TB GROUP INC.

The Company Group recorded an operating loss for the 19th consecutive fiscal year in the previous consolidated fiscal year, and in the current consolidated fiscal year also recorded an operating loss of ¥83 million and a net loss attributable to owners of the parent of ¥195 million, resulting in a situation that raises material doubt about the going concern assumption. The main causes are sluggish sales of small and medium-sized LED display units due to the downturn in regional economies, and delays in commercializing the recurring-revenue business model and the healthcare field. Cash and deposits at the end of the current consolidated fiscal year stood at ¥262 million, and while the Company has taken measures to secure funds, such as planning to receive ¥113 million in proceeds from the issuance of new shares and share options on June 26, 2026, uncertainty remains regarding the securing of funds over the long term.

The Company Group operates global businesses centered on Asia, North America, and Europe, and there is a risk of losses arising from a global or region-specific economic downturn, intensified competition, policy changes, tightened regulations, or political instability. In particular, in Japan, the downturn in regional economies has directly affected sales of the mainstay small and medium-sized LED display units, becoming a primary cause of the deterioration in business performance. In response, the Company strives to gather information on countries where its business partners are located and aims to respond promptly to business risks.

The Company Group's main products are developed and manufactured utilizing technologies such as electrical, electronic, communication, and image processing technologies, and if significant technological innovation occurs, the market competitiveness of its products may decline, adversely affecting business performance. In fact, in the indoor market, the mainstream has been shifting from LCD-based products to ultra-high-brightness, high-definition LED vision, requiring a transformation of the product lineup. In response, the Company is promoting improvements in the performance and quality of existing products, as well as proactive development activities for high-value-added products targeting new markets with "zero penetration rate."

The Company Group conducts transactions denominated in foreign currencies, and exchange rate fluctuations may adversely affect its business results and financial position. To mitigate foreign exchange fluctuation risk, the Company enters into derivative transactions such as forward exchange contracts based on actual demand; however, there is no guarantee that these hedging transactions will completely eliminate the risk. For the Company Group, which operates globally, exchange rate fluctuations are a significant risk that directly affects the stability of earnings.

The Company Group primarily raises business funds through borrowings from financial institutions, and fluctuations in interest rates may adversely affect its business results and financial position. While the Company strives to utilize short-term borrowings and reduce interest costs on long-term borrowings in consideration of interest rate conditions, there is a risk that fundraising costs will increase in the event of future interest rate hikes. Under circumstances where material doubt about the going concern assumption exists, a deterioration in the fundraising environment could have a particularly severe impact.

Although the Company Group conducts credit management for each business partner and takes measures against collection risk, if a specific business partner defaults on its obligations due to bankruptcy or other reasons, it may adversely affect the Company Group's business results and financial position. While credit management utilizes accumulated know-how, it does not guarantee full recovery of amounts due. Amid the continuing downturn in regional economies, continued attention is required regarding the materialization of credit risk due to the deteriorating business environment of business partners.

The Company Group establishes new companies and invests in existing companies to expand its business, and if the corporate value of an investee declines, it may adversely affect the Company Group's business results and financial position. While the Company exercises caution regarding new investments through deliberation by the Board of Directors and the setting of exit criteria, it cannot completely eliminate the risk. Investments in new businesses such as the recurring-revenue business model and the healthcare field continue to fail to achieve the expected results due to delays in commercialization.

If quality problems occur, compensation losses may arise, adversely affecting business results and financial position. In addition, there is a growing trend among domestic and overseas business partners to demand guarantees of non-use of environmentally hazardous substances, and if an unforeseen situation arises, there is a risk of disruption to business transactions. In response, the Company has taken risk countermeasures such as adding product liability insurance, but even with thorough quality control, it is difficult to completely eliminate risk.

Natural disasters such as earthquakes may occur on a scale exceeding expectations, and in such cases, they may adversely affect the Company Group's business results and financial position. While the Company is advancing measures such as developing earthquake response manuals, establishing an emergency response headquarters, and conducting drills, it may be difficult to respond to disasters of unexpected scale. Given the currently fragile financial base, the risk to business continuity in the event of a large-scale disaster could be particularly severe.

If fraudulent acts are committed by officers or employees, it may adversely affect business results and financial position. While the Company makes every effort to prevent fraudulent acts through the strengthening of internal controls, this does not guarantee complete prevention. Under a business environment of continued operating losses, maintaining the effectiveness of internal controls has become an increasingly important issue.