Asterisk Inc.

Following two consecutive fiscal years of operating losses in FY2023 (ended August 2023) and FY2024 (ended August 2024), the Company recorded a consolidated operating loss again in FY2025 (ended August 2025). The US subsidiary AsReader, Inc. has posted operating losses for three consecutive fiscal years, putting pressure on overall group performance. Although operating cash flow turned positive, it is explicitly stated that events exist that raise material doubt about the going concern assumption, and the Company is implementing countermeasures including rebuilding the domestic sales structure, expanding stock-type products, and securing cash on hand.

Among the mainstay AsReader Series (Barcode/RFID Readers) products, Apple MFi-certified products can only be manufactured by SPS Inc. of South Korea, and approximately 49.0% of consolidated net sales of ¥1,666,306 million for FY2025 (ended March 2025) is dependent on production by this company. Since manufacturing outside MFi-certified factories is not possible, there is a risk that product supply could be halted in the event of deterioration in the company's financial condition, disasters, or political developments. While measures such as diversifying manufacturing sites and accumulating in-house production know-how are being implemented, alternative means remain limited.

Indications of impairment were identified at subsidiaries AsReader, Inc. and Jido Reji Kenkyusho Co., Ltd., and impairment losses were recorded in the 19th fiscal year (FY2025, ended August 2025). If indications of impairment are identified in held fixed assets in the future, additional impairment losses may be recorded based on the results of recoverability assessments using future cash flows, which could affect the financial position and operating results.

Some products in the AsReader Series (Barcode/RFID Readers) are designed to be attached to smart devices such as iPhones, and if the device side undergoes specification changes such as size changes, a model change of the product becomes necessary. Increased response costs and temporary declines in sales during the development period could affect operating results and financial condition. The Company addresses this through continuous information gathering and maintaining a development structure, but depending on the frequency and scale of specification changes, the impact could become significant.

Manufacturing of mainstay products is conducted under EMS contracts denominated in US dollars, and exchange rate fluctuations affect procurement costs and thus product competitiveness. In addition, since the sales, expenses, and assets of overseas subsidiaries are converted into yen when preparing consolidated financial statements, sudden exchange rate movements can affect financial condition and operating results even without changes on a local currency basis. The Company is considering and promoting the introduction of risk hedging and review of its income/expense structure.

The Company continues to actively invest in R&D for advanced technology development, but if development does not proceed as planned, if new technologies or products fail to penetrate the market, or if rapid technological innovation renders the Company's own technology obsolete, it may become difficult to recoup upfront investments, affecting financial condition and operating results. While the Company states it grasps market needs through active marketing activities, there is a risk that its response could lag depending on the pace of technological innovation.

Of the stock acquisition rights issued on September 17, 2024, 460,000 shares' worth remain unexercised, and if fully exercised, this would result in dilution equivalent to 5.9% of the total issued shares of 7,796,800 shares. In addition, there are 176,000 potential shares (approximately 2.3% of total issued shares) from granted stock options, meaning total dilution could reach a maximum of approximately 8.2%.

Founder and Representative Director, Executive Officer and President Noriyuki Suzuki plays a central role ranging from formulating management strategy to leveraging industry networks, and if he were to become unable to continue his duties, this could have a significant impact on management and business operations. While the Company is working to strengthen its management structure, develop next-generation leaders, and recruit executive talent, it explicitly states that a certain degree of dependence currently exists.

Since products are manufactured on a contracted basis based on demand forecasts, if actual orders diverge from forecasts, there is a risk of lost sales opportunities due to stockouts or valuation losses due to excess inventory. Both the opportunity loss when additional production cannot keep up and inventory buildup when demand falls short of forecasts could adversely affect cash flow and operating results.

Some products in the AsReader Series (Barcode/RFID Readers) require certification under the radio wave laws of the countries and regions in which they are used, and if there is a delay in recognizing changes to certification requirements, legal violations could occur at sales destinations. The Company addresses this through regular exchange of information with manufacturing plants and certification agencies, as well as gathering information from industry organizations such as JAISA and the RAIN RFID Alliance, but given its expansion into multiple countries, there are limits to comprehensively grasping regulatory changes.