I3 : Consolidated Financial Results for the Fiscal Year Ended June 30, 2022

Consolidated Financial Results

for the Fiscal Year Ended June 30, 2022

[Japanese GAAP]

August 9, 2022

Company name: i3 Systems, Inc.

Stock exchange listing: Tokyo Stock Exchange

Code number: 4495

URL: https://www.i3-systems.com/

Representative: Tsutomu Sasaki, President and CEO

Contact: Takashi Ono, Manager, Accounting and Finance Department

Phone: [phone]

Scheduled date of ordinary general meeting of shareholders: September 28, 2022

Scheduled date of filing annual securities report: September 28, 2022

Scheduled date of commencing dividend payments: September 29, 2022

Availability of supplementary explanatory materials on financial results: Yes

Schedule of financial results briefing session: Yes (for institutional investors, analysts and individual investors)

(Amounts of less than one million yen are rounded down.)

1. Consolidated Financial Results for the Fiscal Year Ended June 30, 2022 (July 1, 2021 - June 30, 2022)

(1) Consolidated Operating Results (cumulative)

(% indicates changes from the previous corresponding period.)

Net sales

Operating profit

Ordinary profit

Profit attributable to

owners of parent

Fiscal year ended

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

June 30, 2022

2,454

－

826

－

817

－

539

－

June 30, 2021

－

－

－

－

－

－

－

－

(Note) Comprehensive

income:

Fiscal year ended June 30, 2022: ¥539 million ( － %)

Fiscal year ended June 30, 2021: － million ( － %)

Basic earnings

Diluted earnings

Return on equity

Ratio of ordinary

Ratio of operating

profit to total

income to net

per share

per share

(ROE)

assets

sales

Fiscal year ended

Yen

Yen

%

%

%

June 30, 2022

102.67

100.85

24.3

25.5

33.7

June 30, 2021

－

－

－

－

－

(Reference) Equity in

earnings of associated companies:

Fiscal year ended June 30, 2022

- million yen

Fiscal year ended June 30, 2021

- million yen

(Note) The Company did not begin preparing consolidated financial statements until the fiscal year ended June 30, 2022, and therefore the figures for the fiscal year ended June 30, 2021 and year-on-year changes are not presented. In addition, because this is the first year in which consolidated financial statements have been prepared, return on equity and ratio of ordinary profit to total assets are based on shareholders' equity and total assets, respectively, as of the end of the fiscal year.

(2) Consolidated Financial Position

	Total assets	Net assets	Equity ratio	Total equity per
	share
	Millions of yen	Millions of yen	%	yen
As of June 30, 2022	3,202	2,223	69.3	420.88
As of June 30, 2021	－	－	－	－

(Reference) Shareholders' equity: As of June 30, 2022: ¥2,220 million As of June 30, 2021: － million

(Note) The Company did not begin preparing consolidated financial statements until the fiscal year ended June 30, 2022, and therefore the figures for the fiscal year ended June 30, 2021 are not presented.

(3) Consolidated Cash Flows

	Cash flows from	Cash flows from	Cash flows from	Cash and cash
	equivalents at end of
	operating activities	investing activities	financing activities
	year
	Millions of yen	Millions of yen	Millions of yen	Millions of yen
Fiscal year ended	275	(208)	(36)	2,337
June 30, 2022
Fiscal year ended	－	－	－	－
June 30, 2021

(Note) The Company did not begin preparing consolidated financial statements until the fiscal year ended June 30, 2022, and therefore the figures for the fiscal year ended June 30, 2021 are not presented.

2. Dividends

		Annual dividends per share		Total	Dividend	Ratio of
						dividends to
	1st	2nd	3rd			dividends	payout ratio
			total equity
	quarter-	quarter-	quarter-	Year-end	Total	(Annual)	(Consolidated)
	(Consolidated)
	end	end	end
Fiscal year ended	Yen	Yen	Yen	Yen	Yen	Millions of yen	%	%
-	0.00	－	10.00	10.00	52	－	－
June 30, 2021
Fiscal year ended	-	0.00	－	20.00	20.00	105	19.5	4.8
June 30, 2022
Fiscal year ending
June 30, 2023	-	0.00	－	20.00	20.00		－
(Forecast)

(Note)The Company did not begin preparing consolidated statements until the fiscal year ended June 30, 2022, and therefore the consolidated dividend payout ratio and the consolidated ratio of dividends to total equity for the fiscal year ended June 30, 2021 are not presented. Also, because this is the first year in which consolidated financial statements have been prepared, the consolidated ratio of dividends to total equity for the fiscal year ended June 30, 2022 has been calculated based on consolidated total equity per share as of the end of the fiscal year.

