Quarterly Consolidated Financial Results for the First Half of Fiscal
Year Ending March 31, 2023 (Japanese Accounting Standards)

October 31, 2022

Name of listed company:
Securities code:

Digital Arts Inc.

Listed on:

2326

Tokyo Stock Exchange
Prime Market

URL https://www.daj.jp

Representative Director,(Name) Toshio Dogu
President and CEO
General Manager of theContact:(Title)(Name) Isao Konishi (TEL) 03-5220-6045
Administration Department
Scheduled date for submission
Scheduled date to start
November 4, 2022
December 2, 2022
of quarterly report:
dividends distribution:
Preparation of supplementary explanatory ：Yesdocuments for quarterly results:
Holding of quarterly results briefing:
Yes ( for institutional investors and financial analysts )Representative:(Title)(Figures shown are rounded down to the nearest million yen.)

1. Consolidated financial results for the first half of the fiscal year ending March 31, 2023 (April 1, 2022 –September 30, 2022)(Percentage figures represent changes from same periodof previous year.)
Profit attributable toOperating profit
Ordinary profit
owners of parent(1) Consolidated operating results (cumulative totals)
Net sales
Million yen%

Million yen%

Million yen%

Million yen%First half of year ending
5,084
11.7
2,247
8.1
2,263
8.8
1,558
8.7
March 31, 2023
First half of year ended
4,552
46.8
2,079
58.7
2,080
58.0
1,433
57.7
March 31, 2022
(Note) Comprehensive First half of year 1,566 million yen ( 9.1 %) First half of year ending 1,435 million yen ( 58.3 %)income:ending March 31,
March 31, 2022
2023
Profit per share(basic)
First half of year ending
March 31, 2023
First half of year ended
March 31, 2022

Profit per share(diluted)
Yen

Yen

111.03108.82102.16

99.81(2) Consolidated financial position
Total assets

Net assets

Million yen
As of September 30, 2022
20,305
As of March 31, 2022
19,341(Reference) Equity capital: As of September 13,131 million
30, 2022:
yen

Equity ratio

Net assets per share

Million yen
13,16464.7
12,15962.7
As of March 12,129 million
31, 2022:
yen％

2. Dividends
Annual dividends
1Q-endYen

2Q-end3Q-endYen

Year ended March 31, 2022
30.00
－Year ending March 31, 2023
35.00
－Year ending March 31, 2023
(forecast)(Note) Revisions to most recently announced dividend forecast:Year-end

Annual

Yen

Yen

Yen

－40.0070.00－40.00

75.00

No

Yen

935.35863.96

3. Forecast of consolidated financial results for the year ending March 31, 2023 (April 1, 2022 – March31, 2023)(Percentage figures represent changes from same period of previous year.)
Profit attributable toNet sales
Operating profit
Ordinary profit
Profit per shareowners of parent
MillionMillionMillionMillion%%%%Yenyenyenyenyen
Full year
10,50016.04,700
13.9
4,700
13.7
3,250
12.0
231.49(Note) Revisions to most recently announced results forecasts: No* Notes(1) Changes in important subsidiaries during the first three months of fiscal
year ending March 31, 2023:

None(Changes in specified subsidiaries resulting in changes in scope of consolidation)
New―(Company name) , Excluding―(Company name)(2) Application of special accounting methods to the preparation of quarterly
consolidated financial statements:

Yes(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 quarterlyconsolidated 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
Nonestandards, etc.:
2) Changes in accounting policies due to reasons other than thoseNonestated in 1):
3) Changes in accounting estimates:
None4) Restatement:

None(4) Number of shares outstanding (common stock)1) Number of shares issued and outstanding As of September 30,14,133,0002022(including treasury shares)
2) Number of treasury shares

As of September 30,2022

As of March 31, 2022

14,133,000

93,798 As of March 31, 2022

93,731

3) Average number of shares issued and First half of year ending
14,039,231
March 31, 2023
outstanding in each period (cumulative total)

