Consolidated Financial Result(For the fiscal year ended December 31, 2021)
February 3, 2022
Company name:
Address:
Stock exchange listings:
Code number :URL:
Representative:
Contact:

SIOS Corporation
2-12-3 Minami Azabu, Minato-ku, Tokyo 106-0047 JapanTokyo Stock Exchange (TSE)3744
https://www.sios.com/
Nobuo Kita, Representative Director
Tokutaro Kobayashi, S.V.P. of Finance & Accounting
Phone: +81-3-6401-5111
Scheduled date of annual shareholders’ meeting:March 25, 2022
Scheduled date of financial report FSA filing:
March 28, 2022
Scheduled date of dividend payment:
March 28, 2022
(Note) All figures in the financial statements are rounded down to the nearest millionth.
‘-‘ indicates a loss or negative figure.

1. Consolidated results (January 1, 2021 through December 31, 2021)(1) Consolidated business results
Net sales

Operating income

Million yen%

Million yen

Net income per share- Basic

Net income per share- Diluted

Yen

Million yen

Million yen

%

51.7
400
56.1
329.9
256
166.4
FY2020: 279 million yen/ -%

367
310

18.6
858.4

Return on equity

Operating income
ratio

FY2020: 6 million yen

Net assets

Million yen

Net income
%

Yen

42.42
35.78
FY2021: 38 million yen(2) Consolidated financial position
Total assets
FY2021
FY2020(Reference) Equity:

Ordinary income%

FY2021
15,725
6.0
358
FY202014,841
8.4
236(Note)Comprehensive income :FY2021: 424 million yen/ 51.9%

FY2021
FY2020(Note) Equity in earnings:(% of change from previous year)

Ratio of ordinary
income to total assets

%

%

%

22.0
22.4

5.9
4.2

2.3
1.6

Equity ratio

Net assets per share

Million yen

%

6,649
1,897
6,851
1,548
As of Dec. 31, 2021: 1,838 million yen

Yen

27.7
21.9
As of Dec. 31, 2020: 1,500 million yen

212.12
173.15(3) Consolidated cash flows
Cash flow fromoperating activities

Cash flow from investing
activities

Cash flow from financing
activities

Cash and cash equivalents- ending

Million yen

Million yen

Million yen

Million yen

587
649

58
151

-267
-182

3,148
2,728

FY2021
FY20202. Cash dividends
Record Date

End of
Q1
Yen

End ofQ2

Dividend per share
End ofYear-end
Q3

Yen

Yen

Yen

AnnualTotal ofdividend(annual)Yen

Payout ratio(consolidated)

Net assets
dividend ratio(consolidated)

%

%

27.9
35.4
144.5

5.8
7.1

Millionyen

FY2020
0.00
10.00
10.00
86
‐
‐
FY2021
0.00
15.00
15.00
130
‐
‐
FY2022 (forecast)
0.00
10.00
10.00
‐
‐
(Note)Breakdown of the year-end dividend for the fiscal year ended December 31, 2021
Ordinary dividend: ¥10.00; Commemorative dividend to celebrate 25th founding anniversary: ¥5.00

3. Forecast of consolidated results for FY2022 (January 1, 2022 through December 31, 2022)
Net sales
FY2022

Operating income(% of change from previous year)
Profit attributable to
Net income
owners of parent
per share

Ordinary income

Million yen%

Million yen%

Million yen%

Million yen%

Yen

16,000

1.7

100

-72.1

120

-70.0

60

-83.7

6.92

- 1 -

4. Others(1) Reclassification of significant subsidiaries during the period (Reclassification due to change in scope of consolidation): None
(2) Change in accounting policies, accounting estimates and restatement(i) Change in accounting policies associated with revision of accounting standards: None(ii) Change arising from other factors: None(iii) Change in accounting estimates: YES(iv) Restatement: None
(3) Number of outstanding shares (common shares)(i)

Number of outstanding shares(including treasury stock)(ii) Number of treasury stock(iii) Average number of outstanding shares

