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January 19, 2007

Consolidated Financial Summaries for the First Half
of the Fiscal Year Ending May 31, 2007

(June 1, 2006 – November 30, 2006)
Company name:
INTER ACTION Corporation
Stock exchange listing: TSE Mothers Market
Stock code:
7725
Company domicile: Kanagawa Prefecture
URL: http://www.inter-action.co.jp/ Representative: Masao
Kimura, President, CEO & COO
Contact:
Tsuyoshi Fukuda, Executive Vice President & CFO
Tel: +81-45-788-8373 Date of Board of Directors meeting for approving financial results: January 19, 2007 Accounting principle: Japanese GAAP
1. Financial Results for the First Half Ended November 30, 2006 (June 1, 2006 – November 30, 2006)
(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 %
First half ended November 2006
1,054
24.5
47
-
46
-
First half ended November 2005
846
-
(63)
-
(56)
-
Fiscal 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
First half ended November 2006
(47)
-
(752)
-
First half ended November 2005
(30)
-
(490)
-
Fiscal year ended May 2006
96

1,535.65
1,534.55
Notes: 1. Earnings (losses) of affiliated companies under equity method
First half ended November 2006:
- million yen
First half ended November 2005:
- million yen
Fiscal year ended May 2006:
- million yen
2. Average number of shares outstanding (consolidated)
First half ended November 2006:
62,630 shares
First half ended November 2005:
62,820 shares
Fiscal year ended May 2006:
62,820 shares
3. Change in accounting principles applied:
None
4. The percentages shown for sales, operating income, ordinary income, and net income represent changes from
the same period of the previous fiscal year.
5. Year-on-year comparisons are not available for the first half ended November 2005 since the Company
started preparing consolidated financial statements effective from the previous fiscal year ended May 2006.

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(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 November 30, 2006
4,205
2,340
55.6
37,839.08
As of November 30, 2005
4,544
2,456
54.1
39,106.28
As of May 31, 2006
4,916
2,579
52.5
41,066.15
Note: 1. Number of shares outstanding at the end of the period (consolidated):
As of November 30, 2006:
61,841 shares
As of November 30, 2005:
62,820 shares
As of May 31, 2006:
62,824 shares
(3) Consolidated Cash Flow Position
(All amounts are rounded down to the nearest million yen)


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

Million yen
Million yen
Million yen
Million yen
First half ended November 2006
153
(37)
(442)
1,821
First half ended November 2005
386
(158)
19
2,621
Fiscal year ended May 2006
154
(404)
23
2,141
(4) The Scope of Consolidation and Application of the Equity Method
Consolidated subsidiaries:
1
Non-consolidated subsidiaries under equity method application:
-
Affiliates under equity method application
-

(5) Changes in the Scope of Consolidation and Application of the Equity Method
Consolidated subsidiaries (Newly added):
-
(Excluded):
-

Affiliates under equity method application (Newly added):
-
(Excluded):
-

2. 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: (485.12) yen

Please refer to page 7 of the attached document for precondition and assumption as the basis of the above forecasts. 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.

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1. Corporate Group
The INTER ACTION group (the Group) is made up of INTER ACTION Corporation (the Company) and one subsidiary BIJ Corporation (BIJ) and develop, manufacture and sale of electronics testing equipment and security systems.
Business activities and the positioning of each company are as follows. Electronics testing equipment business Activities include development, manufacture and sale of illuminators, IP modules and other optical testing equipment for use on the production lines of semiconductor imagers (CCD/C-MOS imagers), camera modules and display devices. Security systems business The Company established a subsidiary BIJ on June 2005 for the purpose of development and sale of security systems. Activities include the development, manufacture and sale of security system and environmental monitoring products that use sheet beam sensors, a type of infrared sensor, heterocore optical fiber sensors, which use patented technology, and other technologies.
A flowchart of business operations is as follows.
A summary of group company is as follows.
Consolidated subsidiary
Name Address
Capital
(million yen)
Major activities
Voting rights held
or Company
stock held (%)
Relationship
BIJ Corporation
Yokohama-city, Kanagawa
70
Security systems business
100
Joint director: 1 Financial support
Note: Major activities use the same names as for the respective business segments.
Customers
Sales
agency
Domestic
Overseas
Electronics testing equipment business
Security systems business
Consolidated subsidiary
BIJ Corporation
Sales
agency
The Company
INTER ACTION Corporation
Goods flow

