crossfor co., ltd. results of operations

1Copyright (C) Crossfor All Rights Reserved

A company dedicated to making people worldwide happy

JASDAQ (Standard) Stock code: 7810

Crossfor Co., Ltd.Results of Operations for the Fiscal Year Ended July 31, 2020

September 28, 2020

2Copyright (C) Crossfor All Rights ReservedCopyright (C) Crossfor All Rights Reserved

Precautions regarding This Presentation

This presentation contains outlooks, plans, targets and other forward-looking statements. These statements are

based on current assumptions regarding upcoming events and trends. There is no assurance that these

assumptions are accurate. Consequently, actual results of operations may differ significantly from these

forward-looking statements for a number of reasons.

Unless otherwise stated, financial data in this presentation is based on generally accepted accounting principles

in Japan.

Crossfor has no obligation to revise forward-looking statements that have been announced, irrespective of the

occurrence of any events in the future, except in cases where required by disclosure rules.

Information in this presentation about companies other than Crossfor is based on sources available to the

public.

This presentation does not constitute a solicitation for the purchase or sale of securities of any type, even if

there are statements to this effect. Furthermore, this presentation cannot be used as the basis for a contract or

obligation of any type.


Contents

I. Company Overview

II. FY7/20 Financial Results

III. FY7/21 Outlook

IV. Growth Strategy

… 4

… 14

… 28

… 30


I. Company Overview


Company name Crossfor Co., Ltd.

Foundation August 1987

Head office/BranchHead office: 7-11-4, Kokubo, Kofu-shi, YamanashiTokyo branch: T&T Okachimachi Building, 4-8-5, Taito, Taito-ku, Tokyo

Representative President Hidetaka Dobashi

Capital 683 million yen (As of July 31, 2020)

Fiscal year end End of July

Number of employees 110 (All group companies, as of July 31, 2020)

Group companiesCrossfor H.K. Limited (Hong Kong)Crossfor (Shenzhen) Co., Ltd. D.Tech Co., Ltd. (As of July 31, 2020)

Listed exchange Tokyo Stock Exchange JASDAQ Standard

BusinessManufacturing and sales of jewelry and accessories using Dancing Stone and of parts for overseasDevelopment, manufacturing and sales of original new products

Auditor KPMG AZSA LLC

Company Overview


March 1977

August 1977

September 1978

September 1979

June 1980

August 1980

August 1987

March 1989

January 1999

October 2002

September 2007

November 2010

January 2013

March 2017

March 2017

October 2018

January 2019

March 2019

October 2019

March 2020

Career of President Hidetaka Dobashi

Graduated from School of Marine Science and Technology, Tokai University (Oceanography)

Went to the United States

Entered Bluefield College (Business Accounting)

Entered Gemological Institute of America (Gemology)

Earned Graduate Gemologist (G.G) degree

Returned to Japan after graduation

Started a gemstone import and wholesale distribution company called Dobashi Jewelry Trading

Established Shibado Co., Ltd. (current Crossfor Co., Ltd.)

Established Gold Supply Co., Ltd., a jewelry manufacturer

Invented “Crossfor cut”

Merged with Shibado and renamed the company Crossfor Co., Ltd.

Established subsidiary Crossfor H.K. in Hong Kong

Invented the Dancing Stone®

Obtained a patent for Dancing Stone® in Japan

Relocated the head office to the city of Kofu in Yamanashi prefecture

Winner in demand acquisition category of Vibrant Habataku Small and Medium Enterprises 300 Program of the Ministry of Economy, Trade and Industry

One of 14 EY Entrepreneurs of the Year 2018 Japan

Invention and commercialization of the EZ Clasp

Became a member of Keidanren (Japan Business Federation)

Elected a No. 1 delegate of the Kofu Chamber of Commerce

Japan Patent Office Commissioner’s Award, Intellectual Property Achievement Category

