Informetis Co., Ltd.

In FY2025 (ending December 2025), performance deteriorated due to external factors such as the termination of a contract with a major customer, resulting in a substantial operating loss (an operating loss of ¥628,704 thousand on a converted basis). As a result, the Company recognizes that events exist which raise substantial doubt about its ability to continue as a going concern. The Company has undertaken measures such as issuing MS warrants to secure funds, and judges that it holds sufficient funds through December 31, 2026; however, depending on business progress and the exercise status of stock acquisition rights, there is a possibility of impact on its financial base. As countermeasures, the Company continues to implement measures to lower its break-even point through fixed cost reduction, optimization of personnel allocation, and streamlining of business processes.

In FY2025 (ending December 2025), the sales dependence ratio on Energy Gateway Co., Ltd. reached 58.8%, and furthermore, the top five sales destinations beyond that (including Tokyo Electric Power Grid Incorporated and Daiwa Living Co., Ltd.) accounted for approximately 90% of total sales, indicating a highly concentrated structure. In the fourth quarter of FY2025 (ending December 2025), all transactions with a major customer were suddenly terminated contrary to the Company's expectations, making it impossible to continue recording sales in the "Upfront" and "Platform/App Provision" areas, which had a material impact on business performance. While the Company is working to reduce this dependence by expanding transactions with new customers and other existing customers, the state of high concentration risk currently continues.

The "Shareholders' Agreement" with Tokyo Electric Power Grid Incorporated and the "Master Distributorship Agreement" and "Platform Usage License Master Agreement" with Energy Gateway Co., Ltd. form the foundation of the business, and if these were to be terminated or expire, a significant decrease in net sales is expected. At present, relations are favorable and continuation of the contracts is expected, so the likelihood of occurrence is judged to be low; however, if general grounds for termination such as breach of contract or bankruptcy, or a change in the counterparty's management policy were to occur, it would have a material impact on business continuity. Under a memorandum dated November 13, 2025, the Company itself is now able to sell products, excluding Energy Gateway's existing customers and existing business negotiation counterparts, and efforts to reduce dependence are progressing.

The manufacturing of power sensors is fully outsourced to WNC Corporation, and the procurement ratio from this company reached 100.0% in FY2025 (ending December 2025). If there is a change in that company's management policy or a shift in its customer trends, product supply could be disrupted, potentially causing significant disruption to business continuity. As a countermeasure, the Company has a policy of considering alternative outsourcing partners when the volume of outsourced manufacturing increases, but at present, the state of substantial dependence on a single supplier continues.

The energy digital business/DX-related market and the data analysis market utilizing AI and machine learning are attracting attention as growth markets, and there are multiple competing companies, mainly overseas, that conduct power data analysis. If competing companies provide superior services, the competitiveness of the Group in the market could decline, potentially affecting business performance. As a countermeasure, the Company seeks differentiation by achieving both high-precision NILM and low cost, and by providing an integrated offering from power sensor development, manufacturing, and sales through to the AI data analysis platform.

Technological innovation is progressing rapidly, particularly in the fields of AI and machine learning, and if the Group's technological innovation does not proceed as planned, its competitive advantage could be lost, potentially affecting its business and performance. In particular, in terms of intellectual property, there is an inherent risk that technological superiority could decline due to competitors' advanced technologies, the expiration of patent terms, technological obsolescence, or the emergence of low-cost alternative technologies. As countermeasures, the Company is building a system for timely grasp of the latest trends, recruiting and developing excellent personnel, and conducting prior research in cooperation with experts before filing for patents.

The Company has positioned overseas expansion, mainly in Europe, as an important priority, and began full-scale commercial rollout in November 2025 through sales of the "UP Series" by Daikin Airconditioning UK Ltd.; however, if the Company is unable to continuously secure excellent personnel, or falls behind in responding to the pace of transformation in the European energy market, expansion as planned could become difficult. In addition, changes in local laws and regulations or social conditions, as well as exchange rate fluctuations, are also risk factors that could affect business performance. While the Company is actively recruiting using Informetis Europe Ltd. as a personnel recruitment base, the difficulty of securing personnel due to its small organizational scale remains an issue.

Supply constraints and extended lead times for certain materials, including semiconductors, have not been fully resolved, and if timely procurement of materials becomes difficult, it could disrupt production activities and affect business performance and financial condition. In addition, if increases in the prices of semiconductors and other materials, and increases in logistics costs due to rising crude oil prices, container shortages, and yen depreciation cannot be sufficiently passed on to product prices, there is a risk that profitability could deteriorate. As countermeasures, the Company is stabilizing prices through long-term contracts and securing larger quantities of materials, as well as operating procurement plans for foreign-currency-denominated transactions and monitoring exchange rate trends.

As of December 31, 2025, the ratio of interest-bearing debt (borrowings) to total assets stood at a high level of 51.8%, with the Company relying on financial institution borrowings for a portion of its working capital, capital expenditures, and R&D funds. If interest rates rise going forward, an increase in financial costs could adversely affect business performance and cash flow. While the Company maintains good relationships with financial institutions to respond flexibly to interest rate conditions, the high dependence on interest-bearing debt amid the existence of doubt about going concern is a factor that amplifies financial risk.

Because many customers are major companies with a fiscal year ending in March, net sales tend to concentrate in the first quarter (January to March) and fourth quarter (October to December), and this concentration continued in FY2025 (ending December 2025), with the first quarter accounting for 22.3% and the fourth quarter for 30.9%. In quarters with lower sales, fixed costs are incurred evenly, making operating losses more likely to occur, and in FY2025 (ending December 2025) the Company recorded operating losses in every quarter (full-year operating loss of ¥628,704 thousand). While the Company seeks to mitigate seasonal fluctuations by acquiring new customers, the concentration stemming from its customer structure has not been resolved at present.