INFORICH INC.

There is a risk that demand for mobile battery sharing services could disappear due to rapid improvements in the performance of smartphone built-in batteries. Currently, the gap between battery capacity and power consumption has widened five-fold cumulatively over 28 years, and the Company analyzes that it will take a considerable period before battery technologies other than lithium-ion are put into practical use in smartphones. However, if unexpected technological innovation occurs, it could affect the fundamental basis of the business. The Company has established an R&D base in Guangzhou, Guangdong Province, China, and continues to monitor the latest technology trends and formulate countermeasures.

Installation locations for Battery Stands rely relatively heavily on convenience stores, and if installation contracts with major convenience store chains and others are not continuously renewed, the number of installed units could decline significantly, impairing the revenue base. While the Company is diversifying risk through adoption by multiple chains and expanding installations into other industries, concentration in specific installation locations remains a structural vulnerability. The likelihood of materialization is assessed as low, but the impact is assessed as severe.

Hironobu Akiyama, Representative Director, Executive Officer and Group CEO, plays an essential role in overseas expansion, leveraging his fluency in Japanese, English, and Chinese as well as his network in China, resulting in high dependence on him. If an unforeseen event or early retirement were to occur involving him, it could have a material impact on the continuity of business development and management strategy. While the Company is working to build an organizational management structure, the establishment of a substitute framework remains a work in progress.

Mobile battery sharing services do not currently fall under a regulated industry requiring licensing or approval, but in addition to existing laws such as the Consumer Contract Act, the Act against Unjustifiable Premiums and Misleading Representations, and the Electrical Appliance and Material Safety Act, there is a risk that business activities could be significantly restricted if new regulations are introduced or existing regulations are substantially revised or strengthened in the future. While no violations of laws or regulations have occurred to date, the likelihood of materialization is assessed as low and the impact as severe, and continuous monitoring of regulatory trends is necessary.

Since mobile battery sharing services are not a regulated industry and OEM entry is relatively easy, there is a risk of intensifying competition from new entrants. The Company holds approximately 80% share in Japan based on the number of installed Battery Stands and ranks first in Hong Kong, Taiwan, and Australia, but if plans for expanding installations and increasing user numbers do not proceed as expected due to intensifying competition, it could affect the Company's financial position and results of operations. The likelihood of materialization is assessed as medium, and the impact is assessed as medium.

The Company operates overseas primarily in Asia, and its R&D and production outsourcing for mobile batteries and Battery Stands is concentrated in China. If changes occur in China's political, economic, or social conditions, or if unexpected changes are made to tax systems or legal regulations, including investment restrictions or transfer pricing taxation, there is a risk of deteriorating business environment or employee attrition, among other issues. While the Company is working to reduce dependence by developing production outsourcing partners outside China, the likelihood of short-term materialization is assessed as medium.

The CHARGESPOT business depends on network environments such as communication infrastructure and servers, and if a service outage occurs due to natural disasters, cyberattacks, or increased load from a surge in users, it could lead to lost opportunities, customer damage, and reduced credibility. The Company has diversified telecom carriers, strengthened server load balancing and monitoring, and established a system for rapid recovery in the event of a failure, but complete avoidance is difficult. The likelihood of materialization is assessed as medium, the impact as medium, and the timing of materialization as short-term.

The CHARGESPOT business is an investment-front-loaded business model, and although consolidated results turned profitable in the fiscal year ended December 2023, continuous investment is required for increasing the number of installations, developing new models, and accelerating expansion in Europe. If the anticipated results are not achieved through such investment, it could adversely affect the Company's financial position and results of operations. The likelihood of materialization is assessed as medium and the impact as medium, and the Company's policy is to make investment decisions while monitoring its financial condition.

Goodwill and customer-related assets arising from M&A are recorded on the consolidated balance sheet, and there is a risk of recognizing impairment losses if profitability declines due to changes in the business environment or other factors. Goodwill is calculated based on expected future excess earning power, while customer-related assets are calculated as the present value of income expected from continuing transactions with existing customers; the financial impact if these assumptions break down is assessed as moderate. The likelihood of materialization is assessed as medium, and the impact as medium.

If defects occur in mobile batteries or Battery Stands manufactured by outsourced factories in China, there is a risk of accidents involving third parties, loss of social credibility, and substantial liability for damages. The Company has taken measures such as diversifying manufacturing outsourcing partners, conducting durability tests for each part, minimizing risk through phased expansion of installations, and obtaining liability insurance, but the likelihood of materialization is assessed as low and the impact as medium.