Serverworks : Summary of Non-Consolidated Financial Results for the Year Ended February 28, 2021

Translation

Notice: This document is an excerpt translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japanese document, the latter shall prevail.

Summary of Non-Consolidated Financial Results

for the Year Ended February 28, 2021

(Based on Japanese GAAP)

																	April 14, 2021
Company name:	Serverworks Co.,Ltd.
Stock exchange listing:	Tokyo
Stock code:	4434	URL https://www.serverworks.co.jp/
Representative:	Representative Director, President		Ryo Oishi
Inquiries:	Director					Hiroyuki Oshio		TEL [phone]
Scheduled date of ordinary general meeting of shareholders:	May 28, 2021
Scheduled date to file Securities Report:		May 28, 2021
Scheduled date to commence dividend payments:		-
Preparation of supplementary material on financial results:		Yes
Holding of financial results meeting:					Yes		(for institutional investors)
										(Amounts less than one million yen are rounded down)
1. Non-consolidated financial results for the year ended February 28, 2021 (from March 1, 2020 to February 28, 2021)
(1) Non-consolidated operating results								Percentages indicate year-on-year changes
		Net sales		Operating profit	Ordinary profit		Profit
		Millions of yen		%	Millions of yen		%	Millions of yen	%	Millions of yen		%
Year ended February 28, 2021	8,029		17.9		419		0.5		410	(2.5)			482		44.7
Year ended February 29, 2020	6,811		52.1		417		24.4		421	25.5			333		(6.5)
		Earnings per share	Diluted earnings per		Profit/equity		Ordinary profit/total	Operating profit/net
						share									assets				sales
			Yen		Yen			%					%					%
Year ended February 28, 2021	66.68		63.21				8.1					5.4					5.2
Year ended February 29, 2020	49.49		46.39				14.0					11.0					6.1
(2) Non-consolidated financial position
		Total assets		Net assets		Equity ratio	Net assets per share
		Millions of yen	Millions of yen					%						Yen
As of February 28, 2021	10,717					8,855					82.6			1,167.06
As of February 29, 2020	4,472					3,035					67.9						448.97
(3) Non-consolidated cash flows
		Cash flows from	Cash flows from	Cash flows from	Cash and cash equivalents
		operating activities	investing activities	financing activities		at end of period
		Millions of yen	Millions of yen		Millions of yen		Millions of yen
Year ended February 28, 2021				529					159					5,157						7,426
Year ended February 29, 2020				407					(155)					567						1,579
2. Cash dividends
					Annual dividends per share					Total cash	Dividend payout		Ratio of dividends
														ratio		to net assets
		1st quarter-end	2nd quarter-end	3rd quarter-end	Fiscal year-end	Total			dividends (Total)	(Non-consolidated)	(Non-consolidated)
		Yen		Yen	Yen				Yen	Yen	Millions of yen	%				%
Year ended February 29, 2020	-		0.00	-				0.00	0.00		-		-				-
Year ended February 28, 2021	-		0.00	-				0.00	0.00		-		-				-
Year ending February 28, 2022	-			0.00	-				0.00	0.00				-
(Forecast)

1

3. Forecast of non-consolidated financial results for the year ending February 28, 2022 (from March 1, 2021 to February 28, 2022)

Percentages indicate year-on-year changes

	Net sales		Operating profit		Ordinary profit	Profit		Earnings per share
	Millions of yen	%	Millions of yen		%	Millions of yen	%	Millions of yen	%	Yen
Full year	9,300	15.8	446		6.4	471	14.8	326	(32.3)	45.17

4. Notes

(1) Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements

Changes in accounting policies due to revisions to accounting standards and other regulations:	No
Changes in accounting policies due to other reasons:	No
Changes in accounting estimates:	No
Restatement of prior period financial statements:	No

(2) Number of issued shares (common shares)

Total number of issued shares at the end of the period (including treasury shares)

	As of February 28, 2021	7,588,044	shares	As of February 29, 2020	6,760,380	shares
Number of treasury shares at the end of the period
	As of February 28, 2021	340	shares	As of February 29, 2020	224	shares
Average number of shares during the period
	Year ended February 28, 2021	7,232,317	shares	Year ended February 29, 2020	6,736,067	shares

