Consolidated Financial Results for the Fiscal Year Ended March 31, 2020
[Japan GAAP]
Name of listedcompany:
Securities code:

Digital Arts Inc.

May 8, 2020
Tokyo Stock Exchange
1st Section

Listed on:2326
URL https://www.daj.jp
Representative
Director,(Title)(Name) Toshio Dogu
Representative:
President and CEO
General Manager of the(Title)(Name) Isao KonishiContact:
TEL: 03-5220-6045
Administration Department
Scheduled date to hold the
Scheduled date to start dividends
ordinary general meeting ofJune 19, 2020
June 22, 2020
distribution:
shareholders:
Scheduled date for filing annual
June 22, 2020
financial report:
Supplementary materials prepared:
Yes
Yes(for institutional investors and financial analysts)
Results information meeting held:(Figures shown are rounded down to the nearest million yen.)

1. Consolidated financial results for the year ended March 31, 2020 (April 1, 2019 – March 31, 2020)(1) Consolidated operating results(Percentage figures represent changes from previous year.)Net sales

Operating profit

Million yen%

Million yen%

Million yen%

Million yen

%

2,326

(11.6)

1,590(18.9)

2,630

37.8

1,961

53.0

Year ended March
5,641
(3.4)
2,328
(11.5)
31, 2020
Year ended March
5,841
14.2
2,629
38.2
31, 2019(Note)
Comprehensive income: Year ended March 31, 2020:
1,587 million yen (-19.7%)
Profit per share(basic)Profit per share(diluted)

Yen

Profit attributable toowners of parent

Ordinary profit

Year ended March 31, 2019:
1,977 million yen (55.1%)
Ordinary profit tototal assets

Operating profit to
net sales

%

%

%

19.4

22.5

41.3

28.1

29.6

45.0

Return on equity

Yen

Year ended March
113.69110.8331, 2020
Year ended March
141.11140.8031, 2019
Reference: Equity-method
Year ended March 31, 2020:
investment profit (loss):－ million yen

Year ended March 31, 2019:－ million yen(2) Consolidated financial position
Total assets
As of March 31,
2020
As of March 31,
2019
Reference: Equity capital:

Net assets

Equity ratio

Net assets per share

Million yen

Million yen%

Yen

10,852

8,680

79.7

617.27

9,859

7,802

78.7

558.33

Year ended March 31, 2020:
8,652 million yen

Year ended March 31, 2019:
7,761 million yen(3) Consolidated cash flows
Cash flows from operating Cash flows from investing Cash flows from financing Cash and cash equivalents
activities
activities
activities
at end of period
Year ended March
31, 2020
Year ended March
31, 2019

Million yen

Million yen

Million yen

Million yen

2,686

111

(709)

7,651

3,091

(908)

(429)

5,569

―1―

2. Dividends
Total
Dividends to
Payout ratio
dividends
net assets(consolidated)
paid (annual)(consolidated)

Annual dividends
1Q-end2Q-endYen

Year-end

3Q-endYen

Yen

Year ended March
18.00
－
－
31, 2019
Year ended March
25.00
－
－
31, 2020
Year ending March
25.00
－
－
31, 2021 (forecast)(Note) Revisions to most recently announced dividend forecast: No

AnnualYen

YenMillion yen

%

%

30.00

48.00

667

34.0

9.6

25.00

50.00

701

44.0

8.5

30.00

55.00

31.5

3. Forecast of consolidated financial results for the year ending March 31, 2021 (April 1, 2020 – March 31, 2021)(Percentage figures represent changes from previous year for full year figures and from same period of previous year for interim
period figures.)
Profit attributable to
Net sales
Operating profit
Ordinary profit
Profit per shareowners of parent
First six months
Full year

Million yen%

Million yen%

Million yen%

Million yen

%

Yen

3,300
7,500

19.4
32.9

1,490
3,550

35.8
52.5

1,490
3,550

36.4
52.6

1,030
2,450

38.2
54.0

73.48
174.79―2―

* Notes(1) Changes in subsidiaries during the fiscal year
(Changes in specified subsidiaries resulting in changes in scope of consolidation): None
New―(Company name), Excluding―(Company name)(2) Changes in accounting policies, changes of accounting estimates and restatement
1) Changes in accounting policies due to revisions of accounting standards, etc.

