Consolidated Financial Result(For the fiscal year ended December 31, 2022)
February 2, 2023
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 28, 2023
Scheduled date of financial report FSA filing:
March 29, 2023
Scheduled date of dividend payment:
March 29, 2023

(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, 2022 through December 31, 2022)(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

%

-499
51.7
400
56.1
FY2021: 424 million yen/ 51.9%

-639
367

18.6

Return on equity

Operating income
ratio

FY2021: 38 million yen

Net assets

Million yen

Net income%

Yen-73.8142.42
FY2022: 51 million yen(2) Consolidated financial position
Total assets
FY2022
FY2021(Reference) Equity:

Ordinary income%

FY2022
14,420-8.3-572
FY2021
15,7256.0
358(Note)Comprehensive income : FY2022: -548 million yen/ -%FY2022
FY2021(Note) Equity in earnings:(% of change from previous year)

Ratio of ordinary
income to total assets

%

%

%

-42.6
22.0

-7.9
5.9

-4.0
2.3

Equity ratio

Million yen

Net assets per share
%

6,022
1,243
6,649
1,897
As of Dec. 31, 2022: 1,168 million yen

Yen

19.4
27.7
As of Dec. 31, 2021: 1,838 million yen

134.76212.12(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

-370
587

-107
58

-245
-267

2,505
3,148

FY2022
FY2021

2. Cash dividends
Record Date

End of
Q1
Yen

End ofQ2

Dividend per share
End ofYear-end
Q3

Yen

Yen

Yen

AnnualYen

Total ofdividend(annual)Payout ratio(consolidated)

Net assets
dividend ratio(consolidated)

%

%

35.4
‐
‐

7.1
7.4

Millionyen

FY2021
0.00
15.00
15.00
130
‐
‐
FY2022
0.00
10.00
10.00
86
‐
‐
FY2023 (forecast)
‐
‐
‐
‐
‐
(Notes)1.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
2.The dividend forecast for the fiscal year ending December 31, 2023 is undecided.

- 1 -3. Forecast of consolidated results for FY2023 (January 1, 2023 through December 31, 2023)
Net sales

Operating income

Million yen%

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

Ordinary income%

Million yen%

Million yen%

Yen

FY2023
‐
‐
‐
‐
‐
‐
‐
‐
‐
(Note)Regarding the consolidated earnings forecast for the fiscal year ending December 31, 2023, it is extremely difficult to reasonably
calculate at this time. Since then, it is undecided. In the future, we will promptly announce it when it becomes possible to make areasonable calculation.

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: YES(ii) Change arising from other factors: None(iii) Change in accounting estimates: None(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

FY2022

8,874,400 shares

FY20218,874,400 shares

FY2022205,838 shares

FY2021205,838 shares

FY2022

8,668,562 shares

FY2021

8,668,562 shares(Reference)
1. Non-consolidated results (January 1, 2022 through December 31, 2022)(1) Non-consolidated financial results
Net sales
FY2022
FY2021

FY2022
FY2021

Operating income

Ordinary income

Net income

Million yen%

Million yen%

Million yen%

Million yen

%

1,277
1,306

-2.2
30.3

318
346

-8.3
185.2

299
339

-11.8
187.3

285
310

-7.9
296.8

Net income per share- Basic

Net income per share- Diluted

Yen

Yen

32.97
35.78

-

(2) Non-consolidated financial position
Total assets

Net assets

Million yen

FY2022
FY2021(Note) Equity(% of change from previous year)

