1

April 13, 2007

Consolidated Financial Summaries for the Nine Months
of the Fiscal Year Ending May 31, 2007

(June 1, 2006 – February 28, 2007)

Company name: INTER ACTION Corporation
(Stock code: 7725 TSE Mothers Market)
(URL http://www.inter-action.co.jp/Eng)

Contact: Masao Kimura, President, CEO & COO
Tsuyoshi Fukuda, Executive Vice President & CFO
(Tel: +81-45-788-8373)

1.
Significant Accounting Policies in the Preparation of Quarterly Consolidated Financial Statements

(1) Accounting standards for the preparation of quarterly consolidated financial statements:
The standards for Consolidated Interim Financial Statements
(2) Changes in accounting principles from the most recent consolidated fiscal year: None (3) Changes in the scope of consolidation and application of the equity method:
None

Consolidation (Newly added) 0 (Excluded) 0
Equity-method (Newly added) 0 (Excluded) 0
(4) Auditing process by independent accountants:
Yes
The quarterly consolidated financial statements have been through auditing process in accordance with the
supplementary provisions “Standards of Auditors’ Opinion for the Quarterly Financial Statements” of the “Instructions for the Application of the Regulations for Timely Disclosure of Corporate Information by Issuers of Listed Securities” as set by the Tokyo Stock Exchange.

2. Financial Results for the Nine Months Ended February 28, 2007 (June 1, 2006 – February 28, 2007)
(1) Consolidated Results of Operations
(All amounts are rounded down to the nearest million yen)

Sales
Operating income
Ordinary income
Million
yen
YoY
change %
Million yen
YoY
change %
Million yen
YoY
change %
Nine months ended Feb. 2007
1,327
22.0
(64)
-
(76)
-
Nine months ended Feb. 2006
1,087
-
(134)
-
(137)
-
(Reference) Year ended May 2006
2,090

155

141
Net
income
Net income per share
(basic)
Net income per share
(diluted)
Million
yen
YoY
change %
Yen Yen
Nine months ended Feb. 2007
(119)
-
(1,924.08)
-
Nine months ended Feb. 2006
(82)
-
(1,308.23)
-
(Reference) Year ended May 2006
96

1,535.65
1,534.55
Note: The percentages shown for sales, operating income, ordinary income, and net income represent changes from the same period
of the previous fiscal year.

2
[Qualitative information regarding consolidated operational results]
Since the beginning of the current fiscal year, some Japanese and foreign manufacturers have rapidly reduced their capital expenditures due to excess inventories, mainly of CCD/C-MOS imagers used in camera-equipped mobile phones. This downturn caused delays in decisions to make capital expenditures and postponements of some orders already placed. To increase their production capabilities, a growing number of manufacturers have been remodeling and upgrading existing facilities while holding down purchases of new equipment. Furthermore, sales tend to slow down in the third quarter (December – February) due mainly to seasonal factors. As a result of the above and other factors, third-quarter (December 2006 – February 2007) sales in the electronics testing equipment business were 203 million yen.
On the other hand, after overhauling its product line-up and actively pursuing orders, the Group has received orders for several major development projects in the security systems business. The development work and sales related to these projects are on target. As a result, the Company expects to record a profit in the second half, but it does not expect to be able to post a profit for the full fiscal year. Therefore, it has become necessary to revise the tax-effect accounting at BIJ Corporation and the Company posted an interim net loss resulting from the deferred income tax of 52 million yen.
The Company reported sales of 1,327 million yen, ordinary loss of 76 million yen and net loss of 119 million yen. Compared with the previous nine-month period, these were increase of 239 million yen and 61 million yen, but decrease of 37 million yen, respectively. Sales by product category were as follows.
In the electronics testing equipment business, illuminator sales were 849 million yen (139.7% of the same period in the previous fiscal year), which was 64.0% of total sales, as the Company sold 69 units for the current nine-month period.
IP module sales were 88 million yen (98.7%), which was 6.7% of total sales, as the Company sold 17 units.
Sales of supplied parts, units and maintenance services were 316 million yen (92.2%), which was 23.8% of total sales.
In security systems business, sales was 72 million yen (157.0%), which was 5.5% of total sales.
(2) Consolidated Financial Position
(All amounts are rounded down to the nearest million yen)
Total
assets
Net
assets
Equity ratio
Net assets per share