: None2) Changes in accounting policies due to reasons other than those stated in 1): None3) Changes in accounting estimates: None4) Restatement: None(3) Number of shares outstanding (common stock)1) Number of shares issued and outstanding(including treasury shares)

As of March 31,
2020
As of March 31,

2) Number of treasury shares

20203) Average number of shares issued andoutstanding in each period

Year ended March
31, 2020

As of March 31,

14,133,0002019

14,133,000

As of March 31,

116,042

232,3202019Year ended March

13,991,859

31, 2019

13,898,934(Reference) Overview of the non-consolidated business results
1. Non-consolidated financial results for the year ended March 31, 2020 (April 1, 2019 – March 31, 2020)(1) Non-consolidated operating results(Percentage figures represent changes from previous year.)Net salesYear ended March
31, 2020
Year ended March
31, 2019

Operating profit

Ordinary profit

ProfitMillion yen%

Million yen%

Million yen%

Million yen

%

5,336

(7.2)

2,357

(15.0)

2,359(15.1)

1,613

(9.6)

5,752

14.0

2,774

32.9

2,777

32.4

1,784

107.4

Profit per share
Year ended March
31, 2020
Year ended March
31, 2019

Diluted profit per share
Yen

Yen

115.29112.39128.42

128.14(2) Non-consolidated financial position
Total assets
As of March 31,
2020
As of March 31,
2019
Reference: Equity capital:

Net assets

Equity ratio

Net assets per share

Million yen

Million yen%

Yen

10,839

8,714

80.2

620.45

9,870

7,804

78.8

559.74As of March 31, 2020: 8,696 million yen

As of March 31, 2019: 7,780 million yen

2. Forecast of non-consolidated financial results for the year ending March 31, 2021 (April 1, 2020 – March 31, 2021)(Percentage figures represent changes from previous year for full year figures and from same period of previous year for interim
period figures.)
Net salesFirst six months
Full year

Ordinary profit

ProfitProfit per share

Million yen%

Million yen%

Million yen

%

Yen

3,100
7,000

17.0
31.2

1,480
3,500

32.4
48.4

1,020
2,420

32.5
50.0

72.77
172.65* Summaries of financial results are not subject to audit.
* Explanation concerning the appropriate use of financial result forecasts and other special notes―3―

(Forward looking statements)
Business forecasts and other forward-looking statements in this material contain predictions based on future assumptions,
outlooks and plans as of the date of publication of this material. The Company does not warrant the accomplishment of theforecasts. Actual results may different significantly from the forecasts due to risks and uncertain factors associated with theworld economy, the state of competition, and fluctuations in foreign exchange rates and interest rates.
For matters relevant to business forecasts, refer to (4) Outlook in 1. Overview of Business Results, Etc. on page 4 of the
Attached Document.
(Obtaining the Supplementary Material for the Financial Results)
The material is available at Digital Arts Inc. corporate website.

―4―

○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……………………………………………………

3(3) Overview of cash flows in the fiscal year under review ……………………………………………………………

3(4) Outlook ………………………………………………………………………………………………………………

4

2. Basic Approach to Selection of Accounting Standards …………………………………………………………………

5

3. Consolidated Financial Statements and Major Notes……………………………………………………………………

6(1) Consolidated balance sheet …………………………………………………………………………………………

6(2) Consolidated statement of income and consolidated statement of comprehensive income…………………………

8

Consolidated statement of income …………………………………………………………………………………

8

Consolidated statement of comprehensive income…………………………………………………………………

9(3) Consolidated statement of changes in equity ………………………………………………………………………

10(4) Consolidated statement of cash flows ………………………………………………………………………………

12(5) Notes to consolidated financial statements…………………………………………………………………………

13(Notes on the premise of a going concern) …………………………………………………………………………

13(Significant matters that serve as the basis for the preparation of consolidated financial statements)………………

13(Consolidated balance sheet) …………………………………………………………………………………………

14(Consolidated statement of income) …………………………………………………………………………………

14(Consolidated statements of comprehensive income)………………………………………………………………… 15(Consolidated statement of changes in equity) ………………………………………………………………………

16(Consolidated statement of cash flows) ………………………………………………………………………………

18(Lease transactions) …………………………………………………………………………………………………… 18(Financial instruments) ………………………………………………………………………………………………

18(Securities) ……………………………………………………………………………………………………………

21(Derivatives transactions) ……………………………………………………………………………………………

22(Retirement benefits) …………………………………………………………………………………………………

22(Stock options) ………………………………………………………………………………………………………

22(Asset retirement obligations) ………………………………………………………………………………………

26(Segment information, etc.) …………………………………………………………………………………………

26(Related party information) …………………………………………………………………………………………

28(Per share information) ………………………………………………………………………………………………

28(Significant subsequent events)………………………………………………………………………………………

29

4. Non-consolidated Financial Statements and Major Notes………………………………………………………………

30(1) Balance sheet ………………………………………………………………………………………………………

30(2) Statement of income …………………………………………………………………………………………………

32(3) Statement of changes in equity ……………………………………………………………………………………… 34(4) Notes to non-consolidated financial statements……………………………………………………………………… 33(Notes on the premise of a going concern)……………………………………………………………………………

