INTERNET RESEARCH INSTITUTE LTD
2017 ANNUAL REPORTINTERNET RESEARCH INSTITUTE LTD
2017 ANNUAL REPORTTABLE OF CONTENTS

Page
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Statements of Financial Position

3

Consolidated Statements of Income

4

Consolidated Statements of Changes in Equity

6-7

Consolidated Statements of Cash Flow8

Notes to the financial statements

9-65

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Note

ASSET
CURRENT ASSETS
Cash and cash equivalents
Trade receivables
Related parties
Income tax receivables
Other current financial assets
Other current assets
TOTAL CURRENT ASSETSNON-CURRENT ASSETS
Other financial assets
Investments accounted for using the equity
methodProperty, plant and equipment
Intangible assets
Deferred tax assets
TOTAL NON-CURRENT ASSETSTOTAL ASSETSLIABILITIES AND EQUITYCURRENT LIABILITIES
Trade payable
Current maturity of borrowings
Accruals and other payables
Obligations under finance leases
Related parties
TOTAL CURRENT LIABILITIESNON-CURRENT LIABILITIES
Obligations under finance leases
Borrowings
Asset Retirement Obligations
Contingencies and commitments
TOTAL NON-CURRENT LIABILITIESTOTAL LIABILITIESEQUITY
Share capital
Capital surplus
Retained earnings
Accumulated other comprehensive income
Other reserve
Exchange differences on translation fromfunctional currency to presentation currency
TOTAL EQUITYTOTAL LIABILITIES AND EQUITY

USD (In thousands)
31 December
2016
2017

2,095
58
280
35
-;95
2,563

8,949
10
1
153
94
802
10,009

3,14

118

777

13

16,614

17,878

12

87
5
639
17,46320,026262
11524
19,452
29,461

14
14
4,18
4,22
4,8,25

67
36
2,523
11
112
2,749

180
-;4,446
12
38
4,676

4,22
14,21
4,20

19
24
29
-;72
2,821

8
-;196
-;204
4,880

3
3

837
-;15,575
249
270-;9,604
13,752
373
-;-

274

852

17,20520,026

24,581
29,461

3,14,16
3,14
3,14,25
3,14
3,14,15

23

20

-3-

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF INCOME

Note
Revenue
Operating costs and expenses:
Cost of sales
Selling, general and administrative
Research and Development expenses
Other incomes
Other expenses
Total operating costs and expenses
Operating loss
Finance income
Finance expense
Finance income (expense), net
Share of profit of investments accounted forusing the equity method
Gain on change in share of investments
accounted for using equity method

USD (In thousands)
Year ended
31 December
2016
2017
7,959

9,121

8
8
8

(2,727)(5,301)(16)
8(2)(8,038)
(79)
2
(8)
(6)

(3,100)(8,942)
(130)
7
(30)
(12,195)(3,074)
2
(1)
1

13

1,455

1,457

13

453

123

9

1,823
(443)
1,380

(1,493)(330)(1,823)

1,380(1,823)

(491)

133

8

(9)

373

578

Total other comprehensive income, net of tax
Comprehensive income(loss) for the year

(110)
1,270

702
(1,121)

Earnings per share attributable to owners of the parent
Basic (USD)
10
Diluted (USD)
10

0.051
0.051

(0.057)(0.057)

Profit(loss) before income taxes
Income tax expense
Profit(loss) for the year

65
5Profit(loss) for the period attributable to:
Owners of the parent
Profit(loss) for the year
Other comprehensive income, net of tax:
Items that may be reclassified to profit or loss
Share of other comprehensive income ofinvestments accounted for using equity
methodChange in fair value of available-for-salefinancial assets
Items that will not be classified to profit or loss
Differences from translation of financial
statements from functional currency topresentation currency-4-

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

NoteBalance as of 31 December,2016
Loss for the year
Other comprehensive income , netof taxTotal comprehensive income (loss) for theperiodTransaction with owners and other
Issuance of common shares
17
Share based expenses related to20
issuance of common shares
Decrease by merger
Lapse of subscription rights to
17,19
sharesTotal transaction with owners and other
Balance as of 31 December,2017

SharecapitalCapitalsurplusRetainedearnings

USD (In thousands)
Equity attributable to owners of the parent
Exchange
Accumulateddifferences on
Other
other
translation fromreservecomprehensivefunctional currency
incometo presentation
currency
274
249
270

Total
equity837-;-

15,575-;--;-(1,823)

-;-

-;-

-;-

(1,823)

-;-

-;-

-;-

124

-;-

578

702

-;-

-;-

(1,823)

124

-;-

578

(1,121)

4,244

4,244

-;-

-;-

-;-

-;-

8,488

-;-

9

-;-

-;-

-;-

-;-

9

(5,081)

5,081

-;-

-;-

-;-

-;-

-;-

-;-

270

-;-

-;-

(270)

-;-

-;-

(837)
-;-

9,604
9,604

-;13,752

-;373

(270)
-;-

-;852

8,497
24,581-6-

17,205INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

USD (In thousands)
Equity attributable to owners of the parent

SharecapitalCapitalsurplusRetainedearnings

Accumulated
othercomprehensive
income (loss)

Other
reserve

Exchange differenceson translation fromfunctional currency topresentation currency

837

-;-

14,732

732

-;-

(99)

16,202-;-;-;--;-;-;-

1,380-;1,380-;(483)(483)-;-;-;-

-;373
373

1,380
(110)
1,270

26

-;-

-;-

(537)

-;-

-;-

-;-

(537)

19

-;-

-;-

-;-

-;-

270

-;-

270

-;837

-;-;-

(537)
15,575

-;249

270
270

-;274

(267)
17,205

Note

Balance as of 31 December,2015
Profit for the year
Other comprehensive loss, net of tax
Total comprehensive income (loss) for the period
Transaction with owners and otherAcquisition of NOM
Issuance of subscription rights tosharesTotal transaction with owners and other
Balance as of 31 December,2016

-7-

Total
equityINTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF CASH FLOWSUSD (In thousands)
31 December
Note
Cash flows from operating activities:
Profit (loss) before income taxes
Depreciation and amortization
Share of profit of investments
13
accounted for using equity method
Gain on change in share of investments
13
accounted for using equity method
Finance income and finance expense,
8
net
Share-based compensation expenses
19
IPO related costs with regards toissuance cost
Change in assets and liabilities
Trade receivables
Trade payable
Accruals and other payables
OthersDividends received
Interest received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Acquisitions of property, plant andequipment
Acquisitions of intangible assets
Acquisition of NOM, net of cash acquiredof NOM
Loans to related parties
Proceeds from collection of loan torelated parties
Payments for guarantee deposits
Acquisition of other financial assets
Net cash used in investing activities

2017

2016
1,823
36

(1,493)35(1,455)(1,457)

(453)

(123)

6

(1)

270

9

-;-

430

2
31
1,008
(2)
310
(134)
(20)
1,422

(0)
109
1,432
(406)
1,101
7
(1)
(303)
(661)

(3)

(51)

(3)

(8)

27

730

-;-

26

(276)

-;-

26

-;-

288

-;-

(757)
(2)
(530)

15

(1)
447

Cash flows from financing activities:
Repayments of short-term financing liabilities
Repayments of long-term financing liabilities
Proceeds from issuance of common shares
Payment for IPO related cost
Repayments of obligations under finance leases
Net cash provided by financing activities

(549)
(111)
(12)
(672)
1,197
885
13
2,095

6,873
2,095
(19)
8,949

-;-;-

Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Capital fund from translation differences
Cash and cash equivalents at end of year
Non-cash investing and financing activities.
Acquisition of NOM by the share change is disclosed in Note 27.

-8-

-;-

(62)
8,488
(350)
(12)
8,064

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 1 – GENERAL
1.1 General Information
Internet Research Institute Ltd (the “Company”) was established as a limited company in Israel
under the Israel Companies Ordinance on 8 August 2017. The Company wholly owns Internet
Research Institute, Inc. (collectively “IRI Japan” at pre/post-merger or “New IRI Japan”) which wasestablished as a limited company in Japan under the Japanese Companies Ordinance on 5 October
2017 and named IRI Inc. at the time of establishment. IRI Japan has been playing a key role in thedevelopment of Internet technologies and services in Japan and it became a wholly subsidiary of theCompany as a result of triangular merger discussed in Note 2.2 Basis of consolidation (c) Businesscombinations under common control.
The registered address of the company is Abba Hiller Rd. 16, Ramat Gan, Israel 5250608. The
Company provides an Internet related research and development services and acts as aninvestment holding company as well. The Company and its subsidiaries (the “Group”) are
principally engaged in Internet service (the “Listing Business”) in Japan.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies applied in the preparation of the consolidated financial
statements are set out below. These policies have been consistently applied through the years
ended 31 December 2016 and 2017, unless otherwise stated.
The consolidated financial statements are measured in thousands of Japanese YEN (“¥”),which is the Group’s functional currency as it is the currency of the primary economic
environment in which the Group operates. And the consolidated financial statements arepresented in thousands of U.S. Dollars (USD or $ or dollar), unless otherwise stated.
2.1 Basis of preparation
The consolidated financial statements of the Group (“the financial statements”) have been
prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by
the International Accounting Standard Board (the “IASB”). The financial statements wereapproved by Representative Director, President Hiroshi Fujiwara and Chief executive officer,
Mirei Kuroda on 26 March, 2018.
The preparation of the financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in theprocess of applying the accounting policies. The areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates are significant to the Financial
Statements are disclosed in Note 4.
2.1.1.

New standards and amendments to existing standards not yet adopted by theGroup
The following are standards and amendments to existing standards that have been publishedand are relevant and mandatory for the Group’s accounting periods beginning on or after 1
January 2018 or later periods, but have not been early adopted by the Group.

(a) IFRS9 – Financial Instruments
IFRS9 addresses the classification, measurement and recognition of financial assets andfinancial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces theguidance in IAS39 that relates to the classification and measurement of financial instruments.
IFRS 9 retains but simplifies the mixed measurement model and establishes three primary-9-INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

measurement categories for financial assets: amortized cost, fair value through OCI and fairvalue through P&L. It introduces a new expected credit losses model that replaces the incurred
loss impairment model used in IAS 39. For financial liabilities there were no changes toclassification and measurement except for the recognition of changes in own credit risk in othercomprehensive income, for liabilities designed at fair value through profit or loss. The standard
is effective for accounting periods beginning on or after 1 January 2018. Early adoption ispermitted. The Group has determined not to early adopt the standard, and IFRS 9 will beapplied from the year ending 31 December, 2018. Also, the Group has assessed the impactsof IFRS 9's adoption on the Consolidated Financial Statement of the Group is immaterial.
(b) IFRS15 – Revenue from contracts with customers
IFRS15 outlines a single comprehensive model for entities to use in accounting for revenue
arising from contracts with customers and supersedes current revenue recognition guidance.
IFRS 15 is based on the principle that revenue is recognized when control of a good or service
transfers to a customer – so the notion of control replaces the existing notion of risks andrewards. The new standard is effective retrospectively for annual reporting periods beginningon or after 1 January, 2018, according to its transition provisions. Earlier application ispermitted.
The Group does not intend to early adopt the standard as it plans to apply from the fiscal
year of 2018. The Group intended to use the full retrospective method upon adoption, due
to the costs of applying such method, the Group has determined to use the modified
retrospective method which is to record cumulative amount of the impact at the beginningbalance of the retained earnings upon adoption. The Group has completed the assessmentof impact of IFRS 15’s adoption, and has assessed the impacts of IFRS 15's adoption on theConsolidated Financial Statement of the Group is immaterial.
(c)IFRS16 – Leases
IFRS16 replaces the current guidance in IAS 17. The standard requires lessees, with certain
expectations, to recognize a lease liability reflecting future lease payments and a “right-of-use
asset” for lease contracts. The standard is effective for annual periods beginning on or afterJanuary 1, 2019, with earlier application permitted if IFRS 15, Revenue from Contracts with
Customer, is also applied. The Group is yet to assess the full impact of the standard.
(d) IFRIC23 – Uncertainty over income tax treatment
IFRIC23 clarifies the accountings for uncertain income tax treatment how to recognize andmeasure deferred and current income tax assets and liabilities if there is uncertainty over a tax
treatment. The standard is effective for annual periods beginning on or after 1 January 2019.
Earlier adoption is permitted. The Management is currently assessing the impact of thestandard; the Company does not expect material effects on the financial statements.
2.2 Basis of consolidation(a) Subsidiaries
A subsidiary is an entity (including a structured entity) over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights to, variable returns fromits involvement with the entity and has the ability to affect those returns through its power overthe entity. Subsidiaries are consolidated from the date on which control is transferred to theGroup. They are deconsolidated from the date that control ceases.
(b) Associates
An associate is an entity in which the Group has significant influence, but not control, over theentity's financial and operating policies. Significant influence is presumed to exist when theGroup holds between 20% and 50% of the voting power of another entity, unless it can beclearly demonstrated that it is not the case.
- 10 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

