SANIX INCORPORATED
Summary of Consolidated Financial Statements
For the Fiscal Year Ended March 31, 2016
[Japanese Standards]

The financial figures in this document are based on Japanese Accounting Standards and accompanying laws. Amounts are rounded off to 1
decimal place. This document is an English translation of the Japanese‐language original.

Consolidated Financial Statements for the Fiscal Year ended March 31, 2016
SANIX INCORPORATED
Stock Listed:Tokyo Stock Exchange First Section, Fukuoka Stock Exchange

Code No;

4651

URL:

http://sanix.jp

President and CEO:Shin-ichi Munemasa

Contact:

Kozo Inoue, Director, Management Corporate Officer,
General Manager of Management & Planning Division

1. Business Results – Operating results for the Fiscal Year ended March 31, 2016
(April 1, 2015 to March 31, 2016)(1) Consolidated Operating Results(In Millions of Yen)
Fiscal Year
From April 1 to March 31
FY2015%change

Net Sales······························································

61,916

Operating Income ··················································FY2014%change(35.3%)

95,62913.5%(2,229)－(3,142)－

Ordinary Income ····················································(1,949)－(3,439)－Net Income ···························································(4,604)－(4,966)－Net Income per Share (¥) ········································(¥96.32)－(¥103.98)－

Net Income per Share, Diluted(¥)······························

－

－

－

－

Return on Equity ····················································(93.0%)－(52.0%)－

Ratio of Recurring Profit to Net Assets ·······················(4.9%)－(6.6%)－

Ratio of Operating Income to Net Sales ·····················(3.6%)－(3.3%)－(Note) Comprehensive Income ································(4,699)－(4,743)－(2) Consolidated Financial Position(In Millions of Yen)
Fiscal YearAs of March 31
FY2014FY2015
Total Assets ···························································

31,24849,120Net Assets ····························································

2,629

7,331

Shareholders’ Equity Ratio (%) ·······························

8.3%

14.9%

Net assets per share(¥) ···········································¥54.34¥152.74(Reference) Equity Capital ·······································

2,597

7,302

(3) Consolidated Financial Cash Flows(In Millions of Yen)
Fiscal Year
From April 1 to March 31
FY2014FY2015
Cash Flows from Operating Activities·························(5,403)(1,794)

Cash Flows from Investing Activities ··························

1,062(1,181)

Cash Flows from Financing Activities·························

1,288

647

Cash and Equivalents ,End of Period ························

2,218

5,329

2. Dividends
Quarterly Period
1st

2nd

3rd

4th

Quarter

Quarter

Quarter

Quarter

Annual(Dividends per Share)
FY2014 ended March 31, 2015······························

0.00

0.00

0.00

0.00

0.00

FY2015 ended March 31, 2016······························

0.00

0.00

0.00

0.00

0.00

FY2016 ended March 31, 2017 (Forecast)···············

0.00

0.00

0.00

0.00

0.00

Quarterly Period
Total

1st

2nd

3rd

4th

Quarter

Quarter

Quarter

Quarter

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

AnnualPayoutDividends

Dividend

ratio

to Net Assets

paid(consolidated)(consolidated)

－

－

－

－

－

－

(Dividends per Share)
FY2014 ended March 31,
2015 ·································FY2015 ended March 31,
2016 ·································FY2016 ended March 31,－

2017(Forecast) ···················

3. Forecasts for Consolidated Business Results (April 1, 2016 to March 31, 2017)(In Millions of Yen)
Fiscal Year 2016
From April 1 to March 31
First Half%change

Full Year%change

Net Sales······························································

22,870(25.3%)

46,670(24.6%)

Operating Income ··················································

(520)

－

600

－

Ordinary Income ····················································

(580)

－

480

－

Net Income ···························································(1,000)

－

(60)

－

Net Income per Share (¥) ········································(¥20.92)(¥1.26)

* Notes(1) Changes in significant subsidiaries during the period(Change in scope of consolidations resulting from change in subsidiaries): None
Number of subsidiaries newly consolidated－
Name of subsidiaries newly consolidated－
Number of subsidiaries excluded from consolidation－
Name of subsidiaries excluded from consolidation－(2) Changes in accounting policies and accounting estimates retrospective restatementⅰ) Changes in accounting policies based on revisions of accounting standard: trueⅱ) Changes in accounting policies other than ones based on revisions of accounting standard: Noneⅲ) Changes in accounting estimates: Noneⅳ) Retrospective restatement: None
(Note) For details, please refer to “V. (5) Notes to the Consolidated Financial Statements [Changes in Accounting Policies]” on page 21 of
the Attachment.

(3) Number of Issued and Outstanding Shares (Common Stock)(Shares)
End of term
FY 2015

FY 2014

Number of issued and outstanding shares ,end of period (including treasury stock)48,919,396

48,919,396

Number of treasury stock ,end of period······························································

1,113,443

1,113,143

Average number of shares during the fiscal term ··················································

47,806,103

47,763,330(Reference) Business Result-Overview of non-consolidated Operating Results
1. Business Results – Operating results for the Fiscal Year ended March 31, 2016
(April 1, 2015 to March 31, 2016）(1) Non-Consolidated Operating Results(In Millions of Yen)
Fiscal Year
From April 1 to March 31
FY2015%change

FY2014%change

Net Sales······························································

56,700(30.3%)

81,328136.7%

Operating Income ··················································(2,800)－(3,342)－

Ordinary Income ····················································(2,599)－(3,571)－Net Income ···························································(4,700)－(3,272)－Net Income per Share (¥) ········································(¥98.33)－(¥68.52)－

Net Income per Share(, Diluted(¥)·····························

－

－

－

－

(2) Non-Consolidated Financial Position(In Millions of Yen)
Fiscal YearAs of March 31
FY2014FY2015
Total Assets ···························································

26,05642,327

Net Assets ····························································

793

5,631

Shareholders’ Equity Ratio (%) ·······························

3.0%

13.3%

Net assets per share(¥) ···········································¥16.59¥117.80(Reference) Equity Capital ·······································