FY20218,874,400 shares

FY20208,874,400 shares

FY2021205,838 shares

FY2020205,838 shares

FY2021

8,668,562 shares

FY20198,668,596 shares(Reference)
1. Non-consolidated results (January 1, 2021 through December 31, 2021)(1) Non-consolidated financial results
Net sales
FY2021
FY2020

FY2021
FY2020Operating income

Ordinary income

Net income

Million yen%

Million yen%

Million yen%

Million yen

%

1,306
1,002

30.3
-13.6

346
121

185.2
-64.6

339
118

187.3
-67.5

310
78

296.8
-75.4

Net income per share- Basic

Net income per share- Diluted

Yen

Yen

35.78
9.02

-

(2) Non-consolidated financial position
Total assets

Net assets

Million yen

FY2021
FY2020(Note) Equity(% of change from previous year)

2,903
2,774
As of Dec. 31, 2021: 1,867 million yen

Equity ratio

Million yen

Net assets per share
%

1,867
64.3
1,643
59.2
As of Dec. 31, 2020: 1,643 million yen

Yen

215.39189.60Explanation about proper use of forecasts of consolidated financial results and other special notes
1.

Information Regarding the Audit Review Procedure: This report is outside the scope of the procedures for audit of financial
statements as required under the financial instruments and Exchange Act of Japan. The aforementioned procedures have not been
completed as of the time of disclosure of this document.

2.

Forecasts announced by the company referred to above were prepared based on management’s assumption with information
available at this time and therefore involve known and unknown risks and uncertainties. Please note such risks and uncertainties
may cause the actual results to be materially different from the forecasts.

3.

This information to above is an UNOFFICIAL English-language translation of the original Japanese-language version. The format
and contents of this document are defined by the requirements of the Tokyo Stock Exchange’s 2nd Section.
To the extent that there are discrepancies between this translation and the original version, the original version shall be definitive.

