TAMAGAWA HOLDINGS CO.,LTD.

From FY2023 (ended March 2023) through the fiscal period ended October 2024, the company continuously recorded operating losses, ordinary losses, and net losses attributable to owners of the parent, giving rise to material doubt about its ability to continue as a going concern. In the fiscal year under review, the company recorded operating income of ¥278 million, ordinary income of ¥231 million, and net income attributable to owners of the parent of ¥268 million, and it has been determined that the material doubt was resolved as of the fiscal year-end. However, the sustainability of the earnings improvement will be key to future financial stability.

As of the end of October 2025, borrowings subject to financial covenants totaled ¥1,512 million, and in the event of a covenant breach, the company could lose the benefit of the term and be required to repay part or all of the borrowings. In addition, a rise in market interest rates or a rating downgrade could have a material impact on the company's financial condition and business performance. As countermeasures, the company is promoting diversification of fundraising methods, including bond issuance, and efficient utilization of intra-group funds.

Demand for products in the Electronic & Communication Equipment Business is affected by domestic and overseas economic conditions and trends in telecommunications infrastructure investment, and a global shortage of semiconductors and non-ferrous metal materials as well as soaring crude oil prices could adversely affect business performance through higher parts, materials, and transportation costs. Furthermore, deterioration in the situation in Russia/Ukraine and the Middle East could compound the impact on supply chains and procurement costs. There are also concerns about intensified price competition due to the entry of overseas companies into the domestic market and the shift of domestic companies' production overseas.

In the high-frequency wireless technology market, including mobile phone equipment, competition is intensifying due to the entry of domestic and overseas companies, and a similar situation exists in the solar module field. If the company is unable to sufficiently withstand price competition, customer attrition may occur, affecting business performance. The company aims to maintain and expand its market share by offering high-quality, high-value-added products and thoroughly reducing costs, but it explicitly states that there is no guarantee of maintaining a competitive advantage going forward.

The Renewable Energy Business depends on the feed-in tariff (FIT) system under the Act on Special Measures Concerning Procurement of Renewable Energy Sourced Electricity, and revisions to purchase prices or shortening of the purchase period could affect business performance. As a countermeasure, the company is focusing on developing small and medium-sized wind power plants, which have higher power sale unit prices, in addition to solar power plants, as well as on newly establishing grid-connected battery storage facilities. The company is promoting diversification of power generation types in order to disperse the risk of system changes.

As the scale of the solar power plant business expands, it becomes subject to regulations under laws and ordinances such as the Forest Act and environmental laws, which could prolong the period required to obtain permits and licenses or, in some cases, force the abandonment of projects. If the period from securing land to constructing power plants takes longer than expected, this could delay revenue recognition and the recovery of investment. The company recognizes that the likelihood of this risk materializing is low.

Since it takes a long time to train analog radio engineers in the high-frequency field, which is a core technology in the Electronic & Communication Equipment Business, training and recruitment costs could push up personnel expenses and affect business performance. In the Renewable Energy Business as well, personnel with specialized knowledge are essential from securing land to constructing power plants and commencing power sales, and it is necessary to strengthen management systems for development and holding, including small wind power plants. Securing and developing capable engineers is explicitly stated as an important issue for the company group.

Products in the Electronic & Communication Equipment Business are used in highly public facilities such as mobile phone equipment, disaster prevention radio equipment, and broadcasting-related equipment, and performance may be affected by outdoor weather conditions and installation environments. If performance deterioration attributable to design or manufacturing occurs, repair and other costs will arise, affecting business performance. In the Renewable Energy Business as well, if deviations from the initial plan occur due to deterioration in the sale of solar and small wind power plants, issues such as compensation claims could arise.

The company handles Chinese-made solar modules and wind power plant equipment, and various factors such as the political, economic, and legal conditions and terrorism in the relevant regions could affect business strategy and performance. In addition, as overseas transactions expand, strengthening of or unexpected changes in tax rates, tariffs, and other legal regulations could give rise to new costs. This risk also encompasses foreign exchange losses arising from sharp currency fluctuations, the occurrence of large-scale natural disasters or infectious diseases, damages arising from non-conformity to contracts, and litigation risk.

The company is considering and promoting M&A and business alliances aimed at expanding the group's overall business and generating synergies, but even after conducting sufficient due diligence, significant changes in the business environment or market conditions, or unforeseen circumstances, could affect business performance. The company may also acquire or sell overseas subsidiaries in the future, which entails risks specific to overseas investment. In new business investments as well, if business development does not proceed as initially planned, this could adversely affect business performance.