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

Consolidated Financial Results for the Fiscal Year Ended March 31, 2024
(Japanese Accounting Standards)
Name of listed company: Digital Arts Inc.
Securities code:

2326

Representative:(Title)Contact:(Title)May 8, 2024
Tokyo Stock
Exchange Prim
MarketListed on:
URL https://www.daj.jp

Representative Director,
President and CEO
General Manager
Investor Relations Office

Scheduled date to hold theordinary general meeting of June 24, 2024
shareholders:
Scheduled date for filing
June 25, 2024
annual financial report:
Preparation of supplementary explanatory：Yes
documents for quarterly results
Holding of quarterly results briefing：Yes(Name) Toshio Dogu
(Name) Fumihiko Tanizaki TEL: +81-3-5220-1670
Scheduled date to start
dividends distribution:

June 25, 2024

(for institutional investors and financial analysts)(Figures shown are rounded down to the nearest million yen.)

1. Consolidated financial results for the year ended March 31, 2024 (April 1, 2023 – March 31, 2024)(1) Consolidated operating results(Percentage figures represent changes from previous year.)Net sales

Operating profit

Million yen%

Million yen

Ordinary profit%

Million yen%

Profit attributable toowners of parent

Year ended March
11,512
10.3
4,427
0.3
4,443
0.3
31, 2024
Year ended March
10,436
15.3
4,413
7.0
4,429
7.1
31, 2023(Note) Comprehensive income:Year ended March 31, 2024:¥ 4,387 million (43.0%)
Year ended March 31, 2023:¥ 3,067 million (5.4%)
Profit per share(basic)Profit per share(diluted)

Yen

Return on equity

Yen

Million yen

%

4,377

43.0

3,062

5.6

Ordinary profit to Operating profit tototal assets
net sales％Year ended March
315.46310.3029.1
31, 2024
Year ended March
218.12213.9223.3
31, 2023
Equity-method
Year ended March 31, 2024: ¥ - million(Reference)
investment profit (loss): Year ended March 31, 2023: ¥ - million

％

％

20.4

38.5

21.9

42.3

(2) Consolidated financial position
Total assets
As of March 31,2024
As of March 31,2023
Equity capital:(Reference)

Net assets

Equity ratio

Net assets per share

Million yen

Million yen％

Yen

22,51815,99871.0

1,162.40

21,14914,17366.9

1,007.27

Year ended March 31, 2024:
Year ended March 31, 2023:¥ 15,986 million¥ 14,141 million

(3) Consolidated cash flows

Million yen

Million yen

Million yen

Cash and cash
equivalents at end of
periodMillion yen

2,830

1,012

(2,545)

18,339

3,147

(867)

(1,051)

17,018Cash flows fromoperating activities
Year ended March
31, 2024
Year ended March
31, 2023

Cash flows frominvesting activities

Cash flows fromfinancing activities

2. Dividends
Annual dividends
1Q-endYear ended
March 31, 2023
Year ended
March 31, 2024
Year ending March 31,
2025 (forecast)

2Q-end3Q-endYear-end

Yen

Yen

Yen

Yen

－

35.00

－

40.00

－

40.00

－

－

40.00

－

AnnualYen

Total
Dividends to
Payout ratio
dividends
net assets(consolidated)
paid (annual)(consolidated)
million yen

%

%

75.00

1,052

34.4

8.0

40.00

80.00

1,105

25.4

7.4

45.00

85.00

33.0

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

Net sales
Full year

Million yen

10,720(Percentage figures represent changes from same period of previous year.)
Profit attributable
Operating profit
Ordinary profit
Profit per shareto owners of parent% Million yen% Million yen% Million yen
%
Yen
(6.9)
5,140
16.1
5,140
15.7
3,540 (19.1)
257.39* Notes(1) Changes in subsidiaries during the fiscal year (Changes in specified subsidiaries： Yes
resulting in changes in scope of consolidation)
New: - (Company name)
Excluding:1(Company name) Digital Arts Consulting Inc.
(2) Changes in accounting policies, changes of accounting estimates and restatement
1) Changes in accounting policies due to revisions of accounting standards, etc.

:

None

2) Changes in accounting policies due to reasons other than those stated in 1)

:

None

3) Changes in accounting estimates

:

None

4) Restatement

:

None

(3) Number of shares outstanding (common stock)
As of March
1) Number of shares issued and outstanding
31, 2024(including treasury shares)

14,133,000 shares

As of March
31, 2023

14,133,000 shares

2) Number of treasury shares

As of March
31, 2024

379,630 shares

As of March
31, 2023

93,833 shares

3) Average number of shares issued andoutstanding in each period

As of March
31, 2024

13,877,851 shares

As of March
31, 2023

14,039,205 shares

(Reference) Overview of the non-consolidated business results

1. Non-consolidated financial results for the year ended March 31, 2024 (April 1, 2023 – March 31, 2024)(Percentage figures represent changes from previous year.)(1) Non-consolidated operating results
Net salesYear ended March
31, 2024
Year ended March
31, 2023

Operating profit

Ordinary profit

ProfitMillion yen%

Million yen%

Million yen%

Million yen

%

9,304

3.6

4,330

(1.5)

4,348

(1.3)

4,536

48.8

8,984

12.3

4,395

8.8

4,407

8.8

3,048

7.6

Profit per share
Year ended March
31, 2024
Year ended March
31, 2023

Diluted profit per share
Yen

Yen

326.90321.55217.15212.97(2) Non-consolidated financial position
Total assets

Net assets

Million yen

Equity ratio

Million yen

As of March 31,
22,59516,0912024
As of March 31,
20,78014,091
2023(Reference) Equity capital: Year ended March 31, 2024: ¥ 16,080 million
Year ended March 31, 2023: ¥ 14,080 million

Net assets per share
%

Yen

71.2

1,169.18

67.8

1,002.92

2. Forecast of non-consolidated financial results for the year ending March 31, 2025 (April 1, 2024 - March 31,
2025)(Percentage figures represent changes from previous year for full year figures.)
Net sales
Full year※※

Million yen

10,710Ordinary profit%

15.1

Million yen

5,150Profit%18.4

Million yen

3,550

Profit per share%(21.7)

Million yen

258.12

Summaries of financial results are not subject to audit.
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 differ 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 relevant to business forecasts, refer to (4) Outlook in 1. Overview of Business Results, etc. on page 5of the Attached Document.
(Obtaining the Supplementary Material for the Financial 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 in the fiscal year under review ......................................................................................... 2(2) Overview of financial position for the fiscal year under review ....................................................................................... 4(3) Overview of cash flows in the fiscal year under review .................................................................................................. 5(4) Outlook ...........................................................................................................................................................................5
2. Basic Approach to Selection of Accounting Standards........................................................................................................ 7
3. Consolidated Financial Statements and Primary Notes ...................................................................................................... 8(1) Consolidated balance sheet ........................................................................................................................................... 8(2) Consolidated statement of income and consolidated statement of comprehensive income ........................................ 10
Consolidated statement of income ................................................................................................................................. 10
Consolidated statement of comprehensive income ....................................................................................................... 11(3) Consolidated statement of changes in equity ............................................................................................................... 12(4) Consolidated statement of cash flows .......................................................................................................................... 13(5) Notes to consolidated financial statements .................................................................................................................. 14(Notes on the premise of a going concern) .................................................................................................................... 14(Significant matters that serve as the basis for the preparation of consolidated financial statements) ......................... 14(Consolidated statement of income)............................................................................................................................... 15(Consolidated statement of comprehensive income) ..................................................................................................... 16(Consolidated statement of changes in equity) .............................................................................................................. 16(Consolidated statement of cash flows) ......................................................................................................................... 18(Financial instruments) ................................................................................................................................................... 19(Securities) .....................................................................................................................................................................23(Retirement benefits) ...................................................................................................................................................... 24(Stock options) ...............................................................................................................................................................24(Asset retirement obligations)......................................................................................................................................... 29(Matters concerning revenue recognition) ...................................................................................................................... 29(Segment information, etc.) ............................................................................................................................................ 30(Related party information) ............................................................................................................................................. 31(Per share information) ................................................................................................................................................... 32(Significant subsequent events) ..................................................................................................................................... 32