- 2 -Table of Contents of the Attached Document
Table of Contents of the Attached Document ..............................................................................................................................3
1. Business Results ......................................................................................................................................................................4(1) Summary of Business Results ............................................................................................................................................4(2) Summary of Financial Position ..........................................................................................................................................5(3) Summary of Cash Flows ....................................................................................................................................................6(4) Forward-looking Statements ..............................................................................................................................................7
2. Basic Policy on the Selection of Accounting Standards ..........................................................................................................7
3. Consolidated Financial Statements ..........................................................................................................................................8(1) Consolidated Balance Sheets ..............................................................................................................................................8(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income........................................ 10
Consolidated Statements of Income ...................................................................................................................................10
Consolidated Statements of Comprehensive Income ......................................................................................................... 11(3) Consolidated Statements of Changes in Equity ................................................................................................................ 12(4) Consolidated Statements of Cash Flows........................................................................................................................... 14(5) Notes on Consolidated Financial Statements.................................................................................................................... 16
Notes on Going Concern Assumption ................................................................................................................................ 16
Changes in accounting estimates ........................................................................................................................................ 16
Additional information ....................................................................................................................................................... 16
Segment Information .......................................................................................................................................................... 16
Per-Share Information ........................................................................................................................................................ 20
Significant Subsequent Events ........................................................................................................................................... 20- 3 -1. Business Results(1) Summary of Business Results
Overview of Consolidated Business Results for the Fiscal Year Ended December 31, 2021
During the fiscal year ended December 31, 2021, the global economy continued to face lingering uncertainty amid
the COVID-19 pandemic.
While the prolonged chip shortages on a global scale compelled hardware manufacturers to cut back on production,companies in diverse industries continued to invest aggressively in implementing digital transformation (DX)1solutions, including greater use of cloud environments. In this business environment, the SIOS Group offered valueadded products and services to corporate clients to assist them in moving forward with DX, with a focus on solutions
that work in the cloud, as well as the SaaS business2.
The Group achieved consolidated business results by segment for the fiscal year under review as follows:(i) Open System Infrastructure Business Segment
Corporate clients rushed to invest in DX to better deal with the challenges brought about by the COVID-19 crisis. In
this favorable environment, the Group enjoyed strong sales of Red Hat Enterprise Linux3 and other software products
sourced from Red Hat, Inc.4 The Group also saw an increase in sales of its core LifeKeeper5. As a result, net sales inthis segment amounted to 9,588 million yen, up 7.9% from the previous fiscal year, with a segment income of 352
million yen, up 44.6% year on year.
(ii) Application Business Segment
Revenues from providing financial institutions with support for system development and implementation declined
from the year before. In addition, as the web service business for broadcasters, as well as the social and public
outsourcing service business, had been sold to parties outside the Group in the previous fiscal year, revenues fromthose services were no longer counted toward segment sales for the period under review. On a positive note, revenues
from software applications for MFPs6 grew. This was primarily because the revenues from subscriptions7 for theseapplications that corporate clients had signed on for during the previous fiscal year began to be recognized during theperiod under review. The Gluegent series8 also achieved a year-on-year increase in sales. Furthermore, revenues fromproviding support for system development and implementation, as well as sales of the management support system tofinancial institutions, recorded growth from a year earlier. As a result, net sales in this segment increased 3.0% to
6,136 million yen. The segment income was 4 million yen, compared with a loss of 8 million yen the year before.
The Group's combined net sales of these two segments jumped 6.0% to 15,725 million yen for the fiscal year underreview, which marked record-high annual sales for the Group, as well as revenue growth for 11 consecutive years. The
Company posted a consolidated operating profit of 358 million yen, up 51.7% from a year earlier. The consolidated
ordinary profit was 400 million yen, up 56.1%, and the consolidated profit attributable to owners of parent was up
18.6% to 367 million yen.
The Group’s key management metrics EBITDA (the sum of operating profit, depreciation, and amortization of
goodwill) and ROIC (ratio obtained by dividing operating profit after tax by the sum of shareholders’ equity andinterest-bearing debts) for the fiscal year under review are as follows:
EBITDA: 448 million yen, up 36.1% year on year
ROIC (annualized): 10.0%, compared with 6.9% for the previous fiscal year
Notes: 1. Digital transformation(DX)A process in which a company uses data and digital technology to transform its products, services, andbusiness models to more effectively respond to constantly changing business environments and deliver
greater value to customers and society as well as to transform its business processes and organizational
structure and culture to gain greater competitive advantage.
2. SaaS
Software as a Service. A software licensing and distribution model that allows users to connect to and use cloud-based
software applications over the internet.

- 4 -3. Red Hat Enterprise LinuxLinux OS developed by Red Hat, Inc., a provider of open-source solutions.
4. Red Hat, Inc. Related Items
Linux OS product developed by Red Hat, Inc., a provider of open source solutions.
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. The Group develops, markets, and updates document management software applications, such as Quick Scan and Speedoc,that run on an MFP.
7. Subscription model
A business model that charges customers a recurring monthly or annual fee to access a software product or service.
8. Gluegent seriesService products designed to assist corporate clients in achieving greater operational efficiency using cloud solutions. The
series includes the Gluegent Gate cloud-based management of user IDs, the Gluegent Flow cloud-based workflow system, and
the Gluegent Apps Group Scheduler, which incorporated a function to manage schedules of team members into Google Calendar.

(2) Summary of Financial Position
Assets, Liabilities, and Net Assets
Assets(i)

Current assets amounted to 5,774 million yen as of December 31, 2021, down 4.7% from the end of the previous fiscal year, reflecting
primarily a decrease of 484 million yen in merchandise.
Non-current assets amounted to 875 million yen, up 10.5%, reflecting primarily an increase of 55 million yen in investment securities
and an increase of 44 million yen in deferred tax assets.
As a result, total assets decreased 3.0% to 6,649 million yen.
(ii)

Liabilities

Current liabilities amounted to 4,268 million yen, down 10.2% from the previous fiscal year-end, reflecting primarily a decrease of 628
million yen in accounts payable trade and an increase of 328 million yen in advances received.
Non-current liabilities amounted to 483 million yen, down 12.5%, reflecting primarily a decrease of 109 million yen in long-termborrowings.
As a result, total liabilities decreased 10.4% to 4,752 million yen.
(iii) Net assets
Total net assets amounted to 1,897 million yen, up 22.6% from the previous fiscal year-end, reflecting primarily an increase of 281
million yen in retained earnings.