2

Non-consolidated financial statements

Non-consolidated balance sheets

			(Thousands of yen)
		As of February 29, 2020	As of February 28, 2021
Assets
Current assets
Cash and deposits	1,579,231	7,426,126
Accounts receivable - trade	953,532	1,196,926
Work in process	49,179	40,740
Advance payments - trade	383,574	272,321
Prepaid expenses	43,499	59,797
Deposits paid	1,261	629
Other	950	5,206
Allowance for doubtful accounts	(6,608)	(2,148)
Total current assets	3,004,621	8,999,600
Non-current assets
Property, plant and equipment
Buildings	77,781	86,688
Accumulated depreciation	(19,432)	(25,746)
Buildings, net	58,349	60,941
Tools, furniture and fixtures	20,160	24,508
Accumulated depreciation	(9,334)	(12,478)
Tools, furniture and fixtures, net	10,826	12,029
Total property, plant and equipment	69,175	72,971
Intangible assets
Software	87,050	93,247
Software in progress	9,056	15,597
Trademark right	4,308	3,758
Other	75	75
Total intangible assets	100,491	112,679
Investments and other assets
Investment securities	1,186,600	1,402,808
Shares of subsidiaries and associates	50,000	50,000
Long-term prepaid expenses	353	9,383
Leasehold deposits	58,388	67,689
Other	2,521	2,767
Total investments and other assets	1,297,864	1,532,649
Total non-current assets	1,467,531	1,718,299
Total assets		4,472,152	10,717,899

3

			(Thousands of yen)
		As of February 29, 2020	As of February 28, 2021
Liabilities
Current liabilities
Accounts payable - trade	633,819	846,369
Accounts payable - other	31,396	20,679
Accrued expenses	40,247	36,836
Income taxes payable	52,135	166,497
Accrued consumption taxes	59,207	59,344
Advances received	261,787	311,949
Deposits received	16,807	18,341
Provision for bonuses	43,444	57,168
Provision for loss on order received	9,349	1,814
Other	-	657
Total current liabilities	1,148,193	1,519,659
Non-current liabilities
Deferred tax liabilities	274,541	328,596
Asset retirement obligations	14,310	14,310
Total non-current liabilities	288,851	342,906
Total liabilities	1,437,044	1,862,566
Net assets
Shareholders' equity
Share capital	609,597	3,201,973
Capital surplus
Legal capital surplus	599,597	3,191,973
Total capital surpluses	599,597	3,191,973
Retained earnings
Other retained earnings
Retained earnings brought forward	1,109,941	1,592,212
Total retained earnings	1,109,941	1,592,212
Treasury shares	(900)	(1,866)
Total shareholders' equity	2,318,236	7,984,292
Valuation and translation adjustments
Valuation difference on available-for-sale securities	716,858	871,041
Total valuation and translation adjustments	716,858	871,041
Share acquisition rights	12	-
Total net assets	3,035,107	8,855,333
Total liabilities and net assets		4,472,152	10,717,899

4

Non-consolidated statements of income

			(Thousands of yen)
		Fiscal year ended	Fiscal year ended
		February 29, 2020	February 28, 2021
Net sales	6,811,373	8,029,275
Cost of sales	5,725,327	6,804,593
Gross profit	1,086,045	1,224,681
Selling, general and administrative expenses	668,475	804,881
Operating profit	417,570	419,799
Non-operating income
Interest income	12	-
Commission income	13,134	32,106
Foreign exchange gains	-	5,758
Other	260	1,599
Total non-operating income	13,408	39,464
Non-operating expenses
Interest expenses	146	-
Market change expenses	-	17,058
Share issuance costs	4,735	24,826
Going public expenses	2,000	-
Foreign exchange losses	2,540	-
Other	341	6,780
Total non-operating expenses	9,764	48,665
Ordinary profit	421,214	410,598
Extraordinary income
Gain on sales of investment securities	37,943	246,221
Total extraordinary income	37,943	246,221
Profit before income taxes	459,157	656,820
Income taxes - current	141,965	188,541
Income taxes - deferred	(16,188)	(13,992)
Total income taxes	125,776	174,549
Profit		333,381	482,271

5

Non-consolidated statements of changes in equity

Fiscal year ended February 29, 2020

											(Thousands of yen)
						Shareholders' equity
			Capital surplus		Retained earnings
							Other retained
	Share capital		Legal capital		Total capital	earnings	Total retained	Treasury shares
			surplus		surplus	Retained earnings	earnings
							brought forward
Balance at beginning of period	169,100		159,100			159,100	776,560	776,560	-
Changes during period
Issuance of new shares	440,497		440,497			440,497
Profit							333,381	333,381
Purchase of treasury shares											(900)
Net changes in items other than
shareholders' equity
Total changes during period	440,497		440,497			440,497	333,381	333,381	(900)
Balance at end of period	609,597		599,597			599,597	1,109,941	1,109,941	(900)
	Shareholders' equity	Valuation and translation adjustments
	Total shareholders'	Valuation difference	Total valuation and	Share acquisition		Total net assets
	on available-for-sale		rights
	equity	translation adjustments
	securities
Balance at beginning of period	1,104,760		631,892		631,892		12		1,736,665
Changes during period
Issuance of new shares	880,995									880,995
Profit	333,381									333,381
Purchase of treasury shares	(900)									(900)
Net changes in items other than				84,965		84,965		-		84,965
shareholders' equity
Total changes during period	1,213,475		84,965		84,965		-		1,298,441
Balance at end of period	2,318,236		716,858		716,858		12		3,035,107

