Japan Display Inc.

Eight consecutive fiscal years of operating losses and impairment losses, and eleven consecutive fiscal years of net loss attributable to owners of the parent, have resulted in negative total shareholders' equity, giving rise to material uncertainty regarding the going concern assumption. There is a risk that the impact of U.S. tariff policy, persistently high costs due to global inflation, and declining sales from reduced customer demand will delay the return to profitability. As countermeasures, the Company has halted production at the Mobara Plant (until March 2026), consolidated production at the Ishikawa Plant, promoted the BEYOND DISPLAY strategy, and borrowed funds from Ichigo Trust (total principal of ¥26.0 billion from July 2024 to March 2025), among other measures; however, fundraising measures remain under negotiation and uncertainty persists.

As of March 31, 2025, the tradable share ratio was 20.1%, failing to meet the Tokyo Stock Exchange Prime Market listing maintenance criteria (35% or more). Ichigo Trust holds 78.2% of voting rights, and the tradable share ratio may decline further due to the conversion of preferred shares or the exercise of stock acquisition rights. In addition, the Company may fall into a state of negative net assets by the end of FY2026 (ending March 2026), and if this is not resolved by the end of FY2027 (ending March 2027), there is a risk of delisting.

The Company relies on borrowings from Ichigo Trust for the majority of its working capital, and if borrowing from the company or financial institutions becomes difficult, it may impede business operations. If stock acquisition rights are not exercised, there is a risk of falling into a fund shortage, whereas if they are exercised, existing shareholders' equity will be diluted. The Company is seeking to improve cash flow through measures such as the February 2025 decision to halt production at the Mobara Plant and the May 2025 workforce reduction, but dependence on external funding remains high.

As of March 31, 2025, Ichigo Trust is a controlling shareholder holding 78.2% of voting rights, exerting significant influence over resolutions at general shareholders' meetings. The Company's director, Scott Callon, also serves as Representative Director and President of Ichigo Asset Management Co., Ltd., creating a structural conflict of interest risk. In addition, if Ichigo Trust sells the Company's shares, depending on the method and scale, it may affect the supply-demand balance and market price of the shares.

If the market fluctuates significantly due to economic changes, shifts in consumer preferences, seasonality, and other factors, this may result in decreased sales, increased costs and valuation losses from excess inventory, and lost opportunities due to reduced plant utilization rates. There is also a risk of declining sales prices due to intensified competition with rivals. As countermeasures, the Company is promoting product portfolio transformation through the BEYOND DISPLAY strategy, asset-light transformation of the Display Business, and differentiation in the Sensor Business and Advanced Semiconductor Packaging business.

Delays in the supply of raw materials and components, supply shortages, or price increases may result in production delays, increased costs from alternative procurement, and higher procurement costs. Since some raw materials and components have limited suppliers and are difficult to switch, the impact when such risks materialize is significant. As countermeasures, the Company is requesting price pass-through to product sales prices, securing appropriate inventory levels, diversifying the supply chain, and confirming the BCP systems of suppliers.

Inappropriate accounting treatment was discovered in FY2020 (ended March 2020), and following the identification of a material weakness in internal control over financial reporting, in July 2020 shareholders filed a damages claim of approximately ¥3,858 million against the Company and 10 former directors. Recurrence prevention measures have been implemented company-wide, and the material weakness was resolved by the end of FY2021 (ended March 2021); however, if new internal control deficiencies arise, this may affect the reliability of financial reporting. In addition, violations of the Antimonopoly Act, intellectual property rights, import/export regulations, and other laws could result in severe damage such as surcharges, criminal penalties, or suspension of business transactions.

If proprietary technologies such as the Next-Generation OLED "eLEAP" are not adopted by customers, or if the Company's technological advantage relatively declines due to technology development by competitors, sales may decrease, affecting business performance and financial condition. The Company implements careful selection of R&D targets and progress reviews at each development stage, under a technology strategy that considers competitors' development and commercialization information as well as customer needs. Since 2021, the Company has begun reskilling education (advanced specialized education, digital and AI education) and is promoting efficient development and manufacturing utilizing digital technology.

The Company has manufacturing bases in Japan and the Philippines, outsources back-end processes to China and Taiwan, and derives a large proportion of sales from overseas customers; therefore, instability in foreign political and economic conditions, tightening of foreign exchange controls, unexpected regulatory changes, military impacts such as war and terrorism, and boycotts due to anti-Japanese sentiment may affect business performance and financial condition. As countermeasures, the Company is building a multi-faceted information-gathering system, diversifying the entire supply chain, and dispersing production systems from a BCP perspective.

The Company conducts extensive transactions with overseas companies in Europe, the United States, China, and elsewhere, and fluctuations in exchange rates may affect the sales prices and costs of products and services denominated in foreign currencies, thereby affecting business performance and financial condition. Since assets and liabilities of overseas subsidiaries denominated in local currencies are translated into yen when preparing consolidated financial statements, financial condition is also affected by exchange rate fluctuations. The Company currently utilizes operational hedges such as currency matching and netting, but is constrained in setting up long-term hedging transactions due to credit condition limitations, and plans to consider optimal hedging strategies after its credit condition improves.