ガーラ（4777） – (Delayed〕Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (Under Japanese GAAP

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. May 13, 2022 Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (Under Japanese GAAP) Company name: Gala Inc. Tokyo Stock Exchange Listing: 4777 Securities code: http://www.gala.jp URL: Satoru Kikugawa, Representative Director and Group CEO Representative: Yuki Okamoto, Director and CFO Inquiries: Telephone: +81- 03-6822-6669 Scheduled date of annual general meeting of shareholders: Scheduled date to commence dividend payments: Scheduled date to file annual securities report: Preparation of supplementary material on financial results: Holding of financial results briefing: June 25, 2022 ― June 27, 2022 Yes None (Yen amounts are rounded down to millions, unless otherwise noted.) 1. Consolidated financial results for the fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) (1) Consolidated operating results (Percentages indicate year-on-year changes.) Net sales Operating profit Ordinary profit Profit attributable to owners of parent Fiscal year ended March 31, 2022 March 31, 2021 Millions of yen % Millions of yen % Millions of yen % Millions of yen % 600 △39.0 985 138.8 △297 ― 26 ― △220 ― 93 ― △186 ― △131 ― Note: Comprehensive income For the fiscal year ended March 31, 2022: For the fiscal year ended March 31, 2021: △260 million yen △138 million yen [―%] [―%] Basic earnings per share Diluted earnings per share Return on equity Ratio of ordinary profit to total assets Ratio of operating profit to net sales Fiscal year ended March 31, 2022 March 31, 2021 Yen △9.77 △6.98 Yen ― ― % △235.3 △121.2 % △20.7 10.3 % △49.6 2.7 Reference: Share of profit (loss) of entities accounted for using equity method For the fiscal year ended March 31, 2022: ― million yen For the fiscal year ended March 31, 2021: ― million yen (2) Consolidated financial position As of March 31, 2022 March 31, 2021 Reference: Equity Total assets Net assets Equity-to-asset ratio Net assets per share Millions of yen Millions of yen 1,047 1,085 438 303 % △2.8 17.3 Yen △1.53 9.83 As of March 31, 2022: As of March 31, 2021: △29 million yen 187 million yen (3) Consolidated cash flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Cash and cash equivalents at end of period Fiscal year ended March 31, 2022 March 31, 2021 Millions of yen Millions of yen Millions of yen Millions of yen △595 381 62 0 ― 310 288 825 2. Cash dividends Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Fiscal year ending March 31, 2023 (Forecast) Annual dividends per share First quarter-end Second quarter-end Third quarter-end Fiscal year-end Total Total cash dividends (Total) Payout ratio (Consolidated) Ratio of dividends to net assets (Consolidated) Yen Yen Yen Yen Yen Millions of yen % % ― ― ― 0.00 0.00 0.00 ― ― ― 0.00 0.00 0.00 0.00 0.00 0.00 ― ― ― ― ― ― ― (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change * Notes in scope of consolidation): Yes Newly included: 1 company (Treeful Inc.) Excluded: ― companies (Company name) (2) Changes in accounting policies, changes in accounting estimates, and restatement (i) Changes in accounting policies due to revisions to accounting standards and other regulations: Yes (ii) Changes in accounting policies due to other reasons: None (iii) Changes in accounting estimates: None (iv) Restatement: None (3) Number of issued shares (common shares) (i) Total number of issued shares at the end of the period (including treasury shares) (ii) Number of treasury shares at the end of the period As of March 31, 2022 As of March 31, 2021 As of March 31, 2022 As of March 31, 2021 (iii) Average number of shares outstanding during the period Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 19,060,800 shares 19,060,800 shares ― shares ― shares 19,060,800 shares 18,791,942 shares * Financial results reports are exempt from audit conducted by certified public accountants or an audit corporation. * Proper use of earnings forecasts, and other special matters: (Disclaimer on forward-looking statements, etc.) These materials contain forward-looking information including earnings projections based on information currently available to the Company and certain assumptions considered reasonable in the judgment of the Company. Nothing contained in these materials is meant to suggest that the Company promises to attain the said projections. Moreover, due to various factors, actual results may materially differ from projections. (How to obtain supplementary documents on financial results) Supplementary materials on financial results will be posted on the Company’s website after the announcement of financial