3,051
2,903
As of Dec. 31, 2022: 2,023 million yen

Equity ratio

Million yen

Net assets per share
%

2,023
66.3
1,867
64.3
As of Dec. 31, 2021: 1,867 million yen

Yen

233.41215.39Explanation 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 Standard.
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 ..............................................................................................................................................6
2. Basic Policy on the Selection of Accounting Standards ..........................................................................................................6
3. Consolidated Financial Statements ..........................................................................................................................................7(1) Consolidated Balance Sheets..............................................................................................................................................7(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income .........................................9(3) Consolidated Statements of Changes in Equity ................................................................................................................ 11(4) Consolidated Statements of Cash Flows .......................................................................................................................... 13(5) Notes on Consolidated Financial Statements ................................................................................................................... 14
Notes on Going Concern Assumption ................................................................................................................................ 14
Changes in accounting policies .......................................................................................................................................... 14
Additional Information ....................................................................................................................................................... 14
Segment Information .......................................................................................................................................................... 15
Per-Share Information ........................................................................................................................................................ 19
Significant Subsequent Events ........................................................................................................................................... 19- 3 -1. Business Results(1) Summary of Business Results
Overview of Consolidated Business Results for the Fiscal Year Ended December 31, 2022
During the 12 months ended December 31, 2022, the global economy continued to face lingering uncertainty amid
the pervasive COVID-19 pandemic, surging materials and energy prices, and the devaluation of the Japanese yen—both caused partly by the prolonged Russia-Ukraine conflict—and the persistent shortages of semiconductors andother electronic components.
To better adapt to this fast-changing socioeconomic landscape, many businesses continued to invest aggressively in
implementing digital transformation (DX)1 solutions, including making greater use of cloud environments. In thisbusiness environment, the SIOS Group leveraged its vast technical expertise and experience in open-source softwaredevelopment to offer corporate clients the right solutions to assist them in moving forward with DX, with a focus on
products and services that work in cloud environments, as well as on the SaaS2 business.
The Group achieved consolidated business results by segment for the fiscal year under review as follows:
On a side note, effective at the beginning of the fiscal year under review, the Company has adopted the AccountingStandard for Revenue Recognition (Accounting Standards Board of Japan Statement No. 29, issued on March 31,2020) in its financial reporting.
(i) Open System Infrastructure Business Segment
While perpetual license sales of LifeKeeper³, which is one of the Group's core software products, declined in Japan,
sales were strong in the Americas, Asia, and Oceania. Sales of Red Hat Enterprise Linux4 and other software products
sourced from Red Hat, Inc.5 plummeted. This was primarily because high-volume sales to corporate clients weresluggish, due to delays and reassessments of their capital expenditure projects, caused by longer delivery lead times
for hardware products at the height of chip shortages. As a result, net sales in this segment fell 9.1% year on year to
8,716 million yen.
The Company posted a segment loss of 13 million yen, compared with a profit of 352 million yen the year before,
due to the decrease in sales described above and rising personnel expenses.
The application of the Accounting Standard for Revenue Recognition had no effect on the segment sales or profit
during the fiscal year under review.
(ii) Application Business Segment
Revenue from the sales of the Gluegent series6 and software applications for MFPs7 was up year on year. In
contrast, sales of the management support system were slow to financial institutions. This was primarily because ofdelays and reassessments of their capital expenditure projects, caused by longer delivery lead times for hardware
products at the height of chip shortages. Combined with the effect of the application of the Accounting Standard for
Revenue Recognition, net sales in this segment were down 7.2% year on year, to 5,691 million yen.
The Company posted a segment loss of 570 million yen, compared with a profit of 4 million yen the year before,
due to the decrease in sales described above, rising personnel expenses, and more aggressive investments indeveloping and marketing new products and services, mainly in the Med Tech8 business.
The application of the Accounting Standard for Revenue Recognition resulted in a decrease of 489 million yen insegment sales and an increase of 22 million yen in segment profit.
The Company's consolidated net sales for the fiscal year under review were down 8.3% year on year, to 14,420
million yen. The Company posted a consolidated operating loss of 572 million yen, which reflected an increase of 199
million yen in research and development expenses, compared with an operating profit of 358 million yen the year
before, and an ordinary loss of 499 million yen, which reflected 51 million yen of the share of profit of entities
accounted for using equity method, compared with an ordinary profit of 400 million yen a year earlier. The Company
posted a loss of 639 million yen, attributable to owners of parent, compared with a profit of 367 million yen the year
before. The loss included an impairment loss of 40 million yen on fixed assets associated with sales of the
management support system to financial institutions, and deferred income taxes of 52 million yen resulting from thereversal of deferred tax assets.
- 4 -The application of the Accounting Standard for Revenue Recognition resulted in a decrease of 489 million yen inconsolidated net sales, an increase of 22 million yen each in operating profit and ordinary profit, and an increase of 26
million yen in profit attributable to owners of parent.
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: -469 million yen, compared with +448 million yen for the previous year
ROIC (annualized): -25.1%, compared with +10.0% for the previous 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.
3. LifeKeeper
A failover software product that automatically switches a failed primary server to a backup server.
4. Red Hat Enterprise LinuxLinux OS developed by Red Hat, Inc., a provider of open-source solutions.
5. Red Hat, Inc. Related Items
Linux OS product developed by Red Hat, Inc., a provider of open source solutions.
6. 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.
7. 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.
8. Med Tech
Short for medical technology.It refers to technology that delivers medical services through software applications.

