ＦフォースＧ（7068） – ［Delayed］Consolidated Financial Results for FY2022 Q2

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. Consolidated Financial Results for the Six months ended November 30, 2021 Company name: Listing: Securities code: 7068 Feedforce Group Inc． Tokyo Stock Exchange URL: https://feedforcegroup.jp [Japanese GAAP] Representative: Representative Director and President Koji Tsukada Inquiries: Director and CFO Shingo Nishiyama TEL +81-3-5846-7016 January 7, 2022 Scheduled date to file quarterly securities report: Scheduled date to commence dividend payment: Preparation of supplementary materials on financial results: Holding of financial results meeting: January 14, 2022 － Yes Yes 1. Consolidated financial results for the first six months of the fiscal year ending May 31, 2022(from June 1, 2021 to November 30, 2021) (1) Consolidated operating results (Percentages indicate year-on-year changes.) (Amounts less than one million yen are rounded down) Net sales EBITDA Operating profit Ordinary profit Six months ended November 30, 2021 November 30, 2020 Millions of yen ％ Millions of yen ％ Millions of yen ％ Millions of yen 507 591 48.3 339 － 507 60.7 315 － 66.0 － 305 1,372 － 1,145 － Note: Comprehensive income Six months ended November 30, 2021: ¥309 million [83.2%] Six months ended November 30, 2020: ¥168 million [–%] Profit attributable to owners of parent ％ Millions of yen ％ 311 124.6 － 138 Basic earnings per share Diluted earnings per share Six months ended November 30, 2021 Yen 12.01 Yen 11.68 November 30, 2020 Note: 1. As the Company has not prepared consolidated financial statements for the Six months ended November 30, 2019, the percentage 5.73 5.49 indicating year-on-year changes is not shown for the Six months ended November 30, 2020. 2. As the “Accounting Standard for Revenue Recognition” will be applied from the fiscal year ending May 31, 2022, the percentage change from the previous fiscal year is not shown for net sales. 3. EBITDA is a sum of operating profit, depreciation, and amortization. 4. The Company conducted a 4-for-1 stock split of common stocks as of December 1, 2020. The “Basic earnings per share” and “Diluted earnings per share” is calculated assuming that the said stock split was conducted at the beginning of the previous consolidated fiscal year. (2) Consolidated financial position As of November 30, 2021 May 31, 2021 Reference: Equity Millions of yen 6,790 6,467 ¥2,680 million ¥2,366 million As of November 30, 2021: As of May 31, 2021: Total assets Net assets Equity-to-asset ratio Millions of yen 2,735 2,401 Millions of yen 39.5 36.6 – 1 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. 2. Cash dividends First quarter-end Second quarter-end Third quarter-end Fiscal year-end Total Annual dividends Yen Yen － Fiscal year ended May 31, 2021 Fiscal year ended May 31, 2022 Fiscal year ended May 30, 2022(Forecast) Note: Revisions to the forecast of cash dividends most recently announced: No 0.00 0.00 － Yen － － Yen 0.00 Yen 0.00 0.00 0.00 3. Consolidated earnings forecasts for the fiscal year ending May 31, 2022 (from June 1, 2021 to May 31, 2022) (Percentages represent year-on-year changes) Profit attributable to owners of parent Basic earnings per share Net sales EBITDA Operating profit Ordinary profit Millions of yen ％ Millions of yen ％ Millions of yen ％ ％ Millions of yen ％ Yen Millions of yen 2,966 － 1,093 3.3 859 △3.4 853 △2.5 517 9.5 19.95 Fiscal year ending May 31, 2022 (Forecast) Note: 1. Revisions to the earnings forecasts most recently announced: Yes 2. Effective from the fiscal year ending May 31, 2022, the “Accounting Standard for Revenue Recognition” will be applied, and the above forecasts are based on figures after the application of the standard. Due to the adoption of this standard, the percentage of net sales increase/decrease from the previous year is not shown. 