August 22, 1954Place of birth: Yamanashi prefecture


History

1980 1987 2000 2010 2015 2020

1987 Established

1999Invented

Crossfor cut*

2001

Started selling

Crossfor New

York brand

2011

Started selling

Dancing Stone

2012

Started selling

Dancing Stone

overseas

2017

Listed on Tokyo

Stock Exchange

JASDAQ market

* Original diamond cut with a central crossImport of jewelry

2010Developed

Dancing Stone

1980Founded

■Dancing Stone■Tennis Bracelets ■EZ Clasp

Expand earnings through these three pillars

Crossfor created the Dancing Stone market and is now enlarging this market worldwide

Used Dancing Stone to create a

new market

Established the Dancing Stone brand

Now

8Copyright (C) Crossfor All Rights ReservedCopyright (C) Cross for All Rights Reserved

The patented Dancing Stone has cumulative sales of more than 30 million items

What is Dancing Stone?

In November 2010, our President Hidetaka Dobashi invented a new jewelry setting in which the slightest movement of the wearer is converted into energy that makes the diamond swing incessantly, to the extent that

“it never stops glittering on your neckline.”

Being minute, gentle and elegant, the movement looks as if it is dancing. Thus, we named it Dancing Stone.

The center stone swings and flickers along with a person's heart beat and breath.

Dancing movement of the stone

A revolutionary technique for jewelry


Used a “dancing” capability to create a new market

Obtained a patent for Dancing Stone in Europe and 8 countries

No movement More movement

Basic technology

Advanced technology

Existing products

Existing products

Existing products

Dancing Stone＝ New market

◆Patent pending in more than 10 countries◆Obtained a design right in Japan, China, USA, India, etc.

Japan China USA

Russia

South Korea

Australia Canada

Taiwan

Europe

European Patent

Convention includes

38 countries (Note)

Note: Germany, France, UK, Italy, Netherlands, Austria, Spain, Switzerland, Turkey, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, Greece, Croatia, Hungary, Ireland, Iceland, Albania, Liechtenstein, Lithuania, Luxembourg, Latvia, Monaco, Macedonia, Malta, Norway, Poland, Portugal, Romania, Serbia, Sweden, Slovakia, Slovenia and San Marino

An entirely new market

Complex cut and attachment of

gemstones

Simple cut and attachment method

Suspended design by using a ring

New technology

The patented Dancing Stone has cumulative sales of more than 30 million items

https://www.google.co.jp/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiy2O_jtpvUAhXEoZQKHbLoAp8QjRwIBw&url=https://kotobank.jp/word/%E6%97%A5%E6%9C%AC-109930&psig=AFQjCNEumQfs2onXJX_uEdMM19E2O69C1w&ust=1496364626947903

http://www.google.co.jp/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjhhdjztpvUAhUBLZQKHdVpBd0QjRwIBw&url=http://college2ch.blomaga.jp/articles/116129.html&psig=AFQjCNEHYA0k3nI4hRZ2GNOLR6ngC8FC6w&ust=1496364656808579

https://www.google.co.jp/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiI5ImfuJvUAhUHoZQKHRdgAt4QjRwIBw&url=https://ja.wikipedia.org/wiki/%E3%82%A2%E3%83%A1%E3%83%AA%E3%82%AB%E5%90%88%E8%A1%86%E5%9B%BD%E3%81%AE%E5%9B%BD%E6%97%97&psig=AFQjCNEZjOuoKlZM435-kanH613rJ_Kkeg&ust=1496364970617894

http://www.google.co.jp/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwid3ta2uJvUAhVFpJQKHWcdAoIQjRwIBw&url=http://www.benricho.org/flagworld/samedesign.html&psig=AFQjCNHWuqoitGDl8nATyf3tB_a7YWVKCg&ust=1496365070507417

http://www.google.co.jp/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjhp4XLuJvUAhVDNJQKHb7vCuoQjRwIBw&url=http://blog.livedoor.jp/tonycyoppa/archives/17239375.html&psig=AFQjCNHK579-qhV2e1yyG30gocYURlTxkA&ust=1496365112162851

