Consolidated Financial Results for the Six Months Ended June 30, 2016
(Under Japanese GAAP)
July 29, 2016
Company name: SIOS Technology, Inc.
Shares listed on: Tokyo Stock Exchange
Code number: 3744
URL: http://www.sios.com
Representative: Nobuo Kita, Representative Director and President
Contact person: Tokutaro Kobayashi, Managing Executive Officer
Telephone: 03-6401-5111
Scheduled filing date of quarterly securities report: August 12, 2016
Scheduled commencement date of dividend payment: Supplementary materials prepared for quarterly financial results: Yes
Presentation of quarterly financial results: Yes (for institutional investors and analysts)

1. Consolidated Financial Results for the Six Months Ended June 30, 2016 (From January 1, 2016 throughJune 30, 2016)(Fractions less than one million yen are rounded off)

(1) Consolidated Results of Operations (cumulative)(Percentage of change from the same period of the previous year)

Operating income (loss) Ordinary income (loss)

Net sales
Million yen%

Million yen%

Million yen

Six months ended June 30,
6,238
42.0
330
292
―
2016
Six months ended June 30,
4,392
21.1
(55)
(38)
―
2015
Note: Comprehensive income (loss) Six months ended June 30, 2016 (2) million yen (-%)
Six months ended June 30, 2015 (48) million yen (-%)
886
Net income (loss) per
Net income per share
share(Diluted)(Basic)Six months ended June 30,
2016
Six months ended June 30,
2015

Yen

Yen

10.34

10.32

(6.90)―Net income (loss)
attributable to ownersof the parent
company%

Million yen

%

―

88

―

―

(59)

―

(2) Consolidated Financial Position
Total assets

Net assets

Million yen

Equity ratio

Million yen

%

1,392
1,414

24.5
24.4

As of June 30, 2016
5,597
As of December 31, 2015
5,642
Note:
Equity As of June 30, 2016
1,370 million yen
As of December 31, 2015 1,376 million yen

2. Cash Dividends
Annual dividend
End of Q1
Yen

End of Q2

End of Q3

Yen

FY 2015
0.00―
FY 2016
0.00―
FY 2016 (expected)
0.00
Note: Revision to the previously announced forecasts of dividend:Year-end

Annual

Yen

Yen

Yen

―

0.00

0.00

―

0.00

0.00

No

3. Consolidated Business Forecasts for FY 2016 (From January 1, 2016 through December 31, 2016)

Sales

Operating income(Percentage of change from previous fiscal year)
Net income
Net income per
Ordinary income
attributable toshareowners of the parent
company
Million yen% Million yen% Million yen

FY 2016
11,50022.8370―
Note: Revision to the previously announced business forecasts: Yes

310% Million yen

%

Yen

―

―

11.62

100

* Notes(1) Material changes in subsidiaries during the six months ended June 30, 2016:

No(Changes in specified subsidiaries resulting in the change of scope of consolidation)
Newly
included:–company (Company name)―–company (Company name)

Excluded:

Notes relating to material changes in subsidiaries during the period(2) Adoption of special accounting treatments for the preparation of: No
quarterly consolidated financial statements
Notes relating to the adoption of special accounting treatments for the preparation of quarterly consolidated financial
statements(3) Changes in accounting policies and accounting estimates and retrospective restatement(i) Changes in accounting policies based on revisions of: Yesaccounting standard(ii) Changes in accounting policies other than the above (i): None(iii) Changes in accounting estimates: None(iv) Retrospective restatement: NoneNotes relating to changes in accounting policies(4) Number of issued and outstanding shares (common stock)(i) Number of issued and outstanding sharesat the end of the period (including treasury stock)(ii) Number of treasury stocks at the end of the period(iii) Average number of shares during the period(cumulative from the beginning of the fiscal year)

FY 2016 Q2

8,874,400 shares

FY 2015

8,874,400 shares

FY 2016 Q2

260,841 shares

FY 2015

274,241 shares

Six months
ended June

Six months
8,605,613 shares30, 2016

ended June

8,597,058 shares30, 2015

Notes relating to the number of issued and outstanding shares*

Presentation of the status of progress in carrying out quarterly review proceduresThis summary of quarterly consolidated financial results is not subject to a quarterly review to be conducted in accordance with
the Financial Instruments and Exchange Law of Japan. At the time of the release of this summary of quarterly consolidated
financial results, the quarterly review procedures in accordance with the Financial Instruments and Exchange Law of Japan
have not been completed.

