Consolidated Financial Results for the First Quarter of the Fiscal Year Ending June 30, 2022
(Three Months Ended September 30, 2021)[Japanese GAAP]
November 15, 2021

Company name: HOPE, INC.
Stock code:
6195
Representative: Takayasu Tokitsu, CEOContact:
Kensuke Ohshima, CFO
Scheduled date of filing of Quarterly Report:
Scheduled date of payment of dividend:
Preparation of supplementary materials for quarterly financial results:
Holding of quarterly financial results meeting:

Listing: TSE-Mothers/FSE Q-Board
URL: https://www.zaigenkakuho.com/
Tel: +81-(0)92-716-1404
November 15, 2021
Yes
Yes (for institutional investors and analysts)(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the First Quarter of the Fiscal Year Ending June 30, 2022
(July 1, 2021 to September 30, 2021)(1) Consolidated results of operations
Net sales(Percentages represent year-on-year changes)
Profit attributable toOrdinary profit
owners of parent

Operating profit

Millions of yen%

Three months ended Sep. 30, 2021
12,978Three months ended Sep. 30, 2020
Note: Comprehensive income (millions of yen)

Millions of yen%

Millions of yen%

Millions of yen

%

(143)
-

-

(126)
(136)
Three months ended Sep. 30, 2021: (143) (-%)
Three months ended Sep. 30, 2020:- (-%)Net income per share

Diluted net income
per share

Yen

Yen

Three months ended Sep. 30, 2021
(17.05)Three months ended Sep. 30, 2020
Notes: 1. Diluted net income per share is not presented because net loss was posted although there were outstanding dilutive shares.
2. Figures and year-on-year changes for the three months ended September 30, 2020 are not presented because HOPE
started preparing consolidated financial statements from the second quarter of the fiscal year ended June 30, 2021.

(2) Consolidated financial position
Total assets

Net assets

Millions of yen

As of Sep. 30, 2021
As of Jun. 30, 2021
Reference: Shareholders’ equity (millions of yen)

Equity ratio

Millions of yen%

12,279(1,701)
10,964(2,498)
As of Sep. 30, 2021: (1,733)(14.1)(23.1)
As of Jun. 30, 2021: (2,530)

2. Dividends
1Q-endDividend per share
3Q-end2Q-endYen

Yen

Year-end

Total

Yen

Yen

Yen

Fiscal year ended Jun. 30, 2021
0.00
Fiscal year ending Jun. 30, 2022
Fiscal year ending Jun. 30, 2022
(forecast)
Notes: 1. Revisions to the most recently announced dividend forecast: None
2. The dividend forecast for the fiscal year ending June 30, 2022 is to be determined.

0.00

0.00

-

-

3. Consolidated Earnings Forecast for the Fiscal Year Ending June 30, 2022 (July 1, 2021 to June 30, 2022)
Net sales
Millions of yen(Percentages represent year-on-year changes)
Profit attributable to
Net income
Ordinary profit
owners of parent
per share

Operating profit%

Millions of yen%

Millions of yen

First half
22,126
57.5
Full year
34,8500.7
Note: Revisions to the most recently announced earnings forecast: Yes-%

Millions of yen

%

Yen

-

-

-

-

* Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes inscope of consolidation): None
Newly added: Excluded: (2) Application of special accounting methods for presenting quarterly consolidated financial statement s: None
(3) Changes in accounting policies and accounting estimates, and restatements
1) Changes in accounting policies due to revisions in accounting standards, others: Yes
2) Changes in accounting policies other than 1) above: None
3) Changes in accounting estimates: None
4) Restatements: None
Note: Please refer to the section “2. Quarterly Consolidated Financial Statements and Notes, (3) Notes to Quarterly
Consolidated Financial Statements, Changes in Accounting Policies, Application of the Accounti ng Standard for
Revenue Recognition” on page 10 of the attachments for further information.

(4) Number of shares outstanding (common shares)
1) Number of outstanding shares as of the end of the period (including treasury shares)

As of Sep. 30, 2021:

9,360,100 shares

As of Jun. 30, 2021:

7,775,100 shares

As of Jun. 30, 2021:

24,981 shares

2) Number of treasury shares as of the end of the period

As of Sep. 30, 2021:

24,981 shares

3) Average number of outstanding shares during the period
Three months ended Sep. 30, 2021:

8,427,767 shares

Three months ended Sep. 30, 2020:

5,977,821 shares* The current quarterly financial report is not subject to quarterly review by certified public accountants or auditing firms .
* Explanation of appropriate use of earnings forecasts, and other special items- Forecasts of future performance in these materials are based on assumptions judged to be valid and information available tothe management of HOPE at the time these materials were prepared. Actual results of operations may differ from forecasts
due to uncertainty involving these judgments and assumptions or to changes in business operations and market conditions.
HOPE does not guarantee the certainty of any forward-looking statements.
- Please refer to the section “1. Qualitative Information on Quarterly Consolidated Financial Performance, (3) Explanation ofConsolidated Earnings Forecast and Other Forward-looking Statements” on page 5 of the attachments regarding
preconditions or other related matters for the forecasts.