Million yen
Million yen
%
Yen
As of February 28, 2007
4,486
2,163
48.2
35,562.09
As of February 28, 2006
4,596
2,404
52.3
38,271.42
(Reference) As of May 31, 2006
4,916
2,579
52.5
41,066.15
(3) Consolidated Cash Flow Position
(All amounts are rounded down to the nearest million yen)

Cash flow from
operating activities
Cash flow from
investing activities
Cash flow from
financing activities
Cash and cash
equivalents at end
of period

Million yen
Million yen
Million yen
Million yen
Nine months ended Feb. 2007
215
(51)
(1)
2,314
Nine months ended Feb. 2006
337
(336)
138
2,511
(Reference) Year ended May 2006
154
(404)
23
2,141

3
[Qualitative information regarding consolidated financial position]
Cash and cash equivalents at the end of the nine-month period totaled 2,314 million yen, an increase of 172 million yen over the end of the previous fiscal year.
Operating activities
Net cash provided by operating activities was 215 million yen (63.7% of the same period in the previous fiscal year). The primary sources of cash were a decrease in trade receivables of 638 million yen reflecting progress in the collection of trade receivables. Income tax payments of 204 million yen and payments for trade payables of 121 million yen represented the principal use of cash in operating activities.
Investing activities
Net cash used in investing activities was 51 million yen (15.2%). The primary use of cash was the payment for acquisition of investment securities.
Financing activities
Net cash used in financing activities was 1 million yen (compared with net cash provided of 138 million yen one year earlier). The principal use of cash were proceeds of 588 million yen from corporate bond issue, repayment of 307 million yen for long-term borrowings and payment of 271 million yen for acquisition of treasury stock.
3. Consolidated Forecasts for the Fiscal Year Ending May 31, 2007 (June 1, 2006 – May 31, 2007)

Sales
Ordinary income
Net income

Million yen
Million yen
Million yen
Full year
1,954
45
(30)
Reference: Estimated net income per share for the full year: (493.09) yen

Note: Forecasts regarding future performance in these materials are based on estimates and judgments of the Company’s management
made in accordance with information available at the time this report was prepared. Forecasts therefore embody risks and uncertainties. Actual results may differ significantly from these forecasts for a number of factors.

[Qualitative information regarding consolidated forecast]
Although the operating environment of the electronics testing equipment business remains severe as semiconductor manufacturers slash capital expenditure, the recent steady decline in orders has been reversed and orders are gradually recovering from the beginning of 2007. The Company is committed to working harder to reduce manufacturing costs by introducing more efficient manufacturing infrastructure at its Kumamoto site and shorting lead times while at the same time stepping up marketing to win more orders for illuminators. However, the forecast of sales resulting from the above marketing initiatives could be affected by delivery schedules specified by clients and the actual delivery timing of testers.
On the other hand, aggressive marketing is bringing in more orders in the security systems business and this business is now in a position to start contributing to sales.
Due to the above items, the Company expects sales of 1,954 million yen, ordinary income of 45 million yen and a net loss of 30 million yen, as stated in the “Notice of Revisions to Operating Forecasts” issued on December 26, 2006.
Along with focusing its efforts on marketing, the Company will work even harder to cut the cost of sales and other operating expenses.
Regarding dividends, management believes that raising corporate value and paying adequate dividends are important methods of sharing profit with our shareholders. INTER ACTION’s basic policy is to pay stable dividends while at the same time building up adequate reserves to strengthen the company’s financial position. In accordance with this policy, we plan to declare a dividend of 600 yen per common share applicable to the fiscal year ending May 31, 2007.

