July 13, 2018

Consolidated Financial Results
for the Six Months Ended May 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:
July 13, 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 Six Months Ended May 31, 2018
(From December 1, 2017 to May 31, 2018)(1) Consolidated Operating Results
Net sales
Millions of yen

Operating income%

Millions of yen

Six months ended
6,009
(8.4)
835
May 31, 2018
Six months ended
6,563
19.4
(236)
May 31, 2017
Note:
Comprehensive income
Six months ended May 31, 2018: ¥1,064 million [(42.3)%]
Six months ended May 31, 2017: ¥1,846 million [-%]
Earnings per
share
Six months ended
May 31, 2018
Six months ended
May 31, 2017

(Percentages indicate year-on-year changes.)
Profit attributable toOrdinary income
owners of parent%

Millions of yen%

Millions of yen

%

-

411

-

1,020

(41.9)

-

(296)

-

1,754

-

Diluted earnings
per share

Yen

Yen

68.53

67.43

117.95106.62(2) Consolidated Financial Position
Total assets
As ofMillions of yen
11,463
May 31, 2018
11,532
November 30, 2017
Reference: Equity
As of May 31, 2018: ¥4,894 million
As of November 30, 2017: ¥3,865 million

Net assets

Equity ratio

Net assets per share

Millions of yen

%

5,591
4,526

42.7
33.5

Yen

328.51259.74

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

Fiscal year ending
November 30, 2018

Operating income(Percentages indicate year-on-year changes.)
Profit attributable
Earnings
Ordinary income
to owners ofper share
parentMillionsof yen%Millionsof yen%Millionsof yen%Millionsof yen%Yen

11,398

(6.6)

743

-

698

-

563

(37.6)

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 May 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 May 31, 2018
130,034 shares
As of November 30, 2017
146,473 sharesc. Average number of shares (Quarterly cumulative total)
For the six months ended May 31, 2018
14,887,972 shares
For the six months ended May 31, 201714,875,254 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…………………..……………………………………………………….…

7(1) Changes in Significant Subsidiaries during the Period.…………………………….………………………

7(2) Application of Special Accounting Practices for Quarterly Consolidated Financial Statements…..............

7(3) Changes in Accounting Policies, Changes in Accounting Estimates, and Restatement of Revisions……...

7(4) Additional Information………………………………………………………………………………………

7

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

8(1) Consolidated Balance Sheets………………………………………………………………………………..

8(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income ……….…..

10

Consolidated Statements of Income(Six months ended May 31, 2018) ........………………………………………….….….….….….….….…. 10
Consolidated Statements of Comprehensive Income(Six months ended May 31, 2018) ......………………………………………….….….….….….….…........

11(3) Consolidated Cash Flow Statements..………………………………………..………..…..………............... 12(4) Notes to Consolidated Financial Statements..………………………………………..………..…..………... 14(Note Concerning Going Concern Assumption) …………………………………………………………… 14(Notes Regarding Significant Change in Shareholders’ Equity) …………………………………………… 14(Segment Information) .………………………………………………………………..…………………… 15