1

1. Overview of Business Results, Etc.
(1) Overview of business results in the fiscal year under review
During the consolidated fiscal year under review (April 1, 2023 through March 31, 2024), the Japanese economy
continued to recover modestly, partly due to effect of various government policies, with capital investment increasing
and employment and income environment improving. This offset the remaining weaknesses in consumer spending andsome exports. On the other hand, the future of the economy needs to be monitored, mainly due to the ongoing increaseof prices, the situation in the Middle East, and the changes in the financial and capital markets.
In the security industry, in which the Digital Arts Group (the “Group”) operates, demand for security products expanded,
mainly reflecting the intensification of damaging incidents caused by cyberattacks, such as ransomware attacks andsupply chain attacks, as well as the frequent occurrence of information leakage incidents caused by internal fraud or
negligence. Apart from demand from large-sized enterprises and public organizations, demand for the introduction of
security measures grew among small- and medium-sized enterprises, which were previously unprepared to invest insuch measures due to budgetary and human source constraints, reflecting their growing awareness of security risks.
In this situation, in response to growing demand for diverse security measures generated by companies andorganizations irrespective of their size, the Company focused on expanding sales of its original next-generation secure
web gateway (SWG) by continuously enhancing the functionality of i-FILTER, m-FILTER and FinalCode, which are its
mainstay products, incorporating the CASB functionality (function visualizing and controlling the use of cloud services)in i-FILTER＠Cloud in April 2023, and combining these products with Anti-Virus & Sandbox, an optional product that it
released in the previous fiscal year. In addition, the AI Chat Filter is provided as a standard feature of i-FILTER and iFILTER@Cloud from August 2023 onwards. This highly-received feature is aimed at allowing users to more securely
use generative AI, which is attracting attention for its autonomous creation of text and other content which was difficult
to do with conventional AI.
Furthermore, to address the demand for comprehensive security, the Company released the new version of mFILTER MailAdviser, a product that prevents e-mails from being sent to the wrong recipients by displaying a popup
message, in July 2023, StartIn, an IDaaS product that realizes safe and secure cloud service authentication and ID
management, in September 2023, and f-FILTER, a DLP and file transfer service that prevents the external leakage ofimportant information through the secure transfer of files, in November 2023.
Meanwhile, the cost of sales and selling, general and administrative expenses surpassed the previous year's level,
chiefly reflecting positive investment in an unprecedented number of newly added features and new product releases,
and rises in labor and personnel expenses, among other expenses, due to business expansion by Digital Arts Consulting
Inc., a consolidated subsidiary.
Further, procedures for transferring all shares of consolidated subsidiary Digital Arts Consulting Inc. to CHANGE
Holdings, Inc. were completed in March 2024.
As a result of the above, consolidated net sales for the fiscal year under review amounted to 11,512 million yen (up10.3% year on year), operating profit reached 4,427 million yen (up 0.3% year on year), ordinary profit came to 4,443
million yen (up 0.3% year on year) and profit attributable to owners of parent was 4,377 million yen (up 43.0% year onyear).
*Including 1,930 million yen as a gain on sale of the stock of consolidated subsidiary Digital Arts Consulting Inc.

2

Overview of Consolidated Business Results(Million yen)
Year ended
March 31, 2023

Year ended
March 31, 2024

Net sales

10,436

11,512＋1,075＋10.3

Operating profit

4,413

4,427

＋13

＋0.3

Ordinary profit

4,429

4,443

＋14

＋0.3

Profit attributable toowners of parent

3,062

4,377

＋1,315＋43.0

Change% Change

The following describes business performance in separate markets.
Enterprise Sector Market
In the enterprise sector market, the Group offered the new CASB function, in addition to i-FILTER and Anti-Virus &Sandbox, to meet the demand for the transition to cloud security and the switch from other companies' products. As aresult of these activities, steady progress was made in the reception of new projects. The Group steadily received
projects for m-FILTER as well, reflecting their high evaluation of its comprehensive security functions which fulfill diverse
needs, such as its function handling ransomware attacks, measures to prevent people using the PPAP method (sendinga password-protected .zip file by e-mail and sending the password by a separate e-mail) and measures to increase thesecurity of e-mail in a cloud environment. With f-FILTER, a new product, the Company received more projects thanplanned, mainly due to its linkage with m-FILTER.
In addition, the number of new projects received by Digital Arts Consulting Inc., a consolidated subsidiary of theCompany that offers security consulting services, increased sharply due to the reception of projects to help build security
governance, including ISMAP acquisition, and the provision of services that offer comprehensive support, including
security assessment and support for the implementation of security measures.

3

As a result, net sales in this market reached 6,456 million yen, up 21.4% year on year.
Public Sector Market
In the public sector market, the Group continued to receive new projects by focusing on proposing solutions that are
in line with guidelines for security improvements for local governments. It also offered a GIGA School version of iFILTER, which is equipped with original functions suitable for applications on the front lines of education, to boards ofeducation and schools that had not adopted filtering in the first phase of the GIGA School Program. Nonetheless, theGroup was affected by a reactionary decline in the number of large-scale projects from the level it won in the previous
fiscal year, as well as the completion of the first round of the project for enhancing cloud security at prefectural offices.
As a result, net sales in this market stood at 4,637 million yen, down 1.0% year on year.

Consumer Sector Market
In the consumer sector market, the Group focused on collaborating with mobile network carriers and MVNOs andon sales of i-FILTER for Multiple Devices, which can be used on multiple operating systems using a single serial ID.
As a result, net sales in this market amounted to 418 million yen, down 3.4% year on year.

(2) Overview of financial position for the fiscal year under review(Assets)
Total assets in the consolidated fiscal year under review increased 1,368 million yen from the end of the previous
fiscal year to 22,518 million yen. This was due mainly to an increase of 1,320 million yen in cash and deposits.
(Liabilities)
Total liabilities in the consolidated fiscal year under review declined 455 million yen from the end of the previous
consolidated fiscal year to 6,519 million yen. This was due mainly to a decrease of 768 million yen in advances received.
(Net assets)
Net assets in the consolidated fiscal year under review increased 1,824 million yen from the end of the previous
consolidated fiscal year to 15,998 million yen. This was mainly due to an increase in retained earnings due to therecording of profit attributable to owners of parent, which outweighed a decrease in dividends paid.

