AOI TYO : 〔Delayed〕Summary of Consolidated Financial Results (Japanese Accounting Standards) for Fiscal Year Ended December 31, 2020

Summary of Consolidated Financial Results (Japanese Accounting Standards)

for Fiscal Year Ended December 31, 2020

Company name:	AOI TYO Holdings Inc.
Stock Exchange:	Tokyo Stock Exchange
Code:	3975
URL:	http://aoityo.com/en/
Representatives:	Yasuhito Nakae, Representative Director
Inquiries:	Satoshi Yuzurihara, Director Tel: [phone]

February 19, 2021

Scheduled date of General Shareholders' Meeting	March 25, 2021
Scheduled date of commencement of dividend payment:	March 26, 2021
Scheduled date of filing of securities report:	March 25, 2021
Supplementary documents for quarterly results:	Yes
Quarterly results briefing:	Yes (for institutional investors and analysts)
(Rounded down to the nearest million yen)

1. Consolidated Financial Results for Fiscal Year Ended December 31, 2020 (January 1, 2020 to December 31, 2020)

(1) Consolidated operating results

(The percentages are year-on-year changes.)

Net sales	Operating income	Ordinary income	Profit attributable to owners of parent
FY2020 FY2019	Million yen 51,087 65,229	% -21.7 0.7	Million yen -727 2,118	% ‒ -38.3	Million yen -1,149 1,763	% ‒ -47.0	Million yen -2,552 -1,280	% ‒ ‒

(Note) Comprehensive income

FY2020: -2,727 million yen (

-%)FY2019: -1,433 million yen (

-%)

Net income per share	Diluted net income per share	Return on equity (ROE)	Ordinary income as percentage of total assets	Operating income on sales
FY2020 FY2019	Yen -108.81 -54.50	Yen - -	% -11.9 -5.3	% -2.3 3.2	% -1.4 3.2

(Reference) Equity in earnings of affiliates

(2) Consolidated financial position

FY2020: -440 million yen

FY2019: -159 million yen

Total assets	Net assets	Equity ratio	Net assets per share
FY2020 FY2019	Million yen 48,682 53,352	Million yen 20,231 23,363	% 40.9 43.0	Yen 848.70 977.76

(Reference) Shareholders' equity

(3) Consolidated cash flow

FY2020: 19,925 million yen

FY2019: 22,935 million yen

Cash flows from operating activities	Cash flows from investing activities	Cash flows from financing activities	Cash and cash equivalents at end of period
FY2020 FY2019	Million yen 2,892 1,198	Million yen -843 -1,561	Million yen -397 -336	Million yen 10,703 9,060

Cash and cash equivalents

2. Dividends

Dividends per share	Total dividends	Payout ratio (consolidated)	Ratio of dividends to net assets (consolidated)
End of Q1	End of Q2	End of Q3	Year end	Annual
FY2019 FY2020	Yen ‒ ‒	Yen 8.00 0.00	Yen ‒ ‒	Yen 12.00 12.00	Yen 20.00 12.00	Million yen 477 286	% - -	% 2.0 1.3
FY2021 (forecast)	‒	0.00	‒	12.00	12.00	73.7

3. Consolidated Financial Forecast for FY2021 (January 1, 2021 to December 31, 2021)

(The percentages are year-on-year changes.)

Net sales	Operating income	Ordinary income	Profit attributable to owners of parent	Net income per share
Full year	Million yen 53,000	% 3.7	Million yen 900	% －	Million yen 800	% －	Million yen 400	% －	Yen 17.05

* Notes

(1) Important changes in subsidiaries for FY2020 under review

No
(2) Changes in accounting policies, and changes or restatements of accounting estimates
(i) Changes in accounting policies due to revisions to accounting standards etc.	:	Not applicable
(ii) Changes in accounting policies other than (i)	:	Not applicable
(iii) Changes in accounting estimates:	:	Not applicable
(iv) Restatements of accounting estimates:	:	Not applicable
(3) Number of issued shares (common stock)
(i) Number of issued shares (including treasury stock)

New: ― companies Excluded: ― companies

:

(Changes is specified subsidiaries resulting in change in scope of consolidation)

FY2020 24,566,447 shares FY2019

24,566,447 shares

• (ii) Number of treasury stock at end of period

  FY2020 1,088,298 shares FY2019 1,109,564 shares

• (iii) Average number of issued shares

  FY2020 23,462,748 shares FY2019 23,495,396 shares

(Note)

Treasury stock includes shares that Custody Bank of Japan, Ltd. (trust account E) holds as trust property related to a Board Benefit Trust system (FY2020: 411,200 shares; FY2019: 418,900 shares).

* This summary of financial results is not subject to review by a certified public accountant or certified public accounting firm.

