トレジャー・ファクトリー（3093） – [Delayed]Consolidated Financial Results for the Fiscal Year Ended February 28, 2022 (Japanese Accounting Standards)

Consolidated Financial Results for the Fiscal Year Ended February 28, 2022 (Japanese Accounting Standards) Company name Securities code Representative Treasure Factory Co., Ltd. 3093 President & CEO, Eigo Nosaka Contact Director & Manager-Corporate Planning, Eiji Kobayashi April 13, 2022 Listings: Tokyo Stock Exchange URL: https://www.treasurefactory.co.jp/ Telephone +81-3-3880-8822 Annual General Meeting of Shareholders: Commencement of dividend payments: Submission of the annual securities report: Supplementary documents: Financial results briefing: May 25, 2022 May 26, 2022 May 25, 2022 Yes Yes (for institutional investors and analysts) 1. Results for the fiscal year ended February 28, 2022 (March 1, 2021 to February 28, 2022) (1) Operating results (Percentage figures represent year-on-year changes) (Amounts in millions of yen rounded down to the nearest million yen) Net sales Operating profit Ordinary profit Profit attributable to owners of parent Year ended Feb. 28, 2022 Year ended Feb. 28, 2021 million yen 23,313 18,735 % 24.4 (2.0) (Note) Comprehensive income: Year ended Feb. 28, 2022 Year ended Feb. 28, 2021 million yen % million yen % million yen 995 106 831.3 (88.6) 1,054 174 502.6 (82.4) 702 million yen (-%) (136) million yen (-%) 703 (134) Profit per share Diluted profit per share Return on equity Return on assets Return on sales (Reference) Share of loss (profit) of entities accounted for using equity method: % 15.6 (3.0) % 9.5 1.8 Year ended Feb. 28, 2022: – million yen Year ended Feb. 28, 2021: – million yen Total assets Net assets Equity capital ratio Net assets per share million yen million yen Year ended Feb. 28, 2022 Year ended Feb. 28, 2021 (2) Financial position Year ended Feb. 28, 2022 Year ended Feb. 28, 2021 (Reference) Equity capital: (3) Consolidated cash flows Year ended Feb. 28, 2022 Year ended Feb. 28, 2021 yen 62.78 (11.94) 11,809 10,417 870 482 yen － － 4,895 4,311 (732) (586) – 1 – Year ended Feb. 28, 2022 Year ended Feb. 28, 2021 4,719 million yen 4,284 million yen Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Cash and cash equivalents at end of period million yen million yen million yen million yen % － － % 4.3 0.6 yen 424.66 382.08 2,353 1,937 % 40.0 41.1 274 422 2. Dividends Year ended Feb. 28, 2021 Year ended Feb. 28, 2022 Year ending Feb. 28, 2023 (forecast) End of 1st quarter End of 2nd quarter Dividend per share End of 3rd quarter Fiscal year end Total yen － － － yen 2.00 8.00 10.00 yen － － － yen 8.00 9.00 Total dividends (Total) yen million yen Dividend payout ratio (Consolidated) % Dividend on equity (Consolidated) % 10.00 17.00 113 189 － 27.1 2.5 4.2 10.00 20.00 30.0 (Note) The dividend per share at the end of the fiscal year ended February 28, 2022 was changed from 8 yen to 9 yen. Please see “Notice on Dividend Forecast for Fiscal Year Ending February 28, 2022 (Year End Dividend)” published today (April 13, 2022) for details. 3. Results forecast for the fiscal year ending February 28, 2023 (March 1, 2022 to February 28, 2023) Net sales Operating profit Ordinary profit million yen 11,841 25,398 % 10.3 8.9 million yen 247 1,098 % 59.1 10.3 million yen 257 1,112 % 41.8 5.5 (Percentage figures represent year-on-year changes) Profit attributable to owners of parent million yen 161 742 256.3 5.5 % Profit per share yen 14.49 66.76 First two quarters Full year – 2 – * Notes (1) Changes in important subsidiaries during the period (changes in specified subsidiaries that caused changes in the scope of consolidation): Yes Number of new companies (their names): 1 (Trefac Technologies Co., Ltd.) Number of excluded companies (their names): 1 (Digital Quest Co., Ltd.) (2) Changes to accounting policies, changes of accounting estimates, and revisions and restatements [1] Changes in accounting policies in accordance with changes in accounting principles: None [2] Changes in accounting policies other than [1] above: None [3] Changes in accounting estimates: None [4] Revisions and restatements: None (3) Number of shares issued and outstanding (common stock) [1] Number of shares issued at period-end (including treasury shares) [2] Treasury shares at period-end [3] Average number of shares issued during the As of Feb. 28, 2022 As of Feb. 28, 2022 As of Feb. 28, 2022 period 11,598,800 shares 11,598,800 shares 484,431 shares 386,131 shares 11,205,128 shares 11,304,944 shares As of Feb. 28, 2021 As of Feb. 28, 2021 As of Feb. 28, 2021 (Reference) Overview of individual results 1. Individual results for the fiscal year ended February 28, 2022 (March 1, 2021 to February 28, 2022) (1) Individual operating results (Percentage figures represent year-on-year changes) Net sales Operating profit Ordinary profit Net profit million yen 18,026 % 15.3 million yen % million yen % million yen % 756 109.8 828 129.8 405 320.0 15,640 (1.0) 360 (60.5) 360 (60.9) 96 (80.8) Profit per share Diluted profit per share yen 36.15 8.53 9,920 8,686 yen － － 4,656 4,360 (2) Individual financial position Total assets Net assets Equity capital ratio Net assets per share million yen million yen % 45.3 50.2 yen 404.32 388.89 (Reference) Shareholders’ equity: Year ended Feb. 28, 2022: 4,493 million yen * These financial results are outside the scope of audit procedures conducted by a certified public accountant or audit corporation. * Explanation of the proper use of financial results forecast and other notes Year ended Feb. 28, 2021: 4,360 million yen Information relating to forecasts stated in this document was based on information available at the time of publication of the document. Actual results may