DIGITAL HEARTS : Notice Regarding the Stock Acquisition of identity Inc. (Conversion into a Consolidated Subsidiary)

Company name:

Name of representative:

Contact:

	May 11, 2021
DIGITAL HEARTS HOLDINGS Co., Ltd.
President and CEO	Genichi Tamatsuka
(Code number: 3676, First Section of the Tokyo
Stock Exchange)
Director and CFO	Toshiya Tsukushi
(TEL: [phone])

Notice Regarding the Stock Acquisition of identity Inc.

(Conversion into a Consolidated Subsidiary)

DIGITAL HEARTS HOLDINGS Co., Ltd. (hereinafter referred to as the "Company") announces that it passed a resolution at its Board of Directors' Meeting held today to convert identity Inc. (hereinafter referred to as "ID") to a subsidiary through the acquisition of shares of ID.

Details are as follows:

1. Reason for stock acquisition

The Company is currently focusing on expanding the Enterprise Business, which is the second pillar of earnings following our mainstay Entertainment Business. The Company has worked to strengthen its human resources including engineers and its technological capabilities and to expand its services and customer base. In particular, in order to increase engineers that are indispensable for business expansion, it has taken various initiatives for recruiting from outside, training internal resources, and alliances with partner companies. The Company has strengthened recruitment of IT experts, built a model to train its 8,000 testers to become engineers, and acquired a company with approximately 400 engineers in Vietnam.

On the other hand, ID is developing the IT Resource Support Business that provides recruitment agency, temporary staffing services, and freelance resource matching service to client companies, focusing on IT specialists including freelance engineers. Its registration platform of "techcareer series" which is targeting IT specialists looking for jobs, keeps the industry-leading number of freelance job offers, and has a unique support system from e-learning programs to welfare services for registrants. The number of registrants in "techcareer series" continues to increase at a pace of over 100 people per month, and it currently exceeds 11,000 people.

For the continuous high growth in the future, we have decided to acquire ID, which has rich basement of human resources including freelance engineers.

With this acquisition, the Company's group will achieve to have a huge talent pool, including approximately 8,000 testers, approximately 400 in-house engineers/security specialists in Japan, approximately 400 engineers in offshore Vietnam and additionally 11,000 IT specialist registered to "techcareer series." Based on this wealth of human resources, the group will aim for the next stage of growth as an IT human resource platformer in order to achieve our corporate mission of "SAVE the

DIGITAL WORLD."

2. Method of transfer

ID operates the IT Human Resource Platform Business, the IT Resource Support Business, and the IT Human Resource Recruitment Support Business. Among these businesses, the IT HR Recruitment Support Business, which is in the investment phase as a newly developing business, will be transferred to the new company of Work with Joy Inc., which will be established after the conclusion of the basic agreement. Then, the Company will acquire all of the shares of ID, which will become a company consisting of the IT HR Platform Business and the IT Resource Support Business, which have

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already been profitable and highly compatible with our Enterprise Business. The all shares of ID are scheduled to be transferred from its existing shareholders to the asset management company, "8 Inc.", after the conclusion of the basic agreement, and then the Company will acquire 100% shares of ID from the asset management company.

3. Overview of the companies to be acquired as a subsidiary

(1)	Company name	identity Inc.
(2)	Location	2-1-12 Shinjuku, Shinjuku-ku,Tokyo, Japan
(3)	Position and name of	President	Tsutomu KONNO
representative
(4)	Business activities	IT Human Resource Platform Business, IT Resource Support Business, and IT
Human Resource Recruitment Support Business
(5)	Share capital	100 million yen
(6)	Date established	August 8, 2008
(7)	Major shareholders and	Tsutomu KONNO	67.4%
shareholding ratios	3 venture capital firms	26.1%
				There are no notable capital ties between the Company and the
		Capital ties		said company. There are no notable capital ties between related
			parties/affiliates of the Company and related parties/affiliates of
				the said company.
				There are no notable personnel relations between the Company
(8)	Relationship between the listed	Personnel		and the said company. There are no notable personnel relations
company and the said company	relations		between related parties/affiliates of the Company and related
				parties/affiliates of the said company.
				There are no notable business relations between the Company
		Business		and the said company. There are no notable business relations
		relations		between related parties/affiliates of the Company and related
				parties/affiliates of the said company.

(9) Operating results and financial position of the said company for the past three years

Fiscal year	Fiscal year ended	Fiscal year ended	Fiscal year ended
July 2018	July 2019	July 2020
Net assets (thousand yen)	319,706	184,621	56,373
Total assets (thousand yen)	704,222	509,587	423,114
Net assets per share (yen)	11,397	6,581	2,009
Net sales (thousand yen)	1,178,987	1,219,476	1,264,320
Operating income (thousand yen)	-45,487	-140,287	-128,361
Ordinary income (thousand yen)	-47,372	-134,733	-127,720
Net income (thousand yen)	-47,662	-135,178	-128,043
Net income per share (yen)	-1,699	-4,819	-4,564

*The above results include the IT Human Resource Recruitment Support Business, which is scheduled to be transferred to a newly established company. In the IT Human Resource Platform Business and other businesses that the Company acquires this time, the results for the fiscal year ended July 2020 were sales of 1,264 million yen and operating income of 36 million yen and the results for the current fiscal year ending July 2021 is estimated to be sales of 1,800 million yen and operating

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income of 100 million yen.

4. Overview of the counterparty to the stock acquisition

(1)	Company name	8 Inc.
(*Scheduled to be newly established after conclusion of basic agreement)
(2)	Location	Scheduled to be established in Meguro-ku, Tokyo, Japan
(3)	Relationship between the listed	None
company and the said company

5. Number of stocks to be acquired, acquisition cost and status of stock ownership before and after acquisition

	Number of stocks owned before	Zero
(1)	(Number of voting rights: Zero)
transfer
	(Ownership percentage of voting rights: 0%)
(2)	Number of stocks to be	28,050 shares
acquired	(Number of voting rights: 28,050)
		The stock acquisition cost: JPY 1,600 million
(3)	The acquisition cost	Other costs including the advisory cost (estimated): JPY 15 million
		Total cost (estimated): JPY 1,615 million
	Number of stocks owned after	28,050 shares
(4)	(Number of voting rights: 28,050)
transfer
	(Ownership percentage of voting rights: 100％)

6. Schedule

(1)	Date of the Board of Directors' resolution	: May 11, 2021
(2)	Date of conclusion of the basic agreement	: May 11, 2021
(3)	Date of conclusion of the stock purchase agreement	: May 13, 2021 (Scheduled)
(4)	Date of the stock acquisition	: June 30, 2021 (Scheduled)

7. Future prospects

The forecasts for the fiscal year ending March 2022, including the impact of this issue, have been published in the "Summary of Business Results for the Fiscal Year Ended March 31, 2021 [Japan GAAP] (Consolidated)" today.

(Reference) Consolidated earnings forecasts for the current period and consolidated operating performance for the previous period

(in million yen)

	Net sales	Operating	Ordinary	Profit attributable	Net income
	income	income	to owners of parent	per share
					yen
Consolidated earnings
forecasts for the current period	28,420	2,100	2,100	1,400	64.77
(Fiscal year ending March 2022)
					yen
Consolidated operating performance
for the previous period	22,669	1,908	1,975	974	45.15
(Fiscal year ended March 2021)
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