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 six 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 April 2018 the Group procured funds of ¥200 million by issuing the 7th unsecured
convertible bond-type bonds with share acquisition rights through a third-party allotment. These funds were raised toundertake basic research and development to provide AI solutions and distributed applications using blockchain technology,
as well as to develop agricultural ICT systems.
Looking at the agricultural ICT business (NCXX FARM), in the “sixth-order industrialization business” initiatives, theGroup expanded sales of ground cherries, which it began growing on a full scale in the current fiscal year, in addition toincreasing sales of its existing cherry tomatoes. Moreover, the Group began limited sales of strawberries (Tochiotome),
which it is growing on a trial basis, at certain retailers in Hanamaki City and Tokyo. In processed food products, the Group
commenced sales of tomato juice (180 ml) available in a colorful selection of four different colors, specifically red, green,
purple and yellow, in March 2018. The Group sold these products in the Hanamaki Product Fair held in March at Ginga
Plaza, a shop selling regional specialties from Iwate Prefecture in Tokyo. The products were well received by customers.
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, public recognition of the Group’s agricultural ICT
business has been increasing as a result of several prominent media appearances. Notably, the agricultural ICT business wasfeatured in the March 7 edition of Nosai Newspaper Iwate. The Group’s agricultural business was also presented in “Togin
Special Furusato Yume Map,” a TV program produced by Television Iwate Corp., and was spotlighted as an example ofsmart agriculture on May 23 in “Prime News,” a news program produced by Iwate Menkoi Television.
Furthermore, in March, the Group’s business model was featured in the “Brochure on Promoting Widespread Adoption
and Awareness of Intellectual Property in the Agriculture Field,” a brochure produced by the Ministry of Agriculture,
Forestry and Fisheries. The purpose of this brochure is to promote widespread adoption and awareness of the value and thesignificance of intellectual property, such as agricultural production technology, expertise and other resources, among
farmers and other members of the agriculture community.
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 increased sharply
from the same period of the previous fiscal year. This increase was 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 accountusing an AI trading system in the first quarter.
In addition, the Group transferred a portion of its shares of Terilogy Co., Ltd. (Listing: 3356 TSE JASDAQ;
Headquarters: Chiyoda-ku, Tokyo; Chairman: Takao Tsubuki) in March 2018, and recorded extraordinary income on thetransfer of shares.
As a result of these efforts, consolidated net sales were ¥6,009 million, down 8.4% year on year. Operating income was¥835 million, compared to an operating loss of ¥236 million in the same period of the previous fiscal year. Ordinary income
was ¥411 million, compared to an ordinary loss of ¥296 million. Income before income taxes was ¥1,082 million, down2

44.1% year on year. Profit attributable to owners of parent was ¥1,020 million, down 41.9% year on year. EBITDA, areference indicator reflecting the amortization of goodwill associated with the conversion of companies into subsidiaries
was ¥934 million, compared to ¥75 million in the same period of the previous fiscal year.
EBITDA = operating income + depreciation + amortization of goodwill (selling, general and administrative expenses)
In the six months ended May 31, 2018, the Group has already posted operating income and profit attributable to ownersof the parent that exceed its consolidated financial forecasts for the fiscal year ending November 30, 2018. However, theGroup is still closely reviewing its financial forecasts for the full fiscal year. If it becomes necessary to revise the financial
forecasts after this review, the Group will promptly disclose any revisions to its financial forecasts.
Business performance by segment in the six months ended May 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. UX302NC-R is scheduled for launch in August 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.
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 (“Care Dynamics”) is a provider of ASP systems to nursing care businesses. It has alreadydeployed ASP systems at more than 400 nursing care facilities. With the launch of new services such as support for the
introduction of nursing care robots since the previous fiscal year and the provision of nursing care ICT, Care Dynamics has
evolved into a comprehensive 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, we provide a replacement support service and reassess electricity providers to help nursing care facilities cut
their electricity bills. We also offer a service that introduces systems for saving water. Additionally, we have launched a
new service to present proposals for reducing insurance premiums.
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 six months ended May 31, 2018 were ¥479 million, down 83.4% year on year. The
segment loss was ¥128 million, compared with a segment loss of ¥15 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 that boasts a network of 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 October 2016, specializes in sending Paralympic athletes
to various events and organizing numerous international para-sports tournaments. Interest in para-sports events has

