FRONTIER INTERNATIONAL INC.

Corporate advertising and sales promotion expenditures are highly susceptible to economic conditions, and an economic downturn in the domestic market could affect the Group's order volume and business performance. The Group classifies client orders into three attributes—major advertising agencies, foreign-affiliated advertising agencies, and direct clients—and manages balance to avoid excessive dependence on any single attribute; however, the risk of reduced orders due to unforeseen circumstances remains.

In many cases, event organizers place orders via major advertising agencies, and a certain proportion of the Group's orders also depends on major advertising agencies. If order volume from major advertising agencies is curtailed, it could directly impact the Group's sales and business performance. The Group seeks diversification by undertaking a wide range of event production, but the structural dependency continues.

There is a risk that the Group's competitive advantage may relatively decline due to new entrants or business expansion by companies with capital strength, marketing capabilities, high brand recognition, or specialized expertise. In particular, the entry of companies with high expertise in the interactive domain could accelerate structural changes in the promotion industry. The Group is responding through partnerships with affiliated companies and the establishment of a dedicated creative department, but depending on how the industry structure changes, business performance could be affected.

During the spread of COVID-19, voluntary refraining from outings and behavioral restrictions led to event cancellations and closures of retail stores, which had a significant impact on the Group's business results. If COVID-19 resurges in the future or an unknown epidemic occurs, there is a risk of similarly affecting financial condition, business results, and cash flows. While COVID-19 has currently settled down, the risk continues to be recognized.

The Group recognizes revenue upon receipt of a work-completion confirmation document from the customer, and there is a possibility that the timing of promotion implementation may be significantly delayed or cancelled due to delays in obtaining permits/licenses, delays in the organizer's product development, or delays in establishing production systems. In FY2025 (ended April 2025), the quarterly sales composition ratio was skewed, with 19.42% in the first quarter and 32.25% in the fourth quarter, and quarterly fluctuations are tending to expand along with an increase in large-scale projects. Fluctuations in implementation timing or cancellations directly affect that period's business performance.

The Group handles large volumes of consumers' personal information, such as names and addresses, through campaign entry postcards and broadband subscription application forms, and there is a risk of leakage, falsification, or unauthorized use. The Group obtained Privacy Mark certification in August 2006 and holds regular information security committee meetings and departmental self-checks, but the risk cannot be completely eliminated. Should an incident occur, business performance could be affected by response cost burdens, damages claims, and loss of credibility.

Promotion proposal work requires personnel with strong planning capabilities, and if the securing and development of human resources accompanying business expansion does not proceed as planned, there is a possibility of a decline in competitiveness or constraints on business expansion. The Group has built an organizational capability-supplementing system through the development of manuals and internal databases, but given the industry characteristic of heavy dependence on individual capabilities, securing excellent personnel remains an ongoing challenge.

Yasuhiro Kawamura, the founder and Representative Director and President, plays an important role in formulating, deciding, and executing management policy and business strategy, and there is a risk that business and performance could be affected should he become unable to continue his duties. The Group is working to reduce this dependence through information sharing at Board of Directors and management meetings and the development of executive personnel, but dependence on him currently continues.

The Group primarily outsources the production of premium goods to factories in China, and if defective products occur, business performance could be affected by returns, exchanges, damages claims, and loss of credibility from business partners. When selecting outsourced factories, the Group scrutinizes past track records and quality control systems and conducts on-site inspections by Group employees, but the risk cannot be completely eliminated.

As of the filing date of this document, the total number of shares subject to stock acquisition rights is 91,300 shares, representing 1.9% of the total number of issued shares. If these stock acquisition rights are exercised in the future, the value per share may be diluted. The current dilution rate is limited, but this is disclosed as an important matter for investors' investment decisions.