prices, and exchange rates may affect performance. The Group seeks to mitigate foreign exchange risk through derivative transactions such as forward exchange contracts, but complete hedging is difficult. In addition, an increase in research and development expenses related to new development and application research for lactoferrin and other materials could also adversely affect performance.

The Group carries out corporate acquisitions and capital alliances to expand existing businesses or enter new business areas, conducting detailed financial due diligence and audits in advance to identify risks. However, if the initially expected effects are not achieved due to changes in the business environment or other factors, this could adversely affect performance through the recognition of goodwill impairment losses, among other things. Launching new businesses also requires the investment of substantial physical and human resources, and if the expected results are not achieved, an increase in fixed cost burden could put pressure on performance.