Bridge Report:（4425）Kudan Second Quarter of the Fiscal Year ending March 2024

Kudan Inc. (4425)

Corporate Information

Stock Information

*The share price is the closing price on November 20. Number of shares outstanding, DPS, and EPS are taken from the financial results for the second quarter of the FY3/24.ROE and BPS are from the previous year.

Earnings Trend

*Unit: yen, million yen. Net income is profit attributable to owners of the parent. Hereinafter the same shall apply. The earnings forecasts are that of the company.

This report briefly describes Kudan Inc., the financial results for the second quarter of the term ending March 2024, and growth strategies.

Table of Contents 

Key Points
1. Company Overview
2. Second Quarter of the Fiscal Year ending March 2024 Earnings Results
3. Fiscal Year ending March 2024 Earnings Forecasts
4. Growth Progress and Initiatives
5. Conclusions
<Reference: Regarding Corporate Governance>

Key Points

• Kudan Inc. is a company that carries out research and development of deep technology specializing in the algorithms for artificial perception (AP), which corresponds to the “eyes” of machines (computers and robots). Its strengths and characteristics include the capability of flexibly responding to the growth of diverse demand, which is expected in the future, and a group of professionals in AP. The company has secured a firm position based on the alliance with Artisense Corporation, which is led by Professor Daniel Cremers, who has produced globally recognized research results as a pioneer in self-driving technologies. 

   

• In the second quarter of the term ending March 2024, sales declined 52.6% year on year to 73 million yen, and operating loss was 395 million yen (a loss of 312 million yen in the same period of the previous year). Although the business, centered on product-related projects, is progressing smoothly, sales in the first half of the year decreased because the majority of sales from evaluation and development projects and product-related sales are expected to come in the second half. Operating loss augmented as SG&A expenses increased 13.1% year on year due to continued business expansions as well as system expansions.

   

• There is no change in the earnings forecast. It is expected that the sales for the term ending March 2024 will be 520 million yen, up 56.3% from the previous year, and operating loss will be 560 million yen, almost unchanged from the previous year. The company expects that the narrowing-down of focus areas will be effective and that product-related sales will drive growth. Thus, overall sales are projected to grow steadily. At present, confirmed sales are 410 million yen, including 70 million yen in the first half and 340 million yen in the second half. This is a 24% increase over the previous year and 79% of the full-year forecast. Therefore, the company's progress is on track. The company aims to achieve the budget by accumulating development and solution projects using the packages for mapping and robot products, which are scheduled for official release in the third quarter, as well as product license sales.

   

• On the other hand, expenses are projected to augment due to the projects which aim the development and sales of packages for products as well as the reinforcement of the system to expand product-related sales. Despite the ongoing appreciation of foreign currencies, progress is generally in line with the initial forecast.

   

• In September 2023, the company and Whale Dynamic Co., Ltd, a business partner and developer of autonomous driving solutions in China, signed a basic agreement for capital and business alliances. Since the launch of products incorporating Kudan’s technology in July 2022, demand for Whale Dynamic's solutions in global regions such as Europe and the Middle East has grown along with the company's growing track record in the Chinese market. Furthermore, the prospects for opportunities to offer Kudan’s technology in a broader range of Whale Dynamic products, such as autonomous driving for passenger cars, increased. Based on this business progress, the two companies will form capital and business alliances to strengthen their cooperative framework and jointly promote the sales of Whale Dynamic products and the spread of the company's technology. Starting with this alliance, the company aims to expand product-related sales by promoting the transformation of business stages with partners in the same manner for the projects where the company's technologies are commercialized by clients.

   

• The company is making steady progress in product commercialization by customers, with a total of four projects in the term ended March 2023, exceeding the three projects expected at the beginning of the term, mainly for robotics and mapping. The company believes that the capital and business alliances with Whale Dynamic will be a turning point that will accelerate the pace of product-related sales growth. Although the company will not disclose its forecast for the number of product commercialization projects from this fiscal year, we expect it to continue to publish releases on product commercialization projects and business progress on a quarterly basis.

