October 12, 2018

Consolidated Financial Results
for the Nine Months Ended August 31, 2018
(Japanese Accounting Standards)
Name of listed company:
Listing:
Stock code:
URL:
Representative:
Contact person:

NCXX Group Inc.
Tokyo Stock Exchange, JASDAQ Standard6634
http://www.ncxxgroup.co.jp/
Tsukasa Akiyama, Representative Director and President
Naoki Ishihara, Representative Director and Vice President
Tel: +81-3-5766-9870
Scheduled date to file Quarterly Securities Report:
October 12, 2018
Scheduled date to commence dividend payments:－
Supplementary explanatory materials prepared:
None
Explanatory meetings:
None(Millions of yen with fractional amounts discarded, unless otherwise noted.)

1. Consolidated Financial Results for the Nine Months Ended August 31, 2018
(From December 1, 2017 to August 31, 2018)(1) Consolidated Operating Results
Net sales
Millions of yen(Percentages indicate year-on-year changes.)
Profit attributable toOrdinary income
owners of parent

Operating income%

Millions of yen%

Nine months ended
8,826
(9.4)
842
－
August 31, 2018
Nine months ended
9,745
20.4
(241)
－
August 31, 2017
Note:
Comprehensive income
Nine months ended August 31, 2018: ¥1,007 million [(31.5%)]
Nine months ended August 31, 2017: ¥1,472 million [－%]
Earnings per share
Nine months ended
August 31, 2018
Nine months ended
August 31, 2017

Millions of yen%

Millions of yen

%

410

－

1,044

(25.6)

(327)

－

1,403

－

Diluted earnings per share
Yen

Yen

70.13

66.74

94.34

84.87

(2) Consolidated Financial Position
Total assets
As ofMillions of yen
11,194
August 31, 2018
11,532
November 30, 2017
Reference: Equity
As of August 31, 2018: ¥4,820 million
As of November 30, 2017: ¥3,865 million

Net assets

Equity ratio

Net assets per share

Millions of yen

%

5,544
4,526

43.1
33.5

Yen

323.51259.74

2. Cash Dividends
Annual dividends per shareFirst
quarter

Secondquarter

Third
quarter

Fiscalyear-end

Annual

Yen

Yen

Yen

Yen

Yen

Fiscal year ended
November 30, 2017

－

0.00

－

0.00

0.00

Fiscal year ending
November 30, 2018

－

0.00

－
0.00

0.00

Fiscal year ending
November 30, 2018
(forecasts)
Note: Changes since most recently announced dividend forecast: None

3. Consolidated Financial Forecasts for the Fiscal Year Ending November 30, 2018
(From December 1, 2017 to November 30, 2018)
Net sales
Millions of yen

Fiscal year ending
November 30, 2018

11,398Operating income
%

(6.6)

(Percentages indicate year-on-year changes.)
Profit attributable
Earnings
Ordinary income
to owners of parent
per share

Millions of yen%

Millions of yen

743

－

698

%

－

Millions of yen%

563 (37.6)

Yen

37.84

Note: Changes since most recently announced earnings forecast: None
Notes:(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in a change in the scope of
consolidation): Yes
Excluded:
2 companies (Corporate names) FISCO International (Cayman) Limited, FISCO International (Cayman)
L.P.
(2) Application of special accounting practices for quarterly consolidated financial statements: None
(3) Changes in accounting policies, changes in accounting estimates, and restatement of revisions
a. Changes in accounting policies due to revisions to accounting standards and other guidelines: Noneb. Changes in accounting policies due to reasons other than a. above: Nonec. Changes in accounting estimates: None
d. Restatement of revisions: None
(4) Number of common shares issued
a. Total number of issued shares at the end of the period (including treasury stock)
As of August 31, 201815,030,195 shares
As of November 30, 201715,030,195 sharesb. Number of shares of treasury stock at the end of the period
As of August 31, 2018125,816 shares
As of November 30, 2017
146,473 sharesc. Average number of shares (Quarterly cumulative total)
For the nine months ended August 31, 2018
14,892,065 shares
For the nine months ended August 31, 201714,878,893 shares*This report falls outside the scope of quarterly review procedures by Certified Public Accountants or the independent auditor.
* Proper use of earnings forecasts and other special matters
The forward-looking statements, including earnings forecasts, contained in these materials are based on information
currently available to the Company and on certain assumptions deemed to be reasonable. These statements do not guaranteethat the Company will achieve its earnings forecasts. In addition, actual business and other results may differ substantially
due to various factors. For details on the conditions assumed and the cautionary notes and items in the financial forecasts,
please refer to “(3) Description of Consolidated Earnings Forecasts and Other Forward-looking Information” in “1.
Qualitative Information Concerning Quarterly Financial Statements” on page 6 of the Attachment to this report.

