INTEGR ATED R EPORT 2019

NCXX Group Inc.

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

About NCXX Group

Strategy

CONTENTS
Sustainability

Note on Forward-Looking Statements
This report contains information that includes forwardlooking statements. These statements are preparedbased on information available to management as of the
preparation date of the report. Accordingly, actual con­ditions may differ significantly from such statements ordetails implied therein based on risks and ­uncertainties
associated with changes in economic conditions andmarkets and other factors.

Editorial Policy
This integrated report has been issued to help stake­holders develop a deeper understanding of the NCXXGroup’s activities to achieve sustainable growth.

Financial Section

Financial Section

02 Corporate Philosophy /Management Vision
03 Overall Image of the NCXX Group04 Business Domains
05 Value Creation Process
07 Financial Highlights
08 Core Performance Indicators

10 Top Message
14 Feature: Device Business Initiatives
for 5G Next-Generation
Communications
16 Introducing Our Businesses

Corporate Data

User Guide
This PDF offers various functions to make it easier to use
and to find information.

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23 Corporate Governance
26 Commitment to SDGs
28 CSR Activities through Business

31 Analysis of Operating Resultsand Financial Position
38 Consolidated Financial Statements
43 Notes
75 Consolidated Supplementary
Schedules

Index
About NCXX Group

Corporate Data

77 Company Overview / History
78 Shareholder Information /Shareholder Memo

Strategy

Click on the items on the contents
page to move directly to that page.

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Corporate Provide new value to people based on telecommunications
Philosophy: technology, thereby contributing to the development ofa more efficient and comfortable societyManagement Connecting, Creating, and Growing:
Vision:The Company will create new value
and contribute to society by integrating
the Group’s accumulated originaltechnologies and knowledge, as wellas its outstanding human resources
NCXX Group Inc.

https://ncxxgroup.co.jp/en

NCXX Inc.

https://www.ncxx.co.jp/

e frontier, Inc.

https://www.e-frontier.com**Care Dynamics Limited

http://www.care-dynamics.jp/

e-tabinet.com

https://www.e-tabinet.com/

Gloria Tours Inc.

https://www.gloria-tours.jp**

TITICACA, Co. Ltd.

http://www.titicaca.jp/english/* NCXX Solutions Inc. and CAICA Inc. are alliance partners.
** Japanese only

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INTEGRATED REPORT 2019
Sustainability

Strategy

About NCXX Group

Financial Section

Corporate Data

Overall Image of
the NCXX GroupIoT Solutions

System Solutions

Internet Travel

The Internet of Things (IoT) refers to asystem that automates various controls
by enabling “things” such as sensors anddevices connected through the Internet to
exchange data with each other. By equipping each of these devices with a wirelesscommunication function, we propose avariety of solutions that realize greater
operational efficiency.

We provide integrated one-stop services
in the manufacturing, finance, distribution,and corporate and public sectors. Services
cover all aspects from commercialization
using blockchain technology and consulting to system development businesses,
including design, ­construction, operation,and maintenance, as well as infrastructure construction such as n
­ etworks anddatabases.

For customers who wish to take a oneof-a-kind trip, not being satisfied withregular travel tours and wanting to maketrips that do not appear in guidebooks,
our travel consultants, known as travel­concierges, propose individually­customized trips.

Total Nursing Care BusinessSupport Service
We will solve various problems faced bynursing care providers, including throughthe provision of Care Online, a businesssupport system for nursing care providers,
and the proposal, development and salesof nursing care robots and nursing care
ICT systems.

Brand Retail
Platform Business
The brand retail platform business handles
brand licenses (trademark rights) andretail businesses that sell miscellaneous
goods and apparel. This business provides a service that can recommend
items tailored to consumers’ tastes aswell as being used in product development by converting information such as
sales and web data into big data, andcombining it with AI.

Robot Business

Agricultural ICT BusinessWe aim to provide new value in a variety
of fields, including nursing care, by­combining robot and communication
technologies and creating a new kind ofrobot, in the broad sense of the word,that is connected to a network, rather
than the narrow sense of “robot” meaning
an independent device (equipment)­operated autonomously.

We aim to realize an agricultural business
in which anyone can succeed by sellingsafe, secure and delicious healthy vegetables grown through digitally managed
soil chemistry, and by providing cultivation technologies for producers.

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INTEGRATED REPORT 2019
About NCXX Group

Sustainability

Strategy

Business Domains

Financial Section

Corporate Data

Other

IoT-Related Business¥35 million¥950 million

Cryptocurrency andBlockchain Business¥1,326 million
Brand Retail Platform Business¥6,445 million

Net sales¥11,125
millionInternet Travel Business¥2,367 million

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Value Creation Process· Dramatic development of­communication infrastructure· Increasing capacity of hardware· Explosive popularization ofmobile terminals

Making use of infor­
mation and communi­
cation technologies· Responding to risks including data leaks, tamperingand loss· Recommends items tailoredto consumer tastes and isused in productdevelopment· Transformation of existing­financial services through thedevelopment of AI· Diffusion of new financial­services by FinTech· Utilization of blockchain
technology

Changing SocietyManagement
Strategy

Construction of­financial systems· Creating innovative financial ­services that make fulluse of resources in financial
systems construction
expertise· Optimization of costs

Social Issues to be
Addressed

Diversity & Inclusion· Climate change risk·W orsening environmental
conditions· Increasing awareness of the needfor food safety·A n aging society with a fallingbirthrate eclining regional vitality·D

Conservation of the­environment and food· Effective use of land·C reating attractive businessmodels in agriculture·C reation of “Safe, Secure,
Ecological” crops andtechnologies· Shortage of nursing carestaff
· Improvement of living­conditions of growers andworkers·S upport for domestic
regions and developing
countries

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INTEGRATED REPORT 2019
Sustainability

Strategy

About NCXX Group

Financial Section

Corporate Data

Value Creation Process

SystemSolutionsImprovementof security

Internet
TravelIoT
Solutions

Business Activities
Agricultural
ICT Business(NCXX FARM)

Realizationof a safe
and securesociety
Brand Retail
PlatformBusiness

Provision of­innovative
financialservices

Prevention of
infrastructure
accidents

Reduction offuel costs

Values to be Created
Resolution of
low birthrate,
aging society
issuesLessening ofenvironmental
burdens

Robot
Business

Total Nursing
Care BusinessSupport Service

Revitalizationof regions

Reduction ofnursing careburdenRealization ofhigh-quality
services

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INTEGRATED REPORT 2019
Sustainability

Strategy

About NCXX Group

Financial Section

Corporate Data

Financial Highlights
Net sales¥11,125 million¥419 million(Millions of yen)

(Millions of yen)

500

419

1,000

0

–47

0

9,000

(Millions of yen)

250

250

12,000¥–473 million¥–47 million(Millions of yen)

15,000

Profit (loss) attributable to owners of parent

Ordinary loss

Operating profit (loss)

–250

500

902

–250
6,000

12,198

11,125

3,000
0

–500

–500

–914

Year ended
Nov. 2018–1,000Comprehensive income (loss)¥–481 million

0

–750

–750

Year ended
Nov. 2017–940

Year ended
Nov. 2017

Year ended
Nov. 2018–1,000–473
Year ended
Nov. 2017

Year ended
Nov. 2018

Total assets

Net assets¥3,953 million–500¥9,302 million¥–31.82(Millions of yen)

(Millions of yen)

(Yen)

1,500

5,000

12,000

80.00

4,000

9,000
40.00

3,000
500

1,022
2,000

0

Year ended
Nov. 2018

Net income (loss) per share(Millions of yen)

1,000Year ended
Nov. 2017

60.68
6,000

4,526

11,532

3,953

9,302

0.00

3,000

1,000

–31.82–481–500

Year ended
Nov. 2017

Year ended
Nov. 20180

As ofNov. 2017

As of
Nov. 20180

As ofNov. 2017

As of
Nov. 2018–40.00Year ended
Nov. 2017

Year ended
Nov. 2018

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Core Performance Indicators
NCXX Group Inc. and consolidated subsidiaries(Thousands of yen)

Net sales
Ordinary income (loss)
Profit (loss) attributable to owners of parent
Comprehensive income (loss)
Net assets
Total assets
Net assets per share (Yen)
Net income (loss) per share (Yen)
Diluted net income per share (Yen)
Equity ratio (%)
Return on equity (%)
Price-earnings ratio (Times)
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents
Number of employees(Average number of temporary employees)

Terms

31st term

32nd term

33rd term

34th term

35th term

Fiscal year-end

November 2014

November 2015

November 2016

November 2017

November 2018

6,375,427
692,055

7,416,907(810,412)

12,231,134(770,026)

12,198,921(940,251)

11,125,302(47,323)

630,311(45,483)(1,068,435)

902,592(473,969)

654,41233,876(930,013)

1,022,017(481,499)

3,551,077
6,979,008
276.14
54.07
51.60
48.7
21.5
9.3
1,448,650(851,134)
2,072,665
3,930,484
235(–)

4,726,400
14,303,095
308.98(3.14)
–
32.0
(1.1)
–
(1,090,008)(844,920)
829,467
2,905,141712(–)

3,800,538
13,459,907
241.60(71.77)–26.7(26.1)–
341,581
686,866(2,047,010)
1,881,667
873
(423)

4,526,047
11,532,367
259.74
60.68
–
33.5
24.2
6.5
(1,388,039)
3,929,054(1,851,972)
2,529,595
272
(286)

3,953,120
9,302,807
216.02(31.82)–
34.6(13.4)–
981,015(1,099,133)(1,389,394)
1,022,774
303
(345)

Notes: 1.	Consumption taxes are not included in net sales.
2.	Although there were potentially dilutive shares for the 32nd term, 33rd term and 35th term, the Company recorded a net loss per share. There were no potentially dilutive shares for the 34th term. Accordingly, diluted net income per share is notdisclosed for these terms.
3.	The price-earnings ratio is not disclosed for the 32nd term, 33rd term and 35th term, because the Company recorded a net loss per share for those terms.
4.	The average number of temporary employees has not been disclosed as the number from the 31st term to the 32nd term is less than one-tenth of the number of employees.

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

St rat egy

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Top Message
Greeting
I am pleased to extend this greeting to all our shareholders and other stakeholders as we deliver
the NCXX Group’s integrated report.
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 be connected to the Internet, and the ability tocollect and retain big data through IoT technology and the ability to manage and analyze thisdata through AI and blockchain technologies will become increasingly crucial. The size of the
Cyber-Physical System (CPS) / IoT market*, our primary focus, is expected to grow to ¥404.4
trillion worldwide and ¥19.7 trillion in Japan by 2030.
Based on this vision for the future, in January 2018, NCXX Group Inc. entered into a businessalliance agreement with Fisco Cryptocurrency Exchange Inc. regarding the development of an AI
trading system for cryptocurrency by e frontier, Inc., a subsidiary of the Company. Concurrently,
NCXX Solutions Inc., an equity-method affiliate of the Company, became a wholly owned subsidiary of CAICA Inc., another equity-method affiliate. This arrangement will enable us to further
increase operational efficiency and synergies, as well as bolster consolidated profitability andenhance Group-wide corporate value. In October 2018, CAICA was excluded from the scope of
application of the equity method. However, our capital and business alliance agreement with
CAICA will remain in force without modification in the future. Together with CAICA, we will­continue to implement initiatives to develop new services in the FinTech business field.
* Source: A survey published by the Japan Electronics and Information Technology Industries Association.

Tsukasa Akiyama
Representative Director and President
NCXX Group Inc.

Corporate Data

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INTEGRATED REPORT 2019
About NCXX Group

Sustainability

Strategy

Financial Section

Corporate Data

Top Message

Results for Fiscal 2018
In fiscal 2018 (December 1, 2017 to November 30, 2018), the Company’s consolidated
business results were as follows. The Group delivered significant results through investments
in Bitcoin in conjunction with performing demonstration trials of software under developmentby e frontier. Meanwhile, net sales decreased due to the exclusion of NCXX Solutions fromthe scope of application of the equity method. As a result, the Company’s consolidated net
sales decreased by 8.8% year on year to ¥11,125 million.
In addition, we posted operating income of ¥419 million (an operating loss of ¥914 million
in the previous fiscal year) and an ordinary loss of ¥47 million (an ordinary loss of ¥940
­million in the previous fiscal year). These results partly reflected an increase in TITICACA’s

selling, general and administrative expenses and its higher cost-of-sales ratio. While werecorded extraordinary income on the transfer of shares, we also booked an impairment
loss on the CoSTUME NATIONAL trademark. Consequently, loss before income taxes was¥265 million (against profit before income taxes of ¥1,024 million in the previous fiscal year)
and loss attributable to owners of parent was ¥473 million (against profit attributable toowners of parent of ¥902 million in the previous fiscal year).

ICT, IoT, Device Business (NCXX Inc.)
In collaboration with NCXX Solutions, in August 2016, NCXX rolled out the safe driving
assistance service Drive Care (http://www.care-dynamics.jp/obd2/), an OBD II solution forbusinesses that operate shuttle vehicles to provide various transportation services for­nursing care facilities and other customers. The system can monitor any dangerous driving
behaviors (sudden starts, sudden stops, sharp turns) in multiple fleet vehicles operated
simultaneously, enabling managers and supervisors to monitor the driving behavior of­drivers and provide appropriate instructions tailored to each driver.

Consolidated Business Performance
Net sales (left axis)
Ordinary income (loss) (right axis)(Millions of yen)

(Millions of yen)

15,000

800

692
487

9,000

12,231
93

0

1,864

4,948

6,375

12,198

7,416

11,125

400
200
0

−47

−3,000−200−6,000−400−9,000−600−770−12,000−15,000−800−810
12/11*

13/11

Detailed data on
hazardous driving
is displayed on
the management
screen

600

6,000
3,000

3G

1,000

12,000

14/11

15/11

16/11

−940
17/11

18/11

−1,000* Transitional accounting period of four months (August 1, 2012 to November 30, 2012) for the fiscal year ended November
30, 2012.

Detection of
hazardous driving

Notifications of hazardous
driving can be sent via
email to the mobile
phones of staff members
traveling together

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Top Message
Care Dynamics continues to provide tours of nursing care facilities that have adopted theDrive Care OBD II solution, and offers free trials of the solution. Care Dynamics has also
launched additional services such as support for the deployment of nursing care robots andthe provision of nursing care ICT. In these and other ways, Care Dynamics has evolved into
a comprehensive nursing care business support enterprise.
In August 2018, the National Defense Authorization Act for Fiscal Year 2019 (NDAA 2019)
entered force in the United States. NDAA 2019 significantly tightens enforcement actions
against five Chinese companies, including Huawei Technologies Co., Ltd. Consequently,
NCXX Inc. has received numerous inquiries about whether or not it has any products that
may infringe upon NDAA 2019. For all of its products, NCXX Inc. does not outsource any
manufacturing to the five Chinese companies affected by NDAA 2019 and does not use anyof their components. NCXX Inc. will continue to implement strict management to ensurethat it remains in compliance with the matters prohibited by NDAA 2019.
Segment sales in fiscal 2018 were ¥950 million, down 76.3% year on year. Segment income
was ¥48 million, compared with a segment loss of ¥465 million in the previous fiscal year.

Internet Travel Businesse-tabinet.com provides travel products that fulfill the increasingly diverse and sophisticatedneeds of customers. The company enjoys a strong reputation for customer s­ atisfaction as
Japan’s only Internet-based travel agency offering customized services. In addition, Web
travel Co., Ltd., a wholly owned subsidiary of e-tabinet.com, is not­able for its highly experienced registered “travel concierges” (travel consultants). The travel support services provided by these travel consultants have proven highly p­ opular among customers.
Since February 2018, Web travel has been pressing forward with a business alliancewith Credit Saison Co., Ltd., a leading credit card issuer in Japan. This business a­ lliance
primarily concerns the travel concierge service, which is presented as a credit card function
under the partnership. The alliance has helped to enhance the number of requests fortravel estimates and order rates at Web travel.

Meanwhile, the number of inbound foreign tourists visiting Japan rose by 8.7% to 31.19
million as of the end of fiscal 2018. One key priority for e-tabinet.com has been to enhance
the content of tourism information available to inbound tourists. For this, e-tabinet.com is
striving to enhance content with the help of Jitsugyo no Nihon Sha, Ltd., a long-standing
publisher and Group company. For example, e-tabinet.com has set up a new dedicatedskiing website in English. In a separate development, e-tabinet.com converted Gloria Tours
Inc. into a subsidiary in October 2016. Gloria Tours specializes in sending Paralympic­athletes to various events and organizing international para-sports tournaments. It is
focused on expanding the market for para-sports ahead of the Tokyo Olympic and­Paralympic Games to be held in 2020.
As a result of the foregoing activities, segment sales in fiscal 2018 rose 8.4% year on
year to ¥2,367 million. Segment income was ¥38 million, compared with a segment loss of¥2 million in the previous fiscal year.

Brand Retail Platform Business
Following on from the previous fiscal year, TITICACA has been pushing ahead with structuralreforms, including the closure of unprofitable stores and revisions to its personnel system.
In the e-commerce business, TITICACA added two new stores to its network of six stores,
bringing the total number of stores to eight.

Wheelchair basketball

Skiing

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Top Message
As part of a tie-up initiative with Japanese actress Alice Hirose, TITICACA set up a
stand at the Aichi Bloc Tahara Conference, an event organized by the Aichi Bloc C­ ouncilof the Junior Chamber International Japan. TITICACA sold tie-up T-shirts and tote bags
at the stand. For every item purchased, TITICACA donated ¥500 to social contribution
organizations.
In February 2018, the Company entered into a capital and business partnership withCSMEN Co., Ltd., an apparel brand retailer. This was done by underwriting a portion of acapital increase through a third-party allotment of shares of CSMEN.
As a result of the foregoing activities, segment sales in fiscal 2018 were ¥6,445 m­ illion,up 8.7% year on year. Segment loss was ¥460 million, compared with a ­segment loss of¥71 million in the previous fiscal year.

Cryptocurrency and Blockchain Businesse frontier is conducting investment operations based on trading using an AI-based cryptocurrency trading system currently being developed by this company. e frontier has produced
significant results by conducting trading activities with an emphasis on risk control andfunding efficiency.
In July 2018, the Company’s Board of Directors passed a resolution to commence a
cryptocurrency mining business in Hanamaki, Iwate Prefecture, where its Head Office islocated. Mining requires massive amounts of computations to be performed using highperformance computers. Therefore, cooling fans and air conditioner installations areneeded to suppress heat emitted from the mining equipment. Hanamaki, Iwate Prefecture islocated in a relatively cold region. Accordingly, the Group can expect to significantly reduce
its electricity bills by relying on natural ventilation for most of its cooling needs throughout
the year. Moreover, the heat released by mining equipment will be reused in the Group’s
agricultural ICT business (NCXX FARM).
As a result of the foregoing activities, segment sales in fiscal 2018 were ¥1,326 million,
and segment income was ¥1,320 million.

Outlook for Fiscal 2019
In the Fourth Industrial Revolution, physical things of all kinds, including automobiles andhome electric appliances, will be connected to the Internet, making it possible to perform
sophisticated analysis of the big data that will be generated. In addition, as a result of thedevelopment of AI and blockchain technologies, a society that is far more efficient and lesslabor intensive than what we have today is predicted to take shape in the future. Based on
this vision for the future, we have positioned FinTech-related ­businesses as a strategic areaof focus, and plan to strengthen various initiatives with a focus on blockchain technology as
a particularly crucial priority.
We will continue to collaborate with CAICA which was excluded from the scope of­application of equity method in the current fiscal year and NCXX Solutions with the aim ofproviding services in the Cryptocurrency and Blockchain Business as early as possible.
Moreover, we will promote the development of an AI-based cryptocurrency trading system,
as well as investment in cryptocurrencies and various tokens using the system. In addition,
as a new initiative, we have started a cryptocurrency mining business on a trial basis, withthe goals of building up expertise and developing ­businesses at the earliest opportunity.
We plan to continue to enter growth fields that are attracting interest, such as upgradingand expanding IoT-related services, providing services that integrate IoT and blockchain
technologies, and offering cryptocurrency services and other services related to the various
tokens issued by Group companies, such as NCXX Coin.

Tsukasa Akiyama
Representative Director and President
NCXX Group Inc.

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INTEGRATED REPORT 2019
About NCXX GroupFeatureSustainability

Strategy

Financial Section

Corporate Data

Device Business Initiatives for
5G Next-Generation Communications

NCXX aims to expand its presence in the M2M field by leveraging the communications­technology assets it has cultivated in its device business, its core business. Commercial 5G
service will start in Japan from March 2020. With 5G, “high speed/high capacity,” “low delay”
and “multiple simultaneous connections” will become a reality, and it is expected to have an
impact on a wide variety of industries. In the age of IoT, when all manner of things can beconnected, services will roll out flexibly whether in urban or rural areas and expectations arehigh that it will resolve local community issues and aid in regional revitalization. As a communications device manufacturer, NCXX is pushing into new fields, and launches productsthat not only support LTE products, but also products that support 5G, which are expected to
expand going forward.

High
speed/
High
capacity

AR/VR

4K/8K streaming

NCXX initiative

5G terminal

Cloud(edge device)

Camera4K footage
low-delay
control data

Edge system

Remote control

Hazard supervision(image authentication)

Image authentication technology
Visualization of traffic volume on an expressway

Autonomous
driving	Visualization of mini tomato varieties,
size and results of collated data

Stadium solution

Remote control

Low
delay

Using 5G

Smart cities/Smart homes

Remotemedicalcare

Agricultural
ICT

Multiple
simultaneousconnections

NCXX’s Initiatives in the 5G Field
NCXX utilizes its strength in the field of BtoB communications adapter module sales tostrengthen planning such as real-time remote-control operation of construction machinery
using high-quality images, control various types of equipment and provide solutions com­bining the use of 5G devices collecting big data and deep learning image authentication
techniques, as well as developing application services.

Looking into the future, development of AI and blockchains means we can predict more
­efficient, more energy-saving operations than now. In anticipation of just such a future, NCXX
is strengthening its collaborations with Group companies CAICA Inc., NCXX Solutions Inc.
and Fisco Cryptocurrency Exchange Inc. By providing communications devices connecting
equipment and cryptocurrency payment terminals and applications for a variety of items, weare studying an IoT payment platform where the various tokens that companies issue canorganically bind to enable token-based payments.

