Consolidated financial result

SIOS Corporation

Consolidated Financial Result(For the 6-month period ended June 30, 2020)
August 3, 2020
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 for filing of quarterly financial report: August 13, 2020
(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, 2020 through June 30, 2020)(1) Consolidated business results
Net sales
Million yen(% of change from previous first quarter)

Operating income%

Ordinary income

Million yen%

Million yen

54
38

42.0
-70.0

57
70

6-month period(2020/6)
7,276
5.2
6-month period(2019/6)
6,914
10.3
(Note)Comprehensive income
As of June.30, 2020: 8 million yen/ -%Million yen

-17.9
-46.5

%

19
-20

-

As of June. 30, 2019: -36 million yen/ -%Net income per share- Basic

Net income per share- Diluted

Yen

Yen

6-month period(2020/6)
6-month period(2019/6)

Net income

%

2.29
-2.32

-

(2) Consolidated financial position
Total assets

Net assets

Equity ratio

Million yen

Million yen

%

1,277
1,308

22.2
23.7

6-month period(2020/6)
5,527
FY2019
5,332(Reference) Equity
As of June. 30, 2020: 1,229 million yen

As of Dec. 31, 2019: 1,264 million yen

2. Cash dividends
Record Date

End of Q1

Interim

Dividend per share
End of Q3

Year-end

Annual

Yen

Yen

Yen

Yen

%

FY2019-0.00

FY2020-0.00

FY2020 (expected)

-

5.00

5.00

-

5.00

5.00

(Note) Revisions to recent dividend forecast: None

3. Forecast of consolidated results for FY2020 (January 1, 2020 through December 31, 2020)
Net sales
Million yen

Operating income%

Million yen

FY202014,3004.580(Note) Revisions to recent business forecast: None

Ordinary income(% of change from previous year)
Net income
Net income
per share%

Million yen%

Million yen

%

45.6

100

3.9

40

23.6

-1-

Yen

4.61

Consolidated financial result

SIOS Corporation

4. Others(1) Reclassification of significant subsidiaries during the period (Reclassification due to change in scope of consolidation): None
(2) Application of special accounting methods for the preparation of the consolidated quarterly financial statements: None
(3) 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:None(iv) Restatement:None(4) 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(6-month period)

Second quarter of
FY2020
Second quarter of
FY2020
Second quarter of
FY20208,874,400 shares

FY20198,874,400 shares

205,812 shares

FY2019205,768 shares

8,668,628 shares

Second quarter of
FY20198,668,632 shares

Explanation 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 quarterly review offinancial statements as required under the financial instruments and Exchange Act of Japan. The aforementioned procedures havenot been completed as of the time of disclosure of this document.

2.

Net income per share was calculated by the number of outstanding shares (excluding treasury stocks) at the end of fiscal year.

3.

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.

4.

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-

Consolidated financial result

SIOS Corporation○Table of Contents of the Attached Document

1. Qualitative Information on Quarterly Results ..................................................................................... 4(1) Results of Operations .................................................................................................................... 4(2) Financial Position ......................................................................................................................... 5(3) Forward-looking Statements Including Consolidated Business Forecasts ............................................. 5
2. Quarterly Consolidated Financial Statements ..................................................................................... 6(1) Quarterly Consolidated Balance Sheet ............................................................................................. 6(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive
Income ............................................................................................................................................. 8
Quarterly Consolidated Statements of Income .............................................................................. 8
Quarterly Consolidated Statements of Comprehensive Income ....................................................... 9(3) Quarterly Consolidated Statements of Cash Flows .......................................................................... 10(4) Notes to Quarterly Consolidated Financial Statements..................................................................... 11
Notes to Going Concern Assumption ........................................................................................ 11(Notes on significant changes in the amount of shareholders' equity)............................................. 11
Segment Information............................................................................................................... 12(Significant subsequent events) ................................................................................................ 14-3-