Attachment Contents
1. Qualitative Information Concerning Quarterly Financial Statements………..…………………………………

2(1) Description of Business Results.…………………………….……………………………………………....

2(2) Description of Financial Position..………………………….……………………………………………….

6(3) Description of Consolidated Earnings Forecasts and Other Forward-Looking Information………………..

6

2. Notes in the Summary Information…………………..……………………………………………………….…

6(1) Changes in Significant Subsidiaries during the Period.…………………………….………………………

6(2) Application of Special Accounting Practices for Quarterly Consolidated Financial Statements..………….

6

3. Quarterly Consolidated Financial Statements and Key Notes …………………………………………………..

7(1) Consolidated Balance Sheets………………………………………………………………………………..

7(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income ……….…...

9

Consolidated Statements of Income(Nine months ended August 31, 2018) ......………………………………………….….….….….….….….

9

Consolidated Statements of Comprehensive Income(Nine months ended August 31, 2018) ......………………………………………….….….….….….….….

10(3) Notes to Consolidated Financial Statements..………………………………………..………..…..………... 11(Note Concerning Going Concern Assumption).……………………………………………………………

11(Notes Regarding Significant Change in Shareholders’ Equity).…………………………………………… 11(Segment Information)..………………………………………………………………..…………………… 12

11. Qualitative Information Concerning Quarterly Financial Statements
Forward-looking statements in this document are judged to be appropriate by the Group (the Company and its
consolidated subsidiaries) as of the date of filing this report.
(1) Description of Business Results
In the nine months of the fiscal year ending November 30, 2018, the Japanese economy continued to expand moderately,
stimulated by government measures. Overseas, however, the outlook was uncertain with concerns about destabilizing
trends in politics and geopolitical risk.
The Japanese government has incorporated the concept of the Fourth Industrial Revolution into its growth strategy. In
the Fourth Industrial Revolution, physical things of all kinds, including automobiles and home electric appliances, will beconnected to the Internet, making Cyber-Physical Systems a reality. A Cyber-Physical System is a system that quantifies
various states of the Physical Part of the real world that are subject to control, and quantitatively analyzes this data in the
Cyber Part to derive new insights and knowledge, which are then fed back and used to control the Physical Part of the realworld. The general belief is that the ability to collect and retain big data from the Physical Part of the real world throughIoT technology, and the ability to manage and analyze this data through AI and blockchain technologies in the Cyber Part,
will be crucial to success.
In 2016, the size of the Cyber-Physical System / IoT market, a strategic focus for the Company, increased to ¥194.0
trillion globally and ¥11.1 trillion in Japan. By 2030, the market is expected to grow to ¥404.4 trillion globally and ¥19.7
trillion in Japan. Looking at fields that have outstanding growth rates in Japan, the agriculture sector has posted an averageannual growth rate of 20.2%. (Source: 2017 Survey of Trends in Emerging Fields by the Japan Electronics and Information
Technology Industries Association)
In this business environment, in July 2018, the Company’s Board of Directors passed a resolution to commence a
cryptocurrency mining business at its Head Office (Hanamaki, Iwate Prefecture). The mining of cryptocurrency refers toauthentication work performed to ensure that blocks of transaction data found on networks are consistent with one another.
Cryptocurrency miners who authenticate data at the fastest pace are rewarded by receiving payment in the relevant
cryptocurrency. Because massive amounts of computations must be performed to conduct this authentication work,
cryptocurrency miners require high-performance computers.
Ordinarily, in order to conduct a mining business, cryptocurrency miners require a considerable number of cooling fans
and air conditioning systems to dissipate the heat generated by mining equipment, as well as the physical space to housethis equipment plus an immense amount of electric power to operate the mining facility. Therefore, a key priority inbusiness is to efficiently solve these problems at the lowest possible cost. Hanamaki, Iwate Prefecture is located in a
relatively cold region. In winter, temperatures fall to the freezing point while in the summer, the average temperature isfairly low at 23.8 degrees Celsius (almost 74.8 degrees Fahrenheit) (Source: Japan Meteorological Agency). Accordingly,
the Group can expect to significantly reduce its electricity bills by relying on natural ventilation for most of its coolingneeds throughout the year. Moreover, Iwate Prefecture is ranked second in terms of its potential for renewable energy.
Notably, Iwate Prefecture has an extremely high potential for wind power and geothermal power. In the future, the Groupplans to target the procurement of low-cost electric power based on this abundant supply of renewable energy.
Moreover, the heat released by mining equipment will be reused in the Group’s agricultural ICT business (NCXX
FARM). At NCXX FARM, the Group grows cherry tomatoes year-round in greenhouses. In winter, the outdoor temperature
falls below freezing, so heaters are run 24 hours a day to maintain the optimal temperature for growing vegetables in thegreenhouses. The mining equipment generates a considerable amount of heat as it is operated 24 hours a day. Therefore,
this heat can be reused to reduce heating costs in the winter.
Looking ahead, the Group will seek to build a self-sufficient agricultural system not only by reusing the heat generated
by mining operations, but also by using the mined coins to procure the seedlings, fertilizer and agrichemicals needed in the
agriculture business.
In this manner, the NCXX Group will conduct a unique cryptocurrency mining business by working to optimize overall
efficiency, including initiatives involving other businesses. The Group’s mining business will thus be markedly different
than mining operations undertaken in overseas countries where electricity is available at low cost.
Meanwhile, in the agricultural ICT business (NCXX FARM), the Group is pursuing “sixth-order industrialization”
initiatives. In the nine months ended August 31, 2018, the Group commenced sales of tomato juice (180 ml) available in acolorful selection of four different colors, specifically red, green, purple and yellow. Sales of this tomato juice have grownsteadily.
Moreover, NCXX increased its lineup of a variety of gift sets that included several kinds of products such as fruit juices
and pouched curries.
In the franchise business, the Group regularly conducts presentations on the franchise business at its proprietary test plot.
It has continued to address various needs, including the use of these presentations by local municipalities and various
agricultural groups as part of their training programs. In addition, the Group has received an increasing number of inquiries

