f-code Inc.

As of the end of the fiscal year ended December 2025, the Group had interest-bearing debt outstanding of ¥13,041 million, part of which was procured at variable interest rates and is thus exposed to interest rate rise risk. In addition, certain borrowings are subject to financial covenants, and if conditions relating to net assets, ordinary income, or similar metrics are breached, the Group could lose the benefit of the grace period and be required to repay the borrowings in a lump sum. The Group seeks to hedge this risk by maintaining an appropriate balance between fixed and variable interest rates and through profitability-focused management.

As of the end of the fiscal year ended December 2025, the Group recorded goodwill of ¥12,101 million and other intangible fixed assets of ¥203 million, and impairment testing is conducted each period in accordance with IFRS. If expected cash flows can no longer be anticipated due to failure to achieve business plans or changes in market conditions or the competitive environment, an impairment loss may occur, which could materially affect the Group's financial position and operating results. Goodwill and intangible assets related to certain M&A transactions include amounts based on provisional accounting treatment as of the end of the fiscal year ended December 2025.

The Group actively pursues M&A to enhance corporate value; however, significant changes in market and competitive conditions after an acquisition, or increased integration costs, may prevent the originally expected synergies from being realized. Although due diligence is conducted in advance, if unexpected risks materialize after an acquisition, the expected investment return may not be achieved, affecting the Group's financial position and operating results. Regarding the use of proceeds, the Group plans to allocate funds raised through public offerings in 2023 and 2024 to the repayment of borrowings related to M&A, and intends to promptly disclose any changes to this plan.

In the marketing technology-related field, competition is intensifying due to the successive entry of strategic consulting firms, major advertising agencies, and SI vendors. If new competitors with competitive strength derived from technological innovation emerge and the Group's service differentiation becomes insufficient, this could lead to a decline in market share and deteriorating profitability. The Group aims to maintain its competitiveness by enhancing existing service functions and establishing a rapid development framework.

In the DX market and marketing technology-related markets, the pace of technological innovation is rapid, and unexpected technological changes may result in additional system development costs. If the Group fails to respond in a timely manner, its technological advantage and service competitiveness may decline, affecting its financial position and operating results. The Group monitors industry trends while maintaining a development framework capable of rapidly deploying new technologies.

The Group's principal business areas are the DX market, internet advertising, and the marketing technology market. If regulations on internet use are introduced or a deterioration in economic conditions leads to a consumption downturn, growth in the advertising market may be hindered. If businesses reduce their advertising expenditures under such circumstances, this would directly affect the Group's sales and earnings. Continued expansion of the market is a precondition for the Group's business growth.

Representative Director Tsutomu Kudo has continuously served as representative since March 2011 and plays an extremely important role, from determining management policy to overseeing business operations. If, for any reason, he becomes unable to perform his duties, this could affect the Group's financial position and operating results. The Group is working to build a management structure that does not depend on a specific individual, through organizational development for appropriate delegation of authority and human resource development.

The improvement in quality of the Group's core services and the development of new services depend on human resources. If intensifying competition for talent prevents the Group from securing sufficient skilled personnel to keep pace with business expansion, this could lead to inefficiencies in business operations. In addition, as the Group is a relatively small organization with fewer than 500 employees, the impact of the departure or turnover of key officers or employees on business activities is relatively significant. The Group continuously implements measures for recruitment, development, and retention.

In its digitalization support business, the Group obtains confidential information and personal information from clients and is bound by confidentiality obligations under non-disclosure agreements and similar arrangements. If such information were leaked externally for any reason, this could result in loss of trust and legal liability, affecting the Group's financial position and operating results. The Group enforces strict information management and provides confidentiality training to employees.

The Group has granted stock acquisition rights to directors and employees, and as of the end of the month preceding the filing date of this document, the number of potential shares was 1,351,000, representing 10.89% of the total number of issued shares of 12,409,400. If these stock acquisition rights are exercised in the future, the value of shares held by existing shareholders may be diluted. In addition, the Group has not paid dividends since its establishment, and the possibility and timing of future dividend payments remain undetermined at this time.