4(3) Overview of cash flows in the fiscal year under review
In the consolidated fiscal year under review, cash and cash equivalents increased 1,320 million yen from the end of
the previous consolidated fiscal year to 18,339 million yen. Cash flows in each category are as follows:(Cash flows from operating activities)
Net cash provided by operating activities amounted to 2,830 million yen (3,147 million yen in the previous year) due
to income before income taxes and minority interests of 6,378 million yen, income taxes paid and gain on sales ofsubsidiaries' stocks.
(Cash flows from investing activities)
Net cash provided by investing activities amounted to 1,012 million yen (867 million yen used in the previous year)
due to an increase from sales of investments in subsidiaries, while there was a decrease in purchase of intangible fixed
assets.
(Cash flows from financing activities)
Net cash used in financing activities was 2,545 million yen (1,051 million yen in the previous fiscal year), primarily
due to dividends paid.
The table below shows trends of cash flow indicators.
As of March 31, As of March 31, As of March 31, As of March 31,
2021
2022
2023
2024
Equity ratio (%)

67.6

62.7

66.9

71.0

Equity ratio based on market value (%)

915.0

538.6

338.5

267.8

1. The methods to calculate the indicators are as follows:a) Equity ratio: Equity capital / Total assetsb) Equity ratio based on market value: Market capitalization / Total assets(Market capitalization is calculated by multiplying the closing stock price at the end of the fiscal year by the
number of issued shares (excluding treasury shares).)
2. Each indicator is calculated based on consolidated financial numbers.

(4) Outlook
The outlook for the next fiscal year (April 1, 2024 to March 31, 2025) is as follows:
In the security industry where the Group operates, cyberattacks are becoming increasingly diverse and sophisticatedas cloud computing becomes ubiquitous and DX progresses. As a result, the number of security threats that businesses,
public organizations and households are exposed to is rising. The need for products which enable comprehensive
security measures is expected to continue to grow in the future. The cabinet approved the proposed budget related tothe second phase of the GIGA School Program in November 2023. This is expected to cause demand for new security
measures to emerge in the public sector market in the fiscal year ending March 31, 2025. In consideration of thesechanges in the external environment and changes in the internal environment due to the transfer of a consolidated
subsidiary, the Group revised its Medium-Term Management Plan (fiscal year ended March 31, 2023 through fiscal year
ending March 31, 2025), which was formulated in 2022, and developed a new Medium-Term Management Plan (fiscal
year ending March 31, 2025 through fiscal year ending March 31, 2027), whose final fiscal year is the fiscal year ending
March 31, 2027. In the Medium-Term Management Plan (fiscal year ending March 31, 2025 through fiscal year ending
March 31, 2027), the Company has set three priority areas: the growth of the security business, the expansion its shareof the public sector market, and investment in human resources to implement new measures. It aims to achieve thegrowth of net sales that exceeds the growth of the security product market.

5Regarding the growth of the security business, the Company will increase the number of customers using WhiteOperation and drive cross-selling and up-selling. To expand its share of the public sector market, the Company will
implement sales and marketing measures by setting projects related to the second phase of the GIGA School Programand projects for the DX of next-generation school operations as its main themes. Regarding investment in humanresources to implement new measures, the Company will invest more than ever in initiatives including the recruitment
and development of engineering human resources who support in-house product development as the Company's policy,
and the provision of incentives to and the recruitment and development of sales human resources to strengthen direct
sales and customer success targeting the large and medium-sized enterprises who are the Company's customers, in an
attempt to achieve its goals of increasing net sales and operating profit and further improving operating margin.
As the Group pursues those initiatives, it expects to post net sales of 10,720 million yen, ordinary profit of 5,140 million
yen, and profit attributable to owners of parent of 3,540 million yen in the next consolidated fiscal year, down 6.9%, up
15.7% and down 19.1%, respectively, year on year.
The Company has determined the results forecasts based on information available on the day of publication of thesefinancial results for the fiscal year ended March 31, 2024. Actual results may differ from the forecasts due to a variety offactors. If there are any significant changes, the Company will disclose them appropriately.

Results forecasts for the next fiscal year (consolidated)
Net sales

Profit attributable to ownersof parent

Ordinary profit

Million yen

Million yen

Million yen

10,720

5,140

3,540

11,512

4,443

4,377

Year ending March 31, 2025
(forecast)Year ended March 31, 2024
(results)(Figures shown are rounded down to the nearest million yen.)*Net income attributable to owners of the parent for the fiscal year ending March 31, 2024 includes a gain of
approximately 1,930 million yen from the sale of shares in a subsidiary of consolidated subsidiary Digital Arts Consulting,Inc..
Results forecasts for the next fiscal year (non-consolidated)
Net salesYear ending March 31, 2025
(forecast)Year ended March 31, 2024
(results)

Ordinary profit

ProfitMillion yen

Million yen

Million yen

10,710

5,150

3,550

9,304

4,348

4,536

(Figures shown are rounded down to the nearest million yen.)*Net income for the fiscal year ending March 31, 2024 includes a gain of approximately 2,150 million yen from the saleof shares in a subsidiary of consolidated subsidiary Digital Arts Consulting, Inc.
Note: The forecasts above are based on information available on the day of publication of these financial results for the
fiscal year ended March 31, 2024. Actual results may be different from the forecasts due to a variety of factors.

6

2. Basic Approach to Selection of Accounting Standards
The Group will prepare consolidated financial statements based on the Japan Accounting Standards for some time tocome, considering a comparison with consolidated financial statements for the previous fiscal year and with financial
statements of other companies. The Group will make an appropriate decision about the application of the International
Financial Reporting Standards (IFRS), considering circumstances in Japan and overseas.

7

3. Consolidated Financial Statements and Primary Notes(1) Consolidated balance sheet(Million yen)
Fiscal 2023
(As of March 31, 2023)

Fiscal 2024
(As of March 31, 2024)

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

17,018
148
1,426
19
3
309

18,339
65
1,469
0
2
305

Total current assets

18,92520,183

Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation

220
(136)

223
(139)

Buildings, net

83

83

18
(13)

25
(8)

VehiclesAccumulated depreciation
Vehicles, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net

5

16

506
(412)

506
(421)

93

84

Land

26

26

Total property, plant and equipment

209

211

1,264
243

1,367
234

Total intangible assets

1,508

1,602

Investments and other assets
Investment securities
Deferred tax assets
Other

101
116
288

100
136
284

506

521

Intangible assets
Software
Other

Total investments and other assets
Total non-current assets
Total assets

8

2,223

2,334

21,14922,518(Million yen)
Fiscal 2023
(As of March 31, 2023)

Fiscal 2024
(As of March 31, 2024)

Liabilities
Current liabilities
Accounts payable - trade
Income taxes payable
Provision for bonuses
Advances received
Other

238
839
156
5,187
502

54
1,354
137
4,418
501

Total current liabilities

6,924

6,467

Non-current liabilities
Asset retirement obligations
Other

48
1

49
3

Total non-current liabilities

50

52

6,975

6,519

713
953
12,768
(308)

713
956
16,029(1,730)14,127

15,968

14

18

14

18

11
20

11

14,173

15,99821,14922,518

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
Non-controlling interests
Total net assets
Total liabilities and net assets

9－(2) Consolidated statement of income and consolidated statement of comprehensive income
Consolidated statement of income

Net sales
Cost of sales

Fiscal 2023
(from April 1, 2022
to March 31, 2023)
10,436
3,666(Million yen)
Fiscal 2024
(from April 1, 2023
to March 31, 2024)
11,512
4,583

Gross profit

6,769

6,928

Selling, general and administrative expenses

2,356

2,500

Operating profit

4,413

4,427

0
12
1
1

0
13
1
2

15

17

Miscellaneous loss－

1

Total non-operating expenses

－

1

4,429

4,443

1

Non-operating income
Interest income
Foreign exchange gains
Gain on forfeiture of unclaimed dividends
Miscellaneous income
Total non-operating income
Non-operating expenses

Ordinary profit
Extraordinary income
Gain on reversal of share acquisition rights
Gain on sales of non-current assets－

04Gain on sales of shares of subsidiaries

－

1,930

Total extraordinary income

1

1,935

0

0

0

0

Profit before income taxes

4,430

6,378

Income taxes – current
Income taxes – deferred

1,385
(19)