results. ○Additional Information 1. Summary of Operating Results…………………………………………………………………………………………… (1) Summary of Current Period Operating Results………………………………………………………………………… 2. Consolidated Financial Statements and Principal Notes…………………………………………………………………… (1) Consolidated Balance Sheet …………………………………………………………………………………………… (2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income………………………… 2 2 4 4 6 6 Consolidated Statement of Income…………………………………………………………………………………… 7 Consolidated Statement of Comprehensive Income………………………………………………………………… (3) Consolidated Statement of Changes in Equity………………………………………………………………………… 8 (4) Consolidated Statement of Cash Flows ………………………………………………………………………………… 10 11 (5) Notes on the Consolidated Financial Statements……………………………………………………………………… 11 (Notes on Going Concern Assumptions)…………………………………………………………………………… 12 (Changes in Accounting Policies) …………………………………………………………………………………… (Segment Information, etc.) ………………………………………………………………………………………… 12 (Per Share Information) ……………………………………………………………………………………………… 15 – 1 – 1． Summary of Operating Results (1) Summary of Current Period Operating Results During the current fiscal year, Japanese economic activities have been significantly restricted by the declaration of a state of emergency and the application of pre-emergency measures due to the spreading of COVID-19. Although the Japanese economy showed a partial recovery following the gradual restart of economic activities as a result of increased vaccination coverage and termination of the state of emergency, uncertainty over the future still exists due to major concerns about the spreading of new mutant viruses, increased raw material price, and situations in Ukraine, etc. In these circumstances, Gala Inc. (the “Company”) and its consolidated subsidiaries (collectively, the “Group”) have proceeded with the Online Game business and the Smartphone App business with the aim of becoming the World’s No.1 global online community company. The Group’s operating results for the current fiscal year are summarized as follows: The Group’s consolidated net sales have significantly decreased to ¥600,958 thousand, a 39.0% decrease from the previous fiscal year. The decrease was mainly due to a sales decrease in the Smartphone App business since one-off license transfer sale was recognized in the previous fiscal year, and furthermore, current fiscal year sales in the Smartphone App business declined as a result of the license transfer. The cost of sales decreased due to a royalty payment decrease, which is in line with the Smartphone App business sales decline following the license transfer stated above. Selling, general and administrative expenses decreased from the previous fiscal year due to a decrease in software amortization expenses, despite an increase in the outsourcing costs of Rappelz (*1). In addition, gain on sales of crypto assets of ¥24,925 thousand, gain on valuation of crypto assets of ¥24,979 thousand, and foreign exchange gains of ¥25,981 thousand were recorded in the non-operating income. As a result, the Group recorded an operating loss of ¥297,865 thousand (operating profit of ¥26,265 thousand in the previous fiscal year), ordinary loss of ¥220,339 thousand (ordinary profit of ¥93,273 thousand in the previous fiscal year), and loss attributable to owners of parent of ¥186,142 thousand (loss attributable to owners of parent of ¥131,087 thousand in the previous fiscal year). The Group’s operating results by each segment are summarized as follows: (i) Japan In October 2021, the Japan segment started offering Rappelz, a smartphone game app developed by Gala Lab Corp., a consolidated subsidiary of the Company, in the US and Canada, although the release date had been delayed since its development period was extended to improve the quality of the game and achieve other enhancements. The segment is currently preparing for the renewal and global release of Rappelz as an NFT game/blockchain game by incorporating blockchain technology. In the NFT games/blockchain games, in-game items are “converted to NFT” by the blockchain, a fundamental technology of cryptocurrencies, and users can change the items obtained in the game to crypto assets that can be traded on an exchange or other markets. The segment will further enhance the appeal of games through these measures and focus on the monetization of the Smartphone App business. The start of the service is expected to be in the second quarter of the fiscal year ending March 2023 for re-release in the US and the third quarter of the same fiscal year for release in the EU and Korea. Following the resolution at the Board of Directors meeting held on