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Agricultural ICT: Creating a new business model for agriculture
The Company aims to enter into a broader range of M2M fields, leveraging the telecommunications technology assets developed in its core device business. As one specific example ofthese efforts, we seek to make ICT a key force in agriculture through the agriculture ICT business. This business integrates new agricultural techniques and facilities with technologies ineach of these areas. Through these efforts, we aim to create a new agricultural business model.
In the agricultural ICT business (NCXX Farm), one of the Company’s key areas of focus, we
provide end-to-end support to producers in activities ranging from growing to sales. We havebeen advancing research and development into a new AI-based growth model and optimization model, along with carrying out related field trials. With NCXX Farm, agricultural products
are grown by integrating several different environmental control tools for agricultural greenhouses (such as ventilation fans, windows, blackout thermal curtains, mist generators, andwatering systems) and digitally controlled chemical soil management. AI-based image recognition technology is employed to determine the right time to harvest crops. We are also pursuing research and development into automated harvesting robots for agricultural products.
Conditions in greenhouses are monitored with quantitative indicators. Therefore, our­agricultural ICT business allows anyone, even beginners, to start farming without having torely on the instincts or experience of expert farmers. In this manner, we have helped tocreate employment for people with disabilities and reduce barriers to entry into agriculture
for new entrants. Additionally, our agricultural ICT business minimizes the impact of agri­
culture on the environment and enables producers to supply reliable, safe and eco-friendly
farm products to consumers.
In September 2019, we formed a partnership with WORKS MOBILE Japan Corp. on LINE
WORKS, a LINE-based collaboration and communication platform for business users. As aresult, we can now use PCs and smartphones to conduct monitoring and surveillance ofvarious types of environmental data, such as temperature, humidity, and sunlight. This information will be easily accessible during break times between jobs and when people are out of
the home or office, making it easier for new entrants to start farming. In emergencies such asinclement weather, NCXX Farm will send out alerts via LINE WORKS as soon as it detects
any unusual conditions. NCXX Farm instantly grasps and address such unusual situations,
including weather-related risks, which are difficult to predict. By doing so, NCXX Farm has
successfully reduced the workload of producers in performing various tasks.
NCXX Farm also seeks to reduce the workload of producers in the growing stage. We
employ a patented agricultural technique called the “stacked planter farming technique.” Thisis a planter-based growing technique designed to enable producers to provide an optimal

Financial Section

Corporate Data

environment according to the growth
Agricultural
Data from sensors
landstage of crops, thereby enabling the
growth of delicious and healthy crops.
Office or home
The planters contain a proprietary highperformance fertilized soil featuring an
Work instructions
Alert
optimally balanced mix of nitrogen,to onsite staff
Out of the officephosphoric acid, potassium, and various
or at the officeminerals. Producers can use this soil tomaximize the natural growth potential of
their crops. No fields are needed because the crops are grown in planters. Crops can begrown simply by putting the fertilized soil into the planters and planting seedlings in the soil.
There are no restrictions on where the planters can be placed. (We recommend growing crops
in greenhouses in the winter.) No agricultural machinery, such as field cultivators, are required,allowing troublesome weeding and soil tilling work to be reduced. The stacked planter farming
technique increases the planting and harvest volume per area, and uses new soil for every
planting. For this reason, there is no need to worry about continuous cropping problems.
We have also built a testing plot on idle land in Hanamaki, Iwate Prefecture, where our
Head Office is located. In 12 greenhouses on the testing plot, we are conducting a variety offield tests using the stacked planter farming technique. Here, yellow tomatoes with a highsugar content are grown. These yellow tomatoes have gained a strong reputation. Notably,
they have been chosen as a local specialty product for Hanamaki’s hometown tax donation
program (furusato nozei).
Another priority is to encourage the deployment of as much agricultural ICT as possible
among not only companies involved in the agriculture business, but also those companies
that have an interest in, but are not yet involved, in the agriculture business. To this end, we
conduct fee-based facility tours every Friday at our testing plot. As part of these study tours,
we present an overview of agricultural ICT systems, hand out briefing materials, provide
guided facility tours and conduct food tasting and sales sessions.
In this manner, we have created an attractive agricultural business model that realizes
work that is less labor intensive and more efficient and that can successfully support locally
produced and consumed agricultural products. Going forward, we aim to more actively­communicate the attractive features of this business model, while at the same time increasing
the number of franchisees.

16

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Introducing
Our Businesses
IoT-Related Business(NCXX Inc.)

Sustainability

Main Target Fields for IoT
Transport anddispatch management
Buses, trucks, and taxis

Financial Section

Corporate Data

NCXX works to incorporate wireless telecommunication functions
into various equipment to provide
IoT solutions that realize­operational efficiency gains.

IoT Solutions
IoT refers to a system that automates various controls by enabling “things” such as
sensors and devices connected through theInternet to exchange data with each other.
One key advantage of M2M is that it
enables data communication between
devices without any human intervention.
For this reason, M2M has been introduced
not just to PCs and servers, but to a diverse
array of fields, including management ofdriving conditions through integration withvehicle driving management systems, inventory management for vending machines andrelated monitoring of malfunctions and otherissues, remote surveillance and monitoring
for faults and so forth of elevators andATMs, remote readings of water, electricity
and gas meters, and security measures.

Remote control
and inspection

Users

Water supply, electricity
and gas meters

Remote monitoring
Security and monitoring
camerasIoT
moduleNetworkInventory management
Vending machines
and others

Operational
supportSettlements and signage

IoT module product examples
Real-time
information retrieval
Car navigation systems
and PCs

GX4x0NC

UX302NC-R

UX102NC

17

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Introducing Our Businesses

IoT-Related Business(NCXX Inc.)

Agricultural ICT
Since 2012, the NCXX Group has been
operating the NCXX FARM agricultural ICT
business with a view to applying its telecommunication technology assets in thefield of agriculture. A test plot was established at NCXX Group Hanamaki Head
Office, where various trials are conductedusing new agricultural methods. The Group
conducts trials that use multi-stage pot
cultivation enabled by digitally based chemical soil management to minimize environmental impacts and supply reliable, safeand eco-friendly farm products. In addition,
the Group aims to convert the various cultivation conditions into data and optimize
them to establish cultivation technologies
that can ensure stable production, with aview to providing these technologies to
producers.

ICT x Agriculture
Fully automated from predictions to inventory control

Utilizing Agricultural ICT· Development of a mushroom cultivation management system· Research into disease prevention strategies in agricultural facility cultivation together with Iwate University· Launch of Yellow Tomato Keema Curry packed in Paulownia Wood Box and 100% Yellow Tomato Juice· Took part as an advisor in the Iwate Prefectural Workshop Promoting Development of New Fields Using IT· Started collaboration on a farming ICT system with LINE WORKS, a LINE for work use
Characteristics of NCXX FARM
A franchise business entailing sales of packaged system with chemical soil management based on a patented farming method, digitalmanagement based on ICT systems, and a sales support system

18

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Introducing Our Businesses

IoT-Related BusinessNursing Care Robot
Business(Care
Dynamics
Limited)Total Nursing Care
­Business Support Services
Care Dynamics develops and sells Care
Online, an ASP service for nursing careservice providers offering a system for centrally managing operations and information
related to the nursing care business, suchas care plan creation, nursing care service
provision, and invoicing national healthinsurance organizations. Looking ahead,the company will combine M2M technologies that utilize synergies with the NCXXGroup to transition into a “total nursing carebusiness support company.” To this end,
the company is expanding its conventional
software service with the addition of
NCXX’s hardware and services in the telecommunication field to provide the highest
level of service and total solutions to people
involved in nursing care. It is also participating in the planning and development of
a nursing care robot business.

Care Dynamics aims to realize the highest level of nursing care service quality
through the harmonization of people androbots. The company supports sales andintroduction and operation of robots at
nursing care facilities. Care Dynamics will
provide consulting to assist with introduction based on diverse trial data obtained
through use of nursing care robots in actual
frontline nursing care situations, and is now
creating a manual for optimal introduction
and operation of nursing care robots.

Nursing Care ICT BusinessProf. Sankai, University ofTsukuba/CYBERDYNE Inc.

ASP Services for Nursing Care
Service Providers
Care Dynamics provides Care Online, an operation support
system for nursing care service providers. The system isprovided as a cloud-based service corresponding to asuite of operations including care plan creation, nursing
care service provision, and invoicing national health­insurance organizations. With simple operation thatanyone can use and features that can be customized tosuit the ­characteristics ofeach facility, the systemcaters to a full range ofadministrative processes infacilities. 120 nursing careservice providers haveintroduced the system atover 400 facilities.

The telecommunication and communication technologies
cultivated in the nursing care robot business will be used
to supplement human workers on the front lines of nursing
care, which tend to be in short supply. This offers a way
for nursing care workers to provide higher-quality services.
Care Dynamics will draw
on the basis of its accumulated experience in thenursing care solutions
business to provide­solutions that nursing
care service p­ roviders
truly need.

< Features of Care Online >Handy
terminal

Touch panel
Input

Input
Call

Improvement
Analysis

ISO 27001
certificationacquiredCall

Various
documents

Robust data
centerCreateVariousanalyses

Apply

Nursing careinsurance, etc.

Externalorganization

19

INTEGRATED REPORT 2019
About NCXX Group

Sustainability

Strategy

Financial Section

Corporate Data

Introducing Our Businesses

FeaturesInternet Travel
Business(e-tabinet.
com)Internet Travel
The main business in the Internet travelbusiness is customized travel services­provided by e-tabinet.com’s wholly owned
subsidiary, Web travel Co., Ltd. Specialist“travel concierges” create ­multiple itineraries based on the requirements of applicants, and propose travel plans via email.
From these, applicants select the travel
concierge and plan that appeals to them.
The service is therefore different from ordinary package tours, combining high-quality
product proposals brimming with hospitality
and the unrivalled convenience of the Internet to provide service with a difference.

 roposal of high-quality products brimming with hospitality that differ from major travelPcompany package tours
Unrivalled convenience of the Internet
Relatively unaffected by low price trends caused by price competition with major tour companies

Service Flow
After hearing from customers about theirgoals, envisaged experience, approximate budget, and other aspects of theirtrip, expert “travel concierges” provide a
proposal and an estimate free of charge
on a travel plan designed according to
the customer’s wishes. Since most of theservice is conducted through e-mail andtelephone, customers who are busy during
work hours can have a plan created at atime that suits them. The service also
includes taking care of tiresome details,
reservations, and other tasks.

STEP 1

STEP 2

Travelconcierges

Send a travel estimate request
using a special form

Travel concierges reply withan estimate by e-mail

STEP 3Conclusion

Customers enjoy a unique,custom-made tour

Travel Concierges
Travel concierges are travel consultants who specialize in creating travel plans to meet individual
clients’ wishes. They each have their own specialty
fields, enabling them to respond flexibly to increasingly diverse customer needs. However, the Internet is a medium that does not provide face-to-faceinteraction. Therefore, we post profiles of the travel
concierges online, emphasizing their experienceand personality, so that customers can feel peaceof mind when they consult us.
The service has about 450 unique andoriginal travel ­concierges registered.

20

INTEGRATED REPORT 2019
About NCXX Group

Sustainability

Strategy

Financial Section

Corporate Data

Introducing Our Businesses

HAPPY TRADE COLLECTION
Brand Retail
Platform Business(TITICACA,
Co. Ltd.)

Retail and Wholesale Salesof Clothing and Accessories
TITICACA deals directly with producers incountries around the world, such as Central
and South America, with integrated­in-house operations spanning planning,
manufacture, and sale of original ethnic
apparel and accessories. The company
creates original products with a handcrafted style designed to match market
demand. TITICACA also strives to “bridge
the world’s happiness” by undertaking
various activities. For example, the company supports the transfer of traditional
technologies and improving the skills ofyoung people by allocating 5% of sales
from the HAPPY TRADE COLLECTION,
designed to protect the welfare of producers
and connect cultures. TITICACA also promotes fair trade, which aims to improve thestandard of living for producers and workers in developing countries and help them
to be autonomous through the purchase of
their materials and products at fair prices.

Promoting culturesof the world

Products that makeuse of traditional
technologies

HA PP YHA PPYSupport fellow humanbeings throughout theworld through shopping

CustomerContinue and­support traditional
technologies

Return 5% ofsales of the
HAPPY TRADE
COLLECTION

TITICACA

Producer

What Is Fairtrade?
Fairtrade is a system of trade that aims to improve the standard of livingfor producers and workers in developing countries through the purchaseof their materials and products at fair prices. Producing products that aredesignated as “fairtrade” and allowing customers to purchase them leads
to mutual prosperity for supplier countries.

Cottonproducer

Cloth
producer

Sewn ­products
manufacturer

Stable living
through fair prices
for cotton

Weaves fairtradecotton into cloth

Sews the resulting
cloth into products

The International Fairtrade Certification MarkThe International Fairtrade Certification Mark assures customers that international Fairtrade Standards set out by Fairtrade
Labeling Organizations International are met at every stage inthe value chain of a product, from production of its raw materials through to import and export, processing, manufacturing,and completion as a Fairtrade Certified Product.

Customer

TITICACA

Enjoyment of products
leads to improvementof conditions for
producers in­developing countries!

Forms closer­relationships between­customers and­producers throughproducts

21

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Introducing Our Businesses

Blockchain Business(NCXX GroupInc.)(e frontier, Inc.)

Cryptocurrency
e frontier entered a business alliance with
Fisco Cryptocurrency Exchange in January
2018, and the two companies have started
developing AI trading system for crypto­
currencies. e frontier has also begun conducting trials of cryptocurrency based on
this AI trading system. Furthermore, in
October 2018, e frontier subscribed tobonds with warrants issued by Fisco
Crypto­currency Exchange’s parent group,
FICSO Digital Asset Group. In anotheraspect of cryptocurrency operations, efrontier conducts cryptocurrency mining
operations in Hanamaki, Iwate Prefecture,
where the NCXX Group Head Office islocated. The heat exhausted from themining equipment is used in the NCXXFARM agricultural ICT operation.
* For TITICACA, the Company has been proceeding with
operations that use the AI trading system for crypto­
currency that e frontier has developed as a trading base.

e frontier×

AI Trading System
for Cryptocurrency

TITICACA*
Hanamaki Mining Business Concept

Conditions conducive to the mining center· Iwate’s cold weather is suited to mining· Utilization of idle assets· Great potential for renewable energy(wind / geothermal) (future application underconsideration)

Feedback into other businesses· Using discharged heat reduces traditional heatingcosts· A self-rotating agricultural business model that uses
mined coins in the near future

Use the heat discharged
from the mining center
to heat greenhouses

Use mined coins to purchase seeds and fertilizer

22

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

S ust ain abilit y23

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Corporate Governance2. Number of Directors

I Corporate Governance System

The Company’s Articles of Incorporation stipulate that the Board of Directors comprises a maximum of
10 directors.

1. Outline of Corporate Governance System
The Company has a corporate governance system comprising a Board of Directors, Audit &­Supervisory Board members, an Audit & Supervisory Board, and an external auditor.
The Company’s Board of Directors has six directors, one of whom is an outside director. As the
body making management decisions, the Board of Directors resolves important business decisionsin accordance with the Board of Directors Regulations. The board meets once a month and as theneed arises to supervise the execution of duties by directors based on monthly financial statements
and other reports. It also invites the outside director to participate in board meetings in order toobtain the outside director’s views on management from an objective perspective based on his
extensive experience.
The Company’s Audit & Supervisory Board has three members (including two outside members),
comprising one full-time Audit & Supervisory Board member and two part-time Audit & Supervisory
Board members. The Audit & Supervisory Board meets as necessary to share information between the
Audit & Supervisory Board members and facilitate efficient audits.
In addition, the Company strives to promptly grasp information on business management by h­ olding
a Management Conference once a week, with mainly the directors and general managers in attendance.
A schematic diagram of the Company’s corporate governance system is presented below.

General Meeting of Shareholders
Appoint and dismiss
Cooperate

External Auditor

Audit &
Supervisory Board

Audit

Appoint and dismiss

Instruct andreportAudit

President and CEO
Discuss and reportManagement
Conference
Cooperate

Advising Corporate
Attorney

Board of Directors

Discuss and report

Division Director &General Manager

AdviseInternal Audit Office

Audit

Instruct and report

Divisions

3. Approval Criteria for the Appointment and Dismissal of Directors
The Company’s Articles of Incorporation stipulate that the appointment of directors shall be approvedby a majority of voting rights exercised at a meeting attended by shareholders holding at least onethird of all voting rights. The Articles of Incorporation also stipulate that the appointment of directors
shall not be approved on the basis of cumulative voting.
The Articles of Incorporation also stipulate that the dismissal of a director shall be approved by
two-thirds majority of voting rights exercised at a meeting attended by shareholders holding a majorityof all voting rights.

4. Limited Liability Agreement
The Company has concluded an agreement limiting liability for damages with each director (excluding
directors with executive responsibilities and similar posts) and each Audit & Supervisory Board member,pursuant to Article 423, Paragraph 1 of the Companies Act, based on the provisions in Article 427,
Paragraph 1 of the same.
The liability for damages based on this agreement is limited to either an amount no larger than ¥1
million specified by the Company in advance, or the minimum liability amount as set forth by the law,­whichever is higher.
The Company’s Articles of Incorporation stipulate that “the Company can conclude an agreement
limiting liability for damages with the external auditor, pursuant to Article 423-1 of the C­ ompanies Act,
based on the provisions in Article 427-1 of the same. However, the upper limit of the liability amountunder the contract shall be the amount provided in the law.” As such, the Company’s external audit
contract with Toko Audit Corporation makes provisions for an article limiting liability. The limit on theamount of liability for damages in this contract is twice the amount of total remuneration for Toko Audit
Corporation’s auditing services.

5. Exemption of Directors and Audit & Supervisory Board Members from Liability
Pursuant to the provisions on liability set forth in Article 423-1 of the Companies Act, the Company’s
Articles of Incorporation stipulate that the Board of Directors may resolve to exempt a director(­including past directors) or Audit & Supervisory Board member (including past Audit & Supervisory
Board members) from their liability within the limit set forth by the law, provided that that person had
acted in good faith and was not grossly negligent.
The aim of this provision is to enable the directors and Audit & Supervisory Board members to fulfill
their roles to the fullest extent, and to enable the Company to appoint experienced and knowledgeable
personnel to the Board of Directors and Audit & Supervisory Board.

6. Body Making Decisions to Pay Dividends and Other Distributions from Surplus
In order to flexibly return profits to shareholders, the Company’s Articles of Incorporation stipulate thatthe Board of Directors may resolve to pay an interim dividend to the shareholders and registered­pledgees of the Company’s shares, listed or recorded in the final register of shareholders as of May 31
each year.

24

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Financial Section

Sustainability

Corporate Data

Corporate Governance

II Establishment of an Internal Control System
The Company has developed Company-wide internal rules governing all business operations, andexecutes business with proper separation of management based on these rules. At the same time, theCompany has built an approval system based on rules governing the authorization of duties and thecircular approval of decisions. In order to evaluate the effectiveness and sustainability of the Company’s
internal control system, the Internal Audit Office audits each business division to ensure that their­important business duties are being executed both efficiently and accurately.

III Status of Internal Audits, Audit & Supervisory
Board Audits and Accounting Audits
Each Audit & Supervisory Board member attends the Board of Directors meetings to audit the executionof duties by directors. The members also exchange information as required with the president and directors of the Company to share an understanding of the management priorities and issues. In addition toauditing the Company’s minutes, circular approval documents, contracts, and business transaction
records, the full-time Audit & Supervisory Board member is mainly responsible for interviewing relevant
personnel, observing accounting audits, and conducting on-site surveys, as well as attending otherimportant meetings apart from the Board of Directors.
The Company’s Internal Audit Office, comprising one person in charge, cooperates with the Audit &Supervisory Board members throughout the year to conduct the required internal audits based on aninternal audit plan. Results of the internal audits are reported in writing to the president and confirm thestatus of specific advice and recommendations given to the divisions receiving audits as well as the
improvements they have made.
The Company has also concluded an external auditor contract with Toko Audit Corporation, underwhich it periodically receives accounting audits.
The Internal Audit Office, Audit & Supervisory Board members, and external auditor cooperate with
one another to conduct audits effectively and efficiently. To this end, they strive to conduct proper
audits and confirm the status of improvements in response to the findings and issues they raise byexchanging information and opinions and sharing what they find.

IV Development Status of the Risk Management System
The Company’s risk management system has rules that were developed based on the International
Organization for Standardization (ISO) from the standpoint of preventing risks. When there is information thought to represent a market, credit, business, or management risk, the Management Conference
confirms the status of compliance with laws and regulations of the Company and Group companies.
At the same time, executives in charge of each division strive to raise risk awareness by rigorously
disseminating information considered to represent a risk within their respective divisions. The Company
is also striving to strengthen its legal risk management system by concluding an advisory contract
with a law firm so that it can receive timely advice and instruction on legal risks of high importance,­particularly the protection of personal information, statutory regulations, and so forth.

Internal audits are conducted periodically to verify that there are no problems with the Company’srisk management system and compliance with laws and regulations.

V 
Status of Development of a System for Ensuring the ­Appropriateness of the Operations of Subsidiaries of the Company
The subsidiaries of the Company have adopted the basic policy of maintaining their independence bymaking management decisions autonomously in light of the characteristics of each company, such as
the scale of operations, business characteristics and design of governing bodies, in tandem with maintaining cooperation and information sharing with the Company. Meanwhile, with regard to importantmatters concerning management at the Company’s subsidiaries, the subsidiaries are requested to seek
the approval of these matters from the Company or report them to the Company, based on internal
rules. In parallel, subsidiaries regularly report on the status of business execution, financial conditionand other matters to the Company. Moreover, the Internal Audit Office audits transactions between the
Company and its subsidiaries.

VI Compensation of Corporate Officers
1. Total Compensation by Corporate Officer Position, Type of Compensation,
and Number of Eligible Officers
Position

Total
compensation(Thousands of yen)

Total by type of compensation (Thousands of yen)
Basiccompensation

Stock
options

Bonuses

Retirement
benefits

Number of
eligible
officers

Directors(excluding outside directors)

6,487

4,910

1,577

–

–

5

Audit & Supervisory Board members(excluding outside Audit &Supervisory Board members)

1,200

1,200

–

–

–

1

Outside officers

3,000

3,000

–

–

–

3

Notes: 1. The Extraordinary General Meeting of Shareholders, held on October 25, 2017, resolved that the total compensation for
the Company’s directors (excluding salary as an employee) shall be limited to within ¥100 million per year. Separatelyfrom the above, the 34th Ordinary General Meeting of Shareholders, held on February 22, 2018, resolved that the totalcompensation in stock options shall be limited to within ¥100 million per year.
2. T he 22nd Ordinary General Meeting of Shareholders, held on June 29, 2006, resolved that the total compensation for theCompany’s Audit & Supervisory Board members shall be limited to within ¥50 million per year.

2. Breakdown of Compensation by Corporate Officer
Omitted from record in this report as there were no corporate officers receiving ¥100 million or more in
total compensation.

25

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Financial Section

Sustainability

Corporate Data

Corporate Governance

3. Material Information on Salary as an Employee for Corporate Officers Serving
Concurrently as Employees
No items to report

4. Policy on Determining the Amount and Calculation Method of Corporate Officer
Compensation
The Company has not established policies on the amount or calculation method of compensation forcorporate officers.

VII Outside Director and Outside Audit &Supervisory Board Members
1. Functions and Roles Relating to Corporate Governance
The Company has appointed one outside director and two outside Audit & Supervisory Board members.
Outside Director Katsumi Kitamura has extensive experience and specialized knowledge as a lawyer. Mr.
Kitamura was appointed because his experience and knowledge is expected to help the executive officers
to ensure that the Company’s operations as a whole satisfy the basic principles required by Japan’s­Corporate Governance Code. There are no conflicts of interest between this i­ndividual and the Company.
Outside Audit & Supervisory Board member Mitsutoshi Urano possesses the extensive experienceand knowledge needed to perform audit operations based on his past and current positions as certified
tax accountant, representative director, and Audit & Supervisory Board member. Mr. Urano was
appointed because his experience and knowledge are expected to help strengthen the Company’s
audit team. There are no conflicts of interest between this individual and the Company.
Outside Audit & Supervisory Board member Kazuhisa Nagabuchi currently serves as chairman of anon-profit organization, and has ample knowledge needed to audit and supervise corporate management. Mr. Nagabuchi was appointed because his knowledge is expected to help strengthen the­Company’s audit team. There are no conflicts of interest between this individual and the Company.
Based on the above, the outside director and outside Audit & Supervisory Board members have no
noteworthy vested interests in the Company from the standpoint of conflict of interest with generalshareholders. Furthermore, they are expected to supervise and audit the execution of duties by theCompany’s ­directors from an independent position posing no risk of a conflict of interest with generalshareholders, since they are expected to apply an outsider’s perspective, drawing on their professional
expertise and experience and knowledge working for other companies, in offering impartial advice andopinions to the Company.

2. View Concerning the Appointment Status of the Outside Director and Audit &Supervisory Board Members
The Company has no standards or policies regarding independence from the Company for theappointment of outside directors and outside Audit & Supervisory Board members. However, as noted
above, the Company recognizes that the outside director and outside Audit & Supervisory Board­members are fulfilling their functions and roles as expected and judges that there is no problem with
their appointment status.

3. Supervision and Audit by the Outside Director and Audit & Supervisory Board Members
and Internal Audit, Their Mutual Cooperation in Audit & Supervisory Board Audits andAccounting Audits, and Relationship with the Internal Control Division
The Company’s outside director voices timely opinions at Board of Directors meetings based on­high-level knowledge and ample experience, and fulfills the functions of supervising and checking
management from an independent position from the Company’s management team.
The outside Audit & Supervisory Board members provide opinions and advice based on professional expertise and ample experience at the Company’s Board of Directors and Audit & Supervisory
Board meetings. They also maintain and strengthen the compliance of Company divisions with laws
and regulations by deliberating and exchanging information with the Internal Audit Office and an­external auditor, as well as by receiving reports from them.

