ａｎｄ　ｆａｃｔｏｒｙ（7035） – [Delayed]Summary of Non-Consolidated Financial Results for the Six Months Ended February 28,2022

Translation Notice: This document is an excerpt translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japanese document, the latter shall prevail. Summary of Non-Consolidated Financial Results for the Six Months Ended February 28, 2022 (Based on Japanese GAAP) April 14, 2022 and factory, inc Tokyo 7035 Rinji Aoki, President and Representative Director Tomoki Hasumi, Director Company name: Stock exchange listing: Stock code: Representative: Contact: Scheduled date to file annual securities report: Scheduled date to commence dividend payments: Preparation of supplementary material on quarterly financial results: Holding of annual financial results meeting: URL https://andfactory.co.jp/ Phone: +81-3-6712-7646 April 14, 2022 － Yes No 1. Non-Consolidated financial results for the six months ended February 28, 2022 (From September 1, 2021 to February 28, 2022) (1) Non-consolidated operating results (cumulative) Percentages indicate year-on-year changes. (Amounts less than one million yen are rounded down.) Net sales Operating income Ordinary profit Net income Millions of yen % Millions of yen Six months ended February 28, 2022 Six months ended February 28, 2021 1,332 (10.0) 1,479 (0.3) 11 (207) % Millions of yen － － (274) (95) % Millions of yen － － (276) (94) % － － Notes: Although dilutive shares exist, diluted earnings per share are not stated as earnings per share were negative. Earnings per share Diluted earnings per share Yen (9.61) (28.12) Total assets Net assets Equity ratio Millions of yen Millions of yen 5,005 5,376 797 888 Yen － － % 15.9 16.5 Six months ended February 28, 2022 Six months ended February 28, 2021 (2) Non-consolidated financial position As of February 28, 2022 As of August 31, 2021 2. Cash dividends Annual dividends per share 1st 2nd 3rd quarter-end quarter-end quarter-end Fiscal year-end Total Year ended August 31, 2021 Year ending August 31, 2022 Year ending August 31, 2022 (Forecast) Notice concerning Revision of the Financial Forecasts Yen － － ： Yen 0.00 0.00 No Yen － － Yen 0.00 0.00 Total 0.00 0.00 3. Forecast of non-consolidated financial results for the year ending August 31, 2022 (From September 1, 2021 to August 31, 2022) Percentages indicate year-on-year changes. Net sales Operating income Ordinary profit Profit Earnings per share Millions of yen % Millions of yen % Millions of yen % Millions of yen Full year 3,050 0.2 170 (47) － (40) % － Yen (4.06) Notice concerning Revision of the Financial Forecasts 4. Notes － ： No (1) Application of special accounting treatment for quarterly financial reporting: Yes Note: For details, please refer to “2. Quarterly Non-Consolidated Financial Statements and Notes (4) Notes to the Quarterly Non-Consolidated Financial Statements (Application of Special Accounting Treatment for Quarterly Financial Reporting)” on page 10 of the attachments to this summary. (2) Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements Changes in accounting policies due to revisions to accounting standards and other regulations: Yes Changes in accounting policies due to other reasons: No Changes in accounting estimates: No Restatement of prior period financial statements: No (3) Number of issued shares (common stock) Total number of issued shares at the end of the period (including treasury shares) As of February 28, 2022 9,853,520 shares As of August 31, 2021 9,827,120 shares Number of treasury shares at the end of the period As of February 28, 2022 257 shares As of August 31, 2021 257 shares Average number of shares during the period (cumulative from the beginning of the fiscal year) 9,848,449 shares Six months ended February 28, 2021 9,826,863 shares Six months ended February 28, 2022 Notes: This financial report is exempt from the review. Explanation about appropriate usage of business forecasts and other special notes: The forecasts above are based on the judgments made on the basis of currently available information. Forecasts therefore include risks and uncertainties. Actual results may differ significantly from projections due to a variety of factors. For information regarding the assumptions underlying the Company’s earnings forecast and cautionary notes concerning the use of the forecast, please refer to “(3) Operating Performance Forecast” on page 4 of the attachments to this summary. Content of Attachments 1. Qualitative Information on Quarterly Financial Results (1) Analysis of Operating Performance (2) Analysis of Financial Conditions (3) Operating Performance Forecast 2. Quarterly Non-Consolidated Financial Statements and Notes (1) Quarterly Non-Consolidated Balance Sheets (2) Quarterly Non-Consolidated Statements of Income (3) Quarterly Non-Consolidated Statements of Cash Flows 8 (4) Notes to the Quarterly Non-Consolidated Financial Statements (Notes Related to the Going Concern Assumption) (Notes in the Events of Significant Changes in Shareholders’ Equity) (Application of Special Accounting Treatment for Quarterly Financial Reporting) (Changes in Accounting Policies) (Additional Information) (Segment Information, etc.) 2 2 4 4 5 5 7 10 10 10 10 10 10 11 1 1. Qualitative Information on Quarterly Financial Results (1) Analysis of Operating Performance The e-book market (the Company’s main business category) continued to grow, according to the eBook Marketing Report 2021 by Impress Research Institute. According to this report, the e-book market had a value of ¥482.1 billion in fiscal 2020, up 28.6% from the previous year’s figure of ¥375 billion. Comics accounted for 83% of the total, or ¥400.2 billion. The same institute’s report for the previous year, the eBook Marketing Report 2020, had forecast that the e-book market would reach a value of ¥444.2 billion in fiscal 2020. The actual figure exceeded this forecast. By fiscal 2025, the institute forecasts that the e-publishing market (including e-books) will grow by approximately 1.4 times larger of fiscal 2020, to ¥674.7 billion. In this business environment, the Company pursues a mission to make people’s lives more fulfilling by bringing a little “something extra” to their daily lives. In the Apps business, the Company has focused mainly on expanding earnings from smartphone manga apps developed in collaboration with large publishers. In the Apps business segment, price per advertisement in the Company’s mainstay manga apps business trended upward, and the Company’s acquisition of new users slowed down as it cut back on promotional investment. In the entertainment business, fortune-telling performed well, and sales in the Apps business segment were essentially unchanged from the same period of the previous fiscal year. On the other hand, operating income was significantly higher year on year thanks to efficient spending on advertising in the manga apps business. In the RET business segment, profitability related to the operation of &AND HOSTEL facilities improved significantly as a result of business structure reforms. At the same time, the occupancy rates at these facilities were on the rise thanks to changes in targets and concepts associated with &AND HOSTEL. In the Other businesses segment, sales decreased year on year because the Company transferred lodging and rental property services during the fiscal year ended August 31, 2021, as part of its efforts to adjust its business portfolio. However, operating income improved due to the Company’s withdrawal from unprofitable businesses. As a result of these activities, in the six months ended February 28, 2022, the Company generated net sales of ¥1,332,199 thousand (down 10.0% year on year), an operating income of ¥11,090 thousand (operating loss of ¥207,519 thousand in the corresponding period of the previous fiscal year), an ordinary loss of ¥95,606 thousand (ordinary profit of ¥274,322 thousand in the corresponding period of the previous fiscal year), and a net loss of ¥94,622 thousand (net income of ¥276,327 thousand in the corresponding period of the previous fiscal year). (1) Apps business It should be noted that we recategorized our reportable segments effective from the three months ended November 30, 2021. Accordingly, comparisons and analysis for the six months ended February 28, 2022 are based on the revised segmentation.. The Company has observed strong performance from existing manga apps, such as Manga UP!, Manga Park, and Manga Mee, since their launch. This strong performance continued during the six months ended February 28, 2022, thanks to the extended availability of popular content and the addition of new titles. Earnings contribution also came from the steady increases in monthly active users (MAUs*1) at Young Jump, a manga app jointly developed with SHUEISHA Inc. (released April 2020), and Mecha Comic’s Mainichi Rensai, a manga app jointly developed with Amutus Corporation (released May 2020). At the same time, the COVID-19 pandemic’s impact on the overall advertising market took a turn for the worse, and advertising revenue declined amid a downward trend in ARPU*2 from in-app ads. As a result, in the six months ended February 28, 2022, sales in the Apps business were ¥1,259,092 thousand (down 5.5% year on year). Segment profit came to ¥233,413 thousand (up 61.2% year on year). *1 The number of people who use