April 2, 2021 to make Treeful Inc. a subsidiary of the Company by accepting its third-party allocation of shares, the Company acquired shares of Treeful Inc. on April 30, 2021. Accordingly, the Group launched the Treehouse Resort business as a new business. The Treehouse Resort business is a resort business in Nago City, Okinawa operated by Treeful Inc., a consolidated subsidiary of the Company. The business offers a combination of Treehouse and Aerohouse built on the ground as one set to the guests. Treeful Inc. is licensed for the business of operation of an inn according to the Hotel Business Act since July 2021 and opened the Treehouse Resort in August 2021 as the first paid treehouse accommodation provider in Japan. With the concept of a “Sustainable Resort”, the Treehouse Resort aims the establishment of a sustainable society by using electricity instead of fossil fuel and generating solar power larger than actual usage. The Group has found a growth strategy for the Treehouse Resort business and aims to increase its enterprise value. Net sales of the segment (including inter-segment transactions) increased from the previous fiscal year since the above sales have been recorded and the Cloud-related business sales have increased. The Cloud-related business supports the Megazone Group, a Korean business group, in deploying its cloud business in Japan and offers support for sales, operations, hiring and human resources, and events in Japan. As for expenses, selling, general and administrative expenses have increased mainly due to increases in payroll costs and depreciation expenses as a result of consolidating Treeful Inc. As a result, net sales of the Japan segment (including inter-segment transactions) increased by ¥22,098 thousand or 40.4% year-on-year to ¥76,747 thousand and the segment recorded a loss of ¥185,479 thousand (loss of ¥164,138 thousand in the previous fiscal year). – 2 – – 3 – (ii) Korea In the Korea segment, winwalk pedometer app, wingift smartphone app and winQuiz smartphone app of the Smartphone App business, each developed by Gala Mix Inc., a consolidated subsidiary of the Company, have been deployed in multiple languages using the Company’s global network and contributed to the stable sales trend. However, net sales of the Smartphone App business (including inter-segment transactions) have decreased year-on-year due to a license transfer in the previous fiscal year, which resulted in the one-off license transfer sale recorded in the previous fiscal year and declined Smartphone App business sales in the current fiscal year. The license transfer was according to the Company’s agreement in January 2021 with a Korean company, METABORA Co., Ltd. (name of the company was WAY2BIT Co., Ltd. as of the contract date. Hereinafter referred to as “METABORA Co., Ltd.”) to transfer the license and operation of Flyff Legacy, a smartphone app developed by Gala Lab Corp. It might also be noted that on April 1, 2022, Gala Lab Corp. entered into an agreement with METABORA Co., Ltd. to reacquire the right of Flyff Legacy. In the Online Game business, the segment proceeded with the license deployment and channeling deployment of Flyff Online and Rappelz Online, Gala Lab Corp.’s major games. However, as the business recorded larger sales in the previous fiscal year in favor of consumption from staying home as well as one-off sales from monetization of the license fee, net sales of the Online Game business (including inter-segment transactions) have decreased year-on-year. As for the license deployment, Digeam Co., Ltd., a game service provider in Taiwan, started a service offering of Flyff Online in June 2021 which was a multilingual service provision leveraging the Company’s strong global network. In the channeling deployment, based on the global license agreement, channeling agreement and operational support agreement entered into with METABORA Co., Ltd. in January 2021, METABORA Co., Ltd. proceeded with the service deployment of Flyff Online and Rappelz Online on LINE POD, the platform offered by LINE Corporation, and released Japanese version in June 2021. Gala Lab Corp. has received license fees and operational support fees in the business. As a measure to contribute to future revenues, Gala Lab Corp. plans to release Flyff Universe which is based on Flyff Online and combines the element of HTML5 game, which enables users to play the game on PCs and smartphones without downloading, and the element of NFT game/blockchain game using the blockchain technology. As another measure for future revenues, Gala Lab Corp. has entered into a development agreement in April 2021 with METABORA Co., Ltd. and Barunson