differ materially from the forecasts due to a range of factors. For further information about the results forecast, please refer to “1. Overview of Operating Results, (4) Outlook” on Page 5 of the attached materials. Year ended Feb. 28, 2022 Year ended Feb. 28, 2021 Year ended Feb. 28, 2022 Year ended Feb. 28, 2021 Year ended Feb. 28, 2022 Year ended Feb. 28, 2021 – 3 – . ○ Table of Contents (Attachments) 1. Overview of Operating Results ……………………………………………………………………………………………… (1) Overview of the Operating Results for the Fiscal Year under Review ………………………………………………… (2) Overview of the Financial Position for the Fiscal Year under Review ………………………………………………… (3) Overview of the Cash Flows for the Fiscal Year under Review ………………………………………………………… (4) Outlook …………………………………………………………………………………………………………………… 5 5 8 8 9 2. Basis for the Selection of the Accounting Principles ………………………………………………………………………… 10 3. Consolidated Financial Statements and Main Notes ………………………………………………………………………… 11 (1) Consolidated Balance Sheet ……………………………………………………………………………………………… 11 (2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income …………………………… 13 13 Consolidated Statement of Income ………………………………………………………………………………… 14 Consolidated Statement of Comprehensive Income ………………………………………………………………… 15 (3) Statement of Changes in Equity ………………………………………………………………………………………… (4) Consolidated Statement of Cash Flows ………………………………………………………………………………… 17 (5) Notes on the Consolidated Financial Statements ………………………………………………………………………… 19 (Notes on the Going Concern Assumption) …………………………………………………………………………… 19 ………………………………………………………………………………… 19 (Related to Business Combination) …………………………………………………………………………………… (Segment Information, etc.) …………………………………………………………………………………………… 20 (Per Share Information) ………………………………………………………………………………………………… 25 26 (Material Post-Balance Sheet Events) ………………………………………………………………………………… – 4 – 1. Overview of Operating Results (1) Overview of the Operating Results for the Fiscal Year under Review During the consolidated fiscal year under review, cases of COVID-19 surged in Japan, when the Delta variant raged over the period from late July and the Omicron variant from January. Yet, as more and more people were vaccinated against COVID-19, restrictions on Japan’s economic activities were gradually eased and overall consumption has been picking up. In these circumstances, demand for purchases by neighborhood reuse stores steadily grew owing to the increased awareness of the importance of reuse as society worked toward the Sustainable Development Goals (SDGs). In regard to sales, there remained considerable needs of consumers to buy daily necessities at bargain prices. During the fourth quarter, the Treasure Factory Group enjoyed steady business that continued from the third quarter. We achieved an operating profit of ¥414,917 thousand over the months from December to February, which was a record figure for our operating profit earned in the fourth quarter of a cumulative accounting period. On a non-consolidated basis, we opened 17 directly-managed stores during the year, which was a record number, and existing stores also enjoyed steady sales throughout the year. In regard to Group companies, from January 2021, sales of PickUP JAPAN were included in our financial results. In addition, Kindal, which engages in the reuse business, enjoyed increased e-commerce sales that led to a dramatic recovery in sales and profits. On the other hand, selling, general and administrative expenses for new stores increased ¥479,667 thousand year on year as non-consolidated store openings went well, whereas the percentage of selling, general and administrative expenses dropped to 56.8 percent. Consequently, the results of operations for the consolidated fiscal year under review show net sales of ¥23,313,103 thousand (up 24.4 percent year on year), operating profit of ¥995,329 thousand (up 831.3 percent year on year), ordinary profit of ¥1,054,109 thousand (up 502.6 percent year on year), and net profit of ¥703,470 thousand attributable to owners of the parent (the previous year saw net loss of ¥134,966 thousand attributable to owners of the parent). These results mean that we achieved record profits earned since the switch to consolidated financial settlement. In terms of profit margins, the gross profit ratio was 61.0 percent (up 0.4 points year on year), selling, general and administrative expenses ratio 56.8 percent (down 3.3 points year on year), operating profit ratio 4.3 percent (up 3.7 points year on year), and ordinary profit ratio 4.5 percent (up 3.6 points year on year). The results of operations sorted by segment are as stated below. (Reuse Business) Consolidated sales increased 24.4 percent year on year, non-consolidated sales increased 15.3 percent year on year, and non-consolidated sales at existing stores increased 7.8 percent year on year. In terms of sales by category, apparel sales, which were greatly affected by the pandemic during the previous year, made a recovery and increased 24.7 percent year on year, and sales of household items increased 14.5 percent year on year. As for electric appliances, sales dropped after the dramatic increase driven by special cash payments provided for residents in Japan during the second quarter of the last year. In addition, the sales of air conditioners and other summer appliances remained below our projection due to lower-than-normal temperatures in August. As a result, sales of electric appliances increased only 3.3 percent year on year. Sales of fashion items and hobby-related items showed significant increases of 46.8 percent and 34.8 percent year on year, respectively, as PickUP JAPAN’s sales were included in the results. As for