* Explanation on the proper use of results forecasts and other notes

The forward-looking statements, including results forecasts, in this document are based on information that AOI TYO Holdings has obtained at the time of publication and certain assumptions that it believes to be reasonable. Actual results may differ materially from the forecasts due to a variety of reasons. For more about assumptions underlying earnings forecasts and cautions regarding the use of earnings forecasts, see 1. Qualitative Information on Results (4) Future Outlook on P.4 of Attachments.

・AOI TYO Holdings will hold an earnings briefing for institutional investors and analysts on March 3, 2021. After the conclusion of this meeting, the group will publish the materials distributed on the AOI TYO Holdings corporate website as quickly as possible.

Attachments

1. Qualitative Information on Results 2

(1) Discussion of Operating Results 2

(2) Discussion of Financial Position 3

(3) Discussion of Cash Flows 3

(4) Future Outlook 4

2. Basic Policy Regarding Selection of Accounting Standards 5

3. Consolidated Financial Statements and Major Notes 6

(1) Consolidated Balance Sheets 6

(2) Consolidated Statements of Income and Statements of Comprehensive Income 10

(3) Consolidated Statements of Changes in Shareholders' Equity 13

(4) Consolidated Statements of Cash Flows 15

(5) Notes on the Consolidated Financial Statements 17

(Notes Regarding Assumption of Going Concern) 17

(Segment Information) 17

(Per-share Indicators) 17

(Significant Subsequent Events) 17

1. Qualitative Information on Results

(1) Discussion of operating results

Any forward-looking statements below are based on AOI TYO Group judgments as of the end of the current consolidated fiscal year.

During the consolidated fiscal year under review, restrictions on travel outside the home and business activities were imposed in Japan and overseas intermittently to prevent the spread of COVID-19. In Japan, production shifted in an upward trend, mainly in production machinery, as external demand continued to pick up beginning in the summer. In addition, business confidence in the non-manufacturing sector experienced a temporary recovery at the beginning of autumn in response to increased consumer movement stemming from eased attitudes toward travel outside the home. The pace of economic recovery is expected to slow, as the level of activity remains sluggish due to the reemergence of COVID-19 infections. The advertising market in Japan declined overall as corporations reduced their advertising expenditures. We saw a significant decrease in TV commercials, while we expect internet advertising to decline only marginally.

In response to the spread of COVID-19, the AOI TYO Group began implementing anti-infection measures in February 2020. Under the declaration of a statement of emergency between April and May 2020, we closed our filming and editing studios temporarily and requested advertising companies and advertisers to postpone filming. After the declaration of the state of emergency was lifted, we moved to resume operations, signing an advisory contract with a medical coordination company to resume operations and creating our own work guidelines. In this way, we have continued to conduct filming and editing operations while taking measures to prevent the spread of infection.

Amid these circumstances, the AOI TYO Group discussed the ideal future state of the group from the dual perspectives of (1) integrated Group management and (2) businesses and organizations following our business development policy to dig deeper, expand wider. These discussions led to the formulation of a medium-term plan, published on August 24, 2020, which we have moved quickly to implement.

Net sales for the consolidated fiscal year in each group business were significantly lower year on year. In addition to the direct impact of the suspensions and postponements of filming and editing operations under the declaration of a state of emergency, Video Advertising Business orders from major advertising companies experienced a notable decrease. Further, continued cancellations and postponements of various events in the Advertisement-Related Business and a decrease in orders in the Solutions Business due to restraints on sales activities under the emergency declaration. These factors combined to drive full-year performance lower. However, although net sales for the stand-alone consolidated fourth quarter continued to decrease year on year in the company's Advertisement-Related Business (including events business sales which continue to be impacted negatively by COVID-19) and Overseas Business, net sales in the Video Advertising and Solutions Businesses were nearly level with the same period in the prior fiscal year.

In terms of profits, AOI TYO Holdings engaged in strict cost reductions related to travel expenses, entertainment expenses, and other costs to achieve up to ¥2.0 billion in cost reductions ahead of schedule as described in our medium-term plan. Further, the company improved effective profit margin which had declined temporarily due to the impact of cost billings for projects that had been canceled or postponed due to the impact of COVID-19. As a result of these and other factors, the company recorded net operating income for the second half, as opposed to a net operating loss during the first half of the fiscal year.

We organized our consolidated subsidiaries into the Content Production Business and the Communication Design Business based on our medium-term plan, engaging in a major reorganization that eliminated 10 consolidated subsidiaries. At the same time, we decided to continue encouraging employees to work from home, first implemented in February 2020, supporting diverse work styles while protecting the health and safety of employees. In connection with this policy, the group has also moved forward with office consolidations and reductions*. As a result, the AOI TYO Group recorded ¥946 million in business restructuring expenses, consisting of a related loss on disposal of property, plant and equipment, restoration costs, and rent expenses, etc., for the period in question. Further, due to the impact of the spread of COVID-19 at an AOI TYO Holdings consolidated subsidiary, a discrepancy has occurred between the businessplan at the time of investment and actual results. Therefore, the company recorded an impairment of goodwill in the amount of ¥300 million.