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

Contents of Attachments
1. Qualitative Information on Quarterly Consolidated Financial Performance2(1) Explanation of Results of Operations

2(2) Explanation of Financial Position

4(3) Explanation of Consolidated Earnings Forecast and Other Forward-looking Statements

5

2. Quarterly Consolidated Financial Statements and Notes

6(1) Quarterly Consolidated Balance Sheet

6(2) Quarterly Consolidated Statements of Income and Comprehensive Income

7

Quarterly Consolidated Statement of Income

7

For the Three-month Period

7

Quarterly Consolidated Statement of Comprehensive Income

8

For the Three-month Period

8(3) Notes to Quarterly Consolidated Financial Statements

9

Going Concern Assumption

9

Significant Changes in Shareholders’ Equity

10

Changes in Accounting Policies

10

Additional Information

11

Segment and Other Information

13

Material Subsequent Events

14

1

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

1. Qualitative Information on Quarterly Consolidated Financial Performance
There are no prior-year comparisons because HOPE started preparing consolidated financial statements in thefirst half of the fiscal year ended June 30, 2021.
(1) Explanation of Results of Operations
The fifth wave of the COVID-19 pandemic severely restricted economic activities in Japan and other countries
during the first quarter of the current fiscal year. Although the number of infections is declining as people are
vaccinated and other actions are taken to combat the pandemic, there is an urgent need to be prepared for a
possible sixth wave. Due to this situation, the outlook for an economic recovery remains unclear.
Translating the corporate philosophy into actions and achieving more growth of corporate value will require an
intent focus on our relationships with local governments. We have been using our business activities si nce our
inception to increase the number of these relationships, which are a key strength of ours. Our objectives are thegrowth of existing businesses and creation of new businesses in two ways. The first is creating new businesses
that can be easily reproduced in many fields while accurately responding to new and amended laws. The second is
the easy reproduction of business expansion in the local government business domain. Taking these actions willallow us to support local governments as they create a self-reliant and sustainable social framework that utilize
the distinctive strength and characteristics of individual communities. Moreover, we believe these actions will
result in the realization of our corporate philosophy accompanied by the growth of cor porate value.
On August 11, 2020, HOPE established HOPE NEXT 3, a three-year medium-term management plan beginning in
the fiscal year that ended in June 2021. To accomplish the goals of this plan, many business activities with theaim of medium-term growth are under way. Between the middle of December 2020 and late January 2021, theprice of electricity on the Japan Electric Power Exchange (JEPX) was very high. This big increase in the cost ofelectricity had an enormous negative impact on the performance of the energy business, which is the HOPE
Group’s largest business segment. There was negative equity of about 2.4 billion yen at the end of June 2021. We
plan to reexamine HOPE NEXT 3 due to these events and make a return to positive equity by the end of thecurrent fiscal year the highest priority.
Negative equity was more than 1.7 billion yen at the end of the first quarter, an improvement of about 700 million
yen from the end of the previous fiscal year. Returning to positive equity will remain the highest priority and, in
conjunction with actions needed to accomplish this goal, we plan to establish a new HOPE NEXT 3.
We continue to position the advertising business as a profit-generating business of the HOPE Group and arecontinuing to work on achieving the proper size of this business to improve profitability. One goal is reducing
over the medium term the high percentage of fiscal year earnings of this business in the fourth quarter. These
steps are aimed at making the advertising business more cost efficient and receiving higher rates for advertising
services. In the energy business, the electricity retail sales business will be comprehensively succeeded to a
HOPE’s consolidated subsidiary to enable this company to focus on operating this business. In addition, we will
no longer submit bids for public-sector electricity supply contracts in order to prevent any further increase in
exposure to market risk associated with using the JEPX to buy electricity. We plan to downsize the energy
business by lowering the amount of electricity supplied. In the Jichitai Works business (former media business),the market for promotions targeting local governments still has much potential for more public -private sector
collaboration and measures to become more competitive. Our goal is to position ourselves at the very top of
upstream information flows in order to capitalize on opportunities involving this potential. This business is
upgrading content, strengthening information dissemination capabilities and reinforcing the ability to keep up
with the latest information. The objective is firmly establishing the value of the Jichitai Works brand in order tostimulate more growth of the market for promotions targeting local governments. In addition, we believe thatthese activities will make possible even more public-private sector collaboration based on government
information circulation centered on HOPE as well as the use of local government information databases forstrengthening, supporting and creating business activities. We will use many activities to accomplish these goals.
These measures will include upgrading and expanding our content production capabilities, increasing activities
for B-to-G promotions (former B-to-G solutions) and making extensive use of Jichitai Works HA×SH, which isan internet platform for supporting public-private sector collaboration.
2

