Note: This document is a translation from the original in the Japanese language and is for reference purposes only. In the event of any discrepancy
between this translated document and the Japanese original, the original shall prevail. The Company assumes no liability for the following:This translation or for direct, indirect or any other forms of damages arising from the translation

Quarterly Consolidated Financial Results for the First Quarter of Fiscal YearEnding March 31, 2025 (Japanese Accounting Standards)

July 31, 2024

Name of listed company: Digital Arts Inc.
Securities code:

2326

Representative:(Title)Contact:(Title)Tokyo Stock Exchange
Prime Market

Listed on:

Representative Director,
President and CEO
General Manager
Investor Relations Office

URL https://www.daj.jp/(Name) Toshio Dogu
(Name)

Scheduled date to start
dividends distribution:
Preparation of supplementary explanatory ： Yes
documents for quarterly results:
Holding of quarterly results briefing:： No

Fumihiko
Tanizaki(TEL) +81-3-5220-1670(Figures shown are rounded down to the nearest million yen.)

1.Consolidated financial results for the first quarter of the fiscal year ending March 31, 2025 (April 1, 2024
–June 30, 2024)(Percentage figures represent changes from same period ofprevious year.)(1) Consolidated operating results (cumulative totals)
Net sales
Three months ended

June 30, 2024
June 30, 2023
(Note) Comprehensive income:Operating profit

Million yen%

Ordinary profit

Million yen%

Million yen

2,234(12.1)
838
(3.9)
2,541
6.5
872
(13.5)
Three months ended June 30, 2024:
Three months ended June 30, 2023:

Profit per share(basic)Three months ended

Million yen

584
614(-4.9%)(-12.7%)%(5.0)(12.4)

Profit per share(diluted)
Yen

June 30, 2024
June 30, 2023

%

847
(4.3)
885
(13.2)
587 million yen
617 million yen

Profit attributable toowners of parent

Yen

42.50
43.87

41.96
43.08

(2) Consolidated financial position
Total assets
As of June 30, 2024
As of March 31, 2024
(Reference) Equity capital:

Net assets

Million yen
21,471
22,518
As of June 30, 2024:
As of March 31, 2024:

Equity ratio

Million yen
15,967
15,99815,955 million yen
15,986 million yen

Net assets per share
Yen

％

74.3
71.0

1,161.63
1,162.40

Year-end

Annual

2. Dividends
Annual dividends
1Q-end2Q-endYen

3Q-endYen

Year ended March 31, 2024
40.00－
Year ending March 31, 2025－
Year ending March 31, 2025 (forecast)
40.00(Note) Revisions to most recently announced dividend forecast ： No

Yen

Yen

Yen

－

40.00

80.00

－

45.00

85.00

3. Forecast of consolidated financial results for the year ending March 31, 2025 (April 1, 2024 – March
31, 2025)

Net sales
Million yen%(Percentage figures represent changes from same period of previous year.)
Profit attributable toOperating profit
Ordinary profit
Profit per shareowners of parent
Million yen%

Million yen%

Full year
10,720 (6.9)
5,140 16.1
5,140
(Note) Revisions to most recently announced results forecasts: No

Million yen

15.7

%

3,540 (19.1)

Yen

257.39* Notes(1) Changes in important scope of consolidation during the three months
ended June 30, 2024
New-

(Company name)： None-Excluding(Company name)(2) Application of special accounting methods to the preparation of quarterly： Yes
consolidated financial statements(Note) For details, please refer to “2. Quarterly Consolidated Financial Statements and Primary Notes (3) Notes toquarterly consolidated financial statements (Application of special accounting methods to the preparation of quarterly
consolidated financial statements)" on page 9 of the attached materials.

(3) Changes in accounting policies, changes of accounting estimates and restatement
1) Changes in accounting policies due to revisions of accounting
standards, etc.:
2) Changes in accounting policies due to reasons other than thosestated in 1):
3) Changes in accounting estimates:
4) Restatement:

None
None
None
None

(4) Number of shares outstanding (common stock)1) Number of shares issued and outstanding(including treasury shares)
2) Number of treasury shares
3) Average number of shares issued andoutstanding in each period (cumulative total)

As of June 30,2025
As of June 30,2025
As of June 30,
2025

14,133,000 Shares

397,130Shares

13,751,364 Shares

As of March 31,2024
As of March 31,2024
As of June 30,
2024

14,133,000Shares379,630Shares

14,018,845Shares* Review of attached quarterly consolidated financial statements by：None
certified public accountant or audit corporation* Explanation concerning the appropriate use of financial result forecasts and other special notes(Forward looking statements)
Business forecasts and other forward-looking statements in this material contain predictions based on futureassumptions, outlooks and plans as of the date of publication of this material. The Company does not warrant theaccomplishment of the forecasts. Actual results may different significantly from the forecasts due to risks and uncertain
factors associated with the world economy, the state of competition, and fluctuations in foreign exchange rates andinterest rates.
For matters concerning results forecasts, please refer to 1. Overview of Business Results, etc. (3) Explanation about
information on future forecasts such as consolidated results forecasts” on page 5 of the attached materials.
(How to obtain supplementary materials for quarterly results)
The material is available at Digital Arts Inc. corporate website.

