Business Environment and Issues to be Addressed

(From the Annual Securities Report disclosed on June 26, 2023
https://ssl4.eir-parts.net/doc/3853/yuho_pdf/S100R4FE/00.pdf)

While the global economy is showing clear signs of recovery from the COVID-19 pandemic, concerns are growing over global security challenges and inflation, which could have an unexpected serious impact on the world economy. In response to this situation, our Group is working hard to minimize a negative impact and build a new work style model by promptly implementing various measures, including telework, to ensure the safety of employees and the continuity of business activities.

In the medium to long term, cloud services and tools designed to achieve “remote operations” and “automation” will become essential in the new normal. This will spur the adoption of new technologies in a shorter period of time than previously anticipated.
Since our Group has been developing products based on the forecast of future demand, we will seek to capitalize on the big changes that lie ahead and boost our performance by addressing the following challenges:

1. Enhancing Corporate Governance

Since our establishment, Asteria has consistently appointed two or more outside directors. Outside directors have constituted the majority of our board of directors to ensure objective decision-making process and supervise execution of business operations.
Regarding the corporate governance code established by the Tokyo Stock Exchange, we have adopted “Comply” or “Explain” approach in some parts. Asteria recognizes the need to maintain and continuously improve our corporate governance with a focus on promoting communications with shareholders and the board diversity.

2. Strategic Investment and Post-investment Management

We are looking to expand our target market by acquiring new technologies and collaborating with future portfolio companies. To this end, we are actively making investment via our wholly owned investment subsidiary, ASTERIA Vision Fund Inc. based in the U.S. state of Texas, which forms one of our business segments. The fair value of portfolio companies, determined by its financial condition and the market environment, could have a material impact on our operating profits. We therefore recognize the importance of strengthening our system for post-investment management as the number of portfolio companies increases.

3. Growth of Design Business

One of our key businesses is the Design Business. The Design Business mainly provides strategic design consulting to help client companies advance their digital transformation (DX) efforts. Since many of existing clients’ businesses were damaged by the COVID-19 pandemic, which caused a decline in revenue, we believe that in order to achieve sustainable growth in the future, we need to shift our focus to growth areas in the era of the new normal.

4. Development of New Markets in the Software Industry

In order to further increase revenues from sales of our products, our challenge is to propose specific applications of our products and cement position in market. Our Group plans to develop the following new promising markets:

4-1. Cloud Data Integration Market
The COVID-19 pandemic has accelerated the use of cloud-based information systems. A platform for integrating data with cloud systems is expected to grow rapidly. The “Warp” series see steady sales growth of “Warp Core,” a subscription model that charges users monthly. We will grow this product to make sure that it will contribute to stabilizing revenues in the medium term.

4-2. AI Integration Market
As DX progresses in business, the market for AI based on machine learning is expected to grow in the medium to long term. We believe it is important to incorporate globally advanced AI into our products and services in this market. We have Asteria Artificial Recognition Technology, LLC., a company specializing in AI research and development, as a subsidiary, and will promote collaboration with external AI technology providers through capital tie-ups and other means.

4-3. IoT/ Edge Computing Integration Market
The market for IoT/edge computing is expected to expand. For companies to utilize IoT, it is important to integrate devices, cloud computing and systems, all of which are areas in which we excel. Particularly we will pursue collaboration with companies in the area of AI-equipped edgeware “Gravio” to develop this market.

5. Promotion of Blockchain Technology

Blockchain technology has huge growth potential. We are working on this technology in areas other than crypto assets. We will offer blockchain solutions that are not limited to a specific industry, such as adapters that connect “ASTERIA Warp” to blockchain, document forgery detection solutions and a blockchain-based voting system for a virtual meeting of shareholders.

6. Overseas Expansion

Since its establishment, our aim has been to develop and provide software that can be used globally. Particularly we are actively taking our internet services overseas, as platforms (technological platforms and sales environments) are standardized worldwide. Our software is developed in three languages (Japanese, English, and Chinese), and we believe that our overseas expansion efforts, including multilingual development, remain an important challenge.

7. Strengthening Human Resources for Growth

The number of client companies using our products and services has increased, while the scope of target industries and business categories has expanded significantly. Moreover, in order to further solidify our growth in various target fields amid the shift to multi-products/services and globalization, we place importance on the timely recruitment of talents in development, marketing, sales, management and other positions. To promote globalization in our business, we are actively hiring non-Japanese nationals.
We recognize the importance of developing global human resources by holding training on overseas legal risks, which is vital to global business.