793

5,631

2. Forecasts for Non-Consolidated Business Results （April 1, 2016 to March 31, 2017）(In Millions of Yen)
Fiscal Year 2016
From April 1 to March 31
First Half%change

Net Sales······························································

20,423(27.7%)

Ordinary Income ····················································(547)

Net Income ···························································(867)

Net Income per Share (¥) ········································(¥18.14)Full Year%change

41,771(26.3%)

－

186

－

－

(183)

－

(¥3.83)*Indication of Implementation status about audit procedure:This summary of financial statements is exempt from audit procedure required by Financial Instruments and Exchange Act. A
part of this statements based on Financial Instruments and Exchange Act have not finished at the time of disclosure of thisstatements.
*Notes to ensure appropriate use of forecasts for the business results:
Forecasts in this document are based on assumptions, prospects and plans as of the date of this document. Actual results may
differ significantly from these forecasts, due to various factors affecting the Company’s business performance, such as change ineconomic conditions. For details of these assumptions, prospects and plans, and for notes appropriate use of forecasts for thebusiness results, please see page 2 of the Attachment.

Index of the attachment
1. Analysis of Business Results & Financial Condition ..................................................................

2(1) Analysis of Consolidated Business Results ..................................................................................

2(2) Analysis of Consolidated Financial Position ..................................................................................
(3) Basic Policy concerning the Distribution of Profit, and Dividend Distributions
for the year under review and the subsequent year ....................................................................
(4) Business and Other Risks ...............................................................................................................

56(5) Important Events concerning the Assumption of Going Concern ..............................................

8

2. The Group Outline ............................................................................................................................

10

3. Management Policies ......................................................................................................................

12(1) Fundamental Business Management Policies ..............................................................................

12(2) Target Management Indices ............................................................................................................

12(3) Medium- and Long- Term Business Strategies and Issues to be Addressed ...........................

12(4) Challenges the Company Faces .....................................................................................................

13

4. Basic Position regarding the Choice of Accounting Standards ...................................

14

5. Consolidated Financial Statements ..........................................................................................

15(1) Consolidated Balance Sheets .........................................................................................................

15(2) Consolidated Statements of Income and Comprehensive Income ............................................

17

Consolidated Statements of Income.........................................................................................

17

Consolidated Statements of Comprehensive Income............................................................

18(3) Consolidated Statements of Changes in Net Assets ...................................................................

19(4) Consolidated Statements of Cash Flows .......................................................................................

23(5) Notes to the Consolidated Financial Statements..........................................................................

25

Going Concern Considerations .................................................................................................

25

Segment Information, etc. ........................................................................................................

27

6. Others ....................................................................................................................................................

28

Consolidated Net Sales by Division ...............................................................................................

28

7

2

1. Analysis of Business Results & Financial Condition(1) Analysis of Consolidated Business Resultsⅰ) Consolidated Business Results for the current period
In the consolidated fiscal year ending March 31, 2016, the Japanese economy continued tofollow a modest recovery path, with improved corporate earnings and an upturn in
employment conditions. However, the outlook remained uncertain due to concerns about
decelerating economy.
Under such a business environment, our Group made effort to spur more demand with the
integrated business ranging from the development and procurement of members forphotovoltaic (PV) systems to the sales, construction and maintenance of PV systems. The
market environment surrounding the PV system was trying which the operation of the“Renewable Energy Feed in Tariff Purchasing Program” was revised drastically and the like.
To respond appropriately to changes in the business environment, the Group took steps tostrengthen its sales In the Kanto, the Kansai and the Tyukyo districts which are in high demand forelectric power, and worked to improve profitability that the Group reduced fixed costs by early
retirement program of approximately 900 employees, and the elimination and consolidation.
As for sales in the consolidated fiscal year under view, the Group was hurt by changes in
the market environment for the solar electric power business, so the sales results in asignificant fall. As a consequence, the net sales of the entire Group were ¥61,916 million(decreased 35.3% year on year).
In terms of profitability, the Group posted an operating loss with drastic decrease inrevenue in Solar Engineering business, however costs are gradually decreasing due tomanagement rationalization. As a consequence, for the whole Group, the operating loss was¥2,229 million compared to the operating loss of ¥3,142 million in the same period of theprevious year, and the ordinary loss was ¥1,949 million compared to the ordinary loss of¥3,439 million in the same period of the previous year. In addition, the Group posted an
impairment loss of ¥991 million, reflecting the elimination and consolidation of stores and areduction in the book value of fixed assets for business in the SE Division as a result of areview of their recoverability, a loss on sales of non-current assets of ¥796 million associatedwith the transfer of non-current assets, expenses related to voluntary retirement of ¥403
million, and a settlement package of ¥316 million associated with litigation as extraordinary
losses. Reflecting the extraordinary losses, the Group posted a net loss belonging to theshareholders of the parent company of ¥4,604 million, compared to a net loss belonging to
the shareholders of the parent company of ¥4,966 million in the same period of the previous
year.
Consolidated results of individual divisions for this fiscal year were as follows:

3a. Solar Engineering (SE) Division
The sales in the East Japan region increased by 8.4% year-on-year. However, sales in theWest Japan region declined by 58.8% due to the effect of a change in the market
environment. As a consequence, the sales were ¥39,871 million (decreased 44.8% year onyear).
The Group worked to reduce fixed costs, including personnel expenses, through thoroughstreamlining, and profitability improved. However, given the large decline in sales, anoperating loss of ¥202 million was posted (compared to an operating loss of ¥2,291 million in
the same period of the previous year).
(Reference: Average number of employees is 2,752 for FY2014, 1,485 for FY2015 in SE
Division)b. Home Sanitation (HS) Division
The HS Division focused on maintenance-related customer management such as termite
control services and floor/ceiling ventilation systems. As a result, net sales were ¥6,519
million (decreased 14.3% year on year).The operating income decreased 62.4% year on yearto ¥614 million due to decreases in segment sales.
c. Establishment Sanitation (ES) Division
The ES Division concentrated on sanitation maintenance-related customer management
such as high-rise building and condominiums. As a result, net sales were ¥924 million(decreased 11.2% year on year). However, cost reduction measured results in an operating
profit of ¥53 million in spite of decreases in segment sales (compared to the operating loss of¥48 million in the same period of the previous year).
d. Environmental Resources Development (ERD) Division
Plastic fuel sales declined 4.3% from a year earlier, despite a higher collection volume ofwaste plastic, due to a fall in unit prices. Electricity sales rose 5.0% year on year due to theaddition of sales in the Power Producer and Supplier (PPS) business, which started in
October 2015. As a consequence, the sales were ¥14,601 million (decreased 0.9% year onyear). The operating loss was ¥282 million due to both the decline in sales (a legal inspection
and periodic repair of boilers once every two years and that of turbines once every four years
were conducted.) and the expenses associated with the maintenance at the TOMAKOMAI
Power Plant (decreased 70.9% year on year).

