Alpha-Win Company Research Report
LOCKON CO., LTD. (3690 TSE Mothers)【New name (starting 8/1/2019): YRGLM Inc.】Issued:5/31/2019● Summary

Research Dept., Alpha-Win Capital Inc.
http://www.awincap.com/

Business Description
・LOCKON CO., LTD. (hereinafter referred to as the “Company”) plans, develops, and sells software related to Internet
marketing. It was founded in 2001 by president Iwata during his college years. Its main product is its proprietary
Internet advertising effect measurement system, provided via the cloud to middle-sized and large companies. The
Company's main business is based on a subscription-based business model, meaning that although costs precede andtemporarily cause an overall loss upon the acquisition of new customers, after a certain period of time, the initialcosts are recovered and profit begins to steadily accumulate over time. Going forward, the Company is expected toenter a profitability-improvement phase by effectively using its accumulated information assets. The Company
became listed on TSE Mothers in September 2014. It is a leading company in a niche market. Also, the Company
will change its name to “YRGLM Inc.” starting on August 1, 2019.
Current Financial Results
・After becoming listed on Mothers, the Company had increased sales and stayed in the black. However, from FY 2017
(the fiscal year ending in Sept. 2017), although the Company continued to increase sales, profit declined due toupfront investment for business expansion and expenses related to business restructuring. In FY 2018, sales increased
but a net loss was posted and dividend payment was stopped. In its forecast for FY 2019 (this FY) that has been
disclosed as ranges, the Company expects a double-digit sales growth and an improvement from operating loss to
profit. In the first half (H1) of this fiscal year, the Company achieved sales of Y1,081 million, a 23% growth, and an
operating profit of Y21 million. However, since litigation-related expenses were recorded as an extraordinary loss, a
net loss of Y47 million was posted. H1 results were positive, with the settlement of a lawsuit that had been of concern
and the improvement from operating loss to profit in the second quarter (January to March).
Competitiveness・ The Company's strengths are the management skill of the president who has a deep knowledge of advanced
technologies in this field, products with proven and strong functions, and possession of and potential to utilize thebig data that have been accumulated over the years. The Company’s two main products both have the largest sharein the domestic market. In the growing industry, the Company aims to further strengthen its products and secure an
extraordinarily large market share.
Business Strategy
・Under the Marketing Robot Strategy, which aims to automate and improve the efficiency of Internet marketing, theCompany plans to expand its business domain as a whole from advertising effect measurement to analysis andutilization, as well as overseas development. It plans to achieve Y3 billion in sales in FY 2020 (next FY). Toward
this end, the Company plans to accelerate its growth by actively pursuing M&As and alliances with other companies.
Forecast on Financial Results (Alpha-Win Research Dept.)
・Before the Company’s disclosure of its forecast for FY 2019, Alpha-Win Research Department had predicted sales
to be Y2,150 million (+19.2% YOY) and net profit to be Y10 million (reversal from loss to profit). Based on thedisclosure of the Company plan and the interim financial results, we revised this forecast – specifically, we made aslight upward revision (sales of Y2,260 million and operating profit of Y60 million). In addition to the large
contribution to sales by the main product AD EBiS, further improvements in cost were made, raising the likelihoodof the Company achieving a positive operating profit for the current full fiscal year. A net loss may be posted due tothe recording of an unexpected extraordinary loss, but the amount of net loss is expected to be limited. With thebusiness restructuring completed for the time being and AD EBiS continuing to perform strongly, we expect to see
positive results from the existing and future businesses and corporate acquisitions as well as various measures thathave been implemented. The growth potential is large, with an annual sales growth rate of about 20% expected overthe medium to long term. In addition, since it seems that the Company will continue to conduct upfront investments“on the offensive” for business expansion over the medium to long term, we believe that it is possible for the Company
to remain in the black and achieve a profit growth rate of 20-30% per year, exceeding the sales growth rate, on thecondition that the Company succeeds in cost control.
1/36This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from theuse of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD. 【New name: YRGLM Inc.】 (3690 TSE Mothers)
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

Stock Price
・ AdTech-related domestic growth stock. Stock price has risen and has been outperforming major indexes since
February 2019 in response to the share buyback and the recovery of financial performance. The Company’s stock
value does not seem cheap when valuation indicators are compared with TOPIX and similar companies. However,since the Company’s results have bottomed out and improved from loss to profit, there is increasing anticipation fora v-shaped recovery in profit. Going forward, factors that may affect stock price include the change in monthly sales,
quarterly transition in profit and loss (change in the amount of profit), announcements of M&As or alliances or new
functions, contents of the next announced medium-term plan, and forecasts on profit levels over the medium term. In
particular, the unit price and the number of active accounts of the core AD EBiS business are key indicators (KPI)
directly linked to financial performance and should be closely followed.
Shareholder Return
・In the previous fiscal year, the Company posted a net loss and terminated its dividend payment and shareholder
benefit plan. Although the Company announced that this year's dividend is undetermined, the possibility of resumed
payment is low and dividend payment is likely to be carried over into the next fiscal year or later. The Company
currently believes that, because it is in its growth phase, it should raise shareholder value by recovering its financial
performance through investments for growth rather than letting its cash flow out.

(Note) CE = the Company’s estimate (forecast); E = estimate (forecast) by Alpha-Win Research Dept. All fiscal years discussed in thisdocument are September-ending. For example, FY 2019 ends in Sept. 2019.

(Note) Prepared by Alpha-Win Research Dept. The most recent stock price and TOPIX values used for the calculation of performance arevalues as of 5/24/2019. However, comparison between periods is based on the end-of-the-month stock price for each corresponding month.

2/36This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in thisReport for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are based on
information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete, appropriate, or
fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage resulting from theuse of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding their investment. Intellectual
property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18
Contents

1．Company Overview.......................................................................................................................... P4
Leading Company in a Niche Market .................................................................................................. P4
Business Philosophy, Basic Policies, Mission, and Action Guidelines ............................................... P6
2．Business Description and Business Model ................................................................................... P7
Providing Originally Developed Marketing Robot via the Cloud ..................................................... P7
Restructuring and Strengthening of Business Portfolio ..................................................................... P8
Details on the Business Contents ....................................................................................................... P9
Subscription-Based Business Model ................................................................................................ P14
3．Shareholder Composition ............................................................................................................ P16
Change in Composition by Shareholder Type ................................................................................. P16
Major Shareholder Composition ...................................................................................................... P16
4．ESG .................................................................................................................................................. P18
Environment and Society ................................................................................................................... P18
Governance ........................................................................................................................................ P19
5．History of Growth ........................................................................................................................ P20
Company History ............................................................................................................................. P20
Transition in Past Financial Results ................................................................................................. P20
6．Business Environment ................................................................................................................. P22
Trends in Japan’s Advertising Industry ............................................................................................. P22
LOCKON CO., LTD.’s Competitors ................................................................................................ P23
7．This Fiscal Year’s H1 Results and Full-Year Forecast .............................................................. P24
Financial Results for FY 03/2019 (this fiscal year’s H1) .................................................................. P24
LOCKON CO., LTD.’s Financial Results Forecast for FY 2019 (this fiscal year: 09/2019) ......... P26
8．Growth Strategy ............................................................................................................................. P27
LOCKON CO., LTD.’s Medium-Term Business Plan and Strategy ............................................... P27
Alpha-Win Research Dept.’s Financial Results Forecast for FY 2019 ............................................. P29
Alpha-Win Research Dept.’s Financial Results Forecast for the Medium Term ............................ P30
9．Analyst’s View .............................................................................................................................. P33
SWOT Analysis ............................................................................................................................... P33
Shareholder Return .......................................................................................................................... P33
Stock Price and Characteristic and Factors that May Affect Stock Price ........................................ P34
Note: Upon translating to English, when the page numbers differed from the original Japanese version, they
were adjusted to those of the English version of the Report.
3/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

1. Company Overview

 As its business, theCompany is developing
the Marketing Robot that
automates and improves
the efficiency of marketing
instead of humans.
Currently, the Internet
advertising effectmeasurement system,
which is a part of thisbusiness, is its main
product.
 As its main service, theCompany provides
Internet-marketing-related
platform as a SaaS (cloud).
(1) Internet advertising
effect measurement system:
A tool to comprehensively
measure the effect of andevaluate various Internet
ads and SEO strategies(2) Paid-listing ads: Also
referred to as searchadvertising. A method of
displaying ads related to
keywords searched orbrowsed by Internet users.
Effectively displays ads inthe users’ areas of interest. A
highly effective method forcorporate advertising.
(3) SaaS (software as aservice): A service where
software is used via theInternet (almost
synonymous with the cloud).
Does not need purchasing of
packaged products. Only thenecessary functions,contents, and quantity ofservice are used via theInternet and paid for.
 Changed its company
name and symbol. The
new name is “YRGLMInc.”◆ Leading Company in a Niche Market
LOCKON CO., LTD. (hereinafter referred to as the “Company”) is an
emerging company that plans, develops, and sells software related toInternet advertising and e-commerce. Susumu Iwata, the Company’s
president, started a web design business in Osaka as a college student and,upon business expansion, established the Company in 2001.
The Company has grown through the full-scale development of theMarketing Robot (registered trademark of the Company) business,developing proprietary software that automatizes and improves theefficiency of marketing instead of humans. Until now, it has grown its
business in two areas – the marketing platform and the EC platform. The
main products are AD EBiS, an Internet advertising effect measurement
system1, and THREe, an operating platform for paid-listing ads2.
Software is provided as a SaaS3 (cloud) to companies (B2B). The
Company is a giant leading company in the niche market of the Marketing
Robot business. It became listed on TSE Mothers in September 2014.
Currently, the Company has two head offices, one in Osaka and one inTokyo.
The current company name “LOCKON” (CO., LTD.) comes from “lockon,” which is a military term in English meaning “a missile becoming
ready to automatically follow a target.” On August 1, 2019, its name willchange to “YRGLM Inc.” As five years have passed since becoming
listed on the market and the Company will reach a milestone next year
(2020) – the 20th anniversary of its founding which can be seen as its
second start-up phase – the Company decided to reconfirm its goal andthe value that it provides and aim for a further leap, and embedded thisdecision in its new name.
The Company created the word “YRGLM” to mean “an ideal world thathas never been seen before” and made it its new name. “In order to present
the image of an ideal future that does not exist in this world yet, we used
‘a meaningless string of letters’ that does not have any origin in existingwords. It is a sole and unique name that we chose to reflect our goal to
become a sole and unique company [excerpt from the Company’s
website].”In addition, using “five rubber bands,” theCompany created a symbol that represents anorganization aiming to realize the ideal world
YRGLM. The rubber band symbolizes infinite
possibilities since it has various meanings
depending on the person who uses it. The
overlapping shape represents a strong harmony
among employees. Furthermore, the symbol
expresses the respect for the individuality of each
person and diversity and represents a strong andflexible organization that can elastically change.
This new name and symbol have already beenregistered as trademarks.
4/36

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

 Main products are its
proprietary AD EBiS and
EC-CUBE.

