SANIX INCORPORATED
Summary of Consolidated Financial Statements
For the First Half Ended September 30, 2017
[Japanese Standards]

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

Consolidated Financial Statements for the First Half ended September 30, 2017
SANIX INCORPORATED
Stock Listed:Tokyo Stock Exchange First Section, Fukuoka Stock Exchange

Code No;

4651

URL:

http://sanix.jp

President and CEO:

Hiroshi Munemasa

Contact:

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

1. Business Results – Operating results for the First Half ended September 30, 2017
(April 1, 2017 to September 30, 2017)(1) Consolidated Operating Results(In Millions of Yen)First Half
From April 1 to September 30
FY2017FY2016%change

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

24,162

Operating Income ··················································%change

2.2%

23,651(22.8%)

138

33.9%

103

－

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

(29)

－

202

－

Net Income ···························································

(155)

－

(146)

－

Net Income per Share (¥) ········································(¥3.25)－(¥3.05)－Net Income per Share, Diluted (¥) ·····························

－

－

－

－

(Note) Comprehensive Income ································

(104)

－

(366)

－

(2) Consolidated Financial Position(In Millions of Yen)
As of September 30

As of March 31

FY2017FY2016

Total Assets ···························································

29,35331,645Net Assets ····························································

2,740

2,845

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

9.2%

8.9%

Net assets per share (¥) ··········································¥56.63¥58.86(Reference) Equity Capital ·······································

2,707

2,813

2. Dividends
End of Quarterly Period
1st

2nd

3rd

4th

Quarter

Quarter

Quarter

Quarter

0.00

0.00

0.00

0.00

0.00

0.00

Total

(Dividends per Share)
FY2016 ended March 31, 2017 (¥) ·························

0.00

0.00

FY2017 ended March 31, 2018 (¥) ·························

0.00

0.00

FY2017 ended March 31, 2018 (¥) (Forecast) ··········(Note) Revision from the most recently announced dividend forecast : None

3. Forecasts for Consolidated Business Results (April 1, 2017 to March 31, 2018)(In Millions of Yen)
Fiscal Year 2017
Full Year%change

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

47,680(6.4%)

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

1,210

16.7%

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

1,090

20.2%

Net Income ···························································

810

94.7%

Net Income per Share (¥) ········································¥16.94(Note) Revision from the most recently announced forecast of consolidated business results : None
* 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) Adoption of special quarterly accounting methods : None
(3) Changes in accounting policies and accounting estimates retrospective restatementⅰ) Changes in accounting policies based on revisions of accounting standard : Noneⅱ) Changes in accounting policies other than ones based on revisions of accounting standard : Noneⅲ) Changes in accounting estimates : Noneⅳ) Retrospective restatement : None
(4) Number of Issued and Outstanding Shares (Common Stock)(Shares)
End of term
September 30,

March 31,

2017

2017

48,919,396

48,919,396

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

1,113,818

1,113,668

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

47,805,678*47,805,889

Number of issued and outstanding shares ,end of period (including treasury stock)* September 30, 2016

* This summary of financial statements is exempt from audit procedure required by Financial instruments and Exchange Act.
* Note to ensure appropriate use of forecasts:
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 ineconomical 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. Qualitative Information for the first half ended September 30, 2017 .................... 2(1) Information of Consolidated Business Results............................................................................ 2(2) Information of Consolidated Financial Position ........................................................................... 4(3) Information on the Future Outlook,5
Including the Forecasts of Consolidated Business Results ......................................................

2. Quarterly Consolidated Financial Statements and Matters relating to
6
Summary Information (Notes) for the first half ended September 30, 2017 ...........
(1) Quarterly Consolidated Balance Sheets ...................................................................................... 6(2) Quarterly Consolidated Statements of Income and Comprehensive Income ......................... 8
Quarterly Consolidated Statements of Income
For the first half of the fiscal year ending March 31,2018 ..................................................... 8
Quarterly Consolidated Statements of Comprehensive Income
For the first half of the fiscal year ending March 31,2018 ..................................................... 9(3) Quarterly Consolidated Statements of Cash Flows .................................................................... 10(4) Notes to the Quarterly Consolidated Financial Statements ....................................................... 11
Notes to the Assumption of a Going Concern ............................................................................. 11
Notes to Remarkable Changes in the amount of Shareholders’ Equity .................................. 12
Segment Information, etc. ............................................................................................................ 13