Consolidated financial result

SIOS Corporation

1. Qualitative Information on Quarterly Results(1) Results of Operations
Overview of Consolidated Business Performance for the Six Months Ended June 30, 2020
Many corporations in Japan and the rest of the world have reported a substantial year-on-year decline in their earnings for the six
months ended June 30, 2020, amid the increasingly serious COVID-19 crisis. Consequently, companies are becoming cautious in
making new investments and are suspending or postponing large projects. In the IT arena in which the Group operates, however,companies have been investing at an accelerated pace in implementing digital transformation (DX)1 solutions, including switching toteleworking and transitioning to cloud environments as well as streamlining and automating business processes. Under this businessenvironment, the Group offers value-added products and services to assist corporate clients in moving forward with DX. To get throughthe significant changes in a socioeconomic environment brought about by the COVID-19 crisis, we have asked all our employees toswitch to teleworking to protect their health and safety as well as to achieve greater work efficiency. In addition, we plan to merge threemajor subsidiaries operating in Japan on October 1, 2020, to consolidate their human, intellectual property, and financial resources in aneffort to achieve even greater operational efficiency and productivity.
The Group achieved consolidated business results by segment for the six months ended June 30, 2020, as follows:(i) Open System Infrastructure Business Segment
The Group achieved a solid increase in sales of our core LifeKeeper2, thanks to its robust perpetual licensing business in Japan, whichmore than offset its declining sales in the Americas and Europe. In addition, sales of Red Hat Enterprise Linux3 and other software
products sourced from Red Hat Inc.4 as well as revenues from OSS5-related products and support services increased over the same
period the previous fiscal year. As a result, net sales in this segment jumped 7.5% year on year to 4,183 million yen.
This segment posted a loss of 5 million yen, compared with an income of 46 million yen a year earlier, due to additional R&D
spending incurred to upgrade LifeKeeper and increased expenses associated with establishing new businesses.
(ii) Application Business Segment
Revenues from software applications for MFPs6 declined. This was because an increasing number of corporate users switched from aperpetual licensing model to a subscription model7 for these applications. By contract, revenues from the provision of support forsystem development and implementation were strong, especially to educational institutions. In addition, sales of the management
support system to financial institutions increased, as revenues from projects orders for which had been received in the second half of theprevious fiscal year were recognized during the period under review. As a result, net sales in this segment increased 2.4% year on year to
3,092 million yen.
Income from the sales of management support systems to financial institutions as well as the provision of support for systemdevelopment and implementation to educational institutions increased year on year. In addition, income from the provision of support
for system development and implementation to financial institutions was up year on year due in part to a higher gross profit marginresulting primarily from reduced subcontract expenses and in part to the absence of unprofitable projects that had affected negatively the
profitability of this segment the previous fiscal year. As a result, the segment income was 59 million yen, compared with a loss of 7
million yen for the same period the previous fiscal year.
The Group's combined net sales of these two segments jumped 5.2% year on year to 7,276 million yen, which marked record-highsix-month sales for the Group.
While the Group's consolidated operating profit surged 42.0% year on year to 54 million yen, ordinary profit was down 17.9% to 57
million yen due to a decrease in foreign exchange gains and the posting of a share of loss of entities accounted for using equity method.
The Group posted a profit of 19 million yen attributable to owners of parent, compared with a loss of 20 million yen the previous fiscal
year.
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 and interest-bearing debts) are as follows for thesix months ended June 30, 2020:
EBITDA: 101 million yen, up 44.8% year on year
ROIC (annualized): 3.5%, compared with 2.4% for the same period the previous fiscal year-4-Consolidated financial result
1

SIOS Corporation

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

LifeKeeper
A failover software product that automatically switches a failed primary server to a backup server.

3

Red Hat Enterprise Linux

4

Red Hat, Inc. Related Items

Linux OS developed by the open solution provider Red Hat, Inc.
Linux OS product developed by Red Hat, Inc., a provider of open source solutions.
5

OSS
Abbreviation for open source software, Software whose source code, which is the fundamental component of the program, ismade available for free and can be used, modified, and redistributed.

6

Software application 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 runningon an MFP.

7

Subscription business model
A business model that charges customers a recurring monthly or annual fee to access a software product or service.