*Number of locations to be eliminated: 17 (including relocations to reduce floor space and partial returns of space)

As a result, the AOI TYO Group recorded net sales of ¥51,087 million for the consolidated fiscal year ended December 2020, representing a 21.7% decrease compared to the prior year. Operating loss amounted to ¥727 million (¥2,118 million of operating profit in the same period of prior fiscal year), while ordinary loss amounted to ¥1,149 million (¥1,763 million of ordinary profit in the same period of prior fiscal year) and loss attributable to owners of parent amounted to ¥2,552 million (¥1,280 million of loss attributable to owners of parent in the same period of prior fiscal year). Selling, general and administrative expenses included ¥323 million in amortization of goodwill associated with M&A activity.

(2) Discussion of financial position

Total assets at the end of the consolidated fiscal year decreased by ¥4,669 million compared with the end of the prior fiscal year to ¥48,682 million. This decrease was mainly due to decreases in notes and accounts receivable of ¥3,651million, electronically recorded monetary claims of ¥850 million and total property, plant and equipment of ¥827 million, although cash and deposits increased ¥1,702 million.

Liabilities decreased by ¥1,537 million compared with the end of the prior fiscal year to ¥28,451 million. Although long-term loans payable and current portion of long-term loans payable increased ¥2,102 million and ¥1,300 million, respectively, short-term loans payable decreased ¥3,200 million.

Net assets amounted to ¥20,231 million, a decrease of ¥3,132 million compared to the end of the prior consolidated fiscal year. Retained earnings decreased ¥2,552 million due to loss attributable to owners of parent. At the same time, the AOI TYO Group paid ¥286 million in dividend payments.

(3) Discussion of cash flows

Cash and cash equivalents ("Cash") amounted to ¥10,703 million as of the end of the consolidated fiscal year, representing an increase of ¥1,642 million compared to the prior consolidated fiscal year.

The state of cash flow by segment for the fiscal year under review is as follows.

Cash Flows From Operating Activities

Cash flows from operating activities amounted to ¥2,892 million, compared to cash from operating activities of ¥1,198 million for the prior fiscal year. This result was mainly due to decrease in trade receivables of ¥4,484 million, decrease in trade payables of ¥1,532 and loss before income taxes of ¥2,457.

Cash Flows From Investing Activities

Cash used in investing activities amounted to ¥843 million, compared to ¥1,561 million for the prior fiscal year. The main cash inflow was ¥144 million in proceeds from refund of leasehold and guarantee deposits, while the main cash outflow was due to ¥447 million in purchase of property, plant and equipment, ¥283 million in payments of leasehold and guarantee deposits, and ¥235 million in payments for investments in capital.

Cash Flows From Financing Activities

Cash used in financing activities amounted to ¥397 million compared to cash from financing activities of ¥336 million for the prior fiscal year. This result was mainly due to ¥7,200 million in cash proceeds from long-term loans payable, ¥3,200 million decrease in short-term loans payable, and ¥3,793 million in outlays for repayments of long-term loans payable.

(4) Future outlook ① External environment (including the impact of COVID-19) and group initiatives

After the state of emergency was lifted on May 25, we applied new standards for safety in production work, and, in addition to a series of information from national and local governments and various domestic and overseas film production guideline examples, we have entered into an advisory contract with a medical coordination company, drafting our own guidelines for production work. During filming, we have also required attendance of a hygiene management team which includes healthcare professionals, and we are taking a number of other measures to prevent the spread of COVID-19 in filming and editing work, such as health checks, and regularly conducting and checking disinfection and ventilation. Further, we are implementing remote video editing methods as another means to normalize operations. We continue to encourage employees to work from home and are reducing the size of our office space. In January 2021, a second state of emergency was declared due to a third wave COVID-19 infections. Since we already had measures in place to prevent the spread of infection in filming, editing, and other operations as described above, almost no projects were canceled or postponed as had been the previous case.

While the domestic advertising market fell sharply in 2020 due to the impact of COVID-19, we expect moderate positive growth in 2021 and beyond. However, GDP growth rate will remain low and it will take a considerable amount of time for the market to recover to pre-COVID-19 levels. In addition, the reinstatement of the emergency declaration will continue to slow personal consumption due to restraints on unnecessary travel and requests for shortened business hours. There are also concerns that worsening employment income will weigh down the market, which may be another factor delaying recovery in the advertising market.

Amid these circumstances, on August 24, 2020, we published the AOI TYO Group medium-term plan covering the five year period from fiscal 2021 through fiscal 2025. The plan defines three key measures: (1) Reforming business/organizational structures; (2) Clarifying initiatives in each business; and (3) Deepening and strengthening group management. Our earnings plan for fiscal 2025 calls for net sales of ¥68 billion, operating income of ¥4.4 billion, and KPIs of ¥5.7 billion in EBITDA and 10% or greater ROE. In January 2021, we restructured our organizations into two businesses, the Content Production Business and the Communication Design Business, and we have accelerated our efforts to reduce costs.