3. EBITDA is a sum of operating profit, depreciation, and amortization. * Notes (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): Yes please refer to the “Notes on significant changes in the amount of shareholders’ equity（P10)”. (2) Application of specific accounting for preparing the quarterly consolidated financial statements: None (3) Changes in accounting policies, changes in accounting estimates, and restatement a. Changes in accounting policies due to revisions to accounting standards and other regulations: Yes b. Changes in accounting policies due to other reasons: None c. Changes in accounting estimates: None d. Restatement: None (4) Number of issued shares (Common shares) a. Total number of issued shares at the end of the period (including treasury shares) As of November 30, 2021 25,950,400 shares May 31, 2021 25,910,400 shares b. Number of treasury shares at the end of the period As of November 30, 2021 42 shares May 31, 2021 42 shares c. Average number of outstanding shares during the period As of November 30, 2021 25,943,027 shares As of November 30, 2020 24,203,178 shares Note: The Company conducted a 4-for-1 stock split of common stocks as of December 1, 2020. The “Average number of outstanding shares” is calculated assuming that the said stock split was conducted at the beginning of the previous consolidated fiscal year. * Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation. * Proper use of earnings forecasts, and other special matters Forward-looking statements, including the consolidated forecasts stated in these materials, are based on information currently available to the Company and certain assumptions deemed reasonable. Results may differ materially from the consolidated forecasts due to various factors. The Company changed its corporate name from Feedforce, Inc. to Feedforce Group, Inc. as of September 1, 2021, following the transition to a holding company structure. – 2 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. Attached Material Index 1. Qualitative information on quarterly consolidated financial results …………………………………………………………………………………. (1) Explanation of operating results ………………………………………………………………………………………………………………………………. (2) Explanation of financial position ……………………………………………………………………………………………………………………………… (3) Explanation of cash-flow ………………………………………………………………………………………………………………………………………… (4) Explanation of consolidated financial results forecasts and other forward-looking statements ………………………………………. 2. Quarterly Consolidated Financial Statements and Key Notes…………………………………………………………………….……………………… (1) Quarterly Consolidated Balance Sheets ……………………………………………………………………………………………………………………. (2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive Income…………. (3) Quarterly Consolidated Statement of Cash Flows………………………………………………………………………………………………………. 4 4 5 5 5 6 6 7 9 (4) Notes to Quarterly Consolidated Financial Statements………………………………………………………………………………………………. 10 (Notes on premise of going concern) ……………………………………………………………………………………………………………………… 10 (Notes on significant changes in the amount of shareholders’ equity) ………………………………………………………………………. 10 (Changes in significant subsidiaries during the period under review) ………………………………………………………………………… 10 (Change in accounting policy) ………………………………………………………………………………………………………………………………. 11 (Segment Information) …………………………………………………………………………………………………………………………………………. 12 (Significant subsequent events) ……………………………………………………………………………………………………………………………… 13 – 3 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. 1. Qualitative information on quarterly consolidated financial results (1) Explanation of operating results Japan’s economy during the first half of the fiscal year ended May 31, 2022 remained severe due to restrictions on economic activity because of the new coronavirus (COVID-19). Although vaccinations are progressing and there are moves toward normalization of economic activity, the outlook remains uncertain, as there are concerns about the spread of infection by new mutant viruses at present. On the other hand, the size of the Internet advertising market, which is the Group’s main business area, increased by 5.9% year on year to 2,229 billion yen in 2020, and while total advertising expenses decreased by 11.2% year on year, with the acceleration of digital transformation (DX), continued to grow (Source: DENTSU INC., “Advertising expenses in Japan in 2020″). Under these economic circumstances, the Group has been providing optimization of information distribution and effective advertising operation services under the mission of” Feed a force for good and change- continuing to innovate in the B2B field”. Based on the vast amount of data accumulated by the Group to build a data feed and its conversion and update knowledge, we have processed the information of companies into an optimal form and provided appropriate information to target users at the right time and to the appropriate devices. In addition, the Group has built good relationships with each digital platformer, and by leveraging its relationship, we link the Group’s multiple services to develop corporate customers and promote in