an app at least once in a month *2 The average amount of revenue generated per person 2 Of the smartphone apps the Company operates in the Apps business, the following table outlines average MAUs by quarter for the manga apps. (Thousands of people) Date Average MAUs Date Average MAUs May 31, 2017 August 31, 2017 November 30, 2017 February 28, 2018 May 31, 2018 August 31, 2018 November 30, 2018 February 28, 2019 May 31, 2019 August 31, 2019 310 650 1,080 1,500 November 30, 2019 February 29, 2020 May 31, 2020 August 31, 2020 2,040 November 30, 2020 2,380 February 28, 2021 2,790 3,620 May 31, 2021 August 31, 2021 4,300 November 30, 2021 5,320 February 28, 2022 6,410 7,200 9,060 9,940 10,260 10,540 10,560 11,010 10,460 10,440 Note: the average MAUs shown above are quarterly averages. (2) RET business In the six months ended February 28, 2022, occupancy rates trended toward recovery for &AND HOSTEL, the Company’s mainstay brand of smart hostels (lodging facilities offering experiences made possible through IoT).These positive results compared with the fiscal year ended August 31, 2020, when performance was substantially affected by the COVID-19 pandemic, were a result of changing targets and concepts at some stores and promoting the acquisition of new customer bases, the occupancy rate has been on a recovery trend. However, although the average spend per customer is on a recovery trend, it is still at a low level, and the operating revenue of each store remained flat compared to the same period of the previous year. The Company made adjustments to agreements associated with a portion of the &AND HOSTEL locations during the fiscal year ended August 31, 2021, and these adjustments resulted in a decrease in rents and other fixed costs stemming from loss-generating locations. Accordingly, losses in the &AND HOSTEL business declined year on year. Meanwhile, the Company generated real estate-related sales, reporting cases of revenue generated through brokerage fees associated with property sales and an ongoing stream of rental revenue from properties. Consequently, in the six months ended February 28, 2022, sales in the RET business came to ¥67,615 thousand (up 1.5% year on year), with segment losses of ¥34,290 thousand (loss of ¥101,843 thousand in the previous year). (3) Other businesses Sales in the Other businesses segment declined year on year because the Company transferred service operations in the lodging and rental property fields, which were included under the IoT business segment until the fiscal year ended August 31, 2021, to other organizations. However, operating income increased as the Company withdrew from unprofitable businesses. Meanwhile, the Company continued its ongoing review of plans within the field of entertainment that utilize new technologies not being applied in other business segments. In the first six months ended February 28, 2022, Other businesses reported sales of ¥5,491 thousand (down 93.2% year on year) and segment losses of ¥13,866 thousand (loss of ¥47,580 thousand in the previous year). 3 (2) Analysis of Financial Conditions (1) Assets, liabilities, and net assets (Assets) As of February 28, 2022, total assets amounted to ¥5,005,147 thousand, down ¥371,402 thousand from August 31, 2021. This was primarily due to decreases of ¥108,072 thousand in cash and deposits, ¥74,342 thousand in accounts receivable–trade, ¥64,999 thousand in investment securities, and ¥43,144 thousand in leasehold and guarantee deposits.. Total liabilities as of February 28, 2022, amounted to ¥4,207,280 thousand, down ¥280,977 thousand from August 31, 2021. This was primarily due to a decrease of ¥30,000 thousand in short-term borrowings and a decrease of ¥138,568 thousand in long-term borrowings (including the current portion of long-term borrowings). As of February 28, 2022, net assets totaled ¥797,867 thousand, down ¥90,424 thousand from August 31, 2021. This was the result of the posting of a net loss, causing retained earnings to fall ¥94,622 thousand. The equity ratio came to 15.9% (compared with 16.5% as of August 31, 2021). As of February 28, 2022, cash and cash equivalents amounted to ¥666,654 thousand, down ¥108,072 thousand from August (Liabilities) (Net assets) (2)Cash flows 31, 2021. (Cash flows from operating activities) Net cash used in operating activities totaled ¥49,941 thousand. This was primarily due to a loss before income taxes of ¥92,733 thousand, a decrease in accrued consumption taxes of ¥63,391 thousand, and rent payments of ¥93,642 thousand. Meanwhile, the Company recorded depreciation of ¥33,544 thousand and a decrease in trade receivables of ¥74,342 thousand. (Cash flows from