35

5. Other……………………………………………………………………………………………………………………… 35―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, 2019 – March 31, 2020), the Japanese economy saw a continued
recovery in employment and corporate income amid the turnaround in consumer spending and capital investment. Meanwhile, theoutlook on the world economy remained unclear amid intensification of the trade friction between the United States and China,
anxiety over the political management of the U.S. administration and growing geopolitical risks. In addition, the impact of the
COVID-19 coronavirus pandemic came to the surface to drag the global and Japanese economy down sharply.
In the security industry where the Digital Arts Group (hereinafter “the Group”) operates, demand is expanding amid successive
cases of diversifying cyberattacks including ransomware and Emotet. Apart from demand from large-sized organizations asconventionally main sources of demand, demand for the new introduction of security measures is growing from medium- andsmall-sized enterprises, which are comparatively lagging in such measures. In addition, IoT, AI and other technologies wereincreasingly 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 risks, and the demand for security services is
expected to continuously grow. On the other hand, for the consolidated fiscal year under review, there was a surge in demand forthe replacement purchases of computers due to the consumption tax increase and the termination of support for Windows 7. Our
sales partners remained busy with negotiations on replacement purchases of computers.
Under these circumstances, the Group’s domestic operations continuously endeavored to expand sales of i-FILTER Ver. 10 and
m-FILTER Ver. 5 in the enterprise sector and public sector markets in a bid to offer solutions for a secure Internet environment tocustomers of all sizes. Apart from that, as more and more people work from home, web services and e-mail environments are
rapidly shifting to the cloud. Launched in May 2018, the Group’s cloud services of i-FILTER@Cloud and m-FILTER@Cloud
were repriced so that webpages could be viewed without worry and that e-mail messages could be opened without hesitation in
the cloud environment. The Group also released Chat@Cloud. It is a business tool supporting not only text chat but also video
chat to pave the way for online conferencing. The Group thus released a new product that is expected to be increasingly used
under the current circumstances, in which teleworking, including working from home, is quickly expanded amid the COVID-19
coronavirus crisis.
In the consumer sector market, smartphones are increasingly used not only by senior high schoolers but by junior highschoolers or younger children. In view of that, the Act on Development of an Environment that Provides Safe and Secure Internet
Use for Young People was revised on February 1, 2018. This revision toughened enforcement of the introduction of filtering toyoung people, which had been compulsory before the revision. The Group continued to work with mobile network carriers andmobile virtual network operations (MVNOs) to further promote i-FILTER for smartphones.
As a result of the above, consolidated net sales for the fiscal year under review stood at 5,641,805 thousand yen, down 3.4%
year on year, operating profit fell 11.5% year on year to 2,328,036 thousand yen, ordinary profit declined 11.6% to 2,326,930
thousand yen, and profit attributable to owners of parent decreased 18.9% to 1,590,784 thousand yen.
The following describes business performance in separate markets.
Enterprise Sector Market
In this market, the Group carried out active sales promotion activities for high-end models for which full-scale sales started in
the consolidated fiscal year under review, specifically i-FILTER Ver. 10 and m-FILTER Ver. 5. They increased the recognition of
the utility of both products and helped gain some new projects, but this achievement was smaller than expected as a result of thestriking increase in demand for replacement purchases of computers due to the termination of support for Windows 7. Meanwhile,the shortage of security professionals and the spread of teleworking accelerated the use of cloud services to reduce the burden of
security operations. The sales share of i-FILTER Browser & Cloud and other cloud service products among the Group’s products
increased gradually and contributed to a sales rise. While license sales are recorded in a lump at the time of shipping, recorded
sales of cloud services are apportioned on a monthly basis throughout the service provision period. As a result, the balance ofadvances received increased. The balance will be posted from the next consolidated fiscal year.
Net sales in this market reached 3,284,873 thousand yen, up 4.8% year on year.

―2―

Public Sector Market
In this market, the Group traditionally enjoyed high recognition and a large market share as a provider of Japan-made security
solutions with a focus on internal data leakage. Highly regarded for its track record and reliability, it bolstered its presence as a
general security solution provider in the market earlier than in the enterprise sector market as i-FILTER Ver. 10 and m-FILTER
Ver. 5, which provide advanced security measures, including those against targeted attacks, sold well. As in the enterprise sector
market, the cloud shift is seen in this market as well. The sales share of cloud service products is gradually increasing. The sales
balance to be posted for the following and later consolidated fiscal years expanded. On the other hand, there was a reactionary
sales decline following the large-scale project that helped increase net sales for the consolidated previous fiscal year. A
supplementary budget proposal approved by the Japanese Cabinet in December 2019 included an amount of 231.8 billion yen for
the GIGA School Concept envisioning integrated development of providing every school-aged child with a learning terminal andconstructing high-speed and high-capacity communication networks. That led to the revision to the details of projects undernegotiation, and these projects, which were expected to be ordered in the consolidated fiscal year under review, are now expected
to be delayed until the following or later consolidated fiscal year.
As a consequence, net sales in this market stood at 1,911,173 thousand yen, down 12.8% year on year.
Consumer Sector Market
In this market, the Group focused its efforts on collaboration with mobile network carriers and MVNOs and on sales of iFILTER for Multiple Devices, which can be used on multiple operating systems with a single serial ID. Advances in the
introduction of filtering amid widespread use of smartphones among young people and strong sales of multi-year packages and iFILTER for Multiple Devices contributed to an increase in licenses. However, net sales tumbled due to revisions to the prices forsales to mobile network carriers.
Net sales in this market amounted to 445,759 thousand yen, shrunk 13.6% year on year.