1. Company Overview

【1-1 Corporate history】

Mr. Tomohiro Ohno, currently serving as a Managing Director, became convinced of the prospects and growth potential of the AP technology when working at Andersen Consulting (currently Accenture PLC) and set up Kudan Limited in the United Kingdom in January 2011, at which he pursued his own research and development on the Simultaneous Localization and Mapping (SLAM) technology that provides a basis for the AP technology. 
In November 2014, he established Kudan Inc. intending to extend the administrative department through business expansion while moving further ahead with his research and development. The company started offering evaluation software for demonstration of the Kudan SLAM technology in December 2016 and officially began to provide Kudan SLAM in the term ended in March 2018. 
It got listed on the Market of the High-Growth and Emerging Stocks (Mothers) of the Tokyo Stock Exchange (TSE) in December 2018. 
In April 2022, the company got listed on the Growth Market of TSE, through market reclassification.
Consisting of four inside directors, Managing Director & CEO Daiu Ko, who joined the company after working for Toyota Motor Corporation and McKinsey & Company, Managing Director Tomohiro Ohno, Kohei Nakayama, a director and CFO, and Tian Hao, COO, Kudan’s management team places a heavy emphasis on swiftness. 

【1-2 Corporate philosophy】 

Kudan’s corporate philosophy is “to stand alone, and dare to create what is new and different.” 
 
The philosophy guides the company into avoiding following suit and daring to challenge the generally accepted wisdom. Embracing the philosophy, the company aims to expand its business and research and development, raise shareholder interests, and become a one-of-a-kind company in the market by formulating policies that enable them to stand out from all other companies. 
 
While adopting a corporate vision of “Eyes to the All Machines,” Kudan aims to become a player that offers technology essential for full autonomy and automation, goals that all kinds of machines and devices will strive to reach. 

【1-3 Market environment】

In recent years, the increasing need for automation of operations in every industry and advancement of hardware technology, including sensors and semiconductors complementary to algorithms, have been rapidly spreading and practically utilizing the AP algorithms. 
 
In addition, the impact of the spread of COVID-19 has resulted in soaring demand for saving labor and working remotely for operations that require neither human interaction nor group work in all industries. The growth of demand for automation technology, such as robotics, autonomous driving, and drones, is significant particularly in the fields of logistics, manufacturing, construction, retail, etc. 

*Created concerning “Reference material 2: Case studies for estimating the economic impact of advanced technology” used at the 10th meeting for discussing new governance models for realizing Society 5.0 as posted on METI’s website. The red and bold parts were provided by Investment Bridge Co., Ltd. 

In addition to these applications that are already under development, there are many areas where AP (Artificial Perception) technology will be applied and integrated in the future by supporting various advanced technologies, and it is expected that AP (Artificial Perception) technology will be implemented in society at a speed beyond what was previously expected.

【1-4 Business content】 

<What is AP?> 

The evolution of AI (artificial intelligence), a technology that replaces the human brain, is remarkable.
However, the recent evolution of AI is mainly limited to "Internet AI" that does not directly operate in the real (physical) space. At the same time, the demand for "embodied AI" that can directly affect the real space is expected to increase significantly in the future. Machines (computers and robots), which have remained in the Internet space for a long period of time, are heading toward autonomous functions in the real space.

However, autonomous actions and functions of machines cannot be realized by AI alone. It can only be realized by mutually linking and complementing AI (Artificial Intelligence) with the advanced technology AP (Artificial Perception), which is equivalent to the "eyes" for understanding the surroundings. AP (Artificial Perception) is an essential technology that gives machines advanced visual capabilities like human eyes.
With the evolution of AI, the need for AP technology that connects machines and the real world is expected to grow even more in the future.

<What is SLAM?> 
“SLAM: Simultaneous Localization and Mapping" plays a key role in enabling the AP (Artificial Perception) to fully demonstrate its required capabilities.

