Consolidated Financial Results for the Nine Months Ended September 30, 2017
(Under Japanese GAAP)
October 31, 2017
Company name: SIOS Corporation
Stock listed on: Tokyo Stock Exchange
Stock code: 3744
URL: https://www.sios.com
Representative: Nobuo Kita, Representative Director and President
Contact person: Tokutaro Kobayashi, Managing Executive OfficerTelephone: +81-3-6401-5111 (from outside Japan)
Scheduled filing date of quarterly securities report: November 13, 2017
Scheduled commencement date of dividend payment: Supplementary materials prepared for quarterly financial results: None
Presentation of quarterly financial results: No(Fractions less than 1 million yen are rounded off)

1. Consolidated Financial Results for 9 Months Ended September 30, 2017
(1) Consolidated Results of Operations (cumulative)(Percentages represent changes from the same period of the previous year)

Net sales

9 months ended
September 30, 2017
9 months ended
September 30, 2016

Operating income

Profit attributable toowners of parent

Ordinary income

Million yen%

Million yen%

Million yen%

Million yen%

9,283

1.1

184-56.9

194-46.9

79-50.7

9,181

33.5

426-

367-

160-Note: Comprehensive income : 9 months ended September 30, 2017
9 months ended September 30, 2016
Earnings per share (Basic)

9 months ended
September 30, 2017
9 months ended
September 30, 2016

57 million yen (-5.4%)
60 million yen (-%)

Earnings per share(Diluted)

Yen

Yen

9.18

9.14

18.65

18.62

(2) Consolidated Financial Position
Total assets

Equity ratio

Million yen

Million yen%

5,654
5,256

1,713
1,647

29.7
30.8

As of September 30, 2017
As of December 31, 2016

Note:Net assets

Equity: As of September 30, 2017: 1,681 million yen

As of December 31, 2016: 1,619 million yen

2. Dividends
Dividends per share
End of Q1
Fiscal year ended
December 31, 2016
Fiscal year ending
December 31, 2017
Fiscal year ending December
31, 2017 (Forecast)End of Q2

End of Q3

Year-end

Total

Yen

Yen

Yen

Yen

Yen

-0.00

-

0.00

0.00

-

0.00
-

5.00

5.00

Note: Revision to the previously announced forecasts of dividend: None-1-

3. Consolidated Business Forecasts for Fiscal Year Ending December 31, 2017
(Percentages represent changes from the previous fiscal year)
Net sales
Fiscal year ending
December 31, 2017

Operating income

Million yen%

Million yen%

12,600

4.3

500

5.4

Ordinary income
Million yen

Profit attributable toowners of parent

Earnings per share%

Million yen%

Yen

480 23.1

320

25.7

37.12

Note: Revision to the previously announced business forecasts: NoneNotes:(1) Material changes in subsidiaries during the 9 months ended
September 30, 2017

: None(2) Adoption of special accounting treatments for the preparation of: Nonequarterly consolidated financial statements(3) Changes in accounting policies, changes in accounting estimates, and restatements(i) Changes in accounting policies based on revisions of: Noneaccounting standards(ii)

Changes in accounting policies other than the above (i): None(iii) Changes in accounting estimates: None(iv) Restatements: None(4) Number of issued and outstanding shares (common stock)(i) Number of issued and outstanding shares at
As of September
8,874,400 shares30, 2017
the end of the period (including treasury stock)(ii) Number of treasury stocks at end of theAs of September
250,241 shares30, 2017
period(iii) Average number of shares during the period(cumulative from the beginning of the fiscal year)**

For 9 months
ended September 8,620,334 shares30, 2017

As of December
31, 2016

8,874,400 shares

As of December
31, 2016

260,041 shares

For 9 months
ended September 8,608,538 shares30, 2016

This summary of quarterly consolidated financial results is not subject to a quarterly review.
Proper use of business forecasts and other important matters
Forward-looking statements, such as business forecasts included in this document, are based on currently available information orassumptions that the Company considers reasonable, and business results may differ significantly from forecasts due to variousfactors. For assumptions used as a basis for making business forecasts and notes on the use of business forecasts, refer to "(3)Forward-looking Statements Including Consolidated Business Forecasts" on Page 5 of the attached document.