(2) Overview of financial position for the fiscal year under review(Assets)
Total assets at the end of the consolidated fiscal year under review increased 992,887 thousand yen from the end of theprevious consolidated fiscal year to 10,852,234 thousand yen, chiefly reflecting a rise in cash and deposits due to cash provided
by operating activities.
(Liabilities)
Total liabilities at the end of the consolidated fiscal year under review rose 115,557 thousand yen from the end of the previous
fiscal year to 2,172,010 thousand yen. This was due chiefly to a rise in income taxes payable.
(Net assets)
Net assets at the end of the consolidated fiscal year under review climbed 877,329 thousand yen from the end of the previous
consolidated fiscal year to 8,680,224 thousand yen. This was due mainly to an increase in retained earnings after posting of profit
attributable to owners of parent, which more than offset a decrease due to the exercise of share acquisition rights.

(3) Overview of cash flows in the fiscal year under review
In the consolidated fiscal year under review, cash and cash equivalents increased 2,082,473 thousand yen from the end of theprevious consolidated fiscal year to 7,651,645 thousand yen. Cash flows in each category are as follows:(Cash flows from operating activities)
Net cash provided by operating activities stood at 2,686,572 thousand yen (net cash provided of 3,091,862 thousand yen in theprevious consolidated fiscal year), chiefly reflecting a profit before income taxes of 2,326,026 thousand yen and depreciation of805,723 thousand yen.
(Cash flows from investing activities)
Net cash provided by investing activities reached 111,013 thousand yen (net cash used of 908,784 thousand yen in the previous
consolidated fiscal year), due mainly to a decrease in time deposits and proceeds from the redemption of securities despite theacquisition of intangible assets.

―3―

(Cash flows from financing activities)
Net cash used in financing activities was 709,214 thousand yen (net cash used of 429,712 thousand yen in the previous
consolidated fiscal year), primarily due to dividends paid and the purchase of treasury shares, although there were proceeds from
disposal of treasury shares.
The table below shows trends of cash flow indicators.
As of March 31,
2017

As of March 31,
2018

As of March 31,
2019

As of March 31,
2020

Equity ratio (%)

70.2

78.2

78.7

79.7

Equity ratio based on market value (%)

570.2

719.8

1,276.0

603.2

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 ofissued 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, 2020 to March 31, 2021) is as follows:
In the security industry where the Group operates, the challenges that companies and other entities face are expanding, including
diversifying and sophisticating threats of attacks targeting specific companies, organizations and government institutions and otheroutside attacks, as well as shortages of security personnel. In this environment, security products will remain in demand.
Accelerating are the outsourcing of security operations that are now difficult for users to accomplish and the utilization of cloudservices to reduce the burden of security operations. In addition, as the impact of the COVID-19 coronavirus protracts, teleworking
is rapidly spreading in the enterprise sector market. Demand is expected to rise not only for security products but also for software
products that ensure efficient business operations in work-from-home conditions. In the public sector market, after the Japanesecabinet decision on the supplementary budget totaling 231.8 billion yen for the GIGA School Concept in December 2019, a
supplementary budget proposal earmarking an extra 229.2 billion yen aimed at speeding up the concept was approved by theJapanese Cabinet in April 2020. It is urgent to swiftly create an environment using ICT to ensure all children’s learning, evenduring an emergency, by rapidly providing every school-aged child with a terminal.
To provide solutions for customers regardless of their size to enjoy a secure Internet environment against this backdrop, theGroup will continue to enhance i-FILTER Ver. 10 and m-FILTER Ver. 5 and add functions to them, thereby providing a moreaccurate security environment in the enterprise sector market and the public sector market. Meanwhile, the Group will increase thevisibility of DigitalArts@Cloud, which was released in May 2018, and promote its sales to provide a cloud environment wherewebpages can be viewed without anxiety and e-mail messages can be opened without hesitation. In the enterprise sector market,
the Chat@Cloud business tool for enhanced operational efficiency via text and video chat was added to the DigitalArts@Cloud
lineup in line with the rapid expansion of teleworking in an effort to increase its user base as well as its sales. In the public sector
market, the GIGA School Concept unveiled a policy to newly supply approximately 7.5 million tablets to school-aged children to
realize an environment in which every child has a terminal. Accordingly, demand for new web filtering software is anticipated,which is worth nearly 1.9 billion yen, reflecting subscription fees for five years estimated based on the Company’s selling price.
The Company will build closer ties with sales partners to offer the extensive i-FILTER lineup at special prices in line with theacceleration of the GIGA School Concept and run a campaign offering services matched with the standard specifications that
conform to the Guidelines on Education Information Security Policy free of charge. Through this, the Company aims to maintainand increase its current market share of around 60% in the market composed of 1,741 boards of education across the country. The
Company will issue the results forecasts for the next fiscal year in consideration of the adverse impact of the COVID-19
coronavirus pandemic on supply, distribution, installation and other actions concerning tablets.