[Details of Compensation for the External Auditor and Their Staff](Thousands of yen)
Fiscal 2017Classification

Fiscal 2018

Compensation paid
for audit certification
activities

Compensation
paid for non-audit
activities

Compensation paid
for audit certification
activities

Compensation
paid for non-audit
activities

Reporting company

12,000–12,000–Consolidated subsidiaries

31,215–25,200–Total

43,215–37,200–Board ofDirectors
and Audit &Supervisory
Board
Members

Representative Director and President �������������� Tsukasa Akiyama
Representative Director and Vice President ������ Naoki Ishihara
Director �������������������������������������������������������������� Osamu Fukami
Director �������������������������������������������������������������� Yosuke Saito
Director �������������������������������������������������������������� Wei Zhang
Director �������������������������������������������������������������� Katsumi Kitamura
Full-Time Audit & Supervisory Board Member ��� Hiroshi Sasaki
Audit & Supervisory Board Member ������������������ Mitsutoshi Urano
Audit & Supervisory Board Member ������������������ Kazuhisa Nagabuchi

26

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Commitment to SDGs

The NCXX Group aims to “contribute to the development of a moreIn the agricultural ICT business, an area of focus for the NCXX Group,

efficient and comfortable society,” as laid out in its corporate philosophy.

we help to create employment for people with disabilities and the

We believe this aim is aligned with efforts to realize a sustainableelderly by enabling people to start farming even without agriculture­society—the main purpose of the Sustainable Development Goals

knowledge or experience (Goal 8: Decent Work and Economic Growth).

(SDGs) adopted at the United Nations Sustainable Development
Summit held in 2015.
In the Cryptocurrency and Blockchain Business and agricultural ICT
business, the Group has initiated research and development into
­AI-based trading systems and automated harvesting robots. The goal
is to turn these projects into platforms for technological innovation(Goal 9: Industry, Innovation and Infrastructure).

The Group also uses the heat generated from cryptocurrency mining togrow cherry tomatoes in greenhouses, and strives to reduce heating
expenses in the winter and cooling expenses needed to mitigate waste
heat (Goal 7: Affordable and Clean Energy, Goal 12: Responsible­Consumption and Production).

17 GOALS TO TRANSFORM OUR WORLD

27

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Commitment to SDGs

In addition, NCXX offers the GX4x0NC, an OBD II-type automotive

We have entered into business alliances with CAICA Inc. and NCXX

telematics data collecting unit. It can be installed in a variety of welfare

Solutions Inc., along with fostering collaboration between the Group’s

vehicle models. Driving data of vehicles fitted with the device is sent

agricultural ICT business NCXX Farm and WORKS MOBILE Japanover 3G networks to servers, where a management system can quantify

Corp.’s LINE WORKS, a LINE-based collaboration and communicationand visualize the data to detect hazardous driving (sudden starts,

platform for business users. Through such partnerships with othersudden stops, sharp turns). With this system, managers can monitor­companies, we will strengthen our measures to achieve sustainable

any dangerous behaviors and give appropriate instructions to drivers as

development (Goal 17: Partnerships for the Goals).

necessary, thereby making it possible to provide safer transportation
services (Goal 11: Sustainable Cities and Communities).

28

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Financial Section

Sustainability

Corporate Data

CSR Activities through BusinessInitiatives through Business

Service and Supports for People with Disabilities

Volunteer Cosponsor of Motorcycle Sidecar Parade “Feel the Wind”

CSR

Activities
through BusinessSupport forSportsThe NCXX Group’s underlying desire as a manufacturer is to find ways to help people withdisabilities or elderly people achieve things that they want to do but cannot, and to take on
various individual wishes and realize them. Through our activities with various people inand outside the Company, we encounter many ways of thinking, widen our field of view,and create new values and ideas. We believe this helps to invigorate our organization.
Based on this stance, we are engaged in the volunteer activities introduced below andalso volunteer to support events held at nursing care facilities and the lives of elderly­residents in depopulated villages.
In addition, we are also working to serve communities through our businesses and todevelop products that contribute to society.

Support for
CultureSupport for
Persons with
Disabilities
Riding tandem

29

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

CSR Activities through BusinessInitiatives through BusinessSupport for Sports (Support for Motor Sports)
To support the development of motor sports and increase its industry recognition, the
NCXX Group co-sponsored MV AGUSTA Reparto Corse, the motorcycle racing team of
Italian motorcycle manufacturer MV Augusta, as a spot sponsor for races held at Circuitode Jerez in Spain on October 22, 2017 and the Losail International Circuit in Qatar on
November 4, 2017.
The NCXX Group has so far focused on product development in the IoT field, particularly
automotive products. The Group has an extensive track record of developing and delivering
many different products, including the GX4x0NC OBD II-type automotive telematics data­collecting unit. The NCXX Group has participated in the Suzuka 8 Hours Endurance Race
since 2014 in order to develop motorcycle products. At these races, we conduct tests ofproto­types and collect and analyze data. We aim to apply the technologies we have developed
through these races to a variety of uses beyond motorcycle applications, including automotive
applications, as well as capabilities for robots such as motion control and surveillance.
Looking ahead, we aim to continue developing IoT products for motorcycles and­applying tech­nologies for those products to product development in other fields.

Support for Culture(e.g., Mechanisms for Streamlining Sales in the Fashion Industry,
Proposals for Wearable Devices and Matching Apparel with Consumer Needs)
In 2017, FACETASM became a subsidiary of the NCXX Group. The FACETASM fashion
brand was launched in 2007 by Mr. Hiromichi Ochiai, the first Japanese fashion designer
to be selected as a ­finalist for the LVMH Prize for Young Fashion Designers. FACETASM is
actively undertaking expansion initiatives overseas, most notably through the unveiling ofa collection in Paris.
The NCXX Group seeks to form partnerships on developing and popularizing IoT-related
services for the fashion industry. The Group envisions a wide range of initiatives, such as
converting sales data and online information into a repository of big data and combining
this big data with AI to recommend items according to consumer preferences, and applying
it to product development. The Group also envisions embedding highly conductive textiles
and sensors into apparel to make it possible to operate wearable devices.

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About NCXX Group

Strategy

Sustainability

Financial Section

Financial Section

Corporate Data

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Analysis of Operating Results and Financial Position[Review of Operations]
In the fiscal year ended November 30, 2018, the Japanese economy saw corporate earnings follow a recovery
trend, supported by the Japanese government’s economic policies together with monetary policies. On theother hand, the economic outlook still remains uncertain, based partly on unstable political trends overseas
and concerns about the impact of geopolitical risk.
The Japanese government has incorporated the concept of the Fourth Industrial Revolution into its growthstrategy. In the Fourth Industrial Revolution, physical things of all kinds, including automobiles and home electric
appliances, will be connected 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 real world. The general belief is that the ability to collect andretain big data from the Physical Part of the real world through IoT technology and the ability to manage andanalyze this data through AI and blockchain technologies in the Cyber Part will be crucial to success.
The Company’s main focus is the CPS/IoT market, which grew in 2016 to a scale of ¥194.0 trillion globallyand ¥11.1 trillion in Japan. By 2030, the global market scale is projected to grow to ¥404.4 trillion, and theJapanese market scale to ¥19.7 trillion. Furthermore, the agriculture field, which has exhibited remarkable
growth in Japan, saw annualized growth of 20.2%. (Source: Japan Electronics and Information Technology
Industries Association “Survey of Trends Related to Focus Field 2017”)
In this operating environment, in January 2018, the Company entered into a business tie-up with Fisco
Cryptocurrency Exchange (“FCCE”) with regard to the development of an AI trading system for crypto­
currencies to be undertaken with Company’s subsidiary e frontier, Inc. (“e frontier”). Furthermore, e frontier
conducted multiple trials of software under development, started investing in bitcoin, and succeeded in delivering a certain level of results. Moreover, also in January 2018, e frontier’s then-equity method affiliate NCXX
Solutions Inc. (“NCXX Solutions”) conducted a share exchange with another then-equity method affiliate,
CAICA Inc. (“CAICA”) to make NCXX Solutions a wholly owned subsidiary of CAICA. By making NCXX
Solutions a wholly owned subsidiary, CAICA aimed to further increase operational efficiency, expand synergies,
strengthen consolidated earnings capability, and increase consolidated corporate value. The Company and
NCXX Solutions continued to conduct joint development related to IoT after the transfer.
In addition, in February 2018, the Company subscribed to part of a private placement of new shares toraise capital by the apparel brand CSMEN Co., Ltd. (Listing: 3083 TSE JASDAQ; Headquarters: Chuo-ku,
Tokyo; President: Masao Aoki), thereby entering a capital and business alliance. CSMEN Co., Ltd. is
expected to form synergies with the Company’s brand retail platform business.
In April 2018, the Company procured ¥200 million by issuing the 7th Series of Unsecured Convertible
Bond-Type Bonds with Share Acquisition Rights by private placement to fund basic research and development for providing AI solutions and distributed applications using blockchain, as well as development ofagricultural ICT systems, which will be the Company’s main focus areas going forward.

In July 2018, the Company decided to start a cryptocurrency mining operation at its Head Office in
Hanamaki City, Iwate Prefecture. The mining of cryptocurrency refers to authentication work performed toensure 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 house this equipment
plus an immense amount of electric power to operate the mining facility. Therefore, a key priority in businessis 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 average­temperature is fairly low at 23.8 ˚C (almost 74.8˚F) (Source: Japan Meteorological Agency). Accordingly, theGroup can expect to significantly reduce its electricity bills by relying on natural ventilation for most of its
cooling needs throughout the year. Moreover, Iwate Prefecture is ranked second in terms of its potential forrenewable energy. Notably, Iwate Prefecture has an extremely high potential for wind power and geothermal
power. In the future, the Group plans to target the procurement of low-cost electric power based on thisabundant supply of renewable energy. Moreover, the heat released by mining equipment will be reused in theGroup’s agricultural ICT business (NCXX FARM). At NCXX FARM, the Group grows cherry tomatoes yearround 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 the greenhouses. 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.
In October 2018, the Company sold a part of its equity-method affiliate CAICA to procure funds for theCompany’s growth, and CAICA was excluded from the scope of application of the equity method. The
Company has a well-established cooperative relationship with CAICA based on a capital and business­alliance, which will continue unchanged going forward. They will continue joint development combining NCXX
Inc.’s (“NCXX”) IoT technology, CAICA’s blockchain, and AI technology, and continue to conduct initiatives
toward development of new services in the FinTech business field.

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Analysis of Operating Results and Financial Position

Also in November 2018, the Company’s consolidated subsidiary Versatile Inc. (“Versatile”) conducted a­ orporate split of part of its business (incorporation type split), which was transferred to the newly establishedccompany, NCXX Premium Group, Inc. (“NCXX Premium Group”), and NCXX Farm Holdings, Inc. (“NCXX Farm
Holdings”), while the newly established company became a wholly owned subsidiary of Versatile. Subsequently,
also in November, in order to restructure the business, it was decided to apply to conduct a special liquidation inwhich all shares of NCXX Premium Group and NCXX Farm Holdings, which were held by Versatile, would betransferred to the Company, making them into subsidiaries of the Company, and Versatile would be dissolved.

As a result of these efforts, consolidated net sales were ¥11,125 million, down 8.8% year on year.
Operating profit was ¥419 million, compared with an operating loss of ¥914 million in the previous fiscal year.
The ordinary loss was ¥47 million, compared with an ordinary loss of ¥940 million in the previous fiscal year.
Loss before income taxes was ¥265 million, compared with a profit before income taxes of ¥1,024 million in
the previous fiscal year. Loss attributable to owners of parent was ¥473 million, compared with a profit­attributable to owners of parent of ¥902 million in the previous fiscal year.
Business performance by segment in the fiscal year under review was as follows:[Operating Results](IoT Related Business)

Looking at consolidated business results, e frontier began to record revenues after commencing investment
in cryptocurrency on its own account. e frontier conducted trials of software under development for thedevelopment of the abovementioned AI trading system for cryptocurrencies. It then began investing in bitcoin
and achieved considerable success. On the other hand, revenue declined following the removal of NCXX
Solutions from the scope of equity-method affiliates. Furthermore, sales at the Company’s consolidated
subsidiary, e-tabinet.com fell short of target. Turning to income, operating income declined year on year as
the cost ratio at the Company’s consolidated subsidiary TITICACA Co., Ltd. (“TITICACA”) rose in the fourth
quarter after selling, general, and administrative expenses were seen to increase throughout fiscal 2018.
Looking at ordinary income, TITICACA recorded a loss on sale of cryptocurrency of ¥201 million and a loss
on valuation of cryptocurrency of ¥192 million. Recently, the cryptocurrency market has seen some fairly
prominent price declines; however, in the event of a drastic decrease in cryptocurrency prices, TITICACA
executes stop-loss transactions as needed as part of its risk control measures. In this manner, TITICACA
always conducts trading activities with an emphasis on capital efficiency. As a result, the cryptocurrency
business has achieved a certain level of profit for the fiscal year; however, since investment in cryptocurrency
was not one of TITICACA’s main businesses, it has been recorded under non-operating expense.
Loss attributable to owners of parent resulted from impairment of the CoSTUME NATIONAL trademark of¥888 million, which was offset by extraordinary income of ¥651 million from sale of shares held by theCompany. The write-down of the trademark reflected a conservative revision of CoSTUME NATIONAL’s business plan in light of its current performance. Looking forward, the Group will start a worldwide license business, and examine business alliances offering synergies with the business in order to expand it, aiming togrow sales rapidly.
In the same way, a ¥136 million impairment of goodwill of FACETASM was the result of a more conservative revision due to falling below the initial target, despite sales growing.

NCXX Inc. focused on providing solutions using GX410NC and GX420NC, OBD II-type automotive telematic
data collecting units launched in 2015. In collaboration with NCXX Solutions, NCXX Inc. developed the safe
driving assistance service Drive Care (http://www.care-dynamics.jp/obd2/), an OBD II solution for nursing
care transportation service vehicles, and rolled it out in August 2016.
This system enables the managers or supervisors of businesses that provide various transportation services
for nursing care facilities and other customers to confirm the status of multiple fleet vehicles operating simultaneously. The system can ascertain all dangerous driving behaviors (sudden starts, sudden stops, sharp
turns)have occurred when the vehicle is en route to a destination. By displaying these incidents in formats
that are easy for managers and supervisors to understand, such as lists and graphs, they will be able tomonitor the driving behavior of drivers and provide appropriate instructions tailored to each driver. In addition,
managers and supervisors will be able to ascertain the extent of improvement of each driver and follow up on
drivers appropriately by continuously checking driving performance data.
Also, the system can be used to reduce the maintenance and management costs of welfare service­vehicles by making effective use of the various types of data that can be obtained. For example, managers
and supervisors will be able to improve average fuel economy by instructing drivers on environmentallyfriendly driving practices, curtail wear of tires and other parts of vehicles, and issue vehicle inspection alerts
to prevent vehicle malfunctions.
In recent trends, the U.S. National Defense Authorization Act for Fiscal Year 2019 (“NDAA 2019”) was
passed in August 2018, greatly strengthening restrictions on five companies: Huawei, ZTE, HIKVISION,
Dahua Technology, and Hytera; and calling for a ban on transactions between them and U.S. government
institutions. The Group has received numerous inquiries regarding whether NCXX products are also subject
to the NDAA 2019.
NCXX explains that its products can be used with confidence, since none of the products currently on themarket are manufactured by outsourcing to the abovementioned five companies related to the recently
passed NDAA 2019, or use parts sourced from them. Moreover, NCXX will strengthen controls to ensure thatits products do not infringe on any of the prohibitions going forward.

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About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Analysis of Operating Results and Financial Position

The Group will continue to monitor trends carefully, and continuously manage and monitor its contract
manufacturing providers while developing trustworthy new contract manufacturing providers. The Group will
work to further expand its product groups to meet the needs of the market as a domestic Japanese manufacturer. The Group will continue to provide mobile computing solutions such as LPWA, which is expected tospread in markets in Japan and overseas going forward, and the next-generation 5G telecommunications
standards, automotive telematic solutions that integrate high-valued-added communication devices andsoftware, as well as various other types of 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 services such as support for the
introduction of nursing care robots and the provision of nursing care ICT, Care Dynamics has evolved into acomprehensive nursing care business support enterprise.
As a service for assisting caregivers, Care Dynamics offers nursing care robots as a sales agency, distribution of instructive leaflets of corporations using manga illustrations, and services for creating advertisements.
Care Dynamics continues to provide tours of nursing care facilities that have adopted the “Drive Care” OBD II
solution for nursing care transportation services, and offers free trials of the solution.
Moreover, Care Dynamics provide a replacement support service and reassess electricity providers to help
nursing care facilities cut their electricity bills. Care Dynamics also offer a service that introduces systems forsaving water.
Care Dynamics concluded a new network building support service for corporations, concluded a sales agreement with PARAMOUNT BED CO., LTD., and began selling PARAMOUNT BED’s sleep management system.
e frontier has a track record in developing and selling software, such as AI-driven programs for the gamesof go, shogi and mahjong. The company is currently developing a system for cryptocurrency trading thatleverages its AI technologies. Last year, e frontier concluded a business alliance with FCCE, and both com­panies have been conducting trials of AI technology. In addition, e frontier has received provision of a vast
amount of past transaction data from FCCE, as well as expertise in derivative systems and high frequency
trading systems* from a user standpoint, and aims to develop systems with even better usability.
In addition, in June 2018, the Company concluded a general agency agreement for Japan with major U.S.
manufacturer Other World Computing, Inc. (“OWC”) and now plans to expand sales of computer peripheraldevices such as Thunderbolt 3 products and eGPUs, as well as ancillary services, in Japan.
* Derivative systems and high frequency trading systems:
Designed to cover multiple cryptocurrency exchanges in Japan and overseas, checking and analyzing their trends to obtain profit
automatically. The systems control risk appropriately while being able to wait for profit taking opportunities.

As a result, segment sales in the fiscal year ended November 30, 2018 were ¥950 million, down 76.3%
year on year. Segment profit was ¥48 million, compared with segment loss of ¥465 million in the previous
fiscal year.

(Internet Travel Business)
In the Internet travel business, e-tabinet.com and its subsidiaries have received a large number of positive
comments from many highly satisfied customers for their ability to fulfill increasingly diverse and sophisticatedneeds, amid a proliferation of travel products and services. The crucial factor behind this success is thate-tabinet.com has been able to build a solid structure as Japan’s only Internet-based travel agency offering
customized services with a carefully chosen staff of highly experienced registered “travel concierges” (travel
consultants).
In 2015, e-tabinet.com launched a specialized site for inbound tourists visiting Japan from abroad, andimplemented search engine optimization with a focus on Asia. The number of tourists visiting Japan is projected to increase by 14% to 32 million by the end of the fiscal year ended November 30, 2019, which is
expected to lead to shortages in accommodation facilities. Against this backdrop, in cooperation with Group
company Jitsugyo no Nihon Sha, Ltd., e-tabinet.com set up a new dedicated skiing website in English featuring 204 ski fields in Japan to address the strong demand for this information among information for inboundtourists visiting Japan. Additionally, Gloria Tours Inc., a company specializing in sending Paralympic athletes
to various events and organizing numerous international para-sports tournaments, will increase its focus on
the para-sports market. Along with the concierge business of Web travel Co., Ltd. (“Web travel”), e-tabinet.
com seeks to build a niche market base that most general travel agencies would find difficult to serve.
Meanwhile, the number of registered travel concierges has grown steadily, but with a significant amountof the concierges churned, the number was decreased slightly to 440 as of September 30, 2018. In addition,e-tabinet.com has been advancing the crowdsourcing business as a platform for concierges to make themost of their unique talents in areas other than travel. By fostering a stronger sense of community andbelonging among concierges, e-tabinet.com will work to recruit and retain talented personnel.
The business alliance with SAISON UC Card, which has been in place since February 2018, is more than asupple advertising agreement, with the business alliance regarding travel concierges being positioned as afunction of the card itself. This has encouraged even greater social trust in Web travel’s concierge service,
and contributed to an increase in requests for travel estimates and orders.
Overseas travel business sales were ¥2,215 million, centered on standard round trip packages to Europe
and honeymoon packages, and domestic travel business sales were ¥170 million. As the number of requests
for travel estimates from customers began to recover slightly, the number of requests for travel estimates on
the Web travel website increased by 2% year on year. For the e-tabinet.com website, the number of requests
for travel estimates remained level year on year. However, as a result of measures to enhance order rates, thenumber of orders received increased by 16% year on year, and the gross profit margin was maintained at
14%. The total number of staff handling requests also increased by 12% year on year to 7,438.
As a result, segment sales in the fiscal year ended November 30, 2018 were ¥2,367 million, up 8.4% year
on year. Segment profit was ¥38 million, compared with segment loss of ¥2 million in the ­previous fiscal year.

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Sustainability

Financial Section

Corporate Data

Analysis of Operating Results and Financial Position(Brand Retail Platform Business)[Financial Position]

In its stores business, TITICACA had 93 stores as of October 31, 2017, opened two stores in 2018
(Yokohama World Porters, Aeon Mall Sapporo Hassamu) and closed one store (Aeon Mall Nagoya DomeMae) leaving 94 stores as of the end of October 2018. In the e-commerce business, the Company expanded
its six-store lineup including its own online stores to an eight-store lineup by opening stores on au Wowma !
(former Wowma !) and Alinoma in fiscal 2018. The Company also continued to promote structural reforms
such as closing unprofitable stores and revising personnel structures.
Moreover, in its sales measures, the Company, Japanese actress Alice Hirose and TITICACA introduced asecond round to their collaboration effort in 2018, opening a stall at the Aichi Block Conference Tahara
Conference held by the Junior Chamber International Japan, where visitors could listen in person to Alice
Hirose talking about her experiences of overseas cooperation activities. One of the objectives of the conference is to stimulate interest in overseas cooperation among young people and inspire them to take action.
TITICACA sold collaboration T-shirts and tote bags as an immediate form of international collaboration. ¥500
from each unit sold was donated to social contribution organizations supported by Alice Hirose. Purchases ofthe merchandise leads to future happiness.
In fiscal 2019, the Company will continue to expand its customer contacts through social media and its
own app in an effort to expand the customer base. In addition, from a perspective of staff development, theCompany will work to enhance its manuals and education systems, and to stabilize earnings.

(Assets)

As a result, segment sales in the fiscal year ended November 30, 2018 were ¥6,445 million, up 8.7%
year on year. Segment loss was ¥460 million, compared with segment loss of ¥71 million in the previous
fiscal year.

(Cryptocurrency and Blockchain Business)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 crypto­
currency 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
capital efficiency. In addition, the companies are considering investment operations aimed at accumulatingsmall returns from margins while mitigating risk. In these and other 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, segment sales in the fiscal year ended November 30, 2018 were ¥1,326 million. Segment profit
was ¥1,320 million.

Total assets were ¥9,302 million as of November 30, 2018, a decrease of ¥2,229 million from a year earlier.
The main components of this change were decreases of ¥1,500 million in cash and deposits, ¥669 million inadvance payments—trade, and ¥1,033 million in investment securities, and increases of ¥1,000 million in
short-term loans receivable and ¥317 million in long-term loans receivable.

(Liabilities)
Total liabilities were ¥5,349 million, a decrease of ¥1,656 million from a year earlier. The main components ofthis change were decreases of ¥1,165 million in current portion of convertible bond-type bonds with shareacquisition rights, and ¥471 million in interest-bearing debt*.

(Net Assets)
Total net assets were ¥3,953 million, a decrease of ¥572 million from a year earlier. The main contributing
factors were decreases of ¥522 million in retained earnings, and ¥77 million in valuation difference on­available-for-sale securities.
* Interest-bearing debt is the sum of short-term loans payable, current portion of long-term loans payable and long-term loans payable.

[Cash Flows]
Cash and cash equivalents (“cash”) at November 30, 2018 were ¥1,022 million, a decrease of ¥1,506 ­million
from the previous fiscal year-end.
Cash flows during the fiscal year under review and analysis of the main components are as follows:(Cash Flows from Operating Activities)
Net cash provided by operating activities was ¥981 million, compared with net cash used in operating­activities of ¥1,388 million in the previous fiscal year. The primary reasons were impairment loss of ¥1,110
million, decreased in cryptocurrencies of ¥751 million, and advance payment of ¥667 million. These factors
were partly offset by an increases in notes and account receivable—trade of ¥926 million and a gain in salesof investment securities of ¥705 million.

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Financial Section

Corporate Data

Analysis of Operating Results and Financial Position(Cash Flows from Investing Activities)
Net cash used in investing activities was ¥1,099 million, compared with net cash provided by investing­activities of ¥3,929 million in the previous fiscal year. This was mainly due to payment of ¥3,112 for purchaseof cryptocurrencies, payment of ¥320 million for purchase of investment securities, payment of ¥960 million
for purchase of intangible assets, and an increase in long-term loans receivable of ¥760 million, the main
factors reducing cash. These cash outflows were partly offset by proceeds from sale of cryptocurrencies of¥1,961 million and proceeds from sale of investment securities of ¥1,998 million.