3increased every year ahead of the 2020 Tokyo Olympic and Paralympic Games. This year, Gloria Tours provided travel
agency services in the sponsor category for Paralympic athletes sent to the PyeongChang Paralympics from March 9 to 18,
thereby assisting with the travel needs of the sponsors as well as athletes and their family members. Going forward, Gloria
Tours will continue to redouble efforts in para-sports in the run-up to the 2020 Tokyo Olympic and Paralympic Games. In
addition, as part of these efforts, Gloria Tours is working to raise awareness and encourage widespread adoption ofpara-sports. To this end, Gloria Tours supported the publication of a new para-sports journal with help from para-athlete
associations and Jitsugyo no Nihon Sha, Ltd.
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 helping in the information publishing business of 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.
Amid a gradual recovery from terrorist attacks since the previous year, overseas travel business sales were ¥910 million,
centered on mainstay honeymoon packages to Europe and Australia, and domestic travel business sales were ¥81 million.
In total for the Web travel website and the e-tabinet.com website, the number of requests for travel estimates from
customers increased 8% in the six months ended May 31, 2018, indicating a solid recovery in demand for travel to Europe.
The number of orders received was up 25% year on year in the six months ended May 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 oforders received, with a similar trend expected to continue in step with an increasing number of travelers to Europe and theAmericas.
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 six months ended May 31, 2018 were ¥991 million, up 2.6% year on year. The segment
loss was ¥10 million, compared with a segment loss of ¥11 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 proactively implemented tie-up campaigns with well-known brands. It worked tosell campaign merchandise tied to outdoor brands such as Yak Pak and Wild Things, as well as Coco, an animated film
produced by Disney, thereby striving to increase market recognition, win new customers and encourage existing customers
to visit stores and purchase products. Notably, in the tie-up campaign with Coco, TITICACA successfully distributed
information to a broad range of consumers through publicity initiatives and external social media notifications, in addition
to achieving steady sales of campaign merchandise.
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 six
months ended May 31, 2018, there were barely any sales. An operating loss was posted that represents SG&A expenses.
As a result, segment sales in the six months ended May 31, 2018 were ¥3,213 million, up 18.9% year on year. The
segment loss was ¥208 million, compared with ¥56 million in the same period of the previous fiscal year.

4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 the event of a drastic decrease in cryptocurrency
prices, e frontier and TITICACA execute stop-loss transactions as part of its risk control measures. In this manner, efrontier and TITICACA always conduct trading activities with an emphasis on funding efficiency. Moreover, the twocompanies conduct investment operations aimed at generating returns from margins. In these and other ways, they are
establishing an investment style that does not rely on the direction (upward or downward movements) of market prices.
As a result, in the six months ended May 31, 2018, segment sales were ¥1,296 million and segment operating income
came to ¥1,296 million.

5(2) Description of Financial Position
1) Assets, Liabilities, and Net Assets
AssetsTotal assets at May 31, 2018 decreased ¥68 million to ¥11,463 million compared with the end of the previous fiscal
year.
The main factors behind this change comprised a decrease of ¥1,561 million in cash and deposits, a decrease of ¥571
million in advance payments - trade, an increase of ¥1,000 million in short-term loans receivable, and an increase of ¥929
million in trademark right.
Liabilities
Total liabilities were ¥5,871 million, a decrease of ¥1,134 million from a year earlier.
The main components of this change were decreases of ¥965 million in current portion of convertible bond-type bonds
with share acquisition rights and ¥247 million in interest-bearing debt*, an increase of ¥200 million in convertiblebond-type bonds with share acquisition rights, and a decrease of ¥194 million in accrued expenses.
Net Assets
Total net assets increased ¥1,065 million, compared with the end of the previous fiscal year, to ¥5,591 million. The
main changes included increases of ¥1,020 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 payable2) Cash Flows
Cash and cash equivalents (“cash”) at May 31, 2018 totaled ¥962 million, a decrease of ¥1,567 million from theprevious fiscal year-end.
Cash flows during the six months ended May 31, 2018, and analysis of the main components are as follows:
Cash Flows from Operating Activities
Net cash used in operating activities was ¥136 million, compared with ¥301 million in the previous fiscal year.
This was mainly due to an increase in notes and accounts receivable-trade of ¥1,028 million, a gain on sales ofinvestment securities of ¥484 million, an increase in deposits paid of ¥411 million, and a gain on change in equity of ¥207
million. These cash outflows were partly offset by profit before income taxes of ¥1,082 million and a decrease incryptocurrency of ¥602 million.
Cash Flows from Investing Activities
Net cash used in investing activities was ¥463 million, compared with net cash provided by investing activities of ¥1,954
million in the same period of the previous fiscal year.
The main uses of cash were purchase of cryptocurrency of ¥3,112 million, purchase of intangible assets of ¥334 million,
payments of long-term loans receivable of ¥408 million, purchase of property, plant and equipment of ¥87 million, andpurchase of investment securities of ¥44 million. The main sources of cash were proceeds from the sale of cryptocurrencyof ¥1,961 million, proceeds from sales of investment securities of ¥1,247 million, and collection of long-term loans
receivable of ¥340 million.
Cash Flows from Financing Activities
Net cash used in financing activities was ¥964 million, compared with ¥897 million in the same period of the previous
fiscal year.
This was mainly due to the repayment of long-term loans payable of ¥695 million, and the redemption of bonds of ¥965
million, the main factors reducing cash. These cash outflows were partly offset by a net increase in short-term loans
payable of ¥125 million, proceeds from long-term loans payable of ¥372 million, and proceeds from issuance of bonds withshare acquisition rights of ¥200 million, the main factors increasing cash.