3. Others ................................................................................................................................................... 14
Notes to the Assumption of a Going Concern ............................................................................ 14

4. Supplement Information ............................................................................................................... 16
Consolidated Net Sales by Division .............................................................................................. 16

2

1. Qualitative Information for the first half ended September 30, 2017(1) Information of Consolidated Business Results
In the first half of the fiscal year ending March 31, 2018 (April 1, 2017 to September
30, 2017), the Japanese economy continued to follow a recovery path as consumer
confidence picked up backed by improved employment and income conditions inaddition to a rise in corporate earnings, despite future uncertainty remaining due partly
to political instability overseas.
In this business environment, the Group pressed forward with management
streamlining, including employee reductions, store mergers and closures, and logistics
andproduction

downsizing

in

line

with

the

medium-termbusiness

plan(FY2016-FY2018) that was established in light of the business environment
surrounding the solar energy market that continued to shrink due to factors such as thelegislative revisions for the Feed-In Tariffs (FIT) during the previous fiscal year, which
was the first year of the medium-term business plan. Further, in the current fiscal year,
which constitutes the second year of the medium-term business plan, the Groupestablished the Headquarters Overseeing SE, HS and ES as part of its restructure toestablish cross-organizational functions, with the intention of facilitating effective
operation and efficient installations through the cooperation of the three businesses,
Solar Engineering (SE), Home Sanitation (HS), and Establishment Sanitation (ES),which shared their operating facilities. Additionally, some of the personnel wererelocated from the SE Division to the HS and ES Divisions for more appropriate
placement among the business divisions.
Net sales in the SE Division decreased due to the shrinkage of the market for solar
power generation. However, the appropriate distribution of personnel and othermanagement resources as well as the strengthened marketing system, etc. resulted in
an increase in the revenue of the HS and ES Divisions. The Environmental Resources
Development Division also achieved increased sales based on the expansion of its newelectric power business. Consequently, the total net sales of the Group increased 2.2%
year on year, to ¥24,162 million.
Profits declined significantly in the Environmental Resources Development Division
as a result of statutory inspections and repair works at the Tomakomai Power Plant in
the first half under review, but profitability improved in the other three divisions thanks
primarily to reduced expenses as a result of management streamlining and the lower
cost of materials. As a result, the overall financial results of the Group included
operating income of ¥138 million (up 33.9% year on year), an ordinary loss of ¥29
million (ordinary income of ¥202 million in the same period of the previous year) mainly
due to the posting of foreign exchange losses of ¥28 million and miscellaneous loss of¥44 million due to store mergers and closures, and loss attributable to owners of parent

3

of ¥155 million (loss attributable to owners of parent of ¥146 million in the same periodof the previous year).
Consolidated results of individual divisions for the first quarter were as follows:a. SE (Solar Engineering) Division
While the Division focused on the maintenance business including the installation ofincidental equipment following the legislative revisions for the Feed-In Tariffs (FIT),
sales from installation of PV systems declined 27.4% year on year due to a fall in thenumber of constructions and installations of PV systems, strongly affected by thecontraction of the market size for commercial PV systems. As a consequence, thesales were ¥8,716 million (decreased 27.2% year on year).
Despite the significant fall in sales, operating income increased to ¥937 million (up143.3% year on year) thanks to improved profitability as a result of the in expenses
through management streamlining, in cost of materials and in labor expenses due toemployee reductions, etc.
b. HS (Home Sanitation) Division
As a result of focusing on the strengthening and enhancement of the marketing andcustomer management systems by increasing the number of employees throughpersonnel transfers among the business divisions for the purpose of growing thebusiness size of the HS Division, sales of termite eradication services increased 12.6%
year on year, and sales of under-roof and roof ventilation systems were up 30.6% year
on year. Sales of foundation repair and home reinforcement services rose 217.2% year
on year. As a result, the sales were ¥4,611 million (increased 38.9% year on year).
Operating income rose 46.1% year on year, to ¥749 million, thanks to the significant
rise in segment sales, which offset an increase in fixed costs mainly due to theadditional employees.
c. ES (Establishment Sanitation) Division
Sales of anti-rust equipment installation, the key product and service, increased
571.3% year on year, and sales of repairs of building water-works rose 22.9% year on
year as a result of focusing on products for the maintenance of buildings andcondominiums and strengthening the marketing system by increasing the number of
employees through personnel transfers among the business divisions for the purposeof expanding the size of the ES Division.