(Cash Flows from Financing Activities)
Net cash used in financing activities was ¥1,389 million, compared with net cash used in financing activitiesof ¥1,851 million in the previous fiscal year. This was mainly due to payment of long-term loans payable of¥1,055 million and payments for redemption of bonds of ¥1,165 million, the main factors reducing cash.
These cash outflows were partly offset by proceeds from short-term loans payable of ¥241 million, proceedsfrom long-term debt of ¥392 million and proceeds from issuance of bonds with share acquisition rights of¥200 million, the main factors increasing cash.

[Risk Information]
The Group presents the main factors that could pose a risk to its business development and related activities.
From the standpoint of actively disclosing information to investors, the Group discloses matters that could
have a material impact on investor judgment, even external factors beyond the control of the Company andmatters that may not necessarily be considered as business risks.
The items outlined below do not represent an exhaustive listing of all risks affecting investment in the
Company’s stock.
The items in the following section that concern the future were assessed by the Group based on­information available as of November 30, 2018. They are subject to uncertainties and may differ from
actual results.

(1) Business Characteristics
1. Group Driven by Research and Development
The Group primarily comprises companies driven by research and development (R&D), and its source ofcompetitiveness is the constant internal accumulation of new technology. If the Group has difficulty securing
and nurturing competent technicians, or suffers an outflow of competent human resources, this could have amaterial impact on the Group’s business and operating results.

As a policy, the Group adapts to technological and other advancements through its R&D activities.
However, the Group may not be able to adapt promptly to changes in the business environment if they werebrought about by new unforeseen technologies. Adapting to changes in the business environment may also
involve large sums of R&D expenses and other expenses. Such events could have a material impact on theGroup’s business and operating results.
2. Fabless Manufacturing
The Group outsources the manufacturing of mobile telecommunications devices and other products to alarge extent. As a result, business conditions at the outsourcing contractors, as well as the Group’s cultivation
and retention of outsourcing contractors and the Group’s in-house manufacturing capabilities, could have amaterial impact on the Group’s business and operating results.
3. Relationship with Telecommunications Service Providers
The Group’s core products are data telecommunications terminals and other mobile devices developed andmanufactured based on the specifications of telecommunications service providers. Furthermore, in thesetransactions the telecommunications service providers purchase all of the contracted output. As a result,changes in the content of the contracts, sales prices, and transaction terms with the telecommunications
service providers, as well as the success or failure of renewing the contracts, could have a material impact on
the Company’s business and operating results.
4. Changes in Demand for Mobile Devices
Data telecommunications terminals and other mobile devices developed and manufactured by the Groupare subject to severe product competition. As such, the trend in their demand has a tendency to change
dramatically depending on such factors as technological advancement and the status of the product com­
petition. The business is also characterized by the short turnaround in launching new products. As a policy,
the Group seeks to adapt to changes in demand with fabless manufacturing. However, the Group is currently
dependent on specific products because it develops and manufactures a limited variety of products.
Consequently, drastic changes in demand and falls in the sale price of mobile devices brought about byfactors such as business strategies of competitors and changing customer needs could have a material
impact on the Group’s business and operating results.

(2) Dependence on a Specific Business Partner
In the fiscal year ended November 30, 2018, the Group outsourced the manufacturing of mobile devices to
TRICHEER TELECOMMUNICATION LTD. Consequently, changes in the business transaction policy andmanufacturing framework between the Group and this contractor could have a material impact on theGroup’s business and operating results.

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Financial Section

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Analysis of Operating Results and Financial Position(3) Risks Related to Protection of Intellectual Property Rights
The Group is driven by R&D and is the rightful owner of numerous intellectual properties that have been
submitted and registered for patent and registered with design rights and trademarks. The Group also strives
to make sure that the products it develops and manufactures do not infringe on the intellectual property
rights of third parties, and understands that there are no infringements at present. However, the possibility of
infringing on the intellectual property rights of a third party in the future cannot be eliminated. Should theGroup infringe on the intellectual property rights of a third party, it may experience legal action seeking damages, a decline in credibility, a deterioration in its corporate brand, and so forth, which could have a material
impact on the Group’s business and operating results. Conversely, should the intellectual property rights of
the Group suffer infringement by a third party, the Group would be obliged to divert management resources
toward taking the party to court and other defensive measures, which could have a material impact on theGroup’s business and operating results.

Group takes ample precautions such as limiting access to the personal information and strengthening the internal
control system by periodically conducting internal audits. However, should a leak in personal information occur,
the Company may be in violation of laws and regulations as well as its confidentiality agreements with clientcompanies. As a result, the Group may receive claims for damages from client companies and other customers
as well as experience a decline in its credibility with corporate clients and society, a deterioration in its corporate
brand value, and so forth, which could have a material impact on the Group’s business and operating results.

(7) Corporate Organization
In order to continue growing while strengthening the internal control system further at the same time, theGroup sees a need to bolster competent human resources, as well as further enhance the organization of its
administrative divisions, at each stage of business development. Consequently, should the Group be unable
to bolster human resources as required at each stage of business development, or suffer an outflow of competent human resources, this could have a material impact on the Group’s business and operating results.

(4) Quality Control
The Group must recall and repair the mobile devices it develops and manufactures in the event of a productmalfunction. Moreover, should an accident caused by defective products occur, the Company may be­subject to claims for damages under the Product Liability Act.
In order to prevent such product defects and accidents from occurring, the Group has developed a quality
control system that also encompasses the management of outsourcing contractors and suppliers to improve
product safety and promote compliance with laws and regulations. In addition, the Group also subscribes to
product liability insurance as a contingency in the event of product accidents. However, should a serious
product defect or incident violating the Product Liability Act occur, the Group may have to bear product recall
and repair expenses and payment of damages, as well as experience a decline in its credibility with corporateclients and society, a deterioration in its corporate brand value, and so forth, which could have a material
impact on the Group’s business and operating results.

(5) Statutory Regulations on Telecommunications
The Group mainly develops products regulated by the Radio Act of Japan. As a result, trends regarding theRadio Act and other statutory regulations on telecommunications could have a material impact on theGroup’s business and operating results.

(6) Protection of Personal Information
The Group holds the personal information and so forth of its customers in the conduct of its business of sellingand providing product support and so forth for mobile communication devices and selling apparel and generalmerchandise. To prevent the acquired personal information and so forth of customers from leaking externally, the(8) Relationship with the Parent Company
FISCO Ltd. (listed on the Tokyo Stock Exchange JASDAQ Growth) is the parent company of the Company,
holding 48.51% of the voting rights both directly and indirectly as of November 30, 2018.
The Company therefore belongs to a parent company group with FISCO at the center. As a result, changes
in the parent company group’s management policy and other circumstances could have a material impact on
the Company’s business and operating results.

(9) Fluctuations in the Foreign Exchange Market
The Company subcontracts the manufacturing of some of its products to overseas manufacturers and soforth to enhance price competitiveness and profitability. As a result, business transactions denominated inforeign currencies may be affected by fluctuations in the foreign exchange market. To reduce this impact, theCompany strives to make use of instruments such as foreign exchange forward contracts, and to reconfigure
its product portfolio. However, trading conditions and foreign exchange market trends in the future could
have a material impact on the Group’s business and operating results.
Also, fluctuations in the foreign exchange markets could impact the Group’s operating results and financial
position since the Group has assets overseas. Further, in the event that changes in legislation or government
policies in Japan or overseas hinder smooth remittances, the Group’s business operations and accounting
processes may be affected, which could in turn impact the Group’s operating results and financial position.

37

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Analysis of Operating Results and Financial Position(10) Profitability of System Development Projects(14) Losses from Store Relocations and Closings

When undertaking system development, the Group estimates in advance the total number of work hours(labor hours) needed to meet customer requirements and determines the costs necessary to create thesystem as part of its activities to win orders. However, if problems arise during system development andwork hours exceed the budgeted time, the Group could end up bearing that cost.
Additionally, the Group may be called on to bear the cost of an increase in labor hours even if it relates tospecification changes made during development.
Further, the Group may incur the cost of fixing defects that arise after the developed system has beendelivered to the customer and the customer has finished inspecting it and determined it to be free of issues.
The Group therefore strives to increase the accuracy of estimates at the time of the contract by creating
detailed estimates for each development process (phase), and taking other steps to keep the actual numberof labor hours in line with the budgeted number. While the Group gives sufficient consideration to project
profitability, profitability could deteriorate due to factors such as development projects becoming large inscale and escalating competition to win orders.

The Group may relocate or close stores due to tenancy agreements expiring. In that event, costs will arise
for the removal of property, plant and equipment to restore the leased space to its original condition, newinvestments in relocation sites, and so forth. If store relocations and closings increase in the future, theposting of a large amount of losses associated with the removal of property, plant and equipment, as well as
selling, general and administrative expenses would be expected, which could affect the Group’s businessperformance and financial position.

(11) Investments and Loans
To expand business going forward, the Group may undertake M&As or business investments targeting­alliances, or engage in joint venture business development, subsidiary establishment, or capital expendituresin Japan or overseas.
The Group’s policy in making investments and loans is to thoroughly evaluate the recoverability and risks ofthose prospective investments and loans in advance. However, it is sometimes difficult to accurately project
the impact on the Group from business conditions at investees and should investments or loans become
unrecoverable, the Group’s operating results and financial position could be affected.

(12) Merchandise Purchases
The Group company TITICACA mostly sells imported products. Therefore, events in relevant countries suchas unanticipated changes in legislation, political uncertainty, major natural disasters, social unrest, and sharp
fluctuations in foreign exchange rates could affect TITICACA’s merchandise supply framework and theGroup’s operating results and financial position.

(13) Impairment of Property, Plant and Equipment
The Group recognizes impairment losses on the portion of the assets of stores that are ­persistently unprofitable or that it has decided to relocate or close for which the book value of property, plant and equipment isdetermined to be unrecoverable. In the event of an increase in such unprofitable stores going forward, theposting of significant impairment losses would be expected, which could affect the Group’s business­performance and financial position.

(15) Investment in Cryptocurrency
The Group faces risks associated with investment in cryptocurrency, including price movements in crypto­
currency, the risk of losses stemming from the inability to trade in the cryptocurrency markets or being forced
to trade on terms that are less advantageous than normal due to factors such as turmoil in the cryptocurrency
markets. Other risk factors include disruptions in derivative trading systems for cryptocurrency, system disruptions and business failure of cryptocurrency exchanges, and theft due to unauthorized access to servers.
The Group makes every effort to rigorously implement risk management. However, if the aforementioned risksmaterialize, the Group could incur higher costs to deal with the issue or suffer a decline in its credibility, which
could have a material impact on the Group’s business results and financial condition.

(16) Disasters, etc.
In the event that a major natural disaster or accident in the vicinity of stores, warehouses, and so forthcauses physical damage to such facilities; disrupts sales, distribution, purchasing, or other business activities;
or causes personal injury, the Group’s business performance and financial position could be affected.

38

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Consolidated Financial Statements[Consolidated Balance Sheets](Thousands of yen)(Thousands of yen)
Fiscal 2017 (As of
November 30, 2017)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable—trade
MerchandiseWork in process
Raw materials
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
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net

Fiscal 2018 (As of
November 30, 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¥ 1,028,774
525,801
1,146,284
266,947
11,14921,60854,964
300,864
1,015,000
2,030
161,121(6,249)4,528,296*1 1,523,941*3 (1,174,291)
349,650
89,553*3 (65,410)
24,142
1,119,713*3 (950,393)
169,320*1 1,612,880*3 (1,294,686)
318,194
125,524*3 (104,664)
20,8591,181,950*3 (974,567)
207,382

Land
Construction in progress
Total property, plant and equipment
Intangible assets
Software
Goodwill
Trademark rights
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term accounts receivable—other
Long-term loans receivable
Guarantee deposits
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

Fiscal 2017 (As of
November 30, 2017)

Fiscal 2018 (As of
November 30, 2018)*1 192,132–
735,245*1 192,865
16,872756,173

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

43,073
156,652
4,140
12,151
216,017*1, 4 3,531,593
163,181396,140599,245
29,292(219,321)
4,500,130
5,705,358¥11,532,367*1, 4 2,282,185
106,853
713,930
623,576
22,653(162,783)
3,802,319
4,774,510¥ 9,302,807

39

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Consolidated Financial Statements(Thousands of yen)(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 share acquisition 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 assets
Provision for bonuses
Provision for product warranties
Provision for sales returns
Provision for loss on store closing
Provision for point card certificates
Other
Total current liabilities
Non-current 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 non-current liabilities
Total liabilities

Fiscal 2018 (As of
November 30, 2018)¥   600,601*5 191,660¥  576,086*5 383,200

1,165,000*1 836,382
251,417350,077
24,50916,601
268,271
28,7802,076
67,796
106,000
13,376
16,592
8,041
48,2503,995,438−*1 587,606
177,011
164,393
43,78436,438360,875−−
74,16566,0004,908−
12,65052,1322,539,253–*1 1,637,685
29,708360,907
767,129
215,450
3,010,881
7,006,319

200,000*1 1,223,263
31,333377,087
837,642
141,106
2,810,433
5,349,686

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
Please refer to page 47 for *1 and *3 to 5

Fiscal 2017 (As of
November 30, 2017)

Fiscal 2018 (As of
November 30, 2018)

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

10,0002,770,954
412,939(66,515)
3,127,378

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

61,933(78)
30,38992,24427,502705,994
3,953,120¥9,302,807

40

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Consolidated Financial Statements[Consolidated Statements of Income and Consolidated Statements ofComprehensive Income][Consolidated Statements of Income](Thousands of yen)(Thousands of yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income (loss)
Non-operating income
Interest income
House rent income
Foreign exchange gains
Share of profit of entities accounted for using equity method
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 fees
Loss on sale of cryptocurrencies
Loss on valuation of cryptocurrencies
Other
Total non-operating expenses
Ordinary 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
Other
Total extraordinary income

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥12,198,921*1 7,604,901
4,594,019*2, 3 5,508,575(914,555)¥11,125,302*1 5,764,715
5,360,587*2, 3 4,940,868
419,718

12,881
4,293
43,082
43,691–
28,428132,377

27,207−2,424−
14,602
24,51668,75071,540–49,196––37,336
158,072(940,251)

40,35038,696
16,281
201,021
192,004
47,438535,792(47,323)

888,152*4 553
2,968
25,6052,973,909
503
3,891,693

−
*4 31
−
207,547
705,622−913,201

Extraordinary losses
Loss on retirement of property, plant and equipment
Loss on valuation of investment securities
Loss on sales of subsidiaries’ stocks
Impairment loss
Loss on sales of non-current assets
Loss on liquidation of subsidiaries
Other
Total extraordinary losses
Profit (loss) before income taxes
Income taxes
Income taxes—deferred
Total income taxes
Profit (loss)
Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)*6 6,912–
450*7 1,830,642*5 81,790
4,145
2,708
1,926,649
1,024,792
157,377
8,856
166,233
858,559(44,033)¥   902,592*6 10,457
10,366−*7 1,110,179*5 −−−
1,131,003(265,125)
40,285100,523
140,809(405,935)
68,034¥ (473,969)

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥  858,559¥(405,935)

125,199(1,188)39,020(77,528)
(40)
4,377

427
163,458¥1,022,017(2,373)(75,564)¥(481,499)¥1,065,710(43,692)¥(549,514)
68,014

Please refer to page 48 to 49 for *1 to 7

[Consolidated Statements of Comprehensive Income]

Profit (loss)
Other comprehensive income (loss)
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
for using equity method
Total other comprehensive income (loss)
Total comprehensive income (loss)
Comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests(Thousands of yen)41

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Consolidated Financial Statements[Consolidated Statements of Changes in Net Assets]
Fiscal 2017 (From December 1, 2016 to November 30, 2017)(Thousands of yen)
Shareholders’ equity

Capital stock

Capital surplus

Retainedearnings

Balance at beginning of the fiscal year
¥ 1,819,748
Changes during the fiscal year
Issuance of new shares
Transfer to legal capital surplus or other capitalsurplus from capital stock due to capital reduction (1,809,748)
Profit attributable to owners of parent
Purchase of treasury stock
Change in scope of equity method
Change in ownership interest of parent due totransactions with non-controlling interests
Change of scope of consolidation
Net changes of items other than shareholders’ equity
Total changes during the fiscal year
(1,809,748)
Balance at end of the fiscal year¥     10,000¥1,776,350¥ 33,104

Treasury
stock

Total
shareholders’equityValuationdifference on
available-forsale securities

Deferred gains
or losseson hedges

Foreigncurrencytranslation
adjustments

Total accumulated
othercomprehensive
incomeSubscription
rights tosharesNon-controllinginterests

Total
net assets¥(107,897)¥3,521,304¥ 14,695¥ 1,131¥56,533¥ 72,359¥ 37,539¥169,334¥3,800,538

124,831
1,809,748

902,592(183,930)(756,498)
994,150¥2,770,501(12,982)

34,720902,592¥935,697

Accumulated other comprehensive income

21,738¥ (86,159)

124,831

124,831–
902,592(12,982)––
902,592(12,982)–(183,930)(721,778)–
108,733¥3,630,038(183,930)(721,778)
616,776
725,509¥4,526,047

125,199
125,199¥139,894(1,188)(1,188)¥   (57)

39,44839,448¥95,981

163,458
163,458¥235,818(15,327)(15,327)¥ 22,211

468,644468,644¥637,979

Fiscal 2018 (From December 1, 2017 to November 30, 2018)(Thousands of yen)
Shareholders’ equity

Balance at beginning of the fiscal year
Changes during the fiscal year
Issuance of new shares
Transfer to legal capital surplus or other capitalsurplus from capital stock due to capital reduction
Loss attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Change in scope of equity method
Change in ownership interest of parent due totransactions with non-controlling interests
Change of scope of consolidation
Net changes of items other than shareholders’ equity
Total changes during the fiscal year
Balance at end of the fiscal year

Capital stock

Capital surplus

Retainedearnings

Treasury
stock

Total
shareholders’equity¥10,000¥2,770,501¥ 935,697¥(86,159)¥3,630,038(48,788)453¥2,770,954(522,757)¥ 412,939

Deferred gains
or losseson hedges

Foreigncurrencytranslation
adjustments

Total accumulated
othercomprehensive
incomeSubscription
rights tosharesNon-controllinginterests

Total
net assets¥ 139,894¥(57)¥  95,981¥ 235,818¥22,211¥637,979¥4,526,047−

16,4503,193−(473,969)−
18,456(45,594)−(473,969)−
18,456(45,594)

19,644¥(66,515)(1,551)−−(502,659)¥3,127,378(1,551)−(70,268)(572,927)¥3,953,120(1,551)−¥10,000

Valuationdifference on
available-forsale securities−(473,969)
2,005

Accumulated other comprehensive income(77,960)(77,960)¥ 61,933

(20)
(20)
¥(78)

(65,591)(65,591)¥  30,389(143,573)(143,573)¥ 92,244

5,290
5,290
¥27,502

68,01468,014¥705,994

42

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Consolidated Financial Statements[Consolidated Statements of Cash Flows](Thousands of yen)(Thousands of yen)

Cash flows from operating activities
Profit (loss) profit before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts(Decrease) increase in provision for bonuses
Increase (decrease) in provision for product warranties(Decrease) increase in net defined benefit liability
Share-based compensation expenses
Interest and dividend income
Interest expenses
Foreign exchange (gains) losses
Share of (profit) loss of entities accounted for using equity method
Loss on valuation of investment securities
Gain on sales of investment securities
Loss on valuation of cryptocurrencies
Loss on sale of cryptocurrencies
Gain on sales of shares of subsidiaries
Loss on retirement of property, plant and equipment
Loss (gain) on sales of property, plant and equipment
Gain on change in equity
Decrease (increase) in notes and accounts receivable—trade
Decrease in cryptocurrencies
Increase in inventories(Increase) decrease in advance payments(Increase) decrease in accounts receivable—other
Decrease in deposits paid
Increase (decrease) in notes and accounts payable—trade
Decrease in accounts payable—other
Increase (decrease) in accrued expenses
Increase in advances received
Increase in deposits received
Other, net
SubtotalInterest and dividends income received
Interest paid
Income taxes paid
Net cash (used in) provided by operating activities

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥ 1,024,792
212,551
1,830,642
254,073
134,212(56,052)
14,000(276)
2,088(12,883)
71,540(2,970)(43,691)–(2,973,909)––(887,702)
6,912
81,236(25,605)
86,678–(214,177)(470,126)(209,323)–
149,635(155,899)
142,874
11,658–(226,413)(1,256,135)
6,496(80,004)(58,396)(1,388,039)¥  (265,125)
206,046
1,110,179
53,388(103,385)
6,369(40,000)
1,624
5,290
(28,409)40,350576
38,696
10,366(705,622)
192,004
201,021–
10,457(31)(207,547)*2 (926,553)
751,992(104,188)
667,465
118,615
146,268(24,411)(67,749)(204,629)
92,603
2,768
39,276
1,017,708
28,157(54,670)(10,179)
981,015

Cash flows from investing activities
Purchase of cryptocurrencies
Proceeds from sales of cryptocurrencies
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments for asset retirement obligations
Purchase of investment securities
Proceeds from sales of investment securities
Payments for sales of investments in subsidiaries
resulting in change in scope of consolidation
Proceeds from purchase of investments in subsidiaries
resulting in change in scope of consolidation
Proceeds from sales of investments in subsidiaries
resulting in change in scope of consolidation
Payments for sales of investments in subsidiaries
resulting in change in scope of consolidation
Increase in short-term loans receivableCollection of short-term loans receivable
Increase in long-term loans receivableCollection of long-term loans receivable
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payments for distribution of dividends
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net (decrease) increase 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 subscription rights to shares
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 year
Please refer to page 51 for *1 and 2

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)––(133,698)
9,456(97,002)(27,228)(2,797,907)
6,491,645(3,112,542)
1,961,815(278,180)55(960,887)(33,677)(320,864)
1,998,795(490,371)–

281,601–

577,075–(60,964)(20,000)
330,000(344,918)
611,709(136,080)
260,893(524,300)
3,929,054–––*2 (760,000)
442,000(64,927)
32,977–(3,695)(1,099,133)(295,340)
342,804(2,059,670)(300,000)–*2 241,540
392,800(1,055,493)(1,165,000)
200,000

244,999(12,982)–––(4,011)

229,3202,460(1,688)(1,389,394)
690(1,506,821)
2,529,595*1 ¥ 1,022,774(856)(1,104)(1,851,972)(41,113)647,928
1,881,667*1 ¥ 2,529,595

43

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes
(Notes to the Consolidated Financial Statements)
1. Scope of consolidation(1) Number of consolidated subsidiaries: 14(2) Names of consolidated subsidiaries:
TITICACA, Co. Ltd., Gloria Tours Inc., NCXX Inc., Care Dynamics Limited, e-tabinet.com, Web travel Co.,
Ltd., e frontier, Inc., Versatile Inc., Versatile Milano S.R.L., MEC S.R.L. SOCIETA’ AGRICOLA, NCXXInternational Limited, FACETASM, NCXX Premium Group, Inc., NCXX Farm Holdings, Inc.
NCXX Premium Group, Inc. and NCXX Farm Holdings, Inc. were established by incorporation type split
during fiscal 2018 and have therefore been included in the scope of consolidation. FISCO International(Cayman) Limited and FISCO International (Cayman) L.P. were liquidated and wound up during fiscal 2018and have therefore been excluded from the scope of consolidation.
(3) Number of non-consolidated ­subsidiaries: 2(4) Names of non-consolidated subsidiaries:
Webtravel Asia & Pacific Pty Limited
NCXX Racing, Inc. (the company name was changed from IOTA Inc. on July 5, 2018)(Reasons for exclusion from the scope of consolidation)
Because total assets, net sales, net income (loss) (proportional to equity interest), retained earnings(­proportional to equity interest) and other metrics do not have a material impact on the consolidated­financial statements.