6

Fiscal year ended February 28, 2021

											(Thousands of yen)
						Shareholders' equity
			Capital surplus		Retained earnings
	Share capital						Other retained			Treasury shares
		Legal capital		Total capital	earnings	Total retained
			surplus		surplus	Retained earnings	earnings
							brought forward
Balance at beginning of period	609,597		599,597			599,597	1,109,941	1,109,941	(900)
Changes during period
Issuance of new shares	2,592,375		2,592,375			2,592,375
Profit							482,271	482,271
Purchase of treasury shares											(965)
Net changes in items other than
shareholders' equity
Total changes during period	2,592,375		2,592,375			2,592,375	482,271	482,271	(965)
Balance at end of period	3,201,973		3,191,973			3,191,973	1,592,212	1,592,212	(1,866)
	Shareholders' equity	Valuation and translation adjustments
	Total shareholders'	Valuation difference	Total valuation and	Share acquisition		Total net assets
	on available-for-sale		rights
	equity	translation adjustments
	securities
Balance at beginning of period	2,318,236		716,858		716,858		12		3,035,107
Changes during period
Issuance of new shares	5,184,750									5,184,750
Profit	482,271									482,271
Purchase of treasury shares	(965)									(965)
Net changes in items other than				154,182		154,182		(12)		154,170
shareholders' equity
Total changes during period	5,666,056		154,182		154,182		(12)		5,820,226
Balance at end of period	7,984,292		871,041		871,041		-		8,855,333

7

Non-consolidated statements of cash flows

			(Thousands of yen)
		Fiscal year ended	Fiscal year ended
		February 29, 2020	February 28, 2021
Cash flows from operating activities
Profit before income taxes	459,157	656,820
Depreciation	71,858	64,944
Share-based remuneration expenses	1,229	245
Increase (decrease) in allowance for doubtful accounts	(212)	(4,459)
Increase (decrease) in provision for bonuses	11,526	13,724
Increase (decrease) in provision for loss on order received	9,158	(7,534)
Interest and dividend income	(12)	(49)
Interest expenses	146	-
Foreign exchange losses (gains)	22	8
Share issuance costs	4,735	24,826
Going public expenses	2,000	-
Loss (gain) on sales of investment securities	(37,943)	(246,221)
Decrease (increase) in trade receivables	(290,830)	(243,393)
Decrease (increase) in deposits paid	224,108	631
Decrease (increase) in inventories	6,476	8,438
Decrease (increase) in advance payments - trade	(144,586)	111,253
Increase (decrease) in trade payables	359,842	212,550
Increase (decrease) in accounts payable - other	1,800	(8,604)
Increase (decrease) in advances received	(10,987)	50,161
Other, net	18,030	7,344
Subtotal	685,519	640,687
Interest and dividends received	12	49
Interest paid	(37)	-
Income taxes paid	(278,186)	(110,867)
Net cash provided by (used in) operating activities	407,308	529,869
Cash flows from investing activities
Purchase of property, plant and equipment	(30,928)	(15,221)
Purchase of intangible assets	(49,733)	(67,116)
Purchase of investment securities	(99,995)	-
Proceeds from sales of investment securities	40,954	252,243
Payments of leasehold deposits	(16,015)	(10,063)
Other, net	(245)	(245)
Net cash provided by (used in) investing activities	(155,964)	159,595
Cash flows from financing activities
Net increase (decrease) in short-term borrowings	(300,000)	-
Proceeds from issuance of shares	871,544	5,090,261
Purchase of treasury shares	(900)	(965)
Going public expenses	(3,000)	-
Proceeds from issuance of share acquisition rights	-	68,142
Net cash provided by (used in) financing activities	567,644	5,157,437
Effect of exchange rate change on cash and cash equivalents	(22)	(8)
Net increase (decrease) in cash and cash equivalents	818,966	5,846,895
Cash and cash equivalents at beginning of period	760,265	1,579,231
Cash and cash equivalents at end of period		1,579,231	7,426,126

8