-2-

Table of Contents of the Attached Document

1. Qualitative Information on Consolidated Results ............................................................................................. 4(1) Results of Operations ................................................................................................................. 4(2) Financial Position ....................................................................................................................... 5(3) Forward-looking Statements Including Consolidated Business Forecasts ............................ 52. Matters Concerning Summary Information (Notes) ......................................................................................... 6(1) Material changes in subsidiaries during the three months ended September 30, 2017 ....... 6(2) Adoption of special accounting treatments for the preparation of quarterly consolidated
financial statements......................................................................................................................... 6(3) Changes in accounting policies, changes in accounting estimates, and restatements .......... 6(4) Additional information ............................................................................................................... 63. Consolidated Financial Statements ................................................................................................................... 7(1) Consolidated Balance Sheet ....................................................................................................... 7(2) Consolidated Statements of Income and Comprehensive Income .......................................... 9(3) Notes on Consolidated Financial Statements......................................................................... 11
Notes on Going Concern Assumption ........................................................................................ 11Notes on Material Changes in Shareholders’ Equity ............................................................... 11
Segment Information.................................................................................................................. 11Significant Subsequent Events.................................................................................................. 12-3-

1. Qualitative Information on Consolidated Results(1) Results of Operations
Overview of the consolidated business performance for the 9 months ended September 30, 2017
The SIOS Group has long been at the forefront of the fast-evolving IT industry and has been implementing its strategic initiatives,
which are outlined in the Group's medium-term business strategy, by focusing its efforts on continuing to invest in research anddevelopment, expanding into new business segments including Fintech1, and becoming more competitive in its core businesses.
In the nine months ended September 30, 2017, the Group redoubled its sales efforts for LifeKeepr 2 and software applications formultifunction printers (MFPs)3. We also expanded service and product offerings, including the rolling out of SIOS Coati, which
provides automatic disaster recovery of systems in public cloud environments.
As the Group celebrates its 20th anniversary this year, we have a new corporate mission: "Making the impossible possible for thepeople of the world." Under the holding-company structure, which was implemented October 1, 2017, we continue to enhance ourorganizational effectiveness and to invest in new technologies and our talent of people.
With the implementation of these initiatives and efforts, the Group’s consolidated business results by segment for the nine months
ended September 30, 2017, are as follows:
Open System Infrastructure Business Segment
The Group achieved a substantial jump in sales of LifeKeeper in the Americas and a steady increase in its sales in Japan and theAsia-Oceania region. Buoyed by stepped-up sales and marketing efforts, Red Hat Enterprise Linux4 and other software products
sourced from Red Hat, Inc. enjoyed robust sales, and OSS-related products also achieved steady sales growth.
As a result, net sales in this segment amounted to 5,151 million yen, up 8.6% from the same period a year earlier. The segment
income decreased by 8.1% year on year to 134 million yen. This was partly because the gross profit margin from product sales
declined and partly because we increased spending on advertising.
Application Business Segment
The Group achieved a steady increase in sales of software applications for MFPs as well as in revenues from providing support forsystem development and implementation. On the other hand, sales of software applications for regional banks fell sharply from theprevious year. This was partly because their sales for this fiscal year are projected to shift toward the second half of the year, whilemost of their sales had been posted in the first half of the year previously, and partly because some sales that were expected to bemade in the third quarter were deferred until the fourth quarter.
As a result, net sales in this segment amounted to 4,131 million yen, down 6.9% from the same period a year earlier, with a segment
income of 49 million yen, down 82.2% year on year.
The Group’s combined net sales for these two segments were up 1.1% year on year to 9,283 million yen in this period. A sharp
decline in operating income in the application business segment was primarily responsible for driving the Group’s consolidated
operating income down by 56.9% year on year to 184 million yen. With smaller non-operating expenses recorded in this period
compared with the same period the previous year, during which an equity in losses of affiliates had been recorded, the Group posted
an ordinary income of 194 million yen, down 46.9% year on year. The Group’s profit attributable to owners of the parent company
amounted to 79 million yen, down 50.7% year on year. This was primarily because, although expenses related to a retrospective
adjustment of 139 million yen posted as extraordinary losses in the previous year were not a factor in this period, we paid 64 million
yen more in current income taxes than a year earlier. The Group’s key management metrics EBITDA, which is the sum of operating
income, depreciation and amortization, and amortization of goodwill, stood at 315 million yen, down 43.6% year on year.
1. Fintech
An emerging technology for facilitating innovations in the financial sector.
2. LifeKeeper
A failover software product that automatically switches a failed primary server to a backup server.
3. Software applications for multifunction printers
A multifunction printer (MFP) is a piece of office equipment that incorporates print, scan, copy, and fax capabilities into one unit.
SIOS develops, markets, and updates Quick Scan and Speedoc, document management software applications running on an MFP.
-4-4. Red Hat Enterprise LinuxLinux OS developed by Red Hat, Inc., a provider of open-source solutions.