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

In the first quarter, net sales were 12,978 million yen. The operating loss was 126 million yen, the ordinary loss
was 136 million yen, and there was a loss attributable to owners of parent of 143 million yen.
Business segment performance was as follows.
Beginning with the first quarter of the current fiscal year, as described in “2. Quarterly Consolidated Financial
Statements and Notes, (3) Notes to Quarterly Consolidated Financial Statements (Segment Information),” theprevious Media business segment has been changed to the Jichitai Works business segment. There is no effect on
the segment information because only the segment name has changed.
1) Advertising BusinessIn this business, the SMART RESOURCE service purchases a variety of advertising space from local
governments by submitting competitive bids and then sells this space to companies. The SMART CREATION
service jointly produces with local governments Machilet publications for residents at no cost and sells
advertising space in these publications to companies. During the first quarter, there were measures to achieve theproper size of the Machilet service. Machilet, which is the primary medium of the advertisi ng business, isoperating in all areas of Japan while concentrating on six themes: marriage, raising children, senior nursing care,measures involving vacant houses, end-of-life messages, and condolence messages.
We started providing the SMART FR (Financial Resources) CONSULTING service in June 2021. This service
encompasses consulting for every step from assistance for attracting advertisements to the creation and utilizationof media. We have received consultation contracts from two local governments inc luding the city of Fukuoka.
Our goal is to use this new service to take the advertising business beyond simply providing assistance foradvertisements in order to become a source of a broad range of ideas and support concerning advertisements forthe purpose of creating sources of revenue.
Segment sales were 272 million yen and the segment profit was 7 million yen.
2) Energy BusinessThis business, which uses the GENEWAT brand for the retail sale of electricity, has the goal of reducing theexpenses of local governments by providing new forms of value based on the concept of electricity as a genericproduct. On October 22, 2020, HOPE ENERGY, INC. was established as a wholly owned subsidiary of HOPE. As
was explained earlier, the sharp increase in the cost of purchasing electricity due to the higher cost of electricity
on the JEPX had a significant negative impact on the energy business. After this spike in the cost of electricity
had largely ended, we determined measures to take for the stability of energy business earnings, stronger
governance and other revisions to the framework for operating this business. As was announced on August 11,
2021 in the news release titled “Notice of Company Split (Absorption-type Split),” one of these measures is theuse of an absorption and split for the transfer of the electricity retail sales business to HOPE ENERGY. We
believe that HOPE ENERGY should directly operate of all energy operations because of the quantitative andqualitative importance of this business within the HOPE Group and due to the specialized knowledge required bythis business.
To provide more information about the performance of the energy business, we are beginning in th e first quarterthe monthly announcement of preliminary data for the cost of market purchases of electricity, the volume ofelectricity supplied and the selling price of this electricity. These announcements will give investors moredetailed and timely information with respect to the HOPE Group’s financial position and other aspects ofoperations.
In the electricity retail sales business, we will reduce the volume of electricity supplied for the purpose of
preventing any further increase in exposure to market risk associated with market purchases of electricity. During
the first quarter, the number of bids submitted for retail electricity supply contracts was reduced to 39 and thesubmission of all bids was subsequently suspended.
Segment sales were 12,651 million yen and the segment loss was 41 million yen.

3

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

3) Jichitai Works Business
The media business was renamed the Jichitai Works business beginning with the first quarter of the current fiscal
year. This business has been distributing Jichitai Works magazine as HOPE’s original media for about four years.
This publication contains information, recommendations, ideas, stories about innovations and other useful
information for local government employees. As these activities have made the Jichitai Works name well known
among these employees, the decision was made to change the name of this bu siness to more clearly reflect thenature of its operations.
Our goal is to position Jichitai Works as a brand that encompasses a variety of HOPE services for facilitating
cooperation between the public and private sectors based on the concept of “invigor ation for experiences andpeople concerning local government jobs.”
In addition to the Jichitai Works magazine, this business has three order-made media to meet the budgets andrequirements of individual companies: (1) Special editions; (2) PICKS; and (3) INFO. This diversity allows us tooffer a broad range of advertising media to private-sector companies with products and services for local
governments. Another important element of this business is B-to-G promotions (formerly B-to-G solutions),
which uses our relationships with local governments to match the needs of these governments and companies.
In the first quarter, Kyohei Sakita, the former mayor of the city of Nichinan in Miyazaki prefecture, was named
the second Jichitai Works ambassador. With Yuto Yoshida, the first ambassador, Mr. Sakita will provide advice
concerning Jichitai Works, speak at Jichitai Works seminars, be involved with interviews and other Jichitai Works
magazine articles, and provide support in many other ways.
Segment sales were 53 million yen and the segment profit was 8 million yen.
4) Other businesses
Other businesses include Machiiro, Jichitai Works HA×SH and other services that are not part of the reportablesegments. Jichitai Works HA×SH has been operated by the Jichitai Works business but this activity is included inthis category because Jichitai Works HA×SH is still in the investment phase.
Segment sales were 366 thousand yen and the segment loss was 23 million yen.
(2) Explanation of Financial Position
AssetsTotal assets amounted to 12,279 million yen at the end of the first quarter of the current fiscal year, an increase of
1,314 million yen from the end of the previous fiscal year. Current assets amounted to 11,545 million yen, an
increase of 1,148 million yen from the end of the previous fiscal year. This was mainly due to increases of 609
million yen in cash and deposits and 949 million yen in accounts receivable -trade and contract assets, while there
were decreases of 109 million yen in merchandise and finished goods and 305 million yen in other under current
assets. Non-current assets amounted to 733 million yen, an increase of 166 million yen from the end of theprevious fiscal year. This was mainly due to increases of 16 million yen in intangible assets and 150 million yen
in leasehold and guarantee deposits.
Liabilities
Liabilities totaled 13,980 million yen, an increase of 518 million yen over the end of the previous fiscal year.
Current liabilities amounted to 13,469 million yen, an increase of 589 million yen from the end of the previous
fiscal year. This was mainly due to increases of 775 million yen in current portion of bonds payable and 243
million yen in other under current liabilities, while there were decreases of 365 million yen in accounts payable trade and 30 million yen in current portion of long-term borrowings. Non-current liabilities amounted to 511
million yen, a decrease of 71 million yen from the end of the previous fiscal year. This was mainly due to adecrease of 71 million yen in long-term borrowings.

4

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

Net assets
At the end of the first quarter, there were negative net assets of 1,701 million yen while there was an increase of
796 million yen from the end of the previous fiscal year. This was mainly due to increases of 470 million yen in
share capital and 470 million yen in legal capital surplus resulting from issuance of shares through third-party
allotment and exercise of share acquisition rights, while there was the loss attributable to owners of parent of 143
million yen.
(3) Explanation of Consolidated Earnings Forecast and Other Forward-looking Statements
HOPE has revised the first-half and full-year consolidated earnings forecasts announced today (November 15,2021). For more details, please refer to “Notice of Revisions to Fiscal Year Consolidated Forecasts” (Japaneseversion only).