The Group's investments in associates are accounted for using the equity method. Under theequity method, the investment in an associate is initially recognized at cost and the carrying
amount is adjusted to recognize the Group's share of the profit or loss and changes in equity of
the associate after the date of acquisition, including its share in the associate's othercomprehensive income. Dividends received or receivable from associates and joint ventures arerecognized as a reduction in the carrying amount of the investment.
If an associate uses accounting policies different from those of the Group for like transactions
and events in similar circumstances, appropriate adjustments are made to its financial
statements in applying the equity method.
The carrying amount of equity-accounted investments is tested for impairment in accordancewith the policy described in Note 13.
Changes in ownership interests in associates that do not change the significant influence status
in such associate, are accounted for as follows: the difference between any consideration
received for sale of the associate shares, and the change in the carrying amount of theinvestment, is carried to income; a proportionate share of the associate's other comprehensive
income is reclassified to profit or loss.
(c)Business combinations under common control
IRI Japan acquired Nano-Opt Media, Inc. (“NOM”) on 1 January 2016 by share exchange from
Hiroshi Fujiwara. 6 classified shares of the Company were issued to 1 common stock of NOM
shares. The acquisition of NOM was accounted for as business combinations under common
control as noted below.
A business combination involving entities or businesses under common control is a businesscombination in which all of the combining entities or businesses are ultimately controlled by
the same party or parties both before and after the business combination, and in which control
is not transitory. The Group has accounted for the acquisition of NOM based on the carrying
amounts recorded in the stand alone financial statements of NOM. The financial statements of
NOM have been consolidated from the acquisition date, 1 January 2016. The differences of net
assets of NOM at 1 January 2016 and the share values of NOM by the share exchange were
accounted in the retained earnings.
On 18 October, 2017, Internet Research Institute, Inc. (“original IRI Japan”) which wasestablished as a limited company in Japan under the Japanese Companies Ordinance on
9 December 1996, entered into a merger agreement with IRI Japan.
The merger is Absorption-Type Merger under the Japanese law and IRI Japan is a surviving
company and original IRI Japan is a merging company, and IRI Japan succeeded to all rights
and obligation of old IRI Japan and continue to exist while original IRI Japan dissolved on 20
November, 2017 in accordance with the agreement.
In advance of the merger, 34,786 shares of the Company was transferred from Hiroshi Fujiwara
to IRI Japan on 11 October, 2017. Also, original IRI Japan acquired its 756 ordinary A sharesfrom its shareholders and issued 756 ordinary shares to them as a compensation for theacquisition on 19 November, 2017, and then original IRI Japan retired 756 ordinary A shareson the same date.
Through this merger, IRI Japan transferred 34,786 shares of the Company to the shareholdersof original IRI Japan at ratio of 1:2 (i.e., two shares of the Company for each share of original
IRI Japan) as a compensation for the merger. Also, IRI Japan delivered to the holders oforiginal IRI Japan’s Series 1 Share Options, in exchange for their Series 1 Share Options at ratioof 1:1 on the merger date. After that, IRI Japan entered into the waiver letter with the holdersof their Series 1 Share Options on 24 November, 2017 and it resulted that the Options werecancelled.
As a result of these transactions, IRI Japan became a wholly subsidiary of the Company and theprior shareholders of original IRI Japan became the shareholders of the Company. as well. The
triangle merger was accounted for as business combinations under common control. The
Group has accounted for the acquisition of IRI, Inc. based on the carrying amounts recorded in
the stand alone consolidated financial statements of IRI, Inc. The consolidated financial
statements of IRI, Inc. have been prepared from 18 October 2017 of its acquisition date,however, the Group's consolidated financial statements have prepared since 1996, which was- 11 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

established original Internet Research Institute, Inc.
2.3 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided
to the chief operating decision-maker. The Chief Operating Decision-Maker ("CODM"), who is
responsible for allocating resources and assessing performance of the operating segments, hasbeen identified as the CEO of the Group that makes strategic decisions.
2.4 Property, plant and equipment
Property, plant and equipment are measured on a historical cost basis, less accumulated
depreciation and accumulated impairment losses. Historical cost includes costs directly
attributable to the acquisition of the asset and the initial estimated costs related to disassembly,
retirement and site restoration.
Depreciation is calculated using the straight-line method to allocate their cost to their residual
values over their estimated useful lives, as follows:- Leasehold improvement- Equipment

5 to 15 years
3 to 6 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the endof each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with carrying amountand are recognized within “Other (expenses)/incomes, net” in the profit or loss.
2.5

Intangible assets
Computer software
Computer software is stated at cost less accumulated amortization and impairment losses.
Amortization is calculated using the straight-line method to allocate the cost over theirestimated useful lives, which does not exceed five years.

2.6 Impairment of non-financial assets
Assets that are subject to amortization are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs todisposal and value in use. For the purposes of assessing impairment, assets are grouped at thelowest levels for which there are separately identifiable cash flows (cash-generating units).
Non-financial assets that suffered an impairment are reviewed for possible reversal of theimpairment at each reporting date.

- 12 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

2.7 Financial assets
2.7.1

Recognition
The financial assets, upon initial recognition, are measured at their fair value plus,transaction costs that are directly attributable to the asset’s acquisition.

2.7.2

Classification
Financial assets are classified as "loans and receivables," and "available-for-sale financial
assets." The classification depends on the nature and purpose of the financial assets and isdetermined at the time of initial recognition.
i) Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments. Subsequent toinitial recognition, loans and receivables are measured at amortized cost using the effective
interest method, except for loans and receivables for which the effects of discounting isimmaterial.
ii) Available-for-sale financial assets
Non-derivative financial assets are classified as "available-for-sale financial assets," if:(A) The assets are designated as "available-for-sale financial assets" at initial recognition; or(B) The assets are not classified as the other categories.
Subsequent to initial recognition, available-for-sale financial assets are re-measured at fairvalue and gains or losses arising from changes in fair value are recognized in othercomprehensive income (loss). When there is objective evidence that an available-for-salefinancial asset is impaired, previously recognized accumulated other comprehensive income(loss) is reclassified to profit or loss. Available for sales securities are classified as current assets
if they are to be liquidated within one year from the balance sheet date.

2.7.3

Impairment of financial assets
The Group assesses financial assets for any objective evidence of impairment at the end of fiscal
year. Financial assets are considered to be impaired when there is objective evidence ofimpairment as a result of one or more loss events that occurred after the initial recognition of
the financial assets, and these events have an adverse effect on the estimated future cash flowsof the financial assets that can be reliably estimated. For available-for-sale equity instruments,
a significant or prolonged decline in the fair value below cost is considered to be objective
evidence of impairment.
In recognizing an impairment loss on loans and receivables, the Group reduces the carrying
amount of the asset directly. The amount of the impairment loss is measured as the difference
between the asset's carrying amount and the present value of estimated future cash flows,
discounted at the financial asset's original effective interest rate, and is recognized in profit orloss. Interest income after impairment recognition is thereafter recognized through reversal of
discount due to passage of time.
For available-for-sale financial assets, an impairment loss is measured as the difference
between the asset's carrying amount and its fair value and is recognized in profit or loss.
For loans and receivables, if, in a subsequent period, an event that decreases the amount of theimpairment loss occurs, the amount of decrease is reversed through profit or loss to the extent
that it does not exceed the amortized cost of the asset.
- 13 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

For equity instruments classified as available-for-sale financial assets, impairment losses are
not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss
is recognized in other comprehensive income.
2.8 Derivative financial instruments
Derivative financial instruments are initially recognized at fair value on the date on which aderivative contract is entered into and are subsequently re-measured at fair value. Any gains orlosses arising from changes in the fair value of derivatives are recognized in profit or loss.
Derivatives are carried as financial assets when the fair value is positive and as financial
liabilities when the fair value is negative.
2.9 Cash and cash equivalents
In the consolidated statements of cash flows, cash and cash equivalents include cash in hand,deposits held at call with banks, other short-term highly liquid investments with original
maturities of three months. In the consolidated statements of financial position, bankoverdrafts are shown within borrowings in current liabilities.
2.10 Trade receivables
Trade receivables are amounts due from customers for services performed in the ordinary
course of business. If collection of trade and other receivables is expected in one year or less (orin the normal operating cycle of the business if longer), they are classified as current assets.
Trade and other receivables are recognized initially at fair value less provision for impairment.
At the end of each reporting period, the Group assesses the recognition of any impairment offinancial assets on whether there is a significant increase in credit risk from the initialrecognition.
2.11 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in theordinary shares of business from suppliers. Accounts payable are classified as current liabilities
if payable is due within one year or less. Trade payable are recognized initially at fair value, andsubsequently measured at amortized cost.
2.12 Borrowings and borrowing costs
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings
are subsequently carried at amortized cost; any difference between the proceeds (net oftransaction costs) and the redemption value is recognized in the consolidated statements ofcomprehensive income over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right todefer settlement of the liability for at least 12 months after the end of the reporting period.
2.13 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognized in profit
or loss, except to the extent that it relates to items recognized in other comprehensive income
or directly in equity. In this case, the tax is also recognized in other comprehensive income or
directly in equity, respectively.
- 14 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS(a) Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the statements of financial position date in the countries where the Group operates
and generates taxable income. Management periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of amounts expected to be paid to thetax authorities.
(b) Deferred income tax
Deferred tax is recognized using the asset-liability method in respect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting purpose and theamounts used for taxation purposes. A deferred tax liabilities is recognized for all temporary
differences. A deferred tax asset is recognized for all deductible temporary differences, unused
tax losses and unused tax credits to the extent that it is probable that taxable profit will beavailable against which they can be utilized. However, deferred tax is not recognized for thefollowing temporary differences: the initial recognition of assets or liabilities in a transactionthat is not a business combination and that affects neither accounting profit or loss nor taxable
income.
The Group recognizes a deferred tax liability for all taxable temporary differences associatedwith investments in subsidiaries and associates, except to the extent that the Group is able tocontrol the timing of the reversal of the temporary difference and it is probable that thetemporary difference will not reverse in the foreseeable future. The Group recognizes a deferred
tax asset for all deductible temporary differences arising from investments in subsidiaries andassociates, to the extent that it is probable that the temporary difference will reverse in theforeseeable future and taxable profit will be available against which the temporary differences
can be utilized.
The carrying amount of a deferred tax asset is reviewed at the end of each reporting period andis reduced to the extent that it is no longer probable that sufficient taxable profit will beavailable to allow the benefit of part or all of that deferred tax assets to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period when the asset is realized or the liability is settled, based on tax rates and tax laws thathave been enacted or substantively enacted by the end of the reporting period. The
measurement of deferred tax liabilities and deferred tax assets reflects the tax consequencesthat would follow, in a manner that the Group expects, at the end of the reporting period torecover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset
the related current tax liabilities and assets, and they relate to income taxes levied on the same
taxable entity by the same tax authority.
2.14 Employee benefits(a) Profit-sharing and bonus plans
The Group recognizes a liability and an expense for bonuses and profit-sharing, based on aformula that takes into consideration the profit attributable to the Company’s shareholders
after certain adjustments. The Group recognizes a provision where contractually obliged orwhere there is a past practice that has created a constructive obligation.
(b) Employee leave entitlements
Employee entitlements to annual leave are recognized when they accrue to employees. A
provision is made for the estimated liability for annual leave as a result of services rendered by
employees up to the year-end date.
- 15 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

Employee entitlements to sick leave and maternity leave are not recognized until the time ofleave.
(c) Share-based payments
The Group has granted stock options to directors and employees. The fair values of the stock
options are measured at the grant dates. Compensation expenses related to stock options arerecognized over the vesting period. Refer to Note 4 Critical Accounting Estimates andJudgments, Estimates and Assumptions and Note 20 Share-based Payments for more details
on the valuation methodology of stock options and the assumptions used in such valuation.
2.15 Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as aresult of a past event, it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of
the obligation.
The Company is required to incur certain costs in respect of liability to dismantle and remove
assets and to restore sites on which the assets were located. The dismantling costs arecalculated according to best estimate of future expected payments discounted at a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks
specific to the liability. The increase in the provision due to the passage of time is recognized as
finance costs (unwinding of discount).
2.16 Revenue recognition
The Group recognizes revenues at the fair value of the consideration received or receivable.
Sales revenues exclude consumption taxes and any taxes on their other associated value.
Revenue from services
The main activities of the Group are internet-related business that are providing a consulting
service and holding an exhibition.
(a) Consulting service
The Company provides a research report by request from the customer, and the related revenue
is recognized when the company submits the report.
(b) Exhibition service
The company holds several internet-related exhibitions in a year. The company plans, organize
and executes the conventions and as a consideration, the Company collects the fees fromexhibitors in advance. The Company recognizes the revenue when the exhibition is held.
2.17 Research and development expenses
Research and development expenses are charged to the statement of income as incurred unless
all of following conditions have been met:(a) The technical feasibility of completing the intangible asset so that it will be available for use
or sales.
(b) Its intention to complete the intangible asset and use or sell it.
(c) Its ability to use or sell the intangible asset.
- 16 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS(d) How the intangible asset will generate probable future economic benefits. Among otherthings, the entity demonstrates the existence or a market for the output of the intangible
asset or the intangible asset itself or, if it is to be used internally, the usefulness of theintangible asset.
(e) The availability of adequate technical, financial and other resources to complete thedevelopment and to use or sell the intangible asset.
(f) Its ability to measure reliably the expenditure attributable to the intangible asset during its
development.
As of 31 December 2017, the above criteria for capitalization have not been met.
2.18 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by thelessor are classified as operating leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to profit or loss on a straight-line basis overthe period of the lease.
The Group leases certain property, plant and equipment. Leases of property, plant andequipment where the Group has substantially all the risks and rewards of ownership areclassified as finance leases. Finance leases are capitalized at the lease’s commencement at thelower of the fair value of the leased property and the present value of the minimum lease
payments.
Each lease payment is allocated between the liability and finance charges. The corresponding
rental obligations, net of finance charges, are included in other long-term payables. The interest
element of the finance cost is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. The
property, plant and equipment acquired under finance leases is depreciated over the shorter ofthe useful life of the asset and the lease term.
2.19 Share capital
Ordinary shares are classified as equity. Company’s share acquired by the Company (treasury
shares) are presented as a reduction of equity, at the consideration paid, including any
incremental attributable costs, net of tax. Treasury shares do not have a right to receive
dividends or to vote.
2.20 Earnings per share (EPS)
Basic earnings per share is calculated by dividing the profit attributable to equity holders of theCompany by the weighted average number of ordinary shares in issue during the year excluding
ordinary shares in issue during the year excluding ordinary shares purchased by the Company
and held as treasury shares.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary
shares outstanding to assume exercise of all dilutive potential ordinary shares. The instrumentsthat are potential dilutive ordinary shares are equity instruments granted to employees. A
calculation is done to determine the number of shares that could have been acquired at fairvalue (determined as the average annual market share price of the company’s shares) based on
the monetary value of the subscription rights attached to outstanding share options. The
number of shares calculated as above is compared with the number of shares that would havebeen issued assuming the exercise of the share options.

- 17 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 3 – FINANCIAL RISK MANAGEMENT:
3.1

Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including, cash flow
and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk
management program focuses on the unpredictability of financial markets and seeks tominimize potential adverse effects on the Group’s financial performance. The Group does notuse any derivative financial instruments for speculative purposes.
Risk management is carried out by management of the Group. Formal and informal
management meetings are held to identify significant risks and to develop procedures to deal
with any risks in relation to the Group’s businesses.

(a)Market risk
The Group’s interest rate risk arises from bank balances and borrowings which are carried atvariable rates, which expose the Group to cash flow interest rate risk.
The Group’s fair value interest rate risk arises from bank balances and borrowings which arecarried at fixed rates, which expose the Group to fair value interest rate risk.