e-commerce sales, we expanded offerings on our e-commerce site to meet the demand for shopping from home, thereby increasing consolidated e-commerce sales by 34.6 percent year on year. Consolidated purchases of merchandise for the fiscal year under review increased 32.8 percent year on year partly because PickUP JAPAN’s purchases were included. Non-consolidated purchases also grew by 20.4 percent. As for non-consolidated purchases by channel, in-store purchases showed a steady increase of 23.9 percent year on year. Home-visit purchases dramatically increased by 34.0 percent year on year, and home-delivery purchases continued favorably and increased 23.4 percent year on year. During the consolidated fiscal year under review, we opened 7 general reuse stores, 8 fashion reuse stores, and 2 brand-name item reuse stores, the non-consolidated total being 17 stores. In terms of new stores by region, we opened 10 in Kanto, 3 in Kansai, 3 in Chubu, and 1 in Kyushu, maintaining good balance of geographic locations. The numbers of stores at the end of the consolidated fiscal year under review are as follows: 149 directly-managed stores and 4 franchise stores, the non-consolidated total being 153; and 220 stores in total across the Group. These results added up to net sales of ¥22,690,117 thousand (up 24.2 percent year on year) and the segment’s profit of ¥2,476,108 thousand (up 77.7 percent year on year). (Other) Cariru, our rental business, successfully captured demand as people attended more weddings after the state of emergency and other related restrictions were lifted, and sales of the rental business increased 195.8 percent year on year. – 5 – The information system business saw operating loss due to increased development costs. In February, we carried out a company split (incorporation-type company split) to establish a new company, Trefac Technologies Co., Ltd., which took over the system development business from the Group company Digital Quest. We sold our shares in Digital Quest in late February. These results added up to net sales of ¥660,397 thousand (up 30.0 percent year on year) and the segment’s profit of ¥26,240 thousand (the previous year saw ¥52,877 thousand in loss). – 6 – [1] Purchase results by merchandise in reuse business Item Purchase (thousand yen) Composition ratio (%) Year on year (%) (Notes) 1. Consumption tax and other amounts are not included in the above amounts. 2. Side expenses are included in “Other.” [2] Sales results by merchandise in reuse business Item Net sales (thousand yen) Composition ratio (%) Year on year (%) 514,593 3,748,542 2,500,136 882,104 257,538 727,243 575,445 9,205,604 1,481,238 10,404,849 4,865,948 2,624,418 1,128,917 1,716,642 468,102 22,690,117 5.6 40.7 27.2 9.6 2.8 7.9 6.2 100.0 6.5 45.9 21.3 11.6 5.0 7.6 2.1 100.0 123.1 121.7 167.2 119.4 107.0 143.3 128.0 132.8 114.5 124.7 146.8 103.3 101.4 134.8 119.1 124.2 Household items Apparel Fashion items Electric appliances Furniture Hobby-related items Other Total Household items Apparel Fashion items Electric appliances Furniture Hobby-related items Other Total (Notes) 1. Consumption tax and other amounts are not included in the above amounts. 2. Sales of other merchandise and moving-related sales are included in “Other.” – 7 – (2) Overview of the Financial Position for the Fiscal Year under Review Total assets at the end of the consolidated fiscal year under review increased by ¥1,392,095 thousand year on year to ¥11,809,650 thousand because of an increase of ¥366,686 thousand in cash and deposits, an increase of ¥445,539 thousand in merchandise, an increase of ¥179,625 thousand in buildings and structures (net), and an increase of ¥154,473 thousand in leasehold and guarantee deposits, among other reasons. Total liabilities at the end of the consolidated fiscal year under review increased by ¥807,471 thousand year on year to ¥6,913,687 thousand because of an increase of ¥119,415 thousand in short-term borrowings, an increase of ¥133,908 thousand in the current portion of long-term borrowings, an increase of ¥296,760 thousand in long-term borrowings, and an increase of ¥218,028 thousand in income taxes payable, among other reasons. Total net assets at the end of the consolidated fiscal year under review increased by ¥584,623 thousand year on year to ¥4,895,963 thousand because share acquisition rights increased by ¥162,819 thousand and a net profit of ¥703,470 thousand attributable to owners of the parent was recorded, among other reasons. (3) Overview of the Cash Flows for the Fiscal Year under Review Cash and cash equivalents at the end of the consolidated fiscal year under review increased by ¥415,684 thousand year on year to ¥2,353,018 thousand. The status of the cash flows during the consolidated fiscal year under review and factors in these flows are as follows: Cash flows from operating activities for the consolidated fiscal year under review added up to an income of ¥870,485 thousand. This is primarily because we recorded an increase of ¥471,066 thousand in inventories and paid income taxes of ¥95,498 thousand, whereas we recorded net profit of ¥848,706 thousand before taxes, depreciation of ¥326,127 thousand, and impairment loss of ¥216,808 thousand. Cash flows from investing activities for the consolidated fiscal year under review added up to an expenditure of ¥732,242 thousand. This is primarily because we recorded ¥539,272 thousand in the purchase of property, plant and equipment, ¥168,182 thousand in payments of leasehold and guarantee deposits, and ¥57,996 thousand in the purchase of intangible assets, to establish new stores, among other reasons. (Cash flows from operating activities) (Cash flows from investing activities) (Cash