3. Consolidated Financial Results Forecast for the Fiscal Year Ending June 30, 2023 (July 1, 2022 - June 30, 2023) (% indicates changes from the previous corresponding period.)

		Net sales		Operating profit	Ordinary profit	Profit attributable to	Basic earnings
			owners of parent	per share
		Millions of yen		%	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
	Full year	2,734		11.4	657	(20.5)	658	(19.5)	452	(16.2)	85.76
* Notes:
(1) Changes in significant subsidiaries during the period: Yes
	(Changes in specified subsidiaries resulting in changes in scope of consolidation)
	Newly added:		1 company i3-1 Investment Limited Partnership
	Excluded:				- companies

1. Changes in accounting policies, changes in accounting estimates and retrospective restatement
2. 1. Changes in accounting policies due to the revision of accounting standards: Yes
   2. Changes in accounting policies other than 1) above: None
   3. Changes in accounting estimates: None
   4. Retrospective restatement: None
3. Total number of issued and outstanding shares (common shares)
4. 1. Total number of issued and outstanding shares at the end of the period (including treasury shares):

June 30, 2022:	5,274,850 shares
June 30, 2021:	5,238,350 shares

	2) Total number of treasury shares at the end of the period:
		June 30, 2022:												121 shares
		June 30, 2021:												121 shares
	3) Average number of shares outstanding during the period:
		Fiscal year ended June 30, 2022:						5,255,130 shares
		Fiscal year ended June 30, 2021:						5,201,437 shares
(Reference) Overview of non-consolidated results
1. Non-consolidated Financial Results for the Fiscal Year Ended June 30, 2022 (July 1, 2021 - June 30, 2022)
(1) Non-consolidated operating results					(% indicates changes from the previous corresponding period.)
					Net sales				Operating profit		Ordinary profit		Profit
	Fiscal year ended			Millions of yen		%	Millions of yen		%	Millions of yen	%		Millions of yen	%
	June 30, 2022			2,454		21.0			835		46.7		822	46.9		544	29.6
	June 30, 2021			2,029		23.6			569		38.2		559	39.3		420	32.1
				Basic earnings per	Diluted earnings
					share			per share
	Fiscal year ended				Yen						Yen
	June 30, 2022		103.60				101.76
	June 30, 2021		80.79				78.81
(2) Non-consolidated financial position
							Total assets			Net assets		Equity ratio	Total equity per
										share
								Millions of yen					Millions of yen			%		yen
	As of June 30, 2022						3,204				2,226			69.4		421.81
	As of June 30, 2021						2,830				1,681			59.4		320.92

(Reference) Shareholders' equity: As of June 30, 2022: ¥2,224 million As of June 30, 2021: ¥1,681 million

• These financial results are outside the scope of review by certified public accountants or an audit firm.
• Explanation of the proper use of financial results forecast and other notes
  The financial results forecasts and other forward-looking statements herein are based on information currently available and certain assumptions considered to be reasonable, and the Company does not in any way guarantee the achievement of the projections. Actual results may differ significantly from these forecasts due to a wide range of factors. For assumptions underlying the financial results forecasts and notes on their use, please refer to "(4) Future Outlook" in "1. Overview of Operating Results, etc." on page 5 of the attached material.

