HOSHI IRYO-SANKI CO., LTD.

The Group's business spans a wide range of activities, including the manufacture and sale of medical gases, piping equipment construction, home oxygen concentrator rental, and nursing care and welfare equipment rental and sales, with each business operating based on permits, registrations, licenses, and notifications from supervisory authorities. If unintended violations of laws and regulations or litigation occur, or if laws and regulations are amended, this may affect the Group's business results and financial condition. While the Group strives to develop a legal compliance system, the risk of changes in the regulatory environment continues to exist.

Medical gas accounts for more than 30% of net sales, and since medical gas is listed in the drug price standard, the drug price standard functions as an upper limit on the sales price. Depending on the content of drug price revisions, this may directly affect the sales price of medical gas and other products, potentially impacting the Group's business results and financial condition. Periodic drug price revisions are unavoidable under the system, and the impact on the core business, which accounts for over 30% of net sales, is significant.

The Group is promoting nationwide expansion by strengthening the sales capabilities of each business office and sales office and expanding new business partners; however, if expansion is delayed relative to the initial plan, this could lead to a decline in profits and affect the Group's business results and financial condition. Delays in executing the growth strategy pose a risk directly linked to a shortfall in achieving revenue plans.

If a natural disaster such as a large earthquake or flood causes catastrophic damage to manufacturing sites or suppliers, this could result in operational disruption and delays in production or shipment, making stable supply to customers difficult. In addition to a decline in sales, substantial costs may be incurred for business recovery. Although the Group is working to develop disaster prevention and crisis management systems, complete avoidance is difficult.

The Group manufactures and sells medical gases and other products in accordance with the High Pressure Gas Safety Act, and if a fire or explosion accident occurs, this could result in a temporary suspension of operations, affecting the Group's business results and financial condition. Given the nature of the business, which involves handling high-pressure gases, the Group works daily to strengthen its safe operation systems, but accident risk exists as an inherent risk of the business.

The Group has recently pursued aggressive M&A activity to expand its business scale; however, if business investments deviate from the initial plan, this could affect the Group's business results and financial condition. If the acquired company's performance deteriorates, integration costs increase, or synergies fail to materialize, there is a risk that recovery of the investment becomes difficult.

The Group holds personal information of many customers and others, and there is a risk that personal information or technical information could be leaked due to attacks by hackers or computer viruses, infrastructure failures, natural disasters, or other causes. If an information leak occurs, in addition to damage to corporate value and loss of trust, substantial costs may be incurred for claims for damages, compensation, and recurrence prevention measures from business partners, customers, and others. The Group is implementing measures such as improving security levels, developing internal regulations, and providing employee training.

If a raw material manufacturer suspends production activities due to a natural disaster, accident, or other cause, the Group's procurement of raw materials may become difficult, making it unable to fulfill its supply responsibilities to customers. Should such a situation occur, it could affect the Group's business results and financial condition, and the Group is working to ensure stable procurement by promoting measures such as multiple sourcing.

If the fair value of held assets declines significantly or the profitability of a business deteriorates, the application of impairment accounting may result in impairment losses, which could affect the Group's business results and financial position. There is also an inherent risk that assets and goodwill acquired through aggressive M&A activity could become subject to impairment, raising concerns about the impact on the Group's finances.