During the fiscal year ending December 2021, our Content Production Business will increase the frequency of proposals and strengthen sales to secure stable orders from major advertising companies. In addition, the business will engage in new sales activities to strengthen our customer base, targeting foreign advertising companies, online advertising companies, consulting firms, platform providers, etc. At the same time, the Content Production Business will focus on developing a structure for low- to medium-unit price digital video production, which is a segment we expect will grow in the future. Meanwhile, the Communication Design Business will establish new management and human resources systems to strengthen coordination among the departments that have been consolidated in our organizational restructuring. At the same time, the business will enhance lacking functions to grow our direct business with advertisers.

② Future outlook

Based on the preceding, we forecast FY2021 consolidated earnings to be ¥53,000 million in net sales, ¥900 million in operating profit, ¥800 million in ordinary profit, and ¥400 million in profit attributable to owners of parent. These forecasts reflect a gradual recovery in net sales and cost reduction efforts.

Given the current declaration of a state of emergency and the uncertain outlook for the timing of a slow-down in the spread of COVID-19, it is difficult to calculate a reasonable short-term earnings forecast. Accordingly, we have left our consolidated earnings forecast for the first half of the fiscal year ending December, 2021, as undecided. We will announce our forecasts as soon as a reasonable calculation becomes possible.

Based on the earnings forecast above, we have established a dividend forecast for the fiscal year ending December, 2021, at ¥12 per share (interim dividend of ¥0 per share and year-end dividend of ¥12 per share), which is the same amount as in the prior fiscal year. This dividend amounts to a consolidated dividend payout ratio of 73.7%, reflecting a stabledividend to the greatest extent possible while maintaining our policy of a 30% or greater consolidated dividend payout ratio.

2. Basic Policy Regarding Selection of Accounting Standards

AOI TYO Group prepares consolidated financial statements according to the Japanese accounting standards in consideration of comparability between fiscal years and between companies. We will consider the adoption of the International Financial Reporting Standards (IFRS) as appropriate, taking into account conditions in Japan and abroad.

3. Consolidated Financial Statements and Major Notes (1) Consolidated balance sheets

Assets

Allowance for doubtful accounts (37,727)

(31,847)

Non-current assets

Buildings and structures, net 2,368,133

1,715,208

Tools, furniture and fixtures 2,854,794

2,373,860

Tools, furniture and fixtures, net 807,862

633,252

Leased assets, net 58,940

35,025

Total property, plant and equipment 7,084,649

6,257,460

Other 103,479

15,994

Accumulated depreciation (846,805)

(877,518)

(Unit: thousand yen)
FY2019	FY2020
(December 31, 2019)	(December 31, 2020)
Current assets
Cash and deposits	9,111,122	10,813,819
Notes and accounts receivable - trade	16,873,978	13,222,465
Electronically recorded monetary claims - operating	4,413,564	3,562,775
Merchandise and finished goods	7,301	8,267
Work in process	4,510,288	4,331,475
Other	1,125,296	1,108,034
Total current assets	36,003,823	33,014,989
Property, plant and equipment
Buildings and structures	5,142,068	4,791,118
Accumulated depreciation	(2,773,935)	(3,075,909)
Machinery, equipment and vehicles	1,024,383	1,001,381
Machinery, equipment and vehicles, net	177,577	123,862
Accumulated depreciation	(2,046,931)	(1,740,608)
Land	3,606,822	3,593,652
Leased assets	717,898	620,208
Accumulated depreciation	(658,957)	(585,182)
Construction in progress	65,312	156,459
Intangible assets
Goodwill	4,010,215	3,375,272
Software	161,589	210,209
Total intangible assets	4,275,284	3,601,476

Allowance for doubtful accounts (775,409)

(770,326)

Total non-current assets 17,348,413

15,667,526

FY2019	FY2020
(December 31, 2019)	(December 31, 2020)
Investments and other assets
Investment securities	1,787,051	1,081,036
Deferred tax assets	1,328,303	1,533,026
Leasehold and guarantee deposits	1,522,658	1,661,033
Other	2,125,874	2,303,819
Total investments and other assets	5,988,478	5,808,588
Total assets	53,352,237	48,682,515

FY2019 (December 31, 2019)FY2020 (December 31, 2020)

Liabilities

Current liabilities

Accounts payable - trade

Short-term borrowings

Current portion of long-term borrowings

Accounts payable - other

Income taxes payable

Accrued consumption taxes

Advances received

Provision for bonuses

8,697,200 3,200,000 3,073,876

7,144,690

0 4,374,787

661,603 832,283

428,710 172,515

551,961 356,049

899,779 720,753

72,660 218,448

Other 757,366

924,210

Total current liabilities

18,343,158 14,743,739

Non-current liabilities

Long-term borrowings

Long-term deposits received

Deferred tax liabilities

6,672,675 8,774,895

3,501,199 3,501,199

46,098 22,630

Provision for retirement benefits for directors (and other officers) 261,883

259,435

Provision for share-based remuneration for directors (and other officers)