flows from financing activities) Cash flows from financing activities for the consolidated fiscal year under review added up to an income of ¥274,830 thousand. This is mostly because we recorded ¥1,079,332 thousand in repayments of long-term borrowings and ¥179,418 thousand in dividends paid, whereas we recorded ¥1,510,000 thousand in proceeds from long-term borrowings and ¥119,415 thousand in income from short-term borrowings. (Reference) Changes in cash flow-related indicators As of Feb. 28, 2021 As of Feb. 28, 2022 Equity capital ratio (%) Equity capital ratio based on market value (%) Cash flow-to-interest-bearing debt ratio (annual) Interest coverage ratio (times) 41.1 94.9 7.9 72.4 40.0 88.5 5.0 70.4 Equity capital ratio: Equity capital/Total assets Equity capital ratio based on market value: Market capitalization/Total assets Cash flow-to-interest-bearing debt ratio: Interest-bearing debt/Operating cash flow Interest coverage ratio: Operating cash flow/Interest payment (Note 1) All of the above has been calculated using consolidated financial figures. (Note 2) Market capitalization is calculated based on the number of issued shares excluding treasury shares. (Note 3) For operating cash flows and interest payments, cash flows from operating activities and interest paid in the Consolidated Statement of Cash Flows are used. (Note 4) Interest-bearing debt refers to all liabilities that are recorded in our consolidated balance sheet and have interest we pay. – 8 – (4) Outlook The Company will pursue five management policies for growth, namely the development of the reuse business, investments in new businesses, growth in overseas markets, growth through M&A, and growth through investments in digital transformation (DX), in order to achieve the medium-term management plan that covers the period until the fiscal year ending on February 28, 2025. We have set the Group-wide goal of opening 20 to 25 new stores–our largest-ever target–during the fiscal year ending February 28, 2023, and will carry out the plans to reach the goal in Kanto, Kansai, Chubu, and other trade areas. Our Group companies Kindal, PickUP JAPAN, and GK Factory in the reuse business aim to achieve greater results. In overseas markets, we plan to further develop our business in Thailand, which moved into the black last year, and to open stores in Taiwan where we established a local affiliate in April 2021. Trefac Technologies, which was established in February 2022 as a result of reorganization within the Group, will operate the business that centers on system development and marketing support for the Group, contributing to growth through investments in digital transformation. We estimated figures for our full-year results forecast on the assumption that these growth investments will be made. Consequently, as for the results forecast for the fiscal year ending February 28, 2023, we project net sales at ¥25,398 million (up 8.9 percent year on year), operating profit at ¥1,098 million (up 10.3 percent year on year), ordinary profit at ¥1,112 million (up 5.5 percent year on year), and profit attributable to owners of parent at ¥742 million (up 5.5 percent year on year). – 9 – 2. Basis for the Selection of the Accounting Principles The Treasure Factory Group uses the Japanese Accounting Standards. Regarding the application of the International Financial Reporting Standards (IFRS), we plan to take proper actions, considering domestic and international situations. – 10 – 3. Consolidated Financial Statements and Main Notes (1) Consolidated Balance Sheet (Thousands of Yen) Previous Consolidated Fiscal Year (Ended February 28, 2021) Current Consolidated Fiscal Year (Ended February 28, 2022) Assets Current assets Cash and deposits Accounts receivable – trade Merchandise Supplies Other Total current assets Non-current assets Property, plant and equipment Buildings and structures, net Land Construction in progress Other, net Total property, plant and equipment Intangible assets Goodwill Other Total intangible assets Investments and other assets Investment securities Long-term loans receivable Deferred tax assets Leasehold and guarantee deposits Other Total investments and other assets Total non-current assets Total assets 1,994,170 548,801 3,568,686 11,143 505,778 6,628,580 948,213 446,949 19,586 187,123 1,601,872 169,885 121,662 291,547 7,606 220 223,628 1,541,401 122,698 1,895,555 3,788,975 10,417,555 2,360,856 643,971 4,014,226 14,720 518,004 7,551,779 1,127,839 426,511 2,425 251,111 1,807,887 93,313 126,210 219,524 7,606 － 373,751 1,695,875 153,225 2,230,458 4,257,871 11,809,650 – 11 – (Thousands of Yen) Previous Consolidated Fiscal Year (Ended February 28, 2021) Current Consolidated Fiscal Year (Ended February 28, 2022) Liabilities Current liabilities Accounts payable – trade Short-term borrowings Current portion of long-term borrowings Income taxes payable Provision for bonuses Provision for shareholder benefit program Provision for sales returns Provision for point card certificates Other Total current liabilities Non-current liabilities Long-term borrowings Asset retirement obligations Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Cumulative amount of other comprehensive income Foreign currency translation adjustment Total cumulative amount of other comprehensive income Share acquisition rights Non-controlling interests Total net assets Total liabilities and net assets 61,452 1,672,987 600,290 68,756 273,882 4,198 18,822 50,376 1,235,194 3,985,961 1,514,595 583,214 22,444 2,120,254 6,106,215 521,183 456,183 3,624,479 (317,732) 4,284,113 31 31 － 27,194 4,311,340 10,417,555 58,790 1,792,403 734,198 286,785 318,470 4,536 21,335 60,158 1,158,626 4,435,305 1,811,355 