ⅱ) Prospect for the next Consolidated Fiscal Year
Considering the environment of the commercial PV business, the Group reduced fixed
costs in the fiscal year under review through management rationalization initiatives, including

4

workforce reductions through voluntary retirement and the elimination and consolidation of
stores. As a result, in the fourth quarter, the income structure improved, and operating income
moved into the black. However, in the consolidated fiscal year ended March 31, 2016, theGroup posted an operating loss for the second consecutive year.
In this environment, the Group has started to execute its FY2016-FY2018 medium-termbusiness plan, which it announced on April 15, 2016. Under the business plan, the Groupaims to stay in the black and achieve sustainable growth. The Group will work to carry out
management reform and make a stable profit in three businesses.
In the next fiscal year, as stated in the notice of the offering of voluntary retirement, theelimination and consolidation of stores, and the posting of an extraordinary loss dated April 15,
2016, the Group will improve efficiency and profitability and strengthen its management basethrough drastic streamlining, including calling for the voluntary retirement of around 500
employees and the elimination and consolidation of stores.
The Company expects that the commercial PV business will continue to face a challenging
business environment and that sales in the SE Division will decline. However, the Company
expects that the SE Division will move into the black due to an improvement in profitability
resulting from a fall in the costs of components and the reduction of expenses, including
personnel expenses.
The Group will allocate more of its management resources, which have been concentrated
in the SE Division, to the HS Division and the ES Division and will seek to gain new
customers in the divisions. Both divisions expect sales to rise as they enhance their customer
management system and promote follow-up services for the existing customers.
The Environmental Resources Development (ERD) Division will work to improve efficiency
and profitability by changing the unit prices of waste plastic to be collected and improve thequality of waste plastic to be collected. The division expects an increase in electricity sales at
TOMAKOMAI Power Plant and a rise in sales from the Power Producer and Supplier (PPS)
business.
With the above-mentioned prospects for the consolidated financial outlook for the next
consolidated fiscal year of our whole group, we expect net sales to decrease 24.6% to¥46,670 billion, the operating income ¥600 million compared to the operating loss of ¥2,229
million in the same period of the previous year, the ordinary income ¥480 million compared tothe ordinary loss of ¥1,949 million, the net loss belonging to the shareholders of the parent
money stood at ¥60 million compared to the net loss belonging to the shareholders of theparent company of ¥ 4,604 million.

5(2) Analysis of Consolidated Financial Positionⅰ) The status of Assets, Liabilities and Net Assets
Total assets as of the end of the current consolidated fiscal year decreased by ¥17,872
million to ¥31,248 million from the previous consolidated fiscal year. The total liabilities
decreased by ¥13,170 million to ¥28,618 million from the previous consolidated fiscal year.
Net assets decreased by ¥4,701 million to ¥2,629 million from the previous consolidated fiscal
year. As a consequence, the capital-to-asset ratio was 8.3%.
(Assets)
Current assets decreased by 46.4% to ¥16,930 million from the end of the previous
consolidated fiscal year, mainly due to the decrease in cash and deposits by ¥3,987 million,
notes and accounts receivable-trade by ¥8,107 million and inventories by ¥3,120 million.
Fixed assets decreased by 18.4% to ¥14,317 million from the end of the previous
consolidated fiscal year, mainly due to the decrease in property, plant and equipment
because of the sale of assets and impairment of assets by ¥2,681 million.
(Liabilities)
Current liabilities decreased by 30.7% to ¥24,642 million from the end of the previous
consolidated fiscal year, mainly due to the decreased notes and accounts payable-trade by¥11,310 million.
Noncurrent liabilities decreased by 36.2% to ¥3,976 million from the end of the previous
consolidated fiscal year, mainly due to the decreased long-term loan payable by ¥1,968
million and lease obligations by 251 million .
(Net Assets)
Net assets decreased by 64.1% to ¥2,629 million from the previous consolidated fiscal
year, mainly due to the net loss belonging to the shareholders of the parent company of¥4,604 million.

ⅱ) The status of Cash Flows
Cash and cash equivalents (hereinafter “the funds”) decreased by ¥3,111 million to ¥2,218
million from the previous fiscal year.
The status of consolidated cash flows and the factors in the current consolidated fiscal year
are as follows:(Net cash provided by operating activities)
As for net cash provided by operating activities, spending rose by ¥5,403 million (spendingof ¥1,794 million in the previous year), mainly due to decrease in notes and accountpayable-trade of ¥11,074 million, as well as the recognition of ¥4,293 million as a net loss

6

before income tax, although notes and account receivable-trade decreased by ¥8,107,
million, and inventory assets decreased by ¥3,108 million.
(Net cash provided by investing activities)
In regards to net cash provided by investing activities, income was ¥1,062 million(spending of ¥1,181 million in the same period of the previous year), mainly due to proceedsfrom sales of investment securities that was ¥318 million, proceeds from sales of property,
plant and equipment that was ¥709 million.
(Net cash provided by financing activities)
In terms of net cash provided by financing activities, income was ¥1,288 million (income of¥647 million in the previous year), mainly due to the increase of ¥3,757 million in short-termloans payable, despite ¥2,128 million in expenditures for the repayment of long-term loans.