(2) Financial Position
Total assets were 5,654 million yen as of September 30, 2017, up 7.6% from the end of the previous fiscal year; this was primarily
due to an increase of 333 million yen in cash and cash deposits. Total liabilities were up 9.2% to 3,941 million yen, primarily due toan increase of 186 million yen in advances received. Total net assets were up 4.0% to 1,713 million yen, reflecting a profit of 79
million yen attributable to owners of parent posted in this period.

(3) Forward-looking Statements Including Consolidated Business Forecasts
The Group’s consolidated business forecasts for the fiscal year ending December 31, 2017, which were announced on February 2,
2017, stand for the remainder of the year, considering that shortfalls from the forecasts in operating income and other profit items forthe nine months ended September 30, 2017 were attributed primarily to the deferment of some sales in the application businesssegment from the third quarter to the fourth quarter, as mentioned earlier in this report.
However, depending on how orders turn out in the fourth quarter, there is a risk that some sales may shift from the fourth quarterof this fiscal year to the next fiscal year. If this should eventuate, the Group’s consolidated business results for the fiscal year ending
December 31, 2017 might fall short of the forecasts announced on February 2, 2017.

-5-2. Matters Concerning Summary Information (Notes)(1) Material changes in subsidiaries during the three months ended September 30, 2017
Not applicable(2) Adoption of special accounting treatments for the preparation of quarterly consolidated financial statements
Not applicable(3) Changes in accounting policies, changes in accounting estimates, and restatements
Not applicable(4) Additional information
Consolidated business performance for the nine months ended September 30, 2017
(From January 1, 2017 through September 30, 2017)
Effective as of the beginning of the first quarter of the current fiscal year, the Company adopted the “Revised
Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Implementation Guidance No. 26, issued on
March 28, 2016).

-6-3. Consolidated Financial Statements(1) Consolidated Balance Sheet(In thousands of yen)
December 31, 2016

September 30, 2017

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Work in process
Advance payments- tradeOther

1,923,658

2,257,543

1,346,923
56,0081,462,030
58,473

128,189
160,818

141,823
210,796

(200)

(200)

3,615,398

4,130,467

Buildings, net
Other, net

109,119
84,402

98,938

Total property, plant and equipment

193,521

178,725

753,414

Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment

Intangible assets
Goodwill

79,787

Other

217,932

689,385
195,879

Total intangible assets

971,347

885,265

Investment securities
Net defined benefit asset

171,942
27,674

166,784
33,947

Guarantee deposits
Other

229,51356,738

222,795
46,409Allowance for doubtful accounts(9,966)(9,966)

Investments and other assets

Total investments and other assets
Total non-current assets
Total assets-7-475,901

459,970

1,640,770

1,523,961

5,256,168

5,654,428

(In thousands of yen)
December 31, 2016

September 30, 2017

Liabilities
Current liabilities
Accounts payable-trade443,227

574,956

Short-term loans payable
Current portion of long-term loans payable

30,000132,283

50,000133,116

Lease obligations
Income taxes payable

2,110
65,0184,002
106,469

Advances received
Provision for bonuses

1,409,377
24,556

1,595,604
82,949435,080

402,194

Total current liabilities

2,541,654

2,949,292

Non-current liabilities
Long-term loans payable

812,988712,318
202,967

Other

Net defined benefit liability
Other

178,589
75,342

Total non-current liabilities

1,066,920

991,9543,608,575

3,941,247

Shareholders’ equity
Capital stock

1,481,520

Capital surplus
Retained earnings

466,657(67,044)

1,481,520
467,807

Treasury shares(110,178)

12,060(106,025)

Total shareholders’ equity

1,770,954

1,855,362

Valuation difference on available-for-sale securities
Foreign currency translation adjustment

14,008(165,485)(182,562)

Total accumulated other comprehensive income(151,477)(173,369)

Total liabilities

76,669Net assets

Accumulated other comprehensive income

Subscription rights to shares
Total net assets
Total liabilities and net assets

-8-

9,193

28,116

31,188

1,647,593

1,713,1815,256,168

5,654,428

(2) Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Income
For 9 months ended September 30(In thousands of yen)
9 months ended
September 30, 2016
9,181,781