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

Current assets amounted to 5,195 million yen as of December 31, 2022, down 10.0% from the end of the previous fiscal year, reflecting
primarily a decrease of 643 million yen in cash and deposits.
Fixed assets amounted to 827 million yen, down 5.5%, reflecting a decrease of 57 million yen in deferred tax assets and a decrease of
45 million yen in guarantee deposits.
As a result, total assets decreased 9.4% to 6,022 million yen.
(ii)

Liabilities

Current liabilities amounted to 4,337 million yen, up 1.6% from the previous fiscal year-end, reflecting primarily an increase of 361
million yen in contract liabilities.
Non-current liabilities amounted to 441 million yen, down 8.6%, reflecting primarily a decrease of 66 million yen in long-termborrowings.
As a result, total liabilities increased 0.6% to 4,778 million yen.
(iii) Net assets
Total net assets amounted to 1,243 million yen, down 34.5% from the previous fiscal year-end, reflecting primarily a decrease of 761- 5 -million yen in legal retained earnings.

(3) Summary of Cash FlowsThe balance of cash and equivalents at the end of the fiscal year under review increased by 643 million yen to 2,505 million yen, compared withthe previous fiscal year-end.

（In millions of yen）
FY 2021

FY 2022

ChangeCash flows from operating activities

587

-37

-957

Cash flows from investing activities

58

-10

-165

Cash flows from financing activities

-267

--24

21

Net cash used in operating activities amounted to 370 million yen for the fiscal year under review. This reflected the posting of loss before income
taxes and a decrease in trade payables.
Net cash used in investing activities amounted to 107 million yen. This reflected primarily the purchase of investment securities.
Net cash used in financing activities amounted to 245 million yen. This reflected primarily the payment of dividends and the repayment of longterm borrowings.

(4) Forward-looking Statements
As the Group's revenue comes largely from the sales of products and services intended for on-premise environments, its businessperformance tends to be significantly affected by external factors beyond its control, such as corporate customers' capital expenditure
projects and the supply-demand balance of electronic components. To make the Group's revenue base more robust to changes inexternal environments, we intend to restructure our business operations and bolster our cloud-based business, including the SaaS
business and the subscription-based version of LifeKeeper.
We are not disclosing at this time the Group's consolidated business forecasts for the fiscal year ending December 31, 2023, or its
medium-term business plan, as we are unable to make reasonable assumptions or estimates. As soon as we can make reasonableassumptions and estimates, we will disclose the above-mentioned information.
The Company intends to pay a dividend of 10 yen per share for the fiscal year under review, as stated in the Consolidated Financial
Result for the Fiscal Year Ended December 31, 2021, announced on February 3, 2022. We have not determined yet the dividend rate
for the fiscal year ending December 31, 2023. We will announce it as soon as we finalize it.

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.