5

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

2. Quarterly Consolidated Financial Statements and Notes(1) Quarterly Consolidated Balance Sheet(Thousands of yen)First quarter of FY6/22(As of Sep. 30, 2021)

FY6/21(As of Jun. 30, 2021)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Trade receivables and contract asset
Merchandise and finished goods
Work in process
Supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Investments and other assets
Leasehold and guarantee deposits
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Accounts payable-trade
Short-term borrowings
Current portion of bonds payable
Current portion of long-term borrowings

Income taxes payable
Advances received
Contract liabilities
Other
Total current liabilities
Non-current liabilities
Bonds payable
Long-term borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Total accumulated other comprehensive income
Share acquisition rights
Total net assets
Total liabilities and net assets

6

1,932,991
7,336,855
427,4971,717
193
701,753(4,012)
10,396,997

2,542,354
8,286,744
317,8173,938
66
395,766(914)
11,545,775

18,912
83,881

18,057100,045458,279
18,330(11,864)
464,745567,539
10,964,536

609,175
18,501(12,064)
615,612733,715
12,279,490

11,290,446
950,000
366,952
42,242
71,367
159,036
12,880,045

10,925,243
950,000
775,000
336,952
12,447
67,904402,318
13,469,866

100,000
482,658221
582,879
13,462,924

100,000
410,920212
511,132
13,980,998

1,959,676
1,913,476(6,333,191)(70,902)(2,530,939)

2,430,106
2,383,906(6,476,842)(70,902)(1,733,732)

504

484

504
32,047(2,498,387)
10,964,536

484
31,740(1,701,507)
12,279,490

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22(2) Quarterly Consolidated Statements of Income and Comprehensive Income
Quarterly Consolidated Statement of Income(For the Three-month Period)(Thousands of yen)First three months of FY6/22(Jul. 1, 2021 – Sep. 30, 2021)
Net sales

12,978,237

Cost of sales

12,854,281

Gross profit

123,956

Selling, general and administrative expenses

250,080(126,124)

Operating loss
Non-operating income
Interest income

8

Penalty income

2,643

Gain on sale of investment securities

2,621

Other

1,731

Total non-operating income

7,005

Non-operating expenses
Interest expenses

5,813

Commission expenses

3,399

Share issuance costs

8,594
57

Other

17,864

Total non-operating expenses
Ordinary loss

(136,984)

Loss before income taxes(136,984)
6,667

Income taxes-current

6,667

Total income taxes
Loss(143,651)

Loss attributable to owners of parent(143,651)

7

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

Quarterly Consolidated Statement of Comprehensive Income(For the Three-month Period)(Thousands of yen)First three months of FY6/22(Jul. 1, 2021 – Sep. 30, 2021)(143,651)

Loss
Other comprehensive income(20)

Valuation difference on available-for-sale securities(20)

Total other comprehensive income(143,671)

Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable tonon-controlling interests(143,671)-

8HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22(3) Notes to Quarterly Consolidated Financial Statements
Going Concern Assumption
There are reasons for significant doubts concerning the going concern assumption due to consistently negative
cash flows in prior years.
In addition, due to a very large increase in the JEPX price of electricity between th e middle of December 2020and late January 2021, there was a 6,895 million yen operating loss, 6,935 million yen ordinary loss and 6,978
million yen loss attributable to owners of parent in the previous fiscal year. Furthermore, there was a 126 million
yen operating loss, 136 million yen ordinary loss and 143 million yen loss attributable to owners of parent in thefirst three months of the current fiscal year. As a result, HOPE continued to record a negative equity of 1,701
million yen at the end of the first quarter of the current fiscal year.
The HOPE Group is taking the following actions to end these problems.
1. Stabilize earnings of business operations(1) Management of risk involving energy business
The HOPE Group has no electricity generation facilities and therefore purchases most of the electricity sold to its
customers by using the JEPX. As a result, this business is vulnerable to changes in the cost of electricity. As asurge in the market prices in the previous fiscal year caused a significant c apital deficit, many actions have beentaken in order to reduce exposure to this price volatility risk. Major initiatives include establishing new risk
management policies and adjusting the amount of electricity purchased by using the JEPX and one -to-one
transactions for each area and season. Since October 2021, prices on the JEPX have been higher than we
anticipated. Furthermore, it is currently difficult to purchase the expected amount of electricity in line with ourrisk management policy by using direct purchases from suppliers. One reason for this difficulty is the inability tomake these direct purchases while using payment terms that meet our requirements.
Due to these challenges, we plan to conduct a thorough study concerning the viability of the ene rgy business,
including the option of significantly downsizing this business, while monitoring market conditions and otherfactors.
(2) Payment in installments of the January 2021 imbalance fees associated with the insufficient supply of electricity
On January 29, 2021, the Ministry of Economy, Trade and Industry announced that companies meeting certain
requirements will be allowed to pay January 2021 imbalance fees in equal installments over a period of up to fivemonths. (On March 19, 2021, the ministry increased the maximum number of these installments from five tonine.) HOPE applied for the use of this installment payment program and, after receiving permission from every
electricity distribution company involved, made the first of nine equal installmen t payments in April 2021.
2. Stabilize cash flows(1) Financial covenants
HOPE has received the agreement of financial institutions to not exercise the acceleration clause, which would
require the immediate repayment of all applicable debt if HOPE is unab le to fulfill the obligations of its debt
covenants.
(2) Procurement of funds
HOPE is maintaining sound relationships with financial institutions, primarily its main banks, and management
believes these institutions will continue to provide assistance. Fu rthermore, HOPE received proceeds ofapproximately 2.2 billion yen as of August 31, 2021 due to the May 17, 2021 sale of stock through a third-party
allotment and the exercise of the Ninth Share Acquisition Rights with an exercise price adjustment clause. In
addition, HOPE procured about 150 million yen by selling stock through a third -party allotment on September 21,
2021 and 1,000 million yen (about 620 million yen of these bonds had been redeemed as of the date of this firstquarter earnings report by using proceeds from the exercise of the eleventh share acquisition rights) by issuing its
fourth unsecured bonds (a private placement) on September 10, 2021.
9