The Company is specialized in providing the Marketing Robot and carries
out the following two businesses (main product names listed after thecolon).

(4) Programmatic
advertising: An advertising
method where optimizationof ads is conducted
automatically or supported
immediately. After
submitting an ad,
optimization is conducted,
leading to better results.

(1) Marketing platform: AD EBiS, THREe, AdRepo (automatic report
generation tool for programmatic advertising4)(2) EC platform: EC-CUBE
The corporate group consists of a total of six companies: the Company,
two consolidated subsidiaries, one nonconsolidated subsidiary, and two
affiliates accounted for by the equity method.
Consolidated Subsidiaries
・LOCKON Vietnam Co., Ltd. (Vietnam Socialist Republic. An offshoredevelopment site. Conducts software development outsourced by theCompany. 100% owned by the Company.)
・EC-CUBE Co., Ltd. (Established in Osaka City Kita Ward in October
2018. The Company has a 100% stake. Succeeded the EC-CUBE businessfrom the parent company's EC platform business in January 2019）
Nonconsolidated Subsidiary
・LOCKON Marketing of U.S.A (Established for information-gathering
purposes – a dormant company)
Affiliates Accounted for by the Equity Method
・SAI Co., Ltd. (LOCKON CO., LTD. acquired 20% of the shares in
September 2015 and transferred its EC outsourced development business)
・ Radical Opti Co., Ltd. (LOCKON CO., LTD. acquired 20% of theshares in May 2017 and, like SAI, transferred its EC outsourced
development business)

 Consolidated-to-parentcompany ratios are about
1 for both sales andprofit.

The parent company’s sales and profit make up an extremely large portionof the total for the entire corporate group, with the consolidated-to-parentcompany ratios staying at around 1. Total recurring profit/loss of theconsolidated subsidiaries is also almost zero (Figure 1).

【 Figure 1 】Comparison of Consolidated to Parent Company Recurring Profit by Fiscal Year
(unit: Y mil, %)(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report, financial results summary, financial results briefing
materials, website, etc.
(Note) Hereinafter, unless otherwise noted, reference may be omitted if it is the same as the above. Also, since we generally round off
the decimal places for the numbers used in this Report, the numbers may differ from those officially disclosed by the Company. Results
are consolidated starting in FY 2014 (same applies to the rest of this document).

5/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
After becoming listed, the Company had been debt-free, but in FY 2018,2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18
 Essentially debt-free All fiscal years (FY)
discussed in this Report
are September-ending. For
example, FY 2019 ends in
Sept. 2019.

as investment for the future, the Company raised about Y800 million in
long- and short-term loans. The Company commented that thisinvestment is for the development of the marketing platform and AIrelated fields and in preparation for future M&As.
Since the Company’s long- and short-term debt totaled 840 million while
its cash and deposits were about Y920 million as of the end of March
2019, the Company is essentially debt-free. In addition, while its total
assets and market capitalization are relatively small – about Y2.2 billion
and Y11 billion, respectively, as of the end of March (closing price was
Y1,731 on May 24, 2019) – there is no problem with its financial
condition, with an equity ratio of 47% and current ratio of 147%.
Intangible fixed assets, including goodwill (due to the transfer of the
AdRepo business) and software, are Y530 million and deferred tax assets
are Y110 million, totaling Y640 billion. This is smaller than the
Company’s net assets, which total Y1.05 billion, so there seems to be no
problem for the time being.

◆ Business Philosophy, Basic Policies, Mission, and Action
Guidelines
Although the Company’s name is scheduled to be changed, its businessphilosophy remains unchanged as “Impact On the World.” These words
embody the Company’s wish to “create a company with global influenceand give dream and hope to as many people as possible.” The Company’s businessphilosophy

The Company conducts business under the following basic policy: “Wewill maximize our corporate value, contribute to the realization of avibrant and affluent society, and comply with the laws and regulations aseach individual delivers better-than-expected results under his or her roleso that we can earn strong trust and reputation from our customers.
Through these efforts, we will rapidly develop our organization andbusiness and thereby give dream and hope to as many people as possible.”
As its mission statement, the Company has established the following threepolicies: “For the happiness of all employees,” “For the happiness of all
customers,” and “For the happiness of all suppliers.” The Company has
also set five action guidelines: “reliability,” “speed,” “uniqueness,”“innovation,” and “independence.”

6/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

2．Business Description and Business Model A B2B business,
providing proprietary
software via the cloud as
its main business.
Developing businesses
based on two platforms.
Focused on themarketing platformbusiness.

◆ Providing Originally Developed Marketing Robot via
the CloudBased on the concept that a “marketing robot” that solves problems
automatically and efficiently instead of humans is also necessary in thearea of Internet marketing due to the aging and declining population, theCompany provides proprietary Marketing Robot software via the cloud
mainly to companies. The Company's business consists of two businesssegments: (1) the marketing platform business and (2) the EC platformbusiness. The former accounted for approximately 88% of the total salesof the first half (H1) of this fiscal year (approx. 85% in FY 2018) and is
the driver of sales growth (shown by fiscal year on Figures 2 and 3).
Change in operating profit by business segment is shown below on Figure
4. Except for FY 2017, over the full year, the profit of the EC platform
had underpinned the Company’s financial performance amidst前年同期比
fluctuations in the profit of the marketing platform business.

構成

104.5％【 Figure 2 】FY 2018 Full-Year Sales
Breakdown by Business Segment【 Figure 3 】Change in Full-Year Sales by
Business Segment (unit: Y mil)Marketing Platform

49.

EC Platform
107.9％
275
539

477

465
100.4％

526

422
323
545

666

883

911

1,074

1,255

1,530

FY
FY
FY
FY
FY
FY
FY
2012 2013 2014 2015 2016 2017 2018

(Ref) Figures 2-4 were prepared by Alpha-Win Research Dept. from the Company’s securities report, financial resultssummary, and financial results briefing materials.

【 Figure 4 】Change in Full-Year Operating Profit by Business Segment

7/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

50.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18◆ Restructuring and Strengthening of Business Portfolio

 Pushing forward withrestructuring of businessportfolio. Concentrating
business resources on
AD EBiS of themarketing platformbusiness.

(5) Cross-Device Function: A
function to visualize user
behavior across devices,
applications, and browsers(6) DMP: A method bywhich a corporate client
analyzes its website

Since FY 2016, the Company has been actively restructuring andstrengthening its business portfolio, focusing on its core business (ADEBiS in the marketing platform business) and separating its non-corebusiness (EC platform business) (Figure 5). In the marketing platformbusiness, the Internet advertising effect measurement system AD EBiS
accounts for most of the total sales (a little less than 80% this H1). In the
future, the Company plans to concentrate business resources on thisproduct and related products to develop this business as an even greater
driver of growth. Thereby, the Company plans to acquire an extremely
large share in the market.
Specifically, in recent years, the Company has been conducting thefollowing strengthening and restructuring of business.
(i) Strengthened the products of the marketing platform business.
Offering products with enhanced capabilities by adding various
optional functions to the AD EBiS such as the artificial intelligence
functions Cross-Device Function5 (patent-pending; provided startingin August 2018) and Customer Journey Analysis Function(visualizes and evaluates the user's action history; patent obtained).
(ii) Formed 31 new alliances with other companies against the target of30, which had been a high-priority target of the Company’s
development strategy (FY 2018). As a result, with the utilization of
external resources, the Company was able to obtain most of what isneeded for the three components – measurement, analysis, andutilization – crucial to the Marketing Robot.
(iii) Acquired EVERRISE CO., LTD.'s automatic report creation tool
AdRepo business in August 2018 and incorporated it into themarketing platform business.
(iv) Restructured the EC platform business, transferring the EC
outsourced development business (actual sales were Y246 million in
FY 2016) to its two equity-method subsidiaries and withdrawing
from the outsourcing business.
(v) For the same EC platform business, the Company also transferred its
EC-CUBE division to EC-CUBE Co., Ltd., its new consolidated
subsidiary, on January 1, 2019 by a company split-up. Began
providing the new version, EC-CUBE 4 (October 2018).
(vi) Similarly, the DMP6-related business of the EC platform business(previous fiscal year's sales were Y84 million) was transferred to theCompany's marketing platform business in the previous fiscal year
since it is closely related to AD EBiS.
(i) Reinforced human resources to prepare for growth. From FY 2014
to FY 2018, the number of employees were increased from 68 →
71 → 98 → 122 → 144 (the number of employees at the end of
the fiscal year) through new-graduate and mid-career recruitment.
Over the past three years, the Company has been hiring about 20
more employees every year, doubling its size. In particular, theCompany is reinforcing its engineering team for softwaredevelopment and sales team to strengthen sales activities. The
number of employees at the end of this H1 was 150, which is only
six greater than six months ago. Although this rate of hiring is slower
than before, the Company plans to shift its human resources toward
customer success in order to provide more value to customers. In H2,
8/36

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
as 11 new graduates will be hired in addition to midcareer
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

recruitments, the Company estimates that it will have about 160
employees at the end of the fiscal year.
As a result of the above actions, after the second quarter (Q2) of FY 2019,
the Company (parent company) has been concentrating on the marketing
platform business. However, since the company to which EC-CUBE wastransferred is a consolidated subsidiary, on a consolidated basis, theCompany plans to continue to classify its business into the same twosegments as before.

【 Figure 5 】Business Restructuring and Segments(current situation of business segments is highlighted)
Business Segment(1) Marketing
Platform(2) EC Platform

Main Product/Service
1. AD EBiS
2. THREe
4. DMP
4. AdRepo
1. EC-CUBE
2. SOLUTION → terminatedBusiness Subcategory

ChangeNote

Transferred from SOLUTION

ParentCompany

AcquiredTransferred to EC-CUBE Co., Ltd. on 1/1/2019
EC Outsourced Dev.

Consolidated

Were transferred to SAI Co., Ltd. and Radical Opti Co., Ltd. Equity method(DMP)

Transferred to marketing platform(Ref) Figures 5 and 6 were prepared by Alpha-Win Research Dept. from the Company’s securities report, financial results summary, andfinancial results briefing materials.

◆ Details on the Business Contents（1）Marketing Platform Business
The transition in the sales and profit of the marketing platform businessby fiscal year is as follows.

【 Figure 6 】Change in Sales of the Marketing Platform Business and Operating
Profit of This Business Segment
Sales(Y mil)Marketing Platform
1. AD EBiS
2. THREeFY 2012stand-alone
545
499
46

FY 2013stand-alone
666
567
81

FY 2014consolidated
883
722
161

FY 2015
consolidated
911
822
89

FY 2016
consolidated
1,074
1,012
62

-61
-11.2%

-1
-0.1%

142
16.1%

214
23.5%

210
19.5%

3. (DMP)
Segment's O.P.
Segment's O.P. Margin

 AD EBiS is theCompany’s main
product that accounts
for approximately 78%
of the Company’s total
sales (FY 2018).