(2) Financial Position(i) Assets
Current assets amounted to 4,652 million yen as of June 30, 2020, up 3.9% from the end of the previous fiscal
year, reflecting an increase of 329 million yen in cash and deposits and a decrease of 147 million yen in notes
and accounts receivable trade.
Non-current assets amounted to 875 million yen, up 2.6% from the previous fiscal year-end, reflecting an
increase of 86 million yen in software, a decrease of 65 million yen in software in progress, and a decrease of
18 million yen in property, plant and equipment.
As a result, total assets amounted to 5,527 million yen, up 3.7% from the previous fiscal year-end.
(ii) Liabilities
Current liabilities amounted to 3,646 million yen, up 8,7% from the previous fiscal year-end, reflecting an
increase of 359 million yen in advances received.
Non-current liabilities amounted to 603 million yen, down 9.7% from the previous fiscal year-end, reflecting adecrease of 61 million yen in long-term loans payable.
As a result, total liabilities amounted to 4,250 million yen, up 5.6% from the previous fiscal year-end.
(iii) Net assets
Total net assets amounted to 1,277 million yen, down 2.4% from the previous fiscal year-end, reflecting a
profit of 19 million yen attributable to owners of parent for the period under review and cash dividends paid.
(3) Forward-looking Statements Including Consolidated Business Forecasts
The consolidated business forecasts for the fiscal year ending December 31, 2020, remain unchanged from asstated in Consolidated Financial Results for the Fiscal Year Ended December 31, 2019, announced on
February 5, 2020.
Since April 7, 2020, when the Japanese government declared a state of emergency over the COVID-19
outbreak, all our employees have switched to teleworking. The group-wide implementation of teleworking has
not had a material impact on the Group's business operations; however, a prolonged duration of the
COVID-19 crisis might adversely affect the Group's business performance going forward.
We will announce promptly an update on consolidated business forecasts for the fiscal year ending December
31, 2020, if any material change should arise.

-5-

Consolidated financial result

SIOS Corporation

2. Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheet(Unit: thousand yen)

FY 2019(as of December 31, 2019)

FY 2020 Q2(as of June 30, 2020)

2,266,069
1,754,762
47,536
181,936
229,853-200
4,479,958

2,595,132
1,607,303
50,028254,547
145,945-200
4,652,756

112,31274,480186,792

101,163
67,084
168,248786
39,720184,413
1,916
226,835357
126,387
119,117
1,848
247,710137,073
43,741
207,904
55,233-5,071
438,881852,5095,332,468

137,286
40,701
220,973
65,230-5,071
459,119875,079
5,527,835

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Work in progress
Advance payment
Other
Allowance for doubtful accounts
Total current assets
Fixed assets
Tangible fixed assets
Buildings (net)Other (net)Total tangible fixed assets
Intangible fixed assets
Goodwill
Software
Software in progress
Other
Total intangible fixed assets
Investment and other assets
Investment securities
Net defined retirement assets
Guarantee deposits
Other
Allowance for doubtful accounts
Total investment and other assets
Total fixed assets
Total assets-6-

Consolidated financial result

SIOS Corporation(In thousands of yen)
December 31, 2019
Liabilities
Current liabilities
Accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Income taxes payable
Advances received
Provision for bonuses
Provision for loss on order received
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Net defined benefit liability
Lease obligations
Long-term deposits received
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Total accumulated other comprehensive income
Subscription rights to shares
Total net assets
Total liabilities and net assets-7-

June 30, 2020

856,680
50,000132,303
7,156
19,6191,842,348
34,262326
413,077
3,355,774

773,558
50,000126,472
7,340
31,3242,202,221
25,251
371
430,384
3,646,923

413,620
230,539
11,362
11,632
750
667,905
4,023,679

352,060
226,330
12,430
11,632
754
603,2074,250,131

1,481,520
82,963-87,198
1,477,284

1,481,520
59,430-87,230
1,453,719-3,961-7,649-208,398-212,360
43,863
1,308,788
5,332,468-216,501-224,151
48,135
1,277,703
5,527,835

Consolidated financial result

SIOS Corporation(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive
IncomeQuarterly Consolidated Statements of Income
Six months ended June 30

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Foreign exchange gains
Share of profit of entities accounted for using
equity method
Other
Total non-operating income
Non-operating expenses
Interest expenses
Loss on investments in partnership
Share of loss of entities accounted for using
equity method
Loss on valuation of derivatives
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on reversal of subscription rights tosharesTotal extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Other
Total extraordinary losses
Profit before income taxes
Income taxes-current
Income taxes-deferred
Total income taxes
Profit (loss)
Profit (loss) attributable to owners of parent