2. Application of the equity method(1) Number of non-consolidated subsidiaries and affiliates not accounted for by the equity method: 3(2) Names of non-consolidated subsidiaries and affiliates not accounted for by the equity method:
Webtravel Asia & Pacific Pty Limited, TICA HK Co. Limited, NCXX Racing, Inc. (the company name waschanged from IOTA Inc. on July 5, 2018)
Former equity method affiliated NCXX Solutions Inc. was excluded from the scope of application of the equity
method in fiscal 2018 following a share exchange.
CAICA Inc. and its subsidiaries were excluded from the scope of application of the equity method in fiscal
2018 following the sale of the Company’s holdings of CAICA Inc. shares.
(Reasons for not applying the equity method)
Because total assets, net sales, net income (loss) (proportional to equity interest), retained earnings(­proportional to equity interest) and other metrics do not have a material impact on the consolidated­financial statements.

3. Fiscal year of consolidated subsidiaries
The companies with fiscal years that end on different dates than the end of the Company’s fiscal year are
as follows:
Name

TITICACA, Co. Ltd.
e frontier, Inc.
FACETASM

Fiscal year-end

October 31*1
October 31*1
October 31*1

*1 The financial statements as of the fiscal year-end of the consolidated subsidiary are used. The fiscal year-end differs from the endof the Company’s fiscal year. However, the accounts have not been adjusted as there were no significant discrepancies upon theelimination of receivables, obligations and transactions among the consolidated companies. If significant discrepancies arise due toa difference in the fiscal year-end from the end of the Company’s fiscal year, the accounts are adjusted upon consolidation.

4. Accounting policies(1) Valuation standards and accounting treatment for important assets
1. Investment securities(i) Subsidiaries’ stocks and affiliates’ stocks
Stated at cost determined by the moving average method.
(ii) Investment securities—other
With market quotations	 Stated at fair value based primarily on market prices as of the fiscal year-end (with all valuation­differences, net of taxes, reported in a separate component of net assets, with the cost of securities
sold calculated by the moving average method).
Without market quotations
	  Stated at cost determined by the moving average method.
2. Inventories
Valued at cost (book value is written down when profitability declines).
(i) Merchandise and finished goods
Retail method(ii) Work in process
Specific identification method(iii) Raw materials and supplies
Mainly the moving average method

44

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate DataNotes(iv) Cryptocurrency held for trading purposes
Those that have active markets
	  Stated at fair value (Cost of sales is calculated by the moving average method).
Those that do not have active markets
	  Stated at cost by the moving average method(2) Method for depreciating and amortizing important depreciable assets
1. Property, plant and equipment
Property, plant and equipment are mainly depreciated using the declining-balance method. However, thestraight-line method of depreciation is used for buildings, excluding facilities attached to buildings, acquiredon or after April 1, 1998, and facilities attached to buildings and structures acquired on or after April 1, 2016.
The main estimated useful lives are as follows:   Buildings and structures:
5 to 42 years   Machinery, equipment and vehicles: 2 to 10 years   Tools, furniture and fixtures:
2 to 15 years
2. Intangible assets
In-house software is amortized by the straight-line method based on the estimated in-house useful life of 3
or 5 years.
In addition, software intended for commercial sale is amortized by the straight-line method based on theremaining estimated effective sales period of 3 years.
Trademarks are amortized by the straight-line method based on an amortization period of 10 years.

(3) Accounting for significant allowances
1. Provision for product warranties
A provision for product warranties is provided to cover product warranty costs that may be incurred after
products are sold. The provision for product warranties is determined on the basis of the estimated product warranty cost.
2. Provision for bonuses
A provision for bonuses is provided to cover the costs of bonuses paid to employees of domestic consolidated subsidiaries. The provision for bonuses is determined on the basis of the amount projected to be
paid in fiscal 2018.

3. Provision for loss on store closing
Domestic consolidated subsidiaries record the estimated penalties for breach of contract as a provision forloss on store closing to prepare for the cost of cancelling contracts for stores scheduled to close in thenext fiscal year.
4. Allowance for doubtful accounts
In order to prepare for losses due to uncollectible receivables, the Company has recorded the estimateduncollectible amounts as an allowance for doubtful accounts. For general receivables, an amount isrecorded based on the historical default rate. For specific receivables for which there are concerns aboutcollectability, an estimated amount deemed uncollectible is recorded based on consideration of the collectability of each individual account.
5. Provision for sales returns
Domestic consolidated subsidiaries record estimated sales returns as a provision for sales returns in orderto prepare for any returns of products after they are sold.
6. Provision for point card certificates
To prepare for the burden of future use of points, an estimate of the amount to be used from among theconverted balance of unused, awarded points is recognized as necessary and recorded.

(4) Accounting method for retirement benefits
Liabilities related to retirement benefits are recorded to cover the costs of the retirement benefits of employees,
based on the projected retirement benefit obligations at the fiscal year-end. Retirement benefit obligations arecalculated using the simplified method.
In addition, a new, elective defined contribution pension plan was introduced in November 2003.
Employees who elected to join the new plan have been transferred out of the existing lump-sum retirement
benefit payment plan into the defined contribution pension plan.

(5) Method of calculating important revenues and expenses
Basis for calculating sales and cost of sales on contracted development
Completed contract basis

45

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes(6) Standards for translating important foreign currency denominated assets and liabilities
into Japanese yen
Foreign currency denominated receivables and obligations are translated into Japanese yen using the spot
exchange rate at the consolidated fiscal year-end, and translation gains and losses are charged to income.
The assets and liabilities, as well as the revenues and expenses, of foreign subsidiaries and other such­entities are translated into Japanese yen using the spot exchange rate at the fiscal year-end, and translation
gains and losses are recorded as foreign currency translation adjustments under net assets.

(7) Accounting methods for significant hedging
a. Hedge accounting methods
The Company has primarily adopted the deferred hedge accounting method. The allocation method isapplied to foreign currency forward contracts that meet the requirements for allocation. Special treatment
is applied to interest rate swaps that meet the requirements for special treatment.
b. Hedge instrument and hedge targets
Hedge instruments: Interest rate swaps, foreign currency forward contracts
Borrowings, scheduled transactions denominated in foreign currencies
Hedge targets:c. Hedging policy
Hedging is limited to the scope of target obligations in order to mitigate interest rate fluctuation risk andforeign exchange fluctuation risk and improve the financial balance.
d. Method of evaluating hedging effectiveness
The Company compares cumulative market fluctuations in the hedge target and the hedge instrument
over the period from the start of hedging to the hedging effectiveness evaluation date, and arrives at anevaluation based on the amount of changes and other factors with respect to both the hedge target andhedge instrument.
The evaluation of hedging effectiveness is omitted for interest rate swaps and other instruments that
qualify for special treatment.

(10) Other notes to the consolidated financial statements
1. Accounting method for consumption taxes
National and local consumption taxes are accounted for by the net tax method.
2. Gains and losses related to cryptocurrency transactions
Gains and losses related to transactions of cryptocurrency held for trading purposes are presented in net
sales on a net basis.
3. Consolidated taxation
The Company has adopted consolidated taxation.

(Additional Information)(1) Matters concerning the status of cryptocurrency
1. Policy regarding cryptocurrency
Giving first priority to preserving the safety of principal, the Company invests in cryptocurrency, taking into
consideration liquidity, profitability and risk diversification.
2. Content and risks of cryptocurrency
Cryptocurrency is exposed to the risk of fluctuations in market prices.
3. Risk management system for cryptocurrency(i)	Market risk
Market risk is managed by monitoring market prices in a timely manner.
(ii)	Credit risk
Credit risk is managed by monitoring the balances of each borrower.

(2) Matters concerning the fair value of cryptocurrency
The carrying amounts in the consolidated balance sheets, fair values and their differences are as follows. The
table below does not include cryptocurrencies whose fair values cannot be reliably determined because they
do not have active markets.
(Thousands of yen)(8) Method and period of amortization of goodwill
The Company reasonably estimates the period over which investment benefits will materialize, and amortizes
goodwill over this period applying the straight-line method.

(9) Scope of cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents in the consolidated statements of cash flows consist of cash on hand, demand
deposits, and short-term investments that are readily convertible to known amounts of cash and subject toinsignificant risk of change in value and due within three months from the date of acquisition.

Cryptocurrency

Carrying amount

Fair value

Difference¥21,608¥21,608¥–

Note: Measurement of fair value of cryptocurrency
Fair value is stated as the average of the closing prices on the settlement dates of multiple exchanges that the Company uses
frequently.

46

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

(Unapplied Accounting Standards, etc.)(Notes concerning unapplied accounting standards, etc.)
1 Implementation Guidance on Tax Effect Accounting, etc.
· Implementation Guidance on Tax Effect Accounting (ASBJ Guidance No. 28, revised on February 16, 2018,
Accounting Standards Board of Japan)· Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No. 26, final revision on
February 16, 2018, Accounting Standards Board of Japan)(1) Overview
The following revisions to “Implementation Guidance on Tax Effect Accounting” and other documents weremade as necessary based on the original content when responsibility for practical guidance related to tax
effect accounting was transferred from the Japanese Institute of Certified Public Accountants to the
Accounting Standards Board of Japan.
(Main accounting treatments that have been revised)· Treatment of taxable temporary differences related to subsidiaries shares, etc., in the non-consolidated
financial statements· Treatment of recoverability of deferred tax assets for entities in (Category 1)(2) Scheduled adoption date
The Company will adopt the revised accounting standards from the beginning of the fiscal year ending
November 30, 2019.
(3) Impact of the adoption of the revised accounting standards
The Company is currently evaluating the impact of adopting the “Implementation Guidance on Tax EffectAccounting” and other documents on the consolidated financial statements.
2 “Tentative Practical Solution on the Accounting for Virtual Currencies under the Payment Services
Act” (ASBJ Practical Issues Task Force (PITF) No. 38, March 14, 2018, Accounting Standards Boardof Japan)(1) Overview
This solution clarifies tentative treatment regarding accounting treatment and disclosure for cryptocurrency
held by a cryptocurrency exchange operator or cryptocurrency user and cryptocurrencies received from adepositor by a cryptocurrency exchange operator.

(2) Scheduled adoption date
The Company will adopt the accounting standards from the beginning of the fiscal year ending November
30, 2019.
(3) Impact of the adoption of the revised accounting standards
The Company is currently evaluating the impact of adopting the “Tentative Practical Solution on the
Accounting for Virtual Currencies under the Payment Services Act” on the consolidated financial statements.
3 Accounting Standard for Revenue Recognition, etc.
· “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 30, 2018, AccountingStandards Board of Japan)· “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30,
revised on March 30, 3018, Accounting Standards Board of Japan)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB)
have jointly developed a comprehensive accounting standard for revenue recognition. In May 2014,“Revenue from Contracts with Customers” was issued (as IFRS 15 by the IASB and as Topic 606 by the
FASB), with IFRS 15 to be adopted from fiscal years beginning on or after January 1, 2018 and Topic 606
from fiscal years starting after December 15, 2017. In light of this situation, the Accounting Standards Boardof Japan developed a comprehensive accounting standard for revenue recognition and issued it together
with implementation guidance.
The basic policy of the Accounting Standards Board of Japan when developing the accounting standard
on revenue recognition is to determine the accounting standard while incorporating the basic principles of
IFRS 15 as a starting point in order to achieve the benefit of comparability between financial statements fromcompatibility with IFRS 15. Moreover, where there are items to be considered with regard to practices used inJapan to date, alternative treatments have been added within a scope that does not impair comparability.
(2) Scheduled adoption date
The Company is scheduled to adopt the accounting standard from the beginning of the fiscal year ending
November 30, 2022.
(3) Impact of the adoption of the revised accounting standards
The Company is currently evaluating the impact of adopting the “Accounting Standard for Revenue
Recognition” on the consolidated financial statements.

47

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

(Change in Presentation)(Consolidated Balance Sheets)
Guarantee deposits, which were previously included in other under investments and other assets in the fiscal
year ended November 30, 2017, have been presented separately from the fiscal year ended November 30,
2018 due to its increased qualitative importance. The consolidated financial statements for the fiscal year
ended November 30, 2017 have been restated to reflect this change in presentation method.
As a result, the ¥628,537 thousand presented as other under investments and other assets on the consolidated balance sheet as of November 30, 2017 has been restated as guarantee deposits of ¥599,245 thousand and other of ¥29,292 thousand.
Provision for point card certificates, which was previously included in accounts payable—other undercurrent liabilities in the fiscal year ended November 30, 2017, has been presented separately from the fiscal
year ended November 30, 2018 due to its increased qualitative importance. The consolidated financial
statements for the fiscal year ended November 30, 2017 have been restated to reflect this change in­presentation method.
As a result, the ¥259,459 thousand presented as accounts payable—other under current liabilities on the
consolidated balance sheet as of November 30, 2017 has been restated as provision for point card certificates of ¥8,041 thousand and accounts payable—other of ¥251,417 thousand.

(Consolidated Statements of Cash Flows)
Decrease in provision for loss on store closing, increase in other provision, difference on execution of asset
retirement obligations, and decrease in accrued consumption taxes, which were all presented separately
under cash flows from operating activities in the fiscal year ended November 30, 2017, have been included inother for the fiscal year ended November 30, 2018 due to their decreased monetary importance. The consolidated financial statements for the fiscal year ended November 30, 3017 have been restated to reflect thischange in presentation method.
As a result, ¥(47,691) thousand presented as decrease in provision for loss on store closing, ¥143 thousandpresented as increase in other provision, ¥(3,967) thousand presented as decrease in difference on executionof asset retirement obligations, and ¥(3,659) thousand presented as decrease in accrued consumption taxes
under cash flows from operating activities in the consolidated statements of cash flows for the fiscal year
ended November 30, 2017, have been restated as other.

Proceeds from sales of intangible assets, and payments for investments in capital, which were presented
separately under cash flows from investing activities in the fiscal year ended November 30, 2017, have been
included in other for the fiscal year ended November 30, 2018 since they did not occur during the fiscal year
ended November 30, 2018. The consolidated financial statements for the fiscal year ended November 30,
2017 have been restated to reflect this change in presentation method.
As a result, ¥8,273 thousand presented as proceeds from sales of intangible assets and ¥(9,547) thousandpresented as payments for investments in capital under cash flows from investing activities in the consolidated statements of cash flows for the fiscal year ended November 30, 2017, have been restated as other.
Repayments of lease obligations, which was presented separately under cash flows from financing activities
in the fiscal year ended November 30, 2017, has been included in other for the fiscal year ended November
30, 2018 due to its decreased monetary importance. The consolidated financial statements for the fiscal year
ended November 30, 3017 have been restated to reflect this change in presentation method.
As a result, ¥(1,104) thousand presented as repayments of lease obligations under cash flows from financing activities in the consolidated statements of cash flows for the fiscal year ended November 30, 2017, hasbeen restated as other.

(Consolidated Balance Sheets)*1 Collateral assets and collateralized liabilities
Assets pledged as collateral are as follows.
(Thousands of yen)

Buildings
Land
Investment securities
Total

Fiscal 2017 (As of
November 30, 2017)

Fiscal 2018 (As of
November 30, 2018)¥ 12,926
151,097506,781¥670,806¥ 10,907
151,097542,868¥704,873

Fiscal 2017 (As of
November 30, 2017)

Fiscal 2018 (As of
November 30, 2018)¥148,012
726,270¥137,303
588,967

Collateralized liabilities are as follows.
(Thousands of yen)

Current portion of long-term loans payable
Long-term loans payable

48

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

(Consolidated Statements of Income)*2 The Company is providing debt guarantees for the affiliates below for financial institution loans.
(Thousands of yen)

NCXX Solution Inc.
FISCO Ltd.

Fiscal 2017 (As of
November 30, 2017)

Fiscal 2018 (As of
November 30, 2018)¥148,456  9,400¥136,264–*3 Accumulated depreciation on property, plant and equipment(Thousands of yen)

Accumulated depreciation on property, plant and equipment

Fiscal 2017 (As of
November 30, 2017)

Fiscal 2018 (As of
November 30, 2018)¥2,190,095¥2,373,919

Accumulated depreciation includes accumulated impairment loss.
*4 Stakes in and exposures to non-consolidated subsidiaries and affiliates are as follows.
(Thousands of yen)

Investment securities (stocks)

Fiscal 2017 (As of
November 30, 2017)

Fiscal 2018 (As of
November 30, 2018)¥2,331,955¥10,904*5 Certain consolidated subsidiaries have entered into overdraft facility agreements with their banks in orderto ensure the efficient procurement of working capital.
The balance of unused loans based on these agreements as of November 30, 2018 was as follows.

*1 Book value write down of inventory held for sale under normal conditions due to decline in profitability(Thousands of yen)

Cost of sales

Total amount of overdraft facilities and loan commitments
Outstanding loan balance
Difference

Fiscal 2018 (As of
November 30, 2018)¥200,000
91,660¥108,340¥250,000
250,000¥        –Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥206,989¥81,585*2 Major breakdown and amount of selling, general and administrative expenses are as follows.
(Thousands of yen)

Salaries and allowances
Retirement benefit expenses
Commission fees
Office rent
Provision of allowance for doubtful accounts
Provision for point card certificates
Amortization of goodwill

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥1,425,532
9,619
752,670
660,586
8,442¥1,353,800
12,835678,384
658,404(5,360)−254,073

12,65053,388*3 Total research and development expenses included in selling, general and administrative expenses(Thousands of yen)(Thousands of yen)
Fiscal 2017 (As of
November 30, 2017)

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Research and development expenses

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥98,623¥29,957

49

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

*4 The components of gain on sales of non-current assets are as follows.
(Thousands of yen)
Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)

¥553
−

¥ −
31

Tools, furniture and fixtures
Vehicles*5 The components of loss on sales of non-current assets are as follows.

(Thousands of yen)

Buildings and structures, machinery

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥81,790¥–

In fiscal 2017, losses arising from purchases and sales of non-current assets among consolidated­subsidiaries were recorded as loss on sales of non-current assets, without eliminating unrealized losses.
*6 The components of loss on retirement of property, plant and equipment are as follows.

*7 Impairment loss
Fiscal 2017 (From December 1, 2016 to November 30, 2017)
The Group recorded impairment losses on the following assets.
Use

Type

Goodwill
Trademarks
Business assets
Other
Store equipment Buildings and structures

Location–

Minato-ku, Tokyo and otherShibuya-ku, Tokyo and other

Impairment loss
(Thousands of yen)

¥1,064,036
734,899
7,008
24,698(Background to recognizing impairment losses)
Regarding store equipment, the Group recognized as impairment losses under property, plant and equipment
the portion of carrying value determined to be unrecoverable for stores that the Group has decided to close
or expects to continue to generate losses from operations, having revised its management policy in light offactors including impact from the external environment. This applies to 21 stores.
(Asset grouping method)
The Group conducts asset grouping based on the minimum unit generating cash flows in a manner generally
independent of the cash flows of other assets and asset groups.

(Thousands of yen)

Buildings and structures
Tools, furniture and fixtures
SoftwareFiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥    –
11
6,901¥10,411
46–(Method of calculating the recoverable amount)
In principle, the Company uses the value in use to calculate the recoverable amount of business assets.
In addition, the recoverable amount of the carrying value for store equipment has been reduced to zero
because future cash flows are highly unlikely.

50

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

(Consolidated Statements of Comprehensive Income)Fiscal 2018 (From December 1, 2017 to November 30, 2018)
The Group recorded impairment losses on the following assets.
Use–

Business assets

Store equipment

Type

Goodwill
Trademarks
Buildings and structures
Machinery, equipment
and vehicles
Software
Buildings and structures
Tools, furniture and fixtures*1 Reclassification adjustments and tax effects for other comprehensive income
Location

Minato-ku, Tokyo and otherHanamaki-shi, Iwate

Impairment loss
(Thousands of yen)

¥136,965
888,678
34,1702,038
9,634

Shibuya-ku, Tokyo and otherNishitama-gun, Tokyo
Kurashiki-shi, Okayama and other34,945
3,747(Background to recognizing impairment losses)
Impairment loss was recognized on goodwill as the initially anticipated earnings are no longer expected.
Regarding business assets, the Group recognized impairment loss because earnings from operating­activities have continued to be negative or are expected to continue to be negative.
Regarding store equipment, the Group recognized as impairment losses under property, plant and equipment the portion of carrying value determined to be unrecoverable for stores that TITICACA and FACETASM
expect to continue to generate losses from operations. This applies to 19 stores.
(Asset grouping method)
The Group conducts asset grouping based on the minimum unit generating cash flows in a manner generally
independent of the cash flows of other assets and asset groups.
(Method of calculating the recoverable amount)
The recoverable amount was calculated by using the value in use and discounting future cash flows fromoperating activities by a certain discount rate.
However, for assets whose future cash flows from operating activities will be negative, the recoverable
amount is assessed to be zero.

(Thousands of yen)

Valuation difference on available-for-sale securities:
Amount incurred during the fiscal year
Reclassification adjustments
Before tax effect adjustment
Tax effect
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges:
Amount incurred during the fiscal year
Reclassification adjustments
Before tax effect adjustment
Tax effect
Deferred gains or losses on hedges
Foreign currency translation adjustments:
Amount incurred during the fiscal year
Reclassification adjustments
Before tax effect adjustment
Tax effectForeign currency translation adjustments
Share of other comprehensive income of entities
accounted for using equity method:Amount incurred during the fiscal year
Reclassification adjustments
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥202,142(14,695)
187,447(62,247)
125,199¥ 461,734(573,006)(111,272)(33,743)(77,528)(1,188)–(1,188)–(1,188)

(40)
−
(40)
−
(40)

61,843(22,822)39,020–39,02014,691(10,313)
4,377
−
4,377

427
–

14,487(16,861)

427¥163,458(2,373)¥ (75,564)

51

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

(Consolidated Statements of Changes in Net Assets)

3 Dividends(1) Dividends paid
Not applicable

Fiscal 2017 (From December 1, 2016 to November 30, 2017)
1 Type and number of shares issued and type and number of treasury stock(Number of shares)

Issued shares
Common shares
Total
Treasury stock
Common shares(Note)
Total

Startingbalance infiscal 2017

Increaseduringfiscal 2017

Decreaseduringfiscal 2017

Endingbalance infiscal 201715,030,195
15,030,195

–
–

–
–

15,030,195
15,030,195

156,058
156,058

32,90032,90042,48542,485

146,473
146,473

Notes: 1.	The increase in treasury stock was mainly due to a share repurchase under the provisions of the Articles of Incorporation
pursuant to Article 165, Paragraph 2 of the Companies Act.
2.	The decrease in treasury stock was due to the decrease in the Company’s equity interest in CAICA Inc., which owns a
portion of the Company’s shares.

2 Subscription rights to shares

Category

Components of subscription
rights to shares

Filing company (parent company)
5th Series of Unsecured
Convertible Bonds with
Subscription Rights to Shares
6th Series of Unsecured
Convertible Bonds with
Subscription Rights toShares (Note 1)
Subscription rights to sharesas stock options (11th series)
Subscription rights to sharesas stock options(13th series) (Note 2)
Total

Startingbalance infiscal 2017

Increaseduringfiscal 2017

Decreaseduringfiscal 2017

Endingbalance infiscal 2017

Endingbalance infiscal 2017
(Thousandsof yen)Commonshares1,069,788––

1,069,788¥     –

Commonshares466,562–

466,562

–

–

  –

–

–

–

–

19,775

  –

–

–

–

–

2,436

  –

–

–

–

–

¥22,211

Type of shares
underlying thesubscription
rights to shares

Number of shares underlying the subscription rights to shares

Notes: 1.	The decrease in fiscal 2017 was due to the redemption of bonds. The lump-sum method was adopted for reporting purposes.
2. The exercise period has not commenced for the 13th series of subscription rights to shares as stock options.

(2) Dividends with a record date that falls in the fiscal year under review, but an effective date that falls in thefollowing fiscal year
Not applicable
Fiscal 2018 (From December 1, 2017 to November 30, 2018)
1 Type and number of shares issued and type and number of treasury stock(Number of shares)

Issued shares
Common shares
Total
Treasury stock
Common shares(Note)
Total

Startingbalance infiscal 2018

Increaseduringfiscal 2018

Decreaseduringfiscal 2018

Endingbalance infiscal 201815,030,195
15,030,195

–
–

–
–

15,030,195
15,030,195

146,473
146,473––

20,65820,658125,816
125,816

Note: The decrease in treasury stock was mainly due to the exclusion of CAICA Inc. from the scope of application of the equity
method during the fiscal year ended November 30, 2018.