As a result, net sales were ¥685 million(increased 40.0% year on year).
Operating income climbed to ¥98 million (an increase of 226.9% year on year) basedon the strong growth of segment sales, which offset an increase in fixed costs mainly
due to the additional employees.

4d. Environmental Resources Development Division
Sales of plastic fuel increased 6.4% year on year and organic wastewater recyclingrose 3.7% year on year. Electricity sales grew 74.9% year on year, due primarily to anincrease in electric energy suppliers in the new electric power business. As aconsequence, the sales were ¥10,149 million (increased 29.0% year on year).
Operating loss was ¥57 million (operating income of ¥577 million in the same periodof the previous year) due mainly to a fall in electricity sales and an increase in
expenses for statutory inspections and repair works at the Tomakomai Power Plant,
affected by the implementation of statutory inspections once every two years andregular repairs at the Plant in the first half under review.

(2) Information of Consolidated Financial Position
a. The status of Assets, Liabilities and Net Assets
Total assets as of the end of the second quarter under review were ¥29,353 million, adecrease of ¥2,291 million compared with the end of the previous consolidated fiscal
year, mainly due to a decrease in cash and deposits of ¥1,119 million, a decrease innotes and accounts receivable-trade of ¥502 million, a decrease in merchandise andfinished goods of ¥137 million, a decrease in raw materials and supplies of ¥393 million,
and a decrease in buildings and structures of ¥150 million.
Total liabilities were ¥26,612 million, a decrease of ¥2,186 million compared with theend of the previous consolidated fiscal year, mainly due to a decrease in notes andaccounts payable-trade of ¥1,767 million, a decrease in short-term loans payable of¥606 million and a decrease in the current portion of long-term loans payable of ¥263
million, while accounts payable increased by ¥682 million.
Net assets were ¥2,740 million, a decrease of ¥104 million compared with the end of
the previous consolidated fiscal year, mainly due to the posting of loss attributable toowners of parent of ¥155 million.
As a consequence, the shareholders’ equity ratio was 9.2% compared with 8.9% at
the end of the previous consolidated fiscal year.

b. The status of Cash Flows
Cash and cash equivalents as of September 30, 2017 totaled ¥3,703 million, adecrease of ¥1,172 million from March 31, 2017.
The following is the situation and major factors in each category of cash flows in thefirst half under review.

5ⅰ) Net cash provided by (used in) operating activities
Net cash provided by operating activities totaled ¥44 million (compared to net cashused of ¥2,251 million in the same period last year). This was mainly due to adecrease in notes and accounts receivable-trade of ¥502 million, a decrease ininventories of ¥546 million and an increase in other current liabilities of ¥823 million,
while notes and accounts payable-trade decreased ¥1,796 million.
ⅱ) Net cash provided by (used in) investing activities
Net cash used in investing activities totaled ¥39 million (compared to net cash
provided of ¥109 million in the same period last year). This was mainly due toproceeds from withdrawal of time deposits of ¥642 million and payments into time
deposits of ¥667 million.
ⅲ) Net cash provided by (used in) financing activities
Net cash used in financing activities amounted to ¥1,184 million (compared to net
cash provided of ¥2,777 million in the same period last year), mainly due to a net
decrease in short-term loans payable of ¥606 million and the repayment of long-termloans payable of ¥357 million.