2about the franchise business, partly due to a positive public response garnered from media appearances in programs
produced by Television Iwate Corp. and Iwate Menkoi Television, among other media outlets.
Looking at consolidated business results, net sales decreased slightly due to the exclusion of NCXX Solutions Inc.
(“NCXX Solutions”) from the scope of application of the equity method. However, operating income, ordinary income, andprofit attributable to owners of parent increased sharply from the same period of the previous fiscal year. These increases
were mainly due to improved business performance at NCXX Inc. (“NCXX”) and the impact of the recognition of revenue
from investment in cryptocurrency in a proprietary account using an AI trading system in the first quarter.
In addition, the Group transferred all of its shares of Terilogy Co., Ltd. (Listing: 3356 TSE JASDAQ; Headquarters:
Chiyoda-ku, Tokyo; Chairman: Takao Tsubuki) in May and June 2018, and recorded extraordinary income on the transferof shares.
As a result of these efforts, consolidated net sales were ¥8,826 million, down 9.4% year on year. Operating income was¥842 million, compared to an operating loss of ¥241 million in the same period of the previous fiscal year. Ordinary income
was ¥410 million, compared to an ordinary loss of ¥327 million. Income before income taxes was ¥1,228 million, down
29.8% year on year. Profit attributable to owners of parent was ¥1,044 million, down 25.6% year on year. EBITDA, areference indicator reflecting the amortization of goodwill associated with the conversion of companies into subsidiaries
was ¥1,018 million, compared to ¥173 million in the same period of the previous fiscal year.
EBITDA = operating income + depreciation + amortization of goodwill (selling, general and administrative expenses)
In the nine months ended August 31, 2018, the Group has already posted operating income and profit attributable toowners of the parent that exceed its consolidated financial forecasts for the fiscal year ending November 30, 2018. However,the Group is still closely reviewing its financial forecasts for the full fiscal year. If it becomes necessary to revise thefinancial forecasts after this review, the Group will promptly disclose any revisions to its financial forecasts.
Business performance by segment in the nine months ended August 31, 2018 was as follows:
From the three months ended February 28, 2018, the FinTech Systems Development Business and the Information
Service Consulting Business were excluded from the reportable segments and the Cryptocurrency and Blockchain Business
was added as a new reportable segment.
IoT-Related Business
NCXX has focused on the delivery of solutions such as Drive Care, an OBD II solution for shuttle vehicles using
GX410NC/GX420NC, the OBD II-compliant automotive telematic data collecting unit; Bus Rides; Drive Live, an OBD II
solution for delivery vehicles; and Device Gate, a gateway for data collection and transfer.
In addition, NCXX has developed UX302NC-R, a new product that has passed the Inter-Operability Testing (IoT)
certification of NTT DOCOMO, INC. UX302NC-R is the successor model to UX302NC, an LTE/3G data
telecommunications terminal with a strong track record of sales to many telecom operators, including major mobile virtual
network operators (MVNOs), since 2014. NCXX launched UX302NC-R in July 2018.
Moreover, as a new initiative, the Group began research and development into real-time image recognition technology
using deep learning methods driven by GPU computing. This technology can be applied to a wide range of fields, including
image analysis for facial recognition systems and surveillance cameras in the security field, the detection of defective
products on factory assembly lines, and automated driving and assisted driving of automobiles. For example, the Group isusing real-time image recognition technology to track cherry tomatoes on its proprietary test plot, specifically the type ofcherry tomato, the condition of fruit by degree of maturity, and the number of flower buds, and implementing measures to
put this technology to good use in making harvest and yield predictions as part of agricultural ICT.
The Group will continue to provide automotive telematic solutions that integrate high-valued-added communication
devices and software, as well as providing various M2M/IoT solutions.
Care Dynamics Limited is a provider of ASP systems to nursing care businesses. It has already deployed ASP systems
at more than 400 nursing care facilities. With the launch of new services such as support for the introduction of nursing carerobots since the previous fiscal year and the provision of nursing care ICT, Care Dynamics has evolved into acomprehensive nursing care business support enterprise.
As a service for assisting caregivers, we offer nursing care robots as a sales agency, distribute instructive leaflets ofcorporations, and services for creating advertisements. We also plan tours of nursing care facilities that have adopted the“Drive Care” OBD II solution for nursing care transportation vehicles.
Moreover, Care Dynamics continues to provide a replacement support service and to reassess electricity providers to
help nursing care facilities cut their electricity bills. The company also provides a service that introduces systems for saving
water and a service to propose ways to reduce insurance premiums. Apart from this, Care Dynamics refers customers to
consulting services for reducing various costs. Furthermore, Care Dynamics began offering network integration support3