2,015
(19)

Total income taxes

1,365

1,995

Profit

3,064

4,383

2

5

3,062

4,377

Extraordinary losses
Loss on retirement of non-current assets
Total extraordinary losses

Profit attributable to non-controlling interests
Profit attributable to owners of parent

10

Consolidated statement of comprehensive income

ProfitOther comprehensive income
Foreign currency translation adjustment

Fiscal 2023
(from April 1, 2022
to March 31, 2023)
3,064(Million yen)
Fiscal 2024
(from April 1, 2023
to March 31, 2024)
4,383

2

4

2

4

Comprehensive income

Total other comprehensive income

3,067

4,387

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

3,065

4,382

2

5

11

(3) Consolidated statement of changes in equity
Fiscal 2023 (from April 1, 2022 to March 31, 2023)(Million yen)
Shareholders' equity

Balance at beginning of
periodSharecapitalCapitalsurplusSharecapitalCapitalsurplusSharecapital

713

953

10,758(307)

12,118

Accumulated othercomprehensive
incomeCapitalShare
surpluscapital
11

11

Share
NonTotal net
acquisition controlling
assetsrightsinterests
12

17

12,159Changes during period
Dividends of surplus
Profit attributable toowners of parent
Disposal of treasury
sharesPurchase of treasury
sharesNet changes in items
other than shareholders'equityTotal changes during
periodBalance at end of period(1,052)(1,052)(1,052)

3,062

3,062

3,062

(0)

(0)

0

0

(0)
0

2

2

(0)

2

4

－

0

2,009

(0)

2,008

2

2

(0)

2

2,013

713

953

12,768(308)

14,127

14

14

11

20

14,173Fiscal 2024 (from April 1, 2023 to March 31, 2024)(Million yen)
Shareholders' equity

Balance at beginning of
periodSharecapitalCapitalsurplusSharecapitalCapitalsurplusSharecapital

713

953

12,768(308)

14,127

Accumulated othercomprehensive
incomeCapitalShare
surpluscapital
14

14

Share
NonTotal net
acquisition controlling
assetsrightsinterests
11

20

14,173

Changes during period
Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesExercise of shareacquisition rights
Restricted stockcompensation
Total changes during
period(1,116)(1,116)(1,116)

4,377

4,377

4,377

(1,429)(1,429)(1,429)

(0)

0

0

0

2

6

8

8
4

4

(0)

(20)

(16)

Balance at end of period

－

2

3,261

(1,422)

1,841

4

4

(0)

(20)

1,824

Purchase of treasury
shares713

956

16,029(1,730)15,968

18

18

11

－

15,99812

(4) Consolidated statement of cash flows(Million yen)
Fiscal 2024
(from April 1, 2023
to March 31, 2024)

Fiscal 2023
(from April 1, 2022
to March 31, 2023)
Cash flows from operating activities
Profit before income taxes
Depreciation
Increase (decrease) in provision for bonuses
Interest income
Foreign exchange losses (gains)
Gain on reversal of share acquisition rights
Loss on retirement of non-current assets
Loss (gain) on sales of non-current assets
Loss (gain) on sales of shares of subsidiaries
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Increase (decrease) in accounts payable - other

4,430
884
60
(0)
(12)
(1)
0
－
－
(856)
(18)
194
35

6,378
886
△19
(0)
(16)
(0)
0
(4)
(1,930)(1,073)
19
(100)
141

Decrease (increase) in other current assets
Increase (decrease) in other current liabilities
Other

(186)
(81)
16

(60)
58
28

Subtotal

4,464

4,308

Interest and dividends received
Income taxes paid

0
(1,318)0(1,478)Net cash provided by (used in) operating activities

3,147

2,830

(56)

(75)

-

9

(811)

(918)

－

1,992

－

5

(867)

1,012

－
(0)

0
(1,430)1－

Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant andequipment
Purchase of intangible assets
Proceeds from sale of shares of subsidiaries
resulting in change in scope of consolidation
OthersNet cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from disposal of treasury shares
Purchase of treasury shares
Proceeds from stock issuance to non-controllinginterests
Dividends paid

(1,052)(1,115)

Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents(1,051)(2,545)

17

22

1,245

1,320

Cash and cash equivalents at beginning of period

15,77317,018Cash and cash equivalents at end of period

17,01818,33913

(5) Notes to consolidated financial statements(Notes on the premise of a going concern)
There are no applicable matters.

(Significant matters that serve as the basis for the preparation of consolidated financial statements)
1. Matters related to the scope of consolidation(1) Number of consolidated subsidiaries: 3
Names of consolidated subsidiaries
Digital Arts America, Inc.
Digital Arts Asia Pacific Pte. Ltd.
Digital Arts Europe Limited*Digital Arts Consulting Inc., which was a consolidated subsidiary in the previous consolidated fiscal year, was
excluded from the scope of consolidation because all shares of the company were transferred.

(2) Names, etc. of non-consolidated subsidiaries
There are no applicable matters.
2. Matters related to the application of the equity method(1) Number of non-consolidated subsidiaries to which the equity method is applied: ―(2) Names, etc. of non-consolidated subsidiaries to which the equity method is not applied
There are no applicable matters.
3. Fiscal years of consolidated subsidiaries
The fiscal year end of all consolidated subsidiaries is the same as the end of the consolidated fiscal year.
4. Matters related to accounting policies(1) Valuation standards and valuation methods for significant assets
A. Securities(a) Bonds held for maturity
The amortized cost method (interest method) is applied.
B. Inventories(a) Finished goods
The gross average cost method is applied. (The balance sheet amount is calculated by the book value writedown method based on reduction in profitability.)(2) Depreciation/amortization method for significant depreciable/amortizable assets
A. Property, plant and equipment
The declining balance method is applied.
The useful life and the residual value are calculated based on the same standards as those set out in the
Corporation Tax Act. The straight-line method is applied for facilities attached to buildings acquired on April 1, 2016or later.
B. Intangible assets
The straight-line method is applied.
The straight-line method based on the availability period in the company (five years) is used for software in thecompany. For software for sale in the market, a method based on estimated sales quantities (or revenue) or theremaining lifetime (three years) is used.
C. Long-term prepaid expenses
The straight-line method is applied.
The amortization period is calculated based on the same standards as those set out in the Corporation Tax Act.
(3) Standards for recognition of significant allowances
A. Provision for bonuses
For the payment of employees’ bonuses, of the estimated payment amount, the amount to be paid in the
consolidated fiscal year under review is posted.

14

(4) Accounting standards for significant income and expenses
The Company has begun applying the Accounting Standard for Revenue Recognition (ASBJ Statement No.29
issued on March 31, 2020) and the Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ
Guidance No. 30 issued on March 26, 2021). Accordingly, the Company recognizes revenue in the amount expected tobe received in exchange for promised goods or services at the point where control over such goods or services moves
to customers.
Major performance obligations in major businesses and the normal time to recognize revenue are as described in(Matters concerning revenue recognition).
(5) Standards for translating significant assets or liabilities that are in foreign currency into yen
Monetary claims and obligations in foreign currency are translated into yen using the spot exchange rate on the
consolidated settling day, and translation adjustments are treated as a profit or loss. Assets and liabilities at overseas
subsidiaries, etc. are translated into yen using the spot exchange rate on the consolidated settling day. Revenue andexpense are translated into yen using the average rate during the period, and translation adjustments are included in
the foreign currency translation adjustment in net assets.
(6) Scope of funds in the consolidated statement of cash flows
Funds in the consolidated statement of cash flows (cash and cash equivalents) consist of cash on hand, deposits
that can be withdrawn as needed, and short-term investments that can be realized easily and only have insignificant
value fluctuation risk and whose redemption date arrives within three months of the acquisition date.
(Consolidated statement of income)*1. The major items of selling, general and administrative expenses and the amounts are as follows.

