Frontier Management Inc.

The Company recorded operating losses for two consecutive fiscal years, mainly due to weak sales in the M&A Advisory Business in FY2024 (ending December 2024), and weak sales in consulting-related businesses combined with front-loaded fixed cost recognition resulting from delayed investment execution in the Investment Business in FY2025 (ending December 2025). Accordingly, the Company recognizes that events or conditions exist that raise material doubt regarding its ability to continue as a going concern. While the Company has determined that no material uncertainty exists in light of its management policies and responses to key challenges, if the recovery in business performance is delayed, this could have a material impact on its financial position and operating results.

Revenue in the M&A Advisory Business consists of basic fees such as retainer fees and work fees, plus success fees that are received only when a deal is closed. In particular, if a large-scale deal fails to close, revenue may decline significantly. Quarterly performance also fluctuates greatly, and results may diverge sharply between quarters in which success fees are concentrated and those in which they are not. The Company mitigates this through revenue stabilization from the Management Consulting Business and the Business Turnaround Support Business, as well as by accumulating non-large-scale deals, but the risk of dependence on large-scale deals remains.

Frontier Capital Co., Ltd., established in April 2022, has entered into capital increase underwriting agreements totaling ¥13,500 million with eight financial institutions and one company, of which ¥8,000 million has already been raised, and investments have been executed in a cumulative total of seven companies. If investment activities do not progress smoothly relative to the business plan, or if impairment losses arise due to deterioration in the profitability of investee companies, this could impact the Group's financial position and operating results. Delays in the timing of investment execution have already been a contributing factor to two consecutive fiscal years of operating losses, indicating that this risk has already materialized.

Shoichiro Onishi, the founder and Representative Director, plays a critical role across the Group's overall business activities, including determining management policies and strategies. If he were to step down from management for retirement or other reasons, this could have a broad impact on the Group's business strategy, organizational operations, and operating results. At present, his departure is not anticipated, but the annual securities report does not provide specific disclosure regarding the status of succession planning.

The Group's business execution is fundamentally dependent on experienced, highly specialized personnel. If the Group is unable to secure the necessary personnel or if key personnel depart, this would directly impact business execution. In addition, tightening labor supply and demand could increase recruitment costs and fixed costs such as personnel and facility expenses, potentially affecting the Group's financial position and operating results. With an organizational scale of 417 employees (as of the end of December 2025), there is also a risk that human and organizational resources may not keep pace during phases of rapid business expansion.

The Group's business inherently involves obtaining confidential information from client companies, and if an information leak were to occur, the resulting loss of trust could impact the Group's business strategy and operating results. In addition, if officers or employees were to engage in insider trading based on confidential information of client companies, this could severely damage the Group's credibility. The Group has implemented measures such as entering into confidentiality agreements, providing confidentiality training to employees, and in principle prohibiting stock trading under internal regulations, but it is difficult to eliminate this risk entirely.

The Group's businesses do not require specific licenses or permits to operate, resulting in low barriers to entry and intense competition. Price competition may intensify further going forward, which could impact the Group's financial position and operating results. The Group seeks to differentiate itself by providing a one-stop range of diverse management support services and enhancing service sophistication, but sustained efforts are required to maintain competitive advantage.

The Group is expanding overseas through its subsidiary in China (Shanghai), its Singapore branch, its Paris branch (opened in February 2024), and its equity-method affiliate Athema (France), some of which are still in the process of becoming profitable. If the business plans for these entities do not progress smoothly, this could impact the Group's financial position and operating results. There are also risks specific to overseas operations, such as unexpected changes in laws and regulations, difficulty securing personnel, political instability, and foreign exchange fluctuations.

The Group holds fixed assets such as goodwill, customer-related assets, and buildings. If impairment accounting becomes necessary due to deterioration in profitability or other factors, this could impact operating results and financial position. Given the current situation of two consecutive fiscal years of operating losses, the risk that impairment testing will be required if the recovery in profitability is delayed is relatively elevated. The Company intends to respond in accordance with accounting standards and application guidance related to impairment of fixed assets.

The Group has adopted a stock option system and a restricted stock compensation system. As of the end of the current consolidated fiscal year, potential shares from stock options totaled 217,200 shares (equivalent to 1.84% of the total number of issued shares). If these options are exercised or new shares issued, the value of shares held by existing shareholders may be diluted. Further dilution may occur due to additional grants in the future.