SORACOM,INC.

The Group procures communication lines from domestic and overseas MNOs as an MVNO, but some lines are difficult to replace. If procurement disruptions or increases in line costs occur, this could lead to service delivery failures, lost revenue opportunities, and reduced reliability. The Group is expanding contracts with multiple overseas regional carriers, but this may result in substantial capital expenditure and deposit burdens.

The Group has built its IoT platform on AWS, and stable operation of the cloud service is fundamental to business continuity. If AWS experiences outages or system failures due to system errors, cyberattacks, natural disasters, or other causes, this could result in compensation claims from customers, additional cost burdens, and damage to brand credibility. The Group has established continuous monitoring and early recovery systems, but it is difficult to completely eliminate this risk.

The Group's business growth is premised on the continued expansion of the IoT-related market. If market growth is hindered by economic downturn, reduced capital expenditure, stricter legal regulations, stagnation in technological innovation, or other factors, this could have a material impact on operating results and financial position. The Group seeks to reduce this risk through expansion of recurring revenue, geographic diversification via overseas expansion, and close monitoring of the latest technology trends, but its dependence on the market remains high.

Numerous competitors, including MNOs and MVNOs, have entered the IoT-related industry, resulting in intense competition. The Group's competitive advantage may be undermined by intensifying competition with existing operators or the emergence of new entrants building similar platforms. The Group strives to maintain its competitiveness through continuous feature enhancement, quality improvement, and pursuit of convenience, but the sustainability of its advantage is not guaranteed.

The Group procures SIM cards for communication services and IoT device products from overseas suppliers, but stable procurement may become difficult due to semiconductor shortages, supply chain disruptions, and other factors. If significant defects occur in products that are difficult to replace, this could constrain business expansion and affect operating results. The Group works to secure inventory, but risks arising from external factors remain.

The Company is subject to regulation under the Telecommunications Business Act as a telecommunications carrier, and if its business operations are deemed inappropriate, it faces risks of business improvement orders or registration revocation. The Company must also comply with various domestic and international laws and regulations, including consumer protection laws, personal information protection laws, and foreign investment regulations. Violations of laws or regulatory changes could constrain business operations, damage brand image, and result in administrative sanctions. The Company addresses these risks through the use of legal experts and the development of internal regulations, but it is difficult to completely eliminate this risk.

The Group, as a telecommunications carrier, bears an obligation to protect the confidentiality of communications and handles customer information and personal data. If an information leak occurs, this could result in damage to brand image, substantial compensation, and fines under regulations such as the GDPR. The Group has established an information security committee and implemented measures to prevent internal leaks and external unauthorized access, but costs are expected to increase as information protection systems are further strengthened in the future.

As the business grows, the continuous recruitment and development of engineers with advanced technical skills and sales/marketing personnel is essential, but competition for talented personnel is intense. If recruitment plans are not achieved, personnel acquisition costs rise, or existing personnel leave the Company, this could affect service quality, competitiveness, and business operations.

The Group conducts foreign-currency-denominated transactions in sales to overseas customers, procurement of overseas communication lines, and purchase of SIM and device products, and is thus subject to exchange rate fluctuations. Currently, the Group does not implement specific hedging measures, taking into account the offsetting effects of foreign-currency-denominated transactions, and sudden exchange rate fluctuations could affect operating results and financial position.

KDDI Corporation is a major shareholder holding 42.1% of the Company's issued shares, and is in a position to influence the Company's management decisions through the exercise of voting rights. Under the business alliance agreement, competitive activities involving designated business areas require prior agreement with and consultation with KDDI. If future business development is deemed to compete with KDDI and consent cannot be obtained, business activities may be constrained. In addition, it cannot be ruled out that changes in KDDI's management policy or business strategy could give rise to competition.