*

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
or assumptions that the Company considers reasonable, and business results may differ significantly from forecasts due tovarious factors. For assumptions used as a basis for making business forecasts and notes on the use of business forecasts, referto “(3) Forward-looking Statements Including Consolidated Business Forecasts” on Page 4 of the attached document.

○Table of Contents of the Attached Document

1. Qualitative Information on Consolidated Results……………………………………………….…………………………… 2(1)Results of Operations………………………………………………….……………………………………………….. 2(2)Financial Position………………………………………………….…………………………………………………… 3(3)Forward-looking Statements Including Consolidated Business Forecasts……………………………………………... 4
2. Matters Concerning Summary Information (Notes) ………………………………………………………………………. 4(1)Material Changes in Subsidiaries during the Six Months Ended June 30, 2016………………………………………... 4(2)Adoption of Special Accounting Treatments for the Preparation of Quarterly Consolidated Financial Statements….... 4(3)Changes in Accounting Policies, Changes or Restatement of Accounting Estimates…………………………………... 4
3. Consolidated Financial Statements……………………………………………………………………..................………… 6(1)Consolidated Balance Sheet………………………………………………………………………..................…………. 6(2)Consolidated Statements of Income and Comprehensive Income…................................................................................. 8(3)Consolidated Statements of Cash Flows………………………………………………………………................………10(4)Notes to Consolidated Financial Statements……………………………………………………................…………… 12
Notes to Going Concern Assumption...…………………………………………………………………………………... 12
Notes to Significant Changes in Shareholders’ Equity...………………………………………………………………..... 12
Segment Information...…………………………………………………………………………………………………… 13
Significant Subsequent Events...…………………………………………………………………………………………. 14－1－1. Qualitative Information on Consolidated Results(1) Results of Operations
Overview of the consolidated business performance for the six months ended June 30, 2016
In the six months ended June 30, 2016, the SIOS Group's net sales soared by 42.0% year on year to 6,238 million yen, bolstered by
the addition of sales by Keyport Solutions, Inc. (KPS) and Profit Cube Inc. (PCI), both of which the Company acquired in the previous
fiscal year.
In addition to an increased gross margin resulting from the addition of sales by KPS and PCI, the Group enjoyed a year-on-yearincrease in operating income from existing businesses, which comprise LifeKeeper, software applications for multifunction printers,
and support services for system implementation, as we delivered these products and services to a growing number of corporate
customers. As a result, the Group posted an operating income of 330 million yen for the first half of FY 2016, compared with anoperating loss of 55 million yen in the same period of the previous fiscal year, and an ordinary income of 292 million yen, comparedwith an operating loss of 38 million yen in the same period of the previous year. The Group also posted a net income of 88 million yen
attributable to owners of the parent company, including the recognition of expenses related to a retrospective adjustment of 139 million
yen as extraordinary loss, compared with a net loss of 59 million yen in the same period of the previous fiscal year. The Group’s key
management indicator EBITDA, which is the sum of operating income, depreciation, and amortization of goodwill, stood at 417
million yen, compared with a negative of 21 million yen in the same period of the previous fiscal year.
The SIOS Group continued to implement its growth initiatives, which are outlined in the Group's medium-term business strategy andfocused on expanding into new business segments including FinTech(*1), investing in research and development, and becoming morecompetitive in its core businesses.
In the six months ended June 30, 2016, as part of an initiative to expand into new business segments including FinTech, PCI, whichis the Company's subsidiary, acquired a patent for its new proprietary technology that enables greater flexibility and agility of a profit
management system for financial institutions. PCI also developed an automated loan-screening system for financial institutions andfiled a patent for the technology incorporated into the system.
As part of efforts to invest in research and development, the Group continued to invest in machine-learning technology(*2) and released
an upgraded version of SIOS iQ(*3), a software platform for IT operations analytics(*4), to provide greater versatility.
In an effort to become more competitive in the Group's core businesses, the Group significantly upgraded LifeKeeper(*5), which isone of its core products, and software applications for multifunction printers(*6), and expanded services for open-source software(*7)(OSS) for cloud(*8).