52

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

(Consolidated Statements of Cash Flows)

2 Subscription rights to shares

Category

Components of subscription
rights to shares

Filing company (parent company)
5th Series of Unsecured
Convertible Bonds with
Subscription Rights toShares (Note 1)
7th Series of Unsecured
Convertible Bonds with
Subscription Rights to Shares
Subscription rights to sharesas stock options (11th series)
Subscription rights to sharesas stock options (13th series)
Subscription rights to sharesas stock options(14th series) (Note 2)
Total

Type of shares
underlying thesubscription
rights to shares

Number of shares underlying the subscription rights to sharesStartingbalance infiscal 2018

Increaseduringfiscal 2018

Decreaseduringfiscal 2018

Endingbalance infiscal 2018

Endingbalance infiscal 2018
(Thousandsof yen)*1 Cash and deposits in the consolidated balance sheets and cash and cash equivalents in the consolidated
statements of cash flows at the end of the fiscal year
(Thousands of yen)
Fiscal 2017 (As of
November 30, 2017)

Fiscal 2018 (As of
November 30, 2018)¥2,529,595−¥2,529,595¥1,028,774(6,000)¥1,022,774

Commonshares1,069,788–

1,069,788–¥     –

Commonshares–487,800–

487,800

–

  –

–

–

–

–

19,775

  –

–

–

–

–

4,176

*2 Contents of important non-cash transactions
In the fiscal year ended November 30, 2018, borrowings by transfer of obligations were used as consideration for the sale of cryptocurrency. This transaction reduced accounts receivable by ¥1,000,000 thousand,and increased loans receivable to debtors outside the Company by ¥1,000,000 thousand.

  –

–

–

–

–

3,549

(Lease Transactions)

Cash and deposits
Term deposits with periods exceeding three months
Cash and cash equivalents(As a lessee)
  –

–

–

–

–

¥27,502

Notes: 1.	The decrease in fiscal 2018 was due to the redemption of bonds. The lump-sum method was adopted for reporting purposes.
2. The exercise period has not commenced for the 14th series of subscription rights to shares as stock options.

3 Dividends(1) Dividends paid
Not applicable(2) Dividends with a record date that falls in the fiscal year under review, but an effective date that falls in thefollowing fiscal year
Not applicable

Lease transactions were omitted from record in these financial statements in conformity with Article 15-3 of
the Ordinance on Consolidated Financial Statements, due to the small amount per contract and immaterialityof the content.

(Financial Instruments)
1. Conditions of financial instruments(1) Policy regarding financial instruments
As a policy, the Group receives loans from banks and other FISCO Group companies primarily to procure
operating funds, in tandem with managing surplus funds in the form of short-term deposits, and investment
and loans to other FISCO Group companies. This is done in conformity with parent company FISCO Ltd.’sGroup financial policy of optimizing funding efficiency by adjusting the surplus and shortage of funds among
FISCO Group companies. The Company’s policy is to use derivative transactions for hedging against the riskof interest rates on loans payable fluctuating, and to refrain from using them for speculative purposes. For
cryptocurrency transactions, the Company makes investments while mitigating investment risk by establishing rules and systems for investment and conducting daily management.

53

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes(2) Content, risk, and risk management of financial instruments

2. Fair value of financial instruments

Notes and accounts receivable—trade are exposed to the credit risk of customers (risk of default by cus­
tomers or counterparties). To mitigate this risk, relevant departments within each of the Group’s businessdivisions strive to promptly detect and reduce the risk of trade receivables defaulting by keeping track of thedue date and amount of notes and accounts receivable by customer or counterparty.
The short-term loans receivable the Company makes are for managing funds in conformity with the aforementioned FISCO Group financial policy.
The Company’s investment securities are primarily unlisted stocks, and are therefore exposed to the risk ofprices fluctuating. To mitigate this risk, the Company periodically screens the assessed value and financial
position of the issuer of these financial instruments.
As a rule of thumb, trade payables, namely notes and accounts payable—trade, and accounts payable—
other have payment dates that are due in one month or less. Furthermore, the loans the Company receives
are primarily for the purpose of procuring operating funds.
Trade payables and loans payable are exposed to the liquidity risk involved in fund procurement (risk ofdefaulting on the payment date). To mitigate and manage this liquidity risk, the Company’s financial division
formulates a timely funding operation plan based on the reports it receives from the Group’s business divisions.
Certain variable interest rate loans the Company has received are exposed to the risk of interest rates
fluctuating. To mitigate this risk, the Company uses interest rate swaps to hedge against the risk of interest
payable on these loans fluctuating. For information regarding hedge accounting methods, hedge instruments
and hedge targets, hedging policy, and method of evaluating hedging effectiveness, please refer to “Notes to
the Consolidated Statements, 4. Accounting policies, (7) Accounting methods for significant hedging.”
Certain accounts payable are procurement liabilities denominated in foreign currency in conjunction with
manufacturing consigned to an overseas ODM manufacturer. For this reason, the Company uses foreign
currency forward contracts and other arrangements to mitigate the risk of foreign exchange fluctuations
associated with those foreign currency-denominated procurement liabilities.
Derivative transactions are managed in accordance with internal rules that set forth transaction procedures
and transaction authority. The Company’s management division monitors information on transaction balances,
exchange rate movements, and gains or losses on derivative transactions on a daily or a monthly basis.

The carrying amounts in the consolidated balance sheets, fair values, and their differences as of November
30, 2017 and 2018 are as follows. In addition, financial instruments, whose fair values cannot be reliably
determined, are not included. (Please see “Note 2. Carrying amount of financial instruments whose fair values
cannot be reliably determined.”)Fiscal 2017 (As of November 30, 2017)(Thousands of yen)

(1) Cash and deposits(2) Notes and accounts receivable—trade(3) Accounts receivable—other
Allowance for doubtful accounts*1(4) Short-term loans receivable(5) Long-term loans receivable
Allowance for doubtful accounts*2(6) Long-term accounts receivable—other
Allowance for doubtful accounts*3(7) Investment securities*4
Total(1) Notes and accounts payable—trade(2) Short-term loans payable(3) Accounts payable—other(4)	Convertible bond-type bonds with shareacquisition rights (including current portion)(5) Long-term loans payable(including current portion)
Total
Derivative transactions

Carrying amount

Fair value

Difference¥2,529,595
599,269
114,228(53,097)
61,131
15,000396,140(56,140)
339,999
163,181(163,181)–
3,225,630¥6,770,626¥  600,601
191,660
259,459¥2,529,595
599,269––
61,131
15,000––339,999–––
5,146,815¥8,691,811¥  600,601
191,660
259,459¥        –
–
–
–
–
–
–
–
–
–
–
–
1,921,184¥1,921,184¥        ––
–1,165,000

1,165,000–

2,474,068¥4,690,789¥        –2,479,824¥4,695,113¥        –5,756¥    4,323¥        –*1 Excludes the allowance for doubtful accounts recorded for accounts receivable—other.
*2 Excludes the allowance for doubtful accounts recorded for long-term loans receivable.
*3 Excludes the allowance for doubtful accounts recorded for long-term accounts receivable—other.
*4 Investment securities include listed equity-method affiliates, and the difference is based on a fair market valuation of the shares.

54

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

Note: 1. Measurement of fair value of financial instruments, as well as investment securities and derivative transactions
Assets(1) Cash and deposits, (2) Notes and accounts receivable—trade, (3) Accounts receivable—other and (4) Short-term loans receivable
Fair value is stated as the carrying amount because the fair value approximates the carrying amount given the short settlement periodof these instruments.
(5) Long-term loans receivable
The fair value of long-term loans receivable is measured as the present value of loans receivable classified into certain periods for eachcredit risk group used for credit management purposes, using the future cash flows as an appropriate indicator, discounted by aninterest rate to which the credit spread has been added. The current portion of long-term loans receivable expected to be collected
within one year and included in short-term loans receivable on the consolidated balance sheets is included and shown in this item.
(6) Long-term accounts receivable—other
Fair value is measured as the present value of the amount of receivables grouped together for a certain period, discounted using aninterest rate adjusted for the period until maturity and the credit risk of the receivables.
(7) Investment securities
Fair value for investment securities is measured using stock exchange prices.
Liabilities(1) Notes and accounts payable—trade, (2) Short-term loans payable, (3) Accounts payable—other and (4) Convertible bond-typebonds with share acquisition rights (including current portion)
Fair value is stated as the carrying amount because the fair value approximates the carrying amount given the short settlement periodof these instruments.
(5) Long-term loans payable (including current portion)
Fair value is measured as the present value of the total amount of loan principal and interest, discounted using an interest rate thatwould apply to a similar new loan. However, certain long-term loans payable with variable interest rates are subject to special treatment
for interest rate swaps. (Please see “Derivative transactions” below.) The fair value of these loans is measured by discounting the total
amount of the loan principal and interest, which are accounted for together with the respective interest rate swaps, using a reasonably
estimated interest rate that would apply to a similar new loan.
Derivative transactions
Interest rate swaps subject to special treatment are accounted for together with the long-term loans payable that are the hedge
targets. Therefore, the fair value of the interest rate swaps is included in the fair value of the respective long-term loans payable.

Fiscal 2018 (As of November 30, 2018)(Thousands of yen)

(1) Cash and deposits(2) Notes and accounts receivable—trade(3) Accounts receivable—other
Allowance for doubtful accounts*1(4) Cryptocurrencies(5) Current assets—other(6) Short-term loans receivable(7) Long-term loans receivable
Allowance for doubtful accounts*2(8) Long-term accounts receivable—other
Allowance for doubtful accounts*3(9) Investment securities*4
Total(1) Notes and accounts payable—trade(2) Short-term loans payable(3) Accounts payable—other(4)	Convertible bond-type bonds
with share acquisition rights(5) Long-term loans payable(including current portion)
Total
Derivative transactions

Carrying amount

Fair value

Difference¥1,028,774
525,801
54,964(6,249)48,715
21,60821,914
1,015,000
713,930(55,930)
658,000
106,853(106,853)−
2,282,185¥5,601,997¥  576,086
383,200
177,011¥1,028,774
525,801−−
48,715
21,60821,914
1,015,000−−
658,000−−−
2,282,185¥5,601,997¥  576,086
383,200
177,011¥      –
–
–
–
–
–
–
–
–
–
–
–
–
–
–
¥      –
¥      –––

200,000

197,363(2,637)

1,810,869¥3,147,166¥        –1,809,636¥3,143,296¥        –(1,233)¥(3,870)¥      –

*1 Excludes the allowance for doubtful accounts recorded for accounts receivable—other.
*2 Excludes the allowance for doubtful accounts recorded for long-term loans receivable.
*3 Excludes the allowance for doubtful accounts recorded for long-term accounts receivable—other.

55

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

Note: 1. Measurement of fair value of financial instruments, as well as investment securities and derivative transactions
Assets(1) Cash and deposits, (3) Accounts receivable—other and (6) Short-term loans receivable
Fair value is stated as the carrying amount because the fair value approximates the carrying amount given the short settlement periodof these instruments.
(2) Notes and accounts receivable—trade and (8) Long-term accounts receivable—other
Fair value is measured as the present value of the amount of receivables grouped together for a certain period, discounted using aninterest rate adjusted for the period until maturity and the credit risk of the receivables.
(4) Cryptocurrencies and (5) Current assets—other
The fair value of cryptocurrencies is calculated in two ways. For those with active markets, such as Bitcoin, the amount is stated at fairvalue (cost of sales calculated by moving average method), while for those that do not have active markets the amount is stated atcost based on the moving average method. Furthermore, the fair value of deposits included in current assets—other is stated as thebalance in Japanese yen held by each cryptocurrency exchange, since this is a cash equivalent.
(7) Long-term loans receivable
The fair value of long-term loans receivable is measured as the present value of loans receivable classified into certain periods for eachcredit risk group used for credit management purposes, using the future cash flows as an appropriate indicator, discounted by aninterest rate to which the credit spread has been added. The current portion of long-term loans receivable expected to be collected
within one year and included in short-term loans receivable on the consolidated balance sheets is included and shown in this item.
(9) Investment securities
Fair value for investment securities is measured using stock exchange prices.
Liabilities(1) Notes and accounts payable—trade, (2) Short-term loans payable and (3) Accounts payable—other
Fair value is stated as the carrying amount because the fair value approximates the carrying amount given the short settlement periodof these instruments.
(4) Convertible bond-type bonds with share acquisition rights
Fair value is measured as the present value of the total amount of bond principal and interest, discounted using an interest rateadjusted for the remaining maturity and the credit risk of the bonds.
(5) Long-term loans payable (including current portion)
Fair value is measured as the present value of the total amount of loan principal and interest, discounted using an interest rate thatwould apply to a similar new loan. However, certain long-term loans payable with variable interest rates are subject to special treatment
for interest rate swaps. (Please see “Derivative transactions” below.) The fair value of these loans is measured by discounting the total
amount of the loan principal and interest, which are accounted for together with the respective interest rate swaps, using a reasonably
estimated interest rate that would apply to a similar new loan.
Derivative transactions
Interest rate swaps subject to special treatment are accounted for together with the long-term loans payable that are the hedge
targets. Therefore, the fair value of the interest rate swaps is included in the fair value of the respective long-term loans payable.
Note: 2. Carrying amount of financial instruments whose fair values cannot be reliably determined(Thousands of yen)

Unlisted stocks (investment securities)

Fiscal 2017 (As of
November 30, 2017)

Fiscal 2018 (As of
November 30, 2018)¥305,962¥215,904

Fair value is not disclosed because the fair value of these stocks cannot be reliably determined given that they do not have market
prices and their future cash flows cannot be estimated.

Note: 3. Maturity analysis for financial assets and investment securities with contractual maturities after the fiscal year-end
Fiscal 2017 (As of November 30, 2017)(Thousands of yen)(1) Cash and deposits(2) Notes and accounts
receivable—trade(3) Accounts receivable—other*1(4) S hort-term loans receivable(5) L ong-term loans receivable*1(6) Long-term accounts
receivable—other*1
Total

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years¥2,529,595¥      –¥–¥–

599,269
61,131
15,000––––339,999

–
–
–
–

–
–
–
–

–
¥3,204,996–¥339,999

–
¥–

–
¥–

*1 The above table does not include accounts receivable with indefinite redemption schedules of ¥53,097 thousand (allowance for
doubtful accounts of ¥53,097 thousand), long-term loans receivable of ¥56,140 thousand (allowance for doubtful accounts of¥56,140 thousand) and long-term accounts receivable—other of ¥163,181 thousand (allowance for doubtful accounts of ¥163,181
thousand).
Fiscal 2018 (As of November 30, 2018)(Thousands of yen)(1) Cash and deposits(2) Notes and accounts
receivable—trade(3) Accounts receivable—other*1(4) Short-term loans receivable(5) Long-term loans receivable*1(6) L ong-term accounts
receivable—other*1
Total

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years¥1,028,774¥      –¥–¥–

525,801
48,715
1,015,000––––
658,000

–
–
–
–

–
–
–
–

–
¥2,618,291–¥658,000

–
¥–

–
¥–

*1 The above table does not include accounts receivable with indefinite redemption schedules of ¥6,249 thousand (allowance for
doubtful accounts of ¥6,249 thousand), long-term loans receivable of ¥55,930 thousand (allowance for doubtful accounts of ¥55,930
thousand) and long-term accounts receivable—other of ¥106,853 thousand (allowance for doubtful accounts of ¥106,853 thousand).

56

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

Unlisted investment securities (carrying amount ¥305,962 thousand) are not disclosed because the fair valueof these securities cannot be reliably determined given that they do not have market prices.

Note: 4. Scheduled repayments of loans, bonds, and other interest-bearing debt after the fiscal year-end
Fiscal 2017 (As of November 30, 2017)(Thousands of yen)
Due after one
year throughtwo years

Due in one
year or less

Convertible bonds
with subscription
rights to shares
Long-term loans
payableShort-term loans
payableTotal

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due after
five years(Thousands of yen)Type¥1,165,000

¥–

¥–

¥–

¥–

¥–

836,382

618,057

856,628

144,81218,186–

141,660¥2,143,043–¥618,057–¥856,628–¥144,812–¥18,186–¥–

Fiscal 2018 (As of November 30, 2018)(Thousands of yen)

Convertible bonds
with subscription
rights to shares
Long-term loans
payableShort-term loans
payableTotal

Fiscal 2018 (As of November 30, 2018)

Due in one
year or lessDue after one
year throughtwo years

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due after
five years¥       −

¥  200,000¥       –

¥      –¥–¥–

Securities whose carrying amounts
exceed the acquisition cost
Securities whose carrying amounts
do not exceed the acquisition cost

Carrying amount

Acquisition cost

Difference

Share¥2,282,185¥2,191,746¥90,438

Share

−

−

−

Total

¥2,282,185¥2,191,746¥90,438

Unlisted investment securities (carrying amount ¥215,904 thousand) are not disclosed because the fair valueof these securities cannot be reliably determined given that they do not have market prices.

2. Gain on sale of investment securities
Fiscal 2017 (From December 1, 2016 to November 30, 2017)
The Company did not sell investment securities—other.
Fiscal 2018 (From December 1, 2017 to November 30, 2018)587,606

940,474

204,689

78,099––383,200¥970,806–¥1,140,474–¥204,689–¥78,099

–
¥–

–
¥–

(Investment Securities)
1. Investment securities—otherFiscal 2017 (As of November 30, 2017)(Thousands of yen)
Type

Securities whose carrying amounts
exceed the acquisition cost
Securities whose carrying amounts
do not exceed the acquisition cost

Carrying amount

Acquisition cost

Difference

Share¥1,199,637¥  997,927¥201,710

Share

2,025,992

2,089,879(63,886)

Total¥3,225,630¥3,087,806¥137,823(Thousands of yen)

Share
Total

Sale amount

Total gain on sale

Total loss on sale

¥900,202¥900,202¥573,006¥573,006¥−¥−

3. Loss on valuation of investment securities
Fiscal 2017 (As of November 30, 2017)
The Company did not record a loss on valuation of investment securities.
Loss on valuation is recorded in full if the fair value at fiscal year-end falls 50% or more in relation to theacquisition price of investment securities. If the fall in fair value is around 30 to 50%, a loss on valuation
deemed appropriate is recorded in view of factors such as the likelihood of prices recovering.

57

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

Fiscal 2018 (As of November 30, 2018)
In the fiscal year ended November 30, 2018, the Company recorded a ¥10,366 thousand loss on valuation of
investment securities (unlisted shares ¥10,366 thousand).
Loss on valuation is recorded in full if the fair value at fiscal year-end falls more than 50% in relation to theacquisition price of investment securities. If the fall in fair value is around 30 to 50%, a loss on valuation
deemed appropriate is recorded in view of factors such as the likelihood of prices recovering.

(Derivative Transactions)
1. Derivative transactions to which hedge accounting is not applied
Currency related

Fiscal 2017 (As of November 30, 2017)(Thousands of yen)
Main hedge
targetForeign currency
Accounts
forward contracts payable

Contract
amountAmount of contract
exceeding one year

¥3,808¥–Fair value(Note)¥3,728

Fiscal 2018 (As of November 30, 2018)(Thousands of yen)Type of transaction

Contract amountLong-term loans
payable¥1,255,000¥920,000Fair value(Note)¥–

Main hedge
targetForeign currency
Accounts
forward contracts payable

Contract
amountAmount of contract
exceeding one year

¥81,612¥–

Note:	Calculation of fair value
Calculated based on quoted prices obtained from financial institution counterparties.

Type of transaction

Special treatment Interest rate swapof interest ratetransaction
swaps
Variable interest—
received
Fixed interest—paid

Main hedge target

Contract amountAmount of contract
exceeding one year

Long-term loans
payable¥870,000¥650,000Fair value(Note)¥–

Note:	Calculation of fair value
Interest rate swaps to which the special treatment is applied are accounted for together with the long-term loans payabletargeted for hedging. Therefore, their fair value is included in the fair value of long-term loans payable.

(Retirement Benefits)
1. Overview of retirement benefit plan

Note:	Calculation of fair value
Calculated based on quoted prices obtained from financial institution counterparties.

Hedge accounting method

Main hedge target

Amount of contract
exceeding one year

(Thousands of yen)

(1) Currency related

Allocation method forforeign currency forward
contracts, etc.

Type of transaction

Special treatment Interest rate swapof interest ratetransaction
swaps
Variable interest—
received
Fixed interest—paid

Hedge accounting
method

2. Derivative transactions to which hedge accounting is applied

Type of transaction(Thousands of yen)
Hedge accounting
methodFiscal 2018 (As of November 30, 2018)

Fiscal 2018 (As of November 30, 2018)
Not applicable

Hedge accounting method

Fiscal 2017 (As of November 30, 2017)

Note:	Calculation of fair value
Interest rate swaps to which the special treatment is applied are accounted for together with the long-term loans payabletargeted for hedging. Therefore, their fair value is included in the fair value of long-term loans payable.

Fiscal 2017 (As of November 30, 2017)
Not applicable

Allocation method forforeign currency forward
contracts, etc.

(2) Interest rate

Fair value(Note)¥81,491

The Company has adopted an elective system in which employees can choose between a defined contribution pension plan and a prepaid retirement benefit plan as part of its defined contribution plan.
Certain consolidated subsidiaries have adopted a lump-sum payment plan as part of their defined retirement benefit plans, and an elective system in which employees can choose between a defined contribution
pension plan and a prepaid retirement benefit plan as part of their defined contribution plans.
Certain consolidated subsidiaries apply the simplified method for calculating the liability and expenses on
their lump-sum retirement benefit plans.

58

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

2. Simplified-method defined benefit plan(1) Reconciliation of balance of simplified-method liability for retirement benefit at the
beginning and at the end of the fiscal year

(Stock Options)
1. Stock option expense item and amount(Thousands of yen)(Thousands of yen)

Balance of liability for retirement benefit
at the beginning of the fiscal year
Increase from new consolidation
Retirement benefit expenses
Retirement benefits paid
Balance of liability for retirement benefit
at the end of the fiscal year

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥29,724260
6,047(6,323)¥29,708−
9,094(7,469)¥29,708¥31,333(2) Reconciliation of balance of retirement benefit obligations and liability for retirement
benefit on the consolidated balance sheets at the end of the fiscal year
(Thousands of yen)

Retirement benefit obligations for non-funded plans
Net liability on the consolidated balance sheets

Fiscal 2017 (As of
November 30, 2017)

Fiscal 2018 (As of
November 30, 2018)¥29,708
29,708¥31,333
31,333Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥6,047¥9,094(3) Retirement benefit expenses(Thousands of yen)

Retirement benefit expenses based on the simplified method

3. Defined contribution pension plan
The required contributions to the defined contribution pension plans of the Company and its consolidated
subsidiaries were ¥4,260 thousand in fiscal 2017 and ¥2,929 thousand in fiscal 2018.

4. Prepaid retirement benefit plan
Payments made to the prepaid retirement benefit plans of the Company and its consolidated subsidiaries
were ¥499 thousand in fiscal 2017 and ¥1,679 thousand in fiscal 2018.

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥2,088¥5,290Stock compensation expense under selling,
general and administrative expenses

2. Stock option details, scale and change(1) Stock option details
11th Series of Subscription Rights
to Shares

Status andnumber ofoption holders

NCXX Group Inc.
directors: 5
NCXX Group Inc.
employees: 3
NCXX Group Inc.
subsidiary director: 1
Common shares:
100,000 shares

Type of share andnumber ofstock options(Note)
Grant date
October 30, 2014
Vesting condition An option holder mustremain in continued
service from the grant date­(October 30, 2014) to theoption exercise dateRequired service
From October 30, 2014 until
periodthe option exercise date
Exercise period
October 31, 2016 to
October 30, 2020
Note: Recorded based on the number of eligible shares.