(Reference: The Cash Flow Indicators)
FY2011FY2012

Fiscal Year
FY2013

Shareholders’ equity ratio

33.4%

30.2%

21.3%

14.9%

8.3%

Shareholders’ equity ratio on a market
price basis

53.3%

92.0%

99.2%

37.6%

32.9%

5.34%

3.24%

1.96%

-

-

7.36%

13.3%

25.71%--

Interest-bearing liabilities ratio to cash
flow
Interest coverage ratio

FY2014FY2015(Note) Shareholder’s equity ratio: Shareholder’s equity/Total assets
Share ratio on a market price basis: Total market value of stock/Total assets
Interest-bearing liabilities ratio to cash flow:

Operating cash flow/Interest payment

Interest coverage ratio: Operating cash flow/Interest payment
1. Each indicator is calculated based on consolidated financial results.
2. Total market value of stock is calculated by: closing price at the year-end x outstanding shares at
the year-end.
3. The operating cash flow in this table is cash flow from operating activities reported on the
consolidated cash flow statement. Interest-bearing liabilities cover all liabilities reported on the
consolidated balance sheet for which interest is paid. Interest payment used in the calculation of
the interest coverage ratio is the amount of interest expanse reported on the consolidated cash
flow statement.

(3) Basic Policy concerning the Distribution of Profit, and Dividend Distributions forthe year under review and the subsequent year
As a basic corporate policy, the Company focuses on returning profit to our shareholders,
based on the dividend on the equity ratio, together with the overall consideration of

7

operational expansion and internal reserves. Unfortunately, after considering the negative
retained earnings in the net assets section, the Company deeply regrets that it will not pay
dividends for the current fiscal year. In addition, no dividends will be paid for the next fiscal
year as well. We will work to boost sales and build up internal reserves to generate
distributable profits in the net assets section, and then look to begin paying dividends again in
the near future.

(4) Business and Other Risks
Major risks that may affect the operating results and business of the SANIX Group aredescribed below. Recognizing the possibility of these risks occurring, the SANIX Groupendeavors to take proper measures to avert these risks and minimize any impacts in theevent of occurrence.
Certain future-related statements included in this document are estimates made by theCompany based on the information available at the end of the current fiscal year.

ⅰ) Risk of societal and institutional changes
In regards to the PV System business, going forward the Group expects the popularity ofphotovoltaic power generation to continue to grow as a result of the implementation of the“Act on Special Measures Concerning New Energy Use by Operators of Electric Utilities.”
That said, the Company’s performance and financial situation may be affected if customers
become less willing to make investments. There various factors that may discourage
investment, such as purchase prices that are subject to annual review under the“Renewable Energy Feed-in Tariff Purchasing Program” and output controls imposed dueto the state of grid connection capacity at electric power companies.

ⅱ) Foreign exchange rate fluctuations
In the PV System business, the Group sources PV systems mostly from Chinese
manufactures that have a competitive advantage in terms of price. Modules are thematerials that account for a major part of costs in the business. Therefore, the Group’s
performance and financial situation may be affected, depending on fluctuations in purchaseprices stemming from the impact of exchange rates.

ⅲ) Industrial accidents and natural disasters
Unexpected disasters, including natural disasters such as large earthquakes andtyphoons in areas where the Company’s plants, head office, branches and offices arelocated, may make operations difficult and may thus impact the Group’s performance andfinancial situation.

ⅳ) Resource recycling power generation system
One of the factors for stable operation of the ERD Division is the maintenance or8improvement in plastic fuel quality at SANIX Energy’s TOMAKOMAI Power Plant. However,since plastic fuel originates from waste, any inconsistency in the quality or properties that
may affect the stable operation of the power plant may be disadvantageous to theperformance or financial state of the group.
ⅴ) Power demand trend
The ERD Division may experience fluctuations in the electric power unit price at theelectricity sales business of SANIX Energy’s TOMAKOMAI Power Plant due todemand-supply fluctuations for seasonal demand and the supply of electricity and theresumption of nuclear power plant operations. Decline of the electric power unit price above
projections may have an unprofitable impact on the group’s performance and financial
status.
ⅵ) Statutory regulations
Main business lines of the Group, including the sale and installation of PV systems, themaintenance of residential houses, buildings and condominiums, the disposal of industrial
wastes, and power generation and electricity sales are subject to statutory restrictions, suchas the “Construction Business Act,” “Act on Special Measures Concerning Procurement ofRenewable Electric Energy by Operators of Electric Utilities,” “Act on Specified Commercial
Transactions,” “Waste Disposal and Cleaning Act and relevant laws” and the “Electricity
Business Act.” Any unintended infringement of the respective laws or regulations by theGroup, the revision or abolition of laws or regulations, or the enforcement of new laws or
regulations may affect the Group’s performance and financial situation.
ⅶ) Statutory regulations
The impairment of assets may affect the Group’s performance and financial situation.

(5) Important Events concerning the Assumption of Going Concern
The Group recorded a significant operating loss, ordinary loss, and net loss belonging to
the shareholders of the parent company, and cash flows used in operating activities in theprevious fiscal year. In the consolidated fiscal year under review, the Group’s income declined
significantly chiefly due to the adverse effect of changes in the photovoltaic generation market.
The Group posted an operating loss of ¥2,229 million, an ordinary loss of ¥1,949 million, a net
loss belonging to the shareholders of the parent company of ¥4,604 million, and cash flows
used in operating activities of ¥5,403 million. The Group’s interest-bearing debt is ¥12,884
million, which is high compared with its liquidity on hand.
The Company is thus susceptible to events and conditions that cast significant doubt on
going consumption assumptions.
To overcome the situation, in the SE Division, the Group worked to respond appropriately tochanges in the commercial PV business environment in a timely fashion. The Group has