Advertising expenses

Fiscal 2023
(from April 1, 2022
to March 31, 2023)
297 million yen

Fiscal 2024
(from April 1, 2023
to March 31, 2024)
313 million yen

Salaries and allowances

698

753

Provision for bonuses

8673*2. Total amount of research and development expenses included in general and administrative expenses are as follows.
Fiscal 2023
(from April 1, 2022
to March 31, 2023)
24 million yen

Fiscal 2024
(from April 1, 2023
to March 31, 2024)
29 million yen*3. The details of loss on retirement of non-current assets are as follows.
Fiscal 2023
(from April 1, 2022
to March 31, 2023)
Vehicles－ million yen

Fiscal 2024
(from April 1, 2023
to March 31, 2024)
4 million yen*4 A gain on sale of a subsidiary's stock of 1,930 million yen has been recorded as a result of the transfer of shares of Digital
Arts Consulting Inc.

15

*5 The details of loss on retirement of non-current assets are as follows.

Tools, furniture, and fixtures

Fiscal 2023
(from April 1, 2022
to March 31, 2023)

Fiscal 2024
(from April 1, 2023
to March 31, 2024)

0million yen

0million yen(Consolidated statement of comprehensive income)*1. Reclassification adjustment and tax effect related to other comprehensive income
Fiscal 2023
(from April 1, 2022
to March 31, 2023)
Foreign currency translation
adjustment:
Amount that occurred in thefiscal year under review
Reclassification adjustment

Fiscal 2024
(from April 1, 2023
to March 31, 2024)

2million yen

4million yen－－

Before tax effect adjustment

2

4

Tax effectForeign currency translation
adjustment
Total other comprehensive income

-

-

2

4

2

4

(Consolidated statement of changes in equity)
Fiscal 2023 (from April 1, 2022 to March 31, 2023)
1. Class and number of issued shares and class and number of treasury shares
Number of shares at
beginning of
consolidated fiscal
year under review

Increase in number of Decrease in number of Number of shares atshares during
shares during
end of consolidated
consolidated fiscal
consolidated fiscal
fiscal year underyear under review
year under review
review

Issued shares
Common shares

14,133,000－－

14,133,000

Total

14,133,000－－

14,133,000

93,731

102－

93,83393,731

102－

93,833

Treasury shares
Common(Note)
Total

shares(Note) An increase in the number of common shares in treasury shares,102, is due to the purchase of treasury shares.

16

2. Matters related to share acquisition rights and treasury share acquisition rights
Class of
Number of shares to be acquired upon exercise ofsharesshare acquisition rights
Amount atunderlying
end of fiscal
Beginning of Increase
Decreaseshare
End of fiscal year underfiscal year during fiscal during fiscal
acquisition
review
year under
underyear under year underrights(million yen)review
review
review
review

Classification

Breakdown of shareacquisition rights

Reportingcompany(parent
company)

Share acquisitionrights as stock
options

―

―

―

―

―

11

Total

―

―

―

―

―

11

3. Matters related to dividends(1) Dividends paid
Total amount of
Dividend per share
Class of shares dividends (million
(yen)
yen)

Resolution

Record date

Effective date

Annualshareholders’Common shares
meeting on June21, 2022561

40

March 31, 2022

June 22, 2022

Board of Directors
meeting on
October 28, 2022

491

35

September 30,
2022

December 2, 2022

Common shares(2) Of dividends whose record date is in the consolidated fiscal year under review, those whose effective date in the next
consolidated fiscal year

Resolution

Class ofsharesTotal amountof dividends(million yen)

Financialsource ofdividends

Dividend pershare (yen)Annualshareholders’meeting on June23, 2023

Commonshares561

Retainedearnings

40

Record date

Effective date

March 31, 2023

June 26, 2023

Fiscal 2024 (from April 1, 2023 to March 31, 2024)
1. Class and number of issued shares and class and number of treasury shares
Number of shares at
beginning of
consolidated fiscal
year under review

Increase in number of Decrease in number of Number of shares atshares during
shares during
end of consolidated
consolidated fiscal
consolidated fiscal
fiscal year underyear under review
year under review
review

Issued shares
Common shares

14,133,000－－

14,133,000

Total

14,133,000－－

14,133,000

93,833287,300

1,503

379,630

93,833287,300

1,503

379,630

Treasury shares
Common(Note)
Total

shares(Note) The increase in the number of common shares in treasury shares, 287,300, is due to the purchase of treasury
shares. The decrease in the number of treasury shares, 1,503, includes a decrease of 1,403 shares as a result of
the issuance of restricted stock and a decrease of 100 shares due to the exercise of stock options.

17

2. Matters related to share acquisition rights and treasury share acquisition rights

Classification

Reportingcompany(parent
company)

Breakdown of shareacquisition rights

Class of
Number of shares to be acquired upon exercise ofsharesshare acquisition rights
Amount atunderlying
end of fiscal
Beginning of Increase
Decreaseshare
End of fiscal year underfiscal year during fiscal during fiscal
acquisition
review
year under
underyear under year underrights(million yen)review
review
review
review

Share acquisitionrights as stock
options

―

Total

―

―

―

―

11

―

―

―

―

11

3. Matters related to dividends(1) Dividends paid
Resolution
Annualshareholders’meeting on June23, 2023
Board of Directors
meeting on
October 30, 2023

Total amount of
Dividend per share
Class of shares dividends (million
(yen)
yen)

Record date

Effective dateCommon shares

561

40

March 31, 2023

June 26, 2023

Common shares

554

40

September 30,
2023

December 4, 2023

(2) Of dividends whose record date is in the consolidated fiscal year under review, those whose effective date in the next
consolidated fiscal year

Resolution

Class ofsharesTotal amountof dividends(million yen)

Financialsource ofdividends

Dividend pershare (yen)Annualshareholders’meeting on June24, 2024

Commonshares

550

Retainedearnings

40

Record date

Effective date

March 31, 2024

June 25, 2024

(Consolidated statement of cash flows)*1. Cash and cash equivalents at the end of the fiscal year and their relationships with items in the consolidated balance
sheetsFiscal 2023
(from April 1, 2022
to March 31, 2023)

Fiscal 2024
(from April 1, 2023
to March 31, 2024)

Cash and deposit account

17,018 million yen

18,339 million yen

Cash and cash equivalents

17,01818,339*2 Breakdown of the major assets and liabilities of a company that was excluded from the scope of consolidation due to thesale of the company's stock
Fiscal 2023（from April 1,2022 to March 31,2023）
There are no applicable matters.

