GLOME Holdings, Inc.

Against the backdrop of the declining birthrate, aging population, and population decline in regional areas, there is a possibility that medical cost containment measures, such as reductions in medical fees and shortened hospitalization periods, will be strengthened. If the management condition of allied medical institutions deteriorates, there is a risk that the Group's business performance could become unstable due to a decline in revenue such as outsourcing fees. As a countermeasure, the Group regularly monitors healthcare administration and provides management guidance to allied medical institutions so that they can respond to policy changes.

While the Group has significantly downsized its Real Estate-Related Business and is concentrating management resources on the Healthcare-Related Business, it may take a considerable amount of time before revenue significantly exceeds the break-even point. If expansion of the Healthcare-Related Business does not proceed smoothly, there is a risk that this could lead to unstable business performance and a weakened financial position. As a risk diversification measure, the Group has newly launched the grid-connected storage battery business and is proceeding with organizational review and personnel reinforcement.

The Group extends loans such as working capital to allied medical institutions and, in some cases, provides joint guarantees for their borrowings from financial institutions. If the management condition of an allied medical institution deteriorates, this could result in bad debt losses, the need to fulfill joint guarantee obligations, and the recording of allowances for doubtful accounts or provisions for losses on debt guarantees. As a countermeasure, the Group strives to prevent deterioration in the management condition of allied medical institutions by providing services such as management guidance.

As part of its surplus fund management, the Group invests in Bitcoin, which carries price volatility, liquidity, technology, and security risks. Since cryptocurrencies are marked to market at each fiscal period-end and the valuation difference is recorded in profit or loss for the period, a price decline directly worsens profit or loss, and there is also a possibility of losing all or part of the assets due to cyberattacks or the bankruptcy of an exchange. Risk management is conducted by setting an upper limit on the investment amount and introducing a stop-loss mechanism.

In the process of monetizing the business through the acquisition, holding, operation, or sale to third parties of storage batteries and related facilities, the business may not proceed as planned. In addition to the risk that business performance could become unstable due to fluctuations in electricity market prices and pricing conditions with buyers, delays in the procurement of storage batteries and in grid connection or commencement of operation are also anticipated. The Group works to mitigate these risks through careful review of contract terms, conducting due diligence, regular maintenance and inspection, and monitoring of electricity market trends.

The Group has opportunities to access important information, including confidential information and personal information, of allied medical institutions, and if an information leak occurs, it could result in significant cost burdens and a serious impact on the Group's reputation. The Group works to strengthen information security through the establishment of internal regulations, compliance training, and the development of information infrastructure. In the event a leak does occur, the Group has established a response framework for immediate disclosure, prevention of further damage, investigation of the cause, and formulation of preventive measures.

In the business of introducing domestic medical institutions and online medical consultations to patients residing overseas, which was launched in FY2024 (ended March 2024), there is a possibility of violating the prohibition on patient solicitation under the regulations concerning insured medical institutions and insured medical care providers. There is also a possibility of issues arising regarding the application of domestic and overseas personal information protection regulations with respect to the acquisition and use of personal information of overseas patients. As this is a new business, it is expected to operate at a loss for the time being, and if this loss period is prolonged beyond expectations, there is a risk that it could lead to unstable business performance.

Regarding two outsourcing agreements with a total compensation of approximately ¥100 million entered into by the former representative director of the consolidated subsidiary GLOME Management Co., Ltd. without going through the required internal approval process or board of directors resolution, the Group intends to contest the matter in full if sued for payment of the compensation. Depending on the progress of the dispute, this could affect the Group's business performance, but at this time, both the amount and timing remain undetermined. The Group has grasped the facts based on the investigation report of the special investigation committee (received on June 24, 2022) and continues to respond to the matter.

The Group's growth is highly dependent on human resources such as highly specialized consultants, and if it becomes difficult to recruit and develop excellent talent, or if such talent leaves, this could adversely affect growth and profits. The risk of rising personnel costs for doctors, nurses, and other medical staff due to the progress of work-style reforms in medical settings is also a factor that puts pressure on the management of allied medical institutions. As a countermeasure, the Group is working to create an attractive workplace through the development of flexible working arrangements such as flextime and remote work, and through improvements to personnel and welfare benefit systems.

Regarding Fukuyama Iryoki Co., Ltd., which was acquired in FY2024 (ended March 2024), a temporary deterioration in profit and loss was observed in FY2026 (ending March 2026) due to costs associated with the relocation of its head office, among other factors. The medium- to long-term impact on business transactions resulting from the change in shareholders and management is uncertain, and there is a risk that the succession of existing business transactions may not proceed as planned. The Group positions this as part of its efforts to strengthen the Healthcare-Related Business and continues to work toward realizing the effects of integration.