9 months ended
September 30, 2017
9,283,171

Cost of sales

5,862,409

6,087,092

Gross profit

3,319,371

3,196,078

Selling, general and administrative expenses

2,892,686

3,012,053

426,684

184,025

Net sales

Operating income
Non-operating income
Interest income
Foreign exchange gains

642

5,011

10,221Gain on valuation of derivatives
Other9,711

11,546

Total non-operating income

20,57522,016

4,888

3,537

4,254
63,2542,407-

Non-operating expenses
Interest expenses
Loss on investments in partnership
Share of loss of entities accounted for using equity
methodProvision for interest on refund for subsidy repayment
Foreign exchange losses

5,458

5,668

-

Other

2,187

5,130
50

Total non-operating expenses

80,252

11,125367,006

194,916

Ordinary income
Extraordinary income
Gain on sales of investment securities

67-

Gain on reversal of subscription rights to shares

1,289

1,471

Total extraordinary income

1,356

1,471

Loss on valuation of golf club membership
Expense related to retrospective adjustment

1,550
139,212-

Loss on retirement of non-current assets
Other

6,598
4,107

-

151,467
216,895

196,388

Income taxes-current

60,172

124,279

Income taxes-deferred(4,724)(6,995)

Total income taxes

55,448117,283

Profit161,447

79,104Extraordinary losses

Total extraordinary losses
Profit before income taxes

Profit attributable to non-controlling interests
Profit attributable to owners of parent-9-918-

160,529

79,104

Consolidated Statements of Comprehensive Income
For 9 months ended September 30(In thousands of yen)
9 months ended
September 30, 2016
Profit9 months ended
September 30, 2017

161,447

Other comprehensive income
Valuation difference on available-for-sale securities

79,104(8,238)(4,815)

Foreign currency translation adjustment(92,704)(17,076)

Total other comprehensive income(100,942)(21,891)

60,50557,212Comprehensive income
Comprehensive income attributable to:Comprehensive income attributable to owners ofparent
Comprehensive income attributable to non-controllinginterests

59,586918-10-

57,212-(3) Notes on Consolidated Financial Statements
Notes on Going Concern Assumption
Not applicable
Notes on Material Changes in Shareholders’ Equity
Not applicable
Segment Information【Segment Information】
I 9 months ended September 30, 2016
1. Information regarding the amount of net sales and income by reportable segment(In thousands of yen)Amount recordedin quarterly
consolidated
statements ofincome*

Reportable segment
Open systeminfrastructurebusiness

Adjustments

Application
business

Total

Net sales
Sales to external customers
Intersegment
transfers

sales

4,746,027

4,435,7539,181,781-

9,181,781

327-

327

(327)

-

4,746,354

4,435,753

9,182,108(327)

9,181,781

145,971

280,713426,684-

426,684

andTotal
Segment income

Note: The total amount of segment income is equal to operating income recorded in the quarterly consolidated statements of income.
Supplementary Information
Information by region
In addition to the disclosure required by the “Accounting Standard for Quarterly Financial Statements,” information (net sales)by region is disclosed in accordance with the “Accounting Standard for the Disclosure of Segment Information” for the purpose ofproviding users of financial statements with valuable information.
Net sales
For 9 months ended September 30, 2016
(In thousands of yen)Japan
8,629,504

Americas376,733

EuropeOther regions

95,12580,417

Total
9,181,781

Note: Sales are classified by country or region in which customers are located.
2. Information regarding loss on impairment of non-current assets or goodwill by reportable segment
Not applicable-11-II

9 months ended September 30, 2017

1. Information regarding the amount of net sales and income by reportable segment(In thousands of yen)Amount recordedin quarterly
consolidated
statements ofincome*Reportable segment
Open systeminfrastructurebusiness

Adjustments

Application
business

Total

Net sales
Sales to external customers
Intersegment
transfers

sales

5,151,817

4,131,354

9,283,171-

9,283,171

327

-

327

(327)

-

5,152,144

4,131,354

9,283,498(327)

9,283,171

134,129

49,896

184,025-

184,025

and

Total
Segment income

Note: The total amount of segment income is equal to operating income recorded in the quarterly consolidated statements of income.
Supplementary Information
Information by region
In addition to the disclosure required by the “Accounting Standard for Quarterly Financial Statements,” information (net sales)by region is disclosed in accordance with the “Accounting Standard for the Disclosure of Segment Information” for the purpose ofproviding users of financial statements with valuable information.
Net sales
For 9 months ended September 30, 2017
(In thousands of yen)Japan
8,745,890

Americas357,770

EuropeOther regions

87,56891,942

Total
9,283,171

Note: Sales are classified by country or region in which customers are located.
2. Information regarding loss on impairment of non-current assets or goodwill by reportable segment
Not applicable
Significant Subsequent Events
Not applicable-12-