13th Series of Subscription Rights
to Shares

14th Series of Subscription Rights
to Shares

NCXX Group Inc.
directors: 3
NCXX Group Inc.
subsidiary directors: 8
NCXX Group Inc.
subsidiary employees: 3
Common shares:
100,000 shares

NCXX Group Inc.
directors: 5
NCXX Group Inc.
subsidiary directors: 3
NCXX Group Inc.
subsidiary employees: 2
Common shares:
90,000 shares

October 5, 2016
An option holder mustremain in continued
service from the grant date­(October 5, 2016) to theoption exercise date
From October 5, 2016 until
the option exercise date
October 6, 2018 to
October 5, 2021

January 15, 2018
An option holder mustremain in continued
service from the grant date­(January 15, 2018) to theoption exercise date
From January 15, 2018 until
the option exercise date
January 16, 2020 toJanuary 15, 2023

59

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes(2) Stock option scale and change

3. Method for estimating the fair value of stock options

Existing stock options as of fiscal 2018 (ended November 2018) are recorded herein on the basis of thenumber of eligible shares.
1. Number of stock options

The method for estimating the fair value of the 2018 stock options, granted in the fiscal year ended
November 30, 2018, is as follows.
1. Estimation method used
Monte Carlo simulation
2. Main assumptions and estimates(Shares)
11th Series ofSubscription Rights
to Shares

Before vesting
As of November 30, 2017
GrantedForfeited
VestedOutstanding
After vesting
As of November 30, 2017
VestedExercised
Forfeited
Exercisable

13th Series ofSubscription Rights
to Shares

14th Series ofSubscription Rights
to Shares

–
–
–
–
–

100,000––
100,000––
90,000––90,00096,000–––96,000–100,000––
100,000–––––

11th Series ofSubscription
Rights to Shares

13th Series ofSubscription
Rights to Shares

14th Series ofSubscription
Rights to Shares

¥738
–
206

¥458
–
42

¥458
–
86

2. Unit price information(Yen)

Exercise price
Average stock price at exercise
Fair value on the grant date2018 stock options

Stock price volatility (Note 1)
Estimated period to expiry (Note 2)
Estimated dividend yield (Note 3)
Risk free interest rate (Note 4)

67.57%
3.5 years¥0(0.085)%

Notes: 1.	Calculated based on stock price data for five years (December 2012 to December 2017).
2.	Due to insufficient data for making a reasonable estimate, the period to expiry is estimated based on the assumption that thesubscription rights to shares will be exercised at the midpoint of the exercise period.
3.	Based on dividend yields for the fiscal year ended November 30, 2017.
4.	The yield of Japanese government bonds for the estimated period to expiry

4. Method for estimating the number of vested stock options
A method reflecting the actual number of forfeited stock options was adopted due to the fundamental­difficulty of reasonably estimating the actual number of stock options that will be forfeited in the future.

60

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

(Tax-Effect Accounting)
1. Main factors giving rise to deferred tax assets and liabilities

2. Main items giving rise to material differences between the statutory income
tax rate and effective income tax rate
(Thousands of yen)

Deferred tax assets
Inventories
Accrued enterprise taxes
Provision for bonuses
Provision for product warranties
Non-current assets
Shares of affiliated companies
Allowance for doubtful accounts
Carryforwards of unused tax losses
Liability for retirement benefit
Asset retirement obligations
OthersDeferred tax assets subtotal
Valuation allowance
Deferred tax assets total
Deferred tax liabilities
Valuation difference on available-for-sale securities
Fund balance difference
Reserve for special depreciation
OthersDeferred tax liabilities total
Net deferred tax liabilities

Fiscal 2017 (As of
November 30, 2017)

Fiscal 2018 (As of
November 30, 2018)¥     62,383
3,637
20,922
32,711
475,322489,409457,011
1,966,716
9,168
61,71537,9173,616,915(3,616,456)
458¥     74,984
3,417
26,74922,756
298,525
14,67858,282
3,381,601
9,626
130,019
15,4894,036,133(4,034,102)
2,030(62,247)(662,408)–(44,592)(769,248)¥  (768,789)(28,504)(757,050)(8,671)(43,417)(837,642)¥ (835,611)(%)
Fiscal 2017 (As of
November 30, 2017)

Statutory income tax rate
(Adjustments)
Entertainment and other non-deductible expenses
Inhabitants taxes—per capita levy
Share of profit of entities accounted for using equity method
Amortization of goodwill
Change in valuation allowance
Carryforwards of unused tax losses and other deductions
Income taxes recognized for difference on capital surplus
Others
Effective income tax rate

Fiscal 2018 (As of
November 30, 2018)30.86 %

–%

0.42
1.38
(1.32)
7.65
15.85(49.06)
11.98(1.54)
16.22 %

–
–
–
–
–
–
–
–
–%

Note:	Disclosure on the difference in the statutory income tax rate and the effective income tax rate in fiscal 2018 is omitted as loss
before income taxes was recorded.

(Business Combination)
Transactions with Entities under Common Control
1. Overview of transaction(1) Name and business operations of the companies in the business combination
Absorbing company
Versatile Inc.
Name :
Business:	Apparel business, consulting business, wine-related business
Absorbed company
Name :NCXX Premium Group, Inc.
Business: Apparel business, consulting business
Name :NCXX Farm Holdings, Inc.
Business: Wine-related business61

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes(2) Business combination date

(Asset Retirement Obligations)November 12, 2018

Asset retirement obligations recorded on the consolidated balance sheets(1) Overview of recorded asset retirement obligations(3) Statutory basis of business combination
An incorporation type company split with Versatile Inc. as the splitting company and NCXX Premium Group,
Inc. and NCXX Farm Holdings, Inc. as the newly incorporated companies

The recorded asset retirement obligations are obligations under real estate lease contracts to restore business offices and stores where the Company is operating to their original condition when vacating them.

(2) Calculation method for amounts of asset retirement obligations to be recorded(4) Name of company after business combination
NCXX Premium Group, Inc.
NCXX Farm Holdings, Inc.

The period of use is estimated at 18 years from the acquisition of the lease asset, and a discount rate
between 0.01% and 0.48% is used to calculate the asset retirement obligation amounts.

(3) Change in total amount of recorded asset retirement obligations(5) Purpose of the business combination
By consolidating the Group’s apparel business and consulting business into NCXX Premium Group, Inc. andconsolidating the wine-related business into NCXX Farm Holdings, Inc., the Group aims to increase the quality of the businesses, streamline back-office operations, and increase profitability.

2. Overview of accounting treatment
The transaction was treated as a transaction with entities under common control based on the “AccountingStandard for Business Combinations” and the “Revised Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures.”(Thousands of yen)

Balance at the beginning of the fiscal year
Increase from consolidated subsidiary acquisition
Increase from acquisition of property, plant and equipment
Adjustment reflecting the passage of time
Decrease from execution of obligations
Balance at the end of the fiscal year

Fiscal 2017 (From
December 1, 2016 toNovember 30, 2017)

Fiscal 2018 (From
December 1, 2017 toNovember 30, 2018)¥399,040
49,866–
4,349(63,567)¥389,687¥389,687−
13,909181(26,690)¥377,087(4) Asset retirement obligations not recorded on the consolidated balance sheets
Under its real estate lease contract, the Company and its consolidated subsidiaries have obligations to restore
their Head Office to its original condition when vacating it. However, this asset retirement obligation cannot be
estimated reasonably, given that the period of use of the relevant lease assets remains unclear, and the Group
has no plan for relocating. Consequently, this asset retirement obligation was not recorded in this report.

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

(Real Estate Leasing)
Fiscal 2017 (From December 1, 2016 to November 30, 2017)
Certain consolidated subsidiaries had previously held idle real estate in Shizuoka Prefecture and Tochigi
Prefecture. In addition, certain subsidiaries have acquired new properties in Fukuoka Prefecture and otherregions and are using them as offices and for other purposes. Since some of these properties are rented, realestate had been treated as including the portion used as real estate for rent.
However, these consolidated subsidiaries were excluded from the scope of consolidation during fiscal
2017 due to the sale of their shares. As a result, no balances are shown on the consolidated balance sheets
as of November 30, 2017.
(Thousands of yen)
Carrying amount

Idle real estate
Real estate including the portion
used as real estate for rent

Starting balancein fiscal 2017

Change during
fiscal 2017

Ending balancein fiscal 2017

Fair value at
fiscal year-end¥  2,000¥  (2,000)¥–¥–

306,102(306,102)––

Note: The carrying amount represents the acquisition cost less cumulative depreciation.

Fiscal 2018 (From December 1, 2017 to November 30, 2018)
Not applicable(Segment Information)[Segment Information]
1. Overview of reportable segments
The Company’s reportable segments are components of the Company for which separate financial information is available. They are periodically examined by the Board of Directors for the purpose of deciding on
resource allocation and assessing business results.
The Group formulates comprehensive strategies at the Company’s Head Office and is expanding businessactivities related to the products and services it handles. The Group’s businesses are made up of segments
classified based on products and services, as follows.
From fiscal 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 IoTRelated Business, Internet Travel Business, Brand Retail Platform Business, Cryptocurrency and Blockchain
Business, and Other. The reasons for this change are outlined below.
Following a review of the business management system, the FinTech System Development Business,
which was previously presented as a reportable segment, has been merged with the ICT, IoT, Device
Business based on the similarity and relatedness in the method of allocation of management resources andthe method of evaluating earnings, and the segment name has been changed to the IoT Related Business.
In the fiscal year ended November 30, 2017, the cryptocurrency related business that had been included
under other was added as a reportable segment named the “Cryptocurrency and Blockchain Business” dueto its increased quantitative importance.
In addition, following a review of the business management system, in the fiscal year ended November 30,
2017 the wine business, which had been included under other, was integrated into the Brand Retail Platform
Business based on the similarity and relatedness in the method of allocation of management resources andthe method of evaluating earnings.
Furthermore, the Information Service Consulting Business, which had previously been presented as areportable segment, was excluded from the reportable segments and included under other due to a decrease
in its quantitative importance following a contraction in the business, etc.
Segment information for the fiscal year ended November 30, 2017 has been presented based on reportablesegment categories after the Company reorganization.

63

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

Segment

Description of business

IoT-Related Business Development and sale of communication devices applying various wireless systems
Provision of systems solutions and maintenance services incidental to the above
systems development
Agricultural ICT business
R&D for the robot business
ASP services for nursing care centers
Internet Travel
Operation of e-marketplace for travel-related products
Business
Travel agency services for companies and individuals
Travel estimate services
Travel concierge services
Brand Retail Platform Retailing of general merchandise, apparel and other items
Business
Restaurant business
Brand license business
Grape farming, winemaking and sales
Cryptocurrency and Investments related to cryptocurrencies
Blockchain Business Cryptocurrency trading and commercial loans
Development and investment of derivative instruments related to cryptocurrencies
Setting up funds related to cryptocurrencies
Other
Consulting on financial strategy, business strategy, recruitment support services, etc.
Other

2. Calculation method for amounts of net sales, income and loss, assets andliabilities, and other items by reportable segment
The accounting policies and methods for reportable segments are the same as those shown in the notes tothe consolidated financial statements.
Segment income for reportable segments is based on operating income.
Inter-segment sales and transfers are based on prevailing market prices.

64

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

3. Information on net sales, income or loss, assets and liabilities, and other items by reportable segment
Fiscal 2017 (From December 1, 2016 to November 30, 2017)(Thousands of yen)
Reportable segment

Net sales
Sales to external customers
Inter-segment sales and transfers
Total
Segment income (loss)
Segment assets
Other items
Depreciation and amortization
Amortization of goodwill
Increase in property, plant and equipment andintangible assets

IoT Related
Business

Internet Travel
Business

Brand Retail
Platform Business

Cryptocurrency andBlockchain Business

Other

Total

Adjustments

Consolidated¥4,012,681
19,103
4,031,785(465,884)
713,771¥2,183,047
7,601
2,190,648(2,374)
371,007¥5,931,773
54,8055,986,578(71,667)
3,742,937

¥–
–
–
–
–

¥ 71,419
2,176
73,595(57,779)
115,650¥12,198,921
83,687
12,282,608(597,704)
4,943,368¥         –(83,687)(83,687)(316,850)
6,588,998¥12,198,921–
12,198,921(914,555)
11,532,367

64,988137,037539
30,848130,927
65,741––

8,221
20,445

204,676
254,073

7,875–

212,551
254,073

35,7461,250

107,074––

144,071

82,505

226,576

Notes: 1. Segment income (loss) is adjusted to operating income in the consolidated statements of income. Adjustments for segment income mainly represent general and administration expenses that are not allocated to reportable segments.
2. Adjustments for segment assets of ¥6,588,988 thousand include corporate assets that are not allocated to reportable segments and offsetting receivables and obligations with consolidated subsidiaries.
3. Adjustments for depreciation and amortization represent mainly depreciation and amortization related to corporate assets of ¥7,875 thousand.
4. Prices for transactions and transfers between reportable segments are determined based on arm’s length transactions between independent third parties.

65

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

Fiscal 2018 (From December 1, 2017 to November 30, 2018)(Thousands of yen)
Reportable segment

Net sales
Sales to external customers
Inter-segment sales and transfers
Total
Segment income (loss)
Segment assets
Other items
Depreciation and amortization
Amortization of goodwill
Increase in property, plant and equipment andintangible assets

IoT Related
Business

Internet Travel
Business

Brand Retail
Platform Business

Cryptocurrency andBlockchain Business

Other

Total

Adjustments

Consolidated¥  950,751
19,597970,348
48,7342,353,686¥2,367,417
2,211
2,369,629
38,840639,760¥6,445,821
994
6,446,816(460,452)
2,369,082¥1,326,207−
1,326,207
1,320,327
43,522¥ 35,104−
35,104(73,257)−¥11,125,302
22,803
11,148,106
874,192
5,406,051¥         –(22,803)(22,803)(454,473)
3,896,755¥11,125,302−
11,125,302
419,718
9,302,807

10,7283,830

1,590
30,848

149,547
18,709

−
−

8,359
–

170,225
53,38835,821−

206,046
53,388

4,116

5,228

1,155,536

26,806–

1,191,687

65,776

1,257,464

Notes: 1. Segment income (loss) is adjusted to operating income in the consolidated statements of income. Adjustments for segment income mainly represent general and administration expenses that are not allocated to reportable segments.
2. Adjustments for segment assets mainly include corporate assets of ¥3,896,755 thousand that are not allocated to reportable segments such as cash and deposits, short-term loans receivable, etc.
3. Adjustments for depreciation and amortization represent mainly depreciation and amortization related to corporate assets of ¥35,821 thousand.
4. Prices for transactions and transfers between reportable segments are determined based on arm’s length transactions between independent third parties.

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

[Related Information]

Fiscal 2018 (From December 1, 2017 to November 30, 2018)

Fiscal 2017 (From December 1, 2016 to November 30, 2017)

1. Information by product and service

1. Information by product and service

Disclosure is omitted as the same information is shown in segment information.

Disclosure is omitted as the same information is shown in segment information.

2. Information by region(1) Net sales

2. Information by region

Disclosure is omitted as sales to external customers in Japan account for over 90% of net sales in the­consolidated statements of income.

(1) Net sales
Disclosure is omitted as sales to external customers in Japan account for over 90% of net sales in the­consolidated statements of income.

(2) Property, plant and equipment
Disclosure is omitted as the amount of property, plant and equipment in Japan accounts for over 90% of
property, plant and equipment in the consolidated balance sheets.

(2) Property, plant and equipment
Disclosure is omitted as the amount of property, plant and equipment in Japan accounts for over 90% of
property, plant and equipment in the consolidated balance sheets.

3. Information by major customer

3. Information by major customer

Disclosure of information by major customer is omitted as sales to major customers account for less than
10% of consolidated net sales.

Disclosure of information by major customer is omitted as sales to major customers account for less than
10% of consolidated net sales.

[Information on Impairment Loss on Property, Plant and Equipment by Reportable Segment]
Fiscal 2017 (From December 1, 2016 to November 30, 2017)(Thousands of yen)

Impairment loss

IoT Related
Business

Internet Travel
Business

Brand Retail
Platform Business

Cryptocurrency andBlockchain Business

Other

Corporate andelimination¥312,639¥–¥1,086,293

¥–

Total

¥431,709¥–¥1,830,642

IoT Related
Business

Internet Travel
Business

Brand Retail
Platform Business

Cryptocurrency andBlockchain Business

Other

Corporate andelimination¥45,843¥–¥1,064,336

Total

¥–

¥–

¥–

¥1,110,179

Fiscal 2018 (From December 1, 2017 to November 30, 2018)(Thousands of yen)

Impairment loss

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INTEGRATED REPORT 2019
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Strategy

Sustainability

Financial Section

Corporate Data

Notes

[Information on Amortized Amount and Unamortized Balance of Goodwill by Reportable Segment]
Fiscal 2017 (From December 1, 2016 to November 30, 2017)(Thousands of yen)Amortized amountUnamortized balance

IoT Related
Business

Internet Travel
Business

Brand Retail
Platform Business

Cryptocurrency andBlockchain Business

Other

Corporate andelimination¥137,037
23,302¥ 30,848
168,028¥ 65,741
205,674

¥–
–

Total

¥20,445–¥––¥254,073
397,006

IoT Related
Business

Internet Travel
Business

Brand Retail
Platform Business

Cryptocurrency andBlockchain Business

Other

Corporate andelimination¥ 3,830
19,472¥ 30,848
137,180¥18,709
−

Total

¥–
–

¥–
–

¥–
–

¥ 53,388
156,652

Fiscal 2018 (From December 1, 2017 to November 30, 2018)(Thousands of yen)Amortized amountUnamortized balance[Information on Gain on Bargain Purchase by Reportable Segment]
Fiscal 2017 (From December 1, 2016 to November 30, 2017)
Not applicable
Fiscal 2018 (From December 1, 2017 to November 30, 2018)
Not applicable

68

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

[Information on Related Parties]
1. Transactions with related parties(1) Transactions between the filing company and related parties(a) Parent company of the filing company and major shareholders (only companies and other such entities)
Fiscal 2017 (From December 1, 2016 to November 30, 2017)

Type

Parent company

Name of company
or other entity

FISCO Ltd.

Address

Kishiwada, Osaka

Paid-in capitalor investment(Millions of yen)

¥1,266

Description of businessor occupation

Percentage ofvoting rights held (%)

Relationshipwith related party

Informations­ ervicesb­ usiness,consulting
business

Direct (28.38)
Indirect (20.13)

Concurrent
officers

Description of businessor occupation

Percentage ofvoting rights held (%)

Relationshipwith related party

Informations­ ervicesb­ usiness,consulting
business

Direct (28.38)
Indirect (20.13)

Concurrent
officers

Nature of transaction

Amount oftransaction(Thousands of yen)Funds lent

¥340,000Interest received
Debt guarantees received

3,777
899,935

Item

Long-term loans
receivable  –  –Ending balance(Thousands of yen)

¥340,000––

Fiscal 2018 (From December 1, 2017 to November 30, 2018)

Type

Parent company

Name of company
or other entity

FISCO Ltd.

Address

Kishiwada, Osaka

Paid-in capitalor investment(Millions of yen)

¥1,269Notes: 1. Consumption taxes are not included in the amounts of transactions and the ending balances.
2. Transaction terms and policy on deciding transaction terms and conditions
		 (1) The interest rate on funds lent is determined reasonably based on prevailing market interest rates. The funds lent are unsecured.
		 (2) The debt guarantees received are debt guarantees for bank loans. A guarantee fee is not paid.

Nature of transaction

Amount oftransaction(Thousands of yen)Funds lent

¥400,000Funds recovered
Interest received
Debt guarantees received

440,000
7,615
723,651

Item

Long-term loans
receivable
  –
  –
  –

Ending balance(Thousands of yen)

¥300,000
–
–
–

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INTEGRATED REPORT 2019
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Strategy

Sustainability

Financial Section

Corporate Data

Notes(b) Companies and other entities with the same parent company as the filing company and subsidiaries of other related companies of the filing company
Fiscal 2017 (From December 1, 2016 to November 30, 2017)
Name of company
or other entity

Type

Companies withthe same parent
company as thefiling company

Chanty Co., Ltd.

Head office location

Capital stock
or investment(Millions of yen)

Minato-ku, Tokyo¥32

Description of businessor occupation

Advertising agency
business

Percentage ofvoting rights held (%)

Relationshipwith related party   –Concurrent
officers

Nature of transaction

Amount oftransaction(Thousands of yen)Funds recovered¥160,000Interest received

1,574

Nature of transaction

Amount oftransaction(Thousands of yen)Interest received¥19,068

Item

Long-term loans
receivable   –Ending balance(Thousands of yen)¥––

Fiscal 2018 (From December 1, 2017 to November 30, 2018)
Name of company
or other entity

Type

Companies withthe same parent
company as thefiling company

Vulcan Crypto
Currency Financial
Products K.K.

Head office location

Capital stock
or investment(Millions of yen)

Kishiwada, Osaka¥10

Description of businessor occupation

Crypto-currency andblockchain business

Percentage ofvoting rights held (%)

Relationshipwith related party

   –

    –

Item

Short-term loans
receivable

Ending balance(Thousands of yen)

¥1,000,000

Notes: 1. Consumption taxes are not included in the amounts of transactions and the ending balances.
2.	Transaction terms and policy on deciding transaction terms and conditions
The interest rate on funds lent is determined reasonably based on prevailing market interest rates. The funds lent are unsecured.

(c) Officers of filing company, major shareholders and other persons (individuals only)
Fiscal 2017 (From December 1, 2016 to November 30, 2017)
Type

Officer and his relatives

Name of company
or other entity

Tsukasa Akiyama

Description of businessor occupation

Officer

Percentage ofvoting rights held (%)   –

Relationshipwith related party

Representative Director
and President of
NCXX Group Inc.

Nature of transaction

Debt guarantee
received

Amount of transaction(Thousands of yen)

Item

Ending balance(Thousands of yen)

¥29,308     –¥–

Amount of transaction(Thousands of yen)

Item

Ending balance(Thousands of yen)

¥21,304     –¥–

Fiscal 2018 (From December 1, 2017 to November 30, 2018)
Type

Officer and his relatives

Name of company
or other entity

Tsukasa Akiyama

Description of businessor occupation

Officer

Notes: 1. Consumption taxes are not included in the amounts of transactions and the ending balances.
2.	Transaction terms and policy on deciding transaction terms and conditions
The debt guarantees received are debt guarantees for bank loans. A guarantee fee is not paid.

Percentage ofvoting rights held (%)   –

Relationshipwith related party

Representative Director
and President of
NCXX Group Inc.

Nature of transaction

Debt guarantee
received

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Strategy

Sustainability

Financial Section

Corporate Data

Notes

(2) Transactions between the filing company and its consolidated subsidiaries and related parties(a) Parent company of the filing company and major shareholders (only companies and other such entities)
Fiscal 2017 (From December 1, 2016 to November 30, 2017)

Type

Parent company

Name of company
or other entity

FISCO Ltd.

Head office location

Capital stock
or investment(Millions of yen)

Kishiwada, Osaka¥1,266

Description of businessor occupation

Percentage ofvoting rights held (%)

Relationshipwith related party

Information services
business, consulting
business

Direct (28.38)
Indirect (20.13)

Concurrent
officers

Nature of transaction

Amount oftransaction(Thousands of yen)Funds recovered
Interest received¥200,000
1,994

Item

    –
    –

Ending balance(Thousands of yen)¥––

Notes: 1. Consumption taxes are not included in the amounts of transactions and the ending balances.
2.	Transaction terms and policy on deciding transaction terms and conditions
The interest rate on funds lent is determined reasonably based on prevailing market interest rates. The funds lent are unsecured.

Fiscal 2018 (From December 1, 2017 to November 30, 2018)
Not applicable(b) Companies and other entities with the same parent company as the filing company and subsidiaries of other related companies of the filing company
Fiscal 2017 (From December 1, 2016 to November 30, 2017)

Type

Subsidiary of theparent company

Name of company
or other entity

Head office location

Fisco Cryptocurrency Kishiwada, Osaka
Exchange Inc.

Capital stock
or investment(Millions of yen)¥387

Description of businessor occupation

Management ofcryptocurrency
exchange

Percentage ofvoting rights held (%)

Relationshipwith related party

Indirect (4.02)

Cryptocurrency trading

Percentage ofvoting rights held (%)

Relationshipwith related party      –

     –Nature of transaction

Deposits madeAmount oftransaction(Thousands of yen)

¥193,000

Item

DepositEnding balance(Thousands of yen)¥160,984

Fiscal 2018 (From December 1, 2017 to November 30, 2018)

Type

Subsidiary of theparent company

Name of company
or other entity

Vulcan Crypto
Currency Financial
Products K.K.

Head office location

Paid-in capitalor investment(Millions of yen)

Kishiwada, Osaka¥10

Note: Consumption taxes are not included in the amounts of transactions and the ending balances.

