YAMASHITA HEALTH CARE HOLDINGS, INC.

If the officially set prices (reimbursement prices) for specific medical materials under the public medical insurance system are reduced through revisions to the medical fee schedule, this could directly lead to reductions in the Company's selling prices and significantly lower profitability. The Group strives to grasp and analyze the latest information on trends in medical administration and reflect this in its management strategy, while also working to strengthen proposal-based sales activities that contribute to customers' medical business management.

If, after implementing an M&A transaction, greater-than-expected burdens arise in aligning management policies with the counterparty company or integrating various systems and structures, the anticipated synergies may not be realized. If performance falls short of expectations, impairment of goodwill may become necessary, potentially affecting business results and financial condition. The Company conducts financial and legal due diligence on target companies and, after completing M&A transactions, works to enhance synergies through inter-group collaboration.

The Group makes equity investments in companies necessary for maintaining relationships with business partners and for business development purposes. If there is a significant decline in stock prices or a significant deterioration in the business performance of investee companies, valuation losses on investment securities may occur, potentially affecting business results and financial condition. The Company reduces this risk by periodically scrutinizing the performance of investee companies and thoroughly examining and deliberating on whether to continue holding the investment securities it owns.

Of the ¥64,194 million in net sales of the Medical Equipment Sales Business in the fiscal year under review, direct shipment transactions—which account for approximately 5.7% of equipment sales to other companies in the same industry—involve goods being shipped directly from suppliers to medical institutions, making it relatively difficult to verify the facts related to such sales. To address the risk of fraud, the Company has clarified procedures for cross-checking against external evidence such as delivery notes issued by suppliers and for confirming the actual existence of the goods in question, working to reduce this risk.

E.P. Medic Co., Ltd. manufactures and sells orthopedic implants, and Microsonic Co., Ltd. conducts research and development of ultrasonic examination devices. If the expansion of sales channels does not proceed as planned, or if product liability arises due to product defects, this could affect business results and financial condition. The Company works to reduce this risk by improving quality through obtaining ISO13485 certification or undertaking equivalent initiatives, as well as by enrolling in product liability insurance.

The risk of system failures or information leaks arising from cyberattacks, unauthorized access, disasters, and other causes is increasing, and if unforeseen events occur, this could affect business results and financial condition. The Company works to avoid this risk by strengthening its security systems and backup system infrastructure and by conducting information literacy education for employees.

The Company holds numerous licenses and permits, including permits for the sale and rental of controlled medical devices under the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices, and other products, as well as medical device repair business permits and medical device manufacturing and sales business permits. If the Company becomes unable to satisfy the requirements set forth under each relevant law, such permits may be revoked. The management department and the relevant business offices coordinate closely to properly obtain and maintain licenses and permits, and regular education and training is conducted for all employees.

The majority of the procurement operations of the core subsidiary is concentrated at three locations: Tosu City in Saga Prefecture, Isahaya City in Nagasaki Prefecture, and Fukuoka City in Fukuoka Prefecture. If a disaster causes any of these facilities to cease functioning, sales activities could be disrupted until the logistics and procurement management systems are restored or their functions relocated, potentially affecting business results and financial condition. The Company has established a system in which the three locations can mutually complement each other's logistics functions, aiming to disperse and mitigate risk in the event of disasters such as earthquakes or fires.

Against the backdrop of a declining working population in Japan and an active job-changing market, the Company may be unable to secure human resources on advantageous terms, which could significantly affect its human capital. The Company recognizes this as one of its most important management issues for achieving sustainable growth. It has established a Human Resources Strategy Division to actively pursue recruitment activities, while also improving the retention rate of existing employees through health-oriented management and individualized career support enabled by the introduction of talent management.

The outbreak of a new infectious disease could cause business offices and logistics bases to suspend operations, or delay the procurement of goods from supplier manufacturers. In the case of large-scale earthquakes, floods, or other natural disasters, the supply system for medical equipment and general medical consumables, as well as owned assets and human capital, could be affected, potentially making business activities difficult to carry out. As a countermeasure against infectious diseases, the Company thoroughly implements information sharing and hygiene management among group companies, and has formulated a Business Continuity Plan (BCP) as a countermeasure against natural disasters.