https://www.google.co.jp/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjWmveYuZvUAhXEsJQKHXXKCmwQjRwIBw&url=https://ja.wikipedia.org/wiki/%E3%82%AA%E3%83%BC%E3%82%B9%E3%83%88%E3%83%A9%E3%83%AA%E3%82%A2%E3%81%AE%E5%9B%BD%E6%97%97&psig=AFQjCNEZh064_M_SwuA5l-uwnZgr6C_Xpg&ust=1496365275154779

http://www.google.co.jp/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjNnqKluZvUAhUGjZQKHe-PAv4QjRwIBw&url=http://www.abysse.co.jp/world/flag/america/canada.html&psig=AFQjCNFfXK7DJHUVPTy3nBnhAlf0duFFxg&ust=1496365303766027

http://www.google.co.jp/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiDnLO7tpvUAhVBwpQKHVQdBY4QjRwIBw&url=http://www.abysse.co.jp/world/flag/other/taiwan.html&psig=AFQjCNHsGQ1QmMbGF9V9WdcOiJ5gtYJMAQ&ust=1496364543039046


Minute stone movement adds value to any design and gemstone

Compatible with conventional designs Suitable for a variety of motifs

Dancing Stone can add a dynamic element to jewelry and other fashion products regardless of the design and price range.

Advantages of the Dancing Stone More design flexibility Stones look larger More sparkle

The patented Dancing Stone has cumulative sales of more than 30 million items -Unlimited possibilities-


Japan Jewelry Best Dresser Award Gift Item

Used by many brands and gift items

Rank Brand Rank Brand

1 Tiffany & Co. 14 DE BEERS

2 BVLGARI 15 Vendome

3 Cartier 16 Sweet10

4 MIKIMOTO 17 PIAGET

5 SWAROVSKI 18 agete

6 TASAKI 19 Van Cleef & Arpels

7 4℃ 20 BLOOM

8 Folli Follie 21 Ponte Vecchio

9 HARRY WINSTON 22 AHKAH

10 STAR JEWELRY 23 Canal 4℃

11 Samantha Tiara 24 ete

12 GINZA TANAKA 25 THE KISS

13 CHAUMET

■Most Recognized Jewelry Brands in Japan (2015)

Dancing Stone is used by about 30% of the most recognized jewelry brands in Japan

Source: Yano Research Institute Gift for 2012 awardsTwinkle Tear pierced earrings

Gift for 2015 awardsJupiter lapel pin

Selected every year since 2001 (19 consecutive years) as a gift item given to winners of the Japan Jewelry Best Dresser Award

Gift to the winner of the age 20s category of the 2017 Jewelry Best Dresser Awards

The patented Dancing Stone has cumulative sales of more than 30 million items -Use and awards-


Price structure at other companies

Brand value＝ Loyalty

Crossfor Other companies

Goods for sale Framework, functions Parts

Substitutes None (a patented exclusive technology) Many

Competitors None (patent keeps out competitors) Many

Added value Possible (provision of new designs) Difficult

Creation of brand value No brand value (price competition)

Selling price=Brand value is

added at a fixed rateto the retail price

Crossfor’s price structure

ブランド価値=ロイヤリティー

Brand value＝ Loyalty

Cost

Margin

High profit margins are secured because supplying added value creates brand value

Higher retail priceLower retail price Higher retail priceLower retail price

Cost

Margin

Selling price(Cost plus a fixed

amount of margin)

Unable to add brand value to prices

The patented Dancing Stone has cumulative sales of more than 30 million items -Sale of parts-


Sales contracts with about 350 large jewelry manufacturers, including Swarovski, 70 companies in India and 23

companies in the United States

Sales in other countries, mainly jewelry parts, are 35% of sales

Sales in Japan, mainly finished products, are 65% of sales

Sales contracts with about 1,000 companies, including Mikimoto and 4℃

The patented Dancing Stone has cumulative sales of more than 30 million items -Sales network-


II. FY7/20 Financial Results


Sales and earnings decreased for the third consecutive

year as sales fell sharply in Japan and other countries because of COVID-19

Highlights


Consolidated Income Statement


3,493

2,324

0

1,000

2,000

3,000

4,000

5,000

FY7/19 FY7/20

61

(413)-1,000

-500

0

500

1,000

FY7/19 FY7/20

49

(424)