―4―

In the consumer sector market, as more and more young people are using smartphones, they are increasingly being affected byinappropriate Internet content chiefly via smartphone. Filtering needs to be promoted to protect young people. Amid the COVID19 coronavirus crisis, the closures of schools and tutoring schools are protracted and use of computers and other terminals foronline learning at home is increasing. Under such circumstances, the Company will continue to help promote i-FILTER througheducational activities and collaborations with mobile network carriers.
As the Group pursues those initiatives, it expects to post net sales of 7,500 million yen, an ordinary profit of 3,550 million yen,
and a profit attributable to owners of parent of 2,450 million yen in the next consolidated fiscal year.
The Company has determined the results forecasts based on information available on the day of publication of these financial
results for the fiscal year ended March 31, 2020. 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.
Results forecasts for the next fiscal year (consolidated)
Net sales

Profit attributable to owners ofparentOrdinary profit

Million yen

Million yen

Million yen

7,500

3,550

2,450

5,641

2,326

1,590

Year ending March 31, 2021
(forecast)Year ended March 31, 2020
(results)

Results forecasts for the next fiscal year (non-consolidated)
Net salesYear ending March 31, 2021
(forecast)Year ended March 31, 2020
(results)

Ordinary profit

ProfitMillion yen

Million yen

Million yen

7,000

3,500

2,420

5,336

2,359

1,613

(Figures shown are rounded down to the nearest million yen.)
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, 2020. Actual results may be different from the forecasts due to a variety of factors.

2. Basic Approach to Selection of Accounting Standards
The Group will prepare consolidated financial statements based on the Japan GAAP for some time to come, considering acomparison 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.

―5―

3. Consolidated Financial Statements and Major Notes(1) Consolidated balance sheet(Thousand yen)
Fiscal 2019
(As of March 31, 2019)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Securities
Finished goods
Raw materials and supplies
Other

6,169,172
1,172,515
299,968
290

Total current assets

Fiscal 2020
(As of March 31, 2020)－
87,8637,651,645
994,793－771
654
85,614

7,729,809

8,733,479

205,990(104,980)

215,806(115,189)

101,009

100,617

17,519(9,816)

17,519(12,881)

7,703

4,637

416,174(290,055)

443,078(325,965)

Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
VehiclesAccumulated depreciation
Vehicles, net
Tools, furniture and fixtures
Accumulated depreciation

126,119

117,113Land

Tools, furniture and fixtures, net

26,254

26,284

Construction in progress－
261,087

249,474

SoftwareOther

1,044,163
367,390

1,331,410
79,251

Total intangible assets

1,411,553

1,410,661

103,00280,886
1,097

102,529
85,282
1,097

Other

271,910

269,709

Total investments and other assets

456,896458,619

Total property, plant and equipment

822

Intangible assets

Investments and other assets
Investment securities
Deferred tax assets
Shares of subsidiaries and associates

Total non-current assets
Total assets―6―2,129,537

2,118,755

9,859,347

10,852,234

(Thousand yen)
Fiscal 2019
(As of March 31, 2019)
Liabilities
Current liabilities
Accounts payable - trade
Income taxes payable
Provision for bonuses
Advances received
Other
Total current liabilities

Fiscal 2020
(As of March 31, 2020)

22,744
330,672
128,192
1,225,258
303,494

32,469469,079
119,788
1,229,998
274,151

2,010,363

2,125,487

45,444645

45,877645

Non-current liabilities
Asset retirement obligations
Other

46,08946,522

Total liabilities

Total non-current liabilities

2,056,452

2,172,010

Net assets
Shareholders' equity
Share capital

713,590

713,590

Capital surplus
Retained earnings
Treasury shares

827,730
6,518,256(306,939)