(b)

Credit risk
Credit risk is the risk of financial losses to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Group’s
receivables from customers and investments.
In regards of the bank deposits, the Group only deals with banks with high credit ratings, asassigned by external rating agencies, so as to minimize the credit risks.
Maximum amounts of possible financial loss to the Group due to credit risk as of 31 December,2016 and 2017 are as follows;
31 December,
2016
Book value(In thousands)
Cash at bank (1)Trade receivable (1)(2)
Advance paid (1)Other receivables (1)(2)
Related parties (2)Office security deposits (1)
Total

2,093
58
4
280
93
2,528

31 December,
2017
Book value(In thousands)
8,946
10
3
10
1
851
9,821

(1) None of these assets were past due or impaired at the end of the respective reporting
period.
(2) The Group's exposure to credit risk is influenced mainly by the individual characteristics ofeach customer. The Group regularly performs credit assessments on customers andcounterparties considering their financial position and historical data in order to manage
the credit risk.
Management makes periodic assessment on the recoverability of trade and other receivables
based on historical payment records, the length of the overdue period, the financial strength of- 18 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

the debtors and whether there are any disputes with the debtors. The Group’s historicalexperience in collection of trade and other receivables falls within the recorded allowances andthe directors are of the opinion that adequate provision for uncollectible receivables has been
made in the Financial Information.
In case e of impairment of financial assets, the Group does not directly write off such assets by
reducing the carrying amount, but instead records an allowance for doubtful accounts.
However, in the event that there is no realistic prospect of future recovery, financial assets are
directly written off.
Below is the movement in the allowance for doubtful accounts:
Allowance for
doubtful accounts
USD(In thousands)
Balance at 31 December 2015
Acquisition of NOM
Provision for the year
Translation differences
Balance at 31 December 2016
Provision for the year
Translation difference
Balance at 31 December 2017915
5(*) -;2947
177(*) less than thousand US dollars.
(c)Liquidity risk
Liquidity risk refers to the risk that an entity will encounter difficulty in meeting obligations
associated with financial liabilities that are settled by delivering cash or another financial assets.
Prudent liquidity risk management implies maintaining sufficient cash and bank balances, theavailability of funding from an adequate amount of committed credit facilities from leadingbanks and the ability to close out market position.
The Group maintains liquidity by a number of sources including orderly realization of shortterm financial assets and receivables; and long-term financing including long-term borrowings.
The Group aims to maintain flexibility in funding by keeping sufficient bank balances,committed credit lines available and interest bearing borrowings which enable the Group tocontinue its business for the foreseeable future.
The table below analyses the Group’s non-derivative financial liabilities into relevant maturity
groupings based on the remaining period at the end of the reporting period to the contractual
maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Balances due within 12 months equal to their carrying amounts as the impact of discounting is
not significant.

- 19 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

As at 31 December 2016
Trade payables
Other payables (excluding accruals
and provisions)
Obligation under finance lease
Borrowings and interests
Amounts due to related parties

As at 31 December 2017
Trade payables
Other payables (excluding accruals
and provisions)
Obligation under finance lease
Amounts due to related parties

Within 1
year
USD
thousands

Between 1
and 2 years
USD
thousands

Between 2
and 5 years
USD
thousands

USD
thousands

67
126

-

-

67
126

11
36
112
352

11
24
35

8
8

30
60
112
395

180

-;-

-;-

180

1,346

-;-

-;-

1,346

12
38
1,576

8
-;8

-;-;-;-

20
38
1,584

Total

3.2 Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue
as a going concern in order to provide returns for shareholders and benefits for otherstakeholders and to maintain an optimal capital structure to reduce the cost of capital. The
Group has bank borrowings to finance its operations.
In order to maintain or adjust the capital structure, the Group may adjust the amount ofdividends paid to shareholders, return capital to shareholders, issue new shares or sell assets
to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing
ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as totalborrowings (include bank borrowings,) less cash and cash equivalents. Total capital iscalculated as “equity” as shown in the consolidated statements of financial position, plus net
debt, where applicable.
As at 31 December

Borrowings
Less: cash and cash equivalents(Note 17)
Net cash
Total equity
Total capital

2016
USD
thousands

2017
USD
thousands

60(2,095)-;(8,949)(2,035)
17,205
15,170(8,949)24,581
15,632

Gearing ratio(13.4%)(57.2%)The decrease in the gearing ratio as at 31 December 2016 and 2017 resulted primarily from theincrease of cash and cash equivalents (Note 17).
- 20 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

3.3 Fair value estimation
The table below analyses the Group’s financial instruments carried at fair value by level of the
inputs to valuation techniques used to measure fair value. Such inputs are categorized into
three levels within a fair value hierarchy as follows:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
Inputs other than quoted prices included within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)(level 2).
Inputs for the asset or liability that are not based on observable market data (that is,unobservable inputs) (level 3).
Level 1
USD
thousands

Level 2
USD
thousands

Level 3USD
thousands

Total
USD
thousands

As at 31 December 2016
AssetsFinancial assets available forsale for equity securities

-;-

-;-

23

23

As at 31 December 2017
AssetsFinancial assets available forsale for equity securities

-;-

-;-

15

15

(a) Financial instruments in level 1
The fair value of financial instruments traded in active markets is based on quoted market
prices at the statements of financial position date. A market is regarded as active if quoted
prices are readily and regularly available from an exchange, dealer, broker, industry group,
pricing service, or regulatory agency, and those prices represent actual and regularly occurring
market transactions on an arm’s length basis. The quoted market price used for financial assets
held by the Group is the current bid price. These instruments are included in level 1.
Instruments included in level 1 represent listed equity investments classified as fair value
through other comprehensive income which were not held for trading purpose.
(b) Financial instruments in level 2
The fair value of financial instruments that are not traded in an active market is determined byusing valuation techniques. These valuation techniques maximize the use of observable market
data where it is available and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are observable, the instrument isincluded in level 2.
(c)Financial instruments in level 3
If one or more of the significant inputs is not based on observable market data, the instruments
is included in level 3.
Specific valuation techniques used to value financial instruments include:- 21 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

Quoted market prices or dealer quotes for similar instruments.

Other techniques, such as discounted cash flow analysis, are used to determine fairvalue for the remaining financial instruments.

The table below presents the changes in level 3 instruments for the relevant periods:
Available for salefinancial assets
USD (In thousands)
Balance at 1 January 2016
Reclass due to acquisition of
NOM
Fair value gain/(loss) on
valuation
Translation differences

140
(124)

(*)-;-

Balance at 31 December 201623

Balance at 1 January 2017
Fair value gain/(loss) on
valuation

23

7

(8)

Translation differences(*)-;-

Balance at 31 December 2017(*) less than thousand US dollars.

15

There were no transfers between levels 1, 2 and 3 during the relevant periods.
3.4 Offsetting financial assets and financial liabilities
As at 31 December, 2016 and 2017, there were no financial assets or financial liabilities whichwere subject to offsetting, enforceable master netting or similar agreements.
NOTE 4 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the Group’s consolidated financial statements requires management tomake estimates and assumptions are based on the best judgement of the management in lightof historical experience and various factors deemed to be reasonable as of the fiscal year end
date. Given their nature, uncertainty about these assumptions and estimates could result theoutcomes that require a material adjustment to the carrying amount of assets or liabilities
affected in future periods.
The estimates and assumptions are continuously reviewed by the management. The effects ofa change in estimates and assumptions are recognized in the period of the change or in the
period of the change and future periods. Among estimates and assumptions made by the
management, the following are ones that may have a material effect on the amounts recognizedin the consolidated financial statements of the Group.
(a)Impairment- Non-financial assets
Non-current assets, such as property and equipment, and investments in associates, are- 22 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

assessed for indications of impairment at the end of reporting period. The Group evaluates
both internal and external sources of information to assess whether impairment indicators
exist. Some of the impairment indicators are evidence of obsolescence or significant adversechanges in the technological, market, economic or legal environment of the market in which
the Group operates, or the asset is dedicated. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent, if any, of the impairment
loss. Likewise, the determination of the assets’ recoverable amounts involves the use of
estimates by the management that can have a material impact on the respective values andultimately the amount of any impairment.
- Financial assets measured at amortized cost
Regarding the financial assets measured at amortized cost, the Group assesses whether there
is any objective evidence that financial assets are impaired on a quarterly basis. If there is any
objective evidence, the Group recognizes the difference between carrying value of the asset
and the present value of estimated future cash flows as an impairment loss. When the Groupestimates the future cash flows, the management considers the probability of default, time ofrecovery and past trend of losses, and decides whether the actual loss, which reflects current
economic and credit conditions, is more or less that past trend. The Group considers theseestimates to be significant because any adjustments may significantly affect the amount of an
impairment loss for the financial assets measured at amortized cost.
(b) Recoverability of deferred tax assets
Deferred tax assets are recognized for all deductible temporary differences, unused tax losses
carryforward and unused tax credits carryforward to the extent that it is probable that taxable
income will be available. The elimination of future taxable income is calculated based on
financial budgets approved by management of the Group, and it is based on management’s
subjective judgements and assumptions. The Group considers these estimates to besignificant because any adjustments in the assumed conditions and amendments of tax laws
in the future may significantly affect the amounts of deferred tax assets and deferred tax
liabilities.
(c) Method of determining fair value for financial instruments measured at fair value
with unobservable inputs
Certain financial assets and financial liabilities held by the Group measured at fair value
require using valuation techniques that incorporate unobservable inputs based on thejudgement and assumptions of Group management, such as experience assumption, and theuse of specific numerical calculation models.
(d) Provisions
The Group recognizes asset retirement obligations related to assets leased under operatingleases in the consolidated statements of financial position. These provisions are recognizedbased on the best estimates of the costs expected to incur for the restoration of the operatinglease properties to the state as specified in the rental agreements upon termination of theoperating leases. The estimation takes risks and uncertainty related to the obligation into
account as of the fiscal year end date.
(e) Shared-based payments
Shared-based payment expenses related to stock options granted to directors and employees
are estimated based on the option’s fair value determined under the Black-Scholes-Merton(“Black-Scholes”) option pricing model. The Black-Scholes model requires various highly
judgmental assumptions, including expected volatility, expected life of stock options and fairvalue of share capital at the time of option grants, which will be discussed further later.
Expected volatility is estimated based on the historical volatility of reference companies which
are comparable publicly traded companies. The expected life of stock options is estimatedbased on the expectation of future stock price movements and expected exercise patterns of
the option holders.
The sensitivity analysis for the estimation of the fair value is discussed in Note 20.
- 23 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 5 – OTHER INCOME AND OTHER EXPENSES
Other income
USD (In thousands)
31 December
2016
2017
8
8

Miscellaneous income

7
7

Other expense
USD (In thousands)
31 December
2016
2017
Loss on retirement of property, plant and equipment

-;-

24

Miscellaneous loss

2
2

6
30

NOTE 6 – SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
USD (In thousands)
31 December
2016
2017
Advertising expenses
1,119
1,203
Salaries, bonuses and other employee expenses
2,528
3,152
Share-based compensation expenses
270
9
Traveling and transportation expenses
321
501
Rent expenses
211
252
Depreciation and amortization
37
35
Professional fee
157
2,255
IPO related costs with regards to issuance cost-;430
Donation
78200Entertainment
216
204
Bad debt expense
-;50
Other
364
651
Total
5,301
8,942

NOTE 7– EMPLOYEE BENEFITS EXPENSE (INCLUDING DIRECTORS’EMOLUMENTS)
USD (In thousands)
31 December
2016
2017
2,265
2,865
263
287
2,528
3,152

Salaries, bonuses and allowances
Other employee benefits
Total- 24 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 8 – FINANCE INCOME (EXPENSE), NET
USD (In thousands)
31 December
2016
2017

Finance income
Interest income

Finance expense
Bad debt loss for loan
Other

Finance income (expense), net

2

2

2

2

5
3

-;1

8

1

6

1

NOTE 9 – INCOME TAX EXPENSES
USD ( In thousands)
31-Dec2016
2017
Current income tax- Japan corporate income tax for the year
Deferred income tax expenses (Note 23)

5
438
443

189
141
330

Japan corporate income tax has been calculated on the estimated assessable profit for the
relevant periods at the rates of taxation prevailing in Japan in which the Group operates.
The tax on the Group’s profit before income tax differs from the theoretical amount that would
arise using the income tax rate of Israel as follows:
USD (In thousand)
31-Dec2016
2017

Profit (loss) before income tax
Tax calculated at applicable Israel corporate
income tax rate(24% and 25% for the years
ended 31 December 2017 and 2016,
respectively(*1))
Increase (decrease) regarding tax rates
differences of subsidiaries in Japan (*2)
- 25 -

1,823(1,493)

456

(358)

170

(146)

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

Permanent non-deductible expenses
Permanent exempt income
Equity method investment gain
Assessment of the recoverability of deferred
tax assets
Other
Tax expense

54
(53)
(549)

261
(186)
(379)

367

1,144

(2)
443

(6)
330

(*1) Tax rates in Israel
In January 2016, the Law for the Amendment of the Income Tax Ordinance (No. 216) was published,enacting a reduction of corporate tax rate in 2016 and thereafter, from 26.5% to 25%.
In December 2016, the Economic Efficiency Law (Legislative Amendments for Implementing the
Economic Policy for the 2017 and 2018 Budget Year), 2016 was published, introducing a gradualreduction in corporate tax rate from 25% to 23%. However, the law also included a temporary
provision setting the corporate tax rate in 2017 at 24%. As a result, the corporate tax rate will be
24% in 2017 and 23% in 2018 and thereafter.

(*2) The Group is subject to national corporate income tax, inhabitants’ tax, and enterprise tax
in Japan, which, in aggregate, resulted in effective tax rates approximately 34.33% for the years
ended 31 December 2016. Amendments to the Japanese tax regulations were enacted into law
on 29 March, 2016 and it resulted that the effective tax rate are scheduled to be reduced toapproximately 33.80% effective from the year ending 31 December, 2017 and 33.59% effectivefrom the year ending 31 December, 2019.
Under Japanese tax law and regulations, every company is required to submit an annual tax
return to tax authorities. The statute of limitations to request a correction of prior year tax
liabilities is five years from when the original tax return was filed.
After filling of tax return, it may take a tax inspection by the tax authorities on an irregular base.
Most recently, Nano-opt Media Inc. took the tax inspection in April, 2016. As a result of the tax
inspection, Nano-opt Media Inc. did not amend its tax return.
The following table sets forth the applicable tax rate for the company during the period and theformula in calculating each type of tax.
31-Dec

1. Corporate tax rate:
2. Local corporate tax rate:
3. Inhabitants’ tax rate (At Tokyo):
4. Enterprise tax rate (At Tokyo):(a)Profit-based tax rate(b)Special local corporate tax rate
Effective tax rate

1.