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2. Management Policies
(1) Fundamental Management Policy
The Group bases all its operations on the management philosophy of “Client Always Comes First.” The Group’s objective is to contribute to society by using its core optical, image processing and mechanical technologies to supply products and services that meet the needs of clients. The Group defines “client” as not only companies that purchase its products and services, but also as shareholders, employees, residents of communities where the Group has facilities and all other stakeholders. The Group exists for the purpose of contributing to the well-being of all stakeholders through its business activities.
The Group’s motto is “Excelsior, Laboramus” (ever upward, let’s keep working), with the goal of maintaining a workforce made up primarily of young engineers and a spirit of “fair, open, challenging” aiming to gain expertise in even more advanced technology to meet the expectations of its clients. As a small venture capital-backed company with small organization, INTER ACTION Group is determined to remain a company that retains the spirit of its entrepreneurial origin. To accomplish this, the Company believes that it must continuously conduct R&D activities based on the spirit of constantly thinking creatively. (2) Fundamental Policy Regarding Allocation of Earnings
INTER ACTION believes that a stable dividend and growth in its enterprise value are important means of returning earnings to shareholders. The Company’s policy is to retain sufficient earnings to strengthen its operating base and continue to pay a stable dividend, while taking into consideration the current operating environment and long-term outlook. (3) Position and Policy Regarding Reduction in Investment Unit
The Company believes that a reduction in the investment unit to allow the purchase of relatively small amounts of stock is an effective means of raising liquidity, attracting more shareholders and increasing trading activity on the stock market. The policy is to review the stock trading unit in an appropriate manner. (4) Targeted Performance Indicators
From the standpoint of increasing shareholder value, INTER ACTION places priority on improving the ROE and other related indicators for the purpose of continued increasing its enterprise value. Maximizing earnings from the capital entrusted to the Company by shareholders is viewed as the purpose for the Company’s existence. Resources are both channeled to fulfilling this goal. Management also places importance on cash flows. Cash flows will be invested in R&D and capital expenditures in promising business fields to further increase future cash flows. The objective is raising the Company’s enterprise value over the long term. (5) Medium- and Long-term Management Strategies
For illuminators, IP modules and other optical testing systems, the Group will continue to work on developing technologies and lowering manufacturing cost while positioning this business as its primary business. In addition, the Group will continue to make substantial investments in order to use optical, image processing and mechanical technologies, all of which are its key strengths, not only to create new semiconductor testing systems, but to develop new products for the security and environmental monitoring markets.
Regarding production activities, the Group is positioning the Kumamoto Plant (Kumamoto FAB), which has been operating in full-scale since the beginning of 2006, as its primary manufacturing base. The aim is to improve the gross profit margin and raise productivity for the entire Group.
Furthermore, by reinforcing its sales organization and support functions in order to expand its business in display device testers (including camera module testing systems and illuminator for rear-projection LCD panels) as well as security systems and environmental monitoring products, the Group aims to develop these into core businesses alongside its illuminators and IP modules.

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(6) Key Issues
The Group is dedicated to sustaining growth by meeting the various demands of customers through the use of creative ideas and innovative technologies. To achieve this growth, the Group is focusing on the following issues with the aim of strengthening its operating framework. 1) Recruiting skilled individuals As a fast growing, development-oriented organization, the Group needs engineers and other young and talented individuals. The Group will continue to work hard at hiring new college graduates and mid-career professionals. In addition, many measures are taken to improve the skills of the current workforce. Through these activities, the Group aims to give its young and talented workers the skills they need to contribute to the Group’s growth. The Group employed six new graduates in April 2006, nine mid-career individuals since the beginning of the current fiscal year, mainly in order to reinforce the development, manufacturing, and sales division. 2) Rapidly responding to customers’ needs The Group is active in business fields characterized by changes that are both rapid and enormous in scale. That means it is essential to identify as quickly as possible future trends in customers’ needs associated with changes in the operating environment. It is also vital to use this insight to develop new products. The Group is working on enhancing its marketing activities and assembling a more efficient product and technology development framework.
In the electronics testing equipment business, the Company has developed a new type of illuminator to help semiconductor manufacturers sharply increase productivity. New functions have also been added to the camera module testing system that the Company began marketing last fiscal year. Going forward, the Company will strive to develop new products that meet customer’s needs.
Regarding sales structure, the Company has established a new location in Kyoto to provide prompt support to customers in the Kansai area. The Company is working in close cooperation with overseas agents in three countries to grasp customer needs. 3) Raise the gross profit margin and boosting productivity As a manufacturer, the Group is constantly seeking ways to improve its gross profit margin and raise productivity while maintaining the same high level of quality. To achieve these goals, the Group will work even harder at improving productivity and manufacturing infrastructure, with activities focused at the Kumamoto FAB in full-scale operation.
4) Strengthen the base of operations On May 29, 2006, the Company established a fundamental policy concerning internal controls. To reinforce its base of operations, the Company is constantly reviewing its organization and operating methods for the purposes of enhancing corporate governance and ensuring the effective functioning of risk management systems, compliance programs and other elements of its internal control system. With respect to employee training, the Company is working to reinforce its business foundation by actively conducting compliance, hierarchical, and other training for all of its officers and employees. (7) Parent Company, etc.
No reportable information.
(8) Other Important Management Matters
No reportable information.