640,774 26,252 2,478,381 6,913,687 521,183 456,183 4,148,547 (410,119) 4,715,795 3,987 3,987 162,819 13,360 4,895,963 11,809,650 – 12 – (2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income (Consolidated Statement of Income) (Thousands of Yen) Previous Consolidated Fiscal Year (from March 1, 2020 to February 28, 2021) Current Consolidated Fiscal Year (from March 1, 2021 to February 28, 2022) Net sales Cost of sales Gross profit Provision for sales returns Reversal of provision for sales returns Net gross profit Selling, general and administrative expenses Operating profit Non-operating income Interest income Vending machine income Foreign exchange gains Subsidy income Proceeds from sales of abandoned goods Commission income Other Total non-operating income Non-operating expenses Interest expenses Foreign exchange losses Other Total non-operating expenses Ordinary profit Extraordinary income Gain on reversal of share acquisition rights Gain on sales of shares of subsidiaries and associates Gain on bargain purchase Total extraordinary income Extraordinary losses Loss on sales of non-current assets Loss on retirement of non-current assets Impairment loss Loss on valuation of investment securities Loss on cancellation of rental contracts Total extraordinary losses Profit before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit (loss) Loss attributable to non-controlling interests Profit (loss) attributable to owners of parent 18,735,893 7,366,405 11,369,487 18,822 20,076 11,370,741 11,263,861 106,879 568 10,096 272 36,065 578 12,077 15,705 75,364 6,339 － 966 7,306 174,938 6,619 － 30,658 37,277 － 3,505 139,643 45,523 6,272 194,945 17,270 131,086 24,880 155,967 (138,696) (3,730) (134,966) 23,313,103 9,078,836 14,234,267 21,335 18,822 14,231,754 13,236,424 995,329 371 12,117 － 16,001 3,059 12,754 28,383 72,687 12,350 322 1,235 13,908 1,054,109 － 17,141 － 17,141 1,138 4,597 216,808 － － 222,543 848,706 305,000 (154,517) 150,483 698,223 (5,246) 703,470 – 13 – (Consolidated statement of comprehensive income) (Thousands of Yen) Previous Consolidated Fiscal Year (from March 1, 2020 to February 28, 2021) Current Consolidated Fiscal Year (from March 1, 2021 to February 28, 2022) Profit (loss) Other comprehensive income Foreign currency translation adjustment Total of other comprehensive income Comprehensive income: (Comprehensive income attributable to) Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests (138,696) 1,923 1,923 (136,772) (133,042) (3,730) 698,223 3,956 3,956 702,179 707,426 (5,246) – 14 – (3) Statement of Changes in Equity Previous consolidated fiscal year (from March 1, 2020 to February 28, 2021) (Thousands of Yen) Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity 521,183 456,183 3,872,603 (241,113) 4,608,857 – – (113,157) (134,966) (113,157) (134,966) (76,619) (76,619) (248,123) 3,624,479 (76,619) (317,732) (324,743) 4,284,113 Balance at beginning of period Changes during period Dividends of surplus Loss attributable to owners of parent Purchase of treasury shares Net changes in items other than shareholders’ equity Total changes during period Balance at beginning of period Changes during period Dividends of surplus Loss attributable to owners of parent Purchase of treasury shares Net changes in items other than shareholders’ equity Total changes during period Balance at end of period 521,183 456,183 Cumulative amount of other comprehensive income Foreign currency translation adjustment Total cumulative amount of other comprehensive income Share acquisition rights Non-controlling interests Total net assets (1,892) (1,892) 6,619 30,925 4,644,509 (113,157) (134,966) (76,619) 1,923 1,923 (6,619) (3,730) (8,425) 1,923 1,923 (6,619) (3,730) (333,168) Balance at end of period 31 31 － 27,194 4,311,340 – 15 – Current consolidated fiscal year (from March 1, 2021 to February 28, 2022) (Thousands of Yen) Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity 521,183 456,183 3,624,479 (317,732) 4,284,113 Shareholders’ equity (179,402) 703,470 (179,402) 703,470 (92,386) (92,386) (92,386) (410,119) 431,681 4,715,795 Balance at beginning of period Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Net changes in items other than shareholders’ equity Total changes during period Balance at end of period 521,183 456,183 4,148,547 － － 524,067 Cumulative amount of other comprehensive income Foreign currency translation adjustment Total cumulative amount of other comprehensive income Share acquisition rights Non-controlling interests Total net assets 31 31 － 27,194 4,311,340 (179,402) 703,470 (92,386) 3,956 3,956 162,819 (13,834) 152,941 3,956 3,956 162,819 (13,834) 584,623 Balance at beginning of period Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Net changes in items other than shareholders’ equity Total changes during period Balance at end of period 3,987 3,987 162,819 13,360 4,895,963 – 16 – (4) Consolidated Statement of Cash Flows (Thousands of Yen) Previous Consolidated Fiscal Year (from March 1, 2020 to February 28, 2021) Current Consolidated Fiscal Year (from March 1, 2021 to February 28, 2022) Cash flows from operating activities Profit before income taxes Depreciation Impairment loss Amortization of goodwill Loss (gain) on sales of shares of subsidiaries and associates Share-based remuneration expenses Gain on bargain purchase Increase (decrease) in provision for bonuses Increase (decrease) in provision for shareholder benefit program Increase (decrease) in provision for point card certificates Increase (decrease) in provision for sales returns Loss (gain) on valuation of investment securities Interest and dividend income Interest expenses Foreign exchange losses (gains) Subsidy income Gain on reversal of share