FY 2018
consolidated% of Total
1,530
84.7%
1,402
77.7%
43
2.4%
84
4.7%
153
-121
12.2%
-7.9%

FY 2017
consolidated
1,255
1,200
54

The marketing platform business consists of four businesses: 1) AD EBiS
(Internet advertising effect measurement system), 2) THREe (in-house
operation platform for paid-listing ads), 3) DMP, and 4) AdRepo. By
combining THREe, which enables automatic optimization and automaticad submission, and AD EBiS, which measures and analyzes theeffectiveness of Internet advertising, the Company provides a one-stop
platform for the three elements of marketing automation – from effectmeasurement to optimization to purchase/ad-submission.
Increasingly diversified and dispersed consumer behavior of today’s
Internet society has led to more sophisticated and complicated marketing
and advertising, making technology-based operation more important.
9/36

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
Usually, an advertising effect measurement system is involved in the
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

effect measurement, analysis, and evaluation of ads, and utilization (admanagement) is normally not included. The Company’s characteristic orstrength is its ability to offer, at a reasonable price, software that canaccurately evaluate and utilize the effect of Internet ads using various
analysis functions and analytical methods, and its capability to provide
excellent support.
 AD EBiS is an Internet
advertising effectmeasurement system.
 Provides services as a
SaaS, adopting thesubscription-based
business model.
(7) Impressions: The
number of times an ad wasdisplayed.
(8) Clicks: The number oftimes an ad was clicked.
(9) Conversions: The
number of times that users,
who visited the site andclicked on an ad, took
actions that the advertiser
considers as achievement,such as product purchase,information request, andinquiry.
(10) Subscription-based
business model: A businessmodel where users pay forthe provided service
according to the duration ofuse.
 Number one in thedomestic market for four
consecutive years
 Unit price largely
increased with thetransition to the newpricing system with the
packaged plan.

(i) AD EBiSAD EBiS is the Company’s core product and is an Internet advertising
effect measurement system that allows the collective management, effectmeasurement, analysis, and visualization of the effect of Web ads, etc., tohelp assess the cost effectiveness of ads. It comprehensively provides a
one-stop marketing environment for maximizing sales or acquiringprospective customers through proactive marketing by “using” marketing
data accumulated by the “effect measurement” function. AD EBiS makes
possible the visualization of marketing strategy (evaluation, improvement,etc.), letting advertisers measure and understand the series of behavior
from the number of impressions7 of the ads displayed on PCs,
smartphones, etc., and the contacts, interests, and reactions toward theadvertiser’s ads to the number and history of clicks8 for the paid-listing
ads and the final purchase made at the advertiser's website (the number ofconversions9).
The service is provided as a SaaS under a subscription-based businessmodel10 (described in detail on page 14).
Since its release in 2004, AD EBiS has had a total of more than 9,000
installations and has had the largest share in domestic market for Internet
advertising effect measurement system for four years in a row. Moreover,according to the Company's data, it is increasing its share year by year
from 36.0% in FY 2015 to 40.0% in FY 2016, 42.9% in FY 2017, and44.2% in FY 2018 (forecasted value). It is a B2B business with its major
customers being ECC Junior, Aiful, Noevir, Zwei, Kobayashi
Pharmaceutical, Z-kai, Yazuya, Setagaya Shizenshokuhin, etc.
AD EBiS allows users to add a variety of optional functions (CrossDevice Function, access history analysis function, etc.) to the basic
function as necessary. In the past, its pricing plan was a pay-as-you-go
based on multiple parameters. However, starting in June 2018, theCompany simplified the plan and set up a pricing table with a flat rate fordifferent upper limits to the monthly number of clicks and PV (page view),
much like a mobile phone pricing plan. New contracts have already beentransferred to the new pricing system. In the new pricing system, theimplementation-support program and telephone support are packaged
together with the basic functions and three main plans of S, M, and L(monthly basic charge: 100, 200, and 300 thousand yen, respectively) are
offered. Options (various external linkage functions such as reporting,etc.) can be added to a plan.
As a reference, sales of AD EBiS are determined by average unit price ×
number of active users. Both figures are important indices (KPI) not only
for this business but for the Company as a whole.
10/36This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
In Q2 of FY 2019 (January to March), the average monthly unit price2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18(average unit price as of the end of the last month of each quarter; thesame applies below) was Y98,042, which is Y22,196 or 29.3% greaterthan Y75,846 in the same period of the previous fiscal year. This price isalso Y11,421 and 13.2% greater than in Q1.
Meanwhile, AD EBiS’s number of active accounts was 1,516, having
increased only by 37 accounts or 2.5% compared to 1,479 in the same
period of last fiscal year. Compared with the end of Q1, the number ofaccounts has decreased by 53 (Figure 8). This sharp rise in unit price andslight decrease in the number of accounts are due to the increase incancellations by low-priced contracts when the existing customers'
contracts were transferred to the new pricing system in March and Aprilof 2019. However, the Company is not concerned about this change since
it is a transient phenomenon associated with the pricing revision and thesales in the low price range where cancellations have increased are only
2% of total sales.

 AD EBiS’s number ofaccounts and average
unit price are the KPI.

 One of the goals is to
reduce the contract
cancellation rate.

Since October 2018, the average unit price of AD EBiS for newly
acquired contracts has been exceeding Y100,000. Nearly 90% of theexisting customers have already transferred to the new pricing system,
and large increases in unit price from the pricing revision have mostly
ended. However, as the number of high-priced new customers increases
and new functions and services (including the increase in revenue fromproviding option services through external partners) are added, the unit
price is expected to continue to rise annually by around 5-10%.

【 Figure 8 】Change in the Number of Active【 Figure 7 】Change in Average Unit Price of
AD EBiS

Accounts of AD EBiS(# of accounts)(Y)

98,042100,000

1,600
1,500

90,000

1,516

1,479

1,400
1,300

80,00075,846
Q4→Q1
Seasonal
variation

70,0001,200

Change in
Pricing System

1,100
1,000

60,000900
50,000800
700

40,000Q1Q2Q3FY 2015

Q4

Q1

Q2

Q3

FY 2016

Q4

Q1

Q2

Q3

FY 2017

Q4

Q1

Q2

Q3

FY 2018

Q4

Q1

Q2

FY 2019

Q1

Q2

Q3

FY 2015

Q4

Q1

Q2

Q3

FY 2016

Q4

Q1

Q2

Q3

FY 2017

Q4

Q1

Q2

Q3

FY 2018(Ref) Figures 7-9 were prepared by Alpha-Win Research Dept. from the Company’s securities report andfinancial results briefing materials.

11/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Q4

Q1

Q2

FY 2019

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18(ii) THREe THREe's sales are verysmall. The Company plansto reduce businessresources used for thisbusiness in order toconcentrate on AD EBiS.
(11) Human-like Portfolio: A
bidding function thatalgorithmizes the bidding
strategy of the operator. If
budget and efficiency target
are set, it will automatically
perform optimal bidding as if
operated by a person.

 Moved the DMP businessfrom the EC platformbusiness

 AdRepo’s customers areadvertising agencies.
Enables automatedcreation of reports for
programmatic advertising.

THREe is also a proprietary product – an operation platform for paidlisting ads. Of the many forms of Internet advertising, programmatic
advertising is especially rapidly growing and is becoming more
complicated and advanced. Consequently, manual operation is becoming
difficult (about 70% of Internet ads are programmatic ads). Using THREe,
it is possible to analyze big data accumulated through AD EBiS or various
media, automatically optimize ads, and automatically submit ads. By
enabling fully automatic operation (Human-like Portfolio11), including
the optimal adjustment of bid unit price and addition of keywords, it canshorten the amount of time needed for operation and management andrealize optimization. It has been used by more than 5,000 users. THREeis also provided as a SaaS.
However, THREe accounted for only a little less than 3% of total sales in
FY 2018 and merely 1-2% in this fiscal year’s H1. In order to concentratebusiness resources on AD EBiS, the Company intends to scale down thisbusiness in the future.
(iii) DMP Business

The DMP business was transferred from the SOLUTION division of theEC platform business to a division of the marketing platform business inthe previous fiscal year since it is closely related to AD EBiS. DMP is theabbreviation for “Data Management Platform.” The private DMP
provided by the Company is a method by which a corporate client cananalyze its website. For instance, a client can investigate and verify the
behavior history and stay time of users who visited its website. The
Company has several major clients for this business including Lion. This
H1, the business was only about 3% of the total sales, and the Company
intends to scale down this business like THREe.
(iv) AdRepo BusinessIn August 2018, the Company acquired the AdRepo business, anautomatic report-generation tool for programmatic advertising, and has
begun to fully develop this business starting this fiscal year. Annual sales
are estimated to have been a little less than Y100 million in the last fiscal
year. By acquiring new customers and creating a synergy with AD EBiS,
the Company plans to develop this business as its growth business (salesof greater than Y100 million and growth rate of about 30% forecasted forthis fiscal year). Its domestic market share is third place, following
ATOM (TechLoCo Co., Inc.: not listed) and glu (ATALA LLC: not listed,a partner of the Company).
AdRepo is a tool to fully automate the generation of reports and is a cloudservice developed to reduce the workload of advertising agencies in report
creation for programmatic ads. By collaborating with key advertising
platforms such as Google AdWords, Yahoo! Promotional Ads, Facebook
Ads, and FreakOut, it can automate data aggregation and report
generation for programmatic ads. In addition, by strengthening its
coordination with AD EBiS, AdRepo enables the integrated managementof all data from data measurement to reporting and automation of digitalmarketing work.
12/36

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18（2）EC Platform Business

Until FY 2018, the EC platform business had been composed of the following
two divisions: (i) EC-CUBE and (ii) SOLUTION. However, starting thisfiscal year, the SOLUTION division no longer exists due to a transfer.

【 Figure 9】Change in Sales of the EC Platform Business and Operating Profit of This Business Segment
Sales(Y mil)EC Platform
1. EC-CUBE
2. SOLUTION

FY 2012stand-alone
323
150
174

FY 2013consolidated
422
207
214

FY 2014consolidated
477
245
232

FY 2015
consolidated
526
230
296

FY 2016
consolidated
539
219
319

98
30.5%

75
17.8%

107
22.5%

136
25.8%

38
7.1%

(DMP)
Segment's O.P.
Segment's O.P. Margin(12) Open source software:
The source code, which isequivalent to the blueprintof software, is madeavailable free of charge,
letting anyone improve andredistribute it.
(13) ASP: A service that
rents applications tocustomers through theInternet.
(14) Freemium Model:“Freemium” is a coined wordthat combines “free” and“premium.” Refers to abusiness model thatgenerates revenue byoffering basic services freeof charge while charging feesfor more sophisticated or
specially-added related
services.
 The EC-CUBE businesshas been transferred to a
consolidated subsidiary.

 SOLUTION business wastransferred to affiliates
accounted for by theequity method.