services for nursing care facilities and support services for the introduction of IoT products at nursing care facilities.
As a result of the aforementioned reclassification of segments, the ICT, IoT, Device Business and the FinTech Systems
Development Business have been integrated to form the IoT-Related Business. In addition, net sales and operating income
decreased sharply following the conversion of NCXX Solutions Inc. into an equity-method affiliate.
As a result, segment sales for the nine months ended August 31, 2018 were ¥707 million, down 80.7% year on year. The
segment loss was ¥156 million, compared with a segment loss of ¥44 million in the same period in the previous fiscal year.
Internet Travel Business
Amid a flood of travel products, e-tabinet.com (“e-tabinet.com” ) and its subsidiaries provide services that meet thediverse and increasingly advanced needs of consumers. It has received many comments from highly satisfied customers.
Web travel Co., Ltd. (“Web travel”) has built an unparalleled reputation as Japan’s only Internet-based custom-itinerary
travel agency with its travel concierges, who are hand-picked travel consultants with extensive experience.
In 2015, we launched a website specifically for foreign tourists, and raised our profile in search engine results targeting
Asia as a part of efforts to promote travel services. Going forward, we remain committed to further improving our website
for foreign tourists, widening our focus to cover not only Asia but also Europe and the U.S.
Gloria Tours Inc. (“Gloria Tours”), which joined the Group in 2016, specializes in sending Paralympic athletes tovarious events and organizing numerous international para-sports tournaments. Interest in para-sports events has increased
every year ahead of the 2020 Tokyo Olympic and Paralympic Games. Going forward, Gloria Tours will continue toredouble efforts in para-sports in the run-up to the 2020 Tokyo Olympic and Paralympic Games. In addition, as part ofthese efforts, Gloria Tours is working to raise awareness and encourage widespread adoption of para-sports. To this end,
Gloria Tours supported the publication of a new para-sports journal titled “Parasports magazine” with help frompara-athlete associations and Jitsugyo no Nihon Sha, Ltd. With the cooperation of wheelchair manufacturers, Gloria Tours
has also been conducting school-organized events for elementary and junior high school students designed to increase theirunderstanding of the wheelchairs used by people with disabilities and caregivers. These events have been conducted since
July 2018 on a trial basis.
Meanwhile, with steady growth in the number of registered travel concierges, we are seeking talented personnel for
crowd sourcing operations as a means to leverage the unique skills of these concierges in areas other than travel. Morespecifically, we are taking measures to enhance a sense of belonging by outsourcing work that leverages the skills ofconcierges, such as supporting the travel agency services of Gloria Tours, helping in the information publishing business ofparent company FISCO Ltd., writing short comments for investor relations news at FISCO IR Ltd., and translating web
pages of interest to foreign tourists.
Furthermore, in February 2018, Web travel entered into a business alliance with Credit Saison Co., Ltd., thereby
establishing a direct link between the Saison Card homepage to the Group’s website for requesting estimates for travel
packages proposed by travel concierges. The travel concierge service provided by Web travel is presented as a credit card
function, not an advertisement, in Tentomushi, a magazine for UC Gold Card members published every month, andmagazines for Saison Gold Card and AMEX Gold Card members. Notably, this partnership came about only because Credit
Saison Co., Ltd. approached the Group with a request to form a business alliance, underscoring the high marks given to theGroup’s unique concierge service.
Furthermore, the travel concierges take the lead in planning Kodawaru Hito No Tabi (“Journeys for the Discerning
Traveler”) travel itineraries, an initiative that has continued for the past few years, coming up with a new travel itinerary
every month. In June 2018, the travel concierges unveiled “Attend UEFA Europe League Matches,” a travel package that
attracted considerable attention due to the 2018 FIFA World Cup. This itinerary emphasized Web travel’s ability to offer
unique travel experiences, in addition to ensuring safe and reliable travel arrangements. In July, the special travel itinerary
was “Canada by Rail,” a travel package featuring a comfortable journey by rail through the great outdoors. In August, theunique itinerary was called “Visit Shanghai and Old Canal Towns Nearby,” a travel package spotlighting Shanghai, a citythat has recently enjoyed a resurgence in popularity among travelers. We will continue to propose interesting Kodawaru