With the implementation of these initiatives, business results by segment turned out as follows:
Open System Infrastructure Business Segment
The Group increased sales of LifeKeeper in Japan, the Americas, Europe, and Asia/Oceania. Red Hat Enterprise Linux(*7) and otherproducts offered by Red Hat, Inc. also enjoyed robust sales, buoyed by stepped up sales and marketing efforts. Support services for
OSS and OSS-related products also achieved solid sales growth. As a result, net sales in this segment amounted to 3,203 million yen,
up 18.1% year on year, with a segment income of 81 million yen, compared with a loss of 88 million yen in the same period of theprevious fiscal year.

Application Business Segment
Net sales in this segment increased substantially due to the addition of sales by KPS and PCI, both of which the Company acquiredin the previous fiscal year. The increase in sales also resulted from the delivery of software applications for multifunction printers andsupport services for system implementation to a growing number of corporate customers. As a result, net sales in this segment soared
80.7% year on year to 3,034 million yen.
The income in this segment surged 658.7% year on year to 249 million yen, with an increased gross profit gained from a sales
increase more than offsetting an increase in personnel costs and rents resulting from the addition of the two consolidated subsidiaries
mentioned earlier.
The Company, to reflect the impact of inappropriate accounting practices found to be conducted by Kanshin!, Inc. (formerly SIIIS－2－

Inc.), which is one of its consolidated subsidiaries, revised its publicly released consolidated financial statements for past fiscal years,
as stated in the “Notice Regarding the Submission of FY 2016 Q1 Consolidated Financial Results, the Revision of Consolidated
Financial Results for Past Fiscal Years, the Filing of Amendments to Past Securities Reports, and Dividends of Retained Earnings andAcquisition of Treasury Stocks in Past Fiscal Years” dated June 16, 2016.
Furthermore, in the “Notice Regarding Measures to Prevent the Recurrence of Inappropriate Accounting Practices by the Company’s
Consolidated Subsidiaries” dated July 8, 2016, the Company announced preventive measures to be implemented across the Group. The
outline of the measures is as follows:(1) Perform thorough due diligence when considering acquiring other companies(2) Enhance the corporate governance structure in every company in the SIOS Group(3) Ensure that every company in the SIOS Group has a heightened awareness of regulatory compliance
We appreciate your understanding and support as we endeavor to take actions to prevent the recurrence of misconduct so as toensure regulatory compliance by the Company and its subsidiaries and restore your confidence in the SIOS Group.
(*1) FinTech
An emerging technology for facilitating innovations in the financial sector.
(*2) Machine-learning technology
A technology for giving the computer the same learning ability as a human being and for extracting useful informationfrom a variety of data.
(*3) SIOS iQ
A software platform that comprehensively monitors, analyzes, and optimizes operations of applications in virtual and cloudenvironments to improve performance and efficiency and ensure reliability in resolving complex issues.
(*4) IT operations analytics
Analyzing data generated in IT operations and converting them into practical and easy-to-digest information.
(*5) LifeKeeper
A failover software product that automatically switches a failed primary server to a backup server.
(*6) 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.
(*7) Open-source software
Software whose source code, which is the fundamental component of the program, is made available for free and can beused, modified, and redistributed.
(*8) Cloud
A new form of computing that provides computing resources as services over the Internet.
(*9) Red Hat Enterprise LinuxLinux OS developed by the open solution provider Red Hat, Inc.

(2) Financial Position＜Assets, liabilities and net assets＞(i) Assets
Current assets amounted to 3,927 million yen as of June 30, 2016, up 0.7% from the end of the previous fiscal year, mainly due
to an increase of 66 million yen in advance payments and a decrease of 46 million yen in notes and accounts receivable-trade.
Fixed assets amounted to 1,670 million yen, down 4.1% from the end of the previous fiscal year, mainly due to a decrease of 57
million yen in investment securities.
As a result, total assets amounted to 5,597 million yen, down 0.8% from the end of the previous fiscal year.
(ii) Liabilities
Current liabilities amounted to 3,063 million yen as of June 30, 2016, up 6.6% from the end of the previous fiscal year, mainly
due to an increase of 295 million yen in advance received and a decrease of 240 million yen in short-term loans payable.
Fixed liabilities amounted to 1,141 million yen, down 15.8% from the end of the previous fiscal year, mainly due to a decrease－3－