972,058
7,340,668(380,126)

Total shareholders' equity

7,752,637

8,646,190

8,499

6,120

Accumulated other comprehensive income
Foreign currency translation adjustment
Total accumulated other comprehensive income
Share acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets

―7―

8,499

6,120

23,587
18,16918,0499,864

7,802,894

8,680,224

9,859,347

10,852,234

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

Net sales
Cost of sales

Fiscal 2019(from April 1, 2018
to March 31, 2019)
5,841,287
1,059,444(Thousand yen)
Fiscal 2020
(from April 1, 2019
to March 31, 2020)
5,641,805
1,361,682

Gross profit

4,781,842

4,280,123

Selling, general and administrative expenses

2,152,750

1,952,086

Operating profit

2,629,092

2,328,036

1,079
198

794
15

Gain on forfeiture of unclaimed dividends
Miscellaneous income

1,168
1,759

840
2,354

Total non-operating income

4,204

4,005

2,224
108

4,812
299

2,333

5,111

2,630,963

2,326,930

2,135

561

Non-operating income
Interest income
Commission income

Non-operating expenses
Foreign exchange losses
Miscellaneous loss
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on reversal of share acquisition rights

2,135

561

Extraordinary losses
Loss on retirement of non-current assets
Loss on valuation of golf club membership

Total extraordinary income

4,374
2,200

65
1,400

Loss on liquidation of subsidiaries
Loss on valuation of shares of subsidiaries

56,135
7,156

Total extraordinary losses

69,866－－
1,465

Profit before income taxes

2,563,232

2,326,026

Income taxes - current
Income taxes - deferred

605,870(7,001)

740,151(4,396)

Total income taxes

598,869

735,755

1,964,363

1,590,271

3,087

(513)

1,961,276

1,590,784

ProfitProfit (loss) attributable to non-controlling interests
Profit attributable to owners of parent―8―

Consolidated statement of comprehensive income
Fiscal 2019(from April 1, 2018
to March 31, 2019)
1,964,363(Thousand yen)
Fiscal 2020
(from April 1, 2019
to March 31, 2020)
1,590,271

13,203(2,378)

13,203(2,378)Comprehensive income

1,977,567

1,587,892

Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable to non-controllinginterests

1,974,480

1,588,405

3,087

(513)

ProfitOther comprehensive income
Foreign currency translation adjustment
Total other comprehensive income―9―(3) Consolidated statement of changes in equity
Fiscal 2019 (from April 1, 2018 to March 31, 2019)(Thousand yen)
Shareholders' equity

Balance at beginningof period
Changes in items
during period
Dividends ofsurplus
Change inownership interestof parent due totransactions with
non-controllinginterests
Profit attributable toowners of parent
Change in scope of
consolidation
Disposal of treasury
sharesPurchase oftreasury shares
Net changes in
items other thanshareholders' equity
Total changes in items
during period
Balance at end of
periodSharecapitalCapitalsurplusRetainedearnings

Treasuryshares713,590825,560

4,991,931(327,671)(444,592)

Accumulated othercomprehensive income
Share
NonTotal
Foreign
Total
accumulated acquisition controllingcurrencyinterests
rightsshareholders'othertranslation
equitycomprehensive
adjustment
income6,203,410(4,703)(4,703)33,812

15,082

Total net
assets6,247,602(444,592)(444,592)－－

1,961,276

1,961,276

1,961,276

9,641

9,641

9,641

20,741

22,912

22,912

(10)

(10)

(10)

2,170

13,203

13,203(10,225)

3,087

6,065

－

2,170

1,526,325

20,731

1,549,227

13,203

13,203(10,225)

3,087

1,555,292

713,590827,730

6,518,256(306,939)

7,752,637

8,499

8,499

23,587

18,1697,802,894―10―

Fiscal 2020 (from April 1, 2019 to March 31, 2020)(Thousand yen)
Shareholders' equity

Balance at beginningof period
Changes in items
during period
Dividends ofsurplus
Change inownership interestof parent due totransactions with
non-controllinginterests
Profit attributable toowners of parent
Change in scope of
consolidation
Disposal of treasury
sharesPurchase oftreasury shares
Net changes in
items other thanshareholders' equity
Total changes in items
during period
Balance at end of
periodSharecapitalCapitalsurplusRetainedearnings

Treasuryshares713,590827,730

6,518,256(306,939)(768,372)

7,752,637

8,499

8,499

23,587

18,169Total net
assets7,802,894(768,372)(768,372)

(123)

(123)

1,590,784

1,590,784－－

226,542

370,994

370,994(299,730)(299,730)(299,730)(123)

1,590,784

144,451

Accumulated othercomprehensive income
Share
NonTotal
Foreign
Total
accumulated acquisition controllingcurrencyinterests
rightsshareholders'othertranslation
equitycomprehensive
adjustment
income(2,378)(2,378)(5,538)(8,305)(16,222)－