Hito no Tabi packages.
Additionally, in August 2018, Web travel entered into a business alliance with coconala Inc., the operator of Japan’slargest online “flea market” where “knowledge, skills and experience” are easily bought and sold. Under this alliance, Web
travel has registered its travel concierges in the travel and excursions category and is providing professional travel services
through this channel.
Amid a gradual recovery from terrorist attacks since the previous year, overseas travel business sales were ¥1,638
million, centered on mainstay to Europe, and domestic travel business sales were ¥135 million. In total for the Web travel4website and the e-tabinet.com website, the number of requests for travel estimates from customers declined 7% year on
year in the nine months ended August 31, 2018, remaining mostly unchanged from the previous year. The number of orders
received was up 17% year on year in the nine months ended August 31, 2018, and the gross profit margin held steady at
15%. Conditions in Europe have returned to a stable footing, leading to a gradual recovery in the number of orders received.
With an increasing number of travelers to Europe and the Americas, the number of orders received is expected to continue
following a similar trend going forward.
At Gloria Tours, the 2020 Tokyo Olympics and Paralympic Games are giving rise to a steadily increasing number ofoverseas group tours, and an increase in tours associated with yachting competitions and other sailing-association tours.
Consequently, expectations are high moving forward.
As a result, segment sales in the nine months ended August 31, 2018 were ¥1,764 million, up 9.0 % year on year. The
segment income was ¥17 million, compared with a segment loss of ¥6 million in the same period in the previous fiscal
year.
Brand Retail Platform Business
TITICACA, Co., Ltd. (“TITICACA”) had 94 stores as of the end of April 2018, reflecting the opening of 2 stores(Yokohama World Porters, Aeon Mall Sapporo Hassamu) and the closure of 1 store (Aeon Mall Nagoya Dome Mae) in thesix months ended May 31, 2018, after closing down 18 stores over the previous twelve-month period, compared with 111
stores as of the end of October 2016. Meanwhile, following on from the previous fiscal year, TITICACA pushed ahead withthe closure of unprofitable stores and structural reforms, including revisions to the personnel structure.
In marketing initiatives, TITICACA positioned the month of May as “Fair Trade Month” in the run-up to World Fair
Trade Day. The company worked closely with Japanese actress Alice Hirose to sell charity merchandise—T-shirts and totebags made of organic cotton grown in India. It also collected donations to support the financial independence of women in
the Philippines in conjunction with working to increase public recognition of fair trade. Measures to promote this campaign
at all TITICACA stores and the positive effects of distributing information through various publicity initiatives led togreater purchases than in the average year.
Versatile Inc. sells wine imported from overseas subsidiary MEC S.R.L. SOCIETA’ AGRICOLA, operates a foodbusiness, and has a global licensing business for CoSTUME NATIONAL. Versatile aims to grow this business by acquiring
trademarks in Europe and the United States to complement its existing trademark licensing business across Asia. In the ninemonths ended August 31, 2018, there were barely any sales. An operating loss was posted that represents SG&A expenses.
As a result, segment sales in the nine months ended August 31, 2018 were ¥4,983 million, up12.4 % year on year. The
segment loss was ¥154 million, compared with a segment income of ¥28 million in the same period in the previous fiscal
year.
Cryptocurrency and Blockchain Businesse frontier, Inc. (“e frontier”) and TITICACA are conducting investment operations based on trading using an AI-based
cryptocurrency trading system currently being developed by e frontier. In contrast to 2017, the cryptocurrency market has
seen some fairly prominent price declines in 2018. In the event of a drastic decrease in cryptocurrency prices, e frontier and
TITICACA execute stop-loss transactions as needed as part of their risk control measures. In this manner, e frontier and
TITICACA always conduct trading activities with an emphasis on funding efficiency. In addition, the companies are
considering investment operations aimed at accumulating small returns from margins while mitigating risk. In these andother ways, the two companies will establish an investment style that does not rely on the direction (upward or downward
movements) of market prices.
As a result, in the nine months ended August 31, 2018, segment sales were ¥1,338 million and the segment operating
income came to ¥1,335 million.