Retirement benefit liability

Asset retirement obligations

254,811 247,750

267,504 343,303

491,279 442,737

Other 149,711

115,407

Total non-current liabilities

11,645,165 13,707,359

Total liabilities 29,988,323

28,451,099

Net assets

Shareholders' equity

Share capital

Capital surplus

Retained earnings

5,000,000 5,000,000

12,172,896 12,111,198

7,056,711 4,217,210

Treasury shares (1,259,085)

(1,233,609)

22,970,523 20,094,798

Total shareholders' equity

Accumulated other comprehensive income

Valuation difference on available-for-sale securities

Foreign currency translation adjustment

Remeasurements of defined benefit plans

10,693 (109,116)

(44,141) (59,597)

(1,945)

(231)

Total accumulated other comprehensive income

(35,393)

(168,945)

Non-controlling interests 342,508

262,707

FY2019	FY2020
(December 31, 2019)	(December 31, 2020)
Share acquisition rights	86,274	42,855
Total net assets	23,363,913	20,231,415

Total liabilities and net assets

53,352,237

48,682,515

(2) Consolidated statements of income and statements of comprehensive income Consolidated statements of income

(Unit: thousand yen)

FY2019 (January 1, 2019-December 31, 2019)FY2020 (January 1, 2020-December 31, 2020)

Net sales

65,229,849

51,087,544

Cost of sales

53,514,621 43,867,259

Gross profit 11,715,227

7,220,284

Selling, general and administrative expenses

Remuneration for directors (and other officers)

Salary and bonus

Retirement benefit expenses

Provision for share-based remuneration for directors (and other officers)

Outsourcing expenses

Commission expenses

Provision of allowance for doubtful accounts

Depreciation

Amortization of goodwill

1,484,604 1,307,296

2,718,118 2,387,323

54,385 49,026

57,696 6,749

560,977 670,376

577,609 151,768

15,203 6,865

250,382 218,023

320,115 323,332

Other

3,557,688

2,826,727

Total selling, general and administrative expenses 9,596,781

7,947,490

2,118,445

Operating profit (loss)

(727,206)

Non-operating income

Interest income

Dividend income

Subsidy income

Insurance return

7,234 2,467

21,886 16,279

－ 279,784

42,061 42,385

Other

108,807 124,729

Total non-operating income 179,989

465,646

Non-operating expenses

Interest expenses

Commission expenses

Share of loss of entities accounted for using equity method

Loss on retirement of non-current assets

76,310 83,327

170,381 164,824

23,676 124,546

Other 105,243

74,610

535,078 887,714

Total non-operating expenses

Ordinary profit (loss)

1,763,356

(1,149,274)

(Unit: thousand yen)
FY2019	FY2020
(January 1, 2019-	(January 1, 2020-
December 31, 2019)	December 31, 2020)

Extraordinary income

Gain on reversal of share acquisition rights 3,672

34,560

Extraordinary losses

Total extraordinary losses 2,756,967

1,386,944

Income taxes - current 1,200,964

289,252

Total income taxes 600,487

111,542

Profit (loss) attributable to non-controlling interests 13,139

(16,406)

Gain on sales of non-current assets	－	6,279
Gain on sales of investment securities	323,073	3,321
Gain on sales of shares of subsidiaries and associates	－	34,201
Total extraordinary income	326,745	78,362
Impairment loss	1,207,313	300,209
Loss on sales of investment securities	65,374	－
Loss on valuation of investment securities	1,157,265	86,439
Loss on liquidation of subsidiaries and associates	279,462	－
Business restructuring expenses	－	946,707
Loss on sales of shares of subsidiaries and associates	34,635	－
Other	12,916	53,588
Loss before income taxes	(666,865)	(2,457,856)
Income taxes - deferred	(600,476)	(177,710)
Loss	(1,267,352)	(2,569,398)
Loss attributable to owners of parent	(1,280,492)	(2,552,992)

Consolidated statements of comprehensive income

(Unit: thousand yen)

FY2019 (January 1, 2019-December 31, 2019)FY2020 (January 1, 2020-December 31, 2020)

Profit (loss)

(1,267,352)

(2,569,398)

Other comprehensive income

Valuation difference on available-for-sale securities Foreign currency translation adjustment Remeasurements of defined benefit plans, net of tax

Share of other comprehensive income of entities accounted for using equity method

(157,171) (119,809)

(12,002) (30,911)

448 2,737

1,713

(8,885)

Total other comprehensive income (165,987)

(157,893)

