Golf Digest Online : Notice regarding Additional Acquisition of Equity Interest in Consolidated Subsidiary,Issuance of Class A Preferred Shares by way of Third-party Allotment, Amendment of Articles of Incorporation, and Reduction in Amounts of Stated Capital and Capital Reserve(207 KB)

[Translation]

September 22, 2022

Listed company name:	Golf Digest Online Inc.
Stock code:	3319 (TSE Prime)
Representative:	Nobuya Ishizaka, President & CEO
Contact:	Ryo Nakamura, CFO
	Phone: [phone]

Notice regarding Additional Acquisition of Equity Interest in Consolidated Subsidiary,

Issuance of Class A Preferred Shares by way of Third-party Allotment,

Amendment of Articles of Incorporation, and Reduction in Amounts of Stated Capital and

Capital Reserve

Golf Digest Online Inc. (the "Company") hereby announces as follows that, at its Board of Directors meeting held on September 22, 2022, the Company resolved the following matters in items (1) through (5).

1. GDO Sports, Inc., which is a 100.0% subsidiary of the Company in the US (whose head office is located in California, USA; "GDOS") will acquire from GTE Step1 HoldCo LLC (whose head office is located in Colorado, USA) a 37.0% equity interest in GolfTEC Enterprises, LLC (whose head office is located in Colorado, USA; "US GOLFTEC") and make US GOLFTEC a 97.0% subsidiary of GDOS (the "Additional Equity Interest Acquisition").
2. The Company will execute an investment agreement (the "Investment Agreement") with Fivestar Mezzanine No.2 Investment Limited Partnership (the "Scheduled Allottee"), pursuant to which the Company will issue to the Scheduled Allottee by way of third-party allotment on November 25, 2022 (the "Payment Date") Class A Preferred Shares with an aggregate value of 6,000,000,000 yen (the "Capital Increase by Third-PartyAllotment").
3. The Company will partially amend its Articles of Incorporation for newly establishing provisions related to the Class A Preferred Shares (the "Articles of Incorporation Amendment").
4. The Company will reduce the amount of its stated capital and capital reserve in respect of the full amount by which the stated capital and capital reserve will increase as a result of the incorporation of the paid-in amount for the Class A Preferred Shares into the stated capital and capital reserve, effective as of the Payment Date (the "Reduction in Amount of Stated Capital, Etc.").
5. The Company will submit to an extraordinary shareholders meeting of the Company scheduled to be held on November 24, 2022 (the "Extraordinary Shareholders Meeting") proposals relating to (i) the Capital Increase by Third-Party Allotment (including a special resolution pertaining to the favorable issuance of Class A Preferred Shares) and (ii) the Articles of Incorporation Amendment.

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The Capital Increase by Third-Party Allotment is subject to the condition that shareholder approval is obtained at the Extraordinary Shareholders Meeting for the resolutions pertaining to the Capital Increase by Third-Party Allotment and the Articles of Incorporation Amendment, and the Articles of Incorporation Amendment is subject to the condition that shareholder approval is obtained at the Extraordinary Shareholders Meeting for the resolution pertaining to the Articles of Incorporation Amendment. The Reduction in Amount of Stated Capital, Etc. is subject to the condition that the Capital Increase by Third-Party Allotment becomes effective.

Further, under the Investment Agreement, the payment for the Class A Preferred Shares by the Scheduled Allottee is subject to conditions such as (i) that shareholder approval is obtained at the Extraordinary Shareholders Meeting for the resolutions pertaining to the Capital Increase by Third- Party Allotment and the Articles of Incorporation Amendment, (ii) that the loan the purpose of use of funds of which is the Additional Equity Interest Acquisition is certain to be drawn down or has already been drawn down, and (iii) that it is certain that the Additional Equity Interest Acquisition will be implemented within 6 business days from the Payment Date.

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Ⅰ． Additional Equity Interest Acquisition

1. Reasons for additional equity interest acquisition

Uniquely offering lessons and golf club fittings customized to suit each individual based on three levels of data-swing data, ball and golf club data, and user profile data-derived from world-leading technology, US GOLFTEC, a consolidated subsidiary of the Company, has over 230 locations in six countries including the US as well as Canada and the Southeast Asian region and provides over 1.5 million lessons annually by over 900 accredited coaches.

The US golf market has seen new technology and the COVID-19 situation impact golfing habits and the way people enjoy golf, and there has been an increase in ways to enjoy golf outside the golf course as well as golf becoming a closer part of players' lives.

Under such environment, US GOLFTEC, based on the basic policy of the Company's medium-term management policy "LEAD THE WAY" announced in February 2021, has adopted a growth strategy focused on expanding locations and is engaging in its business operations to achieve such strategy. With its sights on further growth and expansion, US GOLFTEC has adopted its concept "GOLFTEC ANYWHERE," aimed at offering more golfers world-classknow-how to improve their performance for all scenes and locations based on its conventional one-on-one lessons.

Since the Company's acquisition of 60.0% of US GOLFTEC's equity interest and turning US GOLFTEC into a subsidiary of the Company in July 2018, and up to today, the Company and GTE Step1 HoldCo LLC have steadily expanded the business while establishing a favorable partnership. As a result, US GOLFTEC, which was in a state of insolvency when it became a subsidiary of the Company, is expected to resolve its insolvency during the 2022 fiscal year. At this time, in order to accelerate the long-term expansion of profits by realizing the "GOLFTEC ANYWHERE" concept, the Company has decided to increase its equity interests in US GOLFTEC.