5(2) Description of Financial Position
AssetsTotal assets at August 31, 2018 decreased ¥337 million to ¥11,194 million compared with the end of the previous fiscal
year.
The main factors behind this change were decreases of ¥1,403 million in cash and deposits and ¥904 million in
investment securities, which were partly offset by increases of ¥1,000 million in short-term loans receivable and ¥905
million in trademark right.
Liabilities
Total liabilities were ¥1,356 million, a decrease of ¥5,650 million from a year earlier.
The main components of this change were decreases of ¥272 million in notes and accounts payable-trade, ¥965 million
in current portion of convertible bond-type bonds with share acquisition rights, and ¥156 million in interest-bearing debt*.
Net Assets
Total net assets increased ¥1,018 million, compared with the end of the previous fiscal year, to ¥5,544 million. The mainchanges included increases of ¥1,044 million in retained earnings.
* Interest-bearing debt is the sum of short-term loans payable, current portion of long-term loans payable and long-termloans payable(3) Description of Consolidated Earnings Forecasts and Other Forward-Looking Information
There have been no changes to the consolidated financial forecasts announced in the financial report (kessan tanshin)titled “Consolidated Financial Results for the Fiscal Year Ended November 30, 2017” published on January 19, 2018.

2. Notes in the Summary information(1) Changes in Significant Subsidiaries during the Period
1) Significant Changes in the Scope of Consolidation
The Company’s consolidated subsidiaries FISCO International (Cayman) Limited and FISCO International(Cayman) L.P. were excluded from the scope of consolidation following the completion of their liquidation.
2) Significant Changes in the Scope of Application of the Equity Method
NCXX Solutions Inc., which had previously been an equity-method affiliate, was excluded from the scope of
application of the equity method due to a share exchange conducted with CAICA Inc., an equity-method affiliate of theCompany.

(2) Application of Special Accounting Practices for Quarterly Consolidated Financial Statements
None6

3. Quarterly Consolidated Financial Statements and Key Notes(1) Consolidated Balance Sheets(Thousands of yen)
Fiscal 2017
(As of November 30, 2017)

3Q Fiscal 2018
(As of August 31, 2018)

2,529,595
599,269
1,070,793
245,736
3,632
15,899114,228
970,582
15,000416
314,951(53,097)
5,827,009

1,126,385
709,996
1,035,578
232,2858,316
057,192
468,332
1,015,000
1,804
875,477(51,915)
5,478,453

735,245758,00762,710397,006
6,300
3,964
469,982

56,080306,276
911,867
7,247
1,281,472

3,531,593
163,181396,140
628,537(219,321)
4,500,130
5,705,358
11,532,367

2,627,158
156,019464,030
640,287(211,049)
3,676,446
5,715,926
11,194,379

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Cryptocurrency
Accounts receivable - other
Advance payments - trade
Short-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Software
Goodwill
Trademark right
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term accounts receivable - other
Long-term loans receivable
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets7