Comprehensive income

(1,433,340) (2,727,292)

Comprehensive income attributable to

Comprehensive income attributable to owners of parent

(1,448,017) (2,706,290)

Comprehensive income attributable to non-controlling interests

(3) Consolidated statements of changes in shareholders' equity

FY 2019 (January 1, 2019-December 31, 2019)

(Unit: thousand yen)

Shareholders' equity
Capital stock	Capital surplus	Retained earnings	Treasury shares	Total shareholders' equity
Balance at beginning of current period	5,000,000	12,106,819	9,055,601	(1,190,097)	24,972,324
Changes of items during period
Dividends of surplus	(718,397)	(718,397)
Profit (loss) attributable to owners of parent	(1,280,492)	(1,280,492)
Purchase of treasury shares	(79,943)	(79,943)
Disposal of treasury shares	(7,905)	10,955	3,049
Change in ownership interest of parent due to transactions with non-controlling interests	73,982	73,982
Net changes of items other than shareholders' equity
Total changes of items during period	－	66,076	(1,998,889)	(68,988)	(2,001,800)
Balance at end of current period	5,000,000	12,172,896	7,056,711	(1,259,085)	22,970,523

Accumulated other comprehensive income	Share acquisition rights	Non-controllin g interests	Total net assets
Valuation difference on available-for-sale securities	Foreign currency translation adjustment	Remeasure-ments of defined benefit plans	Total accumulated other comprehensive income
Balance at beginning of current period	167,873	(23,287)	(2,393)	142,193	92,723	472,685	25,679,925
Changes of items during period
Dividends of surplus	(718,397)
Profit (loss) attributable to owners of parent	(1,280,492)
Purchase of treasury shares	(79,943)
Disposal of treasury shares	3,049
Change in ownership interest of parent due to transactions with non-controlling interests	73,982
Net changes of items other than shareholders' equity	(157,180)	(20,853)	448	(177,586)	(6,449)	(130,176)	(314,211)
Total changes of items during period	(157,180)	(20,853)	448	(177,586)	(6,449)	(130,176)	(2,316,012)
Balance at end of current period	10,693	(44,141)	(1,945)	(35,393)	86,274	342,508	23,363,913

FY2020 (January 1, 2020-December 31, 2020)

(Unit: thousand yen)

Shareholders' equity
Capital stock	Capital surplus	Retained earnings	Treasury shares	Total shareholders' equity
Balance at beginning of current period	5,000,000	12,172,896	7,056,711	(1,259,085)	22,970,523
Changes of items during period
Dividends of surplus	(286,509)	(286,509)
Profit (loss) attributable to owners of parent	(2,552,992)	(2,552,992)
Purchase of treasury shares	(728)	(728)
Disposal of treasury shares	(3,394)	26,204	22,809
Change in ownership interest of parent due to transactions with non-controlling interests	(58,303)	(58,303)
Net changes of items other than shareholders' equity
Total changes of items during period	－	(61,698)	(2,839,501)	25,475	(2,875,724)
Balance at end of current period	5,000,000	12,111,198	4,217,210	(1,233,609)	20,094,798

Accumulated other comprehensive income	Share acquisition rights	Non-controllin g interests	Total net assets
Valuation difference on available-for-sale securities	Foreign currency translation adjustment	Remeasure-ments of defined benefit plans	Total accumulated other comprehensive income
Balance at beginning of current period	10,693	(44,141)	(1,945)	(35,393)	86,274	342,508	23,363,913
Changes of items during period
Dividends of surplus	(286,509)
Profit (loss) attributable to owners of parent	(2,552,992)
Purchase of treasury shares	(728)
Disposal of treasury shares	22,809
Change in ownership interest of parent due to transactions with non-controlling interests	(58,303)
Net changes of items other than shareholders' equity	(119,809)	(15,455)	1,713	(133,552)	(43,419)	(79,801)	(256,773)
Total changes of items during period	(119,809)	(15,455)	1,713	(133,552)	(43,419)	(79,801)	(3,132,497)
Balance at end of current period	(109,116)	(59,597)	(231)	(168,945)	42,855	262,707	20,231,415

(4) Consolidated statements of cash flows

(Unit: thousand yen)FY 2019 (January 1, 2019-December 31, 2019)FY 2020 (January 1, 2020-December 31, 2020)

Cash flows from operating activities

Loss before income taxes

Depreciation

Impairment loss

Amortization of goodwill

Increase (decrease) in allowance for doubtful accounts

Increase (decrease) in provision for bonuses

Increase (decrease) in provision for retirement benefits for directors (and other officers)

Increase (decrease) in provision for share-based remuneration for directors (and other officers)