9bolstered its organizations in the Kanto, Kansai and Chubu districts, where demand for poweris high, and has stepped up sales activities to receive orders. In response to rapid changes inthe business environment, the Group called for approximately 900 employees to voluntarily
retire and reduced fixed costs in the fiscal year under review. As a result, in the fourth quarter,
the Group posted an operating profit.
However, considering the business environment of the commercial PV business, theCompany believes that it needs to strengthen its business foundation to achieve sustainablegrowth. On April 15, 2016, the Company announced its medium-term business plan (FY2016- FY2018), which includes the following initiatives:ⅰ) A well-balanced allocation of management resources to business divisions- Scaling down the SE Division to an appropriate size based on a reasonable analysis of
the external environment- Rebuilding the HS Division and ES Division- Improving efficiency of the Environmental Resources Development Divisionⅱ) Strengthening the business base through thorough streamlining- Disposing of assets in accordance with the downsizing of the SE Division (the eliminationand consolidation of stores, the closing of a logistics center, and the scaling down of the
production of power conditioners)- Calling for voluntary retirement (approximately 500 employees) in accordance with sales- Lowering the level of wages across the boardⅲ) Enhancement of the governance system- Increasing the number of outside directors- Strengthening the management oversight functions of the Board of Directors- Changing the business execution system to clarify the responsibilities of each businessdivision
The Company expects that its profitability will improve through these initiatives and willremain in the black. The medium-term business plan (FY2016 - FY2018) has been formulatedon the assumption of the continued support of the main financing bank. The Company
expects to continue to receive support and cooperation in financing and will work to stabilize
cash management.
However, we have not completed these initiatives, and the support and cooperation of themain financing bank is not ensured, although we have obtained their understanding. We
therefore recognize significant uncertainty about the going concern assumption.

10

2. The Group Outline
The Group consists of the Company and 10 other consolidated subsidiaries. Its major
business fields are sales/installation of PV systems, environmental sanitary services forgeneral households, environmental sanitary services for corporations and recycling-based
power generation.
The structure of each company in relation to the Group’s business fields is as follows:ⅰ) SE Division
The Company engages in the sale and installation of the PV system for commercial use
and residential use.

ⅱ) HS Division
The Company engages in environmental sanitation work for general households,
specifically termite control, repairing foundations, under-roof/floor ventilation systems.

ⅲ) ES Division
The Company offers corporate environmental sanitation services, specifically buildings
and condominiums plumbing installation and maintenance, and PV system installation for
multi-dwelling business operators. From March 2015, the division’s PV operations arescheduled to shift to the SE-East section.

ⅳ) ERD Division
The Company sells plastic fuel to its consolidated subsidiary SANIX Energy Incorporated.
SANIX Energy generates and sells electricity by using plastic fuel, purchased from SANIX
and Hokkaido SANIX Environment Incorporated, SANIX’s consolidated subsidiary. K.K.
C&R, SANIX’s consolidated subsidiary, disposes of incinerator ash from SANIX Energy. K.K.
HOKUHAI, SANIX’s consolidated subsidiary, leases facilities to K.K. C&R.
And the Company engages in the Power Producer and Supplier (PPS) business, whichstarted in October 2015.

PV modules sold and used for installation by our group have been partially sourced to ourconsolidated subsidiary SHANRI (Shanghai) Energy Science and Technology Co., Ltd.
Chemicals and business vehicles used by our group have been sourced and leased from ourconsolidated subsidiary SUNAIM Incorporated. Information system operation of our divisions
has been outsourced to our consolidated subsidiary SANIX Software Design Incorporated.

11

12

3. Management Policies(1) Fundamental Business Management Policies
We are engaged in three businesses: the commercial PV business, which we have madeour core business in recent years, the environmental sanitation management business forhouseholds and business offices, and the power generation business associated withindustrial waste treatment and resource recycling.
We will develop ecology business and energy business by improving our customer-focusedservices and technologies in the three businesses, creating markets, and tapping into
potential needs. We will increase profitability and capital efficiency in these businesses andwill work to increase our corporate value.

(2) Target Management IndicesWe aim to achieve sustainable, stable earnings in the three businesses. The targetedmanagement benchmark is the operating income ratio, which precisely captures the state ofproductivity in balance with costs. In the medium- to long-term, we target an operating marginof 10%.

(3) Medium-and Long-Term Business Strategies and Issues to Be Addressed
On April 15, 2016, we announced our medium-term business plan, which states that we will
review the current management environment and will work to stay in the black and achievesustainable growth. We will improve profitability in the commercial PV business by
restructuring the business to change its scale in accordance with the market environment, willagain focus on the environmental sanitation management business for households andbusiness offices, a business we have been engaged in since our foundation, and expand its
business scale, and will emphasize efficiency and profitability in the environmental resources
development business.
ⅰ) SE Division
In the PV system market, competitors are expected to go out of business due to changes
in the market environment. The division will increase share by responding to falling market
prices of PV systems. The division will improve productivity and efficiency by adjusting its
workforce in accordance with the business scale. The division will cut costs, including costsof modules and power conditioners, thereby improving profitability.
ⅱ) ERD Division
The collection volume of waste plastic at 15 plastic resource development plants
nationwide is the largest among domestic companies. The division will establish its position
as the price leader and will improve profitability. From October 2015, the division started thePower Producer and Supplier (PPS) business, in which the division had been engaged in
Hokkaido, in regions west of Kanto, except in Shikoku. The division will make the PPS

13business as a core business in the medium to long term like the electricity sales business at
TOMAKOMAI Power Plant.
ⅲ) HS・ES Division
We will reallocate our management resources, which have been concentrated in the SE
Division, and will focus on this division again. More specifically, the division will strive toexpand earnings by gaining new customers. The division will comply with laws andregulations thoroughly to protect consumers.