acquisition rights Loss (gain) on sales and retirement of non-current assets Loss on cancellation of rental contracts Decrease (increase) in trade receivables Decrease (increase) in inventories Increase (decrease) in trade payables Increase (decrease) in accrued consumption taxes Other Subtotal Interest and dividends received Interest paid Proceeds from subsidy income Income taxes paid Cash flows from operating activities Cash flows from investing activities Proceeds from withdrawal of time deposits Purchase of property, plant and equipment Purchase of intangible assets Payments of leasehold and guarantee deposits Proceeds from refund of leasehold and guarantee deposits Purchase of shares of subsidiaries resulting in change in scope of consolidation Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation Other Cash flows from investing activities Cash flows from financing activities Net increase (decrease) in short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Purchase of treasury shares Dividends paid Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation Proceeds from issuance of share acquisition rights Other – 17 – 17,270 300,161 139,643 24,103 － － (30,658) 24,564 (1,285) 855 (1,253) 45,523 (608) 6,339 1,822 (36,065) (6,619) 3,505 6,272 (22,137) 105,880 7,756 60,874 86,947 732,892 604 (6,666) 36,065 (280,472) 482,422 － (222,246) (78,220) (70,530) 60,843 (210,518) － (65,594) (586,267) 350,584 820,000 (561,397) (76,619) (113,255) － － 3,133 848,706 326,127 216,808 20,399 (17,141) 160,000 － 44,588 338 9,782 2,512 － (402) 12,350 1,344 (16,001) － 5,735 － (116,039) (471,066) (1,193) (52,949) (11,961) 961,939 399 (12,356) 16,001 (95,498) 870,485 48,430 (539,272) (57,996) (168,182) 6,824 － 34,847 (56,894) (732,242) 119,415 1,510,000 (1,079,332) (92,386) (179,418) (6,268) 2,819 － Cash flows from financing activities Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 422,445 101 318,702 1,618,631 1,937,333 274,830 2,611 415,684 1,937,333 2,353,018 – 18 – (5) Notes on the Consolidated Financial Statements (Notes on Going Concern Assumption) N/A (Related to Business Combination) Split-up of a consolidated subsidiary and the transfer of shares in the subsidiary The Company split up the business of Digital Quest Co., Ltd. (“Digital Quest”), one of its subsidiaries, so that a newly established company would take over part of the business, and transferred shares in Digital Quest after the split-up. (1) Timeline Date of the resolution by the Board of Directors on the incorporation-type company split of Digital Quest: December 14, 2021 Date of the resolution by the Board of Directors on the incorporation-type company split of the Company: December 15, 2021 Date of the resolution by the general meeting of shareholders on the split company: December 21, 2021 Effective date of the company split (date of establishment of the new company): February 14, 2022 Date of the sale of shares in the split company: February 28, 2022 (2) Name of the new company established through the split-up Trefac Technologies Co., Ltd. (3) Approach to the company split Name Outsourced system development business, along with businesses related to business advancement and investments, with Digital Quest being the split company. (4) Principal reason for the business divestiture The Company acquired the ownership of Digital Quest to make it a consolidated subsidiary in January 2019 in order to advance its ability to develop information systems. Since the acquisition, the Company and Digital Quest have worked together to develop various information systems and apps within the Group, including the system for the B2B auction business. To acquire even greater ability to develop information systems and speed up our development processes for the services the Treasure Factory Group offers (e.g., systems, e-commerce websites, and apps), we have split up Digital Quest and established Trefac Technologies Co., Ltd., as a new consolidated subsidiary that mainly engages in the information system development business. Digital Quest continues its media content business that is separate from the system development business. Given that the media content business would unlikely have a synergistic relationship with the Treasure Factory Group, we sold our shares in Digital Quest to external third parties. (5) Details of the allotment pertaining to the incorporation-type company split The newly established company issued 10,675 common shares when the split-up took place, and all of these shares were allotted and delivered to the split company Digital Quest. At the same time, Digital Quest delivered all of these allotted shares as dividends of surplus to shareholders of Digital Quest according to their ownership ratio for shares. Profiles of the companies involved in the incorporation-type company split Split company Newly established company Digital Quest Co., Ltd. Trefac Technologies Co., Ltd. Outsourced system development business; businesses related to business advancement and investments Business descriptions Media content business Date of establishment January 6, 2014 February 14, 2022 Major shareholders and shareholding ratios Share capital Treasure Factory: 53.1% Hiroyuki Samejima: 7.9% Treasury shares: 39.0% ¥10,000 thousand Treasure Factory: 87.1% Hiroyuki Samejima: 12.9% ¥10,000 thousand The Company acquired all shares in the newly established company held by Hiroyuki Samejima, CEO of Digital Quest, after the split-up took place. (6) Summary of accounting conducted This split-up has been processed as a common control transaction in accordance with the Accounting Standard for Business Combinations and the Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures. The split-up