SLAM is a technology for each computer to concurrently “estimate the self-location (localization: checking where you are)” and “produce an environmental map (mapping: checking your surroundings)” in the real environment based on data input from external sensors, such as cameras and lidar.
It is possible to record how you have travelled in a new environment while producing a map (tracking) and recognize where you are based on a previously produced map (re-localization).
Unlike GPS and beacons, which detect the position from external radio waves, it recognizes its own position in a standalone manner. Thus, it can be used in a wider range of environments, situations, and use cases.

(Taken from the reference material of the company) 

Taking a car applied with the SLAM technology as an example, the technology localizes the car based on a computer program of mathematically processing the distance that the car has travelled, camera images, and sensor information provided by Lidar, which is a sensor using laser light, and outputting three-dimensional information (such as the direction, distance, and size) and kinesthesia (such as the location and movement) on a real-time and precise basis and, at the same time, makes a three-dimensional map based on data on the surroundings amassed by the sensors. 

In the case of cars, SLAM enables drivers to obtain basic information for safe travel by car by using a three-dimensional map drawn from time to time by the technology while driving cars, even if they have no information in advance on road conditions (such as the location of cars driving in the front, back, left, and right of their cars, how fast the cars in all directions drive, the road width, and the number of road lanes). 
Differing from GPS, which detects a position with external radio waves, and beacons, it recognizes the self-position in a stand-alone manner, so it can be used in a broader range of environments, situations, and cases.

SLAM is the most critical technology for AP, and what are extremely important are precision and processing speed when it comes to ensuring the safety in autonomous cars. Such technological issues have been pointed out as obstacles to using SLAM for general purposes. 
 
In this regard, GrandSLAM offered by the Kudan Group is comprised of three different SLAM algorithms, each of which has its own unique strengths. 

(Taken from the reference material of the company) 

Kudan Indirect Visual SLAM, for example, is capable of processing information over 10 times faster with less processing power than the most prominent open-source software of camera-based SLAM technology. Compared to other solutions that can generally give only centimeter-level localization precision, such as 5 cm, the precision of Kudan Indirect Visual SLAM can be as small as millimeters. 
By combining these algorithms, etc., the company aims to further improve the function with higher speed and higher precision both indoors and outdoors, using multiple sensors, such as cameras and Lidar, together by integrating the systems through clock synchronization between the sensors (a process called tight coupling). 
This technological superiority has been enhanced further by the acquisition of Artisense Corporation as its subsidiary as mentioned later. 
 
Kudan began offering Kudan Indirect Visual SLAM under the name of Kudan SLAM in the term ended March 2018. Then, it started to provide Kudan 3D-Lidar SLAM in March 2020. The company has been striving to broaden the customer base in the following three areas: 

Like this, having both Visual SLAM and Lidar SLAM, Direct SLAM and Indirect SLAM in Visual SLAM, and having a hybrid technology combining them is a major strength of the company.

<Growing number of fields in which AP can play roles> 
Using one of the existing technologies called computer vision (a set of base technologies of sensor and image processing mainly on a two-dimensional basis) as the foundation after reconstructing it, Kudan has developed its own unique AP technology. 
 
As AP is the base technology necessary for every kind of device that uses cameras and three-dimensional sensors, the company expects that it will be the base technology adopted to diverse next-generation solutions on a cross-cutting basis. 
It has been a technology essential for automatic control of all autonomous machines as robotics in a broad sense, including industrial robots, domestic robots, next-generation mobility such as cars, and flying machines such as drones, just to name a few. 
 
It will also be required for spatial perception in AR and VR that will serve as user interfaces of next-generation computers. 
In addition, the technology will be applied to an extremely wide range of purposes as the base technology for next-generation digital maps, dynamic maps (a dynamic mapping system that swiftly reflects the conditions of the reality environment), digital twin (information on the virtual space synchronized with the reality environment on a real time basis), and the like. 

