EARTH INFINITY CO. LTD.

The Company, whose core business is the bundled sale of electricity and gas, may experience an increase in cancellations and a decrease in customer numbers if it fails to sufficiently differentiate itself amid intensifying competition from other companies offering similar services. In addition, if unit sales prices for electricity and gas decline due to falling fuel prices or the operation of nuclear power plants, the effect of fee reductions achieved through the Company's proposals may be diluted, potentially affecting business results and financial condition. The Company seeks to differentiate itself through the bundled sale of electricity and gas, but responding to changes in the market environment remains an ongoing challenge.

The Company procures electricity through purchases from JEPX and negotiated transactions with power generation operators, and JEPX transaction prices fluctuate depending on crude oil prices, season, time of day, and the operating status of solar and nuclear power generation. While the Company seeks to reduce procurement price fluctuation risk through its own fuel cost adjustment mechanism, a time lag between fluctuations in procurement prices and their reflection in electricity charges could worsen short-term cash flow. In addition, increases in wheeling charges resulting from tariff revisions by general electricity transmission and distribution operators, and increases in transaction prices with gas companies, may also affect business results and financial condition.

The Company's Retail Electricity business is obligated under the planned value simultaneous-simultaneous system to match projected demand with actual demand every 30 minutes, with any difference settled as an imbalance charge. Since supply-demand management is currently outsourced to an external operator, if simultaneous matching cannot be achieved, or if the outsourced provider's business continuity becomes difficult and switching to another provider takes time, substantial imbalance charges may arise, potentially affecting business results and financial condition. There is inherent outsourcing risk due to reliance on external parties, and although a system for switching to an alternative outsourced provider has been established, risk remains during the transition period.

The Company is subject to a wide range of legal regulations, including the Electricity Business Act, the Gas Business Act, the Act on Specified Commercial Transactions, the Consumer Contract Act, the Product Liability Act, the Construction Business Act, and the Act on the Protection of Personal Information, and has obtained registration as a retail electricity business operator (registration number A0281) and as a retail gas business operator (registration number A0073). If a legal violation or administrative disposition occurs, this could lead to a decline in social credibility, business improvement orders, suspension orders, or damages claims, potentially affecting business results and financial condition. The Company conducts compliance training and regular visits and training for agencies, but there is also a risk that inappropriate conduct by other companies in the same industry could damage the overall image of the industry, leading to a decrease in the number of contracts received.

The Company conducts its business based on the Electricity Business Act and the Gas Business Act, and the effects of legal amendments are wide-ranging, including the design of systems related to the planned future abolition of regulated tariffs for deemed retail electricity business operators. If a system change occurs that the Company does not anticipate, this may affect business results and financial condition. Although the Company has established a system for obtaining information on legal amendments through internal staff and legal advisors, the risk of changes in energy policy continues to exist.

Electricity sales volume fluctuates due to weather conditions, economic trends, progress in energy conservation, changes in electricity usage patterns resulting from technological innovation, and the competitive situation with other operators. If electricity sales volume decreases due to these factors, business results and financial condition may be affected. The Company supplies electricity to low-voltage customers (general households, small factories, stores, restaurants, etc.) and high-voltage customers (small and medium-sized factories, etc.), targeting a broad customer base, but there is a structural vulnerability to changes in the external environment.

The Company uses IT systems for customer management and sales management in the Energy Business, and determines billing amounts for each customer and issues invoices through its core IT system. If the system stops functioning or malfunctions, billing to customers may not be conducted properly, causing operational disruption and potentially affecting business results and financial condition. The Company implements measures such as backups, failure management, virus protection, user authentication procedures, and unauthorized access prevention, but these risks cannot be completely eliminated.

In the Electronic Equipment Business, the Company recognizes the improvement of product quality as one of its most important management priorities and strives for quality assurance and quality control activities, but there is no guarantee that all products are free of defects or that losses from quality assurance issues will not occur in the future. If a large-scale product quality assurance issue or a product defect leading to product liability claims occurs, substantial costs may arise, potentially affecting business results. The Company has taken out product liability insurance, but there is no guarantee that this insurance will fully cover the final amount of damages.

If a natural disaster such as an earthquake or typhoon occurs, sales activities may be temporarily suspended due to damage such as power outages or gas leaks, potentially affecting business results and financial condition. The Company owns wind power plants and earns feed-in-tariff (FIT) electricity sales revenue, but if wind power generation facilities malfunction due to a large-scale natural disaster or similar event, there is a risk that electricity sales revenue could be suspended for an extended period. Natural disaster risk may simultaneously affect multiple business segments (energy sales and renewable energy generation).

Mr. Koichi Hamada, Representative Director and President, is a major shareholder holding 49.83% of total issued shares as of the end of the fiscal year under review, and holds substantial influence over the exercise of voting rights. While he has a policy of also considering the interests of minority shareholders, if his shareholding decreases for any reason, this could affect the market price of the Company's shares and the exercise of voting rights, among other matters. The high degree of concentration of shares carries inherent risks relating to the protection of minority shareholders from a corporate governance perspective.