(1,000)

(500)

0

500

1,000

FY7/19 FY7/20

Net sales Operating profit

Ordinary profitProfit attributable to

owners of parent

13

(611)(1,000)

(500)

0

500

1,000

FY7/19 FY7/20

Consolidated Income Statement Summary

(Millions of yen)

(Millions of yen) (Millions of yen)

(Millions of yen)

(500)

(1000)


FY7/19 FY7/20 Change Change (%)

Net sales 3,493 2,324 -1,170 -33.5%

Japan 2,296(65.7%)

1,649(71.0%)

-647 -28.2%

Overseas 1,197(34.3%)

674(29.0%)

-523 -43.7%

Gross profit 1,479(42.3%)

754(32.4%)

-726 -49.0%

Selling, general and administrative expenses

1,417(40.6%)

1,168(50.3%)

-250 -17.6%

Operating profit (loss) 61(1.8%)

(413)(-17.8%)

-476 -%

Ordinary profit (loss) 49(1.4%)

(424)(-18.2%)

-474 -%

Profit (loss)attributable to owners of parent

13(0.4%)

(611)(-26.3%)

-626 -%

(Millions of yen)

* ( ): % to sales

Consolidated Income Statement Summary


FY7/19 FY7/20 Change Major factors

Net sales 3,493 2,324 -1,170

Japan 2,296 1,649 -647Department stores and other stores temporarily closed or reduced operating hours

Overseas 1,197 674 -523Lockdowns of major cities caused cancelations and postponements of trade shows and sales events

Gross profit 1,479 754 -726

Gross profit margin 42.3% 32.4% -

Selling, general and administrative expenses

1,417 1,168 -250

Promotion expenses 108 52 -53 Trade shows were canceled or postponed

Salaries and allowances 321 298 -22Temporarily suspended operations, reduced overtime

Operating profit (loss) 61 (413) -476

Ordinary profit (loss) 49 (424) -474


13 (611) -626

Changes in Consolidated Income Statement

(Millions of yen)


Japan65.7%

2,296 million yen

China 14.6%

Thailand

11.9%

7.8%

Others

Japan71.0%

1,649 million yen

China 8.7%

Thailand

12.6%

7.7%

Others

Total 2,324 million yenTotal 3,493 million yen

FY7/19 FY7/20

Sales by Region (YoY Change)

Overseas sales1,197 million yen

34.3%

Overseas sales675 million yen

29.0%


FY7/19 FY7/20

Change Change (%)

Net sales Comp. Net sales Comp.

Japan 2,296 65.7% 1,649 71.0% -647 -28.2%

Overseas 1,197 34.3% 675 29.0% -523 -43.7%

China 510 14.6% 201 8.7% -309 -60.6%

Thailand 414 11.9% 292 12.6% -122 -29.4%

Others 272 7.8% 180 7.7% -92 -33.8%

Sales by Region (YoY Change)

(Millions of yen)


Consolidated Balance Sheet


3,4753,588

0

1,000

2,000

3,000

4,000

5,000

FY7/19 FY7/20

1,252 1,576

0

1,000

2,000

3,000

4,000

5,000

FY7/19 FY7/20

1,802 1,612

0

1,000

2,000

3,000

4,000

5,000

FY7/19 FY7/20

1,437

1,648

0

1,000

2,000

3,000

4,000

5,000

FY7/19 FY7/20

Changes in Consolidated Balance Sheet

Current assets Current liabilities

Non-current assets Non-current liabilities

(Millions of yen)

(Millions of yen) (Millions of yen)

(Millions of yen)


