KURAMOTO CO.,LTD.

In the consolidated fiscal year under review, the company recorded an operating loss of ¥1,424 million, an ordinary loss of ¥1,475 million, and a net loss attributable to owners of the parent of ¥3,080 million, and is in the process of implementing a business turnaround plan. Material events casting significant doubt on the going concern assumption exist, and material uncertainty is currently recognized. As countermeasures, the company is implementing financial base improvements through the 5th to 8th Stock Acquisition Rights via third-party allotment (payment completed April 18, 2025) as well as measures to improve sales, profitability, and corporate strength, but all of these are still in progress.

In the new perovskite solar cell business, capital expenditure amounts have increased beyond initial expectations, necessitating additional fundraising. There is a risk that business commencement may be delayed if further fundraising becomes necessary due to delays in materials procurement, rising construction costs, sharp foreign exchange fluctuations, restrictions on international transactions, and other factors. The company filed securities registration statements in August, September 2024, and March 2025 to implement and plan fundraising, but uncertainty remains regarding the feasibility of additional fundraising.

Regarding the mass production line for the perovskite solar cell business, orders have been placed with domestic and overseas manufacturers and delivery and installation at the Hanaizumi Plant is proceeding, but if construction of the mass production line is delayed due to procurement delays, construction delays, or funding shortages, business commencement may be delayed. As a risk mitigation measure, the company is also considering overseas OEM procurement of perovskite solar cells, but the impact on the commercialization schedule remains uncertain. The company states it will disclose information as soon as it becomes available if the risk materializes.

In the Substrate Business, LCD glass material manufacturers and their affiliated companies conduct the same type of glass substrate processing in-house as the company. If these client glass material manufacturers increase their in-house production ratio, order volumes to the company could decrease significantly, potentially having a material impact on business performance. The company faces a structural vulnerability in that its clients are also its competitors, and progress in in-house production poses a risk of directly eroding the company's sales base.

In the LCD display industry, there are periods when the supply-demand balance between LCD panel manufacturers' production volumes and sales volumes of products incorporating LCDs temporarily breaks down, which in turn triggers a chain reaction of falling LCD panel market prices and rising inventories. This could reduce order volumes to the company, potentially worsening business performance. The company's performance is heavily influenced by the industry's supply-demand cycle, resulting in high sensitivity to changes in the external environment.

Materials used by the company such as abrasives are special components classified as rare metals and rare earths. If the necessary quantities cannot be secured due to export restrictions, international conflicts, price spikes in international markets, or major fluctuations in production conditions, production activities could be disrupted, potentially affecting business performance. The structure depends on geopolitical risks and international conditions at procurement sources, making the securing of alternative procurement means a challenge.

The Group faces intense competition from domestic and overseas competitors across all business segments, and business performance could deteriorate due to sharp declines in selling prices or significant decreases in sales volumes. In particular, in the Substrate Business, changes in purchasing policies of specific clients with high sales ratios pose a risk of significantly impacting business performance, also entailing customer concentration risk.

If uncontrollable large-scale natural disasters such as earthquakes, typhoons, or floods cause prolonged manufacturing disruptions or transportation stoppages, this could have a material impact on the Group's business performance. Depending on the degree of concentration of manufacturing sites and the state of business continuity planning (BCP) development, there is a risk that damage could become prolonged.

On October 24, 2024, EVOLUTION JAPAN Securities Co., Ltd. filed a lawsuit in the Tokyo District Court seeking payment of a penalty of ¥71,009 thousand (¥71 million) and related default interest. The company asserts that it has no obligation to pay the penalty under the arranger agreement (concluded on August 31, 2023) related to MS warrants, etc., but if the company loses the case, it may become liable for the said amount and default interest.

The perovskite solar cell business is a new venture, with high uncertainty surrounding the construction of mass production lines, establishment of technology, and commercialization. It has already become apparent that capital expenditure amounts exceed initial expectations, and if there are delays in establishing mass production technology or bringing products to market, there is a risk that substantial upfront investments may not be recovered. The company is also considering overseas OEM procurement in the event of a delay in business commencement, but both the timing and scale of monetization remain uncertain.