(Taken from the reference material of the company) 

【1-5 The company's vision】

<Technical Strategy and Management Strategy>
◎ Technology Strategy
The company is targeting only achieving full automation. Full automation is difficult to achieve by merely accumulating non-automated and semi-automated technologies. By focusing on this, the company is accumulating technology while achieving full automation in each area in stages, "mapping" → "indoor robot" → "outdoor robot" → "autonomous driving," in order to realize applied technology with a high degree of difficulty.

(Taken from the reference material of the company) 

◎ Management Strategy
Based on the technology strategy, the company is focusing on algorithm research, software development, and licensing in Deep Tech, which is equivalent to the fundamental technology located in the deepest technological layer below solutions, finished products, and applied technology.
With overwhelming technological strength as its weapon, the company is promoting customer acquisition globally and aiming for "maximization of corporate value with a select few employees" and "positioning that is difficult for customers to replace."

(Taken from the reference material of the company) 

【1-6 Competitive superiority】

(1) Technological features 
Kudan believes that its AP technology has enormous advantages in taking in not only the existing demand for product development but also demand for research and development on highly novel and complex future technologies, because the AP technology can help the company strategically take in technological demand fueled by continuous advancement and wider applications of the technology in mid-/long-term. 
According to the company, the AP technology has the following five features. 
Kudan can flexibly fulfill future demand, which is expected to grow and be diverse, by combining their sophisticated and flexible research and development capabilities that they cultivated by focusing on the AP field: 

(2) Global group of experts on AP 
Researchers and engineers specializing in SLAM are a handful in the rare computer vision field. Among these, the company has many top-notch personnel with a doctoral degree, and as a group of AP professionals, it has built a strong foundation in both technology and business on a global basis.

Following the establishment of the Kudan Group in the UK in 2011 and the opening of its Tokyo office in 2014, the company invested in Artisense Corporation (Germany) in 2020 and made it a subsidiary in the following year 2021.
The acquisition of Artisense, a world-leading technology company, as a subsidiary and the deepening of the relationship with Professor Daniel Cremers of the Technical University of Munich further strengthens the company's competitiveness in terms of human resource acquisition and technology development.

(Overview of Artisense Corporation) 
Artisense Corporation was founded in 2016 jointly by Professor Daniel Cremers, who has delivered the world’s best research results as the leader of the Technical University of Munich (TUM) that has a world-leading research group in AI and computer vision and as a leading expert on the autonomous driving technology, and Mr. Andrej Kulikov, a serial entrepreneur. 
With such fields as autonomous driving, robotics, AR and VR, and drones being its application areas, Artisense Corporation provides AP algorithms that perceive the space and location, taking pride in its capability of putting camera-based visual SLAM into practice on a commercial level. 

The number of players in the market is more limited as M&A by major technology companies continues for companies that specialize in SLAM or have SLAM as their core business.
In this environment, the company is far ahead of existing companies in terms of the breadth of technology it offers, its track record of projects, and its recognition.
To date, the company has achieved development and partnerships with many top global companies and has been highly evaluated by the world's leading companies.

(Taken from the reference material of the company) 

【1-7 Business model】

(1) Acceleration and expansion of customer commercialization
Currently, the majority of projects are in the evaluation and development phase, and the business is in the red due to upfront investment in research and development expenses.
A certain level of profitability and growth is expected for evaluation and development licenses/customer development support, and product-related revenue are expected to increase significantly as technology penetrates the market through the spread of customer products. Sales after commercialization by customers are mainly software license income. As a result, additional costs are negligible, and the increase in sales will contribute to profit. Therefore, a dramatic increase in profit can be expected.

(Taken from the reference material of the company) 

(2) Operation of the solution business
In response to growing market demand, the company will work with ecosystem partners to offer solution packages to end customers, including operations and value-added services, in addition to packages for products.