○Table of Contents for the Attached Document
1. Overview of Business Results, etc. .......................................................................................2(1) Overview of business results for the first three months of the consolidated fiscal year
under review ........................................................................................................................2(2) Overview of financial position for the first three months of the consolidated fiscal year
under review ........................................................................................................................5(3) Explanation about information on future forecasts such as consolidated results forecasts ..5
2. Quarterly Consolidated Financial Statements and Primary Notes .......................................6(1) Quarterly consolidated balance sheet ..................................................................................6(2) Quarterly consolidated statement of income and comprehensive income ...........................7
Quarterly consolidated statement of income
Consolidated first quarter ..........................................................................................7
Quarterly consolidated statement of comprehensive income
Consolidated first quarter ..........................................................................................8(3) Notes to quarterly consolidated financial statements(Application of special accounting methods to the preparation of quarterly consolidated
financial statements) ..........................................................................................................9(Notes on segment information, etc.) .................................................................................9(Notes on significant changes in the amount of shareholders' equity)................................9(Notes on the premise of a going concern) ........................................................................9(Notes on statement of cash flows) ....................................................................................91

1. Overview of Business Results, etc.
(1) Overview of business results for the first three months of the consolidated fiscal year under review
During the first three months of the consolidated fiscal year under review (from April 1, 2024 to June 30, 2024), thesecurity industry where the Digital Arts Group ("the Group") operates saw demand increase among companies andorganizations using information and communication technology (ICT) equipment for business and educational purposes,
given that damage caused by ransomware attacks, supply chain attacks and other cyberattacks intensified and that
information leakage incidents attributable to unauthorized access occurred frequently. This trend is expected to expand
and persist, as it is widespread irrespective of the size or sector of companies and organizations.
At the end of the previous fiscal year, the Company transferred all of the shares it owned in Digital Arts Consulting
Inc. (DAC), a consolidated subsidiary engaged in the security consulting business. That produced an impact of adecrease in net sales for the first three months of the consolidated fiscal year under review of around 452 million yen.
Following this, the Group re-established its Medium-Term Management Plan (fiscal year ending March 31, 2025 throughfiscal year ending March 31, 2027) in a situation where it may begin focusing on product expansion as a general Japanmade security manufacturer this fiscal year. This plan defines three priority areas: growth of the security business,increased public sector market share and investment in personnel to execute new measures. Accordingly, the Groupstarted pursuing a number of different initiatives in the current fiscal year. In the enterprise sector market, the Group
continued to enhance the functions of its mainstay products, namely i-FILTER, m-FILTER and FinalCode, and added
new functions to StartIn and f-FILTER, which are new products. It also advertised the optional product Anti-Virus &Sandbox in a bid to boost net sales by meeting customers' comprehensive security needs and to increase its brandvalue as a general Japan-made security manufacturer. In the public sector market, the Group upgraded the functionsof i-FILTER for schools and advertised the superiority of its products to boards of education through sales partners andparticipation in outside events to display its products for the purpose of winning projects related to the second phase of
the GIGA School Concept and Next-Generation School Affairs DX projects. In so doing, the Group is engaged insystematic activities for steady net sales growth and for further market share expansion. Activities for personnel
investment as one of the priority areas include new outside training for new graduate employees, a base pay increasefor personnel in the development team, consideration of an incentive plan for the sales and marketing team and othermeasures for existing employees as well as bolstering of mid-career recruitment.
With regard to expenses, DAC's cost of sales and personnel expenses dropped due to the exclusion of DAC fromconsolidation. Meanwhile, the Group increased its investment in personnel as mentioned.
As a consequence, net sales for the first quarter of the consolidated fiscal year under review amounted to 2,234
million yen (down 12.1% year on year), operating profit was 838 million yen (down 3.9% year on year), ordinary profit
came to 847 million yen (down 4.3% year on year), and profit attributable to owners of parent was 584 million yen (down
5.0% year on year).
Excluding the effect of the DAC transfer, net sales were up 7.0% year on year. Operating profit declined because of
the personnel investment schedule, but it reached the level planned by the Group.