investing activities) Net cash provided by investing activities was ¥106,239 thousand. This was primarily due to ¥42,570 thousand in proceeds from refund of leasehold and guarantee deposits and ¥70,020 thousand in proceeds from sale of investment securities. Net cash used in financing activities amounted to ¥164,370 thousand. This was primarily due to repayments of long-term (Cash flows from financing activities) borrowings of ¥138,568 thousand. (3) Operating Performance Forecast At present, the Company maintains its forecast for the fiscal year ending August 31, 2022, as announced on October 15, 2021. The forecast is based on information available to management as of the date of this announcement. Actual performance may vary substantially from the forecast for a variety of reasons. 4 2． Quarterly Non-Consolidated Financial Statements (1) Quarterly Non-Consolidated Balance Sheets As of August 31, 2021 As of February 28, 2022 (Thousands of yen) 774,726 542,419 19 3,148,397 228,061 49,547 (9,830) 4,733,342 11,599 1,088 58,788 (37,356) 34,118 68,836 68,836 257,295 281,658 1,298 540,252 643,207 5,376,550 666,654 468,077 34 3,133,669 193,725 35,585 (12,906) 4,484,840 11,675 – 56,777 (37,529) 30,923 57,787 57,787 192,296 238,513 786 431,596 520,307 5,005,147 Assets Current assets Cash and deposits Accounts receivable – trade Work in process Real estate for sale Advances paid Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings Machinery and equipment Tools, furniture and fixtures Accumulated depreciation Total property, plant and equipment Intangible assets Software Total intangible assets Investments and other assets Investment securities Leasehold and guarantee deposits Other Total investments and other assets Total non-current assets Total assets 5 Liabilities Current liabilities Accounts payable–trade Short-term borrowings Current portion of long-term borrowings Accounts payable–other Income taxes payable Provision for shareholder benefit program Other Total current liabilities Non-current liabilities Long-term borrowings Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Share acquisition rights Total net assets Total liabilities and net assets As of August 31, 2021 As of February 28, 2022 (Thousands of yen) 121,095 325,000 277,136 468,268 8,354 35,783 89,289 1,324,928 3,154,342 8,987 3,163,329 4,488,258 549,720 548,361 (210,331) (572) 887,177 1,114 888,292 5,376,550 104,153 295,000 277,136 467,403 9,312 5,895 26,059 1,184,960 3,015,774 6,545 3,022,319 4,207,280 551,819 550,460 (304,953) (572) 796,752 1,114 797,867 5,005,147 6 (2) Quarterly Non-Consolidated Statements of Income Six months ended February 28, 2021 (Thousands of yen) Six months ended February 28, 2022 1,479,660 699,091 780,569 988,088 (207,519) 4 19,834 2,411 1,446 23,697 14,748 72,145 3,606 90,499 (274,322) – – – – 116 – 116 (274,438) 1,888 (276,327) 1,332,199 600,644 731,554 720,463 11,090 4 893 – 238 1,136 15,160 86,581 6,091 107,833 (95,606) 0 10,020 10,020 964 1,183 4,999 7,146 (92,733) 1,889 (94,622) Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating profit (loss) Non-operating income Interest income Subsidy income Surrender value of insurance policies Other Total non-operating income Non-operating expenses Interest expenses Rent Other Total non-operating expenses Ordinary loss Extraordinary income Gain on sale of businesses Gain on sale of investment securities Total extraordinary income Extraordinary losses Impairment losses Loss on retirement of non-current assets Loss on valuation of investment securities Total extraordinary losses Loss before income taxes Income taxes Loss 7 Six months ended February 28, 2021 (Thousands of yen) Six months ended February 28, 2022 (274,438) 40,269 – 116 – – – 7,428 (3,375) (37,282) (4) (19,834) 14,748 72,145 50,808 (4,795) 25,033 213,333 (221,312) 18,048 – 25,479 (93,631) 4 (13,633) 19,834 (52,715) – (994) 127,980 (13,153) (92,733) 33,544 964 1,183 (0) (10,020) 4,999 3,075 – (29,888) (4) (893) 15,160 86,581 74,342 85 34,335 – (16,941) 9,366 (63,391) 18,186 67,951 4 (13,289) 893 (93,642) (8,079) (3,779) – (49,941) (3) Quarterly Non-Consolidated Statements of Cash Flows Cash flows from operating activities Loss before income taxes Depreciation Impairment losses Loss on retirement of non-current assets Loss (gain) on sale of businesses Loss (gain) on sale of investment securities Loss (gain) on valuation of investment securities Increase (decrease) in allowance for doubtful accounts Increase (decrease) in provision for bonuses Increase (decrease) in provision for shareholder benefit program Interest income Subsidy income Interest expenses Rent Decrease (increase) in trade receivables Decrease (increase) in inventories Decrease (increase) in advances paid Decrease (increase) in consumption taxes refund receivable Increase (decrease) in trade payables Increase (decrease) in accounts payable – other Increase (decrease) in accrued consumption taxes Other, net Subtotal Interest and dividends received Interest paid Subsidies received Rent paid Payments for business structure restructuring expenses Income taxes paid Income taxes refund Net cash provided by (used in) operating activities 8 Cash flows from investing activities 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 investment securities Proceeds from sale of investment securities Proceeds from sale of businesses Payments for asset retirement obligations 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 exercise of employee share options Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Six months ended February 28, 2021 Six months ended February 28, 2022 (22,167) (15,306) – 273 (28,514) – – (230) 12,594 (53,349) (5,000) (122,316) – (127,316) (193,818) 1,028,320 834,502 (3,743) – (165) 42,570 – 70,020 0 – (2,441) 106,239 (30,000) (138,568) 4,197 (164,370) (108,072) 774,726 666,654 Cash and cash equivalents at end of period 9 (4) Notes to the Quarterly Consolidated Financial Statements (Notes Related to the Going Concern Assumption) (Notes in the Events of Significant Changes in Shareholders’ Equity) Not applicable Not applicable (Application of Special Accounting Treatment for Quarterly Financial Reporting) (Calculation of Tax Expenses) When computing tax expenses, the Company has rationally estimated the effective tax rate following the application of tax-effect accounting to profit before income taxes for the fiscal year that includes the six months ended February 28, 2022. The Company then calculated tax expenses by multiplying the profit (loss) before income taxes by this rate. However, if the tax expenses calculated using the estimated effective tax rate yield unreasonable results, the statutory effective tax rate may be used. (Changes in Accounting Policies) (Application of the Accounting Standard for Revenue Recognition, etc.) Effective from the beginning of the quarter under review, the Company has applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020; hereinafter referred to as the “Revenue Recognition Standard”) and related implementation guidance. In accordance with this change, the Company recognizes revenue at the time control over promised goods or services is transferred to the customer, in the amount expected to be received in exchange for the goods or services. The Company’s application of the Revenue Recognition Standard is compliant with transitional treatment prescribed in the proviso to Paragraph 84 of the Revenue Recognition Standard. The change had no impact on the balance of retained earnings at the beginning of the quarter under review. In addition, the adoption of the Revenue Recognition Standard had no effect on the net sales, gross profit, operating income, ordinary loss, or loss before income taxes recorded during the six months ended February 28, 2022. In accordance with the transitional treatment prescribed in Paragraph 28-15 of the “Accounting Standard for Quarterly Financial Reporting” (ASBJ Statement No. 12; March 31, 2020), the Company has not presented information on the breakdown of revenue from contracts with customers for the three months ended November 30, 2020. (Application of Accounting Standard for Fair Value Measurement, etc.) Effective from the beginning of the quarter under review, the Company has applied the Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019; hereinafter referred to as the “Fair Value Measurement Standard”) and related implementation guidance. In accordance with transitional treatment prescribed in Paragraph 19 of the Fair Value Measurement Standard and Paragraph 44-2 of the Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019), the Company will progressively apply policies set forth by the Fair Value Measurement Standard. The application has no impact on its quarterly financial statements. (Additional Information) (Accounting Estimates) The spread of COVID-19 continues to impact the economy, and the Company’s business activities are being affected, as well. Advertising revenue from manga apps is shrinking as the advertising market deteriorates. Lower occupancy rates and sales per customer at the &AND HOSTEL locations the Company operates are affecting operating performance. The Japanese government declared a state of emergency on July 8 2021 and lifted it on 30 September 2021, and it is difficult to predict with any accuracy when these conditions could improve. However, based on the information available at the time these financial statements were prepared, for the purposes of making accounting estimates (such as the valuation of real estate for sale, decisions on whether to post impairment losses on fixed assets, and decisions on the recoverability of deferred tax assets), we have assumed that the effect will gradually diminish from the fiscal year ending August 31, 2022. 