- 5 -(3) Summary of Cash FlowsThe balance of cash and equivalents at the end of the fiscal year under review increased by 420 million yen to 3,148 million yen, compared withthe previous fiscal year-end.

（In millions of yen）
FY 2020

FY 2021

ChangeCash flows from operating activities

649

587

-62

Cash flows from investing activities

151

58

-93

Cash flows from financing activities

-182

-267

-84

Net cash provided by operating activities amounted to 587 million yen for the fiscal year under review. This reflected the posting of profit before
income taxes and a decrease in inventories.
Net cash provided by investing activities amounted to 58 million yen. This reflected primarily proceeds from withdrawal of time deposits.
Net cash used in financing activities amounted to 267 million yen. This reflected primarily repayment of long-term borrowings and payment ofdividends.

- 6 -(4) Forward-looking Statements
Uncertainties are predicted to remain high over the Japanese and global economy, amid a new variant of coronavirus spreading at
an alarming rate. However, the Company expects that corporate investment in DX will remain robust for the next several years. In thisbusiness environment, the Company will continue to provide innovative services to corporate clients and pursue opportunities forprofit increase. This can be accomplished by leveraging our industry-leading technological expertise and excellence gained throughthe development of, and operational support for, systems based on open-source software.
The Company projects its consolidated net sales for the fiscal year ending December 31, 2022, to be 16.0 billion yen, up 1.7% year
on year. This will mark revenue growth for 12 consecutive years, even after factoring in the adverse impact that the adoption of the“Amended Accounting Standards for Revenue Recognition” (ASBJ Statement No. 29, amended on March 31, 2020) has on the way
the Company records its revenues. As the Company plans to invest aggressively in talent acquisition and R&D as part of its efforts to
expand the SaaS business, the Company’s consolidated operating profit for the fiscal year ending December 31, 2022, is projected to
be down 72.1% year on year to 100 million yen, ordinary profit down 70.0% to 120 million yen, and profit attributable to owners ofparent down 83.7% to 60 million yen.
The Company intends to pay a dividend of 15 yen per share for the fiscal year under review, which includes an ordinary dividendof 10 yen and a 25th anniversary commemorative dividend of 5 yen. The Company plans to pay an ordinary dividend of 10 yen per
share for the fiscal year ending December 31, 2022, provided that the business forecasts described above are met.

2. Basic Policy on the Selection of Accounting Standards
The Group will, for the time being, continue to prepare its consolidated financial statements under the Japanese GAAP inconsideration of comparability of period-to-period operating performance as well as comparability with other Japanese companies.
We will consider adopting IFRS in the preparation of consolidated financial statements if developments in Japan and abroad warrant
it.

- 7 -

3. Consolidated Financial Statements(1) Consolidated Balance Sheets(In thousands of yen)
December 31, 2020

December 31, 2021

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade

2,858,289
2,311,150

3,148,805
2,101,204

MerchandiseWork in progress

491,228
26,741

6,842
81,243

Advance payments - trade
Other

245,565
127,097

223,317
213,671

-200

-200

6,059,872

5,774,885

201,044-124,517

204,594-145,317

76,52759,276

287,861-247,395

284,682-244,777

40,46639,90538,422-23,801

36,363-14,338

Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Leased assets
Accumulated depreciation
Leased assets, net
Total property, plant and equipment