addition to supporting, we have been working to develop apps and comprehensive DX support that contribute to the continuous strengthening of relationships with target users. In addition, from the consolidated accounting period of the second quarter of the fiscal year under review, the Group has separated the holding companies and operating companies that execute strategies with holding companies responsible for group strategic functions in order to further enhance the mobility and flexibility of group management, develop and promote new businesses, and promote capital and business alliances and alliances with various partner companies related to EC support. We have shifted to a holding company structure because we judge that it is necessary for holding companies to formulate strategies from the group-wide optimal perspective, allocate management resources, and promote business through prompt decision-making at operating companies. As a result, the Group’s operating results for the first half of the fiscal year ended May 31, 2022 were net sales of ¥1,372,855 thousand, EBITDA (operating profit + depreciation + amortization) ¥591,961 thousand (up 48.3% year on year), operating income ¥507,116 thousand(up 60.7% year on year), ordinary income ¥507,594 thousand (up 66.0% year on year) and net income attributable to owners of parent of ¥311,437thousand(up 124.6% year on year). The results of the segment are as follows: (Professional Services Business) “Anagrams”, which provides internet advertising operation agency business and marketing support, “Feedmatic”, an advertising operation consignment service for platforms, “DF PLUS”, a service for building data feeds according to individual needs, for enterprise-based customers. We provide “Contents Feeder”, an SEO support service that generates and automatically operates satellite sites. (SaaS business) During the first half of the fiscal year ended May 31, 2022, Anagrams and Feedmatic acquired new projects. As a result, the consolidated operating results for the first half of the fiscal year ended May 31, 2022 were ¥1,023,026 thousand in net sales and segment profit of ¥461,166 thousand (up 71.8% year on year). “EC Booster”, an ad distribution service that can automatically advertise based on product information on EC sites, “dfplus.io”, a data feed integrated management service that allows advertisers to create, manage and optimize data feeds themselves, In addition, we provide “Social PLUS”, a support service for customer reach by registering, logging in and sending direct messages on During the first half of the fiscal year ended May 31, 2022, we steadily increased sales, through the acquisition of new customers the web using SNS registration information. in dfplus.io and Social PLUS. (DX Business) digital assets using technology”. As a result, the operating results for the first half of the fiscal year ended May 31, 2022 were net sales of ¥342,369 thousand and segment profit of ¥130,059 thousand (up 105.9%year on year). In the DX business, we are developing new services that support dx of companies by “building a foundation for the utilization of During the consolidated cumulative period of the second quarter, we have been developing and investing in new businesses, such as the development of apps for Shopify. In addition, during the second quarter of the fiscal year ended May 31, 2022, the Company made Shippinno Inc., which provides “Shippinno”, a service that automates shipping-related operations to EC – 4 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. operators, and “TēPs”, a no-code tool specialized in e-commerce, as a consolidated subsidiary, but in preparing the second quarter consolidated financial statements, only the balance sheet is consolidated. As a result, the consolidated operating results for the first half of the fiscal year ended May 31, 2022 were net sales of ¥7,458 thousand and segment loss of ¥84,110 thousand (a segment loss of ¥15,952 thousand in the same period of the previous year). (2) Explanation of financial position As of November 30, 2021, assets amounted to ¥6,790,332 thousand, up ¥322,824 thousand from their level on May 31, 2021. (Current assets) As of November 30, 2021, current assets amounted to ¥4,824,550 thousand, down ¥90,863 thousand from their level on May 31, 2021. This was due to a decrease in accounts receivable by ¥86,052 thousand. As of November 30, 2021, non-current assets amounted to ¥1,965,782 thousand, up ¥413,688 thousand from their level on May 