of 96 million yen in long-term loans payable and a decrease of 93 million yen in long-term deposits received.
As a result, total liabilities amounted to 4,204 million yen, down 0.6% from the end of the previous fiscal year.
(iii) Net assets
Total net assets amounted to 1,392 million yen, down 1.5% from the end of the previous fiscal year, mainly due to a net incomeof 88 million yen attributable to owners of the parent company posted for the six months ended June 30, 2016, and a decrease of
80 million yen in foreign currency translation adjustment.
＜Cash flow＞
As of June 30, 2016, the balance of cash and cash equivalents (hereinafter “cash”) amounted to 2,118 million yen, an increase of
72 million yen from the end of the previous fiscal year.
For the six months ended June 30, 2016, cash flows by segment were as follows:•

Cash flows from operating activities

Net cash provided by operating activities amounted to 636 million yen, compared with a gain of 110 million yen in the same
period of the previous fiscal year, mainly due to net income of 152 million yen before income taxes, depreciation and amortizationof 44 million yen, an increase of 356 million yen in advance received, an increase of 114 million yen in notes and accounts
payable-other, and a decrease of 51 million yen in notes and accounts payable-trade.
•Cash flows from investing activities

Net cash used in investing activities amounted to 55 million yen, compared with the use of 41 million yen in the same period of
the previous fiscal year, mainly due to proceeds of 160 million yen from withdrawal of time deposits, payment of 131 million yen
into time deposits, and payment of 49 million yen for guarantee deposits.
•

Cash flows from financing activities

Net cash used in financing activities amounted to 376 million yen, compared with the use of 42 million yen in the same periodof the previous fiscal year, mainly due to a decrease if 240 million yen in short-term loans payable and a decrease of 117 million
yen in long-term loans payable.

(3) Forward-looking Statements Including Consolidated Business Forecasts
Taking the current business environment and other factors into account, we revised the full-year consolidated business forecasts for
FY 2016, which were announced on February 2, 2016.
The details are described in the “Notice Regarding the Posting of Extraordinary Loss and Revision of Business Forecasts,”
separately released on July 29, 2016.
Business forecasts are calculated at 110 yen to the US dollar.

2. Matters Concerning Summary Information (Notes)(1) Material changes in subsidiaries during the six months ended June 30, 2016
Not applicable(2) Adoption of special accounting treatments for the preparation of quarterly consolidated financial statements
Not applicable(3) Changes in accounting policies, changes or restatement of accounting estimates
Six months ended June 30, 2016
(From January 1, 2016 through June 30, 2016)•

Application of Accounting Standard for Business Combinations
Effective at the beginning of the first quarter of the current fiscal year, the Company adopted the “Revised Accounting Standard for－4－

Business Combinations” (ASBJ Statement No. 21, issued on September 13, 2013), the “Revised Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No. 22, issued on September 13, 2013), and the “Revised Accounting Standard for Business
Divestitures” (ASBJ Statement No. 7, issued on September 13, 2013). Under these revised accounting standards, the Company
recognizes as capital surplus any difference arising from changes in the Company's ownership interests in its subsidiaries over which
the Company retains control, and recognizes the acquisition-related costs as expenses in the fiscal year in which they are incurred. In
addition, regarding a business combination conducted at or after the beginning of the first quarter of the current fiscal year, theCompany, when it finalizes its provisional accounting treatments, revises acquisition cost allocation in the quarterly consolidated
financial statements to which the date of the business combination belongs. Furthermore, the Company changed the way its quarterly
net income is presented, and records minority interests as non-controlling interests. To reflect these changes in presentation, theconsolidated financial statements for the six months ended June 30, 2015, and for the previous fiscal year were reclassified.
In the consolidated statements of cash flows for the six months ended June 30, 2016, cash flows related to the acquisition or sale ofshares of subsidiaries not resulting in changes in the scope of consolidation are recognized under “cash flows from financing activities,”and cash flows related to the cost associated with the acquisition of shares of subsidiaries resulting in changes in the scope of
consolidation or to the cost associated with the acquisition or sale of shares of subsidiaries not resulting in changes in the scope of
consolidation are recognized under “cash flows from operating activities.”
With respect to the application of the Accounting Standard for Business Combinations and other accounting standards, the Company
has been following the transitional arrangement set forth in Article 58-2 (4) of the Accounting Standard for Business Combinations,
Article 44-5 (4) of the Accounting Standard for Consolidated Financial Statements, and Article 57-4 (4) of the Accounting Standard forBusiness Divestitures since the beginning of the first quarter of the current fiscal year.
As a result, capital surplus decreased by 9 million yen at the end of the second quarter of the current fiscal year.
•

