Aucfan Co.,Ltd.

Of the ¥4,657,045 million in net sales for FY2025 (ending September 2025), Marketplace revenue accounted for ¥1,610,548 million (34.6%), indicating a high degree of dependence on specific services. If the introduction of new legal regulations or unforeseen events reduces site convenience, this could lead to a decline in the number of users and have a material impact on business results. The Company currently seeks diversification through the operation of multiple marketplaces, but this dependency structure has not been resolved.

Improper transactions and accounting treatment spanning multiple fiscal years were identified at the Company and its consolidated wholly owned subsidiaries. Recurrence prevention measures based on recommendations from the Special Investigation Committee were announced and implemented as of March 8, 2023. However, if these recurrence prevention measures are not steadily executed or an appropriate compliance framework is not established, this could result in material misstatements in financial reporting or loss of credibility, adversely affecting business results and financial condition. Deficiencies in the design and operation of internal controls continue to be recognized as risk factors.

The Group accumulates personal information obtained through member registration in database servers, and faces the risk of information leakage due to unauthorized intrusion or human error. Should a leak occur, it could lead to a decline in reputation resulting in decreased membership and transaction volume, as well as claims for damages. As countermeasures, the Group has obtained ISMS certification, established basic regulations for personal information management, and implemented access restrictions and log management; however, it is explicitly stated that these measures do not guarantee complete prevention.

The Group's core businesses are the EC-related market and internet media business. As internet-related laws and regulations continue to develop, there is a risk that the introduction of new regulations or changes in the interpretation of existing laws could constrain business operations. The Group is subject to the Unauthorized Computer Access Law, the Act on Regulation of Transmission of Specified Electronic Mail, the Act on Specified Commercial Transactions, the Act on Development of an Environment that Provides Safe and Secure Internet Use for Young People, the Consumer Contract Act, the Act against Unjustifiable Premiums and Misleading Representations, and other laws, and business expansion may be restricted by tightened regulations. In addition, the actions of internet auction market operators such as Yahoo Japan Corporation directly affect business results.

The internet industry is characterized by extremely rapid cycles of technological innovation and changing customer needs, with a succession of new entrants based on new technologies. If the Company encounters difficulties in accumulating knowledge and expertise in advanced technologies or in securing talented engineers, this could result in a decline in technological superiority and service competitiveness, affecting business results. The Company's policy is to accumulate knowledge of advanced technologies, including open source, and to actively recruit talented engineers, but this does not guarantee a certain response.

The Group's services are provided via servers, and if the system becomes unable to operate normally due to natural disasters, computer viruses, fraudulent acts, human error, or other causes, this could result in service interruptions or the loss of accumulated product and pricing information. The Group has implemented measures such as hosting at major domestic data centers combined with the use of cloud servers, and internal backup storage of information; however, if a service interruption occurs despite these measures, it could affect business operations and results.

Many users of the Group's services arrive via specific search engines or internet advertising, and a significant change in search algorithms could result in a decrease in user acquisition or difficulty in delivering appropriate advertising. There is a risk that additional costs incurred in response to such changes, or a decrease in the number of visitors to each site, could affect business results. While the Group intends to continue search engine acquisition measures and internet advertising delivery, its dependence on external platforms will continue.

The Group is working to develop overseas BtoB wholesale markets, primarily in China, and to build cross-border EC platform services, with plans to promote bidirectional wholesale product distribution between Japan and China. The Group may face risks from unforeseen changes in laws and regulations related to import/export controls, investment regulations, restrictions on repatriation of profits, transfer pricing taxation, and other matters arising from political and economic factors in each country. If these risks materialize, they could affect business performance and financial condition.

Representative Director Shuichi Takenaga plays a critical role in company management, including business planning and execution, and there is a risk that if he becomes unable to perform his duties, this could affect business operations and results. The Group is focused on developing and strengthening its personnel to avoid excessive dependence on him, but this dependency relationship currently continues. Responding to the risk of a sudden inability to perform duties due to an unforeseen accident or other cause is recognized as a challenge.

The Group grants stock acquisition rights as incentives to officers and employees, and if these are exercised, the value per share may be diluted. Similarly, under the restricted stock compensation plan introduced by resolution of the Board of Directors on November 28, 2019, if new shares are issued as grants, similar dilution will occur. The Group may continue to grant stock acquisition rights and issue restricted stock in the future, raising concerns about the impact on share price.