144,327

822,412(73,187)

893,552(2,378)(2,378)(5,538)(8,305)877,329

713,590972,058

7,340,668(380,126)

8,646,190

6,120

6,120

18,0499,864

8,680,224―11―

(4) Consolidated statement of cash flows(Thousand yen)
Fiscal 2020
(from April 1, 2019
to March 31, 2020)

Fiscal 2019(from April 1, 2018
to March 31, 2019)
Cash flows from operating activities
Profit before income taxes
Depreciation
Loss on valuation of golf club membership
Increase (decrease) in provision for bonuses
Interest income
Foreign exchange losses (gains)
Gain on reversal of share acquisition rights
Loss on valuation of shares of subsidiaries
Loss on retirement of non-current assets
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Increase (decrease) in accounts payable - other
Decrease (increase) in other current assets
Increase (decrease) in other current liabilities
Other
SubtotalInterest and dividends received

2,563,232
662,496
2,200
15,911(1,079)2,878(2,135)
7,156
4,374
298,266404
450(34,743)
85,10245,582
19,5982,326,026
805,723
1,400(8,404)
(794)
3,974
(561)
－
65
181,825(1,135)
9,839(7,081)
5,860(31,077)
11,944

3,669,697

3,297,605

1,390

1,267

Income taxes paid

(579,225)(612,300)

Net cash provided by (used in) operating activities

3,091,862

2,686,572－(167,827)(741,907)－
950

600,000(45,178)(740,170)
300,000(3,638)Net cash provided by (used in) investing activities(908,784)

111,013

Cash flows from financing activities
Proceeds from disposal of treasury shares
Purchase of treasury shares
Purchase of shares from non-controlling shareholders
Dividends paid

14,822(10)－(444,524)

366,017(300,029)(7,916)(767,286)(429,712)(709,214)(2,267)(5,897)

1,751,098

2,082,473

3,826,443

5,569,172(8,369)－5,569,172

7,651,645

Cash flows from investing activities
Decrease (increase) in time deposits
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from redemption of securities
Other

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
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting
from change in scope of consolidation
Cash and cash equivalents at end of period―12―(5) Notes to consolidated financial statements(Notes on the premise of a growing 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: 4Names of consolidated subsidiaries
Digital Arts Consulting Inc.
Digital Arts America, Inc.
Digital Arts Asia Pacific Pte. Ltd.
Digital Arts Europe Limited(2) Names, etc. of non-consolidated subsidiaries
Non-consolidated subsidiaries
Digital Arts Investment, Inc.
(Reason for exclusion from scope of consolidation)
The non-consolidated subsidiary is a small company. Its total assets, net sales, profit, retained earnings or other items do nothave any significant effect on the consolidated financial statements.
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
Non-consolidated subsidiaries
Digital Arts Investment, Inc.
(Reason why the equity method is not applied)
The non-consolidated subsidiary’s effect on profit, retained earnings and other items is minor and insignificant. The nonconsolidated subsidiary as a whole is not significant.
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) Shares in subsidiaries
The moving average cost 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 write-down 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.

―13―

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 and structures acquired from April 1, 2016.
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 the company.
For software for sale in the market, a method based on estimated sales quantities (or revenue) or the remaining 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 allowancesa. 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.
(4) 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. aretranslated into yen using the spot exchange rate on the consolidated settling day. Revenue and expense 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.
(5) 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 bewithdrawn as needed, and short-term investments that can be realized easily and only have insignificant value fluctuation risk andwhose redemption date arrives within three months of the acquisition date.
(6) Other significant matters that serve as a basis for the preparation of consolidated financial statementsa. Treatment of consumption tax
Consumption tax and local consumption tax are excluded from accounting. Non-recoverable consumption tax and local
consumption tax are treated as expenses in the consolidated fiscal year under review.
(Consolidated balance sheet)*1 The item related to non-consolidated subsidiaries is as follows.
Fiscal 2019
(As of March 31, 2019)
Shares of subsidiaries and associates

Fiscal 2020
(As of March 31, 2020)

1,097 thousand yen

1,097 thousand yen(Consolidated statement of income)*1 The major items of selling, general and administrative expenses and the amounts are as follows.
Fiscal 2019(from April 1, 2018
to March 31, 2019)

Fiscal 2020
(from April 1, 2019
to March 31, 2020)

Advertising expenses

290,527 thousand yen

207,266 thousand yen

Salaries and allowances

626,386

580,044

Provision for bonuses

70,76664,292

Commission expenses

108,709108,522―14―

*2 Total amount of research and development expenses included in general and administrative expenses are as follows.
Fiscal 2019(from April 1, 2018
to March 31, 2019)