FY7/19 FY7/20 Change Change (%) Remarks

Current assets 3,475 3,588 +113 +3.2%

Cash and deposits 710 1,347 +636 +89.5% Fund procurement

Finished goods 1,402 921 -480 -34.2%Maintain the proper level of inventories

Non-current assets 1,802 1,612 -190 -10.5%

Property, plant and equipment

1,552 1,384 -168 -10.9%

Intangible assets 85 57 -27 -31.9%

Investments and other assets

164 170 +6 +3.7%

Total assets 5,277 5,201 -77 -1.5%

Consolidated Balance Sheet: Assets

(Millions of yen)


FY7/19 FY7/20 Change Change (%) Remarks

Current liabilities 1,252 1,576 +324 +25.9%

Notes and accounts payable-trade

78 45 -33 -42.6%

Short-term borrowings

500 1,000 +500 +100% For fund procurement

Non-current liabilities 1,437 1,648 +211 +14.7%

Long-term borrowings

1,435 1,647 +211 +14.7% For fund procurement

Total liabilities 2,689 3,224 +536 +19.9%

Total net assets 2,588 1,976 -612 -23.7%

Total liabilities and net assets

5,277 5,201 -76 -1.5%

(Millions of yen)

Consolidated Balance Sheet: Liabilities and Net Assets


Consolidated Cash Flows


FY7/19 FY7/20 Change Remarks

Cash flows from

operating activities655 136 -519

Decrease in trade receivables and inventories

Cash flows from

investing activities(172) (104) +67

Free cash flows 828 241 -587

Cash flows from

financing activities(207) 610 +818 Increase in borrowings

Net increase (decrease) in cash and cash equivalents

266 633 +367

Cash and cash equivalents

at end of period 708 1,342 +633

Consolidated Cash Flows

(Millions of yen)


III. FY7/21 Outlook


FY7/20 FY7/21 Change Change (%)

Net sales 2,324 2,790 +465 +20.0%

Japan 1,649 1,722 +73 +4.43%

Overseas 674 1,068 +394 +58.5%

Operating profit (loss) (413) 68 +481 -%

Ordinary profit (loss) (424) 58 +482 -%


(611) 39 +650 -%

Goal is a return to profitability by using many initiatives for improving performance Aiming to create a new standard for jewelry Reduce slow-selling inventory items, cut cost of sales and operating expenses, and

implement other structural reforms

FY7/21 Outlook

(Millions of yen)


IV. Growth Strategy


The global jewelry market is growing steadily and sales are forecast to rise to 48 trillion yen in 2022

The Global Business Climate

Source: Prepared by Crossfor based on “Global Gems and Jewelry Market, Competition, Forecast and Opportunities, 2012-2022,” TechSci Research (India)

5 trillion yen

24 trillion yen

5 trillion yen

2 trillion yen

12 trillion yen

*Does not reflect the impact of the COVID-19 pandemic


The VIRUS BLOCK™ Antiviral Coating Technology

Jewelry purchases by consumers are declining

1. Fewer opportunities to go outDecrease in the need to use jewelry as well as makeup products

2. Concerns about jewelry and hygienePeople think disinfecting jewelry every day is troublesome, that wearing something on a finger could be a source of an infection, that sanitizing products may damage jewelry, and have other concerns

3. Visiting stores has become much more difficultPeople are afraid to go inside a store, afraid to try on jewelry and have other concerns about stores

The concept behind Crossfor products: What can we do to make people happy precisely at a difficult time like this?1. We want to be a source of jewelry that makes people happy and can be worn with confidence.2. We want to work with retailers and other business partners to create new directions in the currently

stagnant jewelry market.3. We want to share our technologies with others to contribute to the vitality of the entire jewelry industry.

With Hardolass Co., Ltd., we developed VIRUS BLOCK™, a virus and bacteria resistant coating

for jewelry.


Primary feature Fights viruses + Prevents odorsThe combination of antiviral and antimicrobial substances that are harmless to the human body (which is slightly alkaline) and a high-

purity glass coating shuts out a variety of viruses, bacteria and other microbes that cause odors.

Quality guaranteed for 5 years

*Antiviral and antibacterial properties have been confirmed by a third party

*The Society of International Sustaining Growth for Antimicrobial Articles (SIAA) promotes the use of products treated to fight microbes and mold so that these products can be used with confidence. The society consists of about 500 companies in Japan and other countries that manufacture antiviral and anti-mold solutions or products with an antimicrobial or anti-mold capability. Members also include antimicrobial testing organizations.

