First Half of Fiscal 2014

㸦Ticker code: 4662㸧

(Six month ended September 2013)

Interim Financial Results Supplementary Explanation Material
Focus Systems CorporationNovember 2013This document uses information available as of November 11, 2013, and contains forward-looking statements that represent
management’s expectations or beliefs relating to future events. Actual results could differ materially from those stated or implied inthese forward-looking statements. The Focus Systems Group does not guarantee the information’s accuracy.
http://www.focus–s.com
1CopyrightFocus Systems Corporation

Operational Policies for Fiscal 2014In order to further secure anticipated business opportunities, the Company plans to makeinvestments in the current fiscal year eyeing business expansion in the coming years.

(1) Infrastructure-related business that commands ample demand → Enhance staff capabilities(2) Operations support business → Expand market share㻌 Business applications → Endeavor on technological expertise(3) Support for business bases → Expand services into the Tokai region centering on Nagoya,㻌 on top of our ongoing focus on the Kanto and Kinki regions

2CopyrightFocus Systems Corporation

Overview of the Operational Results for the 1st Half of Fiscal Year(¥ million)

1st half of FY
ended March2013
Results

1st half of FY
ending March2014
Results

AmountNet Sales

5,704

6,442

737

12.9%

㻌㻌

Public Sector

1,951

2,005

53

2.7%

㻌㻌Private Sector

3,451

3,842

391

11.3%

Security Equipment

302

595

293

97.0%

Operating Income (Loss)

(30)

248

279

䠉

Ordinary Income (Loss)

(32)

240

273

䠉

Net Income (Loss)

(212)

115

328

䠉

Year-on-year change

Ratio

Public Sector: Orders had been on a downward trend but gradually started to show signs of recovery.
Private Sector: Infrastructure-related business enjoyed ample demand.
Security Equipment: Orders were received concentrated in the first half of the fiscal year, impacted by the government’s supplementarybudget, on top of steady orders from government and municipal agencies for anti-cybercrime measures.
Achieved period-on-period increase both in sales and profits due to the supplementary budgets allocated to the first half ofthe fiscal year, although shortage of advanced information technology engineers remained an issue.
3CopyrightFocus Systems CorporationNon-consolidated Balance Sheets(¥ million)
As of Sep. 30,
2012

As of Mar. 31,
2013

As of Sep. 30,
2013

Current Assets

5,187

5,559

5,469

Non-current Assets

6,187
3,774
35
2,377
11,374

5,636

5,507
3,733
39
1,734
10,977Item(ASSETS)㻌 Property, Plant and Equipment
㻌 Intangible Assets
㻌 Investments and Other Assets

Total Assets

3,746
38
1,851

11,195(LIABILITIES)

3,963
2,583
6,547

3,769

2,905

Retained earnings

2,905
1,468
(86)

367

2,905
1,468
379

Treasury shares

(623)

(706)

(706)

Total shareholders’ equity
Valuation and Translation
Adjustments

3,664

4,035

4,046

1,163

833

732

Total Net Assets

4,827

4,868

4,779

Total Liabilities and Net Assets

11,374

11,195

10,977

Current Liabilities

Non-current Liabilities
Total Liabilities

2,556
6,326

3,713
2,485
6,198

(NET ASSETS)

Capital stock
Capital surplus

1,468

4

Total assets decreased by ¥217 million
compared with the end of the previous fiscalyear.
This was largely because of decreases of ¥158
million in investment securities, ¥97 million in
cash and deposits and ¥33 million in notes andaccounts receivable – trade despite an increaseof ¥155 million in work in process.

CopyrightFocus Systems Corporation

Non-consolidated Income Statements(¥ million)
First Half of FY2012(ended Sep. 30,2011㻕㻌

First Half of FY2013(ended Sep. 30,2012㻕㻌

First Half of FY2014(ended Sep. 30,
2013㻕㻌

5,588

5,704

6,442

Cost of Sales

5,075

5,157

5,674

Gross Profit

512

547

768

SG & A Expenses

593

577

519

Operating Income (Loss)

(81)

(30)

248

Non-operating Income

31

43

36

Non-operating Expenses

454544

Ordinary Income (Loss)

(94)

(32)

240

Extraordinary Income㸫525㸫

Extraordinary Losses

㸫705

㸫

Income (Loss) before
Income Taxes

(94)

(212)

240

Income Taxes

㸫㸫125

Net Income (Loss)

(94)

(212)

115

ItemNet Sales

5

Net sales climbed ¥737 million from the same
period of previous fiscal year.
This was due mainly to a ¥391 million increaseof private sector business and a ¥293 million
increase of security equipment.
The Company thus posted a gross profit of¥768 million, up ¥221 million from the same
period of previous fiscal year.