(Taken from the reference material of the company) 

First, the company will develop its DX infrastructure solution business by leveraging its mapping product packages.
In response to growing DX demand in Europe for municipalities and public infrastructure (survey and maintenance of infrastructure, surveying for construction, registration of street trees and green spaces, etc.), the company will provide integrated solutions ranging from digitization to database management. The company aims to expand sales to reach the scale of 100 million yen in the short term.
The company signed a basic agreement with STS Group, headquartered in Hungary, to become an ecosystem partner for this purpose, and it plans to jointly develop a solution business for digital asset infrastructure in Europe with STS Group as a strategic business partner.
Founded in 2002, STS Group is a plant engineering and turnkey solution provider for renewable energy. The company designs, constructs, and operates power generation facilities and other lifelines for renewable energy sources such as solar and wind power in Hungary, Germany, Central and Eastern Europe, the Balkans, and the Baltic States.

Global demand for digital twins and spatial DX that match the mapping applications of Kudan's technology is expected to create a strong market in the future.

(Taken from the reference material of the company) 

2. Second Quarter of the Fiscal Year ending March 2024 Earnings Results

【2-1 Overview of the consolidated results】 

*Unit: million yen. Net income is profit attributable to owners of the parent. Hereinafter the same shall apply.

Sales dropped and loss augmented
Sales declined 52.6% year on year to 73 million yen, and operating loss was 395 million yen (a loss of 312 million yen in the same period of the previous year). Although the business, centered on product-related projects, is progressing smoothly, sales in the first half of the year decreased because the majority of sales from evaluation and development projects and product-related sales are expected to come in the second half. Operating loss augmented as SG&A expenses increased 13.1% year on year due to continued business expansions as well as system expansions.
Recurring loss was 111 million yen (81 million yen loss in the same period of the previous year). Foreign exchange gains increased to 286 million yen from 232 million yen a year earlier.

【2-2 Financial standing and cash flows】 

◎ Balance sheet indicating major items

*Unit: million yen.

Total assets decreased 58 million yen from the end of the previous period to 949 million yen, mainly due to a drop in cash and deposits.
Net assets decreased 74 million yen year on year to 685 million yen because of a decrease in capital stock, an increase in retained earnings, and a larger loss from the foreign currency translation adjustments.

◎ Cash Flow 

*Unit: million yen 

The cash position declined.

【2-3 Business Topics】

（１）Progress in customer commercialization
Commercial-level customer commercialization is steadily progressing.
In FY3/23, the number of projects, mainly for robotics and mapping, totaled four (see figure below), exceeding the three projects forecast at the beginning of the fiscal year.
Of these, the full-scale adoption of SLAM in Intel's semiconductor products was the first commercial SLAM in the world.
While narrowing down its focus areas to robotics and mapping, which are expected to grow quickly in the future, the company is accumulating the following projects for the next phase of product commercialization by customers.

A

(Taken from the reference material of the company)

(2) Signing a basic agreement with Whale Dynamic for capital and business alliances
In September 2023, the company signed a basic agreement for capital and business alliances with business partner Whale Dynamic Co. Ltd., which develops autonomous driving solutions in China.

(Whale Dynamic Overview)
Whale Dynamic was established in October 2015. David Chang, the founder and CEO of Whale Dynamic, was the senior product manager of Apollo, the largest self-driving project of Baidu, a major Chinese IT company, and led its development. He holds a master's degree from the University of Cambridge, UK.
Based on its L4 and L5 unique autonomous driving technologies, the company is developing and commercializing a wide range of products for autonomous robots and autonomous driving and is widely expanding its business not only in the rapidly developing Chinese market, but also in the global market.
The company has the global EV manufacturer BYD as a customer and is the only company in the world to be a member of both Baidu's Apollo, the global open-source ecosystem for autonomous driving, and The Autoware Foundation, the world's first international industry organization dedicated to setting industry standards for autonomous driving operating systems.

(The purpose of the alliances)
Whale Dynamic began offering a robot (autonomous delivery vehicle) integrating Kudan's 3D-Lidar SLAM technology and related HD mapping toolset in July 2022 and has been promoting market sales mainly in the Chinese market, which is rapidly advancing the demonstration of advanced autonomous driving technology through a public-private system.
As Whale Dynamic's track record in the Chinese market expands, demand for its solutions in global regions such as Europe and the Middle East grows, as does the prospect of opportunities for Kudan to offer its technology in a broader range of Whale Dynamic products, such as autonomous driving for passenger cars.

