Wintest Corp.

In the consolidated fiscal year (January to December 2025), the Company recorded net sales of ¥429,053 thousand against an operating loss of ¥1,218,662 thousand, an ordinary loss of ¥1,217,996 thousand, a net loss attributable to owners of parent of ¥1,242,428 thousand, and negative operating cash flow of ¥751,167 thousand, giving rise to events that raise material doubt about the going concern assumption. In the previous consolidated fiscal year as well, net sales were ¥417,090 thousand and the operating loss was ¥1,083,829 thousand, with losses continuing over multiple periods and severely impairing the financial base. As a countermeasure, on December 26, 2025, the Company resolved to issue 7 million shares of stock acquisition rights through a third-party allotment to abc Corporation, but there is no assurance that the funds will actually be raised, and it is recognized that material uncertainty regarding the going concern assumption exists at the present time.

Due to the concentration of investment in AI-related fields, capital expenditure for consumer and industrial semiconductors (DDIC, CMOS image sensors, etc.), the Company's core market, was frozen or curtailed for two consecutive years in 2024 and 2025, resulting in sluggish orders and sales. According to WSTS, the global semiconductor market grew 22.5% year on year in 2025, but the consumer and industrial segment excluding AI-related fields posted negative growth year on year, and the freeze on capital expenditure at DDIC manufacturing plants in China and Taiwan, the Company's main markets, continued. Full-scale resumption of capital expenditure is expected from FY2026 onward, and there is a risk that recovery in orders and sales will be delayed until then.

The core Semiconductor Test Equipment Business is susceptible to trends in markets for information terminal-related products such as digital home appliances, mobile phones, and personal computers, and is subject to inventory adjustments in the semiconductor industry and the effects of the silicon cycle. In the event of a global outbreak of infectious disease, natural disasters in multiple consuming countries, or unexpected financial market contraction, equipment sales may decline and affect business performance. The Company is working to build a structure less susceptible to cyclical effects by entering the AI server market and developing niche markets, but structural demand volatility risk remains.

In the image sensor-related field, there are approximately three strong competing manufacturers in Japan and overseas, and a shift toward simplified test equipment is also underway. In the display driver IC-related field, there are also three to four competitors in Japan and overseas, and competition is expected to intensify across the test equipment business as a whole going forward. If competitors further increase their investment of management resources, or if new entrants emerge, this could affect the Group's market competitiveness and market share.

If unexpected and dramatic technological innovation occurs in the manufacturing processes or inspection methods of devices targeted by image sensor, LCD (array), and LCD/OLED driver IC test equipment, and the Group is unable to respond, this could lead to a decline in demand for existing products and affect the Group's financial position and operating results. The Company is working to strengthen its technological response capabilities through support for high-speed transfer from 17Gbps to 40Gbps, development of the WLS series dedicated light source for TOF inspection, and multi-platform development, but the risk that the pace of technological change will outstrip the Company's response cannot be ruled out.

In the consolidated fiscal year under review, due to sluggish order growth and changes in the market environment, the Group recorded consolidated inventory valuation losses (cost of sales) of ¥599,920 thousand, primarily at subsidiaries. Inventory valuation losses were also recorded in the previous consolidated fiscal year, and the recording of valuation losses over multiple periods has pushed up cost of sales and has been a factor in the expansion of losses. If the market recovery is further delayed going forward, the recoverability of held inventory may decline further, and additional valuation losses may need to be recorded.

It takes approximately six months to one year from order receipt to delivery and acceptance of test equipment, and while large-scale systems generate sales in the range of tens of millions of yen to ¥100 million, payments to suppliers are made approximately one month after acceptance, resulting in a constant and substantial working capital burden. In response to the shortage and price increases of industrial semiconductor components from 2021 to 2023, the Company implemented early procurement of parts, resulting in cash and deposits decreasing more than planned. If large orders are concentrated or if fundraising does not proceed as planned, there is a risk that cash flow could become tight.

In the consolidated fiscal year under review, the Group's sales ratio between Japan and China/Taiwan was approximately 4:6, with more than half of sales dependent on the China and Taiwan markets. If major political changes occur in the future, this could affect the Group's business performance and financial position. Since September 2023, the Company has shifted from agency-based sales to a direct sales structure in China, strengthening its sales functions and diversifying risk through its subsidiary Wintest Wuhan as a point of contact, but this has not led to a fundamental resolution of geopolitical risk.

If, for any reason including credit risk related to business partners, the Group becomes unable to maintain relationships with its current suppliers and subcontractors, selecting alternative contractors and providing technical guidance may take a certain amount of time, potentially causing delays in shipment schedules. In addition, if stable subcontractors cannot be secured as the business expands, this may affect operating results. While relationships with suppliers and subcontractors are currently considered favorable, latent risk exists in cases of high dependence on specific suppliers.

The Group plans to enter the general-purpose logic testing, memory device testing, and power device testing fields through M&A as part of its growth strategy, and is also pursuing diversification into adjacent areas (MGC equipment, Liquid Lens RYUGU, 3D X-ray Diagnostic Equipment, healthcare management systems, strong alkaline cleaning water, etc.). With respect to M&A, changes in the business environment after acquisition or unforeseen circumstances may prevent progress as initially targeted, and new businesses have a limited track record, creating high uncertainty regarding the outlook for profitability. Diversification investment under conditions of a fragile financial base may lead to a dispersion of management resources and increased financial risk.