Change in Depreciation Method
In accordance with the revision of the Corporation Tax Act of Japan, the Company adopted the “Practical Solution on a Change inDepreciation Method due to Tax Reform 2016” (ASBJ Practical Issues Task Force (PITF) No. 32, issued on June 17, 2016) in the six
months ended June 30, 2016, and changed the depreciation method for facilities attached to buildings and for structures acquired on orafter April 1, 2016, from the declining-balance method to the straight-line method.
This change has no impact on the consolidated financial statements for the six months ended June 30, 2016.

－5－

3. Consolidated Financial Statements(1) Consolidated Balance Sheet(In thousands of yen)
As of December 31, 2015

As of June 30, 2016

AssetsCurrent assets
Cash and deposits

2,206,352

2,250,466

Notes and accounts receivable-trade

1,346,277

1,299,791

Work in progress

114,680

94,253

Advance payment

106,473

173,226

Other

127,536

109,713

Allowance for doubtful accounts

(200)

(200)

3,901,120

3,927,251

Buildings (net)92,84185,356

Other (net)71,96373,552

Total tangible fixed assets

164,805

158,908

838,787

796,101

Total current assets
Fixed assets
Tangible fixed assets

Intangible fixed assets
Goodwill
Other
Total intangible fixed assets

248,472

232,564

1,087,259

1,028,665

244,983

187,389

Investment and other assets
Investment securities
Net defined benefit assets

26,24924,795

Guarantee deposits

216,140

260,098

7,193

15,419Other
Allowance for doubtful accounts(5,071)(5,071)

Total investment and other assets

489,494

482,630

1,741,559

1,670,205

5,642,680

5,597,457

Total fixed assets
Total assets－6－

(In thousands of yen)
As of December 31, 2015

As of June 30, 2016

Liabilities
Current liabilities
Accounts payable-trade543,741

490,160

Short-term loans payable

240,000

Current portion of long-term loans payable

155,442－
134,474

1,244

1,265

Lease obligations
Income taxes payable

28,45086,409Advance received

1,339,886

1,635,188

Reserve for bonuses

26,67841,009Reserve for loss on orders received
Provision for surcharge resulting from repaymentof subsidies
Other

2,515

10,398－37,395534,409626,8932,872,367

3,063,196

Long-term loans payable

974,765

878,008

Deferred tax liabilities
Provision for surcharge resulting from repaymentof subsidies
Net defined benefit liabilities

68,814

66,59032,267－

158,985

169,905

Total current liabilities
Fixed liabilities

Lease obligations
Long-term deposits received
Other
Total fixed liabilities
Total liabilities

5,132

4,494

109,955

16,294

6,359

6,413

1,356,280

1,141,705

4,228,648

4,204,902

1,481,520

1,481,520

Net assets
Shareholders’ equity
Capital stock
Capital surplus

474,415

466,563

Retained earnings(321,538)(232,547)

Treasury stock(116,194)(110,516)

Total shareholders’ equity

1,518,201

1,605,018

Accumulated other comprehensive income
Valuation difference on available-for-sale securities

1,420(9,845)

Foreign currency translation adjustment(143,423)(224,412)

Total accumulated other comprehensive income(142,002)(234,258)

22,281

21,795Equity warrants

15,551－

Total net assets

1,414,031

1,392,554

Total liabilities and net assets

5,642,680

5,597,457

Non-controlling interests－7－(2) Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Income
for six months ended June 30(In thousands of yen)Six months ended June 30,
2015