will lead to no profit or loss. We sold our shares in Digital Quest after the split-up took place, and recorded ¥17,141 thousand as gain on sales of shares of subsidiaries and associates in the Consolidated Statement of Income for the consolidated fiscal year under review. (7) Segment in which the combiner is included in the disclosed segment information Digital Quest’s business is included in “Other” (information system business) in the disclosed segment information. – 19 – (8) Fair book values of the assets and liabilities of the transferred business, and the major details thereof As of Feb. 28, 2022 Current assets (thousand yen) Non-current assets (thousand yen) Total assets (thousand yen) Current liabilities (thousand yen) Total liabilities (thousand yen) of Income for the fiscal year under review Net sales (thousand yen) Operating loss (thousand yen) (Segment Information, etc.) [Segment Information] 1. Overview of the reporting segment 20,012 11,891 31,903 11,563 11,563 185,031 (22,646) (9) Estimated loss or profit pertaining to the divested business (digital content business) included in the Consolidated Statement As of Feb. 28, 2022 The Treasure Factory Group’s reporting segment has access to financial information as the Group’s separated constituent unit. The segment is regularly reviewed by the Board of Directors in order to determine management resource allocation and evaluate performance. The Group runs reuse businesses that revolve around several types of reuse stores including Treasure Factory stores, which are general reuse stores, and Treasure Factory Style stores, which are fashion reuse stores. We also run a rental business and an information system business. 2. Methods for the calculation of the amounts of net sales, profit or loss, assets, and other items by reporting segment The method of accounting for the reported business segment is the same as the method of accounting used to prepare consolidated financial statements. The reporting segment’s profit is an operating profit-based figure. Internal revenues and transfers between segments are based on prevailing market prices. 3. Information about the amounts of net sales, profit or loss, assets, and other items by reporting segment Previous consolidated fiscal year (from March 1, 2020 to February 28, 2021) Reporting segment Reuse business Other (Note 1) Total Adjustment amount (Note 2) 18,274,712 461,181 18,735,893 18,735,893 － 46,889 46,889 (46,889) (Thousands of Yen) Amount recorded in the consolidated financial statements (Note 3) － － Net sales Sales to external customers Internal sales or transfers between segments Total 18,274,712 508,070 18,782,782 (46,889) 18,735,893 Segment’s profit (loss) 1,393,046 (52,877) 1,340,169 (1,233,289) 106,879 Segment’s assets 8,708,900 288,984 8,997,884 1,419,671 10,417,555 Depreciation Amortization of goodwill 227,685 51,409 279,095 21,066 300,161 16,696 7,407 24,103 － 24,103 (Note 1) “Other” refers to the business segments not included in the reporting segments, such as the rental, information system, and real estate businesses. (Note 2) Adjustment amounts are as stated below: – 20 – (1) The adjustment amount for the segment’s profit or loss is a company-wide expense and primarily part of selling, and general and administrative expenses not attributable to the segment. (2) The adjustment amount for the segment’s assets are primarily assets, etc., pertaining to the administration department of the parent’s head office not attributable to the segment. (3) The adjustment amount for depreciation is the depreciation of assets pertaining to the administration department not attributable to the reporting segment. (Note 3) The segment’s profit or loss has been adjusted according to the operating profit shown in the Consolidated Statement of Income. – 21 – (Thousands of Yen) Amount recorded in the consolidated financial statements (Note 3) － － Current consolidated fiscal year (from March 1, 2021 to February 28, 2022) Reporting segment Reuse business Other (Note 1) Total Adjustment amount (Note 2) Net sales Sales to external customers Internal sales or transfers between segments 22,690,117 622,986 23,313,103 23,313,103 － 37,411 37,411 (37,411) Total 22,690,117 660,397 23,350,514 (37,411) 23,313,103 Segment’s profit 2,476,108 26,240 2,502,348 (1,507,018) 995,329 Segment’s assets 9,902,067 186,160 10,088,227 1,721,422 11,809,650 Depreciation Amortization of goodwill 247,666 47,851 295,518 30,609 326,127 16,696 3,703 20,399 － 20,399 (Note 1) “Other” refers to the business segments not included in the reporting segments, such as the rental, information system, and real estate businesses. (Note 2) Adjustment amounts are as stated below: (1) The adjustment amount for the segment’s profit is a company-wide expense and primarily part of selling, and general and administrative expenses not attributable to the segment. (2) The adjustment amount for the segment’s assets are primarily assets, etc., pertaining to the administration department of the parent’s head office not attributable to the segment. (3) The adjustment amount for depreciation is the depreciation of assets pertaining to the administration department not attributable to the reporting segment. (Note 3) The segment’s profit has been adjusted according to the operating profit shown in the Consolidated Statement of Income. – 22 – [Related Information] Previous consolidated fiscal year (from March 1, 2020 to February 28, 2021) 1. Information about each product and service Sales from each category of product or service sold to external customers are omitted because they account for more than 90 percent of the net sales in the Consolidated Statement of Income. Sales to external customers in Japan are omitted because they account for more than 90 percent of the net sales in the 2. Information about each region (1) Net sales Consolidated Statement of Income. (2) Property, plant and equipment The amount of property, plant and equipment located in Japan is omitted because it accounts for more than 90 percent of the amount of the property, plant and equipment in the Consolidated Balance Sheet. 