AXXZIA : 【Delayed】Supplementary Materials Concerning the Acquisition of Shares in Huit Laboratories, Inc.

March 15, 2022

Supplementary Materials

Concerning the Acquisition of

Shares in Huit Laboratories, Inc.

AXXZIA Inc.

Copyright © AXXZIA Inc. All rights reserved.

Summary of the Acquisition of Huit Laboratories, Inc. as a Subsidiary

Summary

Challenges, Objectives, and Potential Synergies

• Acquisition of 100% of shares in Huit Laboratories, Inc., thereby converting it into a subsidiary

Planned date	April 1, 2022
of share
acquisition
Cost of	860mn yen
share
*Share acquisition price
acquisition
Method for	Cash and deposits on hand + borrowings (under
the
procurement	consideration)
of necessary	*Currently reviewing fund position and leverage effect
funds

• Impact on consolidated financial results for FY07/22

We plan to acquire Huit Laboratories in April 2022 and expects the acquisition to have only a negligible impact on performance in FY07/22.

Challenges

Objectives

Synergies

Bottlenecks associated with order lot sizes and lead times encountered when performing original equipment manufacturing for other companies

• Enabling of speedy development, manufacture, and launch of a wide variety of products in small quantities
• Intended use of funds at time of IPO: Construction of a new plant
• Shortening of the time required for plant construction and launch by about 1.5 years
• Reduction of risks associated with the recruitment of personnel and the launch of operations
• Acquisition of domestic sales network (to generate revenue from sales)
• Internalization of outsourced manufacturing
• Acquisition of licenses and expertise related to the manufacture of cosmetics and quasi-pharmaceuticalproducts
• Sales channel and customer base expansion achieved through the acquisition of brands with different price ranges

Copyright © AXXZIA Inc. All rights reserved.

2

Company profile of Huit Laboratories, Inc.

Company profile

■History

• Business

1977

2011

2016

July 2017

September 2017

Founded as LisBlanc Co., Ltd.

Absorbed by Nissui Pharmaceutical Co., Ltd., a pharmaceutical company in the Nissui Group, and became Nissui Pharmaceutical's cosmetics division

Spun off from Nissui Pharmaceutical as Nissui Pharma Cosmetics Co., Ltd.

Became a wholly owned subsidiary of Senshukai Co., Ltd.

Changed name to Huit Laboratories, Inc.

Manufacture and wholesale of cosmetics and quasi-pharmaceutical products; original equipment manufacturing

• Size

FY12/21 Net sales: 717mn yen

Total assets: 858mn yen

Net assets: 727mn yen

Business model

• Yatsugatake Plant

Located in Hokuto City, Yamanashi Prefecture, which is endowed with a rich natural environment, this manufacturing plant for cosmetics and quasi-pharmaceutical products uses natural water pumped directly from within the premise as the base for its products.

• Wholesale business (core brands)

LisBlanc	This brand of skin care cosmetics
	has been on the market for over 40
	years. These products are
	distributed through wholesale to
	approximately 1,000 stores
	throughout Japan.
OEM	Through this business, we conduct
business	original equipment manufacturing
	focused primarily on skin care
	products.

Copyright © AXXZIA Inc. All rights reserved.

3

Role of Huit Laboratories, Inc.
	Supplement outsourced manufacturing and storage
	operations of the AXXZIA Group
	(aside from product development and sales)
Product development	Outsourced manufacturing	Storage	Sales	Shipping
Disadvantages of
outsourcing
	The outsourcing company has limited control over
	production lot sizes and lead times due primarily to the	The outsourcing company incurs
	need to secure production lines operated by its		storage costs
	subcontractors.

Copyright © AXXZIA Inc. All rights reserved.

4

Potential Synergies

・At the time of IPO, we established a 2.0bn yen fund for the construction of a new plant. We will convert Huit Laboratories, Inc. into a subsidiary for 860mn yen.

・Through this acquisition, we will shorten the amount of time required to establish and launch the plant.

・This acquisition will help us eliminate risks (associated with acquisition of manufacturing licenses and expertise or personnel recruitment) incurred prior to the launch of operations at the plant.

・In comparison to outsourced manufacturing, this acquisition will allow us to increase our control over production lot sizes and shorten lead

・Our skincare cosmetics and dietary supplements lie in the mid- to high-price range.

・This acquisition will facilitate sales channel and customer base expansion achieved through LisBlanc and other mid- to low-priceskincare cosmetics.

Heightened

efficiency through

conservation of funds,

reduction of operating	Cosmetic brands with
different price ranges
risk, etc.

Four

types of synergy

Speedy product	Reduction of
development	outsourcing costs

	times that occur prior to product	・Currently, all of the Company's products are manufactured by subcontractors
	completion.	・Internalizing a portion of the manufacturing operations that were previously
	・This acquisition will empower us to	outsourced will allow us to reduce associated costs.
	manufacture prototypes of a wide variety
	of products in small quantities and enable
	speedy product launches.	Copyright © AXXZIA Inc. All rights reserved.	5