2016

2017

23.90%
4.40%
12.90%

23.40%
4.40%
12.90%

6.70%
43.20%
34.33%

6.70%
43.20%
33.80%

Corporate tax rate is imposed on a corporation’s taxable income. Amendments to theJapanese tax regulations were enacted into law on 31 March, 2015 and 29 March, 2016 andit resulted that the corporate tax rate has been reduced from 25.50% to 23.90% effectivefrom the year ended December 31, 2016, and also the corporate tax rate has been reduced
to 23.40% effective from the year ending 31 December, 2017 and 23.20% effective from theyear ending 31 December, 2019.

2. Local corporate tax rate is imposed on total of a corporation’s corporate tax and income tax- 26 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

credit. Amendments to the Japanese tax regulations were enacted into law on 29 March,2016 and it resulted that the local corporate tax rate is scheduled to be increased to 10.30%
effective from the year ending 31 December, 2018.
3. Inhabitants’ tax rate is imposed on total of a corporation’s corporate tax and income tax
credit allocated to each prefecture in Japan. This allocation is generally made on the basisof the number of employees and number of offices in each location. The applied tax rate isdifferent in each prefecture. Amendments to the Japanese tax regulations were enacted into
law on 29 March, 2016 and it resulted that the inhabitants’ tax rate is scheduled to be
reduced to 7.00% effective from the year ending 31 December, 2018.
4. Enterprise tax rate is imposed on a corporation’s taxable income allocated to eachprefecture in Japan and it comprise of (a) Profit-based tax and (b) Special local corporate
tax rate. This allocation is generally made on the basis of the number of employees andnumber of offices in each location. The applied tax rate is different in each prefecture.
Amendments to the Japanese tax regulations were enacted into law on 29 March, 2016. As
a result of this amendment, (a) Profit-based tax rate is scheduled to be increased to 9.60%
effective from the year ending 31 December, 2018, while, (b) Special local corporate tax,
which is rate multiplied by the income portion of enterprise tax, is scheduled to be abolishedfrom the year ending 31 December, 2018 and replaced by enterprise tax.
The detailed formulas for calculating each tape of taxes are as follows. Corporate tax consists
mostly of the effective tax rate, and the change in the rate of corporate tax would result in asimilar change ratio of the effective tax rate.
1. Corporate tax = (Taxable income×Corporate tax rate) – Income tax credit
2. Local corporate tax = (Corporate tax + Income tax credit) × Local corporate tax rate
3. Inhabitants tax = (Corporate tax + Income tax credit) ×Inhabitant tax rate
4. Enterprise tax is calculated as the sum of the followings:(a) Profit-based tax = Taxable income×Profit-based tax rate(b) Special local corporate tax = Taxable income×Special local corporate tax rate
5. Effective tax rate is calculated as:
Corporate tax rate×(1+Local corporate tax rate + Inhabitant tax rate)+Enterprise tax rate(a)+Enterprise tax rate(a)×Enterprisetax rate(b)1+Enterprise tax rate(a)+Enterprise tax rate(a)×Enterprise tax rate(b)NOTE 10 – EARNING PER SHARE
Earnings per share attributable to owners of the parent for the years ended 31 December, 2016
and 2017 are calculated based on the following information.
Related to triangle merger on 20 November 2017, for one common share of IRI Japan, twocommon stocks of the Company were allocated.
A 1000-for-one share split is done, effective as of November 20, 2017.
Relevant to above share splits were conducted on 20 November 2017,
earnings per share for the year 31 December, 2017 and 2017 are calculated assuming that theshare split was conducted at the beginning of the previous fiscal year.
2016
Earnings (losses) per share attributable to owners of the parent(USD)- 27 -

2017

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
Basic
DilutedNumerator (thousands of USD)
Profit (loss) for the year attributable to ownersof the parent
Denominator (Shares)
Weighted average number of common shares
outstanding, basic
Effect of dilutive securities:
Stock options
Weighted average number of common shares
outstanding, diluted

0.051
0.051

(0.057)(0.057)

2016

2017

1,380

(1,823)27,136,000

31,857,759

40

-;-

27,136,040

31,857,759

IRI Japan had the Stock Options, but the Options were cancelled on 24 November, 2017as discussed in Note 2.2.
NOTE 11 – DIVIDENDS
So far the company has not declared or paid any dividend.
In accordance with the Japanese Companies Law, dividend can be distributed from the balanceof retained earnings, includes dividend income from affiliated companies, and does notincludes the retained earnings of affiliated companies that were defined in accordance with JGAAP as distributable in further periods. This takes into consideration that the parent company
has no control over the distribution of dividend by its affiliates.
In accordance with the Japanese Companies Law, the amount of JPY 1,338,104 thousand,equal to USD 11,889 thousand, translated according to the exchange rate as of December 31,
2017, can be distributed in IRI Japan in the year ended December 31, 2017.

- 28 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 12 – PROPERTY, PLANT AND EQUIPMENT
Leaseholdimprovement
Year ended 31 December 2016
Opening net book amount
Additions
Acquisition of NOM -Acquisition cost
Acquisition of NOM -Accumulated
depreciations
Depreciation
Translation differences
Closing net book amount

Equipment

Constructionin progress

Total
USD
thousand-;-;67-;3
153-;-;-;-

-;3
220

(27)

(79)

-;-

(106)

(6)
2
36

(30)
4
51

-;-;-;-(36)
6
87

At 31 December 2016
Acquisition cost
Accumulated depreciation
Net book amount

68
(32)
36

207
(156)
51

-;-;-;-

275
(188)
87

Year ended 31 December 2017
Opening net book amount
Additions
Depreciation
Retirement
Translation differences
Closing net book amount

36
-;(5)
(32)
1
-;-

51
51
(28)
(10)
2
66

-;196
-;-;(0)
196

87
247
(33)
(42)
3
262

At 31 December 2017
Acquisition cost
Accumulated depreciation
Net book amount-;-;-;-

182
(116)
66

196
-;196

378
(116)
262

Depreciation expenses of 36 thousand of USD have been charged in Selling, general andadministrative for the years ended 31 December 2016.
Depreciation expenses of 33 thousand of USD have been charged in Selling, general andadministrative for the years ended 31 December 2017.
The Group’s property, plant and equipment held under financial leases included in the total
amount of equipment were as follows:
USD thousand
31 December
2016
Cost - capitalized finance leases
Accumulated depreciation

2017
64
(36)
28

67
(48)
19

NOTE 13 – INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Set out below are the associate of the group as at 31 December 2016 and 2017 which, in theopinion of the directors, are material to the group. The entities listed below have share capitalconsisting solely of ordinary shares, which are held directly by the group. The country of- 29 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
incorporation or registration is also their principal place of business, and the proportion ofownership interest is the same as the proportion of voting rights held.

% of ownershipinterest
31 December
2016

2017

Nature ofrelationship

Place ofbusiness

・Computer platform
・IoT/AI Solution
・Media Solution

22.0%

22.0%

Associate (1)

Tokyo
Japan

Investment
management

30.0%

30.0%

Associate (2)

Tokyo
Japan

Name ofCompany

Main BusinessBroadBand
Tower, Inc.
MobileInternet
Capital, Inc.

Impact from the change in ownership interest at BBT recorded as a gain on change in share ofinvestments accounted for using the equity method in statement of income, due to the following
contributions: (1) Gain on sale on owner dilution in the holding percentage of BBT; (2)Reclassification of a portion of BBT's accumulated OCI following such sale or dilution, and ; (3)The company's share in equity movement in BBT not resulting from its comprehensive income.
Carrying amount and quoted fair value of each investment as at 31 December, 2016 and 2017 anddividend received from each affiliate are as follows.
USD (In
thousands)

Carrying amount

Quoted fair value

Dividend received

31 December
2016
2017

31 December
2016
2017

31 December
2016
2017

BroadBand
Tower, Inc.

15,49816,33022,076

18,857

310

1,101

MobileInternet
Capital, Inc.

1,116

1,548

-

-

-

-

Name ofCompany(1)

BroadBand Tower, Inc. (the “BBT”) is a trailblazer in the specialty Internet data center
business, BroadBand Tower supports IoT, as a service evolved from ICT for modern
businesses, through its advanced technological capabilities, experienced staff, and high-grade
facilities and services. BroadBand Tower, Inc. has subsidiaries and affiliates, and they provide
planning, construction, and providing dedicated platform services (video, voice, data delivery)and support of VNO setup/operation services to cable television operators.

The Groupholds 22.0% of the voting rights, two directors of the Group are also designated as
director of this entity and they participate in all significant financial and operating decisions of theentity. The Group has therefore determined that it has significant influence over this entity.
BBT’s common stock is listed and traded in the Tokyo Stock Exchange, and above BBT’s quoted
fair value is categorized as level 1 under IFRS 13, which is quoted prices in active markets.
(2)
Mobile Internet Capital, Inc. is a venture capital investing in ICT related venture companies.
The company holds 30.0% of the voting rights, therefore the Grouphas determined that it has
significant influence over this entity.

- 30 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
The summary financial statement of BroadBand Tower, Inc. is as follows:
31-Dec31-DecCurrent assets
Non-current assets
Total assets

2016
USD (In thousands)
113,879
51,473
165,352

2017
USD (In thousands)
93,16882,494
175,662

Current liabilities
Non-current liabilities
Total liabilities

64,07821,57885,65644,34840,616
84,964

Total Net assets

79,696

90,698Group’s share in %Carrying amount

22.0%
15,49822.0%
16,330Year Ended 2016
USD (In thousands)

Year Ended 2017
USD (In thousands)

66,02869,91878,12586,385(3,890)(8,260)12,53014,857

Profit

8,640

6,597

Profit attributable to:
Owners of the parent of thecompany

5,685

5,269

Non-controlling interests

2,954

1,328

(2,205)

184

6,435

6,781

3,511

5,451

2,924

1,330

5,685

5,269

22.0%

22.0%

1,251

1,157

Revenue
ExpenseProfit (loss) fromcontinuing operations
Gain (loss) fromdiscontinued operations

Other comprehensive
income (loss)
Total comprehensive
incomeTotal comprehensive
income attributable to:
Owners of the parent of thecompany
Non-controlling interests
Profit attributable toowners of the parent of thecompany
Group’s share in %Share of profit ofinvestments accounted forusing the equity method

Discontinued operations for the year ended December 31, 2017 is relating to the partial sale of BBT’s
shareholding in its subsidiary BBF, Inc. on 30 June 2017. Discontinued operations for the year ended
December 31, 2016 is relating to the partial sale of BBT’s shareholding in its subsidiary Ingenico Japan Co.,

- 31 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
Ltd (former Lyudia Co., Ltd.) on 26 April 2016, and to the partial sale of BBT’s shareholding in its subsidiary
BBF, Inc., as mentioned above.
Above share of profit of investments accounted for using the equity method for the year ended 31 December
2017 was calculated based on the profit and loss for the quarterly period with share percentage, since theCompany’s share percentage had been decreased throughout the year.

Below is transition from Japanese GAAP to IFRS at BBT as of and for the six months ended 31
December 2016 and 2017, respectively. BBT’s fiscal year end is 30 June, and BBT has publicallyreleased its consolidated financial statements prepared under Japanese GAAP at a quarterly basis.
The recent Japanese GAAP consolidated financial statements of BBT is covering the period of six
months ended 31 December 2017. Therefore, the below transition from Japanese GAAP to IFRS at
BBT is shown as the six months ended 31 December 2016 and 2017, including the balance sheet as at
31 December 2016 and 2017.
Consolidated statement of financial position

As of 31 December 2016
Presentation under
J-GAAP
Current assets
Cash and cash
equivalents
Notes and accounts
receivable-tradeMarketable securities
Inventories
Deferred tax assets

Note

Effect oftransition to
IFRS
JPY(inthousand)IFRS
JPY(inthousand)Presentation
under IFRS

5,016,821

2,099,993

7,116,815

G, I

5,121,546(107,275)

5,014,272

Trade receivables

IG
I

2,099,993
728,981
124,710(2,099,993)
93,684(124,710)-

822,666-

Inventories-

369,821

Others(5,203)

5,203-

13,456,671(133,097)

13,323,574

369,821I

Non-current assets
Property, plant andequipment

H2,452,303(114,377)

2,337,926

Intangible assets

B

318,886(165,256)

153,630-B-

605,940

605,940Investment securities

F, I

1,368,400

195,698

1,564,098-

I-

251,844251,844

Deferred tax assets
Lease and guarantee
deposits

D, I

82,191

434,473

516,665

511,222-511,22280,918-80,9184,813,922

1,208,322

6,022,244

OthersTotal non-current
assetsCurrent assets
Cash and cash
equivalents

I

OthersAllowance for doubtful
accounts
Total current
assetsReported
underJapaneseGAAP
JPY(inthousand)- 32 -

Total current
assetsNon-current
assetsProperty, plant andequipment
Other intangible
assetsGoodwill
Investment
securities at fair value
Investments
accounted for using
the equity method
Deferred tax assets
Lease and guarantee
deposits
Other non-current
assetsTotal non-current
assetsINTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
Total assets

18,270,593

1,075,224

19,345,818

Total assets

As of 31 December 2016
Presentation under
J-GAAP

Note

Current liabilities
Accounts payabletrade
Short-termborrowings

Reported
underJapaneseGAAP
JPY(inthousand)Effect oftransition to
IFRS
JPY(inthousand)IFRS
JPY(inthousand)Presentation
under IFRSCurrent liabilities
4,067,452-

4,067,452

2,096,006-

2,096,006

Lease obligations

25,108-25,108

Accounts payableother422,502-422,502

Income taxes payable

236,842-

236,842

234,612132,024

366,636

265,567

16,870282,437

7,348,091

148,894

7,496,986

Advances received

G

OthersTotal current
liabilities
Non-current
liabilities
Long-term borrowings

1,393,335-

1,393,335

Lease obligations

316,003-

316,003

Asset retirement
obligations

516,652-

516,652

Trade payable
Short-termborrowings
Obligation underfinance leases
Accruals and otherpayablesIncome taxes
payableDeferred revenue
Other current
liabilities
Total current
liabilities
Non-current
liabilities
Long-term
borrowings
Obligation underfinance lease
Asset retirement
obligations
Deferred tax
liabilities
Deferred revenue
Other non-current
liabilities
Total non-current
liabilities