31, 2021. This was due to the acquisition of a new subsidiary resulted in an increase of goodwill by ¥348,187 thousand As of November 30, 2021, current liabilities amounted to ¥2,200,825 thousand, down ¥54,184 thousand from their level on May 31, 2021. This was primarily due to a decrease of ¥71,312 thousand in accounts payable – trade. As of November 30, 2021, non-current liabilities amounted to ¥1,853,589 thousand, up ¥42,634 thousand from their level on May 31, 2021. This was primarily due to an increase of long-term borrowings increased by ¥60,006 thousand. (Non-current assets) (Current liabilities) (Non-current liabilities) (Net assets) As of November 30, 2021, net assets amounted to ¥2,735,916 thousand, up ¥334,374 thousand from their level on May 31, 2021. This was due to an increase of retained earnings by ¥311,437thousand. (3) Explanation of cash-flow As of November 30, 2021, Cash and cash equivalents increased by ¥16,041 thousand to ¥3,209,097 thousand. The status of cash flows and their factors during the cumulative consolidated period for the second quarter are as follows: Cash in flow from operating activities was ¥385,316 thousand (cash inflow ¥678,347 thousand in the same period of the previous year). This was due to Profit before income taxes was recorded at ¥498,657 thousand and depreciation and amortization of (Cash flow from operating activities) ¥61,278 thousand. (Cash flow from investment activities) Cash out flow from investment activities was ¥286,595 thousand (cash out flow ¥7,540 thousand in the same period of the previous year). This was due to expenditures of ¥105,104 thousand from the acquisition of investment securities and ¥178,460 thousand from the acquisition of shares of subsidiaries accompanying changes in the scope of consolidation. (Cash flow from financial activities) Cash out flow from financial activities was ¥82,680 thousand (cash out flow ¥191,804 thousand in the same period of the previous year). This was due to ¥85,000 thousand was spent on repayment of long-term loans payable. (4) Explanation of consolidated financial results forecasts and other forward-looking statements The consolidated earnings forecast for the fiscal year ending May 31, 2022 has been revised from the consolidated earnings forecast announced in the Financial Results for the Fiscal Year Ending May 31, 2021 on June 30, 2021. For details, please refer to the “Notice Concerning Revision of Earnings Forecasts” released today (December 28, 2021). – 5 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. 2. Quarterly Consolidated Financial Statements and Key Notes (1) Quarterly Consolidated Balance Sheets (Thousands of yen) As of May 31, 2021 As of November 30, 2021 Assets Current assets Cash and deposits Accounts receivable – trade Advance payments to suppliers Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings, net Other, net Total property, plant and equipment Intangible assets Goodwill Customer-related assets Total intangible assets Investments and other assets Investment securities Deferred tax assets Other Total investments and other assets Total non-current assets Total assets Liabilities Current liabilities Accounts payable – trade Current portion of long-term borrowings Provision for bonuses Other Total current liabilities Non-current liabilities Long-term borrowings Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Share acquisition rights Non-controlling interests Total net assets Total liabilities and net assets – 6 – 3,193,056 1,312,721 375,146 43,814 △9,325 4,915,413 29,029 14,558 43,588 404,577 939,016 1,343,594 14,073 72,778 78,060 164,912 1,552,094 6,467,507 1,532,942 170,000 59,884 492,184 2,255,010 1,510,000 300,955 1,810,955 4,065,965 465,203 1,357,656 543,918 △48 2,366,729 32,569 2,243 2,401,542 6,467,507 3,209,097 1,226,669 316,866 81,349 △9,433 4,824,550 36,782 14,298 51,080 752,765 884,316 1,637,081 110,240 87,394 79,984 277,619 1,965,782 6,790,332 1,461,629 200,822 61,597 476,777 2,200,825 1,570,006 283,583 1,853,589 4,054,415 10,092 1,815,086 855,355 △48 2,680,487 52,574 2,854 2,735,916 6,790,332 Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. (2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive Income Quarterly Consolidated Statements of Income (Cumulative consolidated second quarter) (Thousands of yen) Six months ended November 30, 2020 Six months ended November 30, 2021 Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating profit Non-operating income Interest income Dividend income