First

half

endingofyear

March31,14,032,314

2022* Quarterly financial statements are not subject to quarterly audits by certified public accountants or audit corporations.
* 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. Qualitative Information on Financial Results for the First
half of Fiscal Year Ending March 31, 2023 (3) Explanation about information on future forecasts such as consolidated
results forecasts” on page 4 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. Qualitative Information on Financial Results for the First Half of Fiscal Year EndingMarch 31, 2023 ..................................................................................................................2(1) Explanation about business results ......................................................................................2(2) Explanation about financial position ...................................................................................4(3) Explanation about information on future forecasts such as consolidated results forecasts ..4
2. Quarterly Consolidated Financial Statements and Primary Notes .......................................5(1) Quarterly consolidated balance sheet ..................................................................................5(2) Quarterly consolidated statement of income and comprehensive income ...........................6
Quarterly consolidated statement of income
Consolidated first half ...............................................................................................6
Quarterly consolidated statement of comprehensive income
Consolidated first half ...............................................................................................7(3) Quarterly consolidated statement of cash flows ...................................................................8(4) Notes to quarterly consolidated financial statements(Notes on the premise of a going concern) .......................................................................9(Notes on significant changes in the amount of shareholders' equity) ..............................9(Application of special accounting methods to the preparation of quarterly consolidated financialstatements) ..........................................................................................................................9―1―1. Qualitative Information on Financial Results for the First half of Fiscal Year Ending March 31, 2023
(1) Explanation about business results
During the first half of the consolidated fiscal year under review (April 1, through September 30, 2022), significant
progress in COVID-19 vaccination was made and normal economic activities were gradually resumed as the numberof COVID-19 cases decreased and activity restrictions were relaxed. On the other hand, rising raw materials prices dueto the prolonged war in Ukraine and the sharp weakening of the yen against the dollar caused uncertainty in the outlook
for the Japanese economy.
In the security industry, in which the Digital Arts Group (the “Group”) operates, demand for security products expanded
following the intensification of damaging incidents caused by diversifying cyberattacks, including ransomware andEmotet. Apart from demand from large-sized organizations, new demand for security measures is growing from medium
and small-sized enterprises, which were comparatively lagging in these measures. In addition, IoT, AI and othertechnologies were increasingly used and the practice of working from home spread quickly to stop the proliferation of
the COVID-19 coronavirus, security personnel must now manage increasingly diversifying and advancing threats, andthe demand for total security is expected to continue growing. Expected to continue accelerating are the outsourcing ofsecurity operations and the utilization of cloud services to reduce the burden of security operations.
Under these conditions, in the enterprise sector market, the Group expanded sales chiefly by adding new functions,particularly those of mainstay products, i-FILTER and m-FILTER, to meet demand for total security and won deals byimplementing a strategy to expand sales to specific targets. In the public sector market, the Group focused on proposing
solutions to support local government efforts to strengthen security measures, which are ramped up from the fiscal year
under review.
As a result, net sales for the first half of the consolidated fiscal year under review amounted to 5,084 million yen (up11.7% year on year), operating profit reached 2,247 million yen (up 8.1% year on year), ordinary profit came to 2,263
million yen (up 8.8% year on year), and profit attributable to owners of parent was 1,558 million yen (up 8.7% year onyear).
Overview of Consolidated Business Results(Million yen)First half of year
ended March 31,2022

First half of year
ending March 31,
2023

Net sales

4,552

5,084＋532＋11.7

Operating profit

2,079

2,247＋168＋8.1

Ordinary profit

2,080

2,263＋182＋8.8

Profit attributable toowners of parent

1,433

1,558＋125＋8.7―2―Change% Change

The following describes business performance in separate markets.
Enterprise Sector Market
In the enterprise sector market, the Group created new projects by adding new functions, including antivirus functions
and sandbox functions, to i-FILTER and m-FILTER to meet demand for total security and strengthened cooperation withagencies to win deals by implementing a strategy to expand sales to specific targets. Sales of m-FILTER increased
steadily as a result of high marks given to the use of the PPAP method (sending the Zip file protected by a password bye-mail and sending the password by a separate e-mail) and a function to deal with targeted attacks, including attacks
using Emotet. In addition, net sales for Digital Arts Consulting Inc., a subsidiary offering security consulting services,increased with a progress achieved in new customer acquisition in line with greater corporate demand for cybersecurity
and digital transformation (DX) consulting.
Net sales in this market reached 2,573 million yen, up 13.3% year on year.

Public Sector Market
In the public sector market, the Group focused on proposing solutions to support local government efforts tostrengthen security measures, which are ramped up from the fiscal year under review, and as a result, sales of the iFILTER and m-FILTER series grew as brisk orders were won from public agencies and local governments.
As a consequence, net sales in this market stood at 2,287 million yen, up11.5% year on year.

―3―Consumer Sector Market
In the consumer sector market, the Group focused on collaborating with mobile network carriers and MVNOs and onsales of i-FILTER for Multiple Devices, which can be used on multiple operating systems using a single serial ID, but
the Group saw sluggish growth in the number of users.
Net sales in this market amounted to 224 million yen, down 2.2% year on year.

(2) Explanation about financial position(Assets)
Total assets at the end of the first half of the consolidated fiscal year under review increased 964 million yen from theend of the previous fiscal year, to 20,305 million yen. This was due mainly to an increase of 881 million yen in cash anddeposits.
(Liabilities)
Total liabilities at the end of the first half of the consolidated fiscal year under review declined 40 million yen from theend of the previous consolidated fiscal year to 7,141 million yen. This was due mainly to a decrease of 114 million yen
in other current liabilities, including accrued consumption taxes.
(Net assets)
Net assets at the end of the first half of the consolidated fiscal year under review increased 1,004 million yen fromthe end of the previous consolidated fiscal year to 13,164 million yen. This was mainly due to an increase in retained
earnings due to the recording of profit attributable to owners of parent, which outweighed a decrease in dividends paid.

