uSonar Co., Ltd.

In the course of handling customer information including personal information, there is a risk of information leakage or loss due to intentional or negligent acts by officers, employees, or outsourcing partners, or cyberattacks by third parties. If such an event occurs, it could result in difficulty acquiring and retaining clients due to a decline in trust and corporate image, as well as the possibility of incurring substantial costs for damages compensation and security system remediation. As a countermeasure, the Company has obtained ISO/IEC27001 certification and established and complies with basic regulations for personal information protection, working to strengthen and enhance its information management system.

Mr. Nanami Fukutomi, the founder, major shareholder, and Representative Director and Chairman, plays a critical role in formulating business strategy and other key matters, resulting in a high degree of dependence on him. If, for any reason, he becomes unable to perform his duties, it could have a material impact on business operations. As a countermeasure, the Company is promoting the adoption of a multiple-representative-director system and the delegation of authority to the Representative Director and President, striving to establish an organizational structure.

In the event of accidents or disasters such as earthquakes, tsunamis, large-scale natural disasters, or fires, or the outbreak of a pandemic, business activities could be disrupted, potentially affecting business strategy, business results, and financial condition. A decline in IT investment appetite due to the spread of infectious disease could also affect business results. To minimize the extent of damage should such events occur, the Company strives to conduct inspections and drills and to establish communication systems.

The core service "uSonar" depends on the IT investment budgets of B2B companies, and if corporate IT investment sentiment weakens, a slowdown in new contract acquisitions, cancellations by existing clients, and a decline in average selling prices are expected. While the subscription-based nature of the service makes immediate cancellations less likely, the impact of external factors such as economic conditions cannot be entirely ruled out. The Company states that no signs of this risk materializing have been detected at present.

Due to the nature of subscription-based services, a certain level of cancellations occurs throughout the year owing to changes in contracted clients' business environment, business strategy, or organizational structure. If cancellations exceed the Company's expectations, it could affect the Company's financial condition and business results. The Company's basic policy is to maintain a low cancellation rate through measures to improve customer satisfaction.

Internet-related technologies are subject to rapid change with the successive introduction of new technologies and services, and a delayed response could lead to service obsolescence and a decline in competitiveness. In addition, if substantial investment in new technologies and services becomes necessary to respond to changes in the environment, it could affect the Company's financial condition and business results. The Company continuously considers the introduction of new technologies and the provision of new services.

The software development field has relatively low barriers to entry, and there is always a possibility of new entrants from individuals or other industries with new technologies or innovative business models. If a major company with abundant financial resources engages in price-based competition, there is a risk that the Company could be pushed out of the market. To secure competitive advantage, the Company is working to expand its service, sales, and system development organizations.

Due to the nature of cloud services, there is a high degree of dependence on communication networks and infrastructure, and unforeseen trouble caused by natural disasters, accidents, or other events could lead to large-scale system failures, potentially affecting the Company's financial condition and business results. The Company monitors system operating status, performs backups, and implements cloud server redundancy to prevent the occurrence of failures and minimize their impact.

Securing, developing, and retaining excellent personnel over the long term is important for the continuous growth of the business, and if the Company is unable to secure sufficient personnel or if labor costs rise sharply, it could affect the business plan and business results. The Company strives to secure personnel through measures such as improving compensation levels and enhancing employee benefits, against a backdrop of intensifying competition in the IT talent market.

The Company collects information from sources such as corporate websites, publicly available information from government agencies, and corporate registry data, but there is a possibility that restrictions or prohibitions on information collection could be imposed due to policy changes by information sources or the tightening of legal regulations. Should such circumstances arise, they could lead to a decline in service quality and additional costs related to information collection, potentially affecting business results. The enactment of new laws regulating internet-related businesses or changes in the interpretation of existing laws could also lead to a decline in the competitiveness of the Company's core services.