TOKYO BOARD INDUSTRIES CO.,LTD.

The Group has recorded operating losses and ordinary losses for nine consecutive fiscal years (eight consecutive fiscal years through the previous consolidated fiscal year), and in the current consolidated fiscal year recorded an operating loss of ¥81,337 thousand, an ordinary loss of ¥190,731 thousand, and a net loss attributable to owners of the parent of ¥777,831 thousand. The balance of interest-bearing debt of ¥7,409,396 thousand (short-term borrowings of ¥256,265 thousand, current portion of long-term borrowings of ¥6,227,512 thousand, and long-term borrowings of ¥925,618 thousand) significantly exceeds available liquid funds on hand (cash and deposits of ¥1,171,854 thousand), giving rise to material doubt about the Company's ability to continue as a going concern. Although the Company has obtained consent from financial institutions that they will not exercise their right to accelerate maturity, material uncertainty is recognized at this time.

As a result of funding the construction costs of the Sakura Plant through borrowings from multiple financial institutions, the balance of interest-bearing debt at the end of the current consolidated fiscal year reached a high level of ¥7,409,396 thousand, or 65.9% of total assets. Some borrowings are subject to financial covenants, and there is a risk that the benefit of time could be forfeited if these covenants are breached. Although the Company has currently obtained consent from all relevant financial institutions that they will not exercise their right to accelerate maturity, ongoing discussions and continued support from these institutions remain essential.

The Group's mainstay product, the E・V・A Board (flooring material), is significantly affected by the number of new starts of multi-family housing and condominiums, while Kabemusha is significantly affected by the number of new starts of detached housing. If the number of new housing starts declines significantly, this could have a direct adverse effect on net sales and financial condition. The Group is working to diversify this risk by expanding sales of non-residential products and focusing on the waste treatment business and the general freight transport business.

The main raw material for the mainstay E・V・A Board product is wood waste, and if it becomes difficult to secure waste wood, this could disrupt production activities and affect business performance and financial condition. Because the procurement of waste wood depends on market conditions and the circumstances of waste-generating businesses, stable procurement is a prerequisite for business continuity. The Group is working to secure the volume of waste wood collected by transporting non-wood waste simultaneously and promoting circular logistics, thereby improving transport efficiency and strengthening customer relationships.

Since the adhesive used as a raw material for the E・V・A Board is derived from crude oil, there is a risk that a surge in crude oil prices caused by exchange rate fluctuations or conditions in producing regions could lead to higher procurement prices. If the increase in adhesive costs cannot be passed on to sales prices, this could adversely affect business performance and financial condition. The Group is working to minimize this impact by optimizing production efficiency to reduce adhesive usage and by utilizing fuel-efficient transport vehicles and conducting driving technique training, among other measures.

The Group's waste treatment business operates under industrial waste collection/transport and disposal permits (valid for five or seven years) obtained from the governors of each prefecture based on the Waste Management and Public Cleansing Act. If renewal, modification, or new acquisition of these permits is not approved, it could have a material impact on business activities. If violations such as illegal dumping or false statements on manifests, or violations of facility standards, occur, there is a risk of administrative sanctions such as business suspension orders or revocation of permits. The Group strives to avoid the risk of permit suspension through thorough compliance and continued maintenance of its certification as an excellent industrial waste treatment operator.

The Waste Management and Public Cleansing Act has been amended almost every year since 2003, with increasing emphasis on strengthening the responsibilities of waste-generating businesses and treatment contractors. Depending on future trends in legal regulations and administrative guidance, there is a possibility that business operating costs could increase or the scope of business could be restricted, affecting business results. The Group works to obtain information on legal amendments early and to establish appropriate systems, while also actively viewing legal amendments as business opportunities and promoting investment toward building a recycling-oriented society.

The Group's main products have obtained JIS mark certification and undergo periodic reviews every three years by registered certification bodies. If significant defects or deficiencies are found in quality, performance, or the quality control system during a review, the JIS mark certification could be revoked, which could affect business performance. In addition, if a new product under development fails to obtain certification by the planned time, this could result in a delay in bringing the product to market.

In the fiscal year ended February 2026, the combined sales ratio of the top three customers (SMB Kenzai Co., Ltd., Toyo Materia Co., Ltd., and Itochu Kenzai Corporation) reached 36.3%, indicating a high degree of dependence on specific customers. If deterioration in transaction terms, termination of transactions, or significant changes to contract terms occur due to circumstances specific to these customers or to end users (such as general contractors and homebuilders), this could affect business performance and financial condition. The Group is working to diversify its customer base for each product so as to maintain a balance among customers.

If production facilities are damaged by natural disasters such as earthquakes or typhoons, or by accidents such as fires, this could result in a suspension of production activities, a significant decline in net sales due to shipment delays, substantial expenditures for repairs, and a slowdown in economic activity due to supply chain disruption. In particular, at production sites with a high risk of fire, the Group is working to strengthen countermeasures and prevent recurrence through capital investment and other measures based on risk assessments. From a business continuity plan (BCP) perspective, the Group is promoting minimization of damage and strengthening of its business continuity systems.