Six months ended June 30,
20196,914,723
4,789,986
2,124,736
2,086,416
38,319(In thousands of yen)Six months ended June 30,
2020
7,276,483
5,097,568
2,178,914
2,124,512
54,402

6,382
27,166

3,956
9,053

5,785

-

3,603
42,9397,887
20,897

1,981
12

1,617
1,269

-

11,087

8,272
435
10,701
70,5573,172
214
17,362
57,938

450

-

450

-

71,00861,501
29,637
91,138-20,130-20,130

615
268
883
57,05537,24537,24519,80919,809-8-

Consolidated financial result

SIOS Corporation

Quarterly Consolidated Statements of Comprehensive Income
Six months ended June 30(Unit: thousand yen)

Profit (loss)
Other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Share of other comprehensive income ofentities accounted for using equity method
Total other comprehensive income
Quarterly comprehensive income(Comprehensive income attributable to)
Quarterly comprehensive income attributableto owners of the parent

Six months ended
June 30, 2019
(From January 1,
2019through June 30,
2019)-20,130-9-Six months ended June 30,
2020(From January 1, 2020
through June 30, 2020)
19,809-209-3,687-16,168-8,206-324

103-16,702-36,832-11,791
8,018-36,832

8,018

Consolidated financial result

SIOS Corporation(3) Quarterly Consolidated Statements of Cash Flows(In thousands of yen)
Six Months Ended
June 30, 2019
Cash flows from operating activities
Profit (loss) before income taxes
Depreciation
Amortization of goodwill
Interest and dividend income
Interest expenses
Loss (gain) on investments in partnership
Share of (profit) loss of entities accounted forusing equity method
Decrease (increase) in notes and accounts
receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts
payable-trade
Increase (decrease) in net defined benefit
liabilities
Increase (decrease) in advance received
Decrease (increase) in advance payment
Increase (decrease) in consumption taxes
payableOther
Sub-totalInterest and dividend income received
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
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Purchase of intangible assets
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Purchase of investment securities
Proceeds from distributions from investment
partnerships
Loan advances to subsidiaries and associates
Other
Net cash provided by (used in) investing
activities
Cash flows from financing activities
Dividends paid
Repayments of long-term loans payable
Other
Net cash provided by (used in) financing
activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of quarter- 10 -Six Months Ended
June 30, 2020

71,00843,823428-6,6761,981
1257,05546,192428-4,464
1,617
1,269-5,785

11,087

76,166

145,501

77,205-4,77185,851-83,122

2,360-4,208

216,415-57,256

367,997-72,610-99,752

91,03580,019485,802
6,676-1,981
53,157-93,641-14,223538,783
4,464-1,61730,033-31,657

450,014540,005-130,000
130,000-7,846-40,537
-594
2,647
-

-130,000
130,000-2,134-44,975-17,741336-25,000-

19,813

1,087-21,542271-45,243-90,971-66,558
6,466-42,707-67,391-4,120-60,091-114,219-10,965-5,751

333,713

329,0632,008,821
2,342,535

2,136,069
2,465,132

Consolidated financial result

SIOS Corporation(4) Notes to Quarterly Consolidated Financial Statements
Notes to Going Concern Assumption
Not applicable(Notes on significant changes in the amount of shareholders' equity)
Six months ended June 30, 2019
1. Dividend payments
Not applicable.
2. Dividends for which the record date fell in this period with an effective date falling after the last day of this period
Not applicable.
3. Significant changes in shareholders' equity
As per the resolution adopted at the 22nd general meeting of shareholders held on March 28, 2019, and pursuant to Article
452 of the Companies Act of Japan, the Company, on the same date, reduced other capital surplus by 480,279,000 yen andtransferred it to retained earnings brought forward to dispose deficit.
There was no significant change in the total amount of shareholders’ equity.
Six months ended June 30, 2020
1. Dividend payments
The following resolution was adopted at the Board of Directors' Meeting held on February 21, 2020:
Matters concerning dividends on common stocksi.

Total amount of dividends: 43,343,000 yen

ii.

Source of dividends: Retained earnings

iii.

Dividend per share: 5.00 yen

iv.

Record date: December 31, 2019v.

Effective date: March 30, 2020

2. Dividends for which the record date fell in this period with an effective date falling after the last day of this period
Not applicable.
3. Significant changes in shareholders' equity
Not applicable.