Fiscal 2020
(from April 1, 2019
to March 31, 2020)

13,176 thousand yen

873 thousand yen*3 The details of loss on retirement of non-current assets are as follows.
Fiscal 2019(from April 1, 2018
to March 31, 2019)
Tools, furniture and fixtures
Software

3,163 thousand yen
1,211

Fiscal 2020
(from April 1, 2019
to March 31, 2020)
65 thousand yen－*4 The details of loss on liquidation of subsidiaries are as follows.
Fiscal 2019 (from April 1, 2018 to March 31, 2019)
The loss on liquidation of subsidiaries resulted from the completion of the liquidation of FinalCode, Inc.
Fiscal 2020 (from April 1, 2019 to March 31, 2020)
There are no applicable matters.
(Consolidated statements of comprehensive income)*1 Reclassification adjustment and tax effect related to other comprehensive income
Fiscal 2019(from April 1, 2018
to March 31, 2019)

Fiscal 2020
(from April 1, 2019
to March 31, 2020)

Foreign currency translation
adjustment:
Amount that occurred in the fiscal
year under review
Reclassification adjustment

10,989－Before tax effect adjustment

13,203(2,378)--

13,203(2,378)

13,203(2,378)Tax effectForeign currency translation
adjustment
Total other comprehensive income

2,214 thousand yen―15―(2,378) thousand yen

(Consolidated statement of changes in equity)
Fiscal 2019 (from April 1, 2018 to March 31, 2019)
1. Class and number of issued shares and class and number of treasury shares
Number of shares at
Increase in number of Decrease in number of
Number of shares at end
beginning ofshares during
shares duringof consolidated fiscal
consolidated fiscal year consolidated fiscal year consolidated fiscal year
year under review
under review
under review
under review
Issued shares
Common shares

14,133,000－－

14,133,000

Total

14,133,000－－

14,133,000

Common shares(Note)

248,0182

15,700232,320

Total

248,0182

15,700232,320

Treasury shares(Note) An increase in the number of common shares in treasury shares, 2, is due to the purchase of treasury shares. A decrease in
the number of treasury shares, 15,700, is due to the exercise of stock options.
2. Matters related to share acquisition rights and treasury share acquisition rights

Classification

Breakdown of shareacquisition rights

Amount at
Class of shares Number of shares underlying share acquisition rights
end of fiscal
underlying
Increase
Decrease
Beginning ofEnd of fiscal year undershare
during fiscal during fiscal
review
fiscal year
year underacquisition
year under year under(thousandunder review
reviewrightsreview
reviewyen)

ReportingShare acquisition
company (parent
rights as stock options
company)

―

―

―

―

―

23,587

Total

―

―

―

―

―

23,5873. Matters related to dividends(1) Dividends paid

Resolution
Annualshareholders’meeting on June 22,
2018
Board of Directors
meeting on October30, 2018

Class of shares

Total amount of
Dividends per share
dividends(yen)(thousand yen)

Record date

Effective dateCommon shares

194,389

14

March 31, 2018

June 25, 2018

Common shares

250,20318

September 30, 2018

December 4, 2018

(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 ofsharesAnnualshareholders’meeting on June 24,
2019

CommonsharesTotal amountFinancial source Dividends perof dividends
share (yen)of dividends(thousand yen)

Record date

Effective date

Retainedearnings

March 31, 2019

June 25, 2019

417,020―16―

30

Fiscal 2020 (from April 1, 2019 to March 31, 2020)
1. Class and number of issued shares and class and number of treasury shares
Number of shares at
Increase in number of Decrease in number of
Number of shares at end
beginning ofshares during
shares duringof consolidated fiscal
consolidated fiscal year consolidated fiscal year consolidated fiscal year
year under review
under review
under review
under review
Issued shares
Common shares

14,133,000－－

14,133,000

Total

14,133,000－－

14,133,000

Common shares(Note)

232,320

49,422

165,700

116,042

Total

232,320

49,422

165,700

116,042

Treasury shares(Note) An increase in the number of common shares in treasury shares, 49,422, is due to the purchase of treasury shares. A
decrease in the number of treasury shares, 165,700, is due to the exercise of stock options.
2. Matters related to share acquisition rights and treasury share acquisition rights

Classification

Breakdown of shareacquisition rights

Amount at
Class of shares Number of shares underlying share acquisition rights
end of fiscal
underlying
Increase
Decrease
Beginning ofEnd of fiscal year undershare
during fiscal during fiscal
review
fiscal year
year underacquisition
year under year under(thousandunder review
reviewrightsreview
reviewyen)

ReportingShare acquisition
company (parent
rights as stock options
company)

―

―

―

―

―

18,049

Total

―

―

―

―

―

18,