Description of businessor occupation

Crypto-currency andblockchain business

Nature of transaction

Transfer of debt
obligation

Amount oftransaction(Thousands of yen)

¥1,000,000

Item

    –

Ending balance(Thousands of yen)

¥–

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INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes(c) Officers of the filing company, major shareholders and other persons (individuals only)
Fiscal 2017 (From December 1, 2016 to November 30, 2017)
Not applicable
Fiscal 2018 (From December 1, 2017 to November 30, 2018)
Not applicable(d) Officers and major shareholders of the filing company’s consolidated subsidiaries (individuals only)
Fiscal 2017 (From December 1, 2016 to November 30, 2017)
Type

Officer of a significant
subsidiary

Name of company
or other entity

Takao Hayashi

Description of businessor occupation

Officer

Percentage ofvoting rights held (%)   –

Relationshipwith related party

Debt guarantee
received

Nature of transaction

Debt guarantee
received

Amount of transaction(Thousands of yen)

Item

Ending balance(Thousands of yen)

¥39,686    –¥–

Amount of transaction(Thousands of yen)

Item

Ending balance(Thousands of yen)

¥17,414    –¥–

Fiscal 2018 (From December 1, 2017 to November 30, 2018)
Type

Officer of a significant
subsidiary

Name of company
or other entity

Takao Hayashi

Description of businessor occupation

Officer

Percentage ofvoting rights held (%)   –

Notes: 1. Consumption taxes are not included in the amounts of transactions and the ending balances.
2.	Transaction terms and policy on deciding transaction terms and conditions
The debt guarantees received are debt guarantees for bank loans. A guarantee fee is not paid.

2. Notes on the parent company or significant related companies(1) Parent company information
FISCO Ltd. (Listed on the Tokyo Stock Exchange JASDAQ Growth Market)(2) Summary of financial information on significant related companies
Not applicable

Relationshipwith related party

Debt guarantee
received

Nature of transaction

Debt guarantee
received

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INTEGRATED REPORT 2019
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Strategy

Sustainability

Financial Section

Corporate Data

Notes

(Per Share Information)(Yen)

Net assets per share
Amounts for net income (loss) per share
Diluted net income per share

Fiscal 2017
(From December 1, 2016
to November 30, 2017)

Fiscal 2018
(From December 1, 2017
to November 30, 2018)¥259.7460.68–¥216.02(31.82)–

Notes: 1.	The basis for calculating the amounts for net income (loss) per share and diluted net income per share is
as follows:(Thousands of yen)
Fiscal 2017
(From December 1, 2016
to November 30, 2017)

Fiscal 2018
(From December 1, 2017
to November 30, 2018)¥902,592–¥(473,969)–

Net income (loss) per share
Gain (loss) attributable to owners of parent
Amounts not attributable to common shareholders
Gain (loss) attributable to owners of parent related
to common shares
Average number of common shares during the period(Shares)902,592(473,969)

14,875,370

14,894,159

Diluted net income per share
Adjustments to profit attributable to owners of parent
Increase in number of common shares (Shares)

–
–

–
–

Outline of dilutive shares
excluded from the calculation of diluted net income
per share because of nothaving a dilutive effectFiscal 2017
(From December 1, 2016
to November 30, 2017)

Fiscal 2018
(From December 1, 2017
to November 30, 2018)

Subscription rights to shares attached to NCXXGroup Inc.’s 11th Series of Subscription Rights toShares (960 subscription rights for 96,000
underlying shares)

Subscription rights to shares attached to
NCXX Group Inc.’s 11th Series of Subscription
Rights to Shares (960 subscription rights for
96,000 underlying shares)

Subscription rights to shares attached to NCXXGroup Inc.’s 5th Series of Unsecured Convertible
Bonds with Subscription Rights to Shares (1,165
subscription rights for 1,069,788 u­ nderlying shares)

Subscription rights to shares attached to
NCXX Group Inc.’s 13th Series of Subscription
Rights to Shares (1,000 subscription rights for
100,000 underlying shares)

Subscription rights to shares attached to NCXXGroup Inc.’s 13th Series of Subscription Rights toShares (1,000 subscription rights for 100,000
underlying shares)

Subscription rights to shares attached to
NCXX Group Inc.’s 14th Series of Subscription
Rights to Shares (900 subscription rights for
90,000 underlying shares)
Subscription rights to shares attached to
NCXX Group Inc.’s 7th Series of Unsecured
Convertible Bonds with Subscription Rights toShares (20 subscription rights for 487,800
u­ nderlying shares)

2.	Diluted net income per share for fiscal 2017 is not disclosed as there were no shares with a potentially dilutive effect.
3.	Although there were potentially dilutive shares, diluted net income per share for fiscal 2018 is not disclosed as a net loss per
share was recorded.

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INTEGRATED REPORT 2019
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Strategy

Sustainability

Financial Section

Corporate Data

Notes

(Subsequent Events)
I Significant Events Related to Investments

II Recognition of Extraordinary Loss on Market Sale of Shares Held by
the Company

In a press release disclosed by the Company’s parent company FISCO Ltd. (“FISCO”) on December 7, 2018,
entitled “Notification of Recording of Extraordinary Loss by the Company and the Company’s Consolidate
Subsidiary, Revision of the Company’s Full-Year Earnings Forecast and Dividend Forecast, and Revision of
the Full-Year Earnings Forecast of the Company’s Subsidiary,” Fisco Cryptocurrency Exchange Inc. (“FCCE”),
a consolidated subsidiary of FISCO’s equity-method affiliate Fisco Digital Asset Group Co., Ltd. (“FDAG”),
had held cryptocurrency reserves to compensate users (2,723.4 Bitcoin, 40,360 Bitcoin cash) as hacking
response expenses upon the transfer of the Zaif business; however, on the effective date of the business
transfer, November 22, 2018, a sharp fall in the market price of these cryptocurrencies meant that a realized
loss was recorded with respect to the cryptocurrency used for compensation due to the difference between
the acquisition price and the fair value of the effective date of the business transfer.
The Company’s consolidated subsidiary, e frontier, Inc., subscribed to the 1st unsecured convertible
bonds with subscription rights to shares issued by FDAG on October 18, 2018, for ¥2 million (two corporate bonds with a face value of ¥1 million), and having exercised all of the subscription rights of these
corporate bonds on December 26, 2018, holds 400 shares issued by FDAG (carrying amount: ¥2 million)
as investment securities. For a certain period from the following fiscal year onward based on FDAG and
FCCE, there is a possibility that a loss on valuation of investment securities could be recognized from thefiscal year ending November 30, 2019 onward if the credit risk on bonds increased or grounds for recoverability cannot be obtained due to a marked divergence between the acquisition price and the real price of
the investment securities.

On January 25, 2019, the Company sold a portion of its shares of CAICA Inc. (Listing: Tokyo Stock
Exchange, JASDAQ; Securities Code: 2315; Head Office: Meguro-ku, Tokyo, President: Shin Suzuki).
As a result, the Company expects to recognize an extraordinarily loss in its non-consolidated financial
results and its consolidated financial results, as follows.

1. Reason for sale of investment securities
To streamline assets and strengthen the financial base

2. Details of sale of investment securities
1. Shares sold: Common shares of CAICA Inc.
2. Sale period: January 17, 2019 to January 25, 2019
3. Details of extraordinary loss: Loss on sale of investment securities of ¥134 million

3. Impact on financial results
The loss on sale of investment securities resulting from this sale will be recorded as an extraordinary loss in thefirst quarter of the fiscal year ending November 30, 2019. The Company will promptly provide notification if thisnecessitates any revision to the consolidated earnings forecast for the fiscal year ending November 30, 2019.

III Issuance of Stock Compensation-Type Stock Options
On January 30, 2019, the Board of Directors of NCXX decided to submit a resolution for approval by the35th Ordinary General Meeting of Shareholders, delegating it the authority to decide the particulars for
issuing and allotting subscription rights to shares, pursuant to the provisions of Article 236, Article 238 and
Article 239 of the Companies Act. The Board of Directors plans to allot the subscription rights to shares todirectors and employees of NCXX and its subsidiary companies as stock options granted at particularly
advantageous terms. The goal will be to raise the motivation and morale of the directors and employees by
providing them with an incentive to enhance the Group’s earnings performance and corporate value. The
allocation of stock options to the Company’s directors corresponds to compensation, etc. under Article 361of the Companies Act.
The 35th Ordinary General Meeting of Shareholders, held on February 26, 2019, approved the proposal in
its original form.

74

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

Details regarding the subscription rights to shares are as follows.

(1) Total number of subscription rights to shares
The maximum number of subscription rights to shares shall be 1,000. Of this, a maximum of 500 rights shallbe allotted to the directors of the Company (with a proportionate 100 of those rights allotted to the outside
directors of the Company).

(2) Class and number of underlying shares
The class of underlying shares shall be common stock of the Company, and the maximum number that canbe issued shall be 100,000 shares. Of these, 50,000 shares shall be the maximum number that can be allotted to directors of the Company when they exercise their subscription rights to shares, including a portion of
10,000 shares for outside directors.
The number of underlying shares for each subscription right to shares shall be 100 shares of common
stock of the Company.
The number of shares of common stock underlying the subscription rights to shares shall be adjusted
according to the following formula in the event the Company conducts a stock split or consolidation following
the resolution date of the General Meeting of Shareholders.
Number of underlying shares after adjustment = N
 umber of underlying shares before adjustment
× Stock split or consolidation ratio
In addition to the foregoing, in the event of other unavoidable reasons requiring adjustment of the underlying shares, the Company shall be able to adjust the number of underlying shares within reasonable bounds
as deemed necessary.
Moreover, the adjustment shall apply only to the number of shares underlying the subscription rights toshares that have yet to be exercised as of the stock split or consolidation, and any fraction under one (1)share resulting from such adjustment shall be rounded down.

(3) Payment in exchange for the subscription rights to sharesNo monetary payment shall be required in exchange for the subscription rights to shares.

(4) Value of assets to be invested upon exercise of subscription rights to shares
The value of assets to be invested upon exercise of a subscription right to shares shall be the amount payable for each share received upon exercise of the subscription right to shares (hereinafter, “exercise price”)
multiplied by the number of shares to be granted per subscription right to shares.
The exercise price of a subscription right to shares shall be the higher of the closing price of the underlying
common stock on the Tokyo Stock Exchange on the allotment date of the right specified by the Board of
Directors (the “allotment date”) (the most recent previous closing price in the event that the stock fails to tradeon that date) and the average closing price on the exchange (excluding days when the stock fails to trade) for
the days of the month prior to the month of the allotment date, multiplied by 1.05 (with the fraction less thanone (1) yen of the resulting amount rounded up).
In the event that a split or consolidation of the Company’s common stock takes place after the allotment
date, the exercise price shall be adjusted according to the following formula, with the fraction less than one(1) yen resulting from the adjustment rounded up.
1
Exercise price after adjustment = Exercise price before adjustment ×

Stock split orconsolidation ratio

In addition to the foregoing, if the exercise price must be adjusted following the allotment date due to theCompany conducting a merger with another company, a corporate split, or reduction in capital stock, orsome accordingly unavoidable reason, the Company shall be able to adjust the exercise price within reasonable bounds as deemed necessary.

(5) Exercise period of subscription rights to shares
The starting date of the exercise period shall be two years from the day following the Board of Directors
resolution date for deciding the issuance terms of subscription rights to shares, and the expiration date shallbe five years from the day following this resolution date.

(6) Conditions for exercising subscription rights to shares
Holders of the subscription rights to shares must remain in their position as a director or employee of theCompany or its subsidiary in order to exercise the rights, apart from when the Board of Directors makes a
special exception.

75

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Notes

Consolidated Supplementary Schedules(7) Provisions for the Company to buy back the subscription rights to shares[Schedule of Corporate Bonds]

1. The Company may buy back the subscription rights to shares from the holders free of charge, on a datespecified separately by the Board of Directors, in the event that a resolution for a merger agreement underwhich the Company will become the dissolving company, or a resolution for a stock exchange agreement
or stock transfer plan under which the Company will become a wholly owned subsidiary, is approved by
the General Meeting of Shareholders (or by the Board of Directors if approval by the General Meeting of
Shareholders is not required).
2. Following the allotment date of particular subscription rights to shares, the Company shall be able toacquire the particular subscription rights to shares from the holders free of charge if the closing price ofordinary transactions of the Company’s common stock traded on the Tokyo Stock Exchange on any
business day falls to 50% or lower than the exercise price of the particular subscription rights to shares(with fractions less than one (1) yen rounded down).
3. The Company may buy back any and all subscription rights to shares of a particular holder free of charge,
on a date specified separately by the Board of Directors, in the event that the particular holder no longer
satisfies the provisions set forth above in “(6) Conditions for exercising subscription rights to shares.”(8) Restrictions on the assignment of subscription rights to shares
Approval of the Company’s Board of Directors shall be required for the acquisition of subscription rights toshares via assignment.

(9) Matters relating to increases of capital stock and capital reserve as a result of sharesissued by the exercise of subscription rights to shares
In the event shares are issued by the exercise of subscription rights to shares, the amount of capital stock
shall be increased by half of the maximum for increase in capital, as calculated in accordance with the provisions of Article 17, Paragraph 1 of the Rules of Account Settlement of Corporations of Japan. Any fraction
less than one (1) yen resulting from the calculation shall be rounded up to the nearest one yen.
The amount of increase in capital reserve shall be the amount calculated by subtracting the aforementioned increase in capital stock from the maximum for increase in capital.

(10) Handling of fractions
Where fractions of less than one (1) share occur in the number of shares issued to holders of subscription
rights to shares upon exercising the rights, such fractions shall be rounded down.

(11) Other
Other terms for the allotment of subscription rights to shares shall be set forth by a separate resolution of theBoard of Directors of the Company.

IssuerSeriesNCXX 5th Series of Unsecured
Group ­Convertible Bonds withInc.
­Subscription Rights to Shares
NCXX 7th Series of Unsecured
Group ­Convertible Bonds withInc.
­Subscription Rights to Shares–
Total

Issuance date

Starting balancein fiscal 2018
(Thousandsof yen)Ending balancein fiscal 2018
(Thousandsof yen)March
30, 2015¥ 1,165,000[1,165,000]¥         –
[–]

0.5

None March
29, 2018

May
1, 2018–[–]

200,000[–]

0.7

None April
30, 2020¥ 1,165,000[1,165,000]¥200,000[–]––Interest(%)

Collateral–

Maturity date–Notes: 1. Amounts in parentheses are the current portion of bonds.
2. Details on bonds with subscription rights to shares are as follows.

SeriesType of shares to be issued
Issue price of subscription rights (Yen)
Issue price of shares (Yen)
Total face amount (Thousands of yen)
Total amount of shares to be issued upon exercise ofsubscription rights to shares (Millions of yen)
Percentage of shares granted per subscription right (%)
Exercise period of the subscription rights

5th Series of Unsecured
Convertible Bonds with
Subscription Rights to Shares

7th Series of Unsecured
Convertible Bonds with
Subscription Rights to Shares

Common shares
Gratis¥1,089¥1,165,000¥–

Common shares
Gratis¥410¥200,000¥–

100%
From March 30, 2015
to March 29, 2018100%
From May 1, 2018
to April 30, 2020

Note: The information above assumes that the full payment due for exercising subscription rights to shares is paid in lieu of thefull redemption of the convertible bonds associated with those rights when requested by rights holders seeking to exercise
their subscription rights to shares. It is further assumed that such a request is made when the subscription rights to sharesare exercised.
Note: 3. Scheduled redemptions due within five years subsequent to November 30, 2018 are as follows.
(Thousands of yen)Due in one year
or less

Due after one year
through two years

Due after two years
through three years

Due after three years
through four years

Due after four years
through five years¥–¥200,000

¥–

¥–

¥–

76

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Financial Section

Corporate Data

Consolidated Supplementary Schedules[Schedule of Borrowings][Other](Thousands of yen)

Category

Starting balancein fiscal 2018

Ending balancein fiscal 2018

Average interest
rate (%)¥  191,660¥  383,200

1.0–

836,382

587,606

1.5–

1,637,685¥2,868,475

1,223,263¥2,194,069

1.6–

2019 to 2022–

Short-term loans payable
Current portion of long-termloans payable
Long-term loans payable(excluding current portion)
Total(Thousands of yen)

Repayment(Cumulative period)

Notes: 1. Average interest rate represents the weighted-average interest rate for the balance at November 30, 2018.
2. Scheduled repayments of long-term loans payable (excluding current portion) and other interest-bearing debt (excluding
current portion) due within five years subsequent to November 30, 2018 are as follows.

Net sales
Profit (loss) before income taxes
Profit (loss) attributable to ownersof parent
Net income (loss) per share (Yen)First quarter

Second quarter

Third quarter

Fiscal year

¥4,006,728
1,232,357¥6,009,732
1,082,013¥8,826,992
1,228,870¥11,125,302(265,125)

1,216,841¥81.751,020,242¥68.53

1,044,308¥70.13(473,969)¥(31.82)First quarter

Second quarter

Third quarter

Fiscal year

¥81.75¥(13.20)¥1.62¥(101.89)(Yen)(Quarterly period)(Thousands of yen)

Long-term loans payable

Quarterly and other information for fiscal 2018

Due after one
year throughtwo years

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due after
five years¥940,474¥204,689¥78,099¥–¥–[Schedule of Asset Retirement Obligations]
The schedule of asset retirement obligations is omitted from record in these financial statements as the­matters that must be recorded in this statement are disclosed as a note in conformity with Article 15-23 of
the Ordinance on Consolidated Financial Statements.

Net income (loss) per share

77

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Company Overview
Name

NCXX Group Inc.

Financial Section

History
Date
Apr.1984
Aug.1985
Aug.1986

Date of establishment

April 21, 1984

Capital stock¥1,000,000,000

Aug.1987
Sept.1998
Oct.1999
Feb.2002
June2002
Apr.2003
Sept.2003
Dec.2003
June2004
Jan.2005

303

June2005

Consolidated Group
employees

Business operations

Location(as of November 30, 2018)(as of November 30, 2018) anagement strategy formulation andMmanagement of Group companies
Planning, development, and sale ofnursing care and rehabilitation robots, etc.
Planning, development, and sale ofagricultural ICT
Businesses associated with or related
to the above
Hanamaki Head Office:2-32-1 Kunuginome, Hanamaki City,
Iwate Prefecture, Japan
TEL : +81-198-27-2851
FAX: +81-198-27-2850
Tokyo Head Office:2F CoSTUME NATIONAL Aoyama Complex,
5-4-30 Minamiaoyama, Minato-ku, Tokyo, Japan
TEL : +81-3-5766-9870
FAX: +81-3-5766-9871

Corporate Data

Sept.2005
Nov.2005
June2007
Nov.2010
July2012
Dec.2012
Dec.2013
Feb.2014
Apr.2015
June2015
Aug.2016
Oct.2016
Dec.2016May2017
July2017
Aug.2017
Jan.2018
Apr.2018
July2018
Oct.2018
Nov.2018

Event
Established as Honda Electron Co., Ltd. with capital stock of ¥10 million invested by Honda Tsushin Kogyo
Co., Ltd. Head Office was located in Himonya, Meguro-ku, Tokyo.
Started design and manufacture of telecommunication line equipment
Constructed Hanamaki Plant in Hanamaki City, Iwate Prefecture and started operations
Participated in the establishment of Iwateken Koudo Gijutsu Shinkou Kikou(Iwate Prefecture Advanced Technology Promotion Organization)
Relocated Head Office to Shibaura, Minato-ku, Tokyo
HOKUBU Communication & Industrial Co., Ltd. and its group company become the major shareholders
Acquired ISO quality certification (ISO 9001, JQA-QM 3856)
Launched world’s first 128 kbps data telecommunication card for PHS
Established the Hanamaki R&D Center as a base for development of PHS data telecommunication cards
Established the Tokyo R&D Center and established bases for development of PLC and wireless
Relocated Head Office to Kyobashi, Chuo-ku, Tokyo
Acquired ISO environmental certification (ISO 14001, JQA-EM 3575)
Index Corporation acquired 2,416 shares, making the Company a subsidiary
Received supreme prize for excellence in the modem category of the BCN Awards
Sold the semiconductor manufacturing equipment business to SHIBAURA MECHATRONICS CORPORATION
and specialized in the information and telecommunication businessChanged company name from Honda Electron Co., Ltd. to Net Index Co., Ltd.
Established Net Index ES Co., Ltd., and spun off the manufacturing and service divisions
Introduced the W-SIM, which is the world’s smallest PHS module, and the first S­ IM-STYLE voice handset
Listed on the JASDAQ securities exchange (securities code: 6634)
Relocated the Head Office to Hanamaki City, Iwate Prefecture
FISCO Ltd. acquired 47,401 shares of the Company, making it a subsidiary
Made e-tabinet.com into a subsidiary
Changed company name from Net Index Co., Ltd. to NCXX Inc.
Made NCXX Solutions Inc. and Care Online Limited (now Care Dynamics Limited) into subsidiaries
Transferred the domestic systems development business of SJI Inc. (now CAICA Inc.) to subsidiary
NCXX Solutions Inc. through an absorption-type company split
Changed the company name from NCXX Inc. to NCXX Group Inc.
Established NCXX Inc. as a newly incorporated company. Transferred the device business to NCXX Inc.
through a corporate split
Made SJI Inc. (now CAICA Inc.) a subsidiary
Made TITICACA, Co. Ltd. a subsidiary
Consolidated subsidiary e-tabinet.com made Gloria Tours Inc. a subsidiary
Made Versatile Inc. and FISCO International Limited into subsidiaries
Versatile Inc. made FACETASM a subsidiary
Made e frontier, Inc. a subsidiary
Transferred 51% of the issued shares of NCXX Solutions Inc. to CAICA Inc., changing it from a consolidated
subsidiary to an equity-method affiliate
Exchanged 49% of the issued shares of NCXX Solutions Inc. with CAICA Inc., excluding NCXX Solutions Inc.
from the scope of application of the equity method and making it a wholly owned subsidiary of CAICA Inc.
FISCO International Limited changed its name to NCXX International Limited
Started the mining business as a new initiative in the cryptocurrency-related business
Sold the Company’s shareholding in CAICA Inc., excluding it from the scope of application of the equity method
Conducted an incorporation type company split with part of the business of Versatile Inc. and newly established
NCXX Premium Group, Inc. and NCXX Farm Holdings, Inc. wholly owned subsidiaries of Versatile Inc.
The Company acquired the shares of NCXX Premium Group, Inc. and NCXX Farm Holdings, Inc. from Versatile
Inc., making them into wholly owned subsidiaries

78

INTEGRATED REPORT 2019
About NCXX Group

Strategy

Sustainability

Shareholder Information
Overview of shares

Total number of issuable shares: 30,000,000
Number of shareholders:

15,030,195
6,139

Major shareholders
Number ofshares held
(shares)

Shareholding
percentage ofissued shares (%)

FISCO Ltd.

4,229,700

28.38

FISCO DIAMOND AGENCY, Inc.

3,000,000

20.13

750,800

5.04

Shareholder name

Hideaki Oka

Corporate Data

Shareholder Memo

(As of November 30, 2018)

Total number of shares issued:

Financial Section

Listed exchanges

Tokyo Stock Exchange, JASDAQ

Listing dateJune 22, 2007

Securities code

6634

Business year

December 1 to November 30

Ordinary General Meetingof Shareholders

Within three months of the final closing date of each year

Shareholder record dateNovember 30

Record dates for dividends
from retained earnings

November 30, May 31

Number of shares in one
trading unit

100 shares

Method of posting notices

The Company provides notification by electronic notices.
However, when the Company cannot provide notices by theelectronic method due to accidents or other unavoidable reasons,it will post the notices in the Nikkei newspaper. Notices areprovided on the Company’s website at the following address
https://ncxxgroup.co.jp/irinfo/notification/

Transfer agent

Mitsubishi UFJ Trust and Banking Corporation,
4-5, Marunouchi 1-Chome, Chiyoda-ku, Tokyo

SBI Securities Co., Ltd.

159,100

1.07

CA INDOSUEZ (SWITZERLAND) SA SINGAPORE BRANCH(Standing proxy Kanetsugu Mike, President & CEO, MUFG
Bank, Ltd.)

Handling office of thetransfer agent(postal address)

Mitsubishi UFJ Trust and Banking Corporation,
Securities Agency Division,
4-5, Marunouchi 1-Chome, Chiyoda-ku, Tokyo

140,000

0.94

Contact office of the sametransfer agent

Mitsubishi UFJ Trust and Banking Corporation
branches throughout Japan

Shuhari Initiative Ltd.

102,000

0.68

Heringu Handeru K.K.

100,000

0.67

Yuya Takada

78,0000.52

Matsui Securities Co., Ltd.

66,2000.44

Masao Ito

58,7000.39

Financial institutions(0.12%)

Individuals and others(42.89%)Foreign companies, etc.
(2.59%)

Financial instruments
business operators(2.79%)

Shareholding
composition

Other companies(51.61%)