Increase (decrease) in retirement benefit liability

Interest and dividend income

Interest expenses

Share of loss (profit) of entities accounted for using equity method

Commission expenses

Loss (gain) on sales of investment securities

Loss (gain) on valuation of investment securities

Loss (gain) on sales of shares of subsidiaries and associates

Loss on liquidation of subsidiaries and associates

Business restructuring expenses

Decrease (increase) in trade receivables

Decrease (increase) in inventories

Increase (decrease) in trade payables

Increase (decrease) in accounts payable - other

Increase (decrease) in accrued consumption taxes

Increase (decrease) in advances received

Decrease (increase) in other assets

Increase (decrease) in other liabilities

(666,865)

(2,457,856)

1,167,950 826,004

1,207,313 300,209

320,115 323,332

52,044

(10,052)

(34,332)

145,788

8,113 (2,448)

(5,160)

75,801

(29,120)

(18,747)

76,310

83,327

159,466 440,406

170,381 164,824

(257,698)

(3,321)

1,157,265

86,439

34,635

(34,201)

279,462

-

-

946,707

(485,653)

4,484,610

(295,780)

187,113

666,645

(1,532,639)

86,332

94,037

173,678 (194,023)

(224,755) (167,536)

(599,979) (239,417)

96,053 (4,793)

Other, net

(4,691) (310,816)

Subtotal 3,109,426

3,175,686

Interest and dividends received

36,344 18,747

Proceeds from insurance income

6,532 7,511

Interest paid

(80,967)

(81,723)

Income taxes paid (1,873,019)

(227,364)

Net cash provided by (used in) operating activities

1,198,316

2,892,857

FY 2019 (January 1, 2019-December 31, 2019)FY 2020 (January 1, 2020-December 31, 2020)

Cash flows from investing activities

Purchase of property, plant and equipment

Proceeds from sales of property, plant and equipment

Purchase of intangible assets

Purchase of investment securities

Proceeds from sales of investment securities

Payments into time deposits

Payments of leasehold and guarantee deposits

Proceeds from refund of leasehold and guarantee deposits

Proceeds from maturity of insurance funds

Payments for investments in capital

Purchase of shares of subsidiaries resulting in change in scope of consolidation

Payments for sales of shares of subsidiaries resulting in change in scope of consolidation

Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation

(813,431)

(447,805)

12,617

83,022

(84,578) (76,992)

(399,333) (23,630)

503,208

12,546

(189,869) (87,115)

(54,128) (283,303)

138,806 144,761

81,778 96,648

(266,382)

(188,141)

-

(235,971)

- - 1,096

Other, net (119,865)

(26,447)

Net cash provided by (used in) investing activities

(1,561,137)

(843,190)

Cash flows from financing activities

Net increase (decrease) in short-term borrowings

Proceeds from long-term borrowings

Repayments of long-term borrowings

Purchase of treasury shares

Dividends paid

Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation

Commission fee paid

(2,318,500)

(3,200,000)

5,850,000

7,200,000

(2,786,830)

(3,793,841)

(80,086)

(728)

(705,122) (280,416)

(170,381) (164,824)

Other, net (125,633)

(40,445)

(336,555) (397,366)

Net cash provided by (used in) financing activities

Effect of exchange rate change on cash and cash equivalents (14,803)

(9,503)

Net increase (decrease) in cash and cash equivalents

(714,181)

1,642,797

Cash and cash equivalents at beginning of period 9,790,600

9,060,407

Decrease in cash and cash equivalents resulting from exclusion of subsidiaries from consolidation

(16,011)

-

Cash and cash equivalents at end of period

9,060,407

10,703,205

(5) Notes on the consolidated financial statements

(Notes regarding assumption of going concern) Not applicable

(Segment information)

As the AOI TYO Group consists of a single Advertising Business segment, we have omitted separate disclosure herein.

(Per-share indicators)

FY 2019 (January 1, 2019-December 31, 2019)	FY 2020 (January 1, 2020-December 31, 2020)
Net assets per share Net income per share Diluted net income per share	977.76yen (54.50)yen －	Net assets per share Net income (loss) per share Diluted net income per share	848.70yen (108.81)yen －

(Note 1) Although the Company has dilutive shares, we have not presented diluted net income per share for the current consolidated fiscal year, since the Company has a diluted net loss per share.

(Note 2) Basis for calculating net income per share and fully diluted net income per share is as shown below.

FY 2019 (January 1,2019- December 31, 2019)	FY 2020 (January 1,2020- December 31, 2020)
Net income per share
Profit (loss) attributable to owners of parent (thousand yen)	(1,280,492)	(2,552,992)
Amount not attributable to common shareholders (thousand yen)	－	－
Net income (loss) attributable to owners of parent pertaining to common shares (thousand yen)	(1,280,492)	(2,552,992)
Average number of common shares issued (thousand shares)	23,495	23,462

*To calculate net income per share, those AOI TYO Holdings shares remaining in trust that are posted as treasury shares are included in treasury shares deducted in the calculation of average number of shares during the term. To calculate net assets per share, these same shares are also included in the number of treasury shares deducted from the year-end number of shares issued. A total of 418,900 shares and 413,569 shares of treasury stock noted above were deducted for the purpose of calculating net income per share for the prior consolidated fiscal year and current consolidated fiscal year, respectively. At total of 418,900 shares and 411,200 shares of treasury stock noted above were deducted for the purpose of calculating net assets per share for the prior consolidated fiscal year and current consolidated fiscal year, respectively.