Co., Ltd., a Korean entertainment company, as a metaverse project that covers the development of Flyff World for Metaverse and Rappelz World for Metaverse offered on the blockchain-based metaverse platform. In the metaverse project, Barunson Co., Ltd. develops and implements a metaverse 3D virtual space, offers and operates the metaverse platform, and develops and builds a system that enables crypto-assets BORA to be used in the metaverse. METABORA Co., Ltd. is responsible for the development and support of blockchain technology usable in the metaverse. Gala Lab Corp. is responsible for the development, content creation and service operation of Flyff World for Metaverse and Rappelz World for Metaverse, the games offered on the metaverse platform that will be provided by Barunson Co., Ltd., using the IP of Flyff Online and Rappelz Online, the PC online games offered globally. The segment will increase customers of the games through these measures and focus on stable monetization of the Online Game business. increase in the outsourcing costs of Rappelz. Selling, general and administrative expenses decreased due to a decrease in software amortization expenses, despite an As a result, net sales of the Korea segment (including inter-segment transactions) decreased by ¥392,687 thousand or 40.7% year-on-year to ¥571,885 thousand and the segment recorded a loss of ¥98,993 thousand (profit of ¥190,181 thousand in the previous fiscal year). (*1) Southeast Asian version of Rappelz M has been significantly updated and renewed as Rappelz. Sales by business segment are as follows: Online Game business Smartphone App business Other business Total For the fiscal year ended March 31, 2021 (April 1, 2020 to March 31, 2021) For the fiscal year ended March 31, 2022 (April 1, 2021 to March 31, 2022) Amount (Thousands of yen) Composition ratio (%) Amount (Thousands of yen) Composition ratio (%) 40.3 51.8 7.9 100.0 371,970 113,086 115,901 600,958 61.9 18.8 19.3 100.0 397,226 510,687 77,499 985,413 – 4 – (Note) In the breakdown of sales by business segment, amounts less than one thousand yen are rounded down. – 5 – 2． Consolidated Financial Statements and Principal Notes (1) Consolidated Balance Sheet (Thousands of yen) For the fiscal year ended March 31, 2021 For the fiscal year ended March 31, 2022 Assets Current assets Cash and deposits Accounts receivable – trade Inventories Accounts receivable – other Prepaid expenses Crypto assets Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings and structures Accumulated depreciation Buildings and structures, net Machinery, equipment and vehicles Accumulated depreciation Machinery, equipment and vehicles, net Tools, furniture and fixtures Accumulated depreciation Tools, furniture and fixtures, net Land Construction in progress Total property, plant and equipment Intangible assets Goodwill Other Total intangible assets Investments and other assets Investment securities Lease and guarantee deposits Long-term prepaid expenses Total investments and other assets Total non-current assets Total assets 825,375 49,403 － 4,677 14,527 － 7,973 △251 901,705 － － － － － － 16,168 △11,320 4,847 － － 4,847 － 68 68 401 9,864 168,511 178,777 183,694 1,085,399 288,934 63,524 1,954 6,882 3,546 126,205 9,592 △398 500,241 158,654 △6,443 152,211 11,025 △3,041 7,984 30,271 △18,022 12,249 46,294 25,228 243,969 108,109 11,089 119,198 279 10,271 173,698 184,249 547,417 1,047,658 – 6 – (Thousands of yen) For the fiscal year ended March 31, 2021 For the fiscal year ended March 31, 2022 Liabilities Current liabilities Accounts payable – trade Accounts payable Accrued expenses Advances received Unearned revenue Income taxes payable Provision for bonuses Other Total current liabilities Non-current liabilities Long-term loans payable Long-term unearned revenue Deferred tax liabilities Net defined benefit liability Total non-current liabilities Total liabilities Total liabilities Shareholders’ equity Capital stock Capital surplus Retained earnings Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Total accumulated other comprehensive income Share acquisition rights Non-controlling interests Total net assets Total liabilities and net assets 30 84,892 16,953 37,852 116,039 1,731 － 45,552 303,052 － 255,372 122 223,041 478,536 781,589 3,531,085 2,176,690 △5,025,218 682,557 277 △495,419 △495,142 112,148 4,246 303,810 1,085,399 571 121,401 13,140 43,827 － 2,140 1,814 8,539 191,434 48,000 190,435 85 179,263 417,783 609,218 3,531,085 2,176,690 △5,211,361 496,414 192 △525,793 △525,600 110,027 357,597 438,439 1,047,658 – 7 – (2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income (Consolidated Statement of Income) (Thousands