G Three Holdings Corporation

The company has recorded operating losses, ordinary losses, and net losses attributable to owners of the parent for three consecutive fiscal years since FY2023 (ending August 2023), compounded by a significant decline in net sales, giving rise to circumstances that create material doubt about the going concern assumption. Although operating cash flow turned positive in the current consolidated fiscal year, losses have continued to be recorded, and material uncertainty remains. As countermeasures, the company is pursuing profitability improvements in existing businesses, withdrawal from unprofitable businesses (already withdrawn from the magnesium battery business, urban mining business, and disinfection OEM business), a reduction of approximately 14.2% in selling, general and administrative expenses, and securing working capital through the sale of solar power plants.

In the Renewable Energy Business, if policy changes occur such as reductions in purchase prices or the imposition of restrictions under the Feed-in Tariff (FIT) system or the electricity supply-demand adjustment market, this could have a material impact on business performance. With the expiration of the FIT system, the secondary sales market for solar power plants has already been on a shrinking trend, and a shift toward PPAs is expected going forward. As countermeasures, in addition to gathering information on policy trends, the company is promoting expansion into the secondary market for solar power plants and diversification into new energy-related businesses to broaden its business portfolio.

In the development of solar power plants and grid-connected storage facilities, regulations under laws such as the Forest Act and environmental laws, as well as local ordinances, can make application procedures complex and wide-ranging, potentially prolonging the time needed to obtain permits and approvals. If development must be suspended or abandoned due to opposition from nearby residents or non-approval by authorities, this could affect business performance. As a countermeasure, the company conducts thorough preliminary surveys and due diligence when acquiring candidate development sites, and adopts a policy of developing only projects where no material risk is anticipated.

Progressing global warming is expected to cause rising seawater temperatures and increased precipitation, raising concerns about reduced sunlight hours and lower wind speeds, which could directly lead to a decline in electricity sales revenue from solar power plants. This is a risk that could directly impair the earnings base of the Renewable Energy Business, the Group's core business. As countermeasures, the company is working to build an optimal regional portfolio, adopt durable designs that anticipate abnormal weather, and strengthen timely power plant monitoring systems.

In addition to the risk of discrepancies between expected and actual power generation due to deterioration of equipment such as solar panels or accidents such as natural disasters and fires, if a serious accident such as a fire or explosion occurs during the R&D process for biofuel production, or if agricultural damage occurs due to natural disasters, this could result in liability for damages and lost opportunities from business suspension, affecting business performance. As countermeasures, the company combines risk hedging through insurance, monitoring of power generation data, and regular maintenance and inspections to maintain power generation capacity, and regularly reviews the adequacy of insurance coverage at management meetings.

For products including OEM manufacturing of portable storage batteries, emergency generators, Basic Skincare Cosmetics, and health foods, if quality standards are not met or safety issues arise, this could result in production suspension, recalls, and claims for damages, leading to loss of trust. This risk is amplified by the possibility that issues could arise at sales partners, suppliers, and contract manufacturers beyond the Group's control. As countermeasures, the company thoroughly manages serial numbers and lot control, exchanges information with suppliers and contract manufacturers, and conducts regular quality control audits of contractors and storage facilities.

In the Sustainable Business, the company conducts R&D toward the production, manufacturing, sale, and import/export of biofuels and other products; however, while investment toward commercialization is increasing, if significant investment fails to yield R&D results, this could affect business performance. There is also a risk that the proprietary technology used in plant cultivation could become obsolete due to more efficient and advanced technology developed by competitors. As countermeasures, the company carefully examines marketability, profitability, and plan feasibility at management meetings when making investment decisions, and diversifies risk through joint research with external partners and promotion of next-generation R&D.

The markets for Basic Skincare Cosmetics and health foods are highly susceptible to changes in consumer preferences, and if the company fails to develop attractive new products or if demand declines due to intensifying competition, this could affect its business results and financial condition. In addition, in the manufacturing and development of biofuels, surfactants, fertilizers, and other products made from vegetable oils, failure to respond to sudden fluctuations in supply and demand caused by weather, exchange rates, or regulatory changes could also affect business performance. As countermeasures, the company diversifies risk through multiple product lines and diversified sales channels, monitors changes in consumer preferences, and avoids dependence on specific suppliers by diversifying procurement channels.

The Group is a small organization with 14 employees, and directors and employees play specialized roles in management strategy, product development, sales, and administrative operations. If such personnel were to leave and successors could not be smoothly secured, this could have a material impact on business development and performance. Due to its small scale, the Group has high dependence on specific personnel, creating a structural risk that is difficult to mitigate through substitution. As countermeasures, the company thoroughly shares information among officers and employees, promotes delegation of authority, works to secure excellent employees, flexibly utilizes internal and external technology and know-how, and implements cost-effective employee benefit measures.

Under a policy of creating and expanding new businesses in adjacent areas while maintaining the Renewable Energy Business as its core, the company may incur significant additional costs for development funding, securing personnel, and enhancing facilities, and there is a risk that business development may not proceed as planned. Even when conducting corporate acquisitions or alliances, there is a possibility that the effects will not match the investment, and given the current material doubt about the going concern assumption, financial flexibility is limited. As countermeasures, the company gathers information and conducts market analysis with input from internal and external experts, engages in thorough discussion at board and management meetings, and has established a system for examining the feasibility of execution through a committee format centered on three outside directors who are Audit and Supervisory Committee members.