Based on this business progress, the two companies agreed to form the following business and capital alliances to strengthen the cooperative framework and jointly promote the sales of Whale Dynamic's products and the spread of Kudan's technology.

(Details of the agreement)
(1) Business Alliance
Kudan plans to enter into a product license agreement with Whale Dynamic for a total of 300-400 million yen in the term ending March 2024 and the term ending March 2025, of which 240 million yen has been confirmed for the agreement during the term ending March 2024.
In addition, Kudan will invest 500 million yen (400 million yen of which is confirmed as above) in Whale Dynamic as growth capital for global expansion and product development for autonomous driving, aiming to accelerate the spread of Whale Dynamic's products, add to and continuously expand product license sales.

In addition to ERASMO in Europe and major automotive OEM projects in Japan and Europe, the two companies will expand automatic driving-related technology collaboration in other regions, such as China and the Middle East, and jointly conduct global marketing, project development, and support.
Furthermore, the two companies plan to expand their product lineup from mapping (in-vehicle) and robotics (autonomous vehicles) to autonomous driving for general passenger vehicles in the larger market and to jointly develop the applications of Kudan’s technologies.

(2) Capital Alliance
The company will invest a total of 500 million yen in Whale Dynamic (including group companies) in the fiscal years ending March 2024 and March 2025 (estimated to be approximately 10% of the total number of shares issued).
The agreement is not legally binding, and the two companies plan to work out the details of the final agreement based on the basic agreement, with the intention of concluding the final agreement in stages depending on the progress of both parties' businesses and their cooperative structure. If they resolve to enter into a final agreement, the details of the agreement will be disclosed.

(Taken from the reference material of the company)

(Future expansion)
Beginning with Whale Dynamic, the company will seek to expand product-related sales by promoting the same business-stage transformation with partners in all the projects where customers do product commercialization.

(Taken from the reference material of the company)

（3）Completed Integration of Hybrid Technology into Customer Products
The world's first commercial SLAM technology to successfully hybridize indirect method SLAM and direct method SLAM.
By integrating the advantages of both, "indirect SLAM" with its high processing speed and versatility and "direct SLAM" with its precise recognition and high stability, a significant improvement in basic performance has been achieved and is expected to contribute to the expansion of the customer base in a wider range of application cases.
In addition to the application of this technology in customer projects, the integration of this technology into customer products has been completed, and is expected to contribute to product-related sales in FY 03/24 and beyond.

3. Fiscal Year ending March 2024 Earnings Forecasts

【3-1 Earnings forecasts】

*Unit: million yen. The forecasts were those released by the company.

There is no change to the earnings forecast; expect to increase product-related sales by focusing on focused areas
There is no change to the earnings forecast. For the term ending March 2024, it is forecast that sales will increase 56.3% year-on-year to 520 million yen and operating loss will be 560 million yen, almost unchanged from the previous fiscal year.
It is expected that the narrowing down of focus areas will prove effective, leading to the expansion of product-related revenue and that overall sales will also grow steadily.
At present, confirmed sales are 410 million yen, including 0.7 billion yen in the first half and 340 million yen in the second half. Sales are up 24% from the previous year and 79% of the full-year forecast, indicating that the company is on track to achieve its goal. The company aims to achieve the budget by accumulating development and solution projects using the package for mapping and robot products, which is scheduled for official release in the third quarter, as well as product license sales.
On the other hand, costs are projected to increase year-on-year due to the development and sales of packages for products as well as the reinforcement of the system to expand product-related sales.
As a non-operating income, the company expects to continue receiving R&D subsidies from overseas governments. Last year, it aimed to transform its earnings structure to become profitable in the term ending March 2024.

