Solasto Corporation

The Group's business foundation relies on service provision by approximately 30,000 personnel, including medical administrative staff, care workers, and nursery school teachers. If staffing standards can no longer be met amid chronic labor shortages, service continuity could become impossible. In the Nursing Care & Childcare Business, staffing standards are stipulated by ministerial ordinances of the Ministry of Health, Labour and Welfare and by local government ordinances, and a shortage of personnel could also result in the risk of revocation of a facility's designation. While the Group promotes measures such as recruitment, training, and improvement of working conditions, failure to execute these measures as planned may affect its business results and financial position.

The Nursing Care Business is centered on long-term care services provided under the Long-Term Care Insurance Act, and is directly affected by the long-term care fee revisions conducted every three years. If long-term care fees are significantly reduced or regulations are tightened, the profitability of this business, which has a high proportion of long-term care insurance revenue, may deteriorate significantly. The Group aims to diversify the impact through the enhancement of paid nursing homes and non-insurance-covered services in addition to home care services, but the risk of system changes cannot be entirely eliminated.

The Group handles a large amount of sensitive personal information, including patient information in the Medical Business, user information in the Nursing Care Business, and nursery school children's information in the Childcare Business. In the event of an information leak, loss of social trust and the occurrence of liability for damages could have a material impact on the Group's business results and financial position. The Group is strengthening its internal systems through the establishment of a personal information protection policy and planned employee training, but the risk cannot be entirely eliminated.

Unauthorized external access, cyberattacks, computer virus intrusions, and similar incidents could give rise to information security deficiencies, including the leakage of confidential information and personal data. In particular, the remote medical services within the Medical Business are provided in an environment that has obtained ISMS/ISO27001 certification and complies with the guidelines of three ministries and two guidelines, but there is also a risk of system outages due to unexpected trouble with communication equipment, etc. Depending on the scale of the damage, this could affect the Group's business results and financial position.

The Group conducts M&A primarily in the Nursing Care Business, acquiring and recording tangible fixed assets, goodwill, and other assets. If previously unrecognized issues come to light after an M&A transaction, or if business development does not proceed as planned, it may become necessary to record an impairment on the share value of the target company or the acquired assets. If a large impairment loss is recognized, this could have a significant impact on the Group's financial position and business results.

Many users of nursing care services are elderly, resulting in a relatively high risk of serious accidents such as falls and aspiration, as well as food poisoning and mass infections. In addition, in the Nursing Care & Childcare Business, because employees provide services directly to elderly individuals and children for extended periods, there is also a possibility of abuse or violent conduct occurring. In the event a serious incident or accident occurs and management responsibility is called into question, the business continuity of the relevant facilities could be significantly affected, which may impact the Group's business results and financial position.

In the Nursing Care Business, many corporations enter the market each year, intensifying competition, and it may become difficult to secure users at numerous facilities. In the Childcare Business, the accelerating decline in the birthrate and an increase in the number of operators create a risk that it will become difficult to secure enough children at childcare facilities. In the Medical Business as well, changes in the content of outsourced work and the Company's market share may occur due to medical fee revisions and the advancement of IT adoption.

The Group employs approximately 30,000 employees, and against the backdrop of the declining birthrate and aging population, social insurance premium rates may continue to rise, increasing the employer's burden going forward. In particular, in the Medical Business, the Group is promoting operational efficiency and securing orders at appropriate prices to address rising costs, but if these measures do not proceed as expected, they could become a factor that squeezes profitability. If the impact of rising costs cannot be sufficiently absorbed, this may affect the Group's business results and financial position.

MP-2605 Co., Ltd. is the parent company holding 53.4% of the Company's issued common shares, and may exert significant influence over resolutions at general shareholders' meetings, including the election and dismissal of officers, organizational restructuring, transfer of significant businesses, amendments to the articles of incorporation, and disposal of surplus. As the parent company is expected to continue holding a majority of the total voting rights, a situation in which the wishes of minority shareholders are not necessarily reflected will continue. There is a risk that the Group's management policy and business strategy may be influenced by the intentions of the parent company.

The facility development of the Nursing Care & Childcare Business adopts a capital investment strategy based primarily on leasing, but restrictions on withdrawal are imposed for a certain period, and early termination of a contract may result in the payment of penalties, among other consequences. In addition, if the owner of land or a building becomes insolvent, there is a risk that continued use of the property or collection of receivables could become difficult. Even for facilities whose performance has not improved, it may be difficult to withdraw immediately based solely on profitability considerations, creating a risk that the burden of fixed costs will continue.