(Thousands of yen)
Fiscal 2017
(As of November 30, 2017)
Liabilities
Current liabilities
Notes and accounts payable - trade
Short-term loans payable
Current portion of convertible bond-type bonds with shareacquisition rights
Current portion of long-term loans payable
Accounts payable - otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Asset retirement obligations
Deferred tax liabilities
Provision for bonuses
Provision for product warranties
Provision for sales returns
Provision for loss on store closing
Other
Total current liabilities
Noncurrent liabilities
Convertible bond-type bonds with share acquisition rights
Long-term loans payable
Net defined benefit liability
Asset retirement obligations
Deferred tax liabilities
Other
Total noncurrent liabilities
Total liabilities
Net Assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Total accumulated other comprehensive income
Subscription rights to shares
Non-controlling interests
Total net assets
Total liabilities and net assets

8

3Q Fiscal 2018
(As of August 31, 2018)

600,601
191,660

327,777
523,300

1,165,000

200,000

836,382
259,459
350,077
24,50916,601
268,271
28,7802,076
67,796
106,000
13,376
16,592
48,2503,995,438

619,306
167,045
137,508
119,983
26,404
488,300
2,273
2,070
45,47177,0007,274−
54,402
2,798,118−
1,637,685
29,708360,907
767,129
215,450
3,010,881
7,006,319

200,000
1,366,357
29,441
374,746732,236
149,2632,852,045
5,650,163

10,0002,770,501
935,697(86,159)
3,630,038

10,0002,770,954
1,980,005(70,094)
4,690,866

139,894(57)
95,981
235,818
22,211
637,979
4,526,047
11,532,367

54,180(469)
75,758129,469
26,359697,5215,544,216
11,194,379

(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Consolidated Statements of Income(Nine months ended August 31, 2018)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit (loss)
Non-operating income
Interest income
House rent income
Foreign exchange gains
Reversal of provision for loss on store closing
Other
Total non-operating income
Non-operating expenses
Interest expenses
Share of loss of entities accounted for using equity method
Commission fee
Loss on sales of cryptocurrency
Loss on valuation of cryptocurrency
Other
Total non-operating expenses
Ordinary profit (loss)
Extraordinary income
Gain on sales of shares of subsidiaries
Gain on sales of non-current assets
Reversal of allowance for doubtful accounts
Gain on change in equity
Gain on sales of investment securities
Gain on liquidation of subsidiaries
Other
Total extraordinary income
Extraordinary losses
Loss on retirement of noncurrent assets
Loss on valuation of investment securities
Loss on sales of shares of subsidiaries
Impairment loss
Other
Total extraordinary losses
Profit before income taxes
Income taxes
Income taxes - deferred
Total income taxes
ProfitProfit (loss) attributable to non-controlling interests
Profit attributable to owners of parent

3Q Fiscal 2017
(From December 1, 2016
to August 31, 2017)
9,745,344
6,146,486
3,598,858
3,840,164(241,306)

9(Thousands of yen)
3Q Fiscal 2018
(From December 1, 2017
to August 31, 2018)
8,826,992
4,259,224
4,567,768
3,724,900
842,867

11,9194,293
49,549−20,446
86,20820,404−4,844
13,002
21,47359,72355,72339,212
49,196−−27,807
171,939(327,037)

32,533
12,201
15,343201,021
192,004
39,016492,121410,470888,152553
2,968
25,6052,974,878
3,851
3,074
3,899,084−
31−
207,547
632,741−−
840,320

10,639−450
1,805,944
4,515
1,821,549
1,750,497
427,408(29,184)
398,224
1,352,272(51,402)
1,403,675

8,903
7,163
499
5,353
−
21,921
1,228,870
122,595
2,112
124,708
1,104,161
59,853
1,044,308

Consolidated Statements of Comprehensive Income(Nine months ended August 31, 2018)

ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Share of other comprehensive income of entities accounted forusing equity method
Total other comprehensive income
Total comprehensive income
Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

3Q Fiscal 2017
(From December 1, 2016
to August 31, 2017)
1,352,272

10(Thousands of yen)
3Q Fiscal 2018
(From December 1, 2017
to August 31, 2018)
1,104,161

86,651(1,165)34,969(86,125)
(636)
(567)

(8)
120,446
1,472,719(9,017)(96,347)
1,007,814

1,523,758(51,038)