(Taken from the reference material of the company)

【3-2 Outlooks and initiatives】

Regarding the forecast of the number of commercialization cases, we expect the number of commercialization cases to be the same or higher this fiscal year as in the previous fiscal year, but we plan to proceed in the future with the content of disclosure appropriate to each stage of progress, rather than the number of commercialization cases.

4. Growth Progress and Initiatives

【4-1 Short- and Medium-term Growth】

1) Growth vision
With the aim of expanding product-related revenue through the introduction and popularization of customer products, the company will continue to strategically promote measures to accelerate the progress of customer products, using the stage of development of customer products as an index.
Basically, the company focuses on massively expanding sales as a deep tech company. It recognizes that turning profitable is a transit point, and although it cannot clearly indicate its timing at this point, it believes that turning profitable should be achieved as a result of the process of expanding.

(Taken from the reference material of the company)

(2) Measures to Boost Product-Related Sales
◎ Narrowing down focus areas
With the start of product commercialization by customers, the company expects that sales associated with customer products (product-related sales) will become a pillar of growth over the medium to long term, and it decided to aim for the full-scale launch of such sales, narrowing its focus to two markets, robotics and mapping, where commercialization by customers has already been realized and where it expects rapid growth in the future.
For markets other than the two focus areas (e.g., autonomous driving), the company will narrow its focus based on medium- to long-term growth potential and will continue to focus on promising projects in the future.

(Taken from the reference material of the company)

◎ Provide packages for products
After narrowing down the focus areas, the company will develop and provide packages for products aiming for it to become the catalyst to increase commercialization by customers further and expand sales of Kudan’s software.

(Taken from the reference material of the company)

(2) Progress in Partnerships
In addition to the adoption of its technology in Intel commercial products, the company is expanding and deepening its partnerships with a group of major semiconductor and sensor companies, which are similarly expanding their ecosystems, and it is making significant progress towards industry standardization of its technology.
In the term ending March 2024, the company will work with Intel to enhance product functions, provide support for customer implementation, and conduct promotions to expand product sales.
In addition, the company will promote partnerships with semiconductor and sensor companies for further product commercialization and strengthen cooperation with system integrators that implement the company's technologies as solutions.

(Taken from the reference material of the company)

(3) Examples of demonstrations for next-generation technology
In areas other than robotics and mapping, which are the areas of focus, the company is working on a selection of demonstrations from a medium- to long-term perspective.
In addition to hybrid SLAM, the company has demonstrated location recognition with AI and sensor integration for autonomous driving, and has achieved effective results.

(Case Example)
To establish vehicle location recognition technology in urban areas, which is difficult even with next-generation high-precision GPS, we are conducting demonstration tests in collaboration with GPS manufacturers and major European automobile companies.

【4-2 Medium/long-term growth】

The company aims to transform its profit structure as soon as possible through the continuous commercialization of its technologies by customers and promoting the progress of customer products.
It also aspires to dramatically increase profits by building up product-related sales significantly through the expansion of focus areas and market penetration of technologies by popularizing customer products.

(Taken from the reference material of the company)

5. Conclusions 

The company is making steady progress in product commercialization by customers, with a total of four projects in the term ended March 2023, exceeding the three projects expected at the beginning of the term, mainly for robotics and mapping.
The company believes that the capital and business alliances with Whale Dynamic will be a turning point that will accelerate the pace of product-related sales growth.
Although the company will not disclose its forecast for the number of product commercialization projects from this fiscal year, we expect it to continue to publish releases on product commercialization projects and business progress on a quarterly basis.

Reference: Regarding Corporate Governance>

◎ Organizational form and compositions of directors and auditors 

◎ Corporate Governance Report
Last updated in June 23, 2023

<Basic Policy> 
Our company recognizes that it is indispensable to establish corporate governance, in order to improve our corporate value, maximize the profits of shareholders, and foster good relationships with stakeholders. 
Under this recognition, the Managing Directors, other Directors, and employees of our company will strive to tighten corporate governance by understanding their respective roles and developing and operating internal control systems. 
 
<Reasons for not following the principles of the corporate governance code> 
We follow all the basic principles of the corporate governance code.