3. Information about each major customer the Consolidated Statement of Income. Information about external customers is omitted because none of them account for 10 percent or more of the net sales in Current consolidated fiscal year (from March 1, 2021 to February 28, 2022) 1. Information about each product and service Sales from each category of product or service sold to external customers are omitted because they account for more than 90 percent of the net sales in the Consolidated Statement of Income. Sales to external customers in Japan are omitted because they account for more than 90 percent of the net sales in the 2. Information about each region (1) Net sales Consolidated Statement of Income. (2) Property, plant and equipment The amount of property, plant and equipment located in Japan is omitted because it accounts for more than 90 percent of the amount of the property, plant and equipment in the Consolidated Balance Sheet. 3. Information about each major customer the Consolidated Statement of Income. Information about external customers is omitted because none of them account for 10 percent or more of the net sales in [Information about impairment losses on non-current assets for each reporting segment] Previous consolidated fiscal year (from March 1, 2020 to February 28, 2021) Other Total Adjustment amount Total (Thousands of Yen) Reporting segment Reuse business Reporting segment Reuse business Impairment loss 139,643 － 139,643 － 139,643 Current consolidated fiscal year (from March 1, 2021 to February 28, 2022) (Thousands of Yen) Other Total Adjustment amount Total Impairment loss 160,636 56,171 216,808 － 216,808 (Note) In the information system business included in “Other,” some assets have decreased in profitability and will unlikely generate return on investment. The book value of these assets (goodwill) has been written down to a recoverable amount, and ¥56,171 thousand – 23 – has been recorded as an impairment loss under extraordinary losses. – 24 – [Information about the amortization of goodwill and the unamortized balance for each reporting segment] Previous consolidated fiscal year (from March 1, 2020 to February 28, 2021) Reporting segment Reuse business Other Total Adjustment amount Total (Thousands of Yen) Balance at end of period 110,010 59,874 169,885 － 169,885 (Note) The amortization of goodwill is omitted because the same information is disclosed in “Segment Information.” Current consolidated fiscal year (from March 1, 2021 to February 28, 2022) (Thousands of Yen) Reporting segment Reuse business Other Total Adjustment amount Total Balance at end of period 93,313 － 93,313 － 93,313 (Note) The amortization of goodwill is omitted because the same information is disclosed in “Segment Information.” [Information about gain on bargain purchase for each reporting segment] Previous consolidated fiscal year (from March 1, 2020 to February 28, 2021) We recorded the gain on bargain purchase of ¥30,658 thousand in “Reuse business.” This is because we acquired shares in K.K. PickUP Japan so that the company would become our consolidated subsidiary. Current consolidated fiscal year (from March 1, 2021 to February 28, 2022) N/A (Notes) 1. Diluted profit per share is omitted because no dilutive potential shares exist. 2. The basis for the calculation of net assets per share is as shown below: Previous Consolidated Fiscal Year (Ended February 28, 2021) Current Consolidated Fiscal Year (Ended February 28, 2022) (Per Share Information) Net assets per share Earnings (loss) per share Diluted profit per share Total net assets (thousand yen) Deductions from total net assets (thousand yen) (Share acquisition rights (thousand yen)) (Non-controlling interests (thousand yen)) Net assets attributable to common shares at end of period (thousand yen) Number of common shares at end of period used in calculation of net assets per share (shares) Previous Consolidated Fiscal Year (from March 1, 2020 to February 28, 2021) Current Consolidated Fiscal Year (from March 1, 2021 to February 28, 2022) ¥382.08 (¥11.94) ¥― 4,311,340 27,194 (―) (27,194) 4,284,145 11,212,669 ¥424.66 ¥62.78 ¥― 4,895,963 176,180 (162,819) (13,360) 4,719,783 11,114,369 – 25 – 3. The basis for the calculation of earnings (loss) per share is as shown below: Previous Consolidated Fiscal Year (from March 1, 2020 to February 28, 2021) Current Consolidated Fiscal Year (from March 1, 2021 to February 28, 2022) (1) Earnings (loss) per share Profit (loss) attributable to owners of parent (thousand yen) (thousand yen) Amount not attributable to ordinary shareholders Profit (loss) attributable to owners of parent pertaining to common shares (thousand yen) Average number of common shares issued during the period (shares) (2) Diluted profit per share Adjustment amount of profit attributable to owners of parent (thousand yen) Increase in common shares (Share acquisition rights (thousand shares)) Summary of non-dilutive potential shares not included in the calculation of diluted profit per share (Material Post-Balance Sheet Events) N/A (134,966) ― (134,966) 11,304,944 ― ― (―) ― 703,470 ― 703,470 11,205,128 ― ― (―) Share acquisition rights issued based on the Board of Directors resolution on April 14, 2021 Number of share acquisition rights: 7,440 Number of common shares: 744,000 – 26 –