Table of Contents - Attachments
1. Overview of Operating Results, etc..............................................................................................................................	2
(1)	Overview of Operating Results ..................................................................................................................	2
(2)	Overview of Financial Position ..................................................................................................................	4
(3)	Overview of Cash Flows ............................................................................................................................	4
(4)	Future Outlook............................................................................................................................................	5
2. Basic Approach to Selection of Accounting Standards ................................................................................................	5
3. Consolidated Financial Statements and Principal Notes .......................................................................................................	6
(1)	Consolidated Balance Sheets......................................................................................................................	6
(2)	Consolidated Statements of Income and Comprehensive Income..............................................................	7
(3)	Consolidated Statement of Changes in Equity ...........................................................................................	9
(4)	Consolidated Statement of Cash Flows ....................................................................................................	10
(5)	Notes to Consolidated Financial Statements ............................................................................................	11
(Notes on going concern assumption) ............................................................................................................	11
(Changes in accounting policies)....................................................................................................................	11
(Segment information, etc.) ............................................................................................................................	12
(Per Share Information) ..................................................................................................................................	13
(Significant Subsequent Events).....................................................................................................................	14

1

1. Overview of Operating Results, etc.

The Group did not begin preparing consolidated financial statements until the fiscal year ended June 30, 2022, and therefore analytical comparisons with the end of the previous fiscal year have not been performed.

(1) Overview of Operating Results

During the fiscal year ended June 30, 2022, the economic environment was affected by declarations of special measures in response to the spread of COVID-19 variants, which led to periods during which restrictions on economic activity were reinstated, but progress has been made in vaccinations, the spread of the disease has slowed, and we are moving toward a resumption of economic activity. On the other hand, there are rising concerns about the increasingly serious situation in Ukraine, soaring prices for crude oil and other resources, trends in the monetary policies of various countries and other issues, which have led to a continuation of uncertainty regarding the future.

In this market environment, the i3 Group, which has designated the period since it was listed in July 2020 as the third phase of its founding, implemented a renewal of the corporate brand in June 2022. We have redefined our purpose as "Become the matrix for realizing unknown ideas that lead to smiles," and our value proposition as "Using the power of design and engineering to support those who take on challenges," while adopting "Enjoy challenges" as our brand slogan. By fostering a culture that thrives on challenge, we aim to become a company that uses IT as the basis for actively taking on new challenges.

In the fiscal year ended June 30, 2022, we continued to strengthen its workforce in preparation for continuous growth in the business going forward, and took proactive steps to recruit human resources, mainly in the Product Development, Sales, and Customer Success divisions. To coincide with this renewal of the corporate brand, we are also focusing on rolling out recruitment adverts with the aim of acquiring human resources. These include displaying advertisements on bus stops and within station facilities in the Fukuoka area, and distributing digital video commercials on other media.

In addition, we are continuing to make positive changes to the working environment, and the Company was recently recognized for the second consecutive year by the Great Place to Work® Institute Japan, which performs awareness surveys of employees in accordance with global standards, and which scored i3 Systems highly in the 2022 edition of the Best Workplaces rankings. Furthermore, 20% of the new graduates that were hired in April 2022 were of foreign nationality, showing that our efforts to create a diverse organization are making progress.

In addition, we are aggressively working on initiatives to generate additional sources of revenue through new products, new services, M&A, and CVC (corporate venture capital), with the objective of preparing to achieve sustainable growth for the i3 Group. During the second quarter of the fiscal year ended June 30, 2022, we established a new division specializing in the field of investments, and which has already begun investment activities. Investments mainly target mobile, SaaS, security, and other areas closely related to the Company's business domain. We may also invest in companies involved in resolving societal issues and in local companies operating in Kyushu, where the Company is headquartered. With these investment activities as a driver, we seek to further accelerate the growth of the i3 Group by expanding the CLOMO business through the discovery of new partners and products for cross-selling. We are also creating new businesses in preparation for diversification, as well as aiming to support entrepreneurs as they work to create new value.

As a result of such initiatives, consolidated net sales in the fiscal year ended June 30, 2022 were ¥2,454,410 thousand, operating profit was ¥826,704 thousand, ordinary profit came to ¥817,879 thousand, and profit attributable to owners of parent was ¥539,529 thousand.

Operating performance by segment was as follows.

In the second quarter of the fiscal year ended June 30, 2022, the Company changed from reporting the previous single segment to classifying its figures into two segments: the "CLOMO Business" and the "Investment Business."

2