Overview of Consolidated Business Results
First quarter of year
ended March 31,
2024

First quarter of year
ending March 31,
2025

2,541

2,234

Operating profit

872

838

Ordinary profit

885

847

Profit attributable toowners of parent

614

584

Net sales

2(Million yen)
Change% Change(307)(12.1)

(38)

(4.3)

(33)

(30)

(3.9)

(5.0)

(Reference)
Overview of non-consolidated business results (net sales)(Million yen)

Net salesFirst quarter of year
ended March 31,
2024

First quarter of year
ending March 31,
2025

2,085

2,231

Change+145% Change+7.0*The transfer of all shares in Digital Arts Consulting Inc., a consolidated subsidiary, owned by the Company at the end of the previous
fiscal year has an impact of lowering net sales for the first three months of the consolidated fiscal year under review by around 452
million yen. (Excluding this effect, net sales were up 7.0% year on year.)

The following describes business performance in separate markets.
Enterprise Sector Market
In the enterprise sector market, the Group proposed i-FILTER and the optional product Anti-Virus & Sandbox in
response to needs for a shift to cloud security, for visualization of the state of use of SaaS after expansion of its use forbusiness, and for shifting from competitors' products. That resulted in a major growth in new projects gained. In addition,
its cloud edition, m-FILTER, excelled in acquiring new projects, as it earned high marks for its comprehensive functions
to meet various e-mail security needs, such as protecting against ransomware attacks and providing e-mail security
measures in the cloud environment. In addition, the new product f-FILTER collaborated with m-FILTER in providing
measures against what is called PPAP, a file transfer practice in which the file is converted into a password-protected zip
file before sending and the password is sent in a separate e-mail message. This helped accelerate the receipt of orders
and increase the number of projects. Meanwhile, the transfer of all shares in Digital Arts Consulting Inc., a consolidated
subsidiary, owned by the Company at the end of the previous fiscal year produced an impact of decreasing net sales byaround 452 million yen.
As a consequence, net sales in this market stood 1,074 million yen, down 24.2.% year on year.
Excluding the effect of the DAC transfer, net sales in the enterprise sector market were up 11.2% year on year.

3

Public Sector Market
In the public sector market, the Group gave comprehensive proposals of solutions that followed the Guidelines for
Educational Information Security Policies in Next-Generation School Affairs DX projects. This led to the acquisition of
new projects and improvement in pipeline. With regard to the projects related to the second phase of the GIGA School
Concept, separate boards of education are budgeting funds for the next fiscal year in which the projects will gather
further momentum. In view of that, the Group strengthened i-FILTER's functions for schools and its superiority inpreparation for winning new projects. In association with the Security Improvements for Local Governments projects,
the Group proposed solutions in line with the Guidelines for Information Security Policies in Local Governments andconsequently received new projects.
As a consequence, net sales in this market reached at 1,066 million yen, up 4.9% year on year.

* The transfer of all shares in Digital Arts Consulting Inc., a consolidated subsidiary, owned by the Company at the end of the previous fiscal
year produced an impact of lowering net sales in the enterprise sector market for the first three months of the consolidated fiscal year
under review by around 452 million yen. (Excluding this effect, net sales in the enterprise sector market were up 11.2% year on year.)

Consumer Sector Market
In the consumer sector market, the Group made efforts to sell i-FILTER for Multiple Devices, which can be used on
multiple operating systems with a single serial ID, and to acquire commissioned development projects related to this.
However, revenue from mobile network carriers, MVNOs, etc. decreased.
As a consequence, net sales in this market amounted to 93 million yen, down 12.0% year on year.

4(2) Overview of financial position for the first three months of the consolidated fiscal year under review(Assets)
Total assets at the end of the first quarter of the consolidated fiscal year under review decreased 1,046 million yen
from the end of the previous fiscal year to 21,471 million yen. This was due mainly to a decreased of 1,290 million yen
in cash and deposits.
(Liabilities)
Total liabilities at the end of the first quarter of the consolidated fiscal year under review decreased 1,015 million yen
from the end of the previous consolidated fiscal year to 5,504 million yen. This was due mainly to a decrease of 1,071
million yen in income taxes payable.
(Net assets)
Net assets at the end of the first quarter of the consolidated fiscal year under review decreased 30 million yen fromthe end of the previous fiscal year to 15,967 million yen. This was mainly due to the payment of cash dividends and thepurchase of treasury stock, which exceeded the increase in retained earnings resulting from the recording of net income
attributable to owners of the parent.