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

As described in “(3) Notes to Quarterly Consolidated Financial Statements, Material Subsequent Even ts,
Company Split,” HOPE plans to spin off its advertising business and the Jichitai Works business to newly
established wholly owned subsidiaries on December 1, 2021. We will consider further actions concerning thesesubsidiaries, including the sale of the stock of these companies by using an equity and business alliance withbusiness partners. Through these activities, the entire HOPE Group will be conducting activities to securesufficient funds. HOPE will continue to consider many methods for procuring funds in order to improve cash
flows and eliminate negative equity.
The goal of these actions is the minimization of risks in the energy business and stabilization of the earnings ofbusiness operations and of cash flows. However, we are only at the beginning of these actions. Moreover, the riskof volatility in the price of electricity is becoming more apparent. Consequently, there are significant
uncertainties concerning the going concern assumption at this time.
The going concern assumption was used as the basis for the quarterly consolidated financial statements and thesestatements do not reflect the significant uncertainties concerning this assumption.
Significant Changes in Shareholders’ Equity
In the first three months, share capital and legal capital surplus increased by 75 million yen each due to theissuance of new shares through third-party allotment. Furthermore, share capital and legal capital surplus
increased by 395 million yen each due to the issuance of new shares following the exercise of the ninth andeleventh share acquisition rights. As a result, share capital was 2,430 million yen and legal capital surplus was
2,383 million yen at the end of the first quarter.
Changes in Accounting Policies
Application of the Accounting Standard for Revenue Recognition
HOPE has applied the Accounting Standard for Revenue Recognition ( Accounting Standards Board of Japan(ASBJ) Statement No. 29, March 31, 2020) from the beginning of the first quarter of the current fiscal year.
Based on this standard, revenue expected to be received in exchange for the provision of goods and services isrecognized when the control of the goods and services is transferred to customers. In the energy business, fees
received from customers as part of their electricity bills for supporting the development of renewable energy
sources are classified as money collected for a third party. Accordingly, these fees were included in net sales inprior years and payments based on the Act on Special Measures Concerning Procurement of E lectricity from
Renewable Energy Sources were recorded as cost of sales. However, this fee is now not included in transaction
prices based on the new revenue recognition standard and the corresponding payments are deducted from the costof sales.
As a result, net sales and cost of sales for the first three months of the current fiscal year decreased by 3,067
million yen each, but there was no change in operating profit, ordinary profit and profit before income taxes. In
addition, there is no cumulative effect of the application of this standard on retained earnings at the beginning of
the fiscal year.
Due to the application of the Accounting Standard for Revenue Recognition, “ Accounts receivable-trade” thatwas presented in the current assets section of the consolidated balance sheet in the previous fiscal year ispresented as “Accounts receivable-trade and contract assets,” and “Advances received” that was presented in thecurrent liabilities section is presented as “Contract liabilities” from the first qua rter of the current fiscal year.
In accordance with the transitional measures prescribed in Paragraph 89 -2 of the Accounting Standard for
Revenue Recognition, no reclassification has been made to the prior year’s consolidated financial statements toconform to the new presentation.
Application of the Accounting Standard for Fair Value Measurement
HOPE has applied the Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019)from the beginning of the first quarter of the current fiscal year, and has applied the new accounting policies in