of yen) For the fiscal year ended March 31, 2021 (April 1, 2020 to March 31, 2021) For the fiscal year ended March 31, 2021 (April 1, 2021 to March 31, 2022) Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating profit (loss) Non-operating income Interest income Gain on sales of crypto assets Gain on valuation of crypto assets Foreign exchange gains Subsidy income Receipt benefit Other Total non-operating income Non-operating expenses Interest expenses Other Total non-operating expenses Ordinary profit (loss) Extraordinary income Gain on reversal of share acquisition rights Gain on sales of investment securities Total extraordinary income Extraordinary losses Impairment loss Loss on retirement of non-current assets Loss on head office relocation Total extraordinary losses Loss before income taxes Income taxes – current Total income taxes Loss Profit (loss) attributable to non-controlling interests Loss attributable to owners of parent 985,413 167,390 818,023 791,758 26,265 492 46,960 － 14,129 3,044 2,000 381 67,008 － － － 93,273 9,323 4,999 14,323 228,257 91 3,167 231,515 △123,918 4,758 4,758 △128,677 2,409 △131,087 600,958 128,525 472,432 770,298 △297,865 464 24,925 24,979 25,981 － － 2,086 78,438 148 763 912 △220,339 2,129 － 2,129 424 － － 424 △218,633 12,339 12,339 △230,972 △44,829 △186,142 – 8 – (Consolidated Statement of Comprehensive Income） Loss Other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Total other comprehensive income Comprehensive income (Comprehensive income attributable to) Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests (Thousands of yen) For the fiscal year ended March 31, 2021 (April 1, 2020 to March 31, 2021) For the fiscal year ended March 31, 2021 (April 1, 2021 to March 31, 2022) △128,677 87 △10,142 △10,055 △138,732 △141,439 2,707 △230,972 △84 △29,924 △30,008 △260,981 △216,600 △44,380 – 9 – (3) Consolidated Statement of Changes in Equity For the fiscal year ended March 31, 2020 (April 1, 2020 to March 31, 2021) (Thousands of yen) Shareholders’ equity Capital stock Capital surplus Retained earnings Total shareholders’ equity Balance at beginning of current period 3,381,082 2,026,687 △4,894,131 513,637 Issuance of new shares 150,003 150,003 300,006 Loss attributable to owners of parent △131,087 △131,087 Changes of items during period Net changes of items other than shareholders’ equity Total changes of items during period Balance at end of current period 150,003 3,531,085 150,003 2,176,690 △131,087 △5,025,218 Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Total accumulated other comprehensive income Share acquisition rights Non-controlling interests Total net assets － 168,919 682,557 Balance at beginning of current period 190 △484,979 △484,789 83,616 1,539 114,004 Changes of items during period Issuance of new shares Loss attributable to owners of parent Net changes of items other than shareholders’ equity 87 87 Total changes of items during period △10,440 △10,352 28,532 Balance at end of current period 277 △495,419 △495,142 112,148 △10,440 △10,352 28,532 2,707 2,707 4,246 300,006 △131,087 20,886 189,806 303,810 － － – 10 – For the fiscal year ended March 31, 2022 (April 1, 2021 to March 31, 2022) (Thousands of yen) Capital stock Capital surplus Retained earnings Total shareholders’ equity Shareholders’ equity Balance at beginning of current period 3,531,085 2,176,690 △5,025,218 682,557 Changes of items during period Loss attributable to owners of parent Net changes of items other than shareholders’ equity － Total changes of items during period － △186,142 Balance at end of current period 3,531,085 2,176,690 △5,211,361 △186,142 △186,142 Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Total accumulated other comprehensive income Share acquisition rights Non-controlling interests Total net assets Balance at beginning of current period 277 △495,419 △495,142 112,148 4,246 303,810 Changes of items during period Loss attributable to owners of parent Net changes of items other than shareholders’ equity △84 192 △84 △30,373 △30,458 △2,120 353,351 320,771 Total changes of items during period △30,373 △30,458 △2,120 353,351 134,629 Balance at end of current period △525,793 △525,600 110,027 357,597 438,439 － △186,142 － △186,142 496,414 – 11 – (4) Consolidated Statement of Cash Flows (Thousands of yen) For the fiscal year ended March 31, 2021 (April 1, 2020 to March 31, 2021) For the fiscal year ended March 31, 2022 (April 1, 2021 to March 31, 2022) Cash flows from operating activities Loss before income taxes Depreciation Amortization of goodwill Impairment loss Increase (decrease) in allowance for doubtful accounts Increase (decrease) in provision for bonuses Increase (decrease) in net defined benefit liability Share-based compensation expenses Interest and dividend income Interest expenses Loss (gain) on sales of crypto assets Loss (gain) on valuation of crypto assets Loss on retirement of property, plant and equipment Loss (gain) on sales of investment securities Gain on reversal of share acquisition rights Decrease (increase) in notes and accounts receivable – trade Decrease (increase) in inventories Decrease (increase) in prepaid expenses Decrease (increase) in long-term prepaid expenses Increase (decrease) in notes and accounts payable – trade Increase (decrease) in accounts payable – other Increase (decrease) in advances received Increase (decrease) in unearned revenue Increase (decrease) in long-term unearned revenue Other Subtotal Interest and dividend income received Interest expenses paid Income taxes refund Income taxes paid Cash flows from operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets Proceeds from purchase of shares of subsidiaries resulting in change in scope of consolidation Proceeds from sales of investment securities Payments for guarantee deposits Cash flows from investing activities Cash flows from financing activities Proceeds from issuance of common shares Proceeds from issuance of share acquisition rights 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 – 12 – △123,918 123,117 － 228,257 △86 － 16,791 27,763 △499 － － － 91 △4,999 △9,323 4,208 － △9,136 2,317 △277 95,487 △21,338 102,485 △29,394 △15,649 385,892 499 － 64 △4,602 381,854 △4,088 △510 － 5,250 △27 623 300,006 10,093 310,100 36,687 729,265 96,110 825,375 △218,633 14,816 13,990 424 130 1,814 △50,353 － △484 148 △24,925 △24,979 － － △2,129 △11,641 △1,954 10,972 1,635 429 18,928 1,719 △95,555 △72,636 △145,397 △583,682 484 △136 79 △12,638 △595,893 △41,353 △9,839 113,504 － － 62,311 － － － △2,859 △536,441 825,375 288,934 (5) Notes on the Consolidated Financial Statements (Notes on Going Concern Assumptions) In the previous fiscal year, Gala Inc. (the “Company”) and its consolidated subsidiaries (collectively, the “Group”) recorded a loss attributable to owners of parent of ¥131,087 thousand despite recording an operating profit of ¥26,265 thousand. In the current fiscal year, net sales decreased by 39.0% year-on-year to ¥600,958 thousand and recorded an operating loss of ¥297,865 thousand and a loss attributable to owners of parent of ¥186,142 thousand. If the lower sales level continues, the Group would continue recording operating losses and face funding difficulties. Considering these situations, there are events or conditions that raise substantial doubt about the Group’s ability to continue as a going concern. The Group will take the following measures to eliminate or mitigate the conditions promptly. At first, for the Smartphone App business, the Group started offering Rappelz, the smartphone game app developed by Gala Lab Corp., a consolidated subsidiary of the Company, in the US and Canada in October 2021, although the release date had been delayed since its development period was extended to improve the quality of the game and achieve other enhancements. The Group is currently preparing for the global release of Rappelz as an NFT game/blockchain game by incorporating blockchain technology. In the NFT games/blockchain games, in-game items are “converted to NFT” by the blockchain, a fundamental technology of cryptocurrencies, and users can change the items obtained in the game to crypto assets that can be traded on an exchange or other markets. The Group will further enhance the appeal of games through these measures and focus on the monetization of the Smartphone App business. The start of the service is expected to be in the second quarter of the fiscal year ending March 2023 for re-release in the US and the third quarter of the same fiscal year for release in the EU and Korea. Secondly, for the Online Game business, the Group proceeded with the channeling deployment of Flyff Online and Rappelz Online which enable users to play the games on the platforms of other companies. The Group also plans to release Flyff Universe which is based on Flyff Online and combines the element of HTML5 game, which enables users to play the game on PCs and smartphones without downloading, and the element of NFT game/blockchain game using the blockchain technology. Moreover, the Group aims for the early development of Flyff World for Metaverse and Rappelz World for Metaverse offered on the blockchain-based metaverse platform as a metaverse project. The Group will increase customers of the games through these measures and focus on stable monetization of the Online Game business. Thirdly, the Group will