(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.

6

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
None(3) Changes in Accounting Policies, Changes in Accounting Estimates, and Restatement of Revisions
None(4) Additional Information
None

7

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

8

2Q Fiscal 2018
(As of May 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

968,528
627,845
1,166,431
238,149
8,778
170,989
225,622399,543
1,015,000
2,126
708,787(50,936)
5,480,867

735,245

761,023

62,710397,006
6,300
3,964
469,982

59,977
318,936
935,869
7,228
1,322,010

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

2,871,110
154,539
462,430
620,978(208,969)
3,900,089
5,983,123
11,463,990

(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

9

2Q Fiscal 2018
(As of May 31, 2018)

600,601
191,660

520,835
267,000

1,165,000
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

200,000
661,279
325,768
155,981
28,97754,352
380,945
16,211
2,070
68,68285,0007,090
13,00268,5162,855,713−
1,637,685
29,708360,907
767,129
215,450
3,010,881
7,006,319

200,000
1,489,646
28,099360,758
774,085
163,695
3,016,285
5,871,999

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

10,0002,769,841
1,955,939(76,865)4,658,916

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

159,951(739)
76,797
236,009
24,869672,196
5,591,991
11,463,990

(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Consolidated Statements of Income(Six months ended May 31, 2018)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating loss (profit)
Non-operating income
Interest income
House rent income
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expenses
Share of loss of entities accounted for using equity method
Foreign exchange losses
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
Total extraordinary income
Extraordinary losses
Loss on retirement of property, plant and equipment
Loss on sales of property, plant and equipment
Loss on valuation of investment securities
Impairment loss
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

2Q Fiscal 2017
(From December 1, 2016
to May 31, 2017)
6,563,785
4,195,091
2,368,693
2,605,375(236,681)

10(Thousands of yen)
2Q Fiscal 2018
(From December 1, 2017
to May 31, 2018)
6,009,732
2,684,002
3,325,730
2,489,913
835,817

9,553
3,134
37,645
10,886
61,22013,169−−17,22130,39141,05023,802−
49,250−−
7,002
121,105(296,567)

21,926
3,732
5,089
14,303201,021
192,004
16,453454,530
411,677

888,152
553
2,968
7,499
1,327,902
4,889
2,231,966−
31−
207,547
484,025－
691,604

8
450
−
−
458
1,934,940
236,461
1,574
238,036
1,696,904(57,642)
1,754,547

8,903
−
7,011
5,353
21,2691,082,013
22,6904,329
27,019
1,054,993
34,7501,020,242

Consolidated Statements of Comprehensive Income(Six months ended May 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

2Q Fiscal 2017
(From December 1, 2016
to May 31, 2017)
1,696,904

11(Thousands of yen)
2Q Fiscal 2018
(From December 1, 2017
to May 31, 2018)
1,054,993

123,689(1,806)27,3691,947(1,042)450(6)149,245
1,846,149

8,616
9,971
1,064,964

1,903,429(57,279)

1,030,747
34,216

(3) Consolidated Cash Flow Statements
2Q Fiscal 2017
(From December 1, 2016
to May 31, 2017)(Thousands of yen)
2Q Fiscal 2018
(From December 1, 2017
to May 31, 2018)

1,934,940
112,179
199,638
123,919(21,000)(9,553)41,05086,334−(12,542)(70,461)−(1,327,902)
8−(7,499)−−44,734(105,651)(116,662)−(117,556)(91,496)(888,152)(28,059)(253,734)
7,906(36,309)(19,522)(301,660)

1,082,013
70,472
28,070(12,513)−(14,185)
21,926(1,028,612)
602,611(93,291)(79,591)
7,011(484,025)
8,903
5,353
(207,547)
201,021
192,004
112,673(39,889)
111,141(411,182)
37,660(215,555)−(8,287)(113,816)
13,935(33,694)(3,338)(136,914)

