TRANSLATION FOR REFERENCE ONLY
November 11, 2015
For Immediate Release
Company Name:
Representative:
Inquiries:

Aplix IP Holdings Corporation
Ryu Koriyama, CEO and Representative Director(Code: 3727, TSE Mothers)
Kengo Nagahashi, Director(Tel: 050-3786-1715)

Notice Concerning a Revision to the Consolidated Results Forecasts for the Fiscal Year Ending
December 31, 2015 and the Posting of a Loss on the Valuation of Inventories and Extraordinary
Loss

The Company announces that its consolidated results forecasts for the fiscal year ending December 31, 2015 (fromJanuary 1, 2015 to December 31, 2015, FY2015) published in the Consolidated Financial Results for FY2014 (JapaneseStandards) on February 13, 2015 (hereinafter “the initial forecasts”) have been revised as follows in light of recent
performance trends and other factors and that it will post a loss on valuation of inventories and an extraordinary loss.
1.

Revision to the consolidated results forecasts for the fiscal year ending December 31, 2015 (from January 1, 2015
to December 31, 2015)
Net Sales

Operating Income
million yen

million yen

Forecasts previously announced (A)3,078-­‐765

Forecasts announced herein (B)1,546-­‐2,410

Change (B) – (A)-­‐1,532-­‐1,645

Change ratio (%)(Reference) Financial results for thepreceding fiscal year (FY 2014)-­‐49.8－2,172-­‐2,766*The Company refrains from disclosing the ordinary income forecast and the net income forecast for the fiscal year
ending December 31, 2015, given that it is not easy to reasonably foresee foreign exchange gains and losses while net
sales from the overseas Internet of Things (IoT) business are expected to grow.
2.

Grounds for the revision(a) Technology Business
For the consolidated fiscal year in question, i.e. ending December 31, 2015, the Company’s Technology
Business is giving shaping to projects for adding IoT support to customers’ products with the use of theCompany’s technology. However, the timing of the release of IoT products will be around six to nine months later
than expected by customers and by the Company. Accordingly, revenues from the IoT-related business, whichwere expected to come into being within the consolidated fiscal year concerned, will be confirmed in the fiscalyear ending December 31, 2016 (from January 1, 2016 to December 31, 2016) and that means a decrease in net
sales by approximately 1,085 million yen. While focusing on the IoT-related business, the Company downsized
the beacon-related consulting service and other conventional services to eventually lower net sales by around 487
million yen. In view of these factors, the Company decided to revise the consolidated results forecasts for thefiscal year in question. The delay in the release of IoT is due chiefly to the lack of knowledge and experience
requisite for commercialization of IoT products on the part of customers and their EMS, ODM, OEM (See Note)

Note: This press release is provided to share information about Aplix business activities, and it is not intended to solicit investment in Aplix shares. While the materials may describe
information such as forecasts related to future business performance, this information has been created based on the judgment of Aplix at the time the materials were created.
As a result, Aplix offers no guarantee that the conditions described will come to pass, and any of the information described is subject to change without notice in the future.

and other contracted manufacturers and to difficulties in different kinds of coordination between customers andtheir contracted manufacturers requisite to commercialization of IoT products. As a backdrop to thesecircumstances, European and American manufacturers, which make up the majority of the Company’s customer
base, tend to discover products from manufacturers that suit their brand image in trade shows and other events andthen release them as their ODM products. They communicate their requests for colors, shapes and otherspecifications to ODM manufacturers in order to create the products. However, commercialization of IoT products
involved so much knowledge and so many processes unfamiliar to customers and to their contracted manufacturersthat it took a longer time than initially expected for the release of such products.
In order to shorten the period before the release of future IoT products, the Company started to serve as amediator between customers and their contracted manufacturers, many of whom are based in China, for offering
assistance in project management in English and Chinese, in addition to technical support covering design,
prototyping and inspection, and provision of terminals for inspection, as well as other equipment. This assistance
was so highly regarded that it began to produce an effect that would lead to business expansion through attracting
customers and their contracted manufacturers. For example, Western manufacturers that we serve introduce theCompany to Chinese contracted manufacturers in other products, and Chinese contracted manufacturers now
introduce the Company to other Western manufacturers that they serve. Even so, the Company understands that,for the purpose of achieving profitability in this business, it is vital to earn sales from revenue sharing and otherdeals by realizing earlier releases of customers’ IoT-ready products to the market. In the future, the Company willcontinue to expand sales of all-inclusive solutions necessary for the commercialization of IoT products ranging
from communication modules to smartphone apps and cloud services. In addition, it will offer project management
services to customers and their contracted manufacturers in an effort to shorten the time required for IoT productcommercialization and to establish the Company’s superiority in the field of IoT-related manufacturing.
On the other hand, it is anticipated that the slide in net sales will directly affect the operating income in theCompany’s Technology Business. Regarding other factors for a change in the operating income, expenses for raw
materials and others are expected to fall by some 625 million yen from the level in the initial forecasts following aconsiderable shrinkage of net sales from the initial forecasts. For departure from the game and animation business,in which it is now difficult to earn stable revenues and from the embedded software licensing business, wherefuture profitability became difficult to attain and for making a fresh start as an IoT start-up company, the Companyspent about 82 million yen on increased overseas sales activities and advising activities. The Company
re-examined the assets that would not be helpful to its new business orientation to treat approximately 170 million
yen worth of inventories as expenses (See 3. Recording of loss on valuation of inventories). As it started in thepreceding consolidated fiscal year, the Company posted around 352 million yen as expenses related to the closing
down of its software infrastructure technology business that it used to engage in. On aggregate, operating expenses
will result in a level close to the initial forecasts.
(b) Publishing and Video Business	  The publishing and video business is performing well and steadily growing, with net sales increasing about
3.6% from the nine months of the previous fiscal year and the operating loss falling by about 52 million yen. In thecurrent consolidated fiscal year, the financial results are also expected to slightly exceed the initial forecast. Inaddition, because the amortization of goodwill (approximately 80 million yen is recorded in the current
consolidated fiscal year) of Flex Comix Inc. and HOLP SHUPPAN, Publishing, which the Company madeconsolidated subsidiaries in August 2012, was completed in September 2015, the results for the original businessactivities will be reflected in the profits as they are in the future. In the publishing and video business, we willcontinue to work on creating titles that are well-received by a greater number of readers, while also maintaining ahigh level of cost awareness.
Note: This press release is provided to share information about Aplix business activities, and it is not intended to solicit investment in Aplix shares. While the materials may describe
information such as forecasts related to future business performance, this information has been created based on the judgment of Aplix at the time the materials were created.
As a result, Aplix offers no guarantee that the conditions described will come to pass, and any of the information described is subject to change without notice in the future.

