Upfront investment in AR technology and video streaming

「As a result, after reviewing the existing businesses and individual services and systems, we decided to withdraw from the 2 entertainment matching services businesses, "OneRoof" and "CarryGo!," and the Korean food e-commerce business, and to record impairment losses on the systems for each business, in order to achieve significant future growth.」

「Revenue edged up through operation of "Kyara-den" and the simulation-golf stores, but advertising and promotional expenses for acquiring new users of "Kyara-den" and "OneRoof" became a burden, resulting in an operating loss. As a result, revenue from the entertainment and matching services business for the cumulative second quarter was ¥57 million, up 4.3% year on year, and the operating loss was ¥66 million (an operating loss of ¥79 million in the same period of the previous year).」

「At the simulation-golf stores, revenue edged up from membership fees and the holding of social events. However, advertising and promotional expenses for acquiring new users for the SNS "OneRoof" were incurred upfront. Although the loss narrowed as other costs were reviewed, we recorded an operating loss. As a result, revenue from the entertainment and matching services business for the cumulative first quarter was ¥28 million, up 4.9% year on year, and the operating loss was ¥33 million (an operating loss of ¥41 million in the same period of the previous year).」

「During the cumulative third quarter, in addition to launching the golf SNS "CarryGo!" in April, we focused on modifying OneRoof, a group-matching app featuring a virtual shared space using photogrammetry technology, and acquiring members for the indoor golf business.」

「During the cumulative second quarter, we focused on modifying OneRoof, a group-matching app featuring a virtual shared space using photogrammetry technology, developing the new golf SNS "CarryGo!," and acquiring members for the indoor golf business.」

「In addition to launching OneRoof, a group-matching app featuring a virtual shared space using photogrammetry technology, at the end of the previous consolidated fiscal year, we began full-scale operation of the membership-based indoor golf business in September. During the cumulative first quarter, however, both businesses were in the user-acquisition phase, so their contribution to revenue was limited and we recorded an operating loss.」

「Because the release of the new SNS services was postponed, revenue for the consolidated fiscal year consisted solely of system usage fees from the social platform provided for BtoB use. Operating loss widened year on year, mainly because service-development costs and franchise-store setup costs were incurred. These are upfront investments expected to contribute to earnings from the fiscal year ending August 2023 onward.」

「We postponed the release of "OneRoof" to improve service quality, so revenue consisted solely of system usage fees from the social platform provided for BtoB use. Operating loss widened year on year, mainly because service development costs and franchise-store setup costs were incurred, all of which were upfront investments. As a result, revenue from the SNS business for the cumulative third quarter was ¥8 million, up 106.7% year on year, and the operating loss was ¥104 million (an operating loss of ¥15 million in the same period of the previous year).」

「During the cumulative second quarter, we recorded system usage fees from the platform provided for BtoB use as revenue. On the profit front, we recorded an operating loss because development costs for 2 new SNS services were incurred ahead of revenue generation. As a result, revenue from the SNS business for the cumulative second quarter was ¥8 million, up 363.6% year on year, while the operating loss was ¥63 million (an operating loss of ¥7 million in the same period of the previous year). Both new SNS services are scheduled for release during the period.」

「In the SNS business, we recorded system usage fees from the platform provided for BtoB use as revenue. On the profit front, we recorded an operating loss because of upfront costs related to developing 2 new SNS services, including the horizontal expansion of the platform.」

「We will operate and plan services for a multifunctional social platform for web-based communication developed by the company, including the use of MR technology over the medium term. We plan to develop and launch our own SNS service during the fiscal year ending August 2022.」

「During the cumulative third quarter, it was difficult to win orders for live-action stereoscopic video shoots because of the impact of the COVID-19 pandemic. Although a small amount of revenue was recorded from system usage fees for the multifunctional communication platform, we recorded an operating loss because we focused on modifying and further developing the platform. As a result, revenue from the XR/SNS business for the cumulative third quarter was ¥4 million (¥0 million in the same period of the previous year), and the operating loss was ¥60 million (¥24 million in the same period of the previous year). We expect the business to reach break-even revenue and contribute to profit in the next fiscal year.」

「The communication platform has been available for BtoB use since November 2020 and has generated a small amount of revenue from system usage fees. However, as we continue to modify the platform and develop additional functions, we expect to reach the break-even revenue level and contribute to profit in the next fiscal year.」

「The communication platform has been made available for BtoB use since the cumulative first quarter, and we expect to generate some revenue from system usage fees during the cumulative second quarter.」

「During the consolidated fiscal year, we held discussions on planning and collaborating on services using real-time, live-action stereoscopic video-capture technology, and developed a service platform equipped with various system functions for the fiscal year ending August 2021.」

