PATH corporation

In the current consolidated fiscal year, the Company recorded an operating loss of ¥774,046 thousand, a net loss attributable to owners of the parent of ¥1,276,638 thousand, and negative operating cash flow of ¥435,483 thousand, giving rise to material events that raise substantial doubt about the going concern assumption. In the previous consolidated fiscal year as well, the Company recorded an operating loss of ¥208,368 thousand and a net loss of ¥276,771 thousand, marking two consecutive fiscal years of substantial losses, resulting in serious impairment of equity capital. The Company is pursuing measures including the formulation of a new medium-term management plan, optimization of its business portfolio, and consideration of capital policies including the use of external funding, but uncertainty remains as to their effectiveness.

The Investment Business invests in cryptocurrencies, which may experience significant price fluctuations due to the macroeconomic environment, geopolitical conditions, international financial trends, and other factors. In the event of sudden market fluctuations, the risk of failing to recover invested capital could materialize, potentially having a material impact on business performance. Although internal regulations have been established for risk management, including the prompt sale of holdings upon certain price movements, there are limits to the ability to respond to sudden fluctuations.

In the Cosmetics Business and the Beauty & Wellness Business, advances in IT technology have made it easy to compare prices of identical products, resulting in intense price competition. If changes in the market environment or price decline pressures exceed expectations, both sales and profits could be adversely affected. Although the Company strives to provide high value-added services, there is a risk that intensifying competition with rival companies will further pressure business performance.

In business investments in both existing and new business areas, there is a risk that anticipated returns as set out in the initial business plan may not be achieved due to changes in the macroeconomic situation, market environment, or the emergence of new competitors. As a result, the recovery of invested capital may become difficult, potentially adversely affecting the financial position. Additional investment amid continued losses carries the risk of further impairing the financial base.

The Cosmetics Business and the Beauty & Wellness Business handle confidential and personal information of customers, and in the event of an information leak, the Company could face claims for damages or a decline in reputation, which could affect business performance. In addition to institutional and system-based measures, the Company imposes confidentiality obligations on employees, including those who have left the Company, but it is difficult to completely eliminate all such risks. Information security incidents could damage both finances and brand value through customer attrition and legal costs.

Securing the personnel necessary to develop existing and new businesses is a challenge, and if employee turnover exceeds expectations or recruitment plans are not achieved, the Company may be unable to secure the necessary personnel, which could affect business performance. Although there are no plans for a significant increase in the number of employees, demand for specialized personnel increases during phases of business restructuring and new business development. A shortage of human resources carries the risk of impeding the realization of earnings recovery plans through a decline in business execution capability.

Many of the Company's subcontractors and suppliers are relatively small-scale operators, and if it becomes difficult to continue transactions with them for any reason, securing alternative suppliers or shifting to in-house production may require time and expense, potentially affecting business performance. In particular, in the environmental equipment sales business, there have been actual instances of inconsistencies in the supply chain process resulting in temporary delays relative to the original plan. The vulnerability of the supply chain carries the risk of simultaneously causing lost sales opportunities and increased costs.

Competing companies exist in each of the Cosmetics, Beauty & Wellness, Regenerative Medicine-Related, and Investment businesses, and intensifying competition could worsen business performance. There is also a risk that the occurrence of unforeseen events, changes in customer preferences, or the emergence of new products or substitutes due to technological innovation could cause deviations from the original business plan. The complexity of the strategy to restructure and grow multiple businesses simultaneously increases the uncertainty of plan execution.

If a third party brings a lawsuit alleging infringement of intellectual property rights, resolution could require significant time and expense, potentially affecting business performance. There is also a possibility that intellectual property rights established by the Group could be infringed upon by third parties, which would also incur response costs. At present, the Company has not received any notices of infringement lawsuits, but intellectual property risks may materialize as the business expands.

If offices, business sites, or employees are affected by a natural disaster such as a large-scale earthquake, volcanic eruption, or flood, obstacles to business operations may arise, and indirect damage such as decreased sales due to market contraction or supply chain disruption may also be expected. Although the Company has implemented measures such as conducting disaster drills, distributing disaster preparedness supplies, and formulating a business continuity plan (BCP), depending on the scale and scope of the disaster, there is a possibility of a material impact on business continuity and performance. A large-scale disaster occurring while the financial base is already fragile carries the risk of further reducing business continuity capability.