2. Outline of subsidiary receiving capital contribution

(1)	Name	GolfTEC Enterprises, LLC
(2)	Location	67 Inverness Drive East, Suite 175, Englewood, Colorado
		80112, U.S.A.
(3)	Name and position of	Joseph L. Assell (President & CEO)
	representative
(4)	Business activities	Operates directly managed and franchise locations mainly in the
		US and Canada (total of 232 locations as of the end of June
		2022) and provides a golf lesson service business utilizing IT.
(5)	Stated capital	Approximately 17.1 million USD
(6)	Date of incorporation	October 24, 2001
(7)	Largest shareholders	GDO Sports, Inc. (60.0%)
	and their shareholding	GTE Step1 HoldCo LLC (40.0%)
	ratios
(8)	Relationship with the	Capital relationship	The Company holds 60.0% of the
	Company		equity interests of the target
			company through GDOS.
		Personnel relationship	The Company's President & CEO
			Nobuya Ishizaka, Executive Vice-
			President Takehiro Yoshikawa, and

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		Executive Officer Ryo Nakamura
		are concurrently serving as Directors
		of the target company.
	Transactional	GDOS has loan claims against the
	relationship	target company. GDO GolfTEC
		Co., Ltd., a subsidiary of the
		Company, is paying franchise fees to
		and has purchased lesson equipment
		from the target company.

(9) Consolidated financial position and consolidated operating results for the past three years (amounts in USD)

	Fiscal year ended	Dec 2019	Dec 2020	Dec 2021
	Consolidated net assets	(4.0 million)	(8.7 million)	(4.6 million)
	Consolidated total assets	43.6 million	48.0 million	76.6 million
	Consolidated net sales	69.7 million	66.7 million	108.6 million
	Consolidated operating profit	0.9 million	(4.2 million)	4.4 million
	Consolidated net income	0.3 million	(4.8 million)	4.0 million

3. Outline of counterparty to acquisition of equity interest

(1)	Name	GTE Step1 HoldCo LLC
(2)	Location	67 Inverness Drive East, Suite 175, Englewood, Colorado
		80112, U.S.A.
(3)	Name of	Thomas A. Gart
	representative
(4)	Business activities	Management of equity interest of GolfTEC Enterprises, LLC
(5)	Date of incorporation	May 23, 2018
(6)	Net assets and total	Not disclosed at request of counterparty.
	assets
(7)	Largest shareholders	GolfTEC Investors, LLC (50.8%)
	and their shareholding	GolfTEC Holdings, LLC (39.1%)
	ratios
(8)	Relationship with the	Capital relationship	The counterparty holds 40.0% of the
	Company		equity interests of GolfTEC
			Enterprises, LLC, a consolidated
			subsidiary of the Company.
		Personnel relationship	Thomas A. Gart, who is a Director of
			GolfTEC Enterprises, LLC, a
			consolidated subsidiary of the
			Company, is concurrently serving as
			the representative of the counterparty.
		Transactional	Not a related party of the Company.
		relationship

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4. Acquisition price and status of equity interests

(1)	Equity interest before	60.0%
	additional acquisition
(2)	Equity interest to be	37.0%
	additionally acquired
(3)	Acquisition price	Approximately 85.7 million USD (122 hundred million yen)
		(See Note 1)
(4)	Equity interest after	97.0%
	additional acquisition

Note 1: Converted at an exchange rate of 1 USD = 142yen.

5. Outline of accounting

The Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22 issued on September 13, 2013) and the Practical Guidelines on Capital Consolidation Procedures in Consolidated Financial Statements (Accounting System Committee Report No. 7, February 16, 2018) will apply to the Additional Equity Interest Acquisition, which will be treated as a transaction for additional acquisition of shares of subsidiaries. Specifically, the amount of non-controlling interests will be reduced by an amount equal to the additionally acquired equity interest (the acquisition price), and if the acquisition price is greater than the amount by which the amount of non-controlling interests is reduced, the capital surplus will be reduced by such difference. Since the amount of non-controlling interests under the consolidated balance sheet is zero, the capital surplus in the consolidated balance sheet will be reduced by an amount equal to the acquisition price in accordance with the process prescribed above.

Also, US GOLFTEC is expected to resolve its insolvency during the 2022 fiscal year, and since the Company's equity interests in US GOLFTEC will be 97.0% as a result of the Additional Equity Interest Acquisition after resolving its insolvency, 97.0% of the consolidated net income of US GOLFTEC will be recorded as net income attributable to owners of parent.

In addition, as a countermeasure in response to the reduction of the amount of Consolidated Net Assets, the Company will conduct the Capital Increase by Third-Party Allotment. For details, please refer to "II. Capital Increase by Third-Party Allotment" below.

6.	Schedule
	(1)	Board of Directors resolution	September 22, 2022
	(2)	Agreement execution date	September 22, 2022 (tentative)
	(3)	Date of implementation of	November 30, 2022 (tentative)
		Additional Equity Interest
		Acquisition
7.	Future outlook

The Company has decided to revise the full-year financial forecast for FY 2022 (January 1, 2022 to December 31, 2022) previously announced on February 15, 2022. For details, please refer to "Notice of Revision to Full-Year Financial Forecast" announced today.

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