「Although the spread of COVID-19 affected progress in the MR business, demand for and the social role of web services enabling communication without face-to-face meetings or physical contact rose sharply. Accordingly, we continued to accelerate development not only by utilizing real-time, live-action stereoscopic video-capture technology but also by developing services equipped with diverse functions.」

「In the MR business, we also focused on improving the technology and forming alliances, with the aim of expanding the use of our proprietary technology for real-time, live-action stereoscopic video capture.」

「In our new businesses, domestic and overseas subsidiaries worked together to promote the medical-tourism and cross-border e-commerce businesses, while we focused on developing "Hologla," an application for the MR business using our proprietary SUPERTRACK technology for real-time, live-action stereoscopic video capture.」

「For the new businesses, from the fourth quarter onward, we will recover our previous upfront investments, beginning with the planned early-summer release of the MR app and the launch of the cross-border e-commerce service. Meanwhile, for the MR business, we plan to continue investing actively in modifications and additional functionality.」

「For the MR business, from the third quarter onward, we plan to recover our upfront investments while continuing to invest funds in modifications and additional functionality.」

「Although we recorded an operating loss for the cumulative first quarter as expenses related to building the business platform for these new initiatives and developing AR- and VR-related systems had an impact, we expect to gradually monetize these upfront investments from the cumulative third quarter onward.」

「The main working-capital requirements arising from the Group's business activities are increases in working capital and system development expenses at domestic and overseas subsidiaries accompanying the expansion of each business and the promotion of new businesses. In the next consolidated fiscal year, we plan to promote new businesses, including cross-border e-commerce, inbound-related businesses such as medical tourism, and the development of new communication tools using MR technology.」

「In overseas new businesses, we continued to promote the VR business with our Chinese partners, including sales of VR equipment primarily to businesses and acquisition of content for distribution on VR content platforms, while also focusing on developing the e-commerce business and the Japanese IP business in mainland China. Although revenue increased as a result of VR-equipment sales and winning orders, upfront investment expanded during the cumulative third quarter because of increased staffing for business expansion and the expected contribution of the e-commerce and IP businesses to sales from the next fiscal year, resulting in higher revenue but lower profit.」

「In our new businesses, we promoted the VR-related business and conducted sales activities as the master domestic distributor of PIMAX products, while also focusing on strengthening business partnerships with other companies. In March, we entered into a business partnership agreement with Beijing Lingyu Zhikong Technology Co., Ltd. (English name: LYRobotix Co., Ltd.; headquartered in Haidian District, Beijing, China; Representative Director: Zhang Daoning (張道寧), hereinafter "LYRobotix Co., Ltd") concerning the exclusive right to distribute in Japan the VR controller device "NOLO," developed and manufactured by the company, and the right to operate in Japan the company's VR content platform "NOLO HOME." We are steadily advancing efforts to expand domestic VR content through synergies with hardware sales, including PIMAX products.」

「In our new businesses, we promoted the VR-related business and conducted sales activities as the master domestic distributor of PIMAX products, while also focusing on strengthening business partnerships with other companies.」

「We steadily advanced the business, including by entering into a business partnership agreement with 小派科技(上海)有限责任公司, a Chinese VR-device developer headquartered in Shanghai, represented by CEO Weng Zhibin (翁 志彬), concerning the operation of a master distribution agency for its products in Japan.」

「In our new businesses, we continued to enter businesses leveraging cutting-edge technologies such as AI and VR and make upfront investments. In the AI business "found it Project," we advanced data analysis and system development, while working to secure personnel and raise awareness through study sessions. In the VR business, we prepared a project for a joint venture with DoubleMe, Inc., a U.S. corporation, and worked toward a business partnership agreement with a VR-device developer to obtain exclusive domestic distribution rights for VR devices.」

「In our new businesses, we continued to enter businesses leveraging cutting-edge technologies such as AI and VR and make upfront investments. In the AI business "found it Project," launched in October 2016, we analyzed and built systems to utilize data accumulated through our existing businesses in future initiatives, while also working to secure personnel and raise awareness by holding seminars and study sessions.」

「Against this backdrop, our group has broadly expanded into new areas as well as its existing businesses, including the overseas rollout of our own content, primarily in Asian countries, the development of a secondary game content business by subsidiaries, the launch of an AI division, and business alliances with companies possessing AR (augmented reality) and VR (virtual reality) technologies.」

「In addition to aggressively developing these core businesses, we intend to manage the company in a manner that maintains a sound balance between stability and challenge by broadly expanding into new business areas, including AR and AI (artificial intelligence), which can contribute to expanding our earnings base.」

「We have actively made upfront investments in various new business areas, including AR technology and the video streaming business.」