Six months ended June 30,
2016

Sales
Cost of sales

4,392,454
2,812,076

6,238,401
3,969,671

Gross margin

1,580,378

2,268,729

Selling, general and administrative expenses

1,636,064

1,938,404

Operating income (loss)(55,685)

330,325

Non-operating income
Interest income

946

718

13,091
10,000

10,488Foreign exchange gain
Compensation received
Other

1,030

－
4,292

Total non-operating income

25,06815,499

76
1,967

3,686
4,254

5,127

5,127

－
509

38,081

7,682

53,207(38,299)292,617Extraordinary income
Gain on sale of investment securities

8,169

－

Gain on negative goodwill
Gain on reversal of equity warrants

11,386
1,231

－
1,166

Total extraordinary income

20,787

1,166

－
341
13,7391,350

Non-operating expenses
Interest expenses
Loss on investment of investment partnership
Provision for surcharge resulting from repayment ofsubsidies
Equity in losses of affiliates
Other
Total non-operating expenses
Ordinary income (loss)

Extraordinary loss
Loss on valuation of golf club membership
Loss on retirement of fixed assets
Loss on withdrawal from employees’ pension fund

2,057

379

－
－

－
799
139,212

Total extraordinary loss

14,081

141,741

Net income (loss) before income taxes(31,593)

152,043

Income taxes-current

27,15465,926

Income taxes-deferred－(3,792)

Total income taxes

27,154

62,134

Net income (loss)(58,747)

89,909600

918(59,347)

88,990Loss on valuation of investment securities
Expense related to retrospective adjustment

Net income attributable to non-controlling interests
Net income (loss) attributable to owners of the parent
company－8－

Consolidated Statements of Comprehensive Income
for six months ended June 30(In thousands of yen)Six months ended June 30,
2015
Net income (loss)
Other comprehensive income (loss)
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Total other comprehensive income (loss)
Comprehensive income (loss)

Six months ended June 30,
2016(58,747)

89,9091,938(11,266)

7,924(80,989)

9,863(92,255)(48,883)(2,346)(49,484)600(3,264)918

Comprehensive income (loss) attributable to:
Owners of the parent company
Non-controlling interests－9－(3) Consolidated Statements of Cash Flows(In thousands of yen)Six months ended June 30,
2015

Six months ended June 30,
2016

Cash flows from operating activities
Net income (loss) before income taxes(31,593)

152,043

Depreciation and amortization
Provision for surcharge resulting from repayment ofsubsidies
Amortization of premiums
Amortization of goodwill

28,57544,077

5,127

5,127

60
5,196

－
42,686

Gain on negative goodwill
Increase (decrease) in reserve for loss on orders
received
Interest and dividends income
Interest expenses(11,386)－(9,379)

7,883

(976)

(1,172)
3,686

Compensation received
Loss (gain) on sale of investment securities－(10,000)(8,169)Loss on valuation of golf club membership
Loss on retirement of fixed assets－
341

Loss (gain) on investment of investment partnership
Investment loss (gain) on the equity method

1,967

－
－
1,350
23
4,254
38,081－(1,231)(79)(1,166)816

Gain on reversal of equity warrants
Foreign exchange loss (gain)
Decrease (increase) in notes and accounts receivabletrade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade132,913

24,104

3,488(66,703)

20,426(51,656)

Increase (decrease) in net defined benefit liabilities
Increase (decrease) in advance received

11,442
68,607

10,919356,801

Decrease (increase) in advance payment
Increase (decrease) in notes and accounts payable-other
Decrease (increase) in notes and accounts receivableother
Increase (decrease) in consumption taxes payable

42,225
6,878(66,772)
114,432849(4,871)

36,250(74,184)

Other

6,017

(12,146)

Sub-total

210,424

614,743

Interest and dividends income

978

1,172

－
－
(101,020)(3,686)38,155(13,827)

110,382

636,557－(131,200)

Proceeds from withdrawal of time deposits
Purchase of tangible fixed assets－(6,465)160,000(16,228)

Purchase of intangible fixed assets
Payment of guarantee deposits(19,176)(7,649)(49,592)