Deferred tax liabilities

D

-

-

-

Deferred revenue

G-

117,543

117,543

OthersE38,485

142,566

181,053

Total non-current
liabilities

2,264,476

260,1092,524,586

Total liabilities

9,612,568

409,004

10,021,572

Total liabilities

EquityShareholders’equityCapital stock
Capital surplus
Retained earnings

2,370,701
2,709,172
2,947,012-

2,370,701
2,709,172

EquityShareholders’equityCapital stock
Capital surplus

320,675

3,267,688

Retained earnings

Treasury shares(259,690)-(259,690)

Total shareholders’equity7,767,196

320,675

8,087,872

Treasury shares
Total
shareholders’equityOther
comprehensive
incomeJ

Othercomprehensive
income- 33 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
Valuation differencesof available-for-saleinvestments
Foreign currencytranslation adjustment
Total othercomprehensive
incomeStock compensation
Non-controllinginterests
Total equity
Total liabilities andequityF(8,876)

193,527

184,651(29,609)-(29,609)(38,485)

193,527

155,042

13,345-

13,345915,969

152,017

1,067,987

8,658,025

666,220

9,324,246

18,270,593

1,075,224

19,345,818- 34 -

Valuationdifferences ofavailable-for-saleinvestments
Foreign currencytranslation
adjustment
Total othercomprehensive
incomeStock compensation
Non-controllinginterests
Total equity
Total liabilities
and equity

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
As of 31 December 2017
Presentation under
J-GAAP
Current assets
Cash and cash
equivalents
Notes and accounts
receivable-tradeMarketable securities

Note

Reported
underJapaneseGAAP
JPY(inthousand)Effect oftransition to
IFRS
JPY(inthousand)IFRS
JPY(inthousand)Presentation
under IFRS

I

6,346,851-

6,346,851

G, I

1,485,416(6,941)

1,478,475I

300,000(300,000)--

1,040,741

1,040,741

Inventories

G

268,953-

268,953

Deferred tax assets

I

19,595(19,595)--

657,887

657,887

675,694

17,813

693,507(6,941)

6,941-

9,089,568

1,396,846

10,486,414

-

A, C

OthersAllowance for doubtful
accounts
Total current
assetsI

Non-current assets
Property, plant andequipment
Intangible assets
GoodwillH

5,141,514(654,960)

4,486,554

204,364B

1,094,719

1'318'547(490,675)

1,522,911
604,044

1,178,113

221,761

1,399,874

Investment securities
-

F, I

-

34,774

34,774

Deferred tax assets

I-

201,054

201,054

D, I

876,475-

876,475

138,348

20,943

159,291

8,633,533

651,4449,284,977

17,723,101

2,048,290

19,771,391

Lease and guarantee
deposits
Non-current assets Others
Total non-current
assetsTotal assets

Current assets
Cash and cash
equivalents
Notes and accounts
receivable - tradeMarketablesecurities
Investment
securities at fair value(Current)
Inventories
Deferred tax assets current
Assets classified asheld for sale
Current assets Others
Allowance for
doubtful accounts
Total current
assetsNon-current
assetsProperty, plant andequipment
Intangible assets
Goodwill
Investment
securities at fair value
Investments
accounted for using
the equity method
Deferred tax assets non current
Lease and guarantee
deposits
Non-current assets Others
Total non-current
assetsTotal assets

As of 31 December 2017
Presentation under
J-GAAP
Current liabilities
Accounts payabletrade

Note

Reported
underJapaneseGAAP
JPY(inthousand)Effect oftransition to
IFRS
JPY(inthousand)IFRS
JPY(inthousand)Presentation
under IFRSCurrent liabilities
495,988-- 35 -

495,988

Trade payableINTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
Short-termborrowings

1,899,980-

1,899,980

Lease obligations

32,703-32,703

Accounts payableother

1,362,626-

1,362,626

590,727-

590,727-

436,644436,644476,264(303,430)

172,834

4,858,288

133,214

4,991,502

Income taxes payable
Advances received

G

OthersTotal current
liabilities
Non-current
liabilities

2,728,610-

2,728,610

Lease obligations

294,931-294,931

Asset retirement
obligations

794,247-

794,247

Long-term borrowings

Short-termborrowings
Obligation underfinance leases
Accruals and otherpayablesIncome taxes
payableDeferred revenue
Other current
liabilities
Total current
liabilities
Non-current
liabilities
Long-term
borrowings
Obligation underfinance lease
Asset retirement
obligations
Deferred tax
liabilities
Deferred revenue
Other non-current
liabilities
Total non-current
liabilities

Deferred tax liabilities

B, D

87,159393,457

480,616

Deferred revenue

G-

100,789

100,789

OthersE

107,485

64,822

172,307

Total non-current
liabilities

4,012,432

559,068

4,571,500

Total liabilities

8,870,720

692,282

9,563,002

Total liabilities
EquityShareholders’equityCapital stock
Capital surplus
Retained earnings

EquityShareholders’equityCapital stock

2,381,163

Capital surplus
Retained earnings

2,776,297
2,683,324

613,756

2,381,163
2,776,297
3,297,080

Treasury shares(259,690)-(259,690)

Total shareholders’equity7,581,095

613,756

8,194,851

32

222,332

222,364(45,833)(415)(46,249)(45,801)

221,917

176,115

13,345

14,414

27,7601,303,742

505,920

1,809,663

8,852,381

1,356,008

10,208,389

17,723,101

2,048,290

19,771,391

J

Other
comprehensive
incomeValuation differencesof available-for-saleinvestments
Foreign currencytranslation adjustment
Total othercomprehensive
incomeStock compensation
Non-controllinginterests
Total equity
Total liabilities andequityF- 36 -

Treasury shares
Total
shareholders’equityOther
comprehensive
incomeValuationdifferences ofavailable-for-saleinvestments
Foreign currencytranslation
adjustment
Total othercomprehensive
incomeStock compensation
Non-controllinginterests
Total equity
Total liabilities
and equity

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

Consolidated statement of income

Presentation
under
J-GAAPNote

Net revenue
Cost of revenue

G
G, H

Gross profit
Selling, general andadministrative
expenses-

Reported
underJapaneseGAAP
JPY(inthousand)
18,717,617(15,428,415)

For the six months ended 31 December 2016
Reclassificati
Effect of
on intoIFRStransition to
Presentation under
Discontinued
JPY(inIFRS
IFRS
Operations
thousand)JPY(in
JPY(inthousand)thousand)(6,866,803)(8,325,118)
3,525,696
Revenue
6,821,602
5,844,289(2,762,524)
Cost of sales

3,289,202(45,201)(2,480,829)

763,172

Gross profit(2,766,404)

81,093

1,793,029(892,282)

Selling, general andadministrative expenses-

28,836(9,275)(1,052)372

27,784(8,903)522,798

55,453(688,480)(110,229)I

33,377(33,377)

-

-

-

I

(93,597)

93,597

-

-

-

I
I

-

5,205
(36,891)

(82)
6,233

5,123
(30,658)I-(90,565)-(90,565)II

462,578-(6,578)-(682,329)-(226,329)-

462,578(6,578)(682,329)(226,329)(236,613)

7

225,885(10,721)

Profit after income
taxes

225,965(6,571)(456,444)(237,050)

Minority interest(136,913)(50,129)-(187,042)

Operating profit
Non-operating
incomeNon-operating
expensesFinance income
Finance expense
Loss under equity
methodOrdinary profit
Extraordinary income
Extraordinary loss
Profit before
income taxes
Income taxes

B, E
I
I

D

-

A

-

-

456,444456,444

Profit (loss)
attributable toowners of parent

I

89,052(56,700)-

32,352225,965(6,571)(456,444)(237,050)

Profit after income
taxes
Reclassification ofloss fromdiscontinued
operations
Profit after income
taxes
Other comprehensive
income (loss), net oftax:
Valuation difference
on available-for-saleinvestment
Foreign currencytranslation
adjustment--

456,444456,444

225,965(6,571)-

219,394

Other income
Other expense
Operating profit

Finance income
Finance expense
Share of loss of investments
accounted for using theequity method
Profit before income
taxes
Income taxes expense
Profit for the period
from continuing
operations
Minority interest
Gain from discontinued
operations, net of taxes
Profit (loss)
attributable to ownersof parent
Profit for the period
from continuing
operations
Reclassification of loss
from discontinued
operations
Profit for the period
Other comprehensive
income (loss), net of tax:

6,937

8,368

-

15,305

Change in fair value ofavailable-for-sale financial
assets76,017--76,017

Foreign currencytranslation adjustment- 37 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
Share of othercomprehensive
income of entities
accounted for using
equity method
Total othercomprehensive
income (loss), netof taxComprehensive
incomeComprehensive
income attributable
to :Owners of parent
Non-controllinginterests

(291)

-

-

(291)

Share of othercomprehensive income ofinvestments using theequity method

82,664

8,368-

91,031

Total othercomprehensive income(loss), net of tax

308,629

1,797-

310,425

Comprehensive income
Comprehensive income
attributable to :171,777(48,332)-

123,445

Owners of parent

136,852

50,128-

186,980

Non-controlling interests

For the six months ended 31 December 2017
Effect oftransition to
IFRS
JPY(inthousand)IFRS
JPY(inthousand)(45,663)(13,883)

4,788,183(3,380,005)

Revenue
Cost of sales

1,467,724(59,546)

1,408,178(1,410,180)

66,589(1,343,591)

II-

224,154(63,191)

224,154(63,191)

Gross profit
Selling, general andadministrative expenses
Other income
Other expense

I
I
C, I
I

57,54485,747(13,833)-

168,006(85,747)
13,833
154,728(11,035)

225,550
154,728(11,035)

I-

83,74983,749II

129,458
687,323(59,900)

323,534(687,323)
59,900452,992-

Operating profit
Finance income
Finance expense
Share of loss of investments
accounted for using the equity
method-756,881(303,889)

452,992

Profit before income taxes(564,641)

146,644(417,997)

Income taxes expense

192,240(157,245)

34,995

Profit for the period(25,238)(9,842)(35,080)

Minority interest

167,002(167,087)(85)

192,240(157,245)

34,995---Presentation under
J-GAAPNote

Net revenue
Cost of revenue

G
G, H

Gross profit
Selling, general andadministrative expenses
Operating profit
Non-operating income
Non-operating expenses
Finance income
Finance expense
Loss under equity
methodOrdinary profit
Extraordinary income
Extraordinary loss
Profit before income
taxes
Income taxes
Profit after income
taxes

B, E

D

Minority interest
Profit (loss)
attributable toowners of parent
Profit after income
taxes
Reclassification ofloss fromdiscontinued
operations

Reported
underJapaneseGAAP
JPY(inthousand)
4,833,846(3,366,122)I- 38 -

Presentation under IFRSProfit (loss) attributable toowners of parent

Profit for the period
Reclassification of loss
from discontinued
operations

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
Other comprehensive
income (loss), net of tax:
Valuation difference on
available-for-saleinvestment
Foreign currencytranslation adjustment
Share of othercomprehensive income ofentities accounted forusing equity method
Total othercomprehensive
income (loss), net oftax
Comprehensive
incomeComprehensive income
attributable to :Owners of parent
Non-controlling interests

Other comprehensive income(loss), net of tax:
Change in fair value ofavailable-for-sale financial
assetsForeign currency translation
adjustment

32

125,229

125,261

5,764

-

5,764

552

-

552

Share of other comprehensive
income of investments using theequity method

6,348

125,229

131,577

Total other comprehensive
income (loss), net of tax

198,588(32,016)

166,572

Comprehensive income

131,491
35,081

Comprehensive income
attributable to :Owners of parent
Non-controlling interests

173,350
25,238(41,858)
9,842

Acquisition of JapanCableCast Inc.
On 10 October 2017, BBT acquired 50.4% of the voting shares of JapanCableCast Inc. (“JCC”), an
unlisted company based in Tokyo, Japan, specializing in providing dedicated platform services (video,
voice, data delivery) and support of VNO setup/operation services to cable television operators. As aresult of the acquisition, BBT obtained control, and JCC became consolidated subsidiaries of BBT.
Before this transaction, JCC was treated as the investment accounted for using the equity method.
BBT acquired JCC for the purpose of tightening the relationship with cable television industry in which
the growth was expected as a critical social infrastructure in the era of the market change by
accelerating next generation broadcasting and video delivery services such as a diffusion of 4K/8K highdefinition television services. As the purchase price allocation is incomplete as of the issuance date of
the consolidated financial statements, BBT reports provisional amounts at the acquisition as of and forthe period ended 31 December, 2017.
Assets acquired and liabilities assumed
The identifiable assets and liabilities of JCC, which are measured at fair value as of the date of acquisition
except for limited exceptions in accordance with IFRS, were as follows:(In thousands of yen)
Fair value
recognizedon acquisition
AssetsCash and cash equivalents
Trade receivables
Inventories
OthersProperty and equipment
Customer relationship assets
Other intangible assets
Other non-current asset
Total assets
Liabilities
Trade payables
Other financial liabilities, current
Other financial liabilities, non-current
Deferred tax liabilities
Other liabilities

2,858,439
350,253
70,48566,001
947,108
1,332,000
140,267
217,593
5,982,146(173,460)(461,710)(1,141,620)(188,631)(704,319)- 39 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
Total liabilities
Total identifiable net assets at fair value
Non-controlling interests
Goodwill
Total consideration(2,669,740)
3,312,406(1,646,683)
604,0442,269,767