10 As it is difficult at present to accurately estimate when the pandemic will subside, our financial condition and operating performance could be affected should there be changes in the assumptions mentioned above. 11 (Segment Information, etc.) [Segment Information] Six months ended February 28, 2021(September 1, 2020 to February 28, 2021) 1. Information related to sales and profits or losses for each reportable segment Net Sales Reportable segments (Thousands of yen) APPs RET Total Other Total Sales to external customers 1,332,140 66,645 1,398,786 80,874 1,479,660 － － － － － Intersegment sales or transfer Total 1,332,140 66,645 1,398,786 80,874 1,479,660 Segment profit (loss) Note : “Other” refers to businesses not included within the Company’s reportable segments and mainly comprises lodging (101,843) (47,580) (42,944) 144,787 (4,635) and rental property services, as well as internet advertising agency services. 2. Total profits or losses for reportable segments and the primary reasons for discrepancies between these values and corresponding figures stated in the quarterly non-consolidated statements of income (matters related to the adjustment of discrepancies) Income Amount Subtotal for reportable segments Income from “Other” businesses Company-wide expenses (Note) Operating profit (loss) in the quarterly non-consolidated statements of income Note: Company-wide expenses are mainly general and administrative expenses not attributable to reportable segments. (207,519) 3. Information related to losses on the impairment of fixed assets or goodwill for each reportable segment (Significant impairment losses related to fixed assets) Not applicable (Thousands of yen) 42,944 (47,580) (202,883) 12 Six months ended February 28, 2022 (September 1, 2021 to February 28, 2022) 1. Information related to sales, profits or losses for each reportable segment Reportable segments APPs RET Total Other (Note) (Thousands of yen) Net Sales Manga apps Fortune &AND HOSTEL RET Other Revenue from contracts with customers Other revenue Sales to external customers transfer Intersegment sales or 1,074,807 159,043 － － 25,241 1,259,092 1,259,092 － － － － 19,546 9,331 1,465 30,343 37,272 67,615 － 1,074,807 159,043 19,546 9,331 26,706 1,289,435 37,272 1,326,707 － Total 1,074,807 159,043 19,546 9,331 32,198 1,294,926 37,272 － － － － － 5,491 5,491 － － 5,491 1,332,199 Total 1,259,092 67,615 1,326,707 5,491 1,332,199 Segment profit (loss) 233,413 (34,290) 199,122 (13,866) 185,255 Notes : “Other” refers to businesses not included within the Company’s reportable segments and mainly comprises entertainment related business operations that utilize new technologies. 2. Total profits or losses for reportable segments and the primary reasons for discrepancies between these values and corresponding figures stated in the quarterly non-consolidated statements of income (matters related to the adjustment of discrepancies) Income or Loss Amount (Thousands of yen) 199,122 (13,866） (174,164） Subtotal for reportable segments Income from “Other” businesses Company-wide expenses (Note) Operating profit (loss) in the quarterly non-consolidated statements of income Note : Company-wide expenses are mainly general and administrative expenses not attributable to reportable segments. 11,090 3. Information related to changes in reportable segments The Company has adjusted its classification of reportable segments in line with reforms to the structure of its former IoT business. Accordingly, effective from the beginning of the quarter under review, the Company has changed the reportable segments from “Apps business” and “IoT business” to “Apps business” and “RET business.” In addition, effective from the beginning of the three-month period ended May 31, 2021, the Company has implemented organizational changes to put its internet advertising agency service operations related to the Apps business under the control of the Apps business segment. Segment information for the six months ended February 28, 2021 has been prepared in accordance with the new segment classification. 13 4. Information related to losses on the impairment of fixed assets or goodwill for each reportable segment (Significant impairment losses related to fixed assets) Not applicable 14