OLBA HEALTHCARE HOLDINGS, INC.

Reimbursement prices for specified medical materials under the Health Insurance Act are reviewed approximately every two years and tend to be revised downward based on actual market selling prices. This leads to a corresponding decline in unit sales prices to medical institutions, continuously pressuring profitability. The Group strives to improve profitability by strengthening price negotiation power with suppliers and expanding the handling of higher value-added products.

The Group continues its business operations based on licenses and notifications obtained under the Pharmaceuticals and Medical Devices Act and related regulations. If a license were revoked due to a violation of laws and regulations, it could have a material impact on business results and business continuity. The Group must maintain multiple licenses, including a license for the sale of controlled medical devices (renewed every 6 years) and a Type II medical device marketing business license (renewed every 5 years). The Group works to enhance compliance awareness through the establishment of a supervisory department and regular training programs for officers and employees.

Life Care Co., Ltd. operates as a designated specified welfare equipment sales business and welfare equipment rental business under designation by prefectural governors. If it becomes unable to meet the required standards, it may be subject to designation revocation, which could affect business results. The company addresses this by establishing safety management systems, including placing managers and welfare equipment specialist advisors at all sales locations.

If defects occur in medical devices or pharmaceuticals sold by the Group, the manufacturer/marketer may take recall or sales suspension measures, which could indirectly affect the Group's business results as a distributor. In addition, selling medical devices past their expiration date constitutes a violation of the Pharmaceuticals and Medical Devices Act, carrying the risk of business suspension orders. The Group secures alternative supply arrangements by maintaining relationships with a diverse range of suppliers.

Violation of the Fair Competition Code for the Medical Device Industry (enacted in 1999) directly constitutes a violation of the Act against Unjustifiable Premiums and Misleading Representations, potentially resulting in penalties such as fines. While the Group strives to ensure compliance with the Code in its sales activities and to educate employees, the risk of differing interpretations arising with authorities cannot be eliminated.

The Group has thoroughly managed personal information, and no leakage-related problems have occurred to date. However, if personal information were leaked in the future, it could lead to damages claims and reputational decline, potentially affecting business results and business development.

External cyberattacks and virus infections are recognized as risks that cannot be completely eliminated, and the Group is working to strengthen its IT environment. Multi-layered measures are being implemented, including the establishment of an information security policy and management regulations, development of contingency plans, 24-hour PC monitoring, and targeted phishing email training.

The Group may in the future establish, sell, merge, split, acquire, or form alliances with affiliated companies, and expenses related to these activities may temporarily affect business results and financial condition. In addition, if an acquired business does not progress as planned, there is a risk that impairment losses on the investment value may occur.

Regarding business-use assets such as land and buildings, and investment securities held by the Group, if business profitability or cash flow deteriorates due to price declines or changes in the external environment, impairment losses may occur, potentially affecting business results and financial condition.

If large-scale natural disasters such as earthquakes or storm and flood damage occur, business results could be affected through impacts on the domestic logistics network. In addition, during the spread of infectious diseases, medical institutions may postpone non-urgent treatments and surgeries, resulting in lost sales opportunities for medical devices. The Group is developing and reviewing its business continuity plan (BCP) to establish a system for rapid response.