Commerce One Holdings Inc.

The Group's revenue base is dependent on the domestic EC market, and if market growth slows or stagnates due to a deterioration in the domestic economic environment or in consumer spending trends, this could affect the Group's operating results through a deterioration in the business conditions of EC business operators, who are the Group's customers. In addition, the withdrawal of EC business operators due to the introduction of new laws and regulations, and increased costs for EC users due to rising telecommunications and logistics costs, could also serve as factors contributing to market contraction. Because the Group has built its business model on the premise of continued expansion of the EC market, it has a structural vulnerability to changes in the market environment.

In the market for EC-related solutions, multiple system integrators and SaaS providers offer similar services, and competition is intensifying, including the emergence of services that require no implementation fee or fixed usage fee. If competitors imitate or catch up with the Group's services in the future, causing the Group's differentiating characteristics to become standardized, its competitive advantage could decline and affect its operating results. The Group is pursuing differentiation through cross-selling and functional enhancements, but there is a possibility that these efforts will not be sufficiently effective.

In the internet and EC industry, in addition to changes in the media used and the expansion of data volumes, rapid technological innovation exemplified by generative AI (such as ChatGPT) is progressing. If the Group is slow to respond to new technologies and services, its services may become obsolete, potentially affecting its operating results. The Group is proceeding with version upgrades and the development of new services, and its subsidiary Commerce Connect is developing an AI-Powered Next-Generation Integrated EC Platform; however, the risk of being unable to keep pace with the speed of technological change remains ongoing.

The Group provides its services in SaaS format, and if unauthorized access leads to system intrusion, if system failures occur due to access volumes exceeding expectations, or if server downtime occurs due to natural disasters or other causes, this could affect operating results through service outages, leakage of personal information, damage to social credibility, and payment of damages. The Group has implemented network monitoring systems such as firewalls and a multi-server and backup system, but the risk of information leakage due to attacks by malicious third parties cannot be completely eliminated. Because the Group handles personal information of customers and purchasers, the risk of legal liability and reputational damage in the event of an information leak is particularly significant.

The Group has recorded software assets related to "commerce creator" of its subsidiary futureshop and the integrated EC platform under development by newly established subsidiary Commerce Connect, and if technological obsolescence or a slowdown in sales of these services occurs, an impairment loss may be recognized. In addition, at subsidiary Softel, diversifying customer needs sometimes result in increased man-hours after order receipt, and if costs exceeding the initially defined requirements arise and cannot be passed on through the sales price, individual projects may incur losses, potentially affecting operating results. At present, no indications of impairment have been identified, but this risk could materialize in the future due to technological innovation or changes in the market environment.

futureshop recognizes as revenue transaction-volume-linked commissions received from partner companies (¥599,105 thousand in FY2026 (ending March 2026)), and there is a risk that revenue will fluctuate due to changes in the number of partner companies or changes in commission rates. Revenue related to Softel's Tsuhan Suru Kura consists of customization fees (¥235,914 thousand, or 36.9%, in FY2026 (ending March 2026)) and maintenance fees (¥404,120 thousand, or 63.1%), and if the Company is unable to continue acquiring new customers, customization fee revenue may decline. Furthermore, for long-term customization projects, revenue is recognized based on the percentage of completion, and fluctuations in estimates of total development time may affect operating results in the following fiscal period.

While no laws or regulations directly applicable to the Group itself have been identified at present, the EC industry is a relatively new sector, and it may become subject to regulation in the future due to strengthened laws and regulations. In addition, the risk that expansion or modification of service functions may infringe on the intellectual property of other companies, or that other companies may infringe on the Group's intellectual property, cannot be ruled out. If litigation over intellectual property infringement or requests for injunctions against use occur, resolution may require substantial costs and time, potentially having a significant impact on business operations.

The Group positions M&A as an important growth strategy and actively pursues it; however, if the initially anticipated synergies are not realized, or if problems such as contingent liabilities or unrecognized liabilities that could not be identified through pre-acquisition due diligence arise after an acquisition, this could affect operating results. If impairment of goodwill becomes necessary, this could also affect business performance. In addition, the addition of new businesses through M&A brings with it the risk that business-specific risk factors of the acquired business will be added to the Group.

The Group holds shares in Wistron Information Technology & Services Corp. (listed on the Taiwan Stock Exchange, book value of ¥402,494 thousand, holding of 748,353 shares) and ZIGZAG, Inc. (book value of ¥4,709 thousand), among others, and if the share price or substantial value declines significantly due to stock market conditions, the business performance of the investee, geopolitical risk, or other factors, this could affect the Group's operating results and net assets. In particular, Wistron is susceptible to geopolitical risk related to Taiwan, and if the company's earnings deteriorate and it suspends dividend payments, there is a risk that dividend income received (¥18,957 thousand in FY2026 (ending March 2026)) would disappear.

Representative Director Okamoto concurrently serves as a non-executive director of the Japan Cycle Co., Ltd. group, and if serious problems arise in the management of that group, Mr. Okamoto may become preoccupied with addressing them regardless of his own intentions, potentially temporarily affecting the execution of the Group's business operations. The Japan Cycle group receives investment and loans from Asian Asset Acquisition Pte. Ltd. (a shareholder of the Company), and attention should also be paid to this relationship with the Group. At present, Mr. Okamoto's involvement is limited to confirming fund flows and providing advice on management policy, and it is planned that he will continue his concurrent position only to the extent that it does not impede his performance of duties as the Company's Representative Director.