10

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

the Accounting Standard for Fair Value Measurement prospectively in accordance with the transitional measuresin Paragraph 19 of the Accounting Standard for Fair Value Measurement and Paragraph 44-2 of the AccountingStandard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019). There is no effect of the application ofthis standard on the quarterly consolidated financial statements.
Additional Information
Progress with Plan for Elimination of Negative Equity
1. Basic policy for the elimination of negative equity
In the fiscal year that ended in June 2021, the HOPE Group recorded an ordinary loss of 6,935 million yen
because of a big increase in the cost of sales in the energy business caused by high electricity on the JEPX
between the middle of December 2020 and late January 2021. As a result, there was negative equity of 2,498
million yen at the end of June 2021. As was announced by HOPE on September 27, 2021 in a new release titled“Measures to End Negative Equity,” we are implementing a number of equity-related measures along with actions
for improving business operations in order to stabilize earnings. Our goal is to end negative equity by the end of
the current fiscal year. However, JEPX prices have been higher than we anticipated since October 2021.
Consequently, the business climate for the energy business is still challenging.
The HOPE Group has established the basic policy of ending negative equity by taking the following actions .
Market risk in the energy business (risk of volatility of the cost of purchasing electricity on the JEPX) will beproperly managed, the effects of this risk will be minimized, and the business value of other growing businesses
will be increased. In addition, equity financing will be used to procure the funds required to restore the group’s
financial soundness, which declined during the previous fiscal year.
In the first three months, the operating loss was 126 million yen, the ordinary loss was 136 millio n yen and loss
attributable to owners of parent was 143 million yen. Negative equity improved by 796 million yen from the endof the previous fiscal year to 1,701 million yen at the end of the first quarter due to the issuance of shares throughthird-party allotment and the issuance of new shares following the exercise of the ninth and eleventh shareacquisition rights.
2. Activities based on the basic policy and schedule(1) Equity financing
HOPE received proceeds of approximately 2.2 billion yen as of Au gust 31, 2021 due to the May 17, 2021 sale ofstock through a third-party allotment and the exercise of the Ninth Share Acquisition Rights with an exercise
price adjustment clause. On September 21, 2021, HOPE procured about 150 million yen by selling stock througha third-party allotment. On September 10, 2021, HOPE procured 1,000 million yen (about 620 million yen ofthese bonds had been redeemed as of the date of this first quarter earnings report by using proceeds from theexercise of the eleventh share acquisition rights) by issuing its fourth unsecured bonds (a private placement).
In addition, HOPE plans to spin off its advertising business and the Jichitai Works business to newly establishedwholly owned subsidiaries on December 1, 2021. HOPE will consider further actions concerning thesesubsidiaries, including the sale of the stock of these companies by using an equity and business alliance withbusiness partners. Through these activities, the entire HOPE Group will be conducting activities to securesufficient funds.
If for some reason we are unable to procure funds in accordance with this plan, we will reexamine the policy
concerning equity as required.
Note 1: This is the amount decided in the terms announced on September 3, 2021 in a new release titled “Noticeof Determination of Issuance Terms for Third-party Allotment of Stock and of the Eleventh Share
Acquisition Rights with Exercise Price Adjustment Clause.”(2) Management improvements for stability of earnings
a. Reduce risk in the electricity retail sales business and take actions concerning business risk

11

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

Currently, there is an excessive level of risk (determination of a suitable risk appetite using VaR and EaR for
assessing risk is not possible at this time) due to the negative equity from the standpoint of achieving the properbalance in the future between capital and the risk appetite of the HOPE Group concerning business operations. To
prevent a further increase in market risk in the electricity retail sales business involving purchases o f electricity
using the JEPX, the amount of electricity supplied will be reduced. Furthermore, we will adjust the balance
between electricity purchased by using the JEPX and one-to-one transactions in different areas and seasons. All
these measures are aimed at reducing exposure to market price volatility risk. As was explained before, the JEPX
price of electricity has been higher than we anticipated since October 2021 and we have often been unable topurchase electricity using terms that match our requirements. As a result, the use of one-to-one transactions topurchase the amount of electricity originally planned is currently difficult. For these reasons, in order to prevent
any further increases in market risk and working capital as equity remains negativ e, the electricity retail sales
business will not participate in bidding for selling electricity to local governments until this business has clearlyreached the point where JEPX market risk no longer has a significant effect on the HOPE’s business operati ons.
In fact, the submission of bids is currently suspended. Taking these actions will lower the demand for working
capital for purchasing electricity and reduce the level of exposure to market risk. In addition, due to the current
high price of electricity on the JEPX, we plan to conduct a thorough study to determine whether to continue theEnergy Business, including the option of significantly downsizing this business, while taking into consideration
the market conditions and other factors.
b. Use of a spinoff and absorption to transfer the electricity retail sales business to a subsidiary
As described above, to reduce risk exposure in the future, we are downsizing the electricity retail sales businessand plan to use a spinoff for the transfer of this business to wholly owned subsidiary HOPE ENERGY, INC. As
was announced on August 11, 2021 in a news release titled “Notice of Company Split (Absorption-type Split),” a
resolution for this spinoff was submitted at the shareholders meeting held on September 28 , 2021. Shareholders
approved this resolution and the transfer of the electricity retail sales business to HOPE ENERGY will take place
on December 1, 2021.
The HOPE Group is taking actions for transitioning to a framework for business operations with spee d andflexibility. These actions will be accompanied by measures to control business risk as much as possible to prevent
this risk from becoming excessive in relation to the level of liquidity. Our priorities are the timely and proper
management of risk involving business operations and the efficient and effective allocation of the group’s
resources.
c. Earnings of current and new businesses
The advertising business and Jichitai Works business are consistently profitable and there are many activities in
the current fiscal year with the goal of ensuring that these two businesses generate earnings as planned. There arealso numerous activities for starting new businesses that can contribute to earnings. One example is theestablishment on August 27, 2021 of an equity and business alliance with media4u inc. (Head office: Chuo -ku,
Tokyo; President: Masahiko Okuoka) concerning a short message service (see note) for local governments.
Note 2: A short message service is a service for exchanging brief text messages between smartphones and othermobile devices.
By continuing initiatives to increase equity and improve business operations to increase financial soundness andprofitability, we are determined to return to positive equity by the end of June 2022.
Conclusion of absorption-type split agreement
The Board of Directors of HOPE approved a resolution on August 11, 2021 to conclude an absorption -type split
agreement with HOPE ENERGY, INC., a wholly owned subsidiary of HOPE, to succeed the electricity retailsales business operated by HOPE to HOPE ENERGY on December 1, 2021 (tentative). On the same day, HOPE
concluded this agreement with HOPE ENERGY. The proposal for the conclusion of this agreement was approvedby the shareholders’ meeting held on September 28, 2021.
12

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

Segment and Other Information
Segment information
1. Overview of reportable segment(1) Method for identifying reportable segments
Segments used for financial reporting are HOPE’s constituent units for which separate financial information isavailable and for which the Board of Directors performs periodic studies for the purposes of determining theallocation of resources and evaluating performance.
There are three reportable segments: advertising, energy, and Jichitai Works, which are based on HOPE’s core
advertising, energy, and Jichitai Works businesses.
(2) Types of products and services in each reportable segment
Products and services in the reportable segments are as follows.
Reportable segments

Products and services

SMART RESOURCE service
Ads in public info publications, banner ads, etc.