The JP numbers are the conference registration numbers for VIRUS BLOCK.

The VIRUS BLOCK™ Antiviral Coating Technology

Antiviral coatingReduction of viruses specific to

certain productsInorganic antiviral coating for jewelry

Antibacterial coatingInorganic antibacterial coating

for jewelry

1) Fights viruses, bacteria and odors

2) Prevents soiling

3) Prevents discoloration

How the antiviral/antibacterial coating works

Virus/bacteria

Lower infection risk

Antiviral/antibacterial substance combined

with glass coatingChain

Metal base1. The antiviral/antibacterial substances, which are an integral part of the glass

coating, activate oxygen, moisture and other airborne particles.2. These energized airborne particles attack the outer walls of viruses and bacteria.3. Destroying the outer walls deactivates (kills) viruses and bacteria, which greatly

lowers the risk of an infection.

–

–

Virus/bacteria

Deactivates (kills) viruses and bacteria


Amulets for Temples and Shrines

Rough diamonds

An amulet with a rough diamondA gold lasting relationship amulet


Already chosen by many temples and shrines in Japan

Yamanashi Ichinomiya Asama JinjaKanagawa Kamakura KenchojiToyama Takase Jinja, etc.

*Only temples and shrines that have given permission for the use of their names are shown.

*Asama Jinja currently sells Crossfor amulets and the other two locations listed here plan to start selling these amulets in late November.

Ichinomiya Asama Jinja

Amulets for Temples and Shrines

Examples of locations selling Crossfor amulets


Brilliant Bracelet

Launch timing is undetermined but preparations are continuing

The launch has been pushed back because of the COVID-19 crisis


Dancing Stone

Problems with counterfeit Dancing Stone products

Fought back by using patents and other intellectual property rights

Legal actions to stop the production and sale of counterfeit products

Cooperation with Chinese customs to prevent exports of these products, and other activities

In the past

Result

Now Receipt of patents makes manufacturing techniques public knowledge

Emergence of counterfeit products targeting gaps in patents and other rights, other problems

Emergence of even more counterfeit products

Growth of the Dancing Stone market, including counterfeits


Dancing Stone

Upcoming actions

Shut out counterfeits by using automation to reduce production expenses

Automate processes by replacing single action with progressive stamping

Progressive die

An automated stamping machine uses a single die for punching, bending and other processes.

Single action die

One die is used for each process, requiring the manual replacement of the die for every step.

Supply low-cost, high-quality Dancing Stone parts while maintaining profitability by holding down the cost of labor for manufacturing


Dancing Stone

Stage 1

Manual fabrication of castings

Stage 2Manual fabrication using single action stamping

Stage 3Automated production using progressive stamping

Extend automation technologies (progressive

stamping) to finished products in order to use automation to produce finished Dancing Stone products

Now

Next Stage

Stamped parts


Dancing Stone Our latest patent applications

Production labor cost Cost of metal Total cost of production

Use at least one Dancing Stone part in every product.

Comparison with conventional cast products

Made by stamping Made by casting

1/2 1/31/5

Big cost reduction may allow selling products outside Japan too

In addition


Dancing Stone Stamped products

Stamped products: Currently four items

Overseas sales

Export as parts

Finished products

Assemble overseas

＋

Stamped parts


Dancing Stone Create new designs using stamping techniques

Use stamping to make original Dancing Stone products sold using overseas brands

• Positioning Dancing Stone as a core item of brands will ensure consistent sales for many years.

• Using overseas brands will result in reliable sources of earnings.• The goal is a strategy for the worldwide success of the

Dancing Stone.


What is Crossfor?

A jewelry industry innovator

A source of creative and original jewelry ideas

A supplier of high-quality jewelry parts

A company dedicated to making people worldwide happy

Closing Message


Thank you for your attention.

crossfor co., ltd. results of operations

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