(3) Information on the Future Outlook, Including the Forecasts of Consolidated
Business Results
There is no change in the forecasts of consolidated business results for the current
fiscal year ending March 31, 2018, from the forecasts announce on May 11, 2017.
(Note to forward-looking statements, etc.)
Results forecasts and other forward-looking statements contained in this document
are based on information available as of the date of this document and assumptions
that are deemed reasonable by the Company, and the Company does not intend topromise to achieve them. Actual results may differ significantly from these forecasts
and forward-looking statements due to various factors.

6

2. Quarterly Consolidated Financial Statements and Matters relating to
Summary Information (Notes) for the first half ended September 30, 2017
(1) Quarterly Consolidated Balance Sheets(In Millions of Yen)

As of Mar. 31

As of Sep. 30

FY2016FY2017

Assets :Current Assets :Cash and deposits

5,578

4,458

Notes and accounts receivable-trade

6,017

5,515

549

412

Merchandise and finished goods
Work in process-construction

304

294

Raw materials and supplies

4,605

4,212

Other

1,010

1,167

Allowance for doubtful accounts

(544)

(560)

17,522

15,500

Buildings and structures (net of depreciation)

1,720

1,570

Machinery, Equipment and Vehicles(net of depreciation)

1,234

1,259

Land

7,941

7,811

Other (net of depreciation)

1,382

1,402

Total Property, Plant and Equipment

12,27812,043

Goodwill

177

121

Other

148

159

Intangible Fixed Assets

325

281

Investments and Other Assets :

1,518

1,528

Total Fixed Assets

14,122

13,85331,64529,353

Total Current Assets
Fixed Assets:
Property, Plant and Equipment :Intangible Fixed Assets :Total Assets

7(In Millions of Yen)

As of Mar. 31

As of Sep. 30

FY2016FY2017

Liabilities :Current Liabilities :Notes and accounts payable-trade

6,365

4,597

Short-term loans payable

12,96912,363

535

272

2,644

3,327

Accrued income taxes

428

268

Allowance for resource-recycling expenses

27

24

Current portion of long-term loans payable
Accounts payable

Other

2,615

2,848

Total Current Liabilities

25,586

23,701Long-term loans payable

484

390

Provision for directors’ retirement benefits

163

9

Non-Current Liabilities :Provision for disposal site closing expenses
Liability related to retirement benefits

538

557

1,404

1,425

620

528

3,212

2,911

28,79926,612

14,041

14,0411

1Retained earnings(9,777)(9,932)

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

Total Shareholders’ Equity

2,784

2,629

Valuation difference on available-for-sale securities

71

80

Foreign currency translation adjustment

(28)

4

Adjustment for retirement benefits (cumulative)

(14)

(7)

Total Accumulated other comprehensive income

28

77

Other
Total Non-Current Liabilities
Total Liabilities
Net Assets :Shareholders’ Equity :Capital stock
Capital surplus

Accumulated other comprehensive income :32

33

Total Net Assets

2,845

2,740

Total Liabilities and Assets

31,64529,353

Non-controlling Interests

8(2) Quarterly Consolidated Statements of Income and Comprehensive Income(Quarterly Consolidated Statements of Income)(For the first half of the fiscal year ending March 31, 2018)(In Millions of Yen)First Half
From April 1 to September 30
FY2017FY2016

Net sales

23,651

24,162

Cost of sales

16,944

17,476Gross profit

6,707

6,685

Selling, general and administrative expenses

6,604

6,546

103

138

9

7

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

1

1Land and house rent revenue

32

31

Foreign exchange gains

156

-

-

20

Other

53

28

Total non-operating income

253

88

Interest expenses

113

109

Commission fee

521

Subsidy income

Non-operating expenses :

-

28

Other

35

96

Total non-operating expenses

154

256

202

(29)

Cost of earlier voluntary retirement

177-

Total extra ordinary loss

177-

Income (loss) before income taxes and minority interests

25

(29)

Income taxes-current

167

128

Foreign exchange losses

Ordinary income (loss)
Extra ordinary loss :2(4)

Total income taxes

169

124

Net Income (loss)

(144)

(154)

1

1

(146)

(155)