All consideration was paid in cash. The fair value of the trade receivables was JPY 350,253 thousand.
The gross contractual amounts of the trade receivables were not materially different from the fair value
determined as part of the purchase price allocation.
Goodwill of JPY 604,044 thousand represented the value of expected synergies arising from theacquisition and was allocated entirely to the BBT segment. None of the goodwill recognized was
expected to be deductible for income tax purposes.
From the date of acquisition, JCC had contributed JPY 826,184 thousand to the revenue of BBT and
had increased profit from continuing operations of BBT by JPY 75,304 thousand. If the businesscombination had taken place on 1 July 2017, revenue for BBT would have been JPY 5,840,322 thousand
and the profit (loss) from continuing operations for BBT would have been JPY (33,785) thousand forthe six months ended 31 December 2017.
The major reconciliation items on BBT’s financial statements in accordance with Japanese GAAP to its
IFRS statements as at and for the six months ended 31 December 2016 and 2017 is follows;
A) Presentation of discontinued operations
Under Japanese GAAP, there is no specific requirements for the presentation of discontinued
operations and reclassification of assets and liabilities as assets and liabilities held for sale.
Under IFRS, an operation which meets certain criteria is classified as a discontinued operation andits results should be presented separately from continuing operations. The reclassification as
discontinued operations for the period ended 31 December 2016 is relating to the partial sale of theCompany’s shareholding in its subsidiary BBF, Inc. on 30 June 2017.
In addition, the Company presents JPY 657,887 thousand as held for sale in current assets, which is
JPY 657,887 thousand of solar power facilities. BBT entered into agreement in January 2018 to sella part of solar power facilities to third party on May 2018, as a result, the asset is classified as held forsale.
The cash flow information from continuing operations in BBT according to Japanese GAAP is as follows.
¥ thousand
For the six months ended 31 December
2017
2016
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Exchange gain (loss)
Net increase in cash and cash equivalents(6,294)(712,474)
1,244,514
72,656598,402(531,301)
23,869(34,893)
5,325(537,000)B) Goodwill and intangibles
As allowed under Japanese GAAP, goodwill is amortized for a period of less than 20 years. Under
IFRS, goodwill is not amortized and the impairment test is performed at least annually, or more
frequently upon occurrence of a trigger event.
As a result, JPY 605,940 thousand and JPY 604,044 thousand of goodwill are recorded under IFRS
as at 31 December 2016 and 2017, respectively. Goodwill as at 31 December 2016 was mainly caused
from the past acquisition of Branch-Out Co., Ltd which was wholly-owned subsidiary of BBF, Inc. andgoodwill as at 31 December 2017 was caused from the acquisition of JCC on 10 October 2017. The- 40 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

carrying value of the goodwill as at 31 December 2017 under both Japanese GAAP and IFRS are as
follow.
31 December 2017
1,094,719
18,554

Goodwill under Japanese GAAP
Removal of amortization expense of
goodwill under Japanese GAAP
Recognition of provisional Customer
Relationship Asset (“CRA”) under IFRS
Deferred tax liability relation torecognition of CRA
Non-controlling interests relation torecognition of CRA
GAAP adjustment from Japanese GAAP
to IFRS as of 10 October related to JCC
Goodwill under IFRS

(1,332,000)
408,657
457,978(43,864)
604,044

The Company tests whether goodwill has suffered any impairment on an annual basis at every 31
December under IFRS. The recoverable amount of a cash generating unit (CGU) is determinedbased on the value-in-use calculations which require the use of the assumptions. The calculations
use cash flow projections based on the financial budget covering a three-year period. Cash flows
beyond the three-year period are extrapolated using the estimated growth rates stated below. These
growth rates are consistent with forecasts included in the industry reports specific to the industry inwhich each CGU operates.
When the recoverable amount of the CGU which includes goodwill is lower than the carrying amountof such CGU, an impairment loss is recognized.

Budgeted grossmargin (%)
Long-term growthrate (%)
Pre-tax discountrate (%)

Period ended
31 December 201746.29%
0%
6.72%

The Company’s management has determined the values assigned to each of the above key
assumptions as follows:
Assumption
Budgeted grossmargin (%)
Long-term growthrate (%)
Pre-tax discountrate (%)

Approach used to determining values
Based on past performance and management’s expectations for the
future.
This is the weighted average growth rate used to extrapolate cash
flows beyond the budgeted period. The rates are consistent with
forecasts included in industry report.
Reflect specific risks relating to the relevant CGU.

The recoverable amounts of the CGU to which goodwill has been allocated exceed its carrying
amounts significantly for the year ended December 31 2017.
C) Discontinuing the use of the equity method
Under Japanese GAAP, an entity shall discontinue the use of the equity method from the date whenits investment ceases to be an associate, and the entity measures the retained interest in the former
associate at its costs in the consolidated financial statements.
Under IFRS, when an entity shall discontinue the use of the equity method, any investment retained- 41 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

in the former associate is re-measured at its fair value with any gain or loss recognized in profit orloss. The same treatment is applied where investments are retained as associates.
The Company sold a partial share of its 13.5% investment in BBF, Inc. on 14 December 2017. As aresult, the Company’s ratio of voting rights was dropped to 10.0% and is accounted for as available
for sales for equity securities. The Company recorded a gain as a result of discontinuation of equity
method which result in financial income in the amount of JPY 133,337 thousand for the period ended
31 December 2017 Under IFRS. Following this transaction, JPY 740,741 thousand of BBF shares,
which is measured at fair value, is classified to Investment securities at fair value (Current).
D) Deferred tax assets and deferred tax liabilities
Japanese GAAP provides detailed guidance on assessing the recoverability of deferred tax assets. An
entity is classified into 5 categories by its profitability and the extent of the recoverability of deferred
tax assets and the length of estimated future periods to assess the recoverability of deferred tax assets
are determined by such categories, and the scheduling of estimated future taxable income and theamounts thereof is taken into account in recording deferred tax assets by assessing the recoverabilityof assets in terms of the sufficiency of taxable income based on profitability, existence of tax planningand sufficiency of taxable temporary differences.
Under IFRS, the recoverability of deferred tax assets is assessed as they are recognized in terms ofwhether it is probable that taxable profits will be available against which the assets can be utilized.
Deferred taxes recognized for other temporary differences arising from adjustments related to IFRS
are also adjusted.
As a result, JPY 309,763 thousand and JPY 181,459 thousand of deferred tax assets are 1) adjusted as
the differences of the treatment of recoverability of deferred taxes under Japanese GAAP and IFRS,
2) recorded from the adjustment accounting entries from Japanese GAAP to IFRS and 3) reclassified
from the tax assets at current assets to non-current assets, also off set the deferred tax assets with theliabilities, as at 31 December 2016 and 2017, respectively.
E) Unused paid absences
Under Japanese GAAP, no provision is made for employees’ unused rights to paid absences. Under
IFRS, they are recognized in other non-current liabilities. Additionally, obligations associated withspecial leave and remuneration that are granted based on specified years of service and which do not
require recognition under Japanese GAAP are recognized and included in other non-current
liabilities under IFRS.
For the 6 month ended December 31, 2016 and 2017, the expense relating to the unused paid absenceat JPY 20,583 thousand and JPY 32,566(profit) thousand are included as the adjustment fromJapanese GAAP to IFRS, respectively. In addition, others in the non-current liability are increasedby JPY 135,921 thousand and JPY 48,722 thousand, respectively, due to the adjustment fromJapanese GAAP to IFRS.
F) Fair value measurement of unquoted equity instrument
Under Japanese GAAP, if a financial asset does not have a quoted market value, then where an entity
is able to reasonably calculate a price which can be considered to be a quasi-quoted price, such price
may be used for that financial asset as a market value. The “reasonably calculated price” represents, aprice calculated using reasonable estimates of management.
Under IFRS, valuation techniques are required to be used to estimate the price at which an orderlytransaction to sell the asset or to transfer the liability would take place between market participantsat the measurement date under current market conditions.
As a result, JPY 195,698 thousand and JPY 221,761 thousand of investment securities are adjusted as
at 31 December 2016 and 2017, respectively. In addition, net of tax of these valuation differences of
unquoted equity investment increases the valuation differences of available for sales investment,
which is included in the equity.

The table below analyses the Company’s financial instruments carried at fair value by level of the inputs
to valuation techniques used to measure fair value. The fair value of unquoted equity instrument isestimated based on the market information (for example, Price Earnings Ratio (PER) and Price
Book-value Ratio (PBR)) for similar types of companies.
- 42 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

Level 1As at 31 December 2016
AssetsFinancial assets available for sale for
equity securities

Level 2

Level 3(In thousands of JPY)
Total

10,168-1,553,930

1,564,098-

740,741

1,699,874

2,440,615

As at 31 December 2017
AssetsFinancial assets available for sale for
equity securities

The table below presents the changes in level 3 instruments for the relevant periods:

Balance at 1 July 2016
Additions of financial assets
Disposal of financial assets
Fair value gain/(loss) on valuation – carried toother comprehensive income
Impairment losses
Balance at 31 December 2016

Available for salefinancial assets¥ thousand
1,451,384
203,560(118,000)
44,486

Balance at 1 July 2017
Additions of financial assets
Disposal of financial assets
Transfer to investment in subsidiary
Fair value gain/(loss) on valuation – carried toother comprehensive income
Balance at 31 December 2017(27,500)
1,553,930
1,375,227
584,508(100,000)(195,850)
35,9891,699,874

There were no transfers between levels 1, 2 and 3 during the relevant periods.
G) Revenue recognition
Revenue from sales of goods is mainly recognized upon shipment and revenue from initialinstallation services at the datacenter and JC-data business is recognized at the time of installation
under Japanese GAAP. However, under IFRS, revenue from sales of goods is recognized whensignificant risks and rewards of ownership have transferred to the customer. In addition, the initialinstallation services at the datacenter and JC-data business is recognized over the period of the
expected period of the customer relationship.
As a result of the adjustment at revenue recognition, the revenue for the 6 month ended 31 December
2016 and 2017 at JPY 40,259 thousand and JPY 62,394 thousand, respectively, increased, and also
the cost of sales for the 6 month ended 31 December, 2016 and 2017 increased by JPY 10,348
thousand and JPY 921 thousand, respectively. In addition, the trade receivables of JPY 115,069
thousand and nil at 31 December 2016 and 2017, respectively, decreased, and the relating inventoriesof JPY 93,684 thousand and nil at 31 December 2016 and 2017, respectively, increased due to thisadjustment.
The Company has provided the services to various customers. In the computer platform business of
BBT, Yahoo Japan Corporation is the largest customer for more than 10 percent of total segment
revenue under J-GAAP at JPY1,613,268 thousand and JPY1,630,572 thousand for the 6 month ended
2016 and 2017, respectively.

Revenue from the e-commerce business where BBF acts as an agent in arrangements is presented ona gross basis under Japanese GAAP, however under IFRS it is presented on a net basis, considering,inter alia, that BBF has no inventory risk and it does not have latitude in establishing prices. For the
6 months ended 31 December 2016, JPY 6,919,990 thousand of revenue and cost of revenue are offset- 43 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

on transition from Japanese GAAP to IFRS and no adjustment are made for the 6 months ended 2017
due to deconsolidation of BBF on 30 June 2017.
H) Impairment of plant, property and equipment
Under Japanese GAAP, an impairment loss is recognized when there is an indicator of impairmentand (1) The undiscounted value of total future cash flows is below the asset’s carrying amount; then(2) The recoverable amount of an asset is below its carrying amount. There are two steps forrecognition of an impairment loss.
Under IFRS, an impairment loss is recognized when there is an indication of impairment and when
the recoverable amount of an asset is below its carrying amount. Step 1 under Japanese GAAP is not
required under IFRS.

I) Reclassificationa) Presentation of cash and cash equivalents
Under Japanese GAAP, cash and deposits and short-term marketable securities are separately
presented on the balance sheet in accordance with the nature of the financial instrument. However,under IFRS, all of the financial instruments which meet the definition of cash and cash equivalents,
are presented as cash and cash equivalents.
As a result, JPY 2,099,993 thousand and nil included in the account of the marketable securities
under Japanese GAAP is transferred into the cash and cash equivalent as at 31 December 2016 , and
JPY 300,000 thousand as at 31 December 2017 is reclassified to Investment securities(cureent) at
fairvalue since it does not meet the definition of cash and cash equivalents.
b) Deferred tax assets and liabilities
Under Japanese GAAP, deferred tax assets and liabilities are presented as current or non-current on
the balance sheet determined based on the manner of generation. Under IFRS, all deferred taxes arepresented as non-current assets/liabilities on the balance sheet.
As a result, JPY 124,710 thousand and JPY 19,595 thousand included in the account of the deferred
tax asset presented as current assets under Japanese GAAP is transferred into one at non-current
assets, as at 31 December 2016 and 2017, respectively.
c) Allowance for doubtful accounts
Under Japanese GAAP, the allowance for doubtful accounts is separately presented on the balance
sheet. Under IFRS, allowances for doubtful accounts are offset against the applicable accounts (i.e.
accounts receivable).
As a result, JPY 5,203 thousand and JPY 6,941 thousand included in the account of the allowance for
doubtful accounts are transferred into one at the trade receivables as at 31 December 2016 and 2017,
respectively.
d) Investment securities
Under Japanese GAAP, investments accounted for using the equity method are presented as a part ofinvestment securities with the investment securities, however, under IFRS, it’s independently
presented as the investment accounted for using the equity method.
As a result, the investment accounted for using the equity method of JPY 251,844 thousand and JPY
34,774 thousand included in the account of the investment securities are independently presented as
at 31 December 2016 and 2017, respectively.
e) Non-operating income & expense and Extraordinary income & loss
Under Japanese GAAP, non-operating income and expense are presented below operating profit.
These accounts consist of financial income and expense, foreign exchange gain (loss), profit (loss)
under equity method investment and others. In addition, exceptional items are required to bepresented as “Extraordinary income and loss” on the face of the income statement. The definition of“special” is broader compared to IFRS and includes some extraordinary items.
Under IFRS, financial income, financial expense and profit (loss) under equity method investment isusually shown below operating profit. The term exceptional items is not used or defined, however,separate disclosure is required (either on the face of the comprehensive income statement or in thenotes) when it is necessary to allow an entity to explain its performance for the period as a result of- 44 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

the size, nature or incidence of certain items of income and expense. It is prohibited to present any
items as “Extraordinary” under IFRS.
J) Retained earnings
Reconciliation of retained earnings under Japanese GAAP and IFRS is below31 December
2016
JPY (inthousand)
2,947,012
440,683

Reported under Japanese GAAP
Reversal of amortization of goodwill
Amortization of customer relationshipasset
Changes in a parent’s ownership interest
which result in a loss of control
Deferred taxes-

31 December
2017
JPY (inthousand)
2,683,323
18,553(19,950)

238,057-

395,174

135,028(33,865)

Unused paid absences(135,921)

Impairment of Property, Plant &Equipment
Revenue recognition(114,377)(271,916)(138,745)

Impairment of investment securities(50,538)(11,827)

Non-controlling interests(152,017)-(9,841)-(28,469)
3,267,688

688,617(3,159)3,297,078

Adjustment in relation to the measurementof remaining BBF shares
Discontinuing the use of the equity method
OthersReported under IFRS

Individually immaterial associates

31 December
2017
2016
USD (InUSD (In
thousands)
thousands)
Aggregate carrying
amount of individually
immaterial associates
The investments in Mobile
Internet Capital Inc.
Profit from continuing
operations
Other comprehensive
incomeTotal comprehensive
income

