Environment Friendly Holdings Corp.

In the solar power generation business, a decrease in sunshine hours due to weather conditions poses a risk of directly reducing electricity sales revenue. In addition, in the sorghum seed development, production, and sales business, which the Company anticipates expanding, weather has a significant impact on growth and harvest volume, and sudden changes in harvest timing and yield may affect business performance. The structure is such that multiple core businesses are simultaneously exposed to weather risk.

Deterioration of equipment such as solar panels, or accidents caused by natural disasters or fires, may create a gap between expected and actual power generation output, impairing electricity sales revenue. Natural disasters such as earthquakes and typhoons can also have a severe impact on the growth and harvest of sorghum seeds. Both the Renewable Energy Business and the sorghum business are exposed in combination to natural disaster risk.

If changes in national energy policy result in a reduction of the purchase price under the Feed-in Tariff (FIT) system or a shortening of the purchase period, the revenue base of the Renewable Energy Business could be fundamentally shaken. The electricity sales revenue model, which depends on the FIT system, is highly sensitive to policy risk, and system revisions could have a direct and significant impact on business performance. At present, the Company has not disclosed any specific countermeasures.

The electricity retail business procures electricity mainly from the Japan Electric Power Exchange (JEPX), and there is a risk that trading prices could fluctuate significantly due to geopolitical and macro factors such as the Russia-Ukraine situation and surging resource prices. A sharp rise in procurement costs could directly squeeze the profitability of the electricity retail business and affect business performance. No hedging measures or other countermeasures against price fluctuation risk have been disclosed.

Purchasing reuse products is the foundation for securing revenue, but changes in economic conditions, an increase in competing buyers, shifts in customer preferences, and market fluctuations may make it difficult to stably secure products in both quality and quantity. In addition, as the distribution of reuse products increases, there is an inherent risk of purchasing and selling stolen goods, and it is stated that complete prevention is difficult given the nature of the business. Losses from purchasing stolen goods, as well as customer disputes and reputational decline, may affect business performance.

Sales trends for core products such as iPhones and gaming devices are significantly affected by changes in new and popular products. In addition, sharp fluctuations in foreign exchange rates and rapid changes in market prices may affect procurement costs and selling prices, putting pressure on business performance. Due to the high degree of dependence on specific product categories, a delayed response to trend changes could have a significant impact.

In the Environmental Business, if raw material and supply shortages occur due to soaring resource prices, there is a risk that contracted work could be suspended or construction schedules delayed or postponed. There are also concerns that a shortage of personnel could halt business activities or hinder business operations. As the business depends on the external environment for both material procurement and staffing, there is a risk of impact on both cost increases and business continuity.

If confidential business information or customer information is leaked due to unforeseen events such as unauthorized external access or criminal activity, this could result in claims for damages or loss of credibility, potentially having a significant impact on business operations and performance. The Company states that it strives to strengthen information management through the establishment of internal regulations and enhanced system security, but complete prevention is not guaranteed. Given the nature of the Reuse Business, which holds a large volume of customer information, the impact could be significant if such a risk materializes.

If, due to changes in market conditions or a lack of investor understanding, the Company is unable to secure the necessary funding for investments in new product development or business expansion aimed at medium- to long-term growth, it may miss business opportunities. In addition, if new shares or stock acquisition rights are issued in connection with fundraising, the value per share may be diluted, and changes in supply-demand balance may affect share value. At present, the timing of dividend payments has not been determined, and the outlook for shareholder returns remains uncertain.

The Company Group holds licenses for "construction business," "real estate brokerage business," "Type II Financial Instruments Business," and "investment management business," which are essential to its existing operations and future business development. If laws and regulations are abolished or amended, new regulations are introduced, or registrations or licenses are revoked, this could hinder the execution of operations in each business and have a significant impact on business performance. Given the business structure spanning multiple regulated industries, it should be noted that the scope of regulatory risk is broad.