KUBOTEK CORPORATION

The Group has recorded operating losses for eight consecutive periods and negative operating cash flow for two consecutive periods, giving rise to events that raise material doubt about the going concern assumption. The outlook for securing funds from the next fiscal period onward remains uncertain, and a concrete funding plan has not yet been formulated, posing a risk of significant impact on cash flow. New orders for the Optics Image Processing Visual Inspection System have declined to a severe level, and the order backlog has decreased substantially, making early improvement in profitability difficult.

The Company's shares were designated as a stock under supervision (in preparation for delisting) by the Tokyo Stock Exchange effective April 22, 2026, and are scheduled to be delisted on October 1, 2026. The delisting will significantly reduce the liquidity of the shares, restricting shareholders' opportunities to recover their investments, and may also adversely affect the Company's social credibility, financing environment, and relationships with business partners. The extent of these impacts is currently difficult to reasonably estimate, creating uncertainty for business operations.

The core inspection system business is heavily dependent on capital expenditure by FPD manufacturers, and sales destinations vary significantly by period due to differences in the timing of investment among manufacturers. If delays in line installation or specification changes occur on the user side after an order for equipment is received, the resulting delivery delays affect period profit and loss. Advances in FPD size enlargement and higher definition may cause development costs and other burdens to exceed the assumptions made at the time of order receipt, potentially squeezing profitability.

The inspection system business is predominantly composed of sales of the Optics Image Processing Visual Inspection System to FPD manufacturers, with concentration progressing among a select number of major manufacturers in Japan, South Korea, Taiwan, and China. Changes in the capital expenditure and order trends of these specific customers pose a risk of directly and adversely affecting the Group's financial position and business results. Furthermore, international conflicts and stricter export controls may restrict business activities, and the Group is working to diversify its markets and customers (e.g., functional film and semiconductor inspection equipment).

The Group differentiates its products by combining information, control, communication, machinery, and other technologies in a complex manner, and takes a policy of avoiding price competition. However, if a competitor develops an innovative new product that surpasses the Group's technology, there is a risk of losing technological competitiveness. Furthermore, if the Group is forced into price competition, this could adversely affect its business strategy and business results.

The Group is small in scale, with 6 officers and 64 employees (as of March 31, 2026), and business activities depend on a small management team. There is a risk that human and organizational responses may not keep pace during business expansion. While the Group intends to strengthen the recruitment of specialized personnel and enhance internal management systems, increases in fixed costs could push down profit plans. If personnel acquisition and organizational development do not proceed as planned, there is a risk of disruption to management activities.

The Group procures many materials, including semiconductors, from external sources, and works to secure stable procurement through supplier diversification and early ordering, among other measures. However, if procurement of materials is disrupted due to sudden fluctuations in supply and demand or other factors, manufacturing and sales of products could become difficult, potentially adversely affecting business strategy and business results. The impact would be particularly significant in the event of supply chain disruptions such as semiconductor shortages.

Exports to South Korea, Taiwan, and China are currently conducted almost entirely in yen-denominated transactions, so the Group is not directly affected by exchange rate fluctuations. However, if the yen appreciates, there is a possibility of indirect effects such as reduced demand due to higher local-currency prices for products. Furthermore, there is no guarantee that yen-denominated transactions will continue in the future, and if transactions shift to foreign-currency denomination, exchange rate fluctuation risk would directly affect business results.

The United States Segment's 3D Solution System products are being promoted for expanded sales of software products utilizing an in-house developed kernel and the 3D Kernel itself, but continued demand stagnation has created uncertainty in business operations. This business is positioned as a pillar of profit recovery alongside the Japan Segment's Optics Image Processing Visual Inspection System, and prolonged stagnation could seriously impede the Group's overall profit improvement plan.

New orders for the Optics Image Processing Visual Inspection System have fallen to a severe level, and the order backlog at the end of the consolidated fiscal year decreased substantially. The decline in order backlog directly signals a decrease in expected future revenue recognition, further complicating a short-term recovery in profitability. While the Group is focusing on developing new markets and securing orders for higher value-added projects, the outlook for improvement remains uncertain.