3,721

5,160

1,116

1,548

676

992

0

304

676

1,296

- 45 -(11,056)

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 14 – FINANCIAL INSTRUMENTS BY CATEGORY

USD thousand
31 December
2016
2017
Financial assets
Available-for-sale for equity securities
Other financial assets at amortized cost,
mainly office security deposits

Financial assets at amortised cost
-Trade receivables-Deposits and other receivables (including
amounts due from related parties)-Bank deposits-Cash in hands

23

15

95

856

118

871

58

10

378

11

2,092
3
2,531
2,649

8,946
3
8,970
9,841

67
296
112
30
60
564

180
1,592
38
20
-;1,830

Financial liabilities
Financial liabilities at amortised cost
Trade payables
Other payables
Amounts due to related parties
Obligations under finance lease
Borrowings- 46 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 15 – OTHER FINANCIAL ASSETS
USD thousand
31 December
2016

2017

Current
Office security deposits

-;-

94

-;-

94

23

15

95

762

118

777

Non-current
Available-for-sale for equity securities
Other financial assets at amortized cost,
mainly office security deposits

NOTE 16 – OTHER CURRENT ASSETS
USD thousand
31 December
2016
Advances paid
Other receivables
Prepaid expense
Advance payment
Consumption tax receivable- 47 -

2017
0
4
75
-;16

0
10
613
2
177

95

802

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 17 – CASH AND CASH EQUIVALENTS
USD thousand
31 December
2016
2017
2
3
2,093
8,946
2,095
8,949

Cash in handBank deposits

NOTE 18 – EQUITY(a) Share Capital
The Company’s total number of shares authorized and issued for the years ended 31 December,2016 and 2017 are as follows:
31 December
2016
2017
Total number of authorized shares
Balance at end of year
Common shares, no par value
10,000,000,000
10,000,000,000
Total number of issued shares
Balance at beginning of year
25,624,000
27,136,000
Changes during the year(*)
1,512,000
7,651,000
Balance at end of year
27,136,000
34,787,000(*) Upon its incorporation in Israel, Hiroshi Fujiwara had 34,787 shares of the Company.
34,786 shares has been transferred to the shareholders of original IRI Japan through thetriangle merger discussed in Note 2.2 (c). After completing the triangle merger, the Company
allotted bonus shares to its shareholders, so that an additional 999 shares were allotted for eachshare of the Company.
All references in the financial statements to the number of shares outstanding of the Company
have been adjusted to reflect the effect of the triangle merger and allotted bonus shares.
(b) Capital Surplus and Retained Earnings
Capital surplus consists of capital reserves and other capital surplus that is derived from equity
transactions and not recorded in share capital. The primary component of capital surplus iscapital reserves. The Companies Act of Japan provides that no less than 50% of the paid-in
amount or proceeds of issuance of shares shall be incorporated in share capital, and that theremaining shall be incorporated in capital reserves. Capital reserves are restricted to distributeas dividend and may be, if necessary, incorporated share capital and other capital surplus upon
approval of the General Meeting of Shareholders.
Retained earnings consist of legal earnings reserves and accumulated earnings. The Companies
Act of Japan requires that an amount equal to at least 10% of dividends from surplus (Refer toNote 11), as defined under the Companies Act, shall be appropriated as capital reserve (part ofcapital surplus) or appropriated for legal earnings reserve (part of retained earnings) until theaggregate amount of capital reserve and legal earnings reserve is equal to 25% of share capital.
The legal earnings reserve are restricted to distribute as dividend and may be, if necessary, used
to eliminate or reduce a deficit or be transferred to other retained earnings upon approval at
the general meeting of shareholders. IRI Japan has not declared or paid cash dividends to date,
and therefore no legal earnings reserves have been recorded as of 31 December, 2016 and 2017.

- 48 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS(c) Other Components of Equity
The changes in other components of equity for the years ended December 2016 and 2017 are
as follows:
USD thousand

Balance as of 31 December, 2015

723

9

-;-

Exchangedifferencesontranslation
fromfunctional
currency topresentation
currency(99)

Change during the year

(413)

(70)

270

373

160

Balance as of 31 December, 2016

310

(61)

270

274

793

Change during the year

156

(32)

(270)

578

432

Balance as of 31 December, 2017

466

(93)

-;-

852

1,225

AFS
financialassetsTranslation
adjustments

Stockoptions

Total

633

(d) Other Comprehensive Income
Each component of other comprehensive income and related tax effect for the years ended 31
December 2016 and 2017 are as follows:
For the year ended 31 December 2016
USD (In thousands)
Before-tax
Net-of-tax
Items that may be reclassified to profit or loss
Change in fair value of available-forsale financial assets
Share of other comprehensive loss ofinvestments accounted for using theequity method
Items that will not be classified to profit or loss
Differences from translation offinancial statements from functional
currency to presentation currency
Total other comprehensive loss

8

8

(491)

(491)

373

373

(110)

(110)

For the year ended 31 December 2017
USD (In thousands)
Before-tax
Net-of-tax
Items that may be reclassified to profit or loss
Change in fair value of available-forsale financial assets(9)- 49 -(9)

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

Share of other comprehensive loss ofinvestments accounted for using theequity method
Items that will not be classified to profit or loss
Differences from translation offinancial statements from functional
currency to presentation currency
Total other comprehensive income- 50 -

133

133

578

578

702

702

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS(e) Issued Capital and Reserves
Issuance of common stock
At the annual extraordinary general meeting of shareholders held on 12 January 2017 and 17
May 2017, IRI Japan resolved to issue common stock to a director of the company and generalinvestors and to authorize the board of directors to determine the subscription requirements.
The details of the common stock are as follows:
Issuance of common stock on 12 January 2017
Candidates and numbers of
One director, one employee and three general investors.
candidates
Total number of common stock
650,000 sharesissuedAmount of proceeds for common
105 yen per share, equal to 0.92 U.S dollars per sharestock (*)
From 23 January 2017 to 31 January 2017
Payment period
The share capital and capital Under the Companies act of Japan, at least 50% of the proceeds ofreserve to be increase
certain issuances of share capital shall be credited to share capital.
The remaining proceeds shall be credited to share premium.
Purpose of issuing common stock For a part of the Company’s capital policy.
Issuance of common stock on 17 May 2017
Candidates and numbers ofMedia Do Co., Ltd.
candidates
Total number of common stock
7,000,000 sharesissuedAmount of proceeds for common
125 yen per share, equal to 1.11 U.S dollars per sharestock
31 May 2017
Payment date
Under the Companies act of Japan, at least 50% of the proceeds of
The share capital and capital
certain issuances of share capital shall be credited to share capital.
reserve to be increase
The remaining proceeds shall be credited to share premium.
Purpose of issuing common stock For capital and business alliance(*) The fair value of IRI Japan’s share on 12 January 2017 is estimated at 125 yen per share
which is based on the issue-price of 17 May 2017 of 125 yen per share, therefore, the sharebased compensation expenses of 9 thousand USD have been charged in the second quarter of2017.

- 51 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 19 – ACCRUALS AND OTHER PAYABLES
USD thousand
31 December
2016
2017
69
1,274
147
219
48
51
2,137
2,731
57
72
42
59
23
27
-;13
2,523
4,446

Accounts payable
Accrued expenses
Accrued consumption taxes
Advances received
Deposits received
Accrued vacation payable
Accrued bonuses
Other

NOTE 20 – SHARE-BASED PAYMENTS
IRI Japan adopted the stock option plan by the subscription rights to shares.
On 15 Jan 2016, the stock option for free of charge have been issued to directors and employees basedon the resolution of the general meeting of shareholders. On 24 Nov 2017, all of the subscription rights
to shares have lapsed. All of the stock acquisition rights outstanding have been transferred to capitalsurplus.
The terms of contract about the stock option are as follows. All the stock option will be settled with
common stocks.

Issue dateDirectors
15-Jan-16

Issue
amount200

Employees
15-Jan-16

40

Vesting conditions
Exercising stock option ispossible from the issuedate.

The validity ofthe stock option
contract

Exercising stock option ispossible from the issuedate.

10 years

10 years

The expenses recognized in connection with share-based payments during the years ended 31
December 2016 and 2017 are shown in the following table:
USD thousand
31 December
2016
Total expenses arising from equitysettled share-based paymenttransactions

2017
270

9

On 12 January 2017, the share-based compensation expenses of 9 thousand USD have been charged
in relation to issuance of common stock (see Note18).
The fair value of the stock option is measured by Black-Sholes Model. Performance terms other thanthe employment condition and market conditions related to these contracts are not taken into accountin calculating fair value.
USD thousand
31 December- 52 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

2016
The fair value on issue date
The Stock price on issue date
Exercise price
Expected volatility (Weighted
average)
Estimated period (Weighted
average)
Estimated dividend
Risk free rate (Based on government
bonds)

2017
270
210
210

-;-;-;-

72.37

-;-

5 years

-;-

-;-

-;-

0.017%-;-The expected volatility is based on the actual volatility of BroadBand Tower's stock price over theperiod corresponding to the expected remaining period.
Due to the complexities involved in the valuation and its long-term nature, the fair value of the stock
option are highly sensitive to change in these assumptions. If the volatility as a key assumption had
been increased or decreased by 5% with all other receivable held constant, the impact on the fair valueof stock option at the issuance date would have been as follows:
USD thousand
Increase by 5%
Decrease by 5%
Total expenses
arising from equity11(11)
settled share-based
payment transactions
NOTE 21 – Asset Retirement Obligations
Changes in Asset Retirement Obligation
USD thousand
Asset Retirement Obligations
At December 31, 2015-

Acquisition of NOM
Arising during the year
Utilized
Unwinding of discount and changes in the discountrate
Translation differences
At December 31, 201631

Arising during the year
Utilized
Unwinding of discount and changes in the discountrate
Translation differences
At December 31, 2017

(2)
29
196
(30)
0
1
196

The Group records provisions for Asset Retirement Obligations related to its properties as the Groupis required to restore these properties upon termination of its properties to the state specified in therental agreement.
- 53 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 22 – BORROWINGSUSD thousand
31 December
2016
2017
Non-current portion
Bank loans

24

-;-

Current portion
Bank loans

36

-;-

Total borrowings

60

-;-

As at 31 December 2016 and 2017, the Group’s borrowings were repayable as follows:
USD thousand
31 December
2016
2017
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
Over 5 years- 54 -

36
24
-;-;-

-;-;-;-;-

60-;-

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 23 – OBLIGATIONS UNDER FINANCE LEASESAs at 31 December, 2016 and 2017 the Group's future aggregate minimum lease expenses under
non-cancellable financial leases are as follows:
USD thousand
31 December
2017

2016
Gross finance lease liabilities minimum lease payments
No later than 1 year
Later than 1 year and no later than
5yearsLater than 5 years
Total
Future finance charges on finance leases
Present values of finance lease liabilities

11

12

19

8

-;30

-;20

1
29

0
20

The present values of finance lease liabilities are as follows:
USD thousand
31 December
2,016
2,017
No later than 1 year
11
Later than 1 year and no later than 5
19years
Later than 5 years
Total finance lease liabilities
30
Less: Amount included in current
liabilities
Non-current portion

Tax losses
Prepaid expense
Allowance for paid leave
Assets retirement obligation
Allowance for bonus
Bad debt allowance
Total deferred income tax assets
Deferred income tax liabilities
The balance comprises temporary
differences attributable to:- 55 -

-;20
(12)

19

8

USD thousand
31-Dec
2016
2017

1,759
64
11
9
8
-;1,851

8(11)

NOTE 24 – DEFERRED TAX BALANCES

Deferred tax assets
The balance comprises temporary
differences attributable to:

12

1,335
62
12
-;10
23
1,442

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

Undistributed earnings relating toinvestments in affiliate
Depreciation
Total deferred income tax liabilities(1,202)

(915)

(10)
(1,212)(3)(918)

Net deferred tax assets
639
524
Undistributed earnings relating to investments in affiliate recorded in deferred income tax liabilities
are derived from taxable temporary differences due to distributable retained amounts in BBT and
MIC.
Deferred income tax
assets
USD thousand
Movements
Balances at 31
December 2016
Charged to othercomprehensive incomeTaxlosses

Prepaid
ExpenseAllowancefor paid
leave

1,759

64

11

-;-

-;-

Asset
retirement
obligation

Allowance
for bonus

Bad debt
allowance

9

8

-;-

1,851

-;-

-;-

-;-

-;-

-;-

Total

Translation difference
Credited/(charged) to
profit or loss

71

3

1

-;-

-;-

-;-

75

(495)

(5)

0

(9)

2

23

(484)

Balances at 31
December 2017

1,335

62

12

-;-

10

23

1,442

Deferred income tax liabilities
Movements

USD (In thousands)
Taxable temporary
differences relating toinvestments in associates

Balances at 31 December 2016
Charged to other comprehensive
incomeTranslation difference
Credited/(charged) to profit or loss
Balances at 31 December 2017

Property, plant andequipment

Total(1,202)
-;-

(10)
-;-

(1,212)
-;-

(49)
336
(915)

(1)
8
(3)

(50)
344
(918)

The Group takes into account the probability that deductible temporary differences or tax
losses carried forward can be utilised against future taxable profits on recognition of deferredincome tax assets. In assessing recoverability of deferred income tax assets, the Group takes
into account scheduled reversal of deferred income tax liabilities, projected future taxable profit
and tax planning.
The Group offsets tax assets and liabilities if and only if it has a legally enforceable right to set
off current tax assets and liabilities and the deferred tax assets and deferred tax liabilities relate
to income taxes levied by the same tax authority.
As a result of the assessment of the recoverability of deferred income tax assets, the Group does
not recognise deferred income tax assets for a portion of deductible temporary differences or- 56 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

tax losses carried forward as of 31 December 2016 and 2017. The amounts of deductible
temporary differences and tax losses carried forward for which deferred income tax assets thatare not recognised as of 31 December 2016 and 2017 are as follows:

Deductible temporary differences
Losses carried forward
Total

USD thousand
31-Dec
2016
2017
7,527
8,727
28,255
19,16635,752
27,893The expiration of tax losses carried forward for which deferred income tax assets are notrecognised is as follows:
USD thousand
31-Dec2016
2017
Grand total
1st Year
2nd Year
3rd Year
4th Year
5th Year and thereafter
Total

11,117
5,418
4,770
6,920
28,225

3,797
8,027
1,196
379
5,767
19,166

The amount of tax losses carried forward are shown in the above table, which are related to theCompany and IRI Japan only.