FY 2017
consolidated
465
208
257
104
-60
-12.9%(i) EC-CUBE
EC-CUBE is an open source software12 or platform whereby users cancreate and operate EC (e-commerce) websites on their own. The
Company provides EC-CUBE as free packaged software for web design
to companies who wish to begin selling and providing products andservices on the web. It is characterized by both the user-friendliness as an
ASP13 and the convenience as a software enabling development –companies can directly and freely customize the program source. It has
the largest share in the domestic market. EC-CUBE has features such as
low cost, high customization (it can be changed according to the needs ofusers), and user-friendly interface, and has become a standard platform.
In return for offering EC-CUBE for free, the Company has set up a
Freemium Model14 where revenue is earned from peripheral services.
Through this system, the Company makes profit from royalties fromofficial partners in the Internet business (account settlement agent
business, hosting businesses, etc.), function-addition fee from plug-ins(program to add functions to software), sales revenue of commercial
license, etc. Other sales related to sales promotion and events are also
included in the net sales.
However, as part of the restructuring of the business domain of theCompany’s group, the EC-CUBE business was succeeded by the 100%
consolidated subsidiary, EC-CUBE Co., Ltd., on January 1, 2019.
Because it is a fully consolidated subsidiary, there will be no change inthe consolidated financial results, but the Company plans for thesubsidiary to further expand and develop the business as a separate
corporate entity, for instance, through partnerships with other companies.
The development of the new version, EC-CUBE4, has been completed,
and it has been provided since October 2018. Its cloud version was also
released and the Company is examining various possibilities for future
development.
(ii) Former SOLUTION businessAlthough the SOLUTION business had been composed of multiple
businesses, with the restructuring of business, its main EC outsourced
development business had been transferred to the two affiliatedcompanies of which the Company owns 20% of shares each (reflected
13/36

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
under non-operating profit/loss as profit or loss accounted for by the
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

equity method). From this fiscal year and onward, this division ofbusiness will no longer exist.

◆ Subscription-Based Business Model The Company’s main
business is based on a
subscription-based
business model. It lets
the Company acquirecontinuous and stableprofit by charging feesfor every certain periodof use.

 A business model
where there is an
overall loss
immediately after
obtaining a newcontract, but over time
the cost is recovered andprofit is steadily
accumulated.

The marketing platform business, which accounts for approximately 90%of the Company's sales, is mostly based on the SaaS (cloud), flat-ratebilling model. It is a subscription-based business where users pay apredetermined fee for the service contents or the use of system services
such as AD EBiS during a certain contract period, such that the Company
can continue to earn revenue until contract cancellation. Althoughexpenses including marketing and sales expenses for customer acquisition
and R&D expenses will precede at the beginning of a new contract, overa period of about three years (the period from the start to the end of atransaction with a customer), revenue can be accumulated continuously
to increase the life time value (LTV: how much cumulative profit isgenerated within a customer’s lifetime). Therefore, it is a business modelthat allows for stable growth.
Figure 10 below shows a model for the change in the Company's
cumulative profit and loss over the average contract period of three years
under the subscription-based business model. In the month that a newcontract is made, all of the expenses are recorded, so that an overall loss
is recorded for that month. However, since the Company then earns analmost fixed amount of sales revenue every month starting in the monthof contract, the cumulative break-even point is reached after eight months.
From the ninth month, the cumulative profit and loss (LTV) turns into asurplus and accumulates until the 36th month when cancellation is
expected. In other words, while the number of contracts is increasing at
an accelerating speed, on the surface level, there would seem to be a timelag, where the contribution to profit in the first year is small but profit
accumulates on a continual and stable basis from the second year until theend of the contract. The Company considers the upper limit of the initialcost to be about 30% of the LTV (the final cumulative profit; therightmost end of the graph in Figure 10) and controls the initial cost
related to new contract acquisition accordingly.

【 Figure 10 】Model for the Change in LTV per Customer (cumulative profit and loss)(Ref) Prepared by Alpha-Win Research Dept. from the Company’s financial results briefing materials, website, etc.

14/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
HubSpot, Inc. (hereinafter “HUBS”), listed on the US NYSE, is a
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

 HubSpot, Inc., which adopts
the same subscription-basedmodel and is listed on themarket in the US, has
improved its financial
performance, leading tolarge increases in stock
price.
(15) Inbound marketing: A
marketing concept where
the relevant information(contents) are sent out tousers who are alreadyinterested in them to somedegree and are potential
future customers of theadvertiser, thereby
encouraging purchase of theadvertiser’s products orservices.

company with the same subscription-based model as the Company thatcan be studied as reference. HUBS provides integrated software for
inbound marketing15 and sales via the cloud. This company charges amonthly fee based on the amount of use.
The transition in HUBS 's overall financial performance is shown on
Figure 11, and the transition in profit margin, various expense ratios, andthe number of customers are shown on Figure 12. Because of sales andmarketing expenses and upfront investment costs such as research anddevelopment (R&D) expenses incurred during the business’s growthphase, or the phase during which the number of customers rapidly
increases, the operating margin resulted in a large negative percentage of-82% in FY 2010. However, due to the time lag in the number of contracts,
sales, and profit inherent to the subscription-based model as describedabove, the operating margin sharply improved to -9% in FY 2018. In
response, the stock price of HUBS also rose to about 7.7 times the priceof its IPO (on October 2014), largely outperforming NASDAQ (by 3.1x)
and S&P500 (by 2.6x) (as of May 18, 2019).
Similar to HUBS, the profit of the Company (LOCKON CO., LTD.) is
predicted to tend to improve with a time lag as the number of contracts(net sales and active users) increases. Therefore, it would be important tofollow up on the Company over multiple years rather than just a single
year. In that sense, the number of active users and the average unit price
may be considered as leading indicators of the Company’s financial
performance.

【 Figure 11 】Change in HUBS’ Financial Performance (1)Sales & Operating Profit (left axis): unit = USD mil O.P.
Margin (right axis): unit = %【 Figure 12 】Change in HUBS’ Financial Performance (2)Gross margin & expense ratios over sales (left axis): unit = %Number of customers (right axis): unit = companies or persons(Ref) Figures 11 and 12 were prepared by Alpha-Win Research Dept. from HUBS’ financial results materials, website, etc.

15/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

3．Shareholder Composition

 The shareholding ratio
of individuals isoverwhelmingly highat about 94%.

◆ Change in Composition by Shareholder TypeRegarding shareholder composition by shareholder type as of the end of
September 2018 (Figure 13), “individuals, etc.” accounts for an
overwhelmingly large portion – about 94% of the total. “Other corporate
entities” is about 2%, “financial instruments business operators” is also
about 2%, and both the “overseas corporate entities, etc.” and “financial
institutions, etc.” are small, at less than 1% and about 1%, respectively.
The composition ratio has not changed significantly.

【 Figure 13 】Change in Shareholder Composition by
Shareholder Type (unit = %)(Ref) Prepared by Alpha-Win Research Dept. based on the Company’s FY 2018 securities report◆ Major Shareholder Composition

 There have been nolarge changes in the
top major
shareholders. Persons
affiliated with theCompany, including
active and former
executive officers andthe employee stock
ownership plan, own
approx. 60% of theshares.

The major shareholders are shown on Figure 14. The following is
supplementary information (as of the end of March 2019). When dataover past periods are compared, we can see that the profiles of the major
shareholders have remained mostly the same, except for the generalindividual shareholders.
・The largest shareholder owning greater than 40% of shares is Susumu

Iwata, the current president, founder, and owner.
・Second and third largest shareholders are former executive officers of
the Company. The shares of the former and present executive officers of
the Company, plus the employee stock ownership plan at seventh place,amount to greater than 60 percent of the total shares.
・The fourth and fifth largest shareholders are both trust banks. The actual
final investors’ names and purposes of investment are unknown, but they
have been buying more shares and climbing up the ranking ofshareholders. Also, we have noticed that 189.5 thousand shares(equivalent to about 3% of LOCKON CO., LTD.’s outstanding shares)
are included in the “MHAM Emerging Growth Stock Open” portfolio(also called “J-Frontier”) as of February 25, 2019. Although we could not
16/36

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
clearly and formally identify this portfolio as a major shareholder, it is2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

highly likely that the portfolio is being invested in the name of a trustbank.
・The eighth largest shareholder is Hakuhodo DT Media Partners Inc.,
the Company’s distributor.
・The ninth largest shareholder is BNY GCM CLIENT ACCOUNTJPRD AC ISG, an account that is a major shareholder of a total of over
40 Japanese stocks – mainly small caps but also large caps. Its investment
objective is unknown, but currently it portrays no activist-like behavior.
As of the end of September 2018, the number of treasury shares ownedby the Company was 983 shares. The Company bought back its shares in
February and March of 2019 (a total of about Y100 million with anaverage stock price of Y1,363), increasing its treasury shares to 78,396
shares (equivalent to 1.23% of outstanding shares). The Company intends
to use these treasury shares for M&A and alliance strategies as well as
stock-based compensation for its executives and employees in the future.

【 Figure 14 】Major Shareholders’ Status
Unit for number of shares in the table: thou. shares

Susumu Iwata (president and CEO)Hiroichi Fukuda (former executive vice president)
Kanako Mataza (director and senior executive officer)
Japan Trustee Services Bank, Ltd.
Trust & Custody Services Bank, Ltd.
Rakuten Securities, Inc.
LOCKON Employee Stock Ownership Plan
Hakuhodo DY Media Partners Inc.
BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)
Tomonori Yamada (indiv.)
Katsuyuki Ito (indiv.)
Akiko Takashima (indiv.)
Kenichiro Wade (former outside director)
Yoshio Takayama (indiv.)
Kayoko Nagano (indiv.)
SEPTENI CO., LTD
Matsui Securities Co., Ltd.
Japan Securities Finance Co., LTD
Yoichi Nishikawa (indiv.)
Akio Shiojiri (former director: audit committee member)(Number of treasury shares)(Ratio of treasury shares over all issued shares)%

End of Sept.
2015

End of Sept.
2016

End of Sept.
2017

2,851
1,071
415
―
―
―
76
60
―
―
―
―
39
―
―
62
―
30
34
26
0

2,817
1,021
415
59
―
―
39
60
―
―
―
―
29
―
―
62
36
35
―
―
0

2,817
1,021
352
―
60
―
48
60
60
28
―
―
29
28
24
―
―
―
―
―
45

2,819
961
354
60
29
72
69
60
―
―
52
29
―
―
―
―
―
―
―
―
983

2,822
961
353
246
111
110
71
60
37
28
―
―
―
―
―
―
―
―
―
―
78,3960.0007%0.0155%1.2302%End of Sept.
2018

End of Mar.
2019

←Shareholding % ←Ranking

44.83
15.27
5.60
3.91
1.76
1.75
1.12
0.95
0.58
0.44

1
2
3
4
5
6
7
8
9
10

(Ref) Prepared by Alpha-Win Research Dept. from the Company’s FY 2019 Q2 securities report

17/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

4． ESG◆ Environment
The Company’s business is not the kind that harms the environment. The
Company aims to conserve energy by saving electricity, etc.