14,62022,024

131,614

121,206

110,467-

86,913
11,524

Intangible assets
Software
Software in progress
Other

1,781

1,781

Total intangible assets

112,249

100,218

Investment and other assets
Investment securities

233,775

289,222Net defined benefit asset
Guarantee deposits

47,093
193,996

53,453
172,939

Deferred tax assets
Other41,31436,00486,24455,961

Allowance for doubtful accounts-4,221-4,221

Total investment and other assets

547,963

653,599

791,826

875,025

6,851,698

6,649,910

Total non-current assets
Total assets- 8 -(In thousands of yen)
December 31, 2020

December 31, 2021

Liabilities
Current liabilities
Accounts payable-trade

1,845,041

1,216,499

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

50,000123,120

109,000

Lease obligations
Income taxes payable

7,099
57,6736,000
24,484

Advance received
Provision for bonuses

2,070,735
35,3282,399,175-

604
561,448

513,734

Total current liabilities

4,751,052

4,268,894

Non-current liabilities
Long-term loans payable

290,500

181,500

241,3158,908

271,844
18,353

Provision for loss on order received
Other

Net defined benefit liability
Lease obligations
Long-term deposits received

11,632

11,632

Total non-current liabilities

552,357

483,3315,303,409

4,752,225

1,481,520
349,766

1,481,520
630,831

Total liabilities
Net assets
Shareholders’ equity
Capital stock
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities-87,254-87,254

1,744,031

2,025,096-6,848-3,592Foreign currency translation adjustment-236,209-182,701

Total accumulated other comprehensive income-243,057-186,294

47,31558,882

1,548,289

1,897,685

6,851,698

6,649,910

Subscription rights to shares
Total net assets
Total liabilities and net assets- 9 -(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Consolidated Statements of Income(In thousands of yen)
Fiscal Year Ended
December 31, 2020

Fiscal Year Ended
December 31, 2021

Net sales
Cost of sales

14,841,739
10,376,326

15,725,371
10,840,759

Gross profit

4,465,412

4,884,612

Selling, general and administrative expenses

4,229,241

4,526,318

236,171358,293

Operating profit
Non-operating income
Interest income

6,536

4,900

Dividend income
Fiduciary obligation fee

855
1,281

497
1,318

Foreign exchange gains
Share of profit of entities accounted for using equity
methodGain on valuation of derivatives

29,646-

6,271

38,537-54,348

Other

6,323

6,576

Total non-operating income

50,914

106,178

3,084

2,181

Foreign exchange losses
Loss on investments in investment partnerships

4,288

57,753
3,434

Loss on valuation of derivatives
Other

22,866387

792

Total non-operating expenses

30,62664,162

256,459

400,309

Gain on sale of non-current assets
Gain on transfer from business divestitures

192,88175-

Total extraordinary income

Non-operating expenses
Interest expenses

Ordinary profit
Extraordinary income

192,88175

Extraordinary losses
Loss on valuation of investment securities

938

1,000

Impairment loss
Loss on retirement of non-current assets

36,875615

2,856

Loss on valuation of golf club membership
Other

268
1,133

-

Total extraordinary loss

39,8303,856Profit before income taxes

409,510396,528

Income taxes-current

118,485

73,757

Income taxes-deferred-19,120-44,979

Total income taxes

99,364

28,777

Profit310,145367,750

Profit attributable to owners of parent

310,145367,750- 10 -

Consolidated Statements of Comprehensive Income(In thousands of yen)
Fiscal Year Ended
December 31, 2020
ProfitFiscal Year Ended
December 31, 2021

310,145

Other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income
Comprehensive income

367,750-2,886

3,255-28,064

54,031

253-524-30,697

56,763

279,448424,513279,448424,513Comprehensive income attributable to:Comprehensive income attributable to owners of parent- 11 -

(3) Consolidated Statements of Changes in Equity
Fiscal Year Ended December 31, 2020
Shareholders' equity
Capital stock
Balance at beginning ofcurrent period

1,481,520

Retained earnings

Treasury shares

Total shareholders’equity82,963-87,198

1,477,284

Changes during period
Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesNet changes in items
other than shareholders'equityBalance at end of current
periodBalance at beginning ofcurrent period-43,343-43,343