Income taxes-deferred

Net Income (loss) belonging to the non-controlling shareholders
Net income (loss) belonging to the shareholders of the parent
company9(Quarterly Consolidated Statements of Comprehensive Income)(For the first half of the fiscal year ending March 31, 2018)(In Millions of Yen)First Half
From April 1 to September 30
FY2017FY2016Net Income (loss)
Other comprehensive income :Valuation difference on available-for-sale securities
Foreign currency translation adjustment

(144)

(154)

(2)

8

(144)

33

Adjustment for retirement benefit adjustment

(74)

7

Total other comprehensive income

(221)

49

(366)

(104)

(367)

(106)

1

1

Comprehensive net income
Comprehensive income
Comprehensive income belonging to the shareholders of theparent company
Comprehensive income belonging to non-controllingshareholders

10(3) Quarterly Consolidated Statements of Cash Flows(In Millions of Yen)First Half
From April 1 to September 30
FY2017FY2016Net Cash Provided by (Used in) Operating Activities
Income (loss) before income taxes and minority interests

25

(29)

Depreciation and amortization

333

324

Amortization of goodwill

56

56

Increase (decrease) in provision

(7)

(158)

Increase (decrease) in provision for retirement benefits

(84)

27

Increase (decrease) in allowance for doubtful accounts

(124)

9

Interest income and dividends income

(11)

(8)

Interest expenses

113

109

Increase (decrease) in notes and accounts receivable-trade

824

502

Increase (decrease) in inventories

902

546

Increase (decrease) in other current assets
Increase (decrease) in notes and accounts payable-trade
Increase (decrease) in accrued consumption taxes
Increase (decrease) in other current liabilities
Other, net
Subtotal

(198)

(135)

(2,385)(1,796)(204)

77(1,352)

823

39

82

(2,073)

430

10

8

Interest expenses paid

(128)

(107)

Income taxes paid

(69)

(285)

Income taxes refund

9-(2,251)

44

(430)

(667)

Interest and dividends income received

Net cash provided by (used in) operating activities

Net Cash Provided by (Used in) Investing Activities
Payments into time deposits
Proceeds from withdrawal of time deposits

715

642

Purchase of property, plant and equipment

(189)

(168)

Proceeds from sales of property, plant and equipment

60

200

Other, net

(46)

(45)

Net cash provided by (used in) investing activities

109

(39)

Net increase (decrease) in short-term loans payable

3,528

(606)

Repayment of long-term loans payable

(521)

(357)

Redemption of bonds

(10)

-

Repayments of finance lease obligations

(133)

(125)

Other, net

(85)

(95)

2,777

(1,184)(52)

7

Net increase (decrease) in cash and cash equivalents

583(1,172)

Cash and cash equivalents, beginning of the period

2,218

4,875

Cash and cash equivalents, end of the quarter

2,802

3,703

Net cash provided by (used in) financing activities

Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents

11(4) Notes to the Quarterly Consolidated Financial Statements(Notes to the Assumption of a Going Concern)
While the Group incurred a significant operating loss, ordinary loss, and loss
attributable to owners of parent in both the fiscal year ended March 31, 2015 and thefiscal year ended March 31, 2016, it achieved operating income, ordinary income, andprofit attributable to owners of parent during the previous fiscal year and, in the first half
under review as well, the Group proceeded steadily with the medium-term management
plan by posting operating income of ¥138 million, ordinary loss of ¥29 million, and loss
attributable to owners of parent of ¥155 million. However, the Group is still working
toward achieving the targets in its medium-term business plan, and its interest-bearing
debt is ¥13,652 million, which is high compared with its liquidity on hand. Accordingly,
the Group recognizes that it is still susceptible to events and conditions that castsignificant doubt on going concern assumptions.
To overcome the situation, the Company believes that, in light of the businessenvironment surrounding the solar electric power business, it is essential to further
strengthen the business foundation to achieve sustainable growth. The Company isthus focusing on the following measures as part of the medium-term business plan
(FY2016 - FY2018) announced on April 15, 2016.
ⅰ) A well-balanced allocation of management resources to business divisions
The Company is scaling down the SE Division to an appropriate size based on areasonable analysis of the external environment, rebuilding the HS Division and ESDivision, and further improving efficiency of the Environmental Resources
Development Division.
ⅱ) Strengthening the business base through thorough streamlining
During the previous fiscal year, the Company disposed of assets in accordancewith the downsizing of the SE Division (store mergers and closures, reduction of
production, logistics and procurement downsizing, and the closure of a logistics
center, etc.). The number of employees has reached the level initially planned as aresult of voluntary retirement that was encouraged in order to reduce the workforce toan appropriate level for the sales volume in the medium-term business plan. In
addition, the salaries of all employees have been reduced.
ⅲ) Enhancement of the governance system
At the 38th Annual general Meeting of Shareholders held on June 29, 2016, theCompany increased the number of outside directors by one to a total of three. The
Company is also strengthening the management oversight functions of the Board of
Directors and changing the business execution system to clarify the responsibilities ofeach business division.