◆ Society Actively engaged in CSR.
Supporting future
entrepreneurs, nextgeneration humanresource development,
and women working in
the technology industry.

The Company is actively engaged in CSR (corporate social responsibility:
responsibility of a company to voluntarily contribute to society throughbusiness activities from an ethical point of view) and has been undertakingsocial initiatives based on the following view: “We believe that, regardlessof the size of the company, it is the minimal responsibility as a corporate
citizen to undertake social initiatives to the extent that is reasonably
possible for each company. We believe that such activities will promote acompany’s growth. By putting this corporate philosophy into action, we
will aim to heighten the value that we provide to our stakeholders including
our customers, shareholders, employees, and the local community.”
・“Osaka to the World” – regional development activities: Osaka Startups– providing a support program for startup companies based in Osaka andfor those aiming to start a company.
・“Promotion of Women's Active Participation in Society” activities:
Girls in Tech Japan – supporting the improvement of the status of women
working in the technology industry based on the philosophy of Girls in
Tech (GIT: a nonprofit organization launched in 2007 in San Francisco,USA).
・ “Next-Generation Human Resources Development” activities:
providing opportunities for students to learn the programming skills
necessary for leading-edge technologies through actual job experience inorder to foster a young generation of human resources.
In addition, the Company holds a general employee meeting twice a year
as well as holding monthly company parties where all the employees
gather on the last Friday of each month. It also has clubs. Through these
activities, the Company provides the opportunity to exchange informationand strengthen the relationship among employees.

(16) Great Place To Work®
Institute: An organizationthat conducts surveys andpresents “Great Places toWork” in about 50 countries
around the world every
year.

The Company also puts efforts into enhancing unique employee benefit
programs, such as the “Mountain-Retreat” Leave System where every
employee must take nine consecutive days of leave every year, theTraining Leave Program which allows employees to take leave for up to
two years for self-development, and the LOCK-Off which is a facility (ahouse) for employees to communicate with each other and learn freely.
Because of these efforts, the Company has been awarded with thefollowing awards.
· Great Place to WorkⓇ16 Best Workplaces Ranking: Best Companies
Award (awarded for seven years in a row; a total of eight awards). Since
the Company has grown in size, the award category has changed from
“Small-sized companies (25-99 employees)” to “medium-sizedcompanies (100-999 employees),” but it again received an award this year.
18/36

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18· Selected by the Ministry of Economy, Trade and Industry as a Driving
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

Company for the Regional Future for Fiscal Year 2017
· The 2nd GOOD ACTION contest sponsored by Rikunabi NEXT: Best
Action Award· The 8th Deloitte Technology Fast 500 Asia Pacific Award· The 7th Japan Technology Fast 50 Award◆ Governance
The Company has adopted a company system with an audit andsupervisory committee and delegates decisions on executions ofimportant business matters to directors to enable quick decision-making.
In addition, by incorporating an executive officer system (five officers),
the Company aims to improve management efficiency and speed byseparating business execution and supervision.
Of the five directors, three are outside directors who are also audit andsupervisory committee members (from Kobe Steel, Ltd. and MUFJ Bank,
Ltd.; certified public accountants). There is no woman among thedirectors or executive officers.
In addition, as transfer-limited stock-based compensation, the Company
has a program where shares are allotted to directors (including directors
who are audit and supervisory committee members), executive officers,
employees, etc., as an incentive.
Also, the Company has not adopted any anti-takeover measures.

19/36This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

5． History of Growth◆ Company History

 Founded by president
Iwata in 2001

 Developed and launchedunique products that canbe differentiated fromother companies
 Listed on Mothers in
September 2014

 In FY 2015, record-highprofit was recorded. Alltime highs are being
consecutively achieved
every year for sales.

 Since FY 2016, theCompany has been
restructuring its businessand conducting upfront
investment for future
growth as its priority,
rather than focusing on
profit. A net loss wasrecorded in FY 2018.

President Susumu Iwata traveled around the world as a backpacker during
his college days. After returning home, he started a restaurant but
withdrew and then started a travel-related business. Through this business,he acquired the skills and know-how for Internet and web design. He thenindividually started a web design business. This business grew and, inJune 2001, when Mr. Iwata was 21 years old, he founded the Company.
After foundation, upon recognizing the business potential, interactivity,
and real-time nature of the Internet, as well as the importance of data
mining, he began to make a transition to a web integration business.
In September 2004, the Company released the EBis (predecessor of AD
EBiS), a proprietary Internet advertising effect measurement system,
based on the concept of “From ‘a Website to Show’ to ‘a Website to Use.’”Then, in September 2006, it released Japan's first open platform software
EC-CUBE, and released the paid-listing ad management service THREein October 2012. Amidst the rapid increase of Internet ads and the related
market needs for adverting effect measurement and EC, the Company
pioneered in the creation of unique products, steadily expanding its
business by cultivating a new market. It became listed on the TSE
Mothers market in September 2014.

◆ Transition in Past Financial Results
From FY 2010 to FY 2013, during which account settlement wasnonconsolidated, the Company increased sales for fourth consecutive
fiscal years. From FY 2014, when consolidated account settlement began,
record-high sales were achieved for four consecutive fiscal years up to
FY 2018 (from what is available in the disclosure material, we can seethat sales have been hitting record-highs for at least eight consecutive
fiscal years). During this period, sales increased by about 2.5 times fromabout Y730 million to about Y1.8 billion. This success was brought by
the rapid expansion of the marketing platform’s AD EBiS business andthe steady growth of the EC platform’s EC-CUBE and SOLUTION
businesses.
Meanwhile, for profit, the Company had sustained profitability both on anonconsolidated and consolidated basis until FY 2017. In FY 2015, a
record-high operating profit of Y350 million and a record-high net profitof Y231 million were achieved. However, since FY 2016, the Company’s
focus on business restructuring and upfront investment has increased theexpenses, leading to a consecutive decline in profit despite increasing
sales. In the previous fiscal year, or FY 2018, the Company recorded a
net loss (of Y88 million) for the first time since becoming listed on themarket (for details on FY 2018’s results, please refer to the first report(English version): “Alpha-Win website: issued January 31, 2019”) due tothe upfront investment cost mainly for the expansion of human resources
for divisions such as development and sales.

20/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18【 Figure 15 】Transition in Past Financial Results (unit: Y mil, %)

2000

30.0%
25.0%

1500

20.0%
15.0%

1000

10.0%
500

5.0%
0.0%
-5.0%

-500

-10.0%FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Sales (left axis: Y mil)

R.P. (left axis: Y mil)

R.P. Margin (right axis: %)(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report and financial results summary(Note) Consolidated results starting in FY 2014; nonconsolidated prior to this point.

【 Figure 16 】 Change in the Number of Employees(unit: persons)(Ref) Prepared by Alpha-Win Research Dept. from the Company’s financial results briefing materials

21/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

6． Business Environment

 The Internet advertisingexpenditure increased byabout 4.6x from 2005 to
2018. The average annual
growth rate (simple
average) is high at about
12.8%.

◆

Trends in Japan’s Advertising Industry

Total advertising expenditure in Japan in 2018 (calendar year; the same
applies to this entire chapter) was about Y6.5 trillion. Over the long term,
the market has been flat. However, since 2012, market growth has been
observed for seven years in a row, indicating that the market as a wholeis on a slight uptrend (the annual growth rate, based on a simple average,is 1.9%). This growth was brought by the growth of the Japanese economy
supported by factors such as strong earnings of companies andimprovement in employment conditions. Internet advertising expenditureis also driving the growth of the overall advertising expenditure. Of thetotal advertising expenditure, Internet advertising expenditure (total of
medium cost and production cost) was about Y1.76 trillion (+16.5% YOY,
growing at a double-digit rate for five consecutive years), which is about
26.9% of the total (ref: Dentsu Inc.’s “2018 Advertising Expenditures inJapan”). Its share in the market is steadily increasing by 1-3% every year,
growing to a level close to the share of 29% for television advertising, thelargest among the four types of mass-media advertising (newspaper,magazine, radio, and television). Internet advertising expenditure hasgrown by about 4.6 times from 2004 (point of comparison, set at 100) to
2018, rapidly increasing at an average annual growth rate of about 12.8%(Figure 17).

【 Figure 17 】Change in Advertising Expenditure by Medium(index value: year 2005 set at 100)(Ref) Prepared by Alpha-Win Research Dept. from Dentsu Inc.’s “2018 Advertising Expenditures in Japan”

 Internet advertising is
expected to continue its
double-digit growth in
the future.

In fact, Internet advertising expenditure is expected to continue to growat a double-digit rate. According to the data on the number of Internet
users and population penetration rate disclosed by the Ministry of Internal
Affairs and Communications, 83.5% of Japan's population already uses
the Internet and the Internet has become a necessity of life. In the near
future, Internet ads are highly likely to become the most influential
advertising medium. Since more people are expected to use the Internet
22/36

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
as technology becomes more advanced in the future, demand for Internet
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

advertising is expected to grow.
In particular, of the Internet advertising expenditure, programmatic
advertising expenditure which is highly relevant to the Company's
business amounted to about Y1.2 trillion (+22.5% compared to theprevious year; approximately 70% of the total Internet advertisingexpenditure) and is growing at a higher rate than the average of Internet
advertising. Since programmatic advertising makes possible the controlof budget, delivery period, and delivery method and allows users to obtaindata in real time, for the time being, the growth of this market is expected
to help keep the business environment favorable for the Company indeveloping its business based on Internet advertising effect measurement
and utilization.
(17) Google Analytics: A
website access analysis
tool provided by Google
targeting SME users.
Analysis is only conductedwithin Google’s website,and mostly the free version
is popular. The high-spec
paid version seems to be in
the high-price zone.
(18) Adobe Analytics: An
access analysis tool that is
installed in many large
websites. It can analyze
complicated and large data,is highly customizable, andhas multiple and highquality functions, but theprice is high.

◆ LOCKON CO., LTD.’s Competitors
There seems to be no Japanese listed company that could be directlycompared with the Company. For advertising effect measurement andanalysis tools, the competing products are Google Analytics17 and Adobe
Analytics18 widely used by domestic SMEs (small- and medium-sizedenterprises), ADPLAN (implemented in a cumulative total of over 1,500
companies) offered by the listed company OPT Holding Group (TSE First
Section 2389; hereinafter “OPT HD”), and Web Antenna (implemented
in more than 600 companies, including major companies as well as
venture companies) provided by the unlisted company beBit, Inc.
However, the other companies are not specialized in the field, and theirproduct’s functions, measurement targets, analysis contents, and support
system are limited. In comparison, the Company's products are superior
in terms of specifications and the development and support systems,
which explains why the Company has a large share and is number one in
the market. Also, the Company’s target customer zone is the middle zone,
different from the high-end zone targeted by the paid versions of Google
Analytics and Adobe Analytics (estimated to be about ten times theCompany’s price setting).