Subsidy income Gain on investments in investment partnerships Other Total non-operating income Non-operating expenses Interest expenses Share of loss of entities accounted for using equity method Total non-operating expenses Ordinary profit Extraordinary losses Loss on valuation of investment securities Total extraordinary losses Profit (loss) before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit Profit (loss) attributable to non-controlling interests Profit attributable to owners of parent 1,145,902 407,678 738,223 ※ 422,634 315,589 9 0 2,850 － 1,128 3,988 7,994 5,805 13,800 305,777 － － 305,777 158,011 △21,022 136,989 168,788 30,095 138,692 1,372,855 396,806 976,048 ※ 468,932 507,116 13 0 5,210 1,984 61 7,269 6,790 － 6,790 507,594 8,936 8,936 498,657 221,439 △31,986 189,452 309,205 △2,231 311,437 – 7 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. Quarterly Consolidated Statement of Comprehensive Income (Cumulative consolidated second quarter) (Thousands of yen) Six months ended November 30, 2020 Six months ended November 30, 2021 Profit Comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests 168,788 168,788 138,692 30,095 309,205 309,205 311,437 △2,231 – 8 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. (3) Quarterly Consolidated Statement of Cash Flows (Cumulative consolidated second quarter) (Thousands of yen) Six months ended November 30, 2020 Six months ended November 30, 2021 Cash flows from operating activities Profit before income taxes Depreciation Amortization of goodwill Share-based payment expenses Share of loss (profit) of entities accounted for using equity method Increase (decrease) in provision for bonuses Increase (decrease) in allowance for doubtful accounts Interest and dividend income Interest expenses Loss (gain) on investments in investment partnerships Loss (gain) on valuation of investment securities Decrease (increase) in trade receivables Increase (decrease) in trade payables Increase (decrease) in accrued consumption taxes Decrease (increase) in consumption taxes refund receivable Other, net Subtotal Interest and dividends received Interest paid Income taxes paid Net cash provided by (used in) operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of investment securities Purchase of shares of subsidiaries resulting in change in scope of consolidation Other, net Net cash provided by (used in) investing activities Cash flows from financing activities Net increase (decrease) in short-term borrowings Repayments of long-term borrowings Proceeds from issuance of shares Proceeds from share issuance to non-controlling shareholders Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 305,777 60,049 23,567 10,804 5,805 1,650 2,769 △9 7,994 － － △154,021 511,616 △8,376 68,384 △4,816 831,196 9 △8,062 △144,796 678,347 △7,550 － － 10 △7,540 △140,000 △85,000 31,556 1,640 △191,804 479,003 2,183,794 2,662,798 498,657 61,278 23,567 19,956 － 1,713 108 △13 6,790 △1,984 8,936 114,981 △75,570 △44,663 △7,149 32,005 638,613 13 △6,548 △246,762 385,316 △5,637 △105,104 △178,460 2,606 △286,595 － △85,000 2,320 － △82,680 16,041 3,193,056 3,209,097 – 9 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. (4) Notes to Quarterly Consolidated Financial Statements (Notes on premise of going concern) Not applicable. (Notes on significant changes in the amount of shareholders’ equity) On September 1, 2021, the Company made a free capital reduction. As a result, capital decreased by ¥456,270 thousand and capital surplus increased by ¥456,270 thousand during the second quarter of the fiscal year ended May 31, 2022, resulting in capital of 10,092,000 yen and capital surplus of ¥1,815,086 thousand. (Changes in significant subsidiaries during the cumulative consolidated period of the fiscal year) Since the second quarter of the fiscal year ended May 31, 2022, the Company has acquired shares in Shippinno Inc., and Shippinno Corporation has been included in the scope of consolidation. Since the deemed acquisition date is September 30, 2021 and the difference from the quarterly consolidated closing date does not exceed three months, only the balance sheet is consolidated in the second quarter of the fiscal year. In addition, FEEDFORCE VIETNAM COMPANY LIMITED has been newly established since the second quarter of the fiscal year, so it is included in the scope of consolidation. – 10 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. （Change in accounting policy） （Application of Accounting Standard for Revenue Recognition, etc.） Effective