4
4. Consolidated Financial Statements
(1) Consolidated Balance Sheets
Yen in thousands

FY5/06 1st – 3rd Qtr.
As of Feb. 28, 2006
FY5/07 1st – 3rd Qtr.
As of Feb. 28, 2007
FY5/06
As of May 31, 2006
Period
Account
Amount % Amount % Amount %

Assets
I Current assets
1. Cash and deposits in banks

2,566,379 2,367,713

2,196,854
2. Trade notes and accounts receivable

393,460 377,215

1,015,140
3. Securities

19,966 19,996

19,967
4. Inventories

558,127 632,961

564,971
5. Other current assets

98,423 135,809

127,697
6. Allowance for doubtful accounts

(502)
(219)
(242)
Total
current
assets

3,635,855 79.1 3,533,476 78.8
3,924,389 79.8
II Fixed assets
1. Tangible fixed assets
(1) Buildings and structures
* 1 , 2
409,384 393,135

404,494
(2) Other tangible fixed assets
* 1 , 2
326,341 308,698

332,608

Total tangible fixed assets

735,725 701,833

737,103
2. Intangible assets

16,719 24,649

22,081
3. Investments and other assets

208,148 226,751

232,578

Total fixed assets

960,593 20.9
953,235 21.2
991,763 20.2
Total
assets
4,596,449 100.0 4,486,711 100.0
4,916,152 100.0

5
Yen in thousands
FY5/06 1st – 3rd Qtr.
As of Feb. 28, 2006
FY5/07 1st – 3rd Qtr.
As of Feb. 28, 2007
FY5/06
As of May 31, 2006
Period
Account
Amount % Amount % Amount %

Liabilities
I Current liabilities
1. Trade accounts payable

92,883 49,138

170,669
2. Short-term borrowings
* 2
380,012 370,012

380,012
3. Current portion of corporate bonds

-
400,000 522,000
4. Reserve for bonuses

13,258 17,003

-
5. Reserve for product warranty

7,287 14,234

7,567
6. Other current liabilities

314,331 67,607

293,791
Total
current
liabilities
807,773 17.6
917,996 20.5
1,374,039 27.9
II Long-term liabilities
1. Corporate bonds

340,000 540,000

-
2. Long-term borrowings
* 2
1,039,975 859,963

957,472
3. Reserve for retirement benefits

4,490 5,119

4,701

Total long-term liabilities

1,384,465 30.1 1,405,082 31.3
962,173 19.6
Total
liabilities
2,192,238 47.7 2,323,078 51.8
2,336,212 47.5

Shareholders’ equity
I Common stock

1,101,259 24.0
-
-
-
-
II Capital surplus

1,032,259 22.5
-
-
-
-
III Retained earnings

433,819 9.4
-
-
-
-
IV Unrealized holding gain (loss) on other
securities

683 0.0
-
-
-
-
V Treasury stock

(163,811)
(3.6)
-
- -
-
Total
shareholders’
equity
2,404,210 52.3
-
-
-
-
Total liabilities and shareholders’ equity

4,596,449 100.0
-
-
-
-

Net assets
I Shareholders’ equity
1. Common stock

-
-
1,102,711 24.6
1,101,360 22.4
2. Capital surplus

-
-
1,033,711 23.0
1,032,360 21.0
3. Retained earnings

-
-
461,272 10.3
612,472 12.4
4. Treasury stock

-
-
(435,250)
(9.7) (163,811)
(3.3)
Total
shareholders’
equity
-
-
2,162,446 48.2
2,582,381 52.5
II Valuation and translation adjustments

1. Unrealized holding gain (loss) on other
securities

-
-
1,186 0.0
(2,441)
(0.0)
Total valuation and translation
adjustments

-
-
1,186 0.0
(2,441)
(0.0)
Total net assets

-
-
2,163,632 48.2
2,579,940 52.5
Total liabilities and net assets

-
-
4,486,711 100.0
4,916,152 100.0