12

In the previous fiscal year, we finished implementing most of the management
streamlining measures such as the reduction of employees, store mergers andclosures, and production and logistics downsizing, resulting in increased profitability
that has enabled the business to remain in the black. Now, in the fiscal year underreview, which is the second year of the medium-term business plan, we haveestablished the Headquarters Overseeing SE, HS and ES in order to further solidify
the business foundation, as well as cross-organizational functions to facilitate
effective operation and efficient installations through the cooperation of the threesegments while also transferring some of the personnel from the SE Division to the
HS and ES Divisions. With regard to funding, we are steadily implementing the
medium-term business plan, which was developed based on the assumption of thecontinued support of the main financing bank. We expect to continue to receive
support and cooperation with regard to financing and will work to stabilize our cash
management.
While we are steadily implementing the measures above, we are still in the processof making progress in the medium-term management plan. In addition, the main
financing bank, while indicating its understanding, has not guaranteed its support andcooperation. As a result, the Company recognizes that at present, there is material
uncertainty regarding the going concern assumption.
The quarterly consolidated financial statements are prepared based on theassumption of a going concern and do not reflect the impact of such a material
uncertainty regarding the going concern assumption.

(Notes to Remarkable Changes in the amount of Shareholders’ Equity): None13(Segment Information, etc.)
Ⅰ The previous first half (From April 1, 2016 to September 30, 2016)ⅰ)Information concerning the Amount of Net Sales and Operating Income(loss) by Segment(In Millions of Yen)

SE

HS

ES

ERD

Total

Elimination
or Group(note 1)

11,972

3,319

489

7,870

23,651-

23,651

-

-

-

-

-

-

-

11,972

3,319

489

7,870

23,651-

23,651

385

513

30

577

1,506

(1,402)103

Segments

Consolidated(note 2)

Sales:
Sales to customers
Internal sales among
segments and transfer
accounts
Total
Operating income (loss)(note 1)
Negative ¥1,402 million for adjustments of Operating income (loss) represents corporate expenses notallocated to reportable segments. Corporate expenses are mainly general and administrative expenses
note attributable to reportable segments.
(note 2)
Operating income (loss) is adjusted to operating loss of quarterly consolidated statements of income.

Ⅱ The first half (From April 1, 2017 to September 30, 2017)ⅰ) Information concerning the Amount of Net Sales and Operating Income(loss) by Segment(In Millions of Yen)

SE

HS

ES

ERD

Total

Elimination
or Group(note 1)

8,716

4,611

685

10,14924,162-

24,162

-

-

-

-

-

-

-

8,716

4,611

685

10,14924,162-

24,162

937

749

98

(57)

1,728

(1,590)138

Segments

Consolidated(note 2)

Sales:
Sales to customers
Internal sales among
segments and transfer
accounts
Total
Operating income (loss)(note 1)
Negative ¥1,590 million for adjustments of Operating income (loss) represents corporate expenses notallocated to reportable segments. Corporate expenses are mainly general and administrative expenses
note attributable to reportable segments.
(note 2)
Operating income (loss) is adjusted to operating loss of quarterly consolidated statements of income.