(4) Challenges the Company Faces
The Group is acutely aware of the need to change its earnings structure and strengthen its
financial structure to overcome the challenging business environment. We will makeGroup-wide efforts to address the following issues:ⅰ) Stable profits from the three businesses
We have concentrated our management resources in the commercial PV business, but
going forward, we will allocate resources to the three businesses—SE business, HS and
ES business, and Environmental Resources Development business—in a balanced way.
We will carry out sweeping structural reforms to build a structure suitable for sales. We will
work to regain earnings power and enhance corporate value continuously.
ⅱ) Through cost cutting
We will cut costs by reducing the costs of components related to the commercial PV
business and improving productivity in construction. We will promote initiatives to cut
expenses significantly, including initiatives to reduce the workforce to an appropriate level.
ⅲ) Initiatives in energy businessWe consider global environmental protection through the reduction of CO2 emissions,
including an improvement in energy efficiency and a switch to clean energy, an importantpart of our corporate social responsibility. We will expand the domain of the PPS businessbased on technologies that the Group has developed in its resource recycling power
generation system over the years. We will help realize a recycling society by encouraging
the use of renewable energy, including photovoltaic energy.
ⅳ) Strengthening business structure and business infrastructure
We will enhance risk management and improve and expand internal control. We will
promote the activities of the compliance committee and initiatives associated with corporate
governance. To respond appropriately to changes in the business environment, we will
strengthen our business infrastructure and business structure, improving the operating
foundations and cultivating human resources that will help the Group grow.
ⅴ) Stabilizing the financial baseThrough the implementation of initiatives stated in the medium-term business plan, the14Group will work to stay in the black and achieve sustainable growth. We will improve cash
flows and reduce interest-bearing debt, thereby stabilizing the financial base.

4. Basic Position regarding the Choice of Accounting Standards
The Group will use the Japanese standards for the time being. Our policy is to take proper
steps toward the adoption of the International Financial Reporting Standards, while giving due
consideration to the circumstances in Japan and other countries.

15

5. Consolidated financial Statements(1) Consolidated Balance Sheets(In Millions of Yen)

As of March 31
FY2014FY2015

Assets :Current Assets :Cash and deposits

7,026

3,038

Notes and accounts receivable-trade

14,800

6,693

Merchandise and finished goods

504

962

Work in process-construction

1,738

514

Raw materials and supplies

8,043

5,688

17

8

Deferred tax assets

677

718

Allowance for doubtful accounts(1,237)(693)

Total Current Assets

31,56916,930

Other

Fixed Assets:
Property, Plant and Equipment :Buildings and structures, net
Less: Accumulated Depreciation
Buildings and structures (net of depreciation)

9,712

8,882

(7,179)(6,973)

2,533

1,909

12,71012,332(11,069)(11,009)

1,640

1,323

Land

9,399

8,001

Lease assets, net

1,236

1,183

Less: Accumulated Depreciation

(551)

(564)

Lease Assets, net

685

618

Construction in progress

609

393

Machinery, Equipment and Vehicles, net
Less: Accumulated Depreciation
Machinery, Equipment and Vehicles(net of depreciation)

Other
Less: Accumulated Depreciation
Other, net

1,075

958

(844)

(787)

231

171

15,09912,417

Goodwill

401

289

Other

143

151

Intangible Fixed Assets, net

545

440

Total Property, Plant and Equipment
Intangible Fixed Assets :Investments and Other Assets :Investment securities

450

91

Lease and guarantee deposits

742

644

Deferred tax assets

66

59

1,110

1,157

Allowance for doubtful accounts

(462)

(494)

Total Investments and Other assets

1,906

1,458

17,551

14,317

49,12031,248

Other

Total Fixed Assets

Total Assets

16(In Millions of Yen)

As of March 31
FY2014FY2015

Liabilities :Current Liabilities :Notes and accounts payable-trade18,537

7,227

Short-term loans payable

6,360

10,118Current portion of long-term loans payable

1,056

896

Accounts payable

4,408

3,298

Accrued expenses

2,000

1,374

Lease obligations

231

256

Accrued income taxes
Accrued consumption taxes
Allowance for resource-recycling expenses

208

244

1,245

390

31

37

Other

1,479

799

Total Current Liabilities

35,56024,642

10-

Non-Current Liabilities :Bonds payable
Long-term loans payable

3,045

1,077

Lease obligations

481

525

Deferred tax liabilities

80

14Long-term lease deposited46

46

Provision for directors’ retirement benefits

170

170

Liability Related to Retirement Benefits

1,490

1,371

477

499

Provision for disposal site closing expenses
Other
Total Non-Current Liabilities
Total Liabilities

425

269

6,229

3,976

41,78928,61814,041

14,041Net Assets :Shareholders’ Equity :Capital stock
Capital surplus

41

Retained earnings(5,588)(10,193)

Treasury stock(1,481)(1,481)

Total Shareholders’ Equity

6,976

2,368

Valuation difference on available-for-sale securities

171

34

Foreign currency translation adjustment

184

46

Adjustment for Retirement Benefits (Cumulative)

(30)

148

Total Valuation and translation adjustments

325

229

Minority Interests29

31

Total Net Assets

7,331

2,629

Total Liabilities and Assets

49,12031,248Valuation and translation adjustments :17(2) Consolidated Statements of Income and Comprehensive Income(Consolidated Statements of Income)(In Millions of Yen)

April 1 to March 31
FY2014FY2015Net sales

95,62961,916

Cost of sales

76,721

48,133Gross profit

18,907

13,783

533

262

1,353

193

Selling, general and administrative expenses :Sales commission
Advertising expenses
Provision of allowance for doubtful accounts
Salaries and Bonuses
Retirement benefit expenses

618

(512)

10,341

8,701

200

230

Legal welfare expenses

1,259

1,180

Rent expenses

1,296

1,281

Depreciation
OthersTotal selling, general and administrative expenses

252

253

6,194

4,421

22,04916,013(3,142)(2,229)54

58

Dividends income

811Land and house rent revenue

68

68

Subsidy income

55

91

-

230

Other

92

100

Total non-operating expenses

278

561

Interest expenses

225

224

Rent expenses

22Operating income (loss)
Non-operating income :Interest income

Foreign exchange gains

Non-operating expenses :Foreign exchange losses

272

-

Other

74

53

Total non-operating expenses

575

280

(3,439)(1,949)Ordinary income (loss)
Extra ordinary income :Gain on sales investment securities-

164

Total extra ordinary income-

164

Loss on sales of non-current assets-

796

Loss on sales of investment securities-

1

Loss on cancellation of lease contacts

-

403

271

991

-

316

271

2,509

(3,710)(4,293)399

292

Extra ordinary loss :Impairment loss
Settlement package
Total extra ordinary loss
Income (loss) before income taxes and minority interests
Income taxes-current