from the beginning of the first quarter of the current fiscal year, the Company has adopted “Accounting Standard for Revenue Recognition” and other related standards and recognizes revenue when control of promised goods or services is transferred to the customer in the amount expected to be received in exchange for those goods or services. As a result, in the past, the Company recognized revenue based on the total amount of consideration received from customers for some transactions that required outsourcing in the professional services business. However, for transactions in which the Company’s role in providing goods or services to customers falls under the category of agent, the Company has changed to a method of recognizing revenue based on the net amount received from customers less the amount paid for outsourcing and other expenses. However, as a result of judging the role (principal or agent) in the provision of goods or services to customers, revenue has been recognized on a net basis since the beginning of the first quarter of the current fiscal year. The Company has applied the new accounting standard for revenue recognition in accordance with the transitional measures prescribed in the proviso of Paragraph 84 of the Accounting Standard for Revenue Recognition, etc. The cumulative effect of applying the new accounting policy retrospectively prior to the beginning of the current first quarter was added to or deducted from retained earnings at the beginning of the current first quarter, and the new accounting policy was applied from the relevant beginning balance. As a result, compared with the previous accounting method, net sales and cost of sales for the first half of the fiscal year ended May 31, 2022, decreased by ¥47,183 thousand, but operating income, ordinary income, and income before income taxes and minority interests were not affected. There is no effect on the beginning balance of retained earnings. （Application of Accounting Standards for Calculation of Fair Value, etc.） The “Accounting Standard for Measurement of Fair Value” and other related accounting standards were applied from the beginning of the first quarter of the current fiscal year, and the new accounting policies set forth by the “Accounting Standard for Measurement of Fair Value” and other related standards will be applied prospectively in accordance with the transitional treatments set forth in Paragraph 19 of the “Accounting Standard for Measurement of Fair Value” and Paragraph 44-2 of the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019).There is no impact from this change. – 11 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. (Segment Information) I. Cumulative Second Quarter of the Fiscal Year Ended May 31, 2021 (June 1, 2020 to November 30, 2020) 1. Sales and Income (Loss) by Reportable Segment (Thousands of yen) Reportable Segment Professional Services SaaS DX Total Reconciling items *1 Quarterly Consolidated Statements of Income *2 － － － － Net sales Revenues from external customers Transactions with other segments 862,120 283,781 1,145,902 1,145,902 － 9,190 9,190 △9,190 Total 862,120 292,971 1,155,092 △9,190 1,145,902 Segment income(loss) 268,387 63,153 △15,952 315,589 － 315,589 *1. Due to elimination of intersegment transactions. *2. The total amount of segment income (loss) is the same as the operating income in the quarterly consolidated statements of income. *3. Since the second quarter of Fiscal year ended May 31, 2021, the newly established Rewire Inc. has been a consolidated subsidiary and is included in the DX Business segment. － － － II. Cumulative Second Quarter of the Fiscal Year Ending May 31, 2022 (June 1, 2021 to November 30, 2021) 1. Sales and Income (Loss) by Reportable Segment (Thousands of yen) Reportable Segment Professional Services SaaS DX Total Reconciling items *1 Quarterly Consolidated Statements of Income *2 Net sales Revenues from external customers Transactions with other segments Total 1,023,026 342,369 7,458 1,372,855 1,372,855 － 13,410 － 13,410 △13,410 1,023,026 355,779 7,458 1,386,265 △13,410 1,372,855 Segment income(loss) 461,166 130,059 △84,110 507,116 － 507,116 *1. Due to elimination of intersegment transactions. *2. The total amount of segment income (loss) is the same as the operating income in the quarterly consolidated statements of income. 