- 11 -

Consolidated financial result

SIOS Corporation

Segment Information【Segment Information】
I. For the Six months ended June 30, 2019 (From January 1, 2019 through June 30, 2019)
1. Information on the amount of sales and income/loss by reportable segment(Unit: thousand yen)
Reportable segment
Adjustments

Amount recordedin quarterly
consolidated
statements ofincome(Note)

Open systeminfrastructurebusiness

Application
business

3,893,255

3,021,347

6,914,603

120

6,914,723

―

475

475

-475

―

3,893,255

3,021,823

6,915,078-355

6,914,723

46,087-7,88738,199120

38,319Total

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

Note: The total amount of segment income (loss) is adjusted to be equal to operating profit presented in the quarterly consolidated
statements of income.
Supplementary Information
Information by region
In addition to the disclosure required by “Accounting Standard for Quarterly Financial Statements,” information (Sales) by region isdisclosed in accordance with “Accounting Standard for the Disclosure of Segment Information” for the purpose of providing users offinancial statement with valuable information.
Net sales
Six months ended June 30, 2019 (From January 1, 2019 through June 30, 2019)(Unit: thousand yen)Japan
6,472,353

Americas317,015

EuropeOther regions

91,33734,016

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

Total
6,914,723

Consolidated financial result

SIOS Corporation

II. For the six months ended June 30, 2020 (From January 1, 2020 through June 30, 2020)
1. Information on the amount of sales and income/loss by reportable segment(Unit: thousandyen)

Adjustments

Amount recordedin quarterly
consolidated
statements ofincome(Note)

7,276,363

120

7,276,483

1,498

2,192

-2,192―

4,184,122

3,094,433

7,278,555-2,072

7,276,483-5,51759,80054,282120

54,402

Reportable segment
Open systeminfrastructurebusiness

Application
business

4,183,428

3,092,935

694

Total

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

Note: The total amount of segment income (loss) is adjusted to be equal to operating profit presented in the quarterly
consolidated statements of income.
Supplementary Information
Information by region
In addition to the disclosure required by “Accounting Standard for Quarterly Financial Statements,” information (Sales) by region isdisclosed in accordance with “Accounting Standard for the Disclosure of Segment Information” for the purpose of providing users offinancial statement with valuable information.
For the six months ended June 30, 2020 (From January 1, 2020 through June 30, 2020)(Unit: thousand yen)Japan
6,959,197

Americas217,520

EuropeOther regions

69,551

30,213

Note: Sales are classified by country or region in which customers are located.
2. Information on impairment loss of fixed assets or goodwill by reportable segment
Not applicable- 13 -

Total
7,276,483

Consolidated financial result

SIOS Corporation(Significant subsequent events)(Simplified absorption-type company split of SIOS Technology, Inc., a consolidated subsidiary)
The board of directors of SIOS Technology, Inc., a consolidated subsidiary of the Company, adopted on June 11, 2020, a resolution
to divest its DirectorGear business to BMAT Music Innovation Co., Ltd. by means of an absorption-type company split. On the sameday, SIOS Technology, Inc. signed an agreement to that effect with BMAT Music Innovation Co., Ltd.
As per this agreement, said business was transferred to BMAT Music Innovation Co., Ltd., with the effective date of July 1, 2020.
1. Outline of Business Divestiture(1) Name of succeeding company
BMAT Music Innovation Co., Ltd.
(2) Description of divested businessWeb services for broadcasters(3) Reason for business divestiture
To make SIOS Technology's management foundation more robust by focusing on its core businesses(4) Effective date of business divestiture
July 1, 2020
(5) Other matters related to the outline of transaction including the legal form of transaction
This is an absorption-type company split under which SIOS Technology, Inc. acts as a divesting company and BMAT Music
Innovation Co., Ltd. acts as a succeeding company. The latter will pay to the former 190,000,000 yen in cash for succeeding
the rights and obligations associated with the divested business. This company split falls under the simplified absorption-typecompany split defined in the provisions of Article 784-2 of the Companies Act of Japan.
2. Outline of Accounting Processing Completed(1) Amount of gain or loss on transfer
Gain on transfer of business: 68,358,000 yen(2) Descriptions and fair book value of assets and liabilities associated with the divested business
Non-current assets (primarily software in progress): 121,452,000 yen
Non-current liabilities (provision for retirement benefits): 1,955,000 yen(3) Accounting processing
For this company split, the divesting company will complete accounting processing in accordance with the AccountingStandard for Business Divestitures (ASBJ Statement No. 7, published on September 13, 2013) and the Guidance on
Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No. 10,
published on January 16, 2019).
3. Reporting segment in which the divested business was included
The DirectorsGear business was included in the Application Business segment.
4. Estimated amount of profit and loss from the divested business included in the consolidated statement of income for the period
under review
Net sales: 80,132,000 yen
Operating profit: 25,071,000 yen- 14 -