18

Income taxes-deferred

857

15

Total income taxes

1,256

308

Income before minority interests(4,967)(4,602)

Minority interests in income
Net income (loss)(0)2(4,966)(4,604)(Consolidated Statements of Comprehensive Income)(In Millions of Yen)

April 1 to March 31
FY2014FY2015
Income before minority interests(4,967)(4,602)

80

(137)

139

(137)

3

178

Other comprehensive income :Share of other comprehensive income of associates accounted
for using equity method
Foreign currency translation adjustment
Retirement benefit adjustment
Total other comprehensive income

223

(96)

(4,743)(4,699)Comprehensive income attributable to parent company(4,742)(4,701)

Comprehensive income attributable to minority interests(0)2Comprehensive income
Comprehensive income attributable to19(3) Consolidated Statements of Changes in Net Assets
The previous consolidated fiscal year (April 1, 2014 to March 31, 2015)(In Millions of Yen)

Shareholders’ equity
Capital stock

CapitalRetained

Treasury

Total

surplusearnings

stock

shareholders’equityBalance at the beginning of

14,041

4(768)(1,581)

11,695current period
Cumulative effects of

146

146

changes in accounting
policies
Restated balance

14,041

4(622)(1,581)

11,841

Changes of items during theperiodNet income(4,966)(4,966)

Purchase of treasury stock

(0)

(0)

Disposal of treasury stock

100

100

Change of Minority Interests-

Net changes of items otherthan shareholders’ equity
Total changes of items--(4,966)100(4,865)

14,041

4(5,588)(1,481)

6,976

during the period
Balance at the end ofcurrent period

20(In Millions of Yen)

Accumulated other comprehensive income
Valuation

Foreign

Retirement

Total

difference

currency

benefits

accumulatedontranslation

adjustment

other

available-

adjustment

Minority

Total net

interests

assets29

11,827comprehen-for-salesive income

securities
Balance at the beginning of

91

44

(33)

102

current period
Cumulative effects of146changes in accounting
policies
Restated balance

91

44

(33)

102

29

11,973

Changes of items during theperiodNet income(4,966)

Purchase of treasury stock(0)

Disposal of treasury stock

100

Change of Minority Interests-

Net changes of items other

80

139

3

223

(0)

223

80

139

3

223

(0)

(4,642)

171

184

(30)

325

29

7,331

than shareholders’ equity
Total changes of items
during the period
Balance at the end ofcurrent period

21

The consolidated fiscal year (April 1, 2015 to March 31, 2016)(In Millions of Yen)

Shareholders’ equity
Capital stock

CapitalRetained

Treasury

Total

surplusearnings

stock

shareholders’equityBalance at the beginning of

14,041

4(5,588)(1,481)

6,976

14,041

4(5,588)(1,481)

6,976

current period
Cumulative effects ofchanges in accounting
policies
Restated balance
Changes of items during theperiodNet income(4,604)Purchase of treasury stock(4,604)(0)

Disposal of treasury stock(0)-

Change of Minority Interests

(2)

(2)

Net changes of items otherthan shareholders’ equity
Total changes of items-(2)(4,604)(0)(4,607)

14,041

1(10,193)(1,481)

2,368

during the period
Balance at the end ofcurrent period

22(In Millions of Yen)

Accumulated other comprehensive income
Valuation

Foreign

Retirement

Total

difference

currency

benefits

accumulatedontranslation

adjustment

other

available-

adjustment

Minority

Total net

interests

assetscomprehen-for-salesive income

securities
Balance at the beginning of

171

184

(30)

325

29

7,331

171

184

(30)

325

29

7,331

current period
Cumulative effects ofchanges in accounting
policies
Restated balance
Changes of items during theperiodNet income(4,604)Purchase of treasury stock(0)

Disposal of treasury stock-

Change of Minority Interests(2)

Net changes of items other

(137)

(137)

178

(96)

2

(94)

(137)

(137)

178

(96)

2

(4,701)

34

46

148

229

31

2,629

than shareholders’ equity
Total changes of items
during the period
Balance at the end ofcurrent period

23(4) Consolidated Statements of Cash Flows(In Millions of Yen)

April 1 to March 31
FY2014FY2015Net Cash Provided by (used in) Operating Activities :Income before income taxes and minority interests(3,710)(4,293)

Depreciation and amortization

887

918

Amortization of goodwill

112

112

Impairment loss

271

991

Increase (Decrease) in reserve for directors’ retirement benefits

(10)

-

Increase (Decrease) in provision for bonuses

(184)

(1)

Increase (Decrease) in allowance for resource-recycling expenses(1)

6

Increase (Decrease) in allowance for doubtful accounts

616

(512)

Increase (Decrease) in liabilities in retirement

125

59

Interest and dividends income

(62)

(70)

Interest expenses

225

224

-

(162)

Loss (gain) on sales of investment securities
Loss (gain) on sales of property, plant and equipment-

789

Increase (Decrease) in notes and accounts receivable-trade

7,405

8,107

Increase (Decrease) in inventories(4,091)

3,108

647

(262)

(1,922)(11,074)

Increase (Decrease) in other current assets
Increase (Decrease) in notes and accounts payable-trade
Increase (Decrease) in consumption tax refund receivable

526

(855)

Increase (Decrease) in other current liabilities(241)(2,207)

Other

(303)

(150

Subtotal

289(4,973)

Interest and dividends income received

69

70

(230)

(229)

(1,929)

(287)

6

16

(1,794)(5,403)

Payments into time deposits(3,058)(2,179)Proceeds from withdrawal of time deposits

3,200

2,945

Purchase of property, plant and equipment(1,254)

(679)

0

709

(32)

(93)

Interest expenses paid
Income taxes paid
Income taxes refund
Net cash provided by operating activities

Net Cash Provided by (used in) Investment Activities :Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Proceeds from sales of investment securities-

318

Payments for lease and guarantee deposits

(111)

(20)

Collection of lease and guarantee deposits

60

58

Other

13

3

(1,181)

1,062

Net cash provided by investing activities

Net Cash Provided by (used in) Financing Activities :Increase (Decrease) in short-term loans payable

