MEDIUS HOLDINGS Co.,Ltd.

As the differentiation and consolidation of medical functions progresses under the Regional Healthcare Vision, the consolidation of medical equipment purchasing by healthcare institutions may reduce the number of institutions that serve as sales destinations. In addition, competition in the medical equipment sales industry may intensify further, which could affect the Group's sales and earnings. As a countermeasure, the Group is working to strengthen its proposal capabilities through the promotion of solutions business and to improve logistics efficiency by leveraging scale merits.

With the revision of medical service fees that occurs in principle once every two years, the reimbursement prices for designated insurance medical materials are revised, but the content of the revisions differs by medical material, making it difficult to calculate the impact on sales and earnings in advance. Designated insurance medical materials account for approximately one-third of the Group's total sales, and if reimbursement prices are revised downward, this may affect earnings through declines in sales prices and gross profit margins. Both sales prices and purchase prices are based on reimbursement prices, but these are not constant, creating a structural risk that is difficult to predict.

The Group is pursuing business expansion through M&A as part of its medium- to long-term strategy, but many target companies are unlisted small and medium-sized enterprises whose financial disclosures lack sufficient transparency, creating a risk that off-balance-sheet liabilities or compliance issues may arise after acquisition. If business plans are not achieved, the Group may recognize impairment losses on goodwill, which could have a significant impact on earnings. In addition, if the integration of corporate cultures or core systems does not proceed smoothly, the effects of M&A may be undermined through the loss of personnel or failure to realize synergies.

The development of new businesses such as the solutions business and logistics efficiency improvements requires upfront investment, and it may take considerable time before stable earnings are generated, which could temporarily reduce profit margins. If business development does not proceed as originally planned due to changes in the medical industry environment or other factors, there is a risk that the investment may not be recovered. New businesses are implemented following approval by the Board of Directors, but the risk of failing to achieve plans cannot be completely eliminated.

The Group has introduced a core system integrating processes from procurement to billing and collection at Group operating companies to achieve efficient management and strengthen internal controls, but building such systems requires substantial capital investment. If discrepancies arise between the system and on-site medical operations or diversifying needs, or if new operations fail to mature as expected, sales productivity and operational efficiency may decline, making it difficult to recover the investment. This could affect the Group's sales and earnings.

The Group is subject to a wide range of legal regulations, including the Act on Pharmaceuticals and Medical Devices, the Poisonous and Deleterious Substances Control Act, the Long-Term Care Insurance Act, and the Construction Business Act, and violations could result in legal sanctions such as revocation of licenses, administrative penalties, or fines. Business activities could also be affected by suspension of transactions with business partners or loss of trust, and substantial costs may arise from damages compensation or improvements to internal control systems. The Group has established compliance guidelines, conducts e-learning training, and carries out audits through its Internal Audit Office, but it states that it is difficult to completely eliminate the risk of violations, including individual misconduct.

Since sales destinations include public medical institutions such as national and public hospitals and involve tender processes, compliance with anti-bribery laws and the Antimonopoly Act (prohibition of bid-rigging) is required. In addition, since the Group handles a large number of medical devices from U.S. manufacturers, it must comply not only with domestic laws but also with overseas laws such as the U.S. Foreign Corrupt Practices Act (FCPA). Violations could have a significant impact on earnings through legal sanctions, suspension of transactions, or loss of trust.

The Group operates a wide network of locations, including in the Tokyo metropolitan area, and in the event of natural disasters such as earthquakes, typhoons, or floods, damage to the head office, business locations, or warehouse facilities, disruption of distribution routes, or difficulty for employees to work could impede ordinary business operations. The Group has established a backup system utilizing a seismic isolation logistics center in Kanagawa Prefecture and a large-scale logistics center in Gunma Prefecture (warehouse area exceeding 19,000 square meters), but given the recent trend toward larger-scale disasters associated with climate change, it states that it is difficult to avoid all risks.

Products handled by the Group, such as medical devices and pharmaceuticals, have expiration dates set by their manufacturers, and if products past their expiration dates are distributed due to human error or system failure, this could result in serious harm to health. In such a case, the Group could face revocation of its medical device sales license, be required to compensate patients or medical institutions, and incur substantial costs to improve its management systems, which could have a significant impact on the Group's sales and earnings. The Group is working to improve and strengthen its expiration date management system through regular physical inventory counts and the use of IT systems.

Because public medical institutions that are sales destinations tend to concentrate capital investment in December and March, the Group's sales and operating profit tend to be weighted toward the second and third quarters, with an operating loss tending to occur in the fourth quarter. As actual results, operating profit/loss for the fourth quarter of FY2023 (ended June 2023) through FY2025 (ended June 2025) was ¥-506 million, ¥-325 million, and ¥-151 million, respectively. In addition, large lump-sum purchases of medical equipment occur when medical institutions build new facilities, relocate, or expand, causing temporary increases in sales, making it difficult to forecast full-year performance based on quarterly results alone.