Consolidated financial result

SIOS Corporation(Simplified absorption-type company split of Keyport Solutions, Inc., a consolidated subsidiary)
The board of directors of Keyport Solutions, Inc., a consolidated subsidiary of the Company, adopted on July 14, 2020, a resolution
to divest its public outsourcing business to Hirokei Co., Ltd. by means of an absorption-type company split. On the same day, Keyport
Solutions, Inc. signed an agreement to that effect with Hirokei Co., Ltd.
1. Outline of Business Divestiture(1) Name of succeeding company
Hirokei Co., Ltd.
(2) Description of divested business
Public outsourcing business(3) Reason for business divestiture
To make Keyport Solutions' management foundation more robust by focusing on its core businesses(4) Scheduled effective date of business divestiture
September 1, 2020
(5) Other matters related to the outline of transaction including the legal form of transaction
This is an absorption-type company split under which Keyport Solutions, Inc. acts as a divesting company and Hirokei Co.,
Ltd. acts as a succeeding company. The latter will pay to the former 142,000,000 yen in cash for succeeding the rights andobligations associated with the divested business. This company split falls under the simplified absorption-type company split
defined in the provisions of Article 784-2 of the Companies Act of Japan.
2. Outline of Accounting Processing Completed(1) Estimated amount of gain or loss on transfer
Gain on transfer of business: 124,784,000 yen(2) Descriptions and estimated fair book value of assets and liabilities associated with the divested businessCurrent assets: 15,930,000 yen
Non-current assets: 940,000 yen(3) Accounting processing
For this company split, the divesting company will complete accounting processing in accordance with the AccountingStandard for Business Divestitures (ASBJ Statement No. 7, published on September 13, 2013) and the Guidance on
Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No. 10,
published on January 16, 2019).
3. Reporting segment in which the divested business was included
The public outsourcing business to be divested was included in the Application Business segment.
4. Estimated amount of profit and loss from the divested business included in the consolidated statement of income for the period
under review
Net sales: 84,470,000 yen
Operating loss: 15,104,000 yen- 15 -

Consolidated financial result

SIOS Corporation(Absorption-type merger of consolidated subsidiaries)
The Board of Directors of the Company adopted on July 6, 2020, a resolution to resolve and merge Keyport Solutions, Inc. and
Gluegent, Inc., both consolidated subsidiaries of the Company, into SIOS Technology, Inc., another subsidiary of the Company.
1. Outline of transaction(1) Names and natures of business of the parties involved in business combination(i) Absorbing company
Name: SIOS Technology, Inc.
Description of business: Development of, infrastructure implementation for, and operation support for information systems(ii) Resolving companies
Name: Keyport Solutions, Inc.
Description of business: Consulting services for and development of information systems
Name: Gluegent, Inc.
Description of business: Development and sales of cloud services; contracted development of information systems(2) Reason for business combination
To consolidate human, intellectual property, and financial assets of these three key subsidiaries in Japan to achieve greater
operational efficiency and productivity(3) Scheduled effective date of business combination
October 1, 2020
(4) Legal form of business combination
Absorption-type merger in which Keyport Solutions, Inc. and Gluegent, Inc. will be resolved and merged into SIOS
Technology, Inc., which will be a surviving company(5) Company name after business combination
SIOS Technology, Inc.
(6) Other matters related to the outline of transaction
As this merger is among wholly owned subsidiaries of the Company, no share or other monetary consideration will beallotted to the Company.
2. Outline of Accounting Processing to Be Completed
The Company will process this transaction as one under common control in accordance with the Accounting Standard for Business
Combinations (ASBJ Statement No. 21, published on January 16, 2019) and Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No. 10, published on Jan- 16 -