- 6 -

3. Consolidated Financial Statements(1) Consolidated Balance Sheets(In thousands of yen)
December 31, 2021
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Notes and accounts receivable - trade, and contract
assetsMerchandiseWork in progress
Advance payments to suppliers
Other
Allowance for doubtful accounts
Total current assets

December 31, 2022

3,148,805
2,101,204

2,505,766--

2,028,395

6,842
81,243
223,317
213,671-200

13,55813,267
272,047
362,291-200

5,774,885

5,195,125

Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation

204,594-145,317

182,331-132,199

Buildings, net

59,27650,131

284,682-244,777

173,538-143,142

39,90530,39636,363-14,338

132,117-99,814

Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Leased assets
Accumulated depreciation
Leased assets, net

22,02432,303

121,206

112,830

Intangible assets
Software
Software in progress
Other

86,913
11,524
1,781

48,49629,879
1,441

Total intangible assets

100,218

79,817

Investment and other assets
Investment securities
Retirement benefit asset
Guarantee deposits
Deferred tax assets
Other
Allowance for doubtful accounts

289,22253,453
172,939
86,24455,961-4,221

380,634
50,635127,063
28,86547,359-Total investment and other assets

653,599

634,558

875,025

827,206

6,649,910

6,022,332

Total property, plant and equipment

Total non-current assets
Total assets- 7 -(In thousands of yen)
December 31, 2021

December 31, 2022

Liabilities
Current liabilities
Accounts payable-trade
Current portion of long-term borrowings
Lease liabilities
Income taxes payable
Advances received
Contract liabilities
Other

1,216,499
109,000
6,000
24,484
2,399,175
513,734

1,084,110
66,00029,7002,760,665
396,729

Total current liabilities

4,268,894

4,337,206

Non-current liabilities
Long-term borrowings
Retirement benefit liability
Lease liabilities
Long-term deposits received

181,500
271,844
18,353
11,632

115,500
302,712
11,746
11,632

Total non-current liabilities

483,331441,591

Total liabilities

4,752,225

4,778,798

Net assets
Shareholders’ equity
Capital stock
Retained earnings
Treasury shares

1,481,520
630,831-87,254

1,481,520-130,975-87,254

2,025,096

1,263,289

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment-3,592-182,701

5,147-100,273

Total accumulated other comprehensive income-186,294-95,125

Total shareholders’ equity

Subscription rights to shares
Total net assets
Total liabilities and net assets- 8 -58,88275,3691,897,685

1,243,534

6,649,910

6,022,332

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

Fiscal Year Ended
December 31, 2022

Net sales

15,725,371

14,420,269

Cost of sales

10,840,759

9,753,613

Gross profit

4,884,612

4,666,656

Selling, general and administrative expenses

4,526,318

5,239,539

358,293-572,883

4,900
497
1,318

6,435
1,310
1,711

38,53751,71054,3486,576

75,3849,777

106,178

146,3282,181
57,753
3,434
792

1,541
64,915
6,364-

64,162

72,821

400,309-499,376

Extraordinary income
Gain on sale of non-current assets

75-

Total extraordinary income

75

-

1,000
2,856

40,6092,409

Operating profit (loss)
Non-operating income
Interest income
Dividend income
Outsourcing service income
Share of profit of entities accounted for using equity
methodGain on valuation of derivatives
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Loss on investments in investment partnerships
Other
Total non-operating expenses
Ordinary profit (loss)

Extraordinary losses
Loss on valuation of investment securities
Impairment loss
Loss on retirement of non-current assets
Total extraordinary losses

3,856

43,019Profit (loss) before income taxes

396,528-542,395

Income taxes-current
Income taxes-deferred

73,757-44,979

44,43552,962

Total income taxes

28,777

97,397

Profit (loss)

367,750-639,793

Profit (loss) attributable to owners of parent

367,750-639,793- 9 -Consolidated Statements of Comprehensive Income(In thousands of yen)
Fiscal Year Ended
December 31, 2021
Profit (loss)
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

Fiscal Year Ended
December 31, 2022

367,750-639,793

3,255
54,031

8,740
81,966-524

462

56,763

91,168Comprehensive income

424,513-548,624

Comprehensive income attributable to:Comprehensive income attributable to owners of parent

424,513-548,624- 10 -

(3) Consolidated Statements of Changes in Equity
Fiscal Year Ended December 31, 2021
Shareholders' equity
Capital stock
Balance at beginning ofcurrent period

1,481,520

Retained earnings

Treasury shares

Total shareholders’equity349,766-87,254

1,744,031

Changes during period
Dividends of surplus
Profit (loss) attributableto owners of parent
Net changes in items
other than shareholders'equityBalance at end of current
periodBalance at beginning ofcurrent period-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-6,848