【 Figure 18】Each Vendor’s Share of Advertising Effect Measurement
Market by Sales Volume (forecast for 2018)

 AD EBiS – No. 1 indomestic share forfour consecutive fiscal
years. Its share is on
an increasing trend.

(Ref) The Company’s financial results briefing materials

23/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

7． This Fiscal Year’s H1 Results and FullYear Forecast◆ Financial Results for FY 03/2019 (this fiscal year’s H1)

 During this H1, net loss
was posted due to upfront
investment for future
growth, but operating loss
turned into profit. Recordhigh sales were achievedin H1 for anotherconsecutive period.
 However, net loss wasposted due toextraordinary loss.

 The main AD EBIS
business’s unit price roseand contributed to thesales increase.

In the first half (hereinafter “H1”: October 2018 to March 2019) of FY

2019, consolidated results were as follows: sales of Y1,081 million(+23.2% YOY), operating profit of Y21 million (in the same period oflast fiscal year: operating loss of Y70 million), recurring profit of Y17
million (last fiscal year: a recurring loss of Y81 million), and net loss
attributable to the parent company of Y46 million (last fiscal year: a net
loss of Y58 million). Regarding sales, sales increased sharply in H1,reaching an all-time high for another consecutive period. Although theCompany had been posting an operating loss since Q4 of FY 2017 for six
consecutive quarters due to upfront investment costs and structural reform,
it turned into the black during this fiscal year’s Q2. However, because of
the Y60 million recorded as litigation-related loss and the Y11 million
recorded as loss on retirement of fixed assets, totaling Y71 million in
extraordinary loss, the Company posted a net loss.
By segment, although overall sales in H1 had increased by Y204 million
YoY, this was mostly due to the marketing platform business which
contributed Y226 million to sales and also contributed significantly to theimprovement in profit by Y90 million (operating loss of Y82 million last
H1 → operating profit of Y9 million this H1) (Figure 19). As mentioned
above, this is explained by how the average unit price of AD EBiS rose
sharply due to the pricing revision as well as its number of active accounts.
The EC platform business’s sales decreased by 15.1% YOY (decreased
by Y22 million), partly due to business restructuring including business
transfer. However, its operating profit had stayed mostly the same, from
Y11 million last H1 to Y12 million this H1.
(Ref) Prepared by Alpha-Win Research Dept. based on
financial results briefing materials and securities report【 Figure 19 】This Fiscal Year’s H1 Financial Results
FY 2018

FY 2019

FY 2018

FY 2019

FY 2019 H1

YOY(Unit: Y mil)Q1 (Oct-Dec)

Q2 (Jan-Mar)

Q1 (Oct-Dec)

Q2 (Jan-Mar)

H1 (Oct-Mar)

H1 (Oct-Mar)

Amount% Change

Total Sales

433
353
80
286
66.1%
334
77.1%
-48
-44
-3
-11.0%-12.5%
-4.2%
-47
-32

444
377
68
296
66.7%
319
71.8%
-23
-37
15
-5.1%
-9.9%
21.3%
-34
-27

520
460
59
344
66.1%
370
71.3%
-27
-21
-5
-5.1%
-4.6%
-9.2%
-30
-36

561
496
67
404
72.0%
356
63.5%
48
29
18
8.5%
5.9%
26.6%
47
-10

877
729
148
582
66.4%
653
74.4%
-70
-82
11
-8.0%
-11.2%
7.5%
-81
-59

1,081
956
126
748
69.2%
727
67.2%
21
8
12
1.9%
0.8%
9.7%
17
-46

204
226
-22
166

23.2%
31.0%
-15.1%
28.4%

74

11.3%

92
90
1

To profit
To profit
10%

98
13

-1
-0

Marketing Platform
EC Platform

Gross Profit
Gross Margin
SG&A Expenses
SG&A Expenses Ratio
Operating Profit (segment)
Marketing Platform
EC Platform

Operating Margin
Marketing Platform
EC Platform

Recurring Profit
Net profit

 With the increase in sales,
SG&A expenses ratio
decreased and margins
improved.

The improvement in overall profit had been largely caused by the increasein sales, which offset the rise in personnel expenses by Y84 million due
to increased hiring, etc., the rise in cost of sales by Y32 million because
of server costs, etc., and the increase of Y28 million in goodwill anddepreciation expenses (Figure 20).
The gross margin had been stably high at about 65% since FY 2014, but
24/36This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
during this H1, it improved to 69.1%, which is 2.7 points greater than the
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

previous fiscal year’s H1. Meanwhile, SG&A expenses (-to-sales ratio)
had risen sharply from Y796 million in FY 2016 (49.3%) → Y1,030
million in FY 2017 (59.9%) → Y1,298 million in FY 2018 (71.4%), but
decreased to 67.2% this H1 (last fiscal year’s H1: 74.4%) due to reduced
advertising expenses, etc. (Figure 21).
【 Figure 20 】Reasons for Change in O.P. in FY 2019 H1 (unit: Y mil)【 Figure 21 】Transition in Margins and Ratios (unit = %)(Ref) Figure 20 is from the financial results briefing materials. Figure 21 was prepared by Alpha-Win Research Dept. from the Company’s securities report.

 Operating loss turned into
profit for the first time inseven quarters.
 Business restructuring andtransition to a flat-ratebusiness model will lead toa stable business structurewith little seasonalvariability.
 Free cash flow is stillnegative.

Looking at the quarterly change in operating profit and loss, from Q4(July to September) of FY 2017 to Q2 (January to March) of FY 2019,the value has changed from -23 → -48 → -23 → -12 → -16 → -26 → +47(unit: million yen), showing that the Company gained profit for the firsttime in seven quarters (Figure 22). This is due to the increase in sales of
AD EBiS, withdrawal from unprofitable business, acquisition ofpromising business, conversion of business model from the pay-as-yougo system to a flat-rate billing system, elimination of seasonal variability
through these measures, and other factors leading to a stable sales growth.
Another reason is that the SG&A expenses ratio has been improving sinceQ2 of FY 2018 thanks to cost control and the gross margin has been
improving since Q3 of FY 2018. As for free cash flow (FCF), on a semiannual basis, FCF has stayed negative (Figure 23).

【 Figure 22 】Quarterly Transition in
Operating Profit(Ref) Prepared by Alpha-Win Research
Dept. from the Company’s securities
report and financial results briefing
materials【 Figure 23 】Quarterly Transition in Cash Flow
(Ref) Prepared by
Alpha-Win
Research Dept.
based on thefinancial resultssummary

25/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18◆ LOCKON CO., LTD.’s Financial Results Forecast for

FY 2019 (this fiscal year: FY 09/2019) For the current full fiscal
year, the Company plans
for sales and profit
increase and an
improvement fromoperating loss to profit.

Since the Company plans to continue to actively invest during this fiscal
year (FY 2019), it had previously kept its forecast on financial results anddividend undisclosed, explaining that accurately predicting the outcomeof investment at the beginning of the fiscal year is difficult. On February
6, 2019, at the same time as the disclosure of Q1 results, the Company
disclosed its forecast on sales and operating profit as ranges. Specifically,
the Company expects sales to be Y2,250 million to Y2,350 million(Y1,804 million last fiscal year) and operating profit to be Y0 million to
Y50 million (loss of Y98 million last fiscal year). Forecasts on recurring
profit and net profit remain undisclosed and dividend is undetermined.
Subtracting the actual H1 results from the Company’s full-year forecast,
we find that the Company predicts H2 sales to be Y1,169 million toY1,269 million (Y927 million in last fiscal year’s H2) and operating profit
or loss to be -21 million yen to +29 million yen (operating loss of Y28
million in last fiscal year’s H2).

 Recent monthly sales havebeen excellent.

Figure 24 shows the change in monthly sales for this fiscal year as
disclosed by the Company. Total sales in April, or the first month of H2
of this fiscal year, was 28% greater YOY, having made significant
progress. Although sales of the EC platform had been declining due
business transfer, etc., the negative effects have disappeared and its sales
are beginning to improve when compared year-on-year. Meanwhile, salesof the marketing platform business have stayed strong, continuing to growby nearly 30%.

（19）UI: Abbreviation foruser interface. The part
directly touched by the user.
UX: Abbreviation for user
experience. Experience
gained by users upon using
products or services.

The Company aims to create customer success by providing more value
to its existing customers and is planning to strengthen its business around
two areas – customer success and development. For the former, theCompany plans to reduce contract cancellation rate and reinforce hiring
and training of its customer success division. As for the latter, theCompany has stated that it will develop upsell products (more expensive
products and services) for its existing customers, improve UI/UX19, anddevelop a three-layer model for the Marketing Robot (measurement,
analysis, and utilization).

【 Figure 24 】Recent Monthly Transition in Sales (flash report)(upper row: sales, unit = Y thou, decimal places cut off)
(lower row: YOY change, unit = %)2018
FY 2019 Monthly
Sales

2019

This Fiscal Year
H1 Cumulative

Oct-Apr
Cumulative

168,971955,731

1,124,702

129.0

133.0

131.0

131.3

19,46021,99023,467125,968

149,435

96.8

82.9

117.2

100.8

84.9

87.0

179,345

183,379

185,455

193,321

192,439

1,081,702

1,274,141

124.0

126.4

125.0

127.5

128.0

123.2

123.9

Oct

Nov

Dec

Jan

Feb

Mar

Apr

149,201

150,478

160,409

158,319

165,994

171,330

126.9

130.9

133.7

132.9

132.9

21,83918,68318,93625,060

78.3

67.6

76.5

171,041

169,161

117.6

118.6

Marketing Platform

EC Platform

Entire Company(Ref) Prepared by Alpha-Win Research Dept. from the news release on the Company’s website.
(Note) The values shown are preliminary data before auditing by an auditor and may be revised in the future.

26/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

 With the growth strategy
focused on the Marketing
Robot, the Company aims
for sales of Y3 billion in FY
2020. Towards this end, theCompany is steadily
expanding its business.