Cash flows from operating activities
Profit before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Decrease in provision for product warranties
Interest and dividend income
Interest expenses
Decrease (increase) in notes and accounts receivable - trade
Decrease in cryptocurrency
Increase in inventories
Decrease in notes and accounts payable – trade
Loss on valuation of investment securities
Gain on sales of investment securities
Loss on retirement of noncurrent assets
Impairment loss
Gain on change in equity
Loss on sales of cryptocurrency
Loss on valuation of cryptocurrency
Increase in advances received
Increase in advance payments
Decrease (increase) in accounts receivable – other
Increase in deposits paid
Increase (decrease) in accounts payable – other
Decrease in accrued expenses
Gain on sales of shares of subsidiaries
Other, net
SubtotalInterest and dividend income received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities

12(Thousands of yen)
2Q Fiscal 2017
(From December 1, 2016
to May 31, 2017)

2Q Fiscal 2018
(From December 1, 2017
to May 31, 2018)−−(35,544)(738,727)
2,559,581(26,471)
3,243(51,446)(296,180)
610,278(11,222)87,691(20,000)
280,000(509,642)(3,112,542)
1,961,815(87,860)(44,542)
1,247,000(334,993)−(16,727)(408,000)
340,000(25,169)
27,075−−−(490,371)−

577,075−

15,816
1,954,081(9,264)(463,208)(135,300)
44,504(1,038,058)−−

125,340
372,800(695,090)(965,000)
200,000

244,999−(12,982)−−(4,011)

−

2,460

(847)
(897,684)(18,870)
735,865
1,881,667
2,617,532(794)(964,297)(2,647)(1,567,067)
2,529,595
962,528

Cash flows from investing activities
Purchase of cryptocurrency
Proceeds from sales of cryptocurrency
Purchase of property, plant and equipment
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of intangible assets
Proceeds from sales of intangible assets
Payments for asset retirement obligations
Payments of long-term loans receivableCollection of long-term loans receivable
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payments of short-term loans receivableCollection of short-term loans receivable
Provisional payments for distribution of dividends
Purchase of shares of subsidiaries resulting in change in scopeof consolidation
Proceeds from sales of shares of subsidiaries resulting inchange in scope of consolidation
Other, net
Net cash provided by investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Redemption of bonds
Proceeds from issuance of bonds with share acquisition rights
Proceeds from issuance of shares resulting from exercise ofsubscription rights to shares
Purchase of treasury stock
Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation
Proceeds from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation
Other
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the fiscal year
Cash and cash equivalents at end of the fiscal year13(4) Notes to Consolidated Financial Statements(Note Concerning Going Concern Assumption)
None(Notes Regarding Significant Change in Shareholders’ Equity)
None

14

(Segment Information)
I Six months of the fiscal year ended November 30, 2017 (From December 1, 2016 to May 31, 2017)
1. Information on net sales, profit and loss by reportable segment(Thousands of yen)
Reportable segment
Adjustments

Amounts in the
consolidated
financialstatements

6,563,785−

6,563,785−

36,344(36,344)

−

−

8,870

6,600,130(36,344)6,563,785−(56,536)(140,329)(96,352)(236,681)

Cryptocurrency
and Blockchain
Business

IoT-Related
Business

Internet
TravelBusiness

Brand Retail
PlatformBusiness

2,885,664

965,8812,703,368

−

8,870

35,778

381

184

−

2,921,443

966,263

2,703,552(15,061)(11,960)(56,770)

Other

Total

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

Amounts in the
consolidated
financialstatements

6,009,732−

6,009,732−

10,658(10,658)−

1,296,921

28,5086,020,391(10,658)

6,009,732

1,296,921(32,231)917,289(81,472)

835,817

IoT-Related
Business

Internet
TravelBusiness

Brand Retail
PlatformBusiness

Cryptocurrency
and Blockchain
Business

Other

Total

479,418

991,342

3,213,542

1,296,921

28,508

9,902

639

117

−

489,320

991,981

3,213,659(128,591)(10,293)(208,515)

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.

15

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 six months ended May 31, 2017 has been prepared and disclosed based on the reportablesegments adopted after the aforementioned changes.

16