(Significant subsequent events)

(Transactions involving entities under common control, etc.)

Pursuant to a resolution passed at a board of directors meeting held October 19, 2020, the company split off certain operations (incorporation-type company split) of consolidated subsidiary TYO Inc. ("Former TYO"), transferring the operations in question to the newly established TYO Inc. on January 4, 2021. The company also conducted an absorption-type merger between consolidated subsidiaries and name change, with Former TYO becoming the surviving company. The company also conducted an absorption-type merger between consolidated subsidiaries and name change, with consolidated subsidiary Digital Garden, Inc. becoming the surviving company.

1. Overview and purpose of transaction

In line our medium-term plan covering the five-year period from fiscal 2021 through fiscal 2025, the AOI TYO Group has engaged in a major organizational restructuring. We have shifted from our legacy business structure focusing on the Advertising Video Production Business to a dual-business structure with clear initiatives assigned to each. This structure will consist of the Content Production Business, which will handle traditional advertisingvideo production focused primarily on orders from advertising companies, and the Communication Design Business, which will handle the design and execution of communications, focusing on directly transacting with advertisers. In addition, we will consolidate post-production subsidiaries within the Content Production Business into one company, with Digital Garden serving as the surviving company. We will consolidate subsidiaries within the Communications Design Business that conduct solutions, PR, and events into one company, with Former TYO serving as the surviving company. In this way, we intend to deepen and strengthen group management while reducing costs.

2. Reorganization summary (1) Incorporation-type split

① Name of company to be split and business lines/scope businesses involved in the split

Name Business lines Net salesFormer TYO

Advertising video production services for advertising companies, etc.

¥13,560 million (FYE December 2020)

• ② Date of company split January 4, 2021

• ③ Legal form of company split

  Incorporation-type split with Former TYO as the split company and TYO, Inc. serving as the successor company

• ④ Details of allocations related to the incorporation-type split

  At the time of the incorporation-type split, the newly established company issued 1,000 shares of common stock, all of which were allocated to Former TYO. At the same time, Former TYO delivered all allocated shares to 100% parent company AOI TYO Holdings as dividends from surplus.

(2) Absorption-type merger with the Former TYO as the surviving company

• ① Name and description of business of the combined companies; assets and liabilities to be taken over

  Name	Former TYO	Quark tokyo Inc.	ZEO Corporation	TYO Digital Works, Inc.	TYO Public Relations, Inc.
  Business lines	Creative planning and production of all advertising content	Marketing solutions, content planning and production	Marketing communi-cations	Web advertising production	General services related to public relations and PR activities
  Assets to be taken over	-	¥978million	¥1,245 million	¥303 million	¥97 million
  Liabilities to be taken over	-	¥182 million	¥1,147 million	¥114 million	¥166 million

• ② Date of business combination

  January 4, 2021

• ③ Legal form of business combination

  An absorption-type merger, with Former TYO as the surviving company and consolidated subsidiaries Quark tokyo Inc., ZEO Corporation, TYO Digital Works, Inc., TYO Public Relations, Inc. becoming the absorbed companies. Quark tokyo Inc., ZEO Corporation, TYO Digital Works, Inc., TYO Public Relations, Inc. have been dissolved.

• ④ Name of the company after the merger

  Former TYO changed its corporate name to xpd, Inc. on January 4, 2021.

(3) Absorption-type merger with Digital Garden, Inc. as the surviving company

• ① Name and description of business of the combined companies; assets and liabilities to be taken over

  Name	Digital Garden, Inc.	Media Garden, Inc.	TTR, Inc.
  Business lines	Planning and production of digital editing and CG	Filming studio and equipment rental	Video post-production business
  Assets to be taken over	－	¥926 million	¥2,005 million
  Liabilities to be taken over	－	¥330 million	¥655 million

• ② Date of business combination

  January 4, 2021

• ③ Legal form of business combination

  An absorption-type merger with Digital Garden, Inc. as the surviving company and consolidated subsidiaries

  Media Garden, Inc. and TTR Inc. becoming the absorbed companies. Media Garden, Inc. and TTR, Inc. have been dissolved.

• ④ Name of the company after the merger

  Digital Garden, Inc. changed its corporate name to TREE Digital Studio, Inc. on January 4, 2021.

• 3. Overview of accounting treatment

These transactions will be treated as transactions under common control in accordance with Accounting Standard for Business Combinations (ASBJ Statement No. 21, January 16, 2019) and Implementation Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No. 10, January 16, 2019).