TRaaS On Product Inc.

The Terminal Solution Business depends on trends in the IoT solution, digital signage, and SaaS service markets, and an economic downturn or product obsolescence due to technological innovation could worsen the business environment. In addition, because the timing of recognition of large-scale orders tends to be uneven, there is a risk that earnings could fluctuate significantly on a quarterly or fiscal-year basis. As the business is currently in a growth phase with a relatively small scale, the impact of such fluctuations tends to be relatively large.

The manufacturing of IoT products is mainly outsourced to multiple companies in China, and the purchase ratio from this region is high at 63.1%. If Japan-China relations deteriorate or unforeseeable changes in laws or regulations occur, stable procurement of products could become difficult, potentially affecting the business and results of operations. Although the Company is working to diversify risk by securing alternative manufacturing partners, complete elimination of this risk is difficult.

A large portion of transactions related to the overseas outsourcing of IoT product manufacturing and the overseas expansion of certain products are denominated in foreign currencies, mainly the US dollar, and sudden exchange rate fluctuations could affect the business and results of operations. The Company considers measures to mitigate foreign exchange risk on a case-by-case basis, but recognizes that complete elimination of the risk is difficult.

IoT products are manufactured and sold using software licenses from multiple companies, and changes in license fees imposed by licensors or difficulty in continuing to use such licenses could affect the business and results of operations. In addition, due to the rapid technological advancement and globalization of the ICT field, it is difficult to fully identify third-party intellectual property rights, creating a risk of being subject to claims for damages or injunctions to cease use. There is also a risk related to the Company's own intellectual property rights, in cases where infringement cannot be fully identified or appropriate measures cannot be taken.

Some services rely entirely on communication networks, and if the system goes down due to natural disasters, accidents, unauthorized access, computer viruses, or other causes, it could have a serious impact on the business and results of operations. Unpredictable factors such as a sudden surge in access or a cloud service outage could also cause system failures. Although the Company takes appropriate security measures, it recognizes that complete protection is difficult.

Contracted development projects for customers are often complex in content, leading to prolonged development periods and higher costs, and there is a possibility that development may not proceed as planned due to project management issues such as unexpected specification changes or personnel turnover. In addition, there is no guarantee that research and development investments will necessarily lead to profits, and the investment burden could affect results of operations. Although research and development themes and budgets are set by the Board of Directors and progress is monitored, complete elimination of this risk is difficult.

As IoT products and services become more sophisticated and complex, it is considered difficult to completely eliminate defects, and if a critical defect occurs, it could lead to a decline in creditworthiness and affect the business and results of operations. In the event of a large-scale recall or product liability dispute, although the Company has product liability insurance, there is no guarantee that damages will be fully covered within the limits of that insurance. To date, no defect that has had a significant impact on results of operations has occurred.

If unauthorized access from outside parties or intentional illegal diversion of source code or information leakage at outsourcing partners occurs, unexpected costs such as damages could arise, potentially affecting the business and results of operations. The leakage of personal information carries the risk of damaging social trust. Although the Company has implemented measures such as establishing information security-related regulations, employee training, and confidentiality agreements, it cannot completely prevent unforeseen incidents from occurring.

Representative Director and President Hidehiko Fujiyoshi has played an extremely important role since the Company's founding in driving the business and determining management policies and strategies, and if he becomes unable to perform his duties, it could affect the business and results of operations. The Company is working to expand and develop its executive staff and build a division-of-labor structure through delegation of authority, but reducing this dependence will take time.

As of January 31, 2026, the Company is a small organization with 6 directors and 25 employees, and its internal management structure remains commensurate with this scale. In a business that requires a high level of technical capability, if the Company is unable to secure sufficient appropriate personnel, or if a large number of engineers were to resign at once, it could lead to a slowdown in development speed and constraints on business expansion. Although the Company has adopted policies to strengthen personnel, develop human resources, and reinforce its internal management structure, a risk remains if these measures cannot be implemented in a timely and appropriate manner.