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

47,315

Total net assets

1,548,289

Changes during period
Dividends of surplus
Profit attributable toowners of parent
Net changes in items
other than shareholders'equityBalance at end of current
periodBalance at end of current
period-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- 11 -

Fiscal Year Ended December 31, 2022
Shareholders' equity
Capital stock
Balance at beginning ofcurrent period
Cumulative effects ofchanges in accounting
policies
Restated balance

1,481,520

Retained earnings

Treasury shares

Total shareholders’equity630,831-87,254

2,025,096

8,014
1,481,520

8,014

638,846-87,254

2,033,111

Changes of items during
periodDividends of surplus
Profit (loss) attributableto owners of parent
Net changes in items
other than shareholders'equityTotal changes of items
during period
Balance at end of current
period-130,028-130,028-639,793-639,793---769,821--769,821

1,481,520-130,975-87,254

1,263,289

Accumulated other comprehensive income
Valuation difference Foreign currency
on available-for-saletranslation
securities
adjustment
Balance at beginning ofcurrent period
Cumulative effects ofchanges in accounting
policies
Restated balance-3,592

Total accumulated Subscription rights
otherto shares
comprehensive
income-182,701-186,294

58,882

Total net assets

1,897,685
8,014-3,592-182,701-186,294

58,882

1,905,699

Changes of items during
periodDividends 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
period-130,028-639,793
8,740

82,42891,16816,487

107,656

8,740

82,42891,16816,487-662,165

5,147-100,273-95,12575,3691,243,534- 12 -

(4) Consolidated Statements of Cash Flows(In thousands of yen)
Fiscal Year Ended
December 31, 2021

Fiscal Year Ended
December 31, 2022

Cash flows from operating activities
Profit (loss) before income taxes
Depreciation
Impairment loss
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
Decrease (increase) in trade receivables andContract assets
Decrease (increase) in inventories
Increase (decrease) in trade payables
Increase (decrease) in retirement benefit liability
Increase (decrease) in advances received
Increase (decrease) in contract liabilities
Decrease (increase) in advance payments to
suppliers
Increase (decrease) in accrued consumption taxes
Other396,528
90,105-5,3972,181-542,395
103,079
40,609-7,745
1,541

3,434

6,364

-38,537-51,710222,029--

177,759

429,884-628,541
30,528271,378--9,335-132,389
30,868265,931

22,247-48,729

12,479-83,392-144,217-5,504

724,929-315,873

5,397

13,320Interest paid
Income taxes refund
Income taxes paid

-2,181141,004-1,54140,802-107,086

Net cash provided by (used in ) operating activities

587,141-370,380

130,000-25,759-17,824-7,297
46,267-25,000-43,146-18,996-447
8,918-45,000

5,995

6,583

-30,535-17,841-35,864
20,237

Net cash provided by (used in) investing activities

58,005-107,717

Cash flows from financing activities
Dividends paid
Net increase (decrease) in short-term borrowings
Repayments of long-term borrowings
Other-87,163-50,000-123,120-7,161-129,638-109,000-7,232

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-267,445-245,871

42,81380,929420,515-643,038

Cash and cash equivalents at beginning of year

2,728,289

3,148,805

Cash and cash equivalents at end of year

3,148,805

2,505,766

Sub-totalInterest and dividends received

Cash flows from investing activities
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Purchase of intangible assets
Payments of guarantee deposits
Proceeds from refund of guarantee deposits
Purchase of investment securities
Proceeds from collection of short-term loans
receivable
Payments for asset retirement obligations
Other- 13 -

