THECOO Inc.

In the fan business market to which the fan community platform "Fanicon" belongs, there is a risk that the Company's competitive advantage may be undermined by the entry of major companies with capital strength, brand power, and technological capabilities, inter-company alliances, price competition, and the rise of emerging services utilizing new technologies. In addition, the retirement, suspension of activities, or dissolution of groups of "Icons," or a decline in Icon popularity due to changes in fan preferences, could directly lead to reduced revenue. The Company is responding by leveraging its native app technology and planning capabilities to add and strengthen service functions and to differentiate itself.

The influencer marketing market, on which the Digital Marketing Business depends, could be affected if changes in consumer behavior lead to shifts in video viewing habits or a slowdown in the growth of SNS users. The Company monitors market changes through interviews with both advertisers and influencers, third-party market research, and observation of overseas trends; however, if a structural decline in demand occurs, it could affect the Company's business and operating results.

Although the Company achieved profitability in FY2025 (ended December 2025) as a result of upfront investments, there is a possibility that it could once again record losses if business development does not proceed as planned due to changes in the competitive environment or deterioration of market conditions. In phases where continuous investment for Icon acquisition, fan base expansion, and service function enhancement exceeds revenue generation, this could affect the financial position and operating results. The Company strives to establish a stable revenue base through the efficient use of existing management resources and thorough management of income and expenditure.

If a problem occurs within a "Fanicon" community and the Company's response is delayed or insufficient, it could escalate into a public controversy, damaging the reputation of the Company and its services, and potentially leading to the departure of Icons and fans. The Company addresses this through the establishment of a response flow for violations of community guidelines, regular checks of content and chat by the Fan Business Platform Business Division, and a system for direct reporting by users; however, it is difficult to completely eliminate this risk.

The Company holds personal information of Icons and fans in the Fan Business Platform Business, and of creators in the Digital Marketing Business. In the event of a leak, the Company could incur damages compensation costs and suffer a loss of social trust, which could affect its business, financial position, operating results, and cash flows. The Company has obtained Privacy Mark certification (renewed in August 2025), has established and thoroughly disseminated its Basic Regulations for the Protection of Personal Information and PMS manual, and has implemented measures such as identification of personal information, risk analysis, and restriction of handling personnel by each department head.

"Fanicon" provides its service 24 hours a day, 365 days a year using Google Cloud Platform and Amazon Web Services. However, if a communication network disruption occurs due to a disaster or accident, if servers become inoperable due to a sudden surge in access, or if hardware malfunctions occur, stable service provision could become difficult. This could directly disrupt the experience of Icons and fans, leading to reputational decline and user churn, which could affect the Company's business, operating results, and cash flows.

Masato Taira, the founder and Representative Director and CEO, plays an extremely important role in determining and executing the Company's management policies and business strategies. If, for any reason, he becomes unable to continue his duties, this could have a material impact on the Company's business and operating results. The Company is working to build a system to reduce excessive dependence on a single individual through information sharing with officers and executive staff at Board of Directors meetings and other venues, and through strengthening its management organization; however, at present, the degree of dependence remains high.

"Fanicon" provides its app through the App Store (Apple) and Google Play, and the use of these platforms is a critical precondition for the business. If either company changes its business strategy, revises its content guidelines, changes its fee structure, or if the relationship with the Company deteriorates, this could have a material impact on the Company's business, operating results, and cash flows. The Company has established a system to comply with the content guidelines of the App Store and Google Play; however, it is difficult to completely eliminate the risk of unilateral policy changes by the platform operators.

Both of the Company's businesses are subject to regulation under a wide range of laws, including the Copyright Act, the Act on Specified Commercial Transactions, the Act against Unjustifiable Premiums and Misleading Representations, the Act on the Protection of Personal Information, the Telecommunications Business Act, and the Payment Services Act. As these are new business types, issues may arise regarding the interpretation and application of existing laws. If laws are amended or abolished, or if new regulations are introduced, the Company may be forced to change its business operations, which could affect its operating results. The Corporate Division takes the lead in developing a compliance system in collaboration with legal counsel, and monitoring is conducted at Risk Management Committee meetings held at least once per quarter.

As of the end of the fiscal year under review, shares of the Company held by VCs and others totaled 263,826 shares (12.6% of the total number of issued shares of 2,100,105 shares). If VCs and others sell part or all of their holdings on the market, this could temporarily disrupt the supply-demand balance and affect share price formation. VCs and others generally tend to sell their holdings after listing in order to realize capital gains, and the likelihood of this occurring is high, with the potential to materialize within one year. The Company's direct countermeasures are limited, and investors should recognize this as a share supply-demand risk.