1,360

3,757

Proceeds from long-term loans payable

485-

Repayments of long-term loans payable(1,026)(2,128)

(20)

(20)

Redemption of bonds

24

Repayments of finance lease obligations

(221)

(256)

Other

68

(63)

Net cash provided by financing activities

647

1,288

13

(58)

Net Increase (decrease) in cash and cash equivalents(2,315)(3,111)

Cash and equivalents at beginning of period

7,645

5,329

Cash and equivalents at end of period

5,329

2,218

Effect of exchange rate changes on cash and cash equivalents

25(5) Notes to the Consolidated Financial Statements(Going Concern Considerations)
The Group recorded a significant operating loss, ordinary loss, and net loss belonging
to the shareholders of the parent company, and cash flows used in operating activities
in the previous fiscal year. In the consolidated fiscal year under review, the Group’s
income declined significantly chiefly due to the adverse effect of changes in thephotovoltaic generation market. The Group posted an operating loss of ¥2,229 million,
an ordinary loss of ¥1,949 million, a net loss belonging to the shareholders of the parent
company of ¥4,604 million, and cash flows used in operating activities of ¥5,403 million.
The Group’s interest-bearing debt is ¥12,884 million, which is high compared with its
liquidity on hand.
The Company is thus susceptible to events and conditions that cast significant doubt
on going consumption assumptions.
To overcome the situation, in the SE Division, the Group worked to respond
appropriately to changes in the commercial PV business environment in a timely fashion.
The Group has bolstered its organizations in the Kanto, Kansai and Chubu districts,
where demand for power is high, and has stepped up sales activities to receive orders.
In response to rapid changes in the business environment, the Group called forapproximately 900 employees to voluntarily retire and reduced fixed costs in the fiscal
year under review. As a result, in the fourth quarter, the Group posted an operating profit.
However, considering the business environment of the commercial PV business, theCompany believes that it needs to strengthen its business foundation to achievesustainable growth. On April 15, 2016, the Company announced its medium-termbusiness plan (FY2016 - FY2018), which includes the following initiatives:ⅰ) A well-balanced allocation of management resources to business divisions- Scaling down the SE Division to an appropriate size based on a reasonable analysisof the external environment- Rebuilding the HS Division and ES Division- Improving efficiency of the Environmental Resources Development Divisionⅱ) Strengthening the business base through thorough streamlining- Disposing of assets in accordance with the downsizing of the SE Division (theelimination and consolidation of stores, the closing of a logistics center, and thescaling down of the production of power conditioners)- Calling for voluntary retirement (approximately 500 employees) in accordance withsales
- Lowering the level of wages across the boardⅲ) Enhancement of the governance system- Increasing the number of outside directors

26- Strengthening the management oversight functions of the Board of Directors- Changing the business execution system to clarify the responsibilities of eachbusiness division
The Company expects that its profitability will improve through these initiatives andwill remain in the black. The medium-term business plan (FY2016 - FY2018) has beenformulated on the assumption of the continued support of the main financing bank. The
Company expects to continue to receive support and cooperation in financing and will
work to stabilize cash management.
However, we have not completed these initiatives, and the support and cooperationof the main financing bank is not ensured, although we have obtained theirunderstanding. We therefore recognize significant uncertainty about the going concern
assumption.

27(Segment Information)
Segment Information by Type of Business
The previous consolidated fiscal year (From April 1, 2014 to March 31, 2015)(In Millions of Yen)

Segments

Elimination
Consolidated
or Group

SE

HS

ES

ERD

Total

72,247

7,605

1,040

14,735

95,629-95,629

-

-

-

-

-

-

-

Total

72,247

7,605

1,040

14,735

95,629-95,629Operating income (loss)(2,291)

1,634

(48)

970

264

(3,406)(3,142)

Segment Assets

26,901974

716

12,18040,772

8,347

49,120

290

19

9

489

808

78

887

-

-

-

112

112

-

112

1,139

34

5

656

1,836

351

2,188

271

-

-

-

Sales:
Sales to customers
Internal sales among
segments
And transfer accounts

Others :Depreciation expenses
Amortization of
goodwill
Capital expenditures
Impairment loss

271

Consolidated fiscal year (From April 1, 2015 to March 31, 2016)(In Millions of Yen)

Segments

Elimination
Consolidated
or Group

SE

HS

ES

ERD

Total

39,871

6,519

924

14,601

61,916-

61,916

-

-

-

-

-

-

-

39,871

6,519

924

14,601

61,916-

61,916

(202)

614

53

282

747

(2,977)(2,229)13,998740

494

12,042

27,276

3,972

31,248Depreciation expenses

332

20

13

459

825

93

918

Amortization of goodwill

-

-

-

112

112

-

112

Capital expenditures

38

18

-

671

728

21

750

805

28

-

-

834

157

991

Sales:
Sales to customers
Internal sales among
segments
And transfer accounts
Total
Operating income (loss)
Segment Assets
Others :Impairment loss

28

6. Others (Supplemental information)
Consolidated Net Sales by Division(In Millions of Yen)

From April 1 to March 31
FY2014FY2015

ChangesCommercial PV system

62,93034,419(28,511)Wholesale of PV components

9,218

5,351

(3,866)

Others98

99

072,24739,871(32,376)

Termite Eradication Service

2,783

2,459

(324)

Under-Roof/Roof Ventilation System

1,078

895

(183)

Solar Engineering Total

Foundation Repairing/Home Reinforcement

549

377

(171)

3,193

2,787

(406)

Home Sanitation Division Total

7,605

6,519

(1,085)Anti-rust equipment installation

104

41

(63)

Repair of building water-woks

459

405

(53)

Water proofing of building

85

121

35

Others

390

356

(34)

OthersEstablishment Sanitation Division Total
Plastic fuelIndustrial

waste(Organic

Waste

Water

Generation of electricity
Final disposal
OthersEnvironmental
Total Net Sales

Resources

Development

1,040

924

(116)

7,534

7,227

(307)

3,795

3,986

(190)

1,635

1,604

(30)

619

702

83

1,150

1,080

(70)

14,735

14,601(134)

95,62961,916(33,712)