TOYOKOH Inc.

The Company's operating sites are concentrated in Shizuoka Prefecture; if a large-scale earthquake, wind or flood damage, or other natural disaster occurs, production capacity may decline due to operational suspension or reduced operating rates, affecting performance. The Company works to reduce this risk through measures such as establishing a remote work environment, conducting disaster drills, and building a data backup system.

In the CoolLaser Business, the Company holds Japanese and U.S. patents exclusively, securing a competitive advantage; however, the emergence of new entrants with research and development capabilities exceeding the Company's own, or the development of alternative technologies that do not infringe on the patents, may reduce this competitive advantage. In the SOSEI Business, there is also a risk of the emergence of construction methods that imitate materials, etc. The Company's policy is to address this risk by anticipating changes in customer needs and continuously monitoring competing technologies.

The majority of the SOSEI Business's net sales require a specific construction business license (license granted by the Governor of Shizuoka Prefecture, valid until June 26, 2026); if this license were revoked for any reason, it could seriously hinder business activities. No grounds for revocation have arisen at present, but the Company addresses this risk through thorough legal compliance and periodic confirmation of compliance with licensing requirements.

The CoolLaser Business allocates resources intensively to its research and development function as a technology group proficient in both optics and construction; however, if the Company fails to keep pace with technological innovation and cannot develop attractive new products, or if market launch and penetration are delayed, performance may be affected. The Company intends to continue allocating resources to research and development and securing human resources going forward.

The Company holds important confidential information such as technical data as well as customers' personal information; if information systems are damaged or suspended, or confidential information is leaked, performance may be affected through damage to corporate value, loss of social credibility, and compensation to customers, among other consequences. The Company has implemented measures such as establishing internal regulations, strengthening security systems, and monitoring data downloads by employees scheduled to resign.

Representative Director and CEO Kazuaki Toyozawa is also a major shareholder and plays an important role in determining management policy and business strategy; if he were unable to continue his duties, this could have a material impact on performance. The Company is working to reduce dependence on a specific individual by strengthening information sharing among officers and reinforcing the management organization.

The CoolLaser Business requires upfront investment such as development costs and hiring of engineers; although it transitioned to the sales phase from FY2025 (ended March 2025) and recorded an operating profit on a company-wide basis, performance may be affected if the acquisition of installation results does not proceed as expected. As of the end of the fiscal year under review, cash and deposits stood at ¥2,199,463 thousand, securing sufficient funds on hand for the immediate future.

The SOSEI Business basically outsources operations other than construction management; if a situation arises in which sufficient outsourcing partners cannot be secured due to a sharp increase in construction projects caused by economic fluctuations or other factors, performance may be significantly affected. The Company's policy is to maintain good relationships with existing outsourcing partners while continuing to develop new outsourcing contractors.

In the CoolLaser Business, changes in the timing of equipment delivery and acceptance, and in the SOSEI Business, sudden changes in construction schedules requested by clients or extended work suspensions due to inclement weather, may cause revenue and profit recognition to shift to the following half-year period or fiscal year. Depending on the magnitude of such timing discrepancies, this may affect half-year or full-year operating results; the Company reflects this timing risk in its budget based on past performance at the budget formulation stage.

The SOSEI Business uses petroleum, and the CoolLaser Business uses semiconductors, as part of their raw materials; rises in raw material prices or supply shortages caused by factors such as the situation in the Middle East that began in February 2026 may affect performance. The Company's policy in response to rising procurement costs is to review selling prices as appropriate and work to pass on costs.