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

Changes in accounting policies
Application of the Accounting Standard for Revenue Recognition
Effective at the beginning of the fiscal year under review, the Company has adopted the Accounting Standard for Revenue Recognition (ASBJ
Statement No. 29, issued on March 31, 2020) in its financial reporting. Under this standard, the Company recognizes revenue when control of a promised
good or service has been transferred to a customer, and the recognized amount of revenue is the amount of the consideration expected to be received
from the customer in exchange for the good or service.
With the application of the Accounting Standard for Revenue Recognition, the Company has made the following changes to its accounting policies:(1) Recognizing revenue from transactions in which the Group acts as an agent
When the Group previously acted as an agent in providing a good or service to a customer, the Company recognized as revenue the total amount of
the consideration to be received from the customer in exchange for the good or service. Under the new accounting policy, the Company recognizes asrevenue the net amount received from customers for the product or service, less amounts paid to suppliers (principal).
(2) Recognizing revenue from made-to-order software development projects
The Company previously recognized revenue from made-to-order software development projects, based on the percentage-of-completion method
when the outcome of the completed portion of development was deemed certain, and based on the completed-contract method when it was not. Under
the new accounting policy, the Company recognizes revenue from such a project over a period of time, based on a reasonably estimated performanceobligation satisfied to date as a percentage of the total obligation to be performed under the contract. In cases where such a reasonable estimate cannot
be made, the Company recognizes revenue based on the cost-recovery method.
In a contract under which a performance obligation is expected to be fully satisfied shortly after the transaction begins, the Company employs analternative method of recognizing revenue only when the performance obligation is fully satisfied.
(3) Recognizing revenue from the transfer of control of a licensed intellectual property
The Company previously recognized revenue from the transfer of control of a licensed intellectual property when the right to access the property
was granted to a customer.
Under the new accounting policy, the Company recognizes revenue when the customer has acquired the ability to direct the use of, and receive thebenefit from, a licensed intellectual property.
In accordance with the transitional treatment as permitted in the proviso of Paragraph 84 of the Accounting Standard for Revenue Recognition, theCompany has treated the assumed cumulative amount of effect from retroactively applying the new accounting policies up to the end of the previous
fiscal year as an adjustment to retained earnings at the beginning of the fiscal year under review, and has begun to apply the new accounting policies tothe beginning balance of retained earnings from the fiscal year under review.
As a result of the application of these new accounting policies, consolidated net sales decreased by 489.434 million yen for the fiscal year under review;
cost of sales decreased by 511.525 million yen; operating loss, ordinary loss, and loss before income taxes increased by 22.090 million yen each; deferredincome taxes decreased by 4.238 million yen; and profit attributable to owners of parent increased by 26.329 million yen. Retained earnings increasedby 8.014 million yen at the beginning of the fiscal year under review.
The effect of these changes on per-share information is described in the relevant section of this document.
With the application of the Accounting Standard for Revenue Recognition, “Notes and accounts receivable trade,” presented under "Current assets" in
the Consolidated Balance Sheet for the previous fiscal year, is included in “Notes and accounts receivable trade, and contract assets,” beginning in thefiscal year under review. “Advances received,” presented under "Current liabilities" in the Consolidated Balance Sheet for the previous fiscal year, is
included in “Contract liabilities,” beginning in the fiscal year under review. "Decrease (increase) in trade receivables," presented under "Cash flows fromoperating activities" in the Consolidated Statement of Cash Flows for the previous fiscal year, is included in "Decrease (increase) in trade receivables
and contract assets," and "Increase (decrease) in advances received" is included in "Increase (decrease) in contract liabilities," beginning in the fiscal year
under review.
In accordance with the transitional treatment as permitted in Paragraph 89-2 of the Accounting Standard for Revenue Recognition, the Company has
not restated the results for the previous fiscal year, using the new presentation methods described above.

Application of the Accounting Standard for Fair Value Measurement
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.

Application of the Accounting Standard Update (ASU) Topic 842 on Leases, published by the U.S. Financial
Accounting Standards Board
Effective in the fiscal year under review, the Company's consolidated subsidiary in the United States has adopted the ASU Topic 842 on Leases ("thisstandard"). This standard requires lessees to recognize all leases as assets or liabilities on their balance sheets. In applying this standard, the Company
has adopted an accepted method for the transitional treatment, under which the cumulative effect of a change in accounting policy is recognized on thedate of adoption of this standard.
As a result, net leased assets, presented under "Tangible fixed assets" in the Consolidated Balance Sheet for the fiscal year under review, increased by
18.912 million yen, and lease liabilities, presented under "Current liabilities," increased by 24.325 million yen. The application of this standard has no
significant effect on the Consolidated Statement of Income for the fiscal year under review.