948,273
59,541

(3) Notes to Consolidated Financial Statements(Note Concerning Going Concern Assumption)
None(Notes Regarding Significant Change in Shareholders’ Equity)
None

11

(Segment Information)
I Nine months of the fiscal year ended November 30, 2017 (From December 1, 2016 to August 31, 2017)
1. Information on net sales, profit and loss by reportable segment(Thousands of yen)
Reportable segment
IoT-Related
Business

Internet
TravelBusiness

Brand Retail
PlatformBusiness

3,672,443

1,618,922

4,434,938

15,8691,820

3,688,313(44,748)

Adjustments

Amounts in the
consolidated
financialstatements

9,745,344−

9,745,344−

17,815(17,815)−−

19,0409,763,160(17,815)

9,745,344−(73,344)(96,771)(144,534)(241,306)

Cryptocurrency
and Blockchain
Business

Other

Total

−

19,040125−

1,620,743

4,435,064(6,798)28,120Net sales
Sales to third
partiesIntersegment sales
and transfers
Total
Segment profit(loss)

Note: Segment profit (loss) is adjusted to operating loss in the consolidated statements of income. Adjustments for segment
profit mainly represent general and administration expenses that are not allocated to reportable segments.
2. Information on impairment loss on non-current assets and goodwill by reportable segment(Significant impairment loss on noncurrent assets)
In the IoT-Related Business, the Group recorded impairment loss on goodwill of ¥204 million. In the Brand Retail
Platform Business, the Group recorded impairment loss on non-current assets of ¥7 million, impairment loss on trademark
right of ¥734 million, and impairment loss on goodwill of ¥750 million.

II Nine months of the fiscal year ending November 30, 2018 (From December 1, 2017 to August 31, 2018)
1. Information on net sales, profit and loss by reportable segment(Thousands of yen)
Reportable segment
Adjustments

Amounts in the
consolidated
financialstatements

8,826,992−

8,826,992−

16,561(16,561)−

1,338,118

33,0908,843,554(16,561)

8,826,992

1,335,513(52,159)

990,617(147,749)

842,867

IoT-Related
Business

Internet
TravelBusiness

Brand Retail
PlatformBusiness

Cryptocurrency
and Blockchain
Business

Other

Total

707,678

1,764,701

4,983,403

1,338,118

33,09014,722

1,196

642

−

722,400

1,765,897

4,984,046(156,072)(17,520)(154,185)

Net sales
Sales to third
partiesIntersegment sales
and transfers
Total
Segment profit(loss)

Note: Segment profit (loss) is adjusted to operating profit in the consolidated statements of income. Adjustments forsegment profit mainly represent general and administration expenses that are not allocated to reportable segments.

122. Note on Change in Reportable Segments
In the three months ended February 28, 2018, the Company changed its previous six segments, specifically the ICT, IoT,
Device Business, the FinTech System Development Business, the Internet Travel Business, the Brand Retail Platform
Business, the Information Service Consulting Business, and Other, to the five segments comprising the IoT-Related
Business, Internet Travel Business, Brand Retail Platform Business, Cryptocurrency and Blockchain Business, and Other.
The reasons for this change are outlined below.
The Company has integrated the FinTech System Development Business, which had previously been disclosed as areportable segment, and the ICT, IoT, Device Business, which had also been disclosed as a reportable segment, into a single
segment and has renamed the segment as the IoT-Related Business. In conjunction with the reshaping of the management
structure, this change was made based on the similar methods for determining resource allocations and assessing businessresults in the relevant businesses.
In addition, the Company has renamed the cryptocurrency-related business, which had previously been included in
Other in the previous fiscal year, as the Cryptocurrency and Blockchain Business, and has added it to the reportablesegments. This change was made due to the increased significance of this business in terms of business volume.
Moreover, the Company has integrated the wine business, which had previously been included in Other in the previous
fiscal year, into the Brand Retail Platform Business. In conjunction with the reshaping of the management structure, thischange was made based on the similar methods for determining resource allocations and assessing business results in therelevant businesses.
Furthermore, the Company has excluded the Information Service Consulting Business, which had previously been
disclosed as a reportable segment, and reclassified it as Other. This change was made due to the diminished importance of
this business in terms of business volume owing mainly to the downsizing of business operations.
Segment information for the nine months ended August 31, 2017 has been prepared and disclosed based on thereportable segments adopted after the aforementioned changes.

13