2． Matters related to changes in reporting segments, etc. (Change of accounting policy) As described in the revision of the accounting policy, the accounting standards for revenue recognition have been applied from the beginning of the first quarter consolidated accounting period, and the accounting method for revenue recognition has been changed, so the method of calculating sales in the business segment has been changed in the same way. As a result of this change, sales and cost of sales of the Professional Services Business for the first half of the fiscal year ended May 31, 2022 decreased by ¥47,183 thousand compared to the conventional method. There is no impact on sales and segment profit or loss in the SaaS business and DX business. 3． Information on impairment losses or goodwill, etc. of fixed assets per reported segment (Significant fluctuations in the amount of goodwill) During the second quarter of the Fiscal Year Ending May 31, 2022, ¥371,755 thousand of goodwill was generated in the DX Business segment due to the inclusion of Shippinno Inc. within the scope of consolidation. – 12 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. At its Board of Directors meeting held on December 17, 2021, the Company resolved to acquire shares in FRACTA Inc. (hereinafter referred to as “FRACTA”) and make the company a consolidated subsidiary and concluded a share transfer agreement (Significant subsequent events) (Business combination by acquisition) on the same day. 1． Business Combination Overview (1) Name of the acquired company and the content of its business Name of acquired company: FRACTA Inc. Consulting, Internet service business (2) Main reasons for the business combination Business: Brand strategy design, e-commerce site construction support and creative creation in line with brand strategy, Shopify With the mission of” Feed a force for good and change. – continuing to innovate in the B2B field”, we have established a professional service business that builds data feeds according to individual needs and consigns advertisement distribution to platforms, and a SaaS-type data feed integrated management tool. In addition to the SaaS business, which provides login services using automated advertising tools and social accounts to websites, etc., we are developing DX business that supports digital transformation of companies for e-commerce operators, using Shopify, we are engaged in business activities to realize rich work styles through the creation of services and products that improve. On the other hand, FRACTA has set forth its vision of “Bring your brand to the culture of the future”, and with the power of technology and design, we are developing our business as a total branding partner that supports the self-propelled of corporate brands, such as corporate branding strategy formulation, e-commerce site construction support, and creative production. FRACTA is certified as a Shopify Plus Partner and has a proven track record of branding and construction consulting in Shopify. Through the acquisition of the shares, in addition to providing Shopify apps and building e-commerce sites, the Company will provide e-commerce apps and build e-commerce sites, especially to e-commerce operators who are potential customers in the DX business, from branding strategy formulation provided by FRACTA to e-commerce site construction support, creative production, etc. We aim to further accelerate the growth of this business segment by providing one-stop services. As a result of the acquisition of the shares, we acquired 51.25% of FRACTA, and FRACTA became a consolidated subsidiary of the Company, In the business segment, all FRACTA’s businesses are scheduled to belong to the DX business. (3) Business combination date December 24, 2021 (4) Legal form of business combinations Acquisition of shares (5) Name of the combined company There is no change. (6) Percentage of voting rights acquired 51.25％ (7) Main grounds for determining the acquiring company The Company acquires shares in exchange for cash. 2． Breakdown of Acquired Costs and Consideration by Type of Acquired Company Consideration for acquisition Cash Acquisition cost 615 million yen 615 million yen 3． Details and amounts of major acquisition-related expenses It has not been confirmed at this time. 4． Amount of goodwill generated, cause of occurrence, amortization method and amortization period It has not been confirmed at this time. – 13 – Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. 5． Amount of assets and liabilities accepted on the business combination date and the main breakdown thereof It has not been confirmed at this time. – 14 –