Convano Inc.

The Group holds cryptocurrency (mainly Bitcoin) equivalent to ¥8,766,742 million (corrected from a thousand-yen unit error: equivalent to ¥8,767 million), representing 46.4% of total assets. At the end of the consolidated fiscal year, a decline in market price led to a cryptocurrency valuation loss of ¥4,847 million, which was the main cause of the loss attributable to owners of the parent for the period. Because the cost model is used, there is an asymmetry whereby valuation gains are not recognized when prices rise; if the market price were to fall 10% as of the fiscal year-end, an additional valuation loss of approximately ¥877 million would arise. The Group plans to proceed with a phased disposal following its change in policy, but depending on the timing and price of sale, it may not be able to recover funds as originally anticipated.

During the consolidated fiscal year, transactions with the General Incorporated Association Medical Alliance accounted for ¥9,567 million in sales revenue (61.7% of total sales performance), of which ongoing transactions reached ¥8,288 million (approximately 53.4%). If the scale of transactions were to shrink significantly due to changes in the association's business policy or outsourcing policy, it could have a material impact on the Group's operating results and cash flows. The Group aims to reduce this dependence through new customer development and expansion of high-value-added services utilizing AI and data analytics, but this remains a medium- to long-term challenge.

The Group raised funds through the exercise of stock acquisition rights (¥10,429 million) and the issuance of corporate bonds (¥7,000 million, of which ¥5,500 million was redeemed during the period). As of the end of March 2026, interest-bearing debt consisted of borrowings of ¥593 million, corporate bonds of ¥1,500 million, and lease liabilities of ¥611 million. If fund demand fluctuates due to cryptocurrency price volatility, changes in the performance of investees and consolidated subsidiaries, or the execution of M&A, additional fund-raising may become necessary, and depending on funding market conditions, this could affect the Group's financial position and business development. The Group intends to stabilize its financial base by maintaining good relationships with financial institutions and continuously monitoring its funding plans.

The nail salon industry has moved into a maturity phase, and the number of competing low-price salons, mainly in the Kanto region, has increased dramatically, transforming what was a blue ocean at the time of the Company's founding into a red ocean. The Company's average customer spend is in the low-price industry range of ¥4,500 to ¥5,000, but its efficiency-focused operations have significantly weakened its ability to propose higher-priced services, and combined with reduced demand due to COVID-19, a medium- to long-term market price slump is anticipated. As a countermeasure, the Company plans to raise customer spend by strengthening its ability to propose higher-quality, higher-priced products, but if competition continues to intensify, declining sales at existing stores could affect performance.

The nail industry has a high proportion of female workers, and turnover tends to be high due to marriage, childbirth, and other life events. A shortage of nail technicians has resulted in the inability to fully utilize seats at existing stores, forcing the Company to turn down reservations, leading to lost opportunities and reduced customer satisfaction. If the hiring environment worsens due to rising wage levels, increased recruitment costs, and increased demand for labor, it may become difficult to secure personnel at appropriate cost, potentially delaying new store openings or reducing sales at existing stores. The Company plans to fundamentally review its HR strategy, expand recruitment and training, and make its workplace environment and employment systems more flexible.

In the M&A and investment business for small and medium-sized enterprises conducted through Toranomon Capital Co., Ltd., there is a risk of economic loss due to fluctuations in market conditions, deterioration in the performance of investee companies, or divergence from expected investment recovery. In addition, the Group is considering an investment policy utilizing highly volatile assets such as cryptocurrency as part of its medium- to long-term management strategy, raising concerns about the temporary impact of valuation losses on performance. The Group intends to improve the accuracy of its decision-making by strengthening its investment review system and collaborating with outside experts.

Goodwill of ¥650 million and intangible assets (trademark rights) of ¥488 million arising from the acquisition of the former Convano Co., Ltd. and others account for 6.0% of total assets, and under IFRS, impairment testing is performed annually or whenever there are indications of impairment. If store profitability deteriorates significantly due to marked changes in the external environment, causing a major divergence between the business plan and actual performance, an impairment loss, including on tangible fixed assets, may need to be recognized, which could have a material impact on the Group's financial position and performance. Impairment testing is also conducted on tangible fixed assets whenever there are indications that the carrying amount may not be recoverable.

The recruitment support, public relations, system implementation support, and medical consumables supply businesses for medical corporations require compliance with relevant laws and regulations, including the Pharmaceuticals and Medical Devices Act. If unexpected issues come to light through findings or investigations by external auditing bodies, this could adversely affect the continuation of contracts or profitability. In addition, since services are provided mainly under outsourcing contracts, revenue may be affected if contract terms are revised or contracts are terminated. The Company intends to design and execute its operations appropriately with advice from legal experts.

The nail salon business systems mainly date from more than 10 years ago and lack integrated functionality for customer management, sales management, shift management, and reservation management, while the BI system used for KPI and performance management is also outdated, leading to inefficiencies in store operations and delays in decision-making. In addition, if systems operated on external rental servers or in-house servers experience failures due to disasters, mechanical breakdowns, or line malfunctions, this could disrupt store operations and affect performance. The Company plans to build out its core systems, data infrastructure, and BI systems going forward.

The Company holds a large amount of personal information, including customer information collected at membership registration and employee information, and if any external leakage occurs, this could affect performance through legal violations and damages claims. In addition, the "FASTNAIL" brand relies heavily on the internet for reservations and advertising, so if malicious word-of-mouth on social media or unauthorized use of trademarks leads to reputational damage that spreads, this could affect the business, performance, brand image, and social credibility. The Company intends to manage personal information in accordance with internal regulations while strengthening its customer support system to curb negative word-of-mouth.