proceed with the Blockchain-related business, the Cloud-related business and the Treehouse Resort business as new businesses to establish a new revenue base other than the Game businesses. In the Blockchain-related business, the Group will provide various content including communities and games on the blockchain-based metaverse platform (metaverse 3D virtual space). The Cloud-related business will support Megazone Cloud Corporation, a Korean cloud business company, in deploying its cloud business in Japan and offer support for sales, operations, hiring and human resources and events in Japan. The Group concluded a business alliance with Megazone Cloud Corporation in May 2019. The Treehouse Resort business is a resort business in Nago City, Okinawa operated by Treeful Inc., a consolidated subsidiary of the Company. The business offers a combination of Treehouse and Aerohouse built on the ground as one set to the guests and will increase the accommodations by building additional Treehouses and Aerohouses. The Group will focus on securing the new revenue base from these measures. In addition to the above measures, we will continue taking possible effective measures actively. However, while implementing these measures, there is a material uncertainty about the Group’s ability to continue as a going concern at the current moment since the future recovery of net sales and profit is dependent upon the development status of the Game business, the progress of the new businesses, the changes in the market environment and other factors. The Group’s consolidated financial statements have been prepared on a going concern basis and the effect of material uncertainty about the Group’s ability to continue as a going concern was not reflected in the consolidated financial statements.- 13 – (Changes in Accounting Policies) (Application of Accounting Standard for Revenue Recognition, etc.) The Group has applied Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020, the “Revenue Recognition Accounting Standard”) and related guidance from the beginning of the current fiscal year and recognized revenues when control of promised goods or services were transferred to a customer at the amount of consideration which the Group expected to receive in exchange for the goods or services. Since the transactions subject to the Revenue Recognition Accounting Standard are those for which revenue is recognized at a point in time or over time, the revenue recognition method was unchanged from the previous method. Therefore, the application of the Revenue Recognition Accounting Standard, etc. did not have any effect on the consolidated financial statements. Disaggregated information of revenue from contracts with customers for the previous fiscal year is not disclosed in accordance with the transitional treatment provided in Paragraph 89-3 of the Revenue Recognition Accounting Standard. (Application of Accounting Standard for Fair Value Measurement, etc.) The Group has applied Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019, the “Fair Value Measurement Accounting Standard”) and related guidance from the beginning of the current fiscal year and has applied the new accounting policy stipulated under the Fair Value Measurement Accounting Standard prospectively in accordance with the transitional treatment provided in Paragraph 19 of the Fair Value Measurement Accounting Standard and the Paragraph 44-2 of Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019). There was no effect on the consolidated financial statements. (Segment Information, etc.) 1． Overview of the reportable segment The reportable segments of the Group are components for which separate financial information is available, and which the Group’s chief executive officer (representative director) regularly reviews to determine the allocation of management resources and evaluate their performance. The Group’s major business is the Internet-related business and each of the Japan and Korea areas is managed by a local entity in the area. Each local entity is an independent management unit and carries out business operations according to the comprehensive plans developed for services provided in each area. Therefore, the Group is comprised of the geographic segment based on the service structure and has two reportable segments of Japan and Korea. The Group’s major businesses by each reportable segment are summarized as follows: Japan: Smartphone App Publishing and Licensing businesses, Cloud-related business, VR business and Treehouse Korea: Online Game Publishing, Development and Licensing businesses, and Smartphone App Publishing, Operation, esort business Development and Licensing businesses 2． Calculation method of net sales, profit (loss), assets, liabilities and other items by reportable segment Accounting treatment of the reported business segment is in accordance with accounting policies applied in preparing the consolidated financial statements. The profit (loss) of the reportable segment is the amount based on operating profit (loss). Inter-segment revenues and transfers are based on the actual market price. – 14 – 3．