In addition to the aforementioned results, about 101 million yen is expected to be recorded as a temporary expense
associated with the relocation of the head office. As a result, the expected net sales for the current consolidated fiscalyear will be 1,546 million yen, while the operating loss will be 2,410 million yen.
Expenses associated with the relocation and removal of the head office and the termination of the software
infrastructure technology business are limited to the current consolidated fiscal year. Expenses such as deprecation, forwhich about 135 million yen was recorded in the nine months of the current consolidated fiscal year, will not be posted
from the fiscal year ending December 31, 2016 due to the impairment of the following non-current assets (refer to 4-(1)“Recording of impairment losses”). In addition, because of the contribution made by eliminating the amortization of
goodwill in the publishing and video business, expenses related to operating activities are expected to decline from thefiscal year ending December 31, 2016.
(Note) EMS (Electronics Manufacturing Service): Service that undertakes the outsourced manufacturing of electronicdevices.
ODM (Original Design Manufacturing): Type of operation involving the outsourced design and manufacturing ofcustomer products.
OEM (Original Equipment Manufacturing): Type of operation in which customers design products and only
outsource the manufacturing.
3.

Recording of loss on valuation of inventories
Due to the reasons previously stated in “Grounds for the revision” in 2., we recorded 170 million yen in the cost ofsales for inventories, such as raw materials for primarily the technology business, in accordance with the AccountingStandards for Measurement of Inventories” (Accounting Standards Board of Japan (ASBJ) Statement No. 9) after
conservatively reviewing the inventories of the Company.
4.

Recording of extraordinary losses(1) Recording of impairment losses
Due to the reasons previously stated in “Grounds for the revision” in 2., we recorded 481 million yen as extraordinary
losses on a consolidated basis for the non-current assets of all the businesses of the Company based on the AccountingStandard for Impairment of Fixed Assets.
(2) Recording of loss on valuation of shares of subsidiaries and associates	  Due to the reasons previously stated in “Grounds for the revision” in 2., we recorded 321 million yen as a loss on
valuation of shares of subsidiaries and associates in extraordinary losses on a non-consolidated basis, based on theAccounting Standards for Financial Instruments. The reason for this was the substantial decline in the actual value ofshares of subsidiaries that were involved in the old businesses of the shares of subsidiaries and associates which theCompany owns. Because the loss on valuation of shares of subsidiaries and associates will be eliminated in theconsolidated settlement of accounts, it will not have an impact on consolidated profits and losses.
* The forecasts above are prepared based on information available as of the publication date of this material. The actual
results may differ from forecast values due to various factors.

Disclaimer: This English translation is for reference purposes only. In the event of any discrepancy between theJapanese original and this English translation, the Japanese original shall prevail. We assume no responsibility forthis translation or for direct, indirect or any other form of damage arising from the translation.	 
Note: This press release is provided to share information about Aplix business activities, and it is not intended to solicit investment in Aplix shares. While the materials may describe
information such as forecasts related to future business performance, this information has been created based on the judgment of Aplix at the time the materials were created.
As a result, Aplix offers no guarantee that the conditions described will come to pass, and any of the information described is subject to change without notice in the future.