Advertising

SMART CREATION service
MachiletEnergy

GENEWAT

Jichitai Works

Jichitai Works, B-to-G promotions

2. Information related to net sales and profit or loss for each reportable segment
First three months of FY6/22 (Jul. 1, 2021 – Sep. 30, 2021)
Reportable segment

Advertising

EnergyJichitaiWorks

Subtotal

Other(Note 1)

Total

(Thousands of yen)Amounts shownon quarterly
Adjustment consolidated(Note 2)statement ofincome(Note 3)

Net sales
External sales
272,628 12,651,794
53,447 12,977,871
366 12,978,237
12,978,237
Inter-segment
sales and transfers
Total
272,628 12,651,794
53,447 12,977,871
366 12,978,237
12,978,237
Segment profit
7,166(41,371)
8,920(25,284) (23,677)(48,962)(77,162)(126,124)(loss)
Notes: 1. Other consists of the businesses which are not included in any of the reportable segments and mainly includes
Machiiro and Jichitai Works HA×SH services.
2. The negative 77,162 thousand yen adjustment to segment profit (loss) is corporate expenses that are not allocated toany of the reportable segments. Corporate expenses mainly consist of selling, general and administrative expenses
that are not attributable to any of the reportable segments.
3. Segment profit (loss) is adjusted to be consistent with operating loss shown on the quarterly consolidated statementof income.

3. Information related to changes in reportable segments, etc.
Change in segment name
From the first quarter of the current fiscal year, the previous Media business segment has been changed to the
Jichitai Works business segment. There is no effect on the segment information because only the segment namehas been changed.
Application of the Accounting Standard for Revenue Recognition
As described in Changes in Accounting Policies, HOPE has applied the Accounting Standard for Revenue
Recognition (ASBJ Statement No. 29, March 31, 2020) from the beginning of the first quarter of the current fiscal
year and changed the accounting method for revenue recognition. Accordingly, the method for calculating
segment profit or loss has been changed as well. Compared with the previous method, net sales decreased 3,067
million yen in the energy business in the first three months of the current fiscal year.
13

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

Material Subsequent Events
Company split
The Board of Directors of HOPE approved a resolution on October 26, 2021 to transfer the rights and obligations
related to HOPE's advertising business and Jichitai Works business to a newly established wholly owned
subsidiary A (newly established company A) and B (newly established company B), respectively, through anincorporation-type company split (the “Company Split”) effective December 1, 2021 (tentative). Details are as
follows.
1.

Background and purpose of the Company Split

The HOPE Group is currently in a state of substantial negative equity (net assets as of June 30, 2021: negative
2,498 million yen), and we are continuing to pursue equity financing to resolve this situation. In addition, we
believe that we need to rebuild our management structure based on the stable business operations in line with ourgoal of eliminating negative equity. With respect to the electricity retail sales business, a resolution has been
passed at the HOPE’s shareholders’ meeting held on September 28, 2021 regarding an absorption-type company
split to be implemented on December 1, 2021 (tentative) with HOPE ENERGY, INC., a wholly owned subsidiaryof HOPE.
However, HOPE has come to the conclusion that it is essential to establish a bus iness management system that
ensures greater mobility and flexibility, and enables the appropriate allocation of group management resources
and the execution of financial strategies and capital policies, in order to achieve the continuity of the company
and further enhance its corporate value over the medium to long term. For this reason, HOPE has determined thata shift to a holding company structure is appropriate to achieve the above objectives and has decided to
implement the Company Split.
2.

Summary of the Company Split(1) Schedule
Resolution of the Board of Directors

October 26, 2021

Date of stock split (effective date)

December 1, 2021 (tentative)

The Company Split will be conducted without obtaining approval at a shareholders’ meeting, as it satisfies therequirements for a simplified incorporation-type company split under the provisions of Article 805 of theCompanies Act. The same schedule is planned for the two newly established companies.
(2) Method of the Company Split
A simple incorporation-type company split by HOPE alone in which HOPE will be the splitting company andthe two newly established companies will be the succeeding companies, and the two newly establishedcompanies will be wholly owned subsidiaries of HOPE.
(3) Distribution of stock associated with the Company Split
The newly established company A will issue 200 shares of common stock and the newly established company B
will issue 200 shares of common stock, all of which will be allocated to HOPE, the splitting company.
(4) Treatment of share acquisition rights and bonds with share acquisition rights accompanying the Company
Split
There will be no change in the treatment of share acquisition rights issued by HOPE following the Company
Split. In addition, there is no applicable matter regarding bo nds with share acquisition rights.
(5) Change in share capital
There will be no change in the share capital of HOPE due to the Company Split.

14

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22(6) Rights and obligation to be transferred to the newly established companies
The newly established company A will succeed to the assets and liabilities, contractual status, and other rights
and obligations belonging to the advertising business upon the Company Split. The employment contracts withthe employees related to the advertising business will not be succeeded, and the employees related to theadvertising business will be transferred to the newly established company A as of the effective date.
Furthermore, HOPE will be jointly responsible for the liabilities to be transferred to the newly establishedcompany A following the Company Split.
The newly established company B will succeed to the assets and liabilities, contractual status, and other rights
and obligations belonging to the Jichitai Works business upon the Company Split. The employment contracts
with the employees related to the Jichitai Works business will not be succeeded, and the employees related to
the Jichitai Works business will be transferred to the newly established company B as of the effective date.
Furthermore, HOPE will be jointly responsible for the liabilities to be transferred to the newly establishedcompany B following the Company Split.
(7) Prospect of fulfillment of obligations
As the assets of both of the two newly established companies are expected to exceed the liabilities, and as there
is currently no foreseeable situation that will hinder the fulfillment of obligations to be borne after the Company
Split, HOPE believes that there is no difficulty in fulfilling obligations by the successor companies in the
Company Split.
3.