(3) Explanation about information on future forecasts such as consolidated results forecasts
Operating results for the first quarter of the consolidated fiscal year under review remained steady overall, and there
was therefore no change in the forecast of consolidated financial results for the year ending March 31, 2025 announced
on May 8, 2024.
The Company has determined the results forecasts based on information available on the day of these financial
results for the first quarter of the year ending March 31, 2025. Actual results may be different from the forecasts due toa variety of factors. If there are any significant changes, the Company will disclose them appropriately.

5

2. Quarterly Consolidated Financial Statements and Primary Notes(1) Quarterly consolidated balance sheet(Million yen)
Fiscal 2024
(As of March 31, 2024)

First quarter of fiscal 2025
(As of June 30, 2024)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - tradeFinished goods
Supplies
Other

18,3391,535

17,049
1,381

0
2

1
2

305

673

20,183

19,108

211

206

Software
Other

1,367
234

1,432
200

Total intangible assets

1,602

1,633

Investments and other assets

521

523

Total current assets
Non-current assets
Property, plant and equipment
Intangible assets

Total non-current assets

2,334

2,363

22,51822,471

Accounts payable - trade
Income taxes payable

54
1,354

23
283

Provision for bonuses
Advances received

137
4,418

75
4,395

Total assets
Liabilities
Current liabilities

Other

501

673

Total current liabilities

6,467

5,451

Non-current liabilities
Asset retirement obligations

49

49

Other

3

3

Total non-current liabilities

52

52

6,519

5,504

713
956

713
956

Total liabilities
Net assets
Shareholders' equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders' equity
Accumulated other comprehensive income
Foreign currency translation adjustment
Total accumulated other comprehensive
incomeShare acquisition rights
Total net assets
Total liabilities and net assets

6

16,02916,063(1,730)15,968(1,798)

18

20

18

20

15,93411

11

15,99815,96722,51821,471

(2) Quarterly consolidated statement of income and comprehensive income
Quarterly consolidated statement of income
Consolidated first quarter

Cost of sales

First quarter of fiscal 2024
(from April 1, 2023
to June 30, 2023)
2,541
1,019

(Million yen)First quarter of fiscal 2025
(from April 1, 2024
to June 30, 2024)
2,234
726

Gross profit

1,521

1,508

648

669

872

838

0
0

0
0

9
2

5
1

12

8

0

0

Net sales

Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Gain on forfeiture of unclaimed dividends
Foreign exchange gains
Miscellaneous income
Total non-operating income
Non-operating expenses
Miscellaneous loss
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on reversal of share acquisition rights

0

0

885

847

0

0

Gain on sales of non-current assets

4-

Total extraordinary income

5

0

0

0

0

0

890

847

275

262

614

584

(0)

-

614

584

Extraordinary losses
Loss on retirement of non-current assets
Total extraordinary losses
Profit before income taxes
Income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

7

Quarterly consolidated statement of comprehensive income
Consolidated first quarter

ProfitFirst quarter of fiscal 2024
(from April 1, 2023
to June 30, 2023)
614(Million yen)First quarter of fiscal 2025
(from April 1, 2024
to June 30, 2024)
584

2

2

Other comprehensive income
Foreign currency translation adjustment22Comprehensive income

Total other comprehensive income

617

587

Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable to noncontrolling interests

617

587

(0)

-

8

(3) Notes to quarterly consolidated financial statements(Application of special accounting methods to the preparation of quarterly consolidated financial statements)
Calculation of tax expenses
With respect to the calculation of tax expenses, reasonable estimations are performed on an effective tax rateestablished after applying tax accounting to profit before income taxes for the consolidated fiscal year, which includes
the first quarter of the consolidated fiscal year under review, and such tax expenses are calculated by multiplying
this estimated effective tax rate by profit before income taxes.
(Notes on segment information, etc.)
Segment information
First three months of fiscal 2024 (from April 1, 2023 to June 30, 2023) and first three months of fiscal 2025 (from
April 1, 2024 to June 30, 2024)
The Group has only one segment, which is the security business, and segment information is omitted.
(Notes on significant changes in the amount of shareholders’ equity)
There are no applicable matters.
(Notes on the premise of a going concern)
There are no applicable matters.
(Notes on statement of cash flows)
The Company did not prepare quarterly consolidated statements of cash flows for the first three months under review.
Depreciation (including amortization of intangible assets) for the first three months under review is as follows.
First quarter of fiscal 2024
(from April 1, 2023
to June 30, 2023)
Depreciation

210 million yen

9First quarter of fiscal 2025
(from April 1, 2024
to June 30, 2024)
225 million yen