310,145

310,145
-55

-55

-

266,802-55

266,746

1,481,520

349,766-87,254

1,744,031

Accumulated other comprehensive income
Valuation difference Foreign currency
on available-for-saletranslation
securities
adjustment
Balance at beginning ofcurrent period-3,961

Total accumulated Subscription rights
otherto shares
comprehensive
income-208,398-212,360

43,863

Total net assets

1,308,788

Changes during period
Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesNet changes in items
other than shareholders'equityBalance at end of current
periodBalance at end of current
period-43,343
310,145-55-2,886-27,811-30,697

3,451-27,245-2,886-27,811-30,697

3,451

239,501-6,848-236,209-243,057

47,315

1,548,289- 12 -

Fiscal Year Ended December 31, 2021
Shareholders' equity
Capital stock
Balance at beginning ofcurrent period
Changes of items during
period

1,481,520

Dividends of surplus
Profit attributable toowners of parent
Net changes in items
other than shareholders'equityTotal changes of items
during period
Balance at end of current
periodRetained earnings

Treasury shares

Total shareholders’equity349,766-87,254

1,744,031-86,685-86,685

367,750

367,750-

281,065-

281,065

1,481,520

630,831-87,254

2,025,096

Accumulated other comprehensive income
Valuation difference Foreign currency
on available-for-saletranslation
securities
adjustment
Balance at beginning ofcurrent period
Changes of items during
period-6,848

Total accumulated Subscription rights
otherto shares
comprehensive
income-236,209-243,057

47,315

Dividends of surplus
Profit attributable toowners of parent
Net changes in items
other than shareholders'equityTotal changes of items
during period
Balance at end of current
periodTotal net assets

1,548,289-86,685
367,750
3,255

53,50756,763

11,567

68,3303,255

53,50756,763

11,567349,395-3,592-182,701-186,294

58,882

1,897,685- 13 -

(4) Consolidated Statements of Cash Flows(In thousands of yen)
Fiscal Year Ended
December 31, 2020
Cash flows from operating activities
Profit before income taxes

Fiscal Year Ended
December 31, 2021
409,510396,528

92,561
786

90,105-

Impairment loss
Gain on transfer from business divestitures

36,875-192,881-

Interest and dividend income
Interest expenses
Loss (gain) on investments in investment
partnerships
Share of loss (profit) of entities accounted forusing equity method
Decrease (increase) in trade receivables-7,391
3,084-5,397
2,181

4,288

3,434

-6,271-38,537-578,555

222,029

Decrease (increase) in inventories
Increase (decrease) in trade payables-468,823
988,361

429,884-628,541

Increase (decrease) in retirement benefit liability
Increase (decrease) in advances received
Decrease (increase) in advance payments to
suppliers
Increase (decrease) in accrued consumption taxes

12,731
256,046

30,528271,378-63,628

22,247

135,979

12,479Depreciation
Amortization of goodwill

Other79,458-83,392

Sub-total

702,131724,929

Interest and dividends received

7,391

5,397

Interest paid
Income taxes refund-3,08435,851-2,181-

Income taxes paid

-92,976-141,004

Net cash provided by (used in ) operating activities

649,314587,141

Payments into time deposits
Proceeds from withdrawal of time deposits-260,000
260,000

130,000

Purchase of property, plant and equipment
Purchase of intangible assets-9,295-47,183-25,759-17,824

Payments of guarantee deposits
Proceeds from refund of guarantee deposits-17,741
1,421-7,297
46,267Purchase of shares of subsidiaries and associates
Purchase of investment securities
Proceeds from distributions from investment
partnerships
Loan advances to subsidiaries and associates
Proceeds from collection of short-term loans
receivable
Proceeds from sale of businesses-89,539-25,000-25,000

19,813--21,352

-

5,838

5,995

Cash flows from investing activities

Payments for asset retirement obligations
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Dividends paid
Net increase (decrease) in short-term borrowings
Repayments of long-term borrowings
Other
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents- 14 -