14

3. Others(Notes to the Assumption of a Going Concern)
While the Group incurred a significant operating loss, ordinary loss, and loss
attributable to owners of parent in both the fiscal year ended March 31, 2015 and thefiscal year ended March 31, 2016, it achieved operating income, ordinary income, andprofit attributable to owners of parent during the previous fiscal year and, in the first half
under review as well, the Group proceeded steadily with the medium-term management
plan by posting operating income of ¥138 million, ordinary loss of ¥29 million, and loss
attributable to owners of parent of ¥155 million. However, the Group is still working
toward achieving the targets in its medium-term business plan, and its interest-bearing
debt is ¥13,652 million, which is high compared with its liquidity on hand. Accordingly,
the Group recognizes that it is still susceptible to events and conditions that castsignificant doubt on going concern assumptions.
To overcome the situation, the Company believes that, in light of the businessenvironment surrounding the solar electric power business, it is essential to further
strengthen the business foundation to achieve sustainable growth. The Company isthus focusing on the following measures as part of the medium-term business plan
(FY2016 - FY2018) announced on April 15, 2016.
ⅰ) A well-balanced allocation of management resources to business divisions
The Company is scaling down the SE Division to an appropriate size based on areasonable analysis of the external environment, rebuilding the HS Division and ESDivision, and further improving efficiency of the Environmental Resources
Development Division.
ⅱ) Strengthening the business base through thorough streamlining
During the previous fiscal year, the Company disposed of assets in accordancewith the downsizing of the SE Division (store mergers and closures, reduction of
production, logistics and procurement downsizing, and the closure of a logistics
center, etc.). The number of employees has reached the level initially planned as aresult of voluntary retirement that was encouraged in order to reduce the workforce toan appropriate level for the sales volume in the medium-term business plan. In
addition, the salaries of all employees have been reduced.
ⅲ) Enhancement of the governance system
At the 38th Annual general Meeting of Shareholders held on June 29, 2016, theCompany increased the number of outside directors by one to a total of three. The
Company is also strengthening the management oversight functions of the Board of
Directors and changing the business execution system to clarify the responsibilities ofeach business division.

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In the previous fiscal year, we finished implementing most of the management
streamlining measures such as the reduction of employees, store mergers andclosures, and production and logistics downsizing, resulting in increased profitability
that has enabled the business to remain in the black. Now, in the fiscal year underreview, which is the second year of the medium-term business plan, we haveestablished the Headquarters Overseeing SE, HS and ES in order to further solidify
the business foundation, as well as cross-organizational functions to facilitate
effective operation and efficient installations through the cooperation of the threesegments while also transferring some of the personnel from the SE Division to the
HS and ES Divisions. With regard to funding, we are steadily implementing the
medium-term business plan, which was developed based on the assumption of thecontinued support of the main financing bank. We expect to continue to receive
support and cooperation with regard to financing and will work to stabilize our cash
management.
While we are steadily implementing the measures above, we are still in the processof making progress in the medium-term management plan. In addition, the main
financing bank, while indicating its understanding, has not guaranteed its support andcooperation. As a result, the Company recognizes that at present, there is material
uncertainty regarding the going concern assumption.

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4. Supplemental Information
Consolidated Net Sales by Division(In Millions of Yen)

From April 1 to September 30
FY2017FY2016
Commercial PV system
Wholesale of PV components

Changes

11,010

7,992(3,018)

900

576

(324)

61

147

85

Solar Engineering Division Total

11,972

8,716(3,256)

Termite Eradication Service

Others

1,211

1,364

152

Under-Floor/Roof Ventilation System

486

635

149

Foundation Repairing/Home Reinforcement
System

287

911

624

1,333

1,699

365

3,319

4,611

1,292

Anti-rust equipment installation

35

240

205

Repair of building water-woks

153

188

35

OthersHome Sanitation Division Total

Water proofing of building

92

66

(26)

Others

207

188

(18)

Establishment Sanitation Division Total

489

685

195

3,449

3,672

222

2,789

4,878

2,088

858

889

31

Final disposal

382

359

(23)

OthersEnvironmental
Division Total :

389

349

(39)

7,870

10,1492,279

23,651

24,162

510

Plastic fuelGeneration of electricity
Industrial waste (Organic
Recycle)Total Net Sales

Resources

Waste

Water

Development