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.

- 14 -

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.
3. Changes in reportable segments
As described in “Changes in accounting policies,” effective at the beginning of the fiscal year under review, the Company has
adopted the Accounting Standard for Revenue Recognition and revised the accounting methods for revenue recognition.
Accordingly, the Company has changed the methods of accounting for net sales and profit/loss for each reportable segment.
As a result of this change, net sales in the Application Business Segment for the fiscal year under review decreased by 489.434
million yen, and the segment profit increased by 26.329 million yen, compared with using the previous methods. The change had
no effect on net sales or profit/loss in the Open System Infrastructure Business Segment.

- 15 -

3. Information on net sales, profit or loss, assets, liabilities, and other items by reportable segment
Fiscal year ended December 31, 2021
(In thousands of yen)
Reportable segment
Open systeminfrastructurebusiness

Application
businessAmount on
consolidated
financialstatements*

Adjustments
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* Note: The total amount of segment income is the same as the amount of operating profit presented in the Consolidated Statementsof Income.
Fiscal year ended December 31, 2022
(In thousands of yen)
Reportable segment
Open systeminfrastructurebusiness

Application
businessAmount on
consolidated
financialstatements*

Adjustments
Total

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

8,716,945

5,691,612

14,408,558

11,711

14,420,269

-

6,651

6,651

-6,651-

8,716,945

5,698,263

14,415,209

5,060

14,420,269-13,792-570,802-584,594

11,711-572,883

26,383

76,695103,079-

103,079

Other items
Depreciation* Note: The total amount of segment loss is the same as the amount of operating loss presented in the Consolidated Statements ofIncome.

- 16 -

Related Information
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

Americas15,103,423

394,516EuropeOther regions

153,383

Total

74,04815,725,371

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

1,650,433

Open system infrastructure businessand application businessOpen system infrastructure businessand application business

Fiscal year ended December 31, 2022
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

Americas13,627,952

522,702

EuropeOther regions

169,900

99,713

Total
14,420,269

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

Americas85,51527,315

Total
112,830

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

Net sales

Relevant segments

Otsuka Corporation

3,895,330

Networld Corporation

1,612,241- 17 -

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, 2021
Not applicable
Fiscal year ended December 31, 2022
Reportable segment

Year-endbalance

Open systeminfrastructurebusiness

Application
business-

40,609Adjustment

Total

Total
40,609-40,609

Information Regarding Amortization of Goodwill and Remaining Goodwill Balance by Reportable Segment
Fiscal year ended December 31, 2021
Not applicable
Fiscal year ended December 31, 2022
Not applicable
Information Regarding Gain on Negative Goodwill by Reportable Segment
Fiscal year ended December 31, 2021
Not applicable
Fiscal year ended December 31, 2022
Not applicable- 18 -

Per-Share Information
Fiscal year ended
December 31, 2021

Fiscal year ended
December 31, 2022

Net assets per share

212.12 yen

134.76 yen

Profit per share

42.42 yen

-73.81 yen

Notes: 1. Diluted profit per share is not presented because the Company has no outstanding dilutive shares.
2. As described in “Changes in accounting policies,” effective at the beginning of the fiscal year under review, theCompany has adopted the Accounting Standard for Revenue Recognition. As a result, net assets per share andprofit per share for the fiscal year under review increased by 3.04 yen each.
3. The basis for calculating profit (loss) per share is as follows:
Fiscal year ended
December 31, 2021

Fiscal year ended
December 31, 2022

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

367,750-639,793

Amount not attributable to ordinary shareholders (thousand
yen)

-

-

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

367,750-639,793

Average number of common stock outstanding during theperiod (shares)

8,668,562

8,668,562

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

Significant Subsequent Events
Not applicable- 19 -

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

Share options for
570,750 commonshares resolved by the
Board of Directors on
May 22, 2012
Share options for
107,000 commonshares resolved by the
Board of Directors on
May 30, 2022