Information on net sales and profit (loss), assets, liabilities and other items by reportable segment For the fiscal year ended March 31, 2021 (From April 1, 2020 to March 31, 2021) Japan Korea Total Adjustment (Note 1) (Thousands of yen) Amount recorded in consolidated financial statements (Note 2) 27,802 957,611 985,413 985,413 26,846 6,961 33,808 △33,808 － Total 54,649 964,573 1,019,222 △33,808 985,413 Segment profit (loss) △164,138 190,181 26,042 222 26,265 494,673 817,633 1,312,307 △226,907 1,085,399 Net sales Net sales to external customers Intersegment net sales or transfers Segment assets Other items Increase in tangible/intangible fixed assets (Notes) 1. Figures are adjusted as follows: 129 3,959 4,088 4,088 (1）Adjustment of segment profit (loss) of 222 thousand yen represents elimination of inter-segment transactions. (2）Adjustment of segment assets of 226,907 thousand yen represents elimination of inter-segment receivables and payables, etc. 2. Segment profit (loss) is adjusted with operating income in the consolidated financial statements. For the fiscal year ended March 31, 2022 (From April 1, 2021 to March 31, 2022) Japan Korea Total Adjustment (Note 1) － 14,261 41,190 371,970 98,825 74,711 371,970 113,086 115,901 55,451 545,507 600,958 55,451 545,507 600,958 (Thousands of yen) Amount recorded in consolidated financial statements (Note 2) 371,970 113,086 115,901 600,958 600,958 21,296 26,378 47,674 △47,674 － Total 76,747 571,885 648,633 △47,674 600,958 △185,479 △98,993 △284,473 △13,391 △297,865 634,762 421,059 1,055,821 △8,163 1,047,658 Net sales Online Game business Smartphone App business Other business Revenue from contracts with customers Net sales to external customers Intersegment net sales and transfer Segment loss Segment assets Other items Increase in tangible/intangible fixed assets － － － － － － － － 40,529 10,663 51,192 51,192 – 15 – (Notes) 1．Figures are adjusted as follows: (1）Adjustment of segment loss of 13,391 thousand yen consists of elimination of intersegment transactions of 598 thousand yen and amortization of goodwill of 13,990 thousand yen. (2）Adjustment of segment assets of 8,163 thousand yen is due to elimination of inter-segment receivables and payables, etc. 2. Segment loss is adjusted with operating income in the consolidated financial statements.- 16 – (Per Share Information) Net assets per share Loss per share Diluted net income per share For the fiscal year ended March 31, 2021 (April 1, 2020 to March 31, 2021) For the fiscal year ended March 31, 2022 (April 1, 2021 to March 31, 2022) 9.83 yen △6.98 yen △1.53 yen △9.77 yen Diluted net income per share is not shown in the above table, because net income per share was Diluted net income per share is not shown in the above table, because net income per share was negative although there are residual shares. negative although there are residual shares. For the fiscal year ended March 31, 2021 (April 1, 2010 to March 31, 2021) For the fiscal year ended March 31, 2022 (April 1, 2021 to March 31, 2022) (Notes) 1．The basis for calculation of net assets per share is as follows: Total net assets (Thousands of yen) Amount deducted from the total net assets (Thousands of yen) (Share acquisition rights (Thousands of yen)) (Non-controlling interests included in the above（(Thousands of yen)) Amount of net assets related to common stock as of the end of the fiscal year (Thousands of yen)) Number of shares of common stock used in the calculation of net assets per share as of the end of the fiscal year (Share) 2．The basis for calculation of loss per share is as follows: Loss per share Amount not attributable to common shareholders (Thousands of yen) Loss related to common stock attributable to owners of parent (Thousands of yen) Average number of shares of common stock outstanding during the fiscal year (Share) 303,810 116,395 (112,148) (4,246) 187,415 － △131,087 18,791,942 19,060,800 19,060,800 For the fiscal year ended March 31, 2021 (April 1, 2020 to March 31, 2021) For the fiscal year ended March 31, 2022 (April 1, 2021 to March 31, 2022) Loss attributable to owners of parent (Thousands of yen) △131,087 △186,142 438,439 467,625 (110,027) (357,597) △29,185 － △186,142 19,060,800 – 17 –