18

Fiscal2024（from April 1,2023 to March 31,2024）
The breakdown of the major assets and liabilities of Digital Arts Consulting Inc., which was excluded from the scopeof consolidation due to the sale of the company's stock, and the relationship between the sale price of the stock andproceeds from the sale thereof (net) are as follows.
Current assets

631 million yen

Non-current assets

11

Current liabilities(323)

Non-controlling interests
Incidental expenses associated with thesale of stock
Gain on sale of shares of subsidiaries(26)

Sale price of stock
Incidental expenses associated with thesale of stock
Cash and cash equivalents
Result: Proceeds from sale of shares ofsubsidiaries resulting in change inscope of consolidation

71
1,930
2,296
(71)
(232)
1,992

(Financial instruments)
1. Matters related to the status of financial instruments(1) Policy on financial instruments
The Group’s fund management is centered on short-term deposits. The Group also invests in government bonds,
which are very safe and highly rated corporate and other bonds.
(2) Description of financial instruments and their risks
Notes and accounts receivable-trade, operating receivables, are exposed to customers’ credit risk.
Investment securities are public and corporate bonds and are exposed to risks of fluctuations in market price.
(3) Risk management system related to financial instruments(i) Credit risk (risk related to business connections’ contract non-performance) management
The sales management section and administrative department of the Company regularly monitor the status ofoperating receivables at the main trading partners under the Company’s credit management regulations and control
the due dates and balances for individual partners. In this way, the Company strives to identify concerns overcollections caused by deterioration in partners’ financial situation early and mitigate them. The Company conducts
similar credit management at consolidated subsidiaries under its credit management regulations.
As for short-term fund management, the Company only uses bank deposits and investments in highly rated funds
to avoid as much credit risk as possible.
(ii) Market risk (interest-rate fluctuation risk, etc.) management
The Company determines its fund management portfolio while expecting its financing needs, and avoids market
risk as much as possible.
(iii) Management of liquidity risk in financing (risk of failure to pay on due dates)
The Company manages liquidity risk chiefly by having the administrative department create financial plans in atimely manner.

19

(4) Additional information on matters related to the market prices of financial instruments, etc.
The market prices of financial instruments are based on market prices and rationally calculated prices if no market
prices are available. The calculated prices include variable factors, which may change if different assumptions are used.
2. Matters related to the market prices of financial instruments, etc.
Consolidated balance sheet amounts, market prices and differences between them are as follows: Cash is omitted.
Deposits are also omitted because deposits are settled in a short period of time and their market prices are similar to theirbook values.
Fiscal 2023 (As of March 31, 2023)(1) Notes receivable - trade(2) Accounts receivable

Consolidated balance
sheet amount(million yen)

Market price (million yen)

Difference (million yen)

148

148

－

1,426

1,426

－

101

100

(0)

1,675

1,675

(0)

839

839

－

839

839

－

Consolidated balance
sheet amount(million yen)

Market price (million yen)

Difference (million yen)

65

65

－

1,469

1,469

－

100

100

(0)

1,635

1,635

(0)

1,354

1,354

－

1,354

1,354

－

(3) Investment securities
Bonds held to maturity
Total assets(1) Income taxes payable
Total liabilities
Fiscal 2024 (As of March 31, 2024)(1) Notes receivable - trade(2) Accounts receivable(3) Investment securities
Bonds held to maturity
Total assets(1) Income taxes payable
Total liabilities

20

(Note) Monetary claims and securities with maturity periods to be redeemed after the consolidated closing dateFiscal 2023 (As of March 31, 2023)
More than aWithin a year year, within(million yen) five years(million yen)
Cash and deposits
Notes receivable - trade
Accounts receivable - trade

More than
five years, More than 10
within 10
years
years
(million yen)(million yen)

17,018

－

－

－

148

－

－

－

1,426

－

－

－

－

100

－

－

18,593

100－－

Investment securities
Bonds held to maturity
Corporate bonds
Total
Fiscal 2024 (As of March 31, 2024)
More than aWithin a year year, within(million yen) five years(million yen)
Cash and deposits
Notes receivable - trade
Accounts receivable - trade

More than
five years, More than 10
within 10
years
years
(million yen)(million yen)

18,339

－

－

－

65

－

－

－

1,469

－

－

－

－

100

－

－

19,874100－－

Investment securities
Bonds held to maturity
Corporate bonds
Total

3. Breakdown of financial instruments in different appropriate classifications
The fair values of financial instruments are classified into the following three levels according to the observability andimportance of inputs used in the calculation of fair values.
Level 1 fair value: fair value calculated using market prices, on an active market, of assets or liabilities whose fair value
is calculated of the observable inputs related to the calculation of fair value
Level 2 fair value: fair value calculated using inputs other than the inputs used for Level 1 of the observable inputs
related to the calculation of fair value
Level 3 fair value: fair value calculated using inputs that are not observable related to the calculation of fair value
If more than one input that has a significant effect on the calculation of fair value is used, the fair value is classified to
the level of inputs whose priority is lowest in the calculation of fair value.

21

Financial assets and financial liabilities whose consolidated balance sheet amounts are not market prices.
Fiscal 2023 (As of March 31, 2023)(Million yen)Classification

Market price
Level 1

Level 2

Level 3

Total

Notes receivable - trade

－

148

－

148

Accounts receivable – trade

－

1,426

－

1,426

Bonds payable

－

100

－

100

Total assets

－

1,675

－

1,675

Income taxes payable

－

839

－

839

Total liabilities

－

839

－

839

Investment securities
Bonds held to maturity

Fiscal 2024 (As of March 31, 2024)
Classification(Million yen)
Market price

Level 1

Level 2

Level 3

Total

Notes receivable - trade

－

65

－

65

Accounts receivable – trade

－

1,469

－

1,469

Bonds payable

－

100

－

100

Total assets

－

1,635

－

1,635

Income taxes payable

－

1,354

－

1,354

Total liabilities

－

1,354

－

1,354

Investment securities
Bonds held to maturity(Note)Explanations about assessment techniques used in the calculation of fair value and inputs related to thecalculation of fair value
Notes and accounts receivable - trade
The fair value of each classified receivable is calculated periodically by the discounted cash flow method based on arate that takes the amount receivable, the period until the due date and credit risk into account and their fair value isclassified as level 2 fair value.
Investment securities
Corporate bonds are valued using quoted market prices. Corporate bonds valued by the Company are bonds forwhich quoted market prices are not readily available because they are not traded frequently and their fair value istherefore classified as level 2 fair value.
Income taxes payable
The fair value of income taxes payable is calculated by the discounted cash flow method based on a rate which takes
future cash flows and the term to the due date into consideration and is classified as level 2 fair value.

22

(Securities)
Bonds held to maturity
Fiscal 2023 (As of March 31, 2023)
Classification(1) Government bonds,
local government
bonds, etc.
Market price exceeds
consolidated balance
sheet amountMarket price does notexceed consolidatedbalance sheet amount

Consolidatedbalance sheet
amount (million yen)

Market price(million yen)

Difference(million yen)

－

－

－

(2) Corporate bonds

－

－

－

(3) Other－－－

Subtotal－－－(1) Government bonds,
local government
bonds, etc.

－

－

－

(2) Corporate bonds

101

100

(0)

(3) Other

－

－

－

101

100

(0)

101

100

(0)

Subtotal
Total
Fiscal 2024 (As of March 31, 2024)
Classification(1) Government bonds,
local
government
bonds, etc.
Market price exceeds
consolidated balance
sheet amountMarket price does notexceed consolidatedbalance sheet amount

Consolidatedbalance sheet
amount (million yen)

Market price(million yen)

Difference(million yen)

－

－

－

(2) Corporate bonds

－

－

－

(3) Other－－－

Subtotal－－－(1) Government bonds,
local
government
bonds, etc.