- 57 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 25 – CONTINGENCIES AND COMMITMENTS
As at 31 December 2016 and 2017, the Group and the Company did not have any significant
contingent liabilities.
As at 31 December 2016 and 2017 the Group’s future aggregate minimum lease receipts under
non-cancellable operating leases are as follows:

No later than one year
Later than one year and no later
than five years
Over five years

USD thousand
31 December
2016
2017
1
1
4
-;-

4
-;-

5
5
Lease expenses of 5 and 1 have been charged in Selling, general and administrative for the years
ended 31 December 2016 and 2017.
IRI Japan entered into a donation agreement with the Israel Technological Institute (the“Technion”) and with the Technion Japan on March, 2017. IRI Japan undertook to donate thesum of USD 4 million (in 10 equal installments over 10 years) to the Technion, which would be
used to support the research and development operations of the Cyber Security Research Centerat the Technion from 1 July, 2017 to 30 June, 2027, which would be called the Hiroshi Fujiwara
Cyber Security Research Center.
The agreement is treated as an executory contract in accordance with IAS 39 and accordingly, an
expense is recognized over the 10-year agreement period, starting 1 July, 2017.
On 8 September, 2016, IRI Japan entered into a memorandum with Technion Japan Co., Ltd.
(“Technion Japan”), the branch of the Technion in Japan, under which IRI Japan would have afirst right upon any sales and/or production on the Japanese market of products developed bystartup companies from the Technion, or located by the Technion, which deal in research anddevelopment in the fields of medicine, life sciences, biology, food and hygiene.
NOTE 26 – RELATED PARTY TRANSACTIONS AND BALANCESFor the purposes of this Financial Information, parties are considered to be related to theGroup if the party has the ability, directly or indirectly, to exercise significant influence overthe Group in making financial and operating decisions. Related parties may be individuals(being members of key management personnel, significant shareholders and/or their closefamily members) or other entities and include entities which are under the significant influenceof related parties of the Group where those parties are individuals. Parties are also considered
to be related if they are subject to common control.
The directors are of the view that the following individuals and companies were related parties
that had transactions or balances with the Group for the reporting periods ended 31 December
2016 and 2017, are as follows. Please note that the scope of related parties has been changed
due to the change in reporting entity with regards to the triangle merger discussed in Note 2.2
etc.

Hiroshi Fujiwara
Mieko Nakagawa

Relationship with theCompany/Group
Director of the Company, the CEO
Director of the Company, the COO

Mirei Kuroda

CFO of the Group

Name of related parties- 58 -

Period subject torelated parties
From 1 January, 2016
From 1 January, 2016
From 20 November,
2017

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
Elchanan Harel

Director of the Company

Kazuhito Sasaki

Director of IRI Japan

Osamu Nakamura
Yasushi Fujita

Independent Director of IRI
Japan
Independent Director of IRI
Japan

Hidehiko Suzuki

Corporate Auditor of IRI JapanIRI Japan

Subsidiary

NANO Opt Media, Inc.
BroadBand Tower, Inc.
Unimo, Inc.

Subsidiary
Affiliate
Company owned by director
Subsidiary of BroadBand Tower,
Inc.

IoT Square, Inc.
Remote Sensing Technology
Center of Japan
Internet Association Japan

From 20 November,
2017
From 1 January, 2016
to 19 November, 2017
From 1 January, 2016
to 19 November, 2017
From 1 June, 2017 to 19
November, 2017
From 1 January, 2016
to 19 November, 2017
From 20 November,
2017
From 1 January, 2016
From 1 January, 2016
From 1 January, 2016
From 2 October, 2017
From 1 January, 2016

Company owned by director

From 1 January, 2016

Company owned by director

Other than those transactions and balances disclosed elsewhere in the Financial Information,
the following transactions were carried out with related parties during the Relevant Periods:(a) BALANCES classified as related parties
The following balances were financial assets and liabilities attributed to related parties at thedays:
USD thousand
31 December
2016

2017

Current assets
Booked in the company and IRI Japan:-Loan to Hiroshi Fujiwara-Interest Receivable to Hiroshi Fujiwara-Trade Receivable to IoT Square, Inc.
-Trade Receivable to Unimo, Inc.
-Allowance for Doubtful accounts to Unimo, Inc.

276
4
-;9
(9)

-;-;1
10
(10)

Booked in NANO OPT Media, Inc.:-Other receivable to Unimo, Inc.
-Allowance for Doubtful accounts to Unimo, Inc.
Total

20
(20)
280

20
(20)
1

Current liabilities
Booked in the company and IRI Japan:-Account payable to BroadBand Tower, Inc.
-Account payable for Hiroshi Fujiwara-Advance payment from BroadBand Tower, Inc.
Total

1
-;111
112

1
37
-;38

All of the above transactions with related parties were conducted in the ordinary course of the- 59 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

business of the Group based on the terms mutually agreed between the relevant parties.
(b) Transactions with related parties
USD thousand
31 December
2016
Booked in the company and IRI Japan:
Transaction with Management Executives-Loan to and correct from Hiroshi Fujiwara-Interest Income from Loan to Hiroshi Fujiwara-Account payable for Hiroshi Fujiwara
Transaction with Other Related Parties-Advance payment from BroadBand Tower, Inc.
-Outsourcing cost to BroadBand Tower, Inc.
-Sales to BroadBand Tower, Inc.
-Sales to IoT Square, Inc.
Booked in NANO OPT Media, Inc.
Transaction with Management Executives-Repayment of Loan from Hiroshi Fujiwara-Interest Expense Paid to Hiroshi Fujiwara-Interest Expense Accrual for Hiroshi Fujiwara
Transaction with Other Related Parties-Sales to BroadBand Tower, Inc.
-Sales to Remote Sensing Technology Center ofJapan-Sales to Internet Association Japan-Outsourcing cost to BroadBand Tower, Inc.
-Payment of membership fee to Internet
Association Japan-Payment on behalf of Unimo, Inc.
Total

2017

(276)
2
-;-

288
2
37

119
(12)
-;-;-

-;(21)
143
3

(613)
(132)
1

-;-;-;-

23

18

-;-

9

-;-;-

10
(9)
(0)

(5)
(893)

-;480

Loan as at 31 December 2016 was for ordinary purpose. These loans were unsecured, interestbearing at 0.6%-3% per annum and repayable on demand. As at 31 2016, there was no
impairment for the amount due from a director as the amount have not past due and they haveno history of default in payment. On November 9, 2017, the Group collected all outstandingloans from Hiroshi Fujiwara. Other transactions were conducted in the ordinary course of thebusiness of the Group based on the terms mutually agreed between the relevant parties.
(C)

Key management compensation

As discussed in the above, until the change in reporting entity occurred on 20 November 2017, key
management personal includes 5 directors and 1 corporate auditors of IRI Japan. After the date, key
management has been changed to 3 directors and 1 CFO of the Company. The compensation paidor payable to key management for employee services for the year ended 31 December 2016 and 2017
are respectively shown below:
USD thousand- 60 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

31 December
2016
Executive compensation
Share-based payment
Total

(d)

2017
209
169
378

265
5
270

Guarantees by directors and shareholders

As at 31 December 2016, the Group's banking facilities were secured by personal guarantee
provided by the director of the Company, Hiroshi Fujiwara. The guarantee was related to theborrowings from the banking facilities in Nano-opt Media and it is limited to the outstandingof the borrowings. Nano-opt Media completed early repayment for all outstanding of theirborrowings on 15 November 2017 and it resulted that the personal guarantee provided by
Hiroshi Fujiwara was cancelled as well.

- 61 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTSNOTE 27 – BUSINESS COMBINATION(a) BUSINESS COMBINATIONOn 11 November 2015, the company acquired 8.7 percent of the outstanding common sharesof Nano-opt Media, Inc., in consideration for USD thousand 124. On 1 January, 2016 thecompany acquired 91.3 percent of the outstanding common shares of Nano-opt Media, Inc. by
the share exchange by issuing 6 classified share A in exchange for 1 common share of Nano-opt
Media Inc.
The majority of Nano-opt Media Inc. shares before the transaction and the majority of thecompany’s shares were held by Mr. Hiroshi Fujiwara. Therefore, the business combination inwhich all the combining entities were ultimately controlled by Mr. Hiroshi Fujiwara.
The company has accounted for the acquisition of Nano-opt Media Inc. based on the book valueof its standalone financial statements as of January 1, 2016, and the subsidiary was consolidated
from this day onwards. The aggregate of the net liabilities assumed, in the amount of USD
thousand 413, and the fair value of the non-controlling shares mentioned above, totalling USD
thousand 537, were recorded against equity, as a reduction to retained earnings.
The identifiable assets and liabilities of Nano-opt Media Inc., at the date of acquisition date wereas follows:
Recognized amounts of identifiable assets acquired and liabilities (USD thousand)ASSET
CURRENT ASSETS
Cash and cash equivalents
Trade receivables
Other current assets
TOTAL CURRENTASSETSNON-CURRENT ASSETS
Property, plant andequipment
Intangible assets
Deferred tax assets
Financial assets at fairvalue
TOTAL NONCURRENT ASSETSTOTAL ASSETSLIABILITIES AND EQUITY

730
48
58
836
114
3
1,016
74
1,207
2,043

CURRENT LIABILITIES
Trade payable

40

Borrowings
Accruals and otherpayablesObligations under financeleasesTOTAL CURRENT
LIABILITIESNON-CURRENT LIABILITIES

570
1,663
10
2,283

- 62 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS

Obligations under financeleasesBorrowings
Asset Retirement
Obligations
TOTAL NONCURRENT
LIABILITIESTOTAL LIABILITIES
Total identifiable net assets
TOTAL LIABILITIES AND
EQUITY

29
116
28
173
2,456
(413)
2,043

NOTE 28 –SEGMENT INFORMATION(1)

General information
Operating segments were determined based on the reports reviewed by the Chief Executive
Officer (CEO) who is responsible for allocating resources and assessing performance of theoperating segments, who is the Chief Operating Decision Maker (“CODM”).
An operating segment of the Group is a component for which discrete financial information isavailable. No operating segments have been aggregated to form the reportable segments.
The CEO considers the business from two areas of activities, as follows;(a) Information technology, which includes two operating segments:(i) IRI- it mainly provides consultancy services, research services and the reviewing ofmarket trends in the field of internet technologies for companies, organizations andgovernment institutions in Japan.
(ii) BBT- it mainly provides data center services, cloud services, storage solutions, AI(artificial intelligence) solutions, dedicated platform services and support of VNO
setup/operation services to cable television operators. In addition, BBT deals inrenewable energy and is the owner of a number of solar power stations. Revenue froma single external customers were approximately 29,521 thousands USD for year ended
December 31, 2016 and 28,240 thousands USD for the year ended December 31, 2017,
respectively.
(b) Information service business(i) NOM – it mainly provides planning, organization, production and management ofconferences, exhibitions, seminars and other business events in the fields of internet
technology, hi-tech, cyber security, etc.
(c) Other
Other comprise of the investments in MIC. It is a general partner in an investment fundthat mainly invests in startups in the technology and services industry, which focus on next
generation ICT (information and communications technology) companies and in relatedareas.
Each segment is divided to services and equipment relating to revenues and cost of revenues.
The reportable operating segments include the following measures: Revenues, Operating profit(loss), and Interest expenses and incomes, Tax, Depreciation and Assets.

- 63 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2016
Technology Information
IRI

BBT

NOM

Other

Sub total

Adjustments

22

66,028

7,937-

73,987(66,028)

7,959(1,280)(2,634)

1,200-(2,714)

2,634

(79)

Share of profit (loss) ofinvestments accounted forusing the equity method

1,252(1,235)

-

203

220

1,235

1,455

Gain on change in share ofinvestments accounted forusing equity method

453

-

-

-

453

-

453

Profit (loss) before income tax

427(4,054)

1.193

203

(2,231)

4,054

1,823

Income tax expenses (benefit)

(2)

163

(441)

-

(279)

(163)

(443)

425

(3,891)752

203(2,510)

3,891

1,380

-

12,530--12,530(12,530)

0

425

8,640

752

203

10,020(8,640)1,380

Finance income

2

165

-

-

167

(165)

2

Finance expense

-

(349)

(8)

-

(357)

349

(8)

Depreciation and amortization-(3,042)(37)-(3,079)

3,042

(37)

Capital expenditure

-

6,055

6

-

6,061

(6,055)

6

Segment revenue fromexternal customers
Operating profit (loss)

Profit (loss) from continued
operations
Profit (loss) from discontinued
operation
Profit for the year

Total

Other segment items- 64 -

INTERNET RESEARCH INSTITUTE LTDCONSOLIDATED STATEMENTS OF NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2017
Technology Information
IRI

BBT

NOM

Other

Sub total

Adjustments

278

78,125

8,843-

87,246(78,125)

9,121(3,816)

2,746

743

-

(328)

(2,746)(3,074)

Share of profit (loss) ofinvestments accounted forusing the equity method

1,159(1,650)

-

298

(194)

1,650

1,457

Gain on change in share ofinvestments accounted forusing equity method

123

-

-

-

123

-

123

Segment revenue fromexternal customers
Operating profit (loss)

Total

Profit (loss) before income tax(2,533)

1,424

742

298

(69)

(1,424)(1,493)

Income tax expenses (benefit)-(9,684)(330)-(10,013)

9,684

(330)

(2,533)(8,260)412

298(10,082)

8,260(1,823)-

14,857--

14,857(14,857)-(2,533)

6,597

412

298

4,775

(6,597)(1,823)Finance income

2

1,615

0

-

1,617

(1,615)2

Finance expense-(1,286)(1)-(1,287)

1,286

(1)

Depreciation and amortization-(4,021)(35)-(4,056)

4,021

(35)

Capital expenditure-

11,865247-

12,112(11,865)

247

Adjustments

Total

Profit (loss) from continued
operations
Profit (loss) from discontinued
operation
Profit for the year
Other segment items

Year ended 31 December 2016
Technology Information
Segment assets

IRI

BBT

15,988165,232

NOM
2,922

Other
1,116

(165,352)

20,026

Year ended 31 December 2017
Technology Information
Segment assets

IRI

BBT

23,779175,661

NOM
4,134

NOTE 29 – SUBSEQUENT EVENTS
NA- 65 -

Other
1,548

Adjustments(175,661)

Total
29,461