329,855-

4,606-30,535-17,841

151,42458,005-42,779-87,163-132,303-50,000-123,120-7,907-7,161-182,990-267,445-25,528

42,813592,220

420,515

(In thousands of yen)
Fiscal Year Ended
December 31, 2020

Fiscal Year Ended
December 31, 2021

Cash and cash equivalents at beginning of year

2,136,069

2,728,289

Cash and cash equivalents at end of year

2,728,289

3,148,805- 15 -

(5) Notes on Consolidated Financial Statements
Notes on Going Concern Assumption
Not applicable

Changes in accounting estimates
The Company decided, during the fiscal year under review, to cancel the rental agreement on its Tennozu Isle Office in Tokyo and relocate the staff.
Therefore, the Company has shortened the usable life of the non-current assets that are to become unusable, and has updated the amount of annual
depreciation for them accordingly.
The Company has also updated the amount and the depreciation period of the unrecoverable portion of the security deposit placed on the property,
which would be used to return it to its original condition, as stipulated in the rental agreement.
As a result of these changes, the operating profit, ordinary profit, and profit before taxes for the fiscal year under review decreased by 8,884,000 yen
each.

Additional information
When estimating the amount of impairment loss on non-current assets and the recoverability of deferred tax assets, the Company assumed at this timethat the impact of the COVID-19 crisis on the Group's business performance would be limited and that the spread of the pandemic would trend down
toward the end of the fiscal year ending December 31, 2021, and beyond.
However, as the extent of the impact of the pandemic on the Group's business performance is difficult to predict with certainty, a change in assumptions
mentioned above might affect the Group's financial position, results of operations, and cash flow performance going forward.

Segment Information
1. Outline of reportable segments
The Group's reportable segments are components of the Group for which separate financial information is available and which are subject toperiodic reviews by the Company's Board of Directors to determine the allocations of resources and evaluate business performance.
The Company has established business units and subsidiaries, each of which serves specific markets and customers as well as specializes in specifictechnology fields: Some provide products and services in the open system infrastructure field, which includes operating systems and middleware,and some in the application field, which includes enterprise applications.
Therefore, the Group has two reportable segments: the open system infrastructure business segment, and the application business segment.
The description of each segment is as follows:
・Open System Infrastructure Business Segment
In this business segment, the Group markets LifeKeeper, which automatically switches a failed primary system to a backup system, andOSS-related software products, including those sourced from Red Hat, Inc., and provides OSS support services as well as consulting services
for a wide range of information systems.
・Application Business Segment
In this business segment, the Group markets software applications for MFPs, management support system for financial institutions, and the
Gluegent series, which is a SaaS product that works with cloud, develops enterprise information systems for corporate clients on a contract
basis, and provides consulting services for a wide range of information systems.

2. Basis for calculating net sales, profit or loss, assets, liabilities, and other items by reportable segment
Accounting methods used for the reported business segments are the same as those described in "Basis for the Preparation of
the Consolidated Financial Statements."
Profit of reportable segments is based on operating profit. Intersegment sales and transfers are calculated based on market prices.
Please note that the Company does not report assets or liabilities by segment.

- 16 -

3. Information on net sales, profit or loss, assets, liabilities, and other items by reportable segment
Fiscal year ended December 31, 2020
(In thousands of yen)
Reportable segment
Open systeminfrastructurebusinessAmount on
consolidated
financialstatements*

Adjustments

Application
business

Total

Net sales
Sales to external customers
Intersegment sales andtransfers
Total
Segment profit

8,883,368

5,957,630

14,841,499

240

14,841,739

832

3,299

4,131

-4,131-8,884,701

5,960,929

14,845,631-3,891

14,841,739

244,046-8,115

235,931240

236,171

29,59962,961

92,561-

92,561

786

-

786

-

786

Other items
Depreciation
Amortization of goodwill* The total amount of segment profit is the same as the amount of operating profit shown in the consolidated statements of income
for the year.
Fiscal year ended December 31, 2021
(In thousands of yen)
Reportable segment
Open systeminfrastructurebusinessAmount on
consolidated
financialstatements*

Adjustments

Application
business

Total

Net sales
Sales to external customers
Intersegment sales andtransfers
Total
Segment profit

9,588,328

6,136,443

15,724,771

600

15,725,371

939

19,503

20,443-20,443-

9,589,267

6,155,947

15,745,215-19,843

15,725,371

352,955

4,738

357,693600

358,293

25,37464,73090,105-

90,105

-

-

-

-

-

Other items
Depreciation
Amortization of goodwill* Note: An impairment loss was posted for the fiscal year ended December 31, 2020, as a result of office relocation.