8． Growth Strategy◆ LOCKON CO., LTD.’s Medium-Term Business Planand Strategy

Utilization

There have been no changes to the medium- and long-term business planand business has been growing steadily as measures have been solidly
implemented in line with the Company’s plan. The Company isdeveloping its business along president Iwata's long-term business plan Actively cooperating withas described by his words, “By creating a completely new product that
other companies
can be differentiated from other companies in the field of Internet
marketing, we hope to acquire an extremely large market share in Japan Focused on making
and then develop our business globally to become a company with aprogress with thestrong presence.” Specifically, the Company has set the Marketing Robotdevelopment of theas the focus of its growth strategy, aiming for sales of Y3 billion in FY
Marketing Robot and2020 (+66% compared to FY 2018; +28% to +33% compared to theenhancing the marketing &Company’s forecast for FY 2019) (Figure 25). To accelerate businesssales divisiondevelopment, the Company has already created new alliances with 31
other companies (met the initial target of 30 companies) (Figure 26).
(20) BI (Business
Reinforcement of alliance will increase AD EBiS 's product strength byIntelligence): A methodenhancing its optional functions, leading to an increase in the number ofwhereby business data
accumulated by business
contracts, an increase in unit price, and prevention of contract cancellation.
intelligence companies andFurthermore, the Company is working on the following measures in order
others in informationto achieve its target.
systems are analyzed and(1) Focus on the development of the Marketing Robot and accomplish its
processed by users as needed
creationand utilized for business and· Conduct big data analysis utilizing artificial intelligence andmanagement. Or, software
actively cooperate with other companies to develop and sell new
and information systems tofunctionspractice this method.
· Move engineers to the core business (AD EBiS) and cut off the(21) API (Application
other businesses
Programming Interface): A· Increase development staff (especially for the AI, BI 20, and API21
protocol that defines
sections)
procedures, data formats,(2)
Strengthen
the marketing & sales divisionetc., for accessing and using·
Enhancementof the marketing system
functions of computer
programs and data to be· Increase the number of experts and sales representatives
managed from other external(Hire 20-30 more people every year by new-graduate and mid-career
programs.
recruitment)【 Figure 26 】Progress with the 30 Alliances for【 Figure 25 】Medium- to Long-Term Targets
the Marketing RobotAds

WEB Customer
Service

Access Analysis

MA/CRM

Email Delivery

Other

Measurement

Analysis8
Reporting

DMP
Data Analysis

ChannelAnalysis

User Analysis

BI / Cloud Storage

Research Panel

TV/Offline Strategies(Demographics/interests andpreferences/surveys)

Data Acquisition
View

CLICK

SEARCHLOG

3rd Party Data

(Ref) Figure 25 and 26 were prepared by Alpha-Win Research Dept. from the Company’s financial results briefing materials

27/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
Furthermore, for the long-term strategy (FY 2021 to FY 2023), the2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

 Over the medium term, theCompany will strengthen
its domestic businessfoundation. Over the longterm, it will aim for global
expansion.

 Will restructure its
business to concentrate on
its core business(marketing platformbusiness) Cost structure of themarketing platformbusiness is improving.

 Aiming for O.P. margin of
10-20% over the medium tolong term

Company plans to increase development and sales sites mainly in Asia.
Also, the Company intends to accelerate its growth not only by organic
growth, but also by M&As, alliances, etc. However, specific target figures
such as those concerning the breakdown of sales and the actual means forachieving them have not been disclosed. Since the Company has beenraising funds ahead of plan, it may actively conduct M&As or acquirebusinesses from other companies in the future.
Regarding the cost structure of the core marketing platform business, thestructure is controlled in four parts and medium- to long-term target ratios
have been set for each (Figure 27). According to this information, in the
future, the Company intends to achieve an operating margin of 10-20%.
For the marketing platform business, the Company had achieved highoperating margins of around 16-24% from FY 2014 to FY 2016. Then, in
FY 2017, because the Company increased the amount of investment
related to marketing & sales and the development of software functions,the operating margin began decreasing. However, in FY 2018, theoperating margin began to bottom out. In FY 03/2019 or H1, the ratios ofexpenses over sales have already reached the target ranges set out in themedium- to long-term target model for three categories excluding otheroverheads (marketing & sales, development, and customer service
expenses). Ratio of other overheads over sales is also expected to decrease
along with the increase in sales and is likely to reach the target range
during next fiscal year or later.
Over the medium to long term, the Company plans to increase sales andsignificantly lower the expenses for this business to stabilize the operating
margin of this business at around 10-20%. Since this level of operating
magin has been achieved in the past, it seems to be an achievable goal.

【 Figure 27 】Cost Structure of the Marketing Platform (MPF) Business(actual and medium/long-term targets)(Ref) Financial results briefing materials

28/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18◆ Alpha-Win Research Dept.’s Financial Results Forecast

for FY 2019
 We have made analysis
that the Company’s
estimates for H2 aresomewhat conservativeand operating profit could
be revised slightly
upward. However, we
expect that the final
profit/loss will be affectedby the extraordinary loss,
resulting in a small net
loss.

 This H1 was marked by a
sharp rise in the unit priceof AD EBiS and thetemporary slowdown in
the rate of increase of thenumber of active accountsof AD EBiS.
 Operating profit expected
to be maintained in Q3
and Q4.

Based on the H1 results and the Company’s disclosure of its full-year
forecast, we have revised our forecast for H2 and our original forecast for
the full year. We believe that business restructuring and active upfront
investment activities have peaked out for now.
We have made upward revisions to our forecast for FY 2019 as follows(in the order of original forecast → current forecast): sales of Y2,150
million (+19.2% YOY) → Y2,260 million (+25.3% YOY) andoperating profit of Y30 million (turned into profit) → Y60 million.
However, although we had previously expected that the Company will
gain a net profit of Y10 million in a positive turnaround, we have changed
the forecast to a net loss of Y25 million due to the posting of an
extraordinary loss that was not originally expected (Figure 28).
The Company’s progress in H1 in terms of its full-year plan (whencompared to the median of the range) was 47% for sales and 84% foroperating profit. Results for the second quarter of this fiscal year (January
to March 2019: Q2) were particularly excellent; sales and especially theaverage unit price of AD EBiS grew more than expected and operating
loss improved to a profit of Y47 million. Sales continued to be strong in
H2. The Company’s forecast for H2 – an operating loss or profit of -21
million yen to +29 million yen – seems conservative.
The Company has already improved its results from operating loss to
profit in Q2, and given the current situation, we expect that it will continue
to post an operating profit in Q3 (April to June) and Q4 (July to
September). However, we expect Q3 and Q4's operating profit to be both
smaller than Q2’s since recruitment expenses, increased personnel
expenses due to increased staff, and expenses associated with the generalemployee meeting and the company name change are expected to be
incurred. Taking into account the prediction that no additional
extraordinary loss will arise in H2, the amount of net loss may be limited
for the full year.
Since we can expect the changes in the pricing system of the main product,
AD EBiS, to raise its average unit price over the long term, we predictthat the gross margin will also improve. The marginal profit ratio of thisbusiness is estimated to be around 70%, and most of the increase in sales
is expected to contribute to an increase in profit, excluding variable
expenses such as fees paid to distributors and server costs. As described
before, due to the nature of the subscription-based business, it takes about
eight months after making a new contract under the new pricing system
to make actual contribution to profit. Although contribution to profit may
be small in H1, it is expected to gradually increase starting in H2 and in
the next fiscal year.
In addition, it is estimated that the contract cancellation rate of AD EBiS
is currently a few percent per month (not disclosed). In the future, theCompany hopes to reduce this cancellation rate by enhancing theattractiveness of its products and services through the addition of optional
29/36

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
functions in collaboration with other companies or functions that have
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

been developed in-house.

【 Figure 28 】Alpha-Win Research Dept.’s Financial Results Forecast for This
Fiscal Year and Over the Medium Term

(Ref) Prepared by Alpha-Win Research Dept. based on the financial results summary. (Note) AD EBiS’s average unit price and number of active
accounts used in the forecast/estimate (E) are average values for the fiscal year and differ from the values used by the Company in its disclosure(averages as of the end of the last month of each quarter). Ａ is actual result (simple average of figures at the end of each quarter).

The difference between the Company's financial results forecast (initial
version) and the actual results in the past is shown on Figure 29. In recent
years, the Company has kept its forecast undisclosed at the beginning of
the fiscal year, and has instead released a disclosure after judging that areasonable forecast can be made. Consequently, the difference between
the disclosed forecast and the actual results has been small. For the current
fiscal year, the forecast figures for the full fiscal year was disclosed at thesame time as the disclosure of Q1 results.

【 Figure 29 】Change in Financial Results Forecast and Actual Results(Ref) Prepared by Alpha-Win Research Dept. CE is the Company’s estimate (forecast). E is Alpha-Win Research Dept.’sestimate (forecast).

◆ Alpha-Win Research Dept.’s Financial Results Forecast
for the Medium Term
Although we have not largely changed our basic views regarding thepreviously prepared medium-term financial forecast for next fiscal year
30/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
and onward, we have revised the financial forecast (Figure 28 on a
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18
 We reviewed the medium-

term results forecast andmade upward revisions tosales and profits.

 Alpha-Win Research Dept.
predicts an annual sales
growth rate of around 2030% over the mediumterm.
 Business model with ahigh marginal profit ratio.
Alpha-Win Research Dept.
expects the profit growthrate (when leveled out) to
be around 30% per year
over the medium to longterm, exceeding the sales
growth rate.
 Whether the Company canachieve its goal for sales –Y3 billion in FY 2020 – will
depend on its M&A andtie-up strategies.

previous page). We predict the following results, in the order of previous
forecast → current forecast (unit: million yen): for next fiscal year (FY2020), sales of 2,600 → 2,750 and operating profit unchanged at 120;
for FY 2021, sales of 3,000 → 3,150 and operating profit of 230 → 250.
These revisions reflect the change in the assumed values for the unit priceand the number of active accounts of AD EBiS.
Going forward, we expect to see positive results from the investment andbusiness restructuring that the Company had conducted. In addition, we
expect AD EBiS’s unit price to continue to increase and its number ofactive accounts to grow steadily. Therefore, the marketing platformbusiness has a large growth potential and is expected to become a growth
driver, leading to an annual sales growth rate of around 20 to 30% overthe medium to long term.
Meanwhile, we also predict that the Company will continue its active
upfront investment for future growth. The final profit and loss will dependon the Company's cost control and its eagerness to achieve the bottom lineof its target figures. In FY 2020 and FY 2021, changes in the cost structure
coupled with sales increase are expected to improve profit and loss in aclearly V-shaped recovery trend, causing profit to change sharply. Overthe long term, we believe that the Company will be able to maintain a net
profit, and since the Company’s business has a high marginal profit ratio,
we expect to see a profit growth rate of nearly 30% per year (when leveledout), exceeding the sales growth rate.
We believe that the Company’s goal of Y3 billion in sales for FY 2020
seems to be generally within an achievable range if the M&A and alliancestrategies are successful. However, since it is a high goal, and since wecannot predict at this point whether an M&A will actually be conductedor how it will contribute to profit, we made a somewhat cautious
prediction. The assumptions or estimates used in our forecast are as
follows.
(i)

In the previous report, we had stated: “The average unit price of AD

EBiS, which makes up the majority of the marketing platformbusiness, is expected to increase since new contracts should have theeffect of raising the unit price and because about 20% of the existing
contracts will be switched to new contracts under the new pricing
system. Also, the number of active users is expected to increase by
10% per year.” However, in Q2 to Q3 of FY 2019, the unit price of
AD EBiS rose sharply since about 90% of the existing AD EBiS
contracts switched to the new pricing system almost at the same time.
Therefore, we made a prediction that the unit price will increase by
about 10% per year from next fiscal year and onward due to the fullcontribution to the average unit price by the increase in the numberof new contracts that are greater than Y100,000 and the effect of theaddition of options and new functions on the unit price. In addition,
we predict that the number of active members will increase by 8 to
10% annually due to the acquisition of new customers and theenhancement of functions through stronger alliances with othercompanies leading to a lower contract cancellation rate.
31/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18(ii) Expecting new or future acquired companies to contribute positively
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