Interest expenses paid
Income taxes refund
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payment into time deposits－
1,432(3,958)Proceeds from collection of guarantee deposits
Purchase of golf club membership
Purchase of shares of subsidiaries resulting in changes
in the scope of consolidation
Purchase of shares of subsidiaries and affiliates
Purchase of investment securities(107,414)－－(480,265)(2,205)

Proceeds from sales of investment securities
Other

573,940
208

－
163

－10－

166
(8,776)－

(In thousands of yen)Six months ended June 30,
2015

Six months ended June 30,
2016(41,697)(55,321)(42,730)(28)(240,000)

Net cash provided by (used in) investing activities
Cash flows from financing activities
Cash dividends paid
Repayment of short-term loans payable
Repayment of long-term loans payable
Purchase of shares of subsidiaries not resulting inchanges in the scope of consolidation
Proceeds from exercise of stock option
Proceeds from issuance of equity warrants－(1,554)(117,725)－(25,888)

1,258
921

7,181

Net cash provided by (used in) financing activities(42,105)(376,460)

Effect of exchange rate changes on cash and cash equivalents

13,665(131,861)

Increase (decrease) in cash and cash equivalents

40,244

72,913

Cash and cash equivalents at beginning of period

1,882,108

2,045,352

Cash and cash equivalents at end of period

1,922,353

2,118,266－11－－

(4) Notes to Consolidated Financial Statements
Notes to Going Concern Assumption
Not applicable
Notes to Significant Changes in Shareholders’ Equity
Not applicable－12－Segment Information【Segment Information】
I. Six months ended June 30, 2015
1. Information regarding the amount of sales and income/loss by reportable segment(In thousands of yen)
Reportable segment
Adjustments

Amount recordedin quarterly
consolidated
statements ofincome(Note)

Open systeminfrastructurebusiness

Application
business

2,712,807

1,679,647

4,392,454―

4,392,454

279

―

279

(279)

―

2,713,086

1,679,647

4,392,733(279)

4,392,454(88,532)

32,846(55,685)―(55,685)

Total

Net sales
Sales to external customers
Inter-segment sales and transfers
Total
Segment income (loss)

Note: The total amount of segment income (loss) is equal to operating income (loss) 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 (sales) byregion 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 the six months ended June 30, 2015
(In thousands of yen)Japan4,119,846

Americas166,615

Europe58,311Other regions
47,681

Total
4,392,454

Note: Sales are classified by country or region in which customers are located.
2. Information regarding loss on impairment of fixed assets or goodwill by reportable segment
Significant gain on negative goodwill
In the application business segment, negative goodwill resulted from the acquisition of shares of Keyport Solutions, Inc.
Gain on negative goodwill from this event amounted to 11,386,000 yen in the six months ended June 30, 2016.

－13－

II. Six months ended June 30, 2016
1. Information regarding the amount of sales and income/loss by reportable segment(In thousands of yen)
Reportable segment
Adjustments

Amount recordedin quarterly
consolidated
statements ofincome(Note)

Open systeminfrastructurebusiness

Application
business

3,203,462

3,034,939

6,238,401―

6,238,401

311

―

311

(311)

―

3,203,773

3,034,939

6,238,712(311)

6,238,401

81,104249,221330,325―

330,325

Total

Net sales
Sales to external customers
Inter-segment sales and transfers
Total
Segment income

Note: The total amount of segment income is equal to operating income recorded in the quarterly consolidated statements ofincome.
Supplementary Information
Information by region
In addition to the disclosure required by the “Accounting Standard for Quarterly Financial Statements,” information (sales) byregion 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 the six months ended June 30, 2016
(In thousands of yen)Japan
5,883,577

Americas

Europe229,644

68,115

Other regions
57,063

Total
6,238,401

Note: Sales are classified by country or region in which customers are located.
2. Matters related to changes in reportable segments
The Group’s Web application business segment is shown as the application business segment effective from the current fiscal year,
considering that the business has expanded into fields beyond web applications. Accordingly, the segment formerly presented as the“Web application business” was reclassified to the “application business” effective from the three months ended March 31, 2016.
Likewise, the segment information pertaining to the said segment for the six months ended June 30, 2015, is presented under the“application business.”
This change in the segment name has no impact on the segment information.
3. Information regarding loss on impairment of fixed assets or goodwill by reportable segment
Not applicable
Significant Subsequent Events
Not applicable－14－