- 17 -

Related Information
Fiscal year ended December 31, 2020
1. Information by product and service
Information is omitted as similar information is disclosed in the Segment Information section.
2. Information by region(1) Net sales(In thousands of yen)Japan

Americas14,205,915

443,690

EuropeOther regions

126,823

Total

65,30914,841,739

Note: Sales are classified by country or region in which customers are located.
(2) Property, plant and equipment(In thousands of yen)Japan

Americas101,874

29,739

Total
131,614

3. Information by major customer(In thousands of yen)
Name of customer

Net sales

Relevant segments

Otsuka Corporation

3,548,866

Networld Corporation

1,493,835

Open system infrastructure businessand application businessOpen system infrastructure businessand application business

Fiscal year ended December 31, 2021
1. Information by product and service
Information is omitted as similar information is disclosed in the Segment Information section.
2. Information by region(1) Net sales(In thousands of yen)Japan

Americas394,516Europe153,383

Other regions

74,04815,725,371

Total
394,516

Note: Sales are classified by country or region in which customers are located.
(2) Property, plant and equipment(In thousands of yen)Japan

Americas101,542

19,663

Total
121,206

3. Information by major customer(In thousands of yen)
Name of customer

Net sales

Relevant segments

Otsuka Corporation

3,680,611

Networld Corporation

1,650,331- 18 -

Open system infrastructure businessand application businessOpen system infrastructure businessand application businessInformation Regarding Impairment Loss on Non-Current Assets by Reportable Segment
Fiscal year ended December 31, 2020
Reportable segment
Open systeminfrastructurebusiness

Application
business

Adjustment

Total

Total

Year-end
36,87536,875balance
Note: Impairment loss was recorded due to office relocation in the previous consolidated fiscal year.
Fiscal year ended December 31, 2021
Not applicable
Information Regarding Amortization of Goodwill and Remaining Goodwill Balance by Reportable Segment
Fiscal year ended December 31, 2020
The amount of goodwill amortization for the year is provided under the Segment Information section and is not provided here.
Fiscal year ended December 31, 2021
The amount of goodwill amortization for the year is provided under the Segment Information section and is not provided here.
Information Regarding Gain on Negative Goodwill by Reportable Segment
Fiscal year ended December 31, 2020
Not applicable
Fiscal year ended December 31, 2021
Not applicable- 19 -

Per-Share Information
Fiscal year ended
December 31, 2020

Fiscal year ended
December 31, 2021

Net assets per share

173.15 yen

212.12 yen

Profit per share

35.78 yen42.42 yen

Notes: 1. Diluted profit per share is not presented because the Company has no outstanding dilutive shares.
2. The basis for calculating profit per share is as follows:
Fiscal year ended
December 31, 2020

Fiscal year ended
December 31, 2021

Profit per share
Profit attributable to owners of parent (thousand yen)

310,145367,750

Amount not attributable to ordinary shareholders (thousand
yen)

-

-

Profit attributable to owners of parent relating to common
stock (thousand yen)

310,145367,750

Average number of common stock outstanding during theperiod (shares)

8,668,596

8,668,562

Descriptions of potentially dilutive common shares that were
not included in the calculation of diluted profit per share

Share options for
459,354 commonshares resolved by the
Board of Directors on
May 22, 2012

Share options for
654,875 commonshares resolved by the
Board of Directors on
May 22, 2012

Significant Subsequent Events
Not applicable- 20 -