The extraordinary income of ¥525 million for
the first half of previous fiscal year wasprimarily comprised of ¥301 million in gain on
sales of investment securities and ¥222 million
in surrender value of insurance.
The extraordinary losses of ¥705 million wasprimarily comprised of ¥704 million in directors’
retirement benefits.

As a result, net income was ¥115 million,increased ¥328 million from the same period ofprevious fiscal year.

CopyrightFocus Systems Corporation

Non-consolidated Performance (Last 3 years)(¥ million)

Net sales
6,442

5,704

5,588

Gross profit
768
512547

1st half ofFY2012

1st half ofFY2013

800

6,000

600
4,000
400
2,0000200
1st half ofFY2012

1st half ofFY2013

0

1st half ofFY2014

Operating income (loss)

Ordinary income (loss)
248

300

1st half ofFY2014

Net income (loss)
240
115

200
100
0(30)

(100)
(200)
(300)

(81)

(94)

(32)

(94)
(212)

1st half of FY2012

1st half of FY2013
6

1st half of FY2014
CopyrightFocus Systems Corporation

Non-consolidated Statements of Cash Flows(¥ million)
First Half of FY2014(ended Sep. 30, 2013㻕㻌

ItemϨ㻌 Cash Flows from Operating Activities

300ϩ㻌 Cash Flows from Investing Activities(48)Ϫ㻌 Cash Flows from Financing Activities(323)

IV㻌 Net Increase (Decrease) in Cash and Cash Equivalents(71)

V Cash and Cash Equivalents at Beginning of Period

2,395

VI Cash and Cash Equivalents at End of Period

2,323

Ϩ Cash Flows from Operating Activities
Net cash provided by operating
activities was ¥300 million. The main
factors were ¥240 million of income
before income taxes and ¥162 million ofincrease in provision for employees’
bonuses and ¥61 million of increase innotes and accounts payable, which
offset ¥157 million of increase ininventories.

ϩ Cash Flows from Investing Activities
Net cash used in investing activitieswas ¥48 million. The main factors were
¥32 million in purchase of insurance
funds, ¥18 million in purchase ofproperty, plant and equipment, ¥14
million of payments for guarantee
deposits and ¥10 million of payments ofloans receivable, which offset ¥25
million of decrease in time deposits.

Ϫ Cash Flows from Financing Activities
Net cash used in financing activities was¥323 million. The main factors were ¥804
million in repayments of long-term loans
payable and ¥143 million in net decreasein short-term loans payable, which offset¥630 million in proceeds from long-termloans payable.

ϭ Cash and Cash Equivalents at End of Period As a result, cash and cash equivalents at period-end decreased ¥71 million from beginning of the period to ¥2,323 million.
7CopyrightFocus Systems Corporation

Segment Information(¥ million)
Net sales of first half period (6 month ended September)
FY2011FY2012FY2013
FY2014

2,374

2,150

1,951

2,005

Although conditions had remained
harsh since the Democratic Party ofJapan came into power as it revisedplans and reduced budgets, among
other matters, signs of recovery
started to appear gradually in the firsthalf of the current fiscal year.

2,866

3,262

3,451

3,842

Organizational framework wasestablished to enhance orderprocessing, given a steady increasein demand.
More orders were received fromclients such as IBM Japan, CTC andNTT DATA INTRAMART.

152

175

302

595

Strong sales were achieved forgovernment and municipal agencies
through reinforcement of anticybercrime offerings. Supplementarybudget prepared in line with thegovernment’s policy also helped drive
sales in the first half of the current
fiscal year.

Public sector

Private sector

Security equipment

8CopyrightFocus Systems Corporation

Sales to Key Customers
Public sector-related
business showed signsof recovery

By customer group(¥ million)
2,500
2,000

NTT DATA related
IBM Japan related

1,500

CTC related

1,000

OKI related
SoftBank related

500

Product sales0

1st half of FY2012(¥ million)

1st half of FY2013

1st half of FY2014

Demand was strong foranti-cybercrime products

By key customer

IBM Japan-related salesincreased dramatically

1,400
1,200
1,000
800

IBM Japan600

NTT DATANTT DATA i

400

CTC200WILLCOM

0

1st half of FY2012

1st half of FY20139

1st half of FY2014

CopyrightFocus Systems Corporation

Projections for Fiscal Year Ending March 2014

Fiscal 2014
(from April 1, 2013 –March 31, 2014)

Projections

Net Sales(¥ million)

Operating Income(¥ million)

Ordinary Income(¥ million)

300

250

12,50010Net Income(¥ million)

100

Cash Dividends
per Share (¥)

12.00

CopyrightFocus Systems Corporation