Overview of companies involved in the Company Split(1) Splitting company
1)2)Company nameLocation

HOPE, INC.
1-14-5, Yakuin, Chuo-ku, Fukuoka

3)

Representative

4)

Business

5)

CapitalTakayasu Tokitsu, CEO
Adverting business for the purpose of creating sources of revenue andreducing the expenses of local governments; energy business; Jichitai Works
business for facilitating cooperation between the public and private sectors
1,959,676 thousand yen

6)
7)

Established
Outstanding shares

October 29, 1993
7,775,100 shares

8)

Fiscal year end

9)

10)

June 30
E.T. Co., Ltd.
17.29%
Takayasu Tokitsu
13.90%GOLDMAN SACHS INTERNATIONAL
4.55%
BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)
4.09%
Major shareholders and
MACQUARIE BANK LIMITED DBU AC
3.22%
shareholding ratios (as of June
Hiroshi Fukudome
3.19%
30, 2021)
Masaki Kuge
3.09%
Custody Bank of Japan, Ltd. (Trust Account)
2.76%
Morgan Stanley MUFG Securities Co., Ltd.
2.49%
Individual shareholder
1.63%
Financial position and operating results for the most-recent fiscal year (FY6/21) (Consolidated)(Thousands of yen)
Net assets(2,498,387)
Total assets
10,964,536
Net asset per share (Yen)Net sales(326.50)
34,615,567

Operating loss
Ordinary loss

(6,895,420)(6,935,626)

Loss attributable to owners of parent
Net loss per share (Yen)(6,978,950)(1,109.09)

15

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22(2) Newly established company A *at the time of establishment
1)Company nameJICHITAI AD, INC.

2)
3)

Location
Representative

1-14-5, Yakuin, Chuo-ku, Fukuoka
Takayasu Tokitsu, CEO

4)
5)

Business
CapitalAdvertising business
10,000 thousand yen

6)
7)

Established
Outstanding shares

December 1, 2021 (tentative)
200 shares

8)
9)

Fiscal year end
Major shareholder and shareholding ratio

June 30
HOPE, INC.: 100%(3) Newly established company B *at the time of establishment

4.

1)Company nameJICHITAI WORKS, INC.

2)
3)

Location
Representative

1-14-5, Yakuin, Chuo-ku, Fukuoka
Takayasu Tokitsu, CEO

4)
5)

Business
Capital

Jichitai Works business
10,000 thousand yen

6)
7)

Established
Outstanding shares

December 1, 2021 (tentative)
200 shares

8)
9)

Fiscal year end
Major shareholder and shareholding ratio

June 30
HOPE, INC.: 100%Overview of business to be spun off(1) Business to be spun off
Newly established company A:

Advertising business

Newly established company B:

Jichitai Works business(2) Operating results for the business to be spun off in the fiscal year ended June 2021

Newly established company A
Newly established company B

Sales of businesses to be spun off(a)1,719,457 thousand yen
228,944 thousand yen

Consolidated sales of HOPE(b)

Ratio (a/b)
5.0%
0.7%

34,615,567 thousand yen(3) Assets and liabilities to be spun off (as of June 30, 2021)
Newly established company A
AssetsItem
Current assets
Non-current assets(Thousands of yen)
Liabilities
AmountItem

764,098
36,708AmountCurrent liabilities
Non-current liabilities

553,069-

Total
800,807
Total
553,069
Note: Since the above amount is calculated based on the balance sheet as of June 30, 2021, the actual am ount to be
succeeded will be adjusted for changes until the effective date.
Newly established company B
AssetsItem
Current assets(Thousands of yen)
Liabilities
AmountItem
Current liabilities

64,005

Amount31,210Non-current assets
Non-current liabilities
Total
64,005
Total
31,210Note: Since the above amount is calculated based on the balance sheet as of June 30, 2021, the actual amount to be
succeeded will be adjusted for changes until the effective date.

16

HOPE, INC. (6195) Consolidated Financial Results for the First Quarter of FY6/22

5.

Post-company split details

Following the Company Split, there are no changes to the company name, location, name and title ofrepresentative, business, capital and fiscal year end of HOPE.
6.

Outlook

The Company Split is a simple incorporation-type company split by HOPE alone, and will have no impact on
HOPE’s consolidated results of operations.
Issuance of new shares and redemption of bonds
During the period from the end of the first quarter of the current fiscal year to the date of submission of thisquarterly financial report, there was an exercise of the eleventh series of share acquisition rights. Details are as
follows. The funds procured through the exercise of share acquisition rights were used to redeem the fourth
unsecured bond.
(1)

Name of the share subscription rights

The eleventh share acquisition rights(2)

Class and number of outstanding shares

Common shares 1,239,000 shares(3)

Increased in share capital

198,399 thousand yen(4)Increased in legal capital surplus

198,399 thousand yen(5)Redeemed bonds

400,000 thousand yen

This financial report is solely a translation of “Kessan Tanshin” (in Japanese, including attachments), which has been
prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience of readers
who prefer an English translation.

17