－

－

－

(2) Corporate bonds

100

100

(0)

(3) Other

－

－

－

100

100

(0)

100

100

(0)

Subtotal
Total

23

(Retirement benefits)
1. Outline of the retirement benefits system
The Company and its consolidated subsidiaries have a defined contribution pension plan.
While one of the consolidated subsidiaries had a defined contribution pension plan, the Company sold all of its sharesof that consolidated subsidiary that it held, excluding it from the scope of consolidation in the consolidated fiscal year
under review.
2. Retirement benefit expenses
Fiscal 2023 (from April 1, 2022 to March 31, 2023)
The amount that was required for contribution to the defined contribution pension plan was 52 million yen.
Fiscal 2024 (from April 1, 2023 to March 31, 2024)
The amount that was required for contribution to the defined contribution pension plan was 60 million yen.
(Stock options)
1. Expenses related to stock options and their account titles
Fiscal 2023
(from April 1, 2022
to March 31, 2023)
Selling, general and administrative expenses

0 million yen

Fiscal 2024
(from April 1, 2023
to March 31, 2024)
0 million yen

2. Amount posted as profit due to the forfeiture of unexercised stock options
Fiscal 2023
(from April 1, 2022
to March 31, 2023)
Gain on reversal of share acquisition rights

1 million yen

24

Fiscal 2024
(from April 1, 2023
to March 31, 2024)
0 million yen

3. Description of stock options, their scale and changes(1) Description of stock options

Company
Category and number of persons subject
to grants
Stock options by class of shares
Grant date

Vesting conditions

Requisite service period

8th Stock options

9th Stock options

Reporting company

Same as on the left

Four directors
151 employees

Three directors
96 employees

Common shares 350,100 shares

Common shares 848,000 shares

November 27, 2015

December 13, 2016

Being a director or an employee ofthe reporting company and not
being subject to salary reduction
or stricter disciplinary action
provided for in the rules of
employment of the reporting
company from the grant date(November 27, 2015) to thevesting date (July 1, 2017)
Share acquisition rights can be
exercised up to the percentage ofthe allocated share acquisitionrights specified in each item below
by each holder of share acquisitionrights only if operating profit
reaches the level specified in each
item below in the fiscal year ended
March 31, 2017, the fiscal year
ended March 31, 2018, or the
fiscal year ended March 31, 2019.
(i) If operating profit exceeds 1.5
billion yen, 20% of shareacquisition rights can be
exercised(ii) If operating profit exceeds 2.0
billion yen, 50% of shareacquisition rights can be
exercised(iii) If operating profit exceeds 2.5
billion yen, 100% of shareacquisition rights can be
exercised
In the items above, the operating
profit stated in the consolidated
statement of income in the
Company’s annual securities report(or the statements of income if noconsolidated statements of income
are prepared) shall be referenced.
If the concept of items to bereferenced changes significantly
due to the application of theInternational Financial ReportingStandards, etc. indicators to bereferenced shall be determined by
the Board of Directors.
No requisite service periods are
determined.

Being a director or an employee ofthe reporting company and not
being subject to salary reduction
or stricter disciplinary action
provided for in the rules of
employment of the reporting
company from the grant date
(December 13, 2016) to thevesting date (July 1, 2018).
Share acquisition rights can be
exercised up to the percentage ofthe allocated share acquisitionrights specified in each item below
by each holder of share acquisitionrights only if operating profit
reaches the level specified in each
item below in the fiscal year ended
March 31, 2018, the fiscal year
ended March 31, 2019, or the
fiscal year ended March 31, 2020.
(i) If operating profit exceeds 2.0
billion yen, 20% of shareacquisition rights can be
exercised(ii) If operating profit exceeds 2.5
billion yen, 50% of shareacquisition rights can be
exercised(iii) If operating profit exceeds 2.8
billion yen, 100% of shareacquisition rights can be
exercised
In the items above, the operating
profit stated in the consolidated
statement of income in the
Company’s annual securities report(or the statements of income if noconsolidated statement of income
are prepared) shall be referenced.
If the concept of items to bereferenced changes significantly
due to the application of theInternational Financial ReportingStandards, etc. indicators to bereferenced shall be determined by
the Board of Directors.
No requisite service periods are
determined.

25

Exercise period

From the vesting date to May 31,
2027.
The person must continue to be adirector or an employee of theCompany to exercise shareacquisition rights.

26

From the vesting date to May 31,
2028.
The person must continue to be adirector or an employee of theCompany to exercise shareacquisition rights.

11th Stock options

12th Stock options

Reporting company

Same as on the left

16 employees

55 employees

Common shares 69,000 shares

Common shares 137,500 shares

September 24, 2021

September 24, 2021

Vesting conditions

Being a director, an auditor, or an
employee of the reporting company
or its subsidiaries and not being
subject to salary reduction or
stricter disciplinary action provided
for in the rules of employment of thereportingcompanyorits
subsidiaries from the grant date
(September 24, 2021) to thevesting date (June 30, 2036)
The share acquisition rights can be
exercised only over the period from
July 1, 2036 to June 30, 2038, if
operating profit exceeds 14,736
million yen in any fiscal year fromthe fiscal year ended March 31,
2022 to the fiscal year ending
March 31, 2036.
Whether the operating profit above
is exceeded or not shall be
determined in reference to theoperating profit stated in the nonconsolidated statement of incomein the Company's Annual Securities
Report, and in the event of amaterial change in the concept of
the item to be referred to due to theapplicationofInternational
Financial Reporting Standards,
etc., the Board of Directors shallseparately determine the index tobe referred to.

Being a director, an auditor, or an
employee of the reporting company
or its subsidiaries and not being
subject to salary reduction or
stricter disciplinary action provided
for in the rules of employment of thereportingcompanyorits
subsidiaries from the grant date
(September 24, 2021) to thevesting date (June 30, 2041)
The share acquisition rights can be
exercised only over the period from
July 1, 2041 to June 30, 2043, if
operating profit exceeds 20,630
million yen in any fiscal year fromthe fiscal year ended March 31,
2022 to the fiscal year ending
March 31, 2041.
Whether the operating profit above
is exceeded or not shall be
determined in reference to theoperating profit stated in the nonconsolidated statement of incomein the Company's Annual Securities
Report, and in the event of amaterial change in the concept of
the item to be referred to due to theapplicationofInternational
Financial Reporting Standards,
etc., the Board of Directors shallseparately determine the index tobe referred to.

Requisite service period

No requisite service periods are No requisite service periods are
determined.
determined.

Exercise period

From July 1, 2036 to June 30,
2038.
The person must continue to be adirector, an auditor, or an employeeof the Company or its subsidiaries
to exercise share acquisition rights.

Company
Category and number of persons subject
to grants
Stock options by class of shares
Grant date

27

From July 1, 2041 to June 30,2043.
The person must continue to be adirector, an auditor, or an employeeof the Company or its subsidiaries
to exercise share acquisition rights.

(2) Scale of stock options and related changes
The stock options below are those that existed in the fiscal year under review (fiscal year ended March 31, 2023).
The number of stock options has been converted to the number of shares.
(i) Number of stock options

8th Stock options 9th Stock options 11th Stock options 12th Stock options
Before vesting (shares)
As of March 31, 2023

－

－

－

－

Granted

－－59,000100,000

Forfeited

－

－

5,000

22,500

Vested－－－－Yet to be vested－－

54,00077,500152,000

300,900－－

Vested－－－－Exercised

－

100

－

－

Forfeited

－

－

－

－

152,000

300,800－－

After vesting (shares)
As of March 31, 2023

Yet to be exercised(ii) Unit price information

8th Stock options 9th Stock options 11th Stock options 12th Stock options
Exercise price (yen)

2,034

2,639

8,310

8,310

－

5,420

－

－

2

24

6,741

7,482

Average stock price when
exercised (yen)Fair unit value (grant date)(yen)

4. Method for estimating the number of stock options vested
It is basically difficult to reasonably estimate the number of stock options to be forfeited, and only the actual number ofstock options forfeited is reflected.
For paid-in stock options with performance conditions, the number of forfeitures of non-vested stock options is estimatedtaking vesting conditions into consideration.
(Additional information)
Transactions granting employees and others stock acquisition rights which involve considerations with vesting
conditions before the applied day of Practical Solution on Transactions Granting Employees and Others Stock Acquisition
Rights, which Involve Considerations, with Vesting Conditions (PITF No. 36; January 12, 2018) are still accounted forusing the previously adopted accounting treatment in accordance with Paragraph 10 (3) of PITF No. 36.
1. Outline of share acquisition rights, which involve considerations, with vesting conditions

28

Notes are omitted because the same description is given in “3. Description of stock options, their scale and changes”
above.
2. Outline of accounting treatment adopted
When share acquisition rights are issued, the amount paid in on the issuance of share acquisition rights will be recorded
as share acquisition rights in net assets. When share acquisition rights are exercised, and new shares are issued, theamount paid in on the issuance of share acquisition rights and the amount paid in on the exercise of share acquisitionrights will be transferred to share capital and legal capital surplus, respectively.
When share acquisition rights have lapsed, the amount that corresponds to the lapse will be recorded as profit withinthat accounting period.

(Asset retirement obligations)
Asset retirement obligations posted in the consolidated balance sheets(1) Outline of the asset retirement obligations
Obligations of restoration related to lease agreements at the head office and other offices(2) Method for calculation of the asset retirement obligations
The period of use is estimated to be one to 15 years from the acquisition. The discount rate is 0.15% to 1.73%. The
amount of asset retirement obligations is calculated based on those assumptions.
(3) Increase/decrease in the asset retirement obligations
Fiscal 2023
(from April 1, 2022
to March 31, 2023)

Fiscal 2024
(from April 1, 2023
to March 31, 2024)

Balance at beginning of fiscal year
Increase due to purchase of property,
plant and equipment
Adjustment due to passage of time

48 million yen

48 million yen

－

－

0

0

Balance at end of fiscal year

48

49

(Matters concerning revenue recognition)
1. Information on the breakdown of revenue from contracts with customers
Fiscal 2023 (from April 1, 2022 to March 31, 2023)
Below is a breakdown of revenue from contracts with customers.
(Million yen)Enterprise
Sector Market

Public Sector
MarketRevenue from contracts with
5,316
4,686
customers(Note) Internal transactions between Group companies are deducted.

Consumer
Sector Market
433

Total
10,436

Fiscal 2024 (from April 1, 2023 to March 31, 2024)
Below is a breakdown of revenue from contracts with customers.
(Million yen)Enterprise
Sector Market

Public Sector
MarketRevenue from contracts with
6,456
4,637
customers(Note) Internal transactions between Group companies are deducted.

29

Consumer
Sector Market
418

Total
11,512

2. Basic information for understanding revenue from contracts with customers
The Digital Arts Group is principally engaged in internet security, email security, the planning, development, sale, etc.
of file encryption and tracking solutions, and information security consulting.
In sales of security software, software is classified into two types: license products and associated maintenanceservices, and cloud service products.
Revenue from a license product is recognized when the software product is provided to the customer, at which time
the performance obligation is deemed fulfilled. The performance obligation for maintenance services is fulfilled over acertain period, and revenue is recognized over the term of the contract as the performance obligation is being satisfied.
As for the cloud service product, the service performance obligation is satisfied over time, and the transaction priceunder the contract with the customer is distributed evenly throughout the term of the contract and recognized as revenue.
Revenue is recorded mostly in accordance with the contract with the customer. If the Company pays a rebate
according to a transaction amount for a certain period, among other factors, the rebate is deducted from the revenue.
The promised consideration does not include any significant financing component.
3. Information to understand revenue in the fiscal year under review and the next fiscal year and thereafter
Below is the opening and ending balance of contract liabilities arising from contracts with customers.
(Million yen)Contract liabilities

Fiscal 2024

Balance at beginning of fiscal year

5,187

Balance at end of fiscal year

4,418

Advances received in the consolidated balance sheet are all contract liabilities arising from contracts with customers,
and advance payments are posted if the related performance obligations are not fulfilled at the end of the fiscal year.
The amount of revenue recognized in the fiscal year under review included in the balance of contract liabilities at the
beginning of the fiscal year is 2,332 million yen.
(Segment information, etc.)
Segment information
Previous consolidated fiscal year (from April 1, 2022 to March 31, 2023) and consolidated fiscal year under review(from April 1, 2023 to March 31, 2024)
The Group has only one segment, which is the security business, and segment information is omitted.
Related information
Fiscal 2023 (from April 1, 2022 to March 31, 2023)
1. Information by product/service
The Group has only one product and service category, and information by product/service is omitted.
2. Information by region(1) Net sales
Sales to external customers in Japan are more than 90% of net sales in the consolidated statement of income, andinformation by region is omitted.
(2) Property, plant and equipment

30

The amount of property, plant and equipment in Japan is more than 90% of the amount of property, plant andequipment in the consolidated balance sheets, and information on property, plant and equipment is omitted.
3. Information by major customer
The Group engages in only one segment, the security business.
(Million yen)
Customer name

Net sales

Daiwabo Information System Co., Ltd.

2,683

SB C&S Corp.

1,747

Fiscal 2024 (from April 1, 2023 to March 31, 2024)
1. Information by product/service
The Group has only one product and service category, and information by product/service is omitted.
2. Information by region(1) Net sales
Sales to external customers in Japan are more than 90% of net sales in the consolidated statement of income, andinformation by region is omitted.
(2) Property, plant and equipment
The amount of property, plant and equipment in Japan is more than 90% of the amount of property, plant andequipment in the consolidated balance sheets, and information on property, plant and equipment is omitted.
3. Information by major customer
The Group engages in only one segment, the security business.
(Million yen)
Customer name

Net sales

Daiwabo Information System Co., Ltd.

2,856

SB C&S Corp.

1,994(Related party information)
Transactions with related parties
Transactions between the company submitting consolidated financial statements and related parties
Officers and major individual shareholders of the company submitting consolidated financial statements
Fiscal 2023 (from April 1, 2022 to March 31, 2023)
There are no applicable matters.
Fiscal 2024 (from April 1, 2023 to March 31, 2024)
There are no applicable matters.

31

(Per share information)
Fiscal 2023
(from April 1, 2022
to March 31, 2023)
Net assets per share

Fiscal 2024
(from April 1, 2023
to March 31, 2024)

1,007.27yen

1,162.40yen

Profit per share

218.12yen

315.46yen

Diluted profit per share
Profit213.92yen

310.30yen(Note) Base for calculating profit per share and diluted profit per share
Fiscal 2023
(from April 1, 2022
to March 31, 2023)

Item

Fiscal 2024
(from April 1, 2023
to March 31, 2024)

Profit per share
Profit attributable to owners of parent (million yen)

3,062

4,377

－

－

3,062

4,377

14,039,205

13,877,851－－

Increase in the number of common shares

275,549

230,763(Of the increase, the number of share acquisition rights)(shares)

275,549

230,763

Outline of potential shares that are not included in thecalculation of the diluted profit per share because they
do not have any diluting effects

Share acquisition rights
Resolution on August 30,
2021
Number of potential shares:
159,000

Share acquisition rights
Resolution on August 30,
2021
Number of potential shares:
131,500

Amount not attributable to common shareholders(million yen)
Profit attributable to owners of parent related tocommon shares (million yen)
Average number of common shares during the term
Diluted profit per share
Adjustment of profit attributable to owners of parent(million yen)

(Significant subsequent events)
There are no applicable matters.

32