 Whether the Company canmake an overall transitionin business from its
specialization inadvertising effectmeasurement system to theMarketing Robot is an
important point.
 Over the medium term,
resumed dividend
payment and an all-timehigh in profit are possible.

to results, we have not changed our estimate that the sales of themarketing platform business will grow annually by about 20%.
(iii) In addition, the marginal profit ratio of the platform business isestimated to also be about 70% in the next fiscal year and onward.
The number of employees is estimated to increase by about 20 every
year, raising general and administrative expenses including
personnel expenses by about 10% annually. SG&A expenses to sales
ratio are expected to gradually decline, such that the operating
margin will improve and eventually reach the target of 10%.
(iv) Regarding the EC platform business, its sales are solely contributedby EC-CUBE. As of this point in time, the Company has notlaunched fundamental measures to expand this business. However,considering the expansion of the EC market and the new productversion, we change our estimate, now predicting a gradual increaseby about 4-6% per year (previous assumption: 10% growth).
(v) Excluding this fiscal year, in making the medium-term financial
forecast, we have assumed that there will be no extraordinary profit
or extraordinary loss such as contingent liabilities.
(vi) We anticipate that M&A(s) will expand business and contribute toabout 1/3 to 1/2 of the increase in sales, but we do not expect it tocontribute to profit in the short term.
Over the medium to long term, whether the Company can make an overallbusiness transition from its specialization in the Internet advertisingmeasurement system to the Marketing Robot is a crucial point in assessing
the Company’s business going forward. So far, the Company has beensteadily expanding its business in line with its plan. In fact, we believethat dividend payment will be resumed within the next two to three years,
record-high profit will be achieved over the medium term (about three tofive years), and the shareholder benefit plan will be resumed.

32/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

9．Analyst’s View
◆ SWOT Analysis

The Company's SWOT analysis result is shown on Figure 30. The
Company’s main strengths are (1) its president’s management skill andexpertise with advanced technologies in the Internet marketing field, (2)its main products and support system with proven and strong functions,and (3) its possession of big data accumulated over many years since thestart of its service and potential for utilization of such data. In particular,
the fact that president Iwata himself possesses a deep knowledge ofInternet-related techniques – he has been building skills related to the field Is in a position to be able
since the foundation of the Company – is considered to be an advantage
to enjoy the benefits ofover other companies. In addition, since the Marketing Robot market isfuture market expansion.
still in its early stage, it has a high growth potential, from which thePlans to expand into new
Company may be able to enjoy benefits. The Company seems to have thebusiness areas andpotential to accelerate its growth through overseas development as welloverseas.
as expansion of the scope of the Marketing Robot business frommeasurement of ads to analysis and utilization.
【 Figure 30 】SWOT Analysis
 The Company's strengths
are the president's
management skills,
product strength, and thepotential to accumulate
and utilize big data.

(Ref) Prepared by Alpha-Win Research Dept.

◆ We expect that there willagain be no dividend forthis fiscal year and that
dividend payment will
be resumed during next
fiscal year or later.

Shareholder Return

In the second fiscal year after becoming listed (FY 2015), the Company’s
dividend was Y4.5 per share. Dividend was then increased by Y0.5 in FY
2016 to Y5.0 per share. In FY 2017, dividend was paid out for the thirdyear in a row, again at Y5.0 yen per share (Figure 31). However, in FY
2018, no dividend was paid out since a net loss was posted that year, andthe Company abolished the shareholder benefit plan as well. Since theCompany is currently in its growth phase, rather than letting its cash flowout through dividends and benefit plans, the Company hopes to increase
shareholder value by focusing on investments for future growth to recoverits financial performance. Dividends for this fiscal year are undetermined
and, for the short term, dividend payment and shareholder benefit plan are
33/36

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)(21)発行日：2018/12/18
AdTech: Abbreviation
unlikely to be resumed. Alpha-Win Research Department believes that
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18
for ad technology. A genericterm for information
technology used inadvertising business, it refers
to digital technology used inInternet ads, etc.

dividend payment may possibly be resumed in FY 2021.

【 Figure 31 】Change in Dividend and Dividend Payout Ratio(22) P/S (Price to Sales
Ratio): Ratio of stock price tosales. A valuation indicator
where market capitalization
is divided by annual sales. P/S
is often used as an indicator
to measure the stock value of
emerging companies with ahigh growth potential or a net
loss.
(23) PEG Ratio (Price
Earnings Growth Ratio): A
valuation indicator thatmeasures the stock value
while taking into
consideration a company's
medium-term profit growthrate. It is calculated by
dividing the expected priceearnings ratio (P/E) by the
expected medium-term profit
growth rate (%) per share.
Generally, a PEG ratio of lessthan 1 means the stock isundervalued, and overvalued
if it is more than 2.

 Stock price jumped up in
response to the disclosurethat results improved in Q2
from loss to profit. For themost recent 12 months or
so, it has been largely
outperforming the TOPIX.
 The Company’s stock value
is not cheap. The current
stock price seems topartially reflect the
expectations for recovery inbusiness performance.
 Stock price going forward
will be affected by the
expected level of profit overthe medium term.

(Ref) Prepared by Alpha-Win Research Dept. from the Company’s securities report, financial
results summary, and financial results briefing materials◆ Stock Price and Characteristic and Factors that May
Affect Stock Price
The Company’s stock is a small AdTech22-related stock listed on the TSE
Mothers market with a highly volatile stock price. Figure C on page 2 ofthis Report shows the stock price and relative stock price with respect to
TOPIX for the past approximately two years and nine months. Until one
year ago, the Company's stock price had been decreasing, largely
underperforming the TOPIX. Reasons for the decline in stock price may
be that (1) as seen from the TSE Mothers Index, the market environment
was unfavorable, with small- and medium-cap stocks in the emerging
markets being generally weak and (2) in order to achieve the goals of thegrowth strategy concerning the Marketing Robot, the Company had been
restructuring its business and conducting upfront investment to focus on
its core business, resulting in the posting of a net loss, no dividend,abolition of the shareholder benefit plan, etc. However, in recent months,
the stock price has risen sharply, and have remained firm since then,thanks to the improvement from loss to profit and the share buyback.
As a reference, we compared the size, business contents, and valuation
indicators of 22 companies listed on the market, including the Company,
under the AdTech category or with a business partly similar to theCompany’s (Figure 32). In this comparison, as far as P/E, P/B, P/S23, anddividend yield are concerned, the Company's stock value is not cheap.
This may be due to the fact that the stock price reflects the anticipation of
future recovery of business performance and growth to some extent.
Also, under the condition that a PEG ratio24 of up to 2 is tolerated and the
medium-term growth rate for the normalized EPS is expected to be 20%,
the P/E comes out to be about 40 at maximum (60 if the growth rate is
34/36

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
assumed to be 30%). Calculating back from the current market
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18

capitalization of about Y11 billion, we can deduce that the necessary net
profit (after income tax) is about Y280 million (Y180 million if P/E is 60).
If business performance recovers such that a net profit greater than thislevel can be anticipated, then the stock price may also possibly jump up.

 For the time being, thekey points of interest are
the unit price and thenumber of active
accounts of AD EBiS, thequarterly profit / loss,
M&A, the timing when
dividend is resumed, etc.

【 Figure 32 】

Looking ahead, we should pay attention to changes in monthly sales andespecially watch out for quarterly changes in net profit and when dividend
payment is resumed. In addition, as the most important management
indicators (KPI), we should continue to watch the unit price and thenumber of active accounts of AD EBiS, which is a key factor of thecompany’s sales. It is also speculated that news releases on M&As,
business alliances, new products and services, etc., may also affect thestock price. Over the medium to long term, the Company's Marketing
Robot business, as well as the Internet advertising market, has muchpotential for growth; the Company seems to be in a good position to beable to benefit from the growth. Going forward, we hope to continue to
see the Company grow as an AdTech-related, domestic growth stock thatis not directly affected by trade wars and exchange rates.

Comparison of Similar Companies (22 companies related to AdTech, etc.)(Ref) Prepared by Alpha-Win Research Dept. from the companies’ websites, securities reports, financial results summaries, andfinancial results briefing materials.
(Note) Generally, each company’s forecasted values as of the latest financial results disclosure (latest quarterly financial results) or
the most recent actual results (BPS, etc.) were used (based on disclosed data available as of May 24). For forecasts disclosed as
ranges, the median was generally used for calculations. Concerning dividend, if a company has not disclosed a forecast, the previous
fiscal year’s actual dividend was used. For the Company, Alpha-Win Research Dept.’s forecast was used. For other companies,
values not disclosed are marked by “ND” (not determined) or “-”. The average was calculated using only valid figures.

＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊＊
35/36
This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.

Alpha-Win Company Research Report
LOCKON CO., LTD.【New Company Name: YRGLM Inc.】(3690 TSE Mothers)
発行日：2018/12/18
2018/12/1820182018/12/1820152018/12/182018/12/182018/12/18
Disclaimers

This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by AlphaWin-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented in this Report.
This Report is not to be construed as a recommendation or solicitation of investment. Alpha-Win
shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must maketheir own decisions on all investment matters and take full responsibility regarding theirinvestment.
This Report has been prepared with a focus on objectivity and neutrality based on the analysis ofgenerally accessible public information and supplemental information including interview(s) by the
analyst. Alpha-Win, the writer, and/or other persons involved in the publication of this Report may
already hold, or buy and sell in the future, the stock of the company presented in this Report.
Contents of this Report are based on information current as of the issue date and are subject tochange without notice. We do not warrant or represent that the information in this Report isaccurate, reliable, complete, appropriate, or fit for any purpose and do not accept any
responsibility or liability.
Copyright of this Report belongs to Alpha-Win and no part of the publication may be copied,photocopied, cited, or translated without our consent.
For inquiries regarding this Report, please send us an e-mail to info@awincap.com. However, Alpha-Win
and the writer of this Report do not have any obligation to reply to inquiries. FV20190610

36/36This Alpha-Win Company Research Report (hereinafter “this Report”) has been prepared by Alpha-Win-Capital Inc. (hereinafter “Alpha-Win”) on the request of the company presented inthis Report for the purpose of providing a description of the company. This Report is not to be construed as a recommendation or solicitation of investment. Contents of this Report are basedon information current as of the issue date and are subject to change without notice. We do not warrant or represent that the information in this Report is accurate, reliable, complete,appropriate, or fit for any purpose and do not accept any responsibility or liability. Alpha-Win shall not be liable for any consequences including direct or indirect loss, lost profit, or damage
resulting from the use of or reliance on this Report. Investors who read this report must make their own decisions on all investment matters and take full responsibility regarding theirinvestment. Intellectual property of this Report belongs to Alpha-Win and no part of this report may be copied, photocopied, cited, or translated without our consent.