(3) Explanation about information on future forecasts such as consolidated results forecasts
Operating results for the first half of the consolidated fiscal year under review remained steady overall, and there wastherefore no change in the forecast of consolidated financial results for the year ending March 31, 2023 announced on
May 10, 2022.
The Company has determined the results forecasts based on information available on the day of these financial
results for the first three months of the year ending March 31, 2023. Actual results may be different from the forecasts
due to a variety of factors. If there are any significant changes, the Company will disclose them appropriately.

―4―2. Quarterly Consolidated Financial Statements and Primary Notes(1) Quarterly consolidated balance sheet(Million yen)
Fiscal 2022
(As of March 31, 2022)

half of fiscal 2023
(As of September 30, 2022)

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

15,773
1,216

16,6541,305

0303111

123

17,10518,088206

217

Software
Other

1,317
2091,331
173

Total intangible assets

1,526

1,504

Investments and other assets

503

495

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

Total non-current assets
Total assets

2,236

2,217

19,341

20,305

44
760

53
744

95
5,684

113
5,748

Liabilities
Current liabilities
Accounts payable - trade
Income taxes payable
Provision for bonuses
Advances received
Other
Total current liabilities
Non-current liabilities
Asset retirement obligations

546

431

7,130

7,090

48

48

Other11

Total non-current liabilities

5050

7,181

7,141

713
953

713953Retained earnings
Treasury shares

10,75811,756△307△308

Total shareholders' equity

12,118

13,1151116

111612171220

12,15913,164

19,341

20,305

Total liabilities
Net assets
Shareholders' equity
Share capital
Capital surplus

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―5―(2) Quarterly consolidated statement of income and comprehensive income
Quarterly consolidated statement of income
Consolidated first half

Net sales
Cost of sales

First half of fiscal 2022
(from April 1, 2021
to September 30, 2021)
4,552(Million yen)First half of fiscal 2023
(from April 1, 2022
to September 30, 2022)
5,084

1,238

1,668

Gross profit

3,314

3,416

Selling, general and administrative expenses

1,234

1,168

Operating profit

2,079

2,247

000013Non-operating income
Interest income
Gain on forfeiture of unclaimed dividends
Foreign exchange gains
Miscellaneous income－0Total non-operating income

0150－0－

2,080

2,263

Gain on reversal of share acquisition rights

10

Total extraordinary income

10－0

Non-operating expenses
Foreign exchange losses
Total non-operating expenses
Ordinary profit

0Extraordinary income

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―6―－02,081

2,263

646702

1,435

1,561

121,433

1,558

Quarterly consolidated statement of comprehensive income
Consolidated first halfProfit

First half of fiscal 2022
(from April 1, 2021
to September 30, 2021)
1,435(Million yen)First half of fiscal 2023
(from April 1, 2022
to September 30, 2022)
1,561

05

Other comprehensive income
Foreign currency translation adjustment
Total other comprehensive income
Comprehensive income

05

1,435

1,566

1,433

1,563

12

Comprehensive income attributable toComprehensive income attributable to owners ofparent
Comprehensive income attributable to noncontrolling interests―7―(3) Quarterly consolidated statement of cash flows(Million yen)First half of fiscal 2023
(from April 1, 2022
to September 30, 2022)

First half of fiscal 2022
(from April 1, 2021
to September 30, 2021)
Cash flows from operating activities
Profit before income taxes

2,081

2,263

Depreciation
Increase (decrease) in provision for bonuses

434
178

448
17

Interest income
Loss on retirement of non-current assets

(0)

(0)
0

Foreign exchange losses (gains)
Gain on reversal of share acquisition rights

－(0)
(1)

(12)
(0)

Decrease (increase) in trade receivables
Decrease (increase) in inventories

2,231
0(26)
0

Increase (decrease) in trade payables
Increase (decrease) in accounts payable - other(13)65825Decrease (increase) in other current assets
Increase (decrease) in other current liabilities

(40)
(15)

(12)
(144)

Other

(35)

6

Subtotal

4,884

2,573

Interest and dividends received
Income taxes paid0(653)

0(717)

Income taxes refund

4,231

1,855

(0)

(32)

Purchase of intangible assets

(527)

(402)

Net cash provided by (used in) investing activities

(528)

(434)

12(0)

－(0)

－1(420)(560)

5－(403)

(560)

020

Cash flows from investing activities
Purchase of property, plant and equipment

Cash flows from financing activities
Proceeds from disposal of treasury shares
Purchase of treasury shares
Proceeds from stock issuance to non-controllinginterests
Dividends paid
Proceeds from issuance of share acquisitionrightsNet 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

3,300881

Cash and cash equivalents at beginning of period

11,382

15,773

Cash and cash equivalents at end of period

14,682

16,654―8―

(4) Notes to quarterly consolidated financial statements(Notes on the premise of a going concern)
There are no applicable matters.
(Notes on significant changes in the amount of shareholders’ equity)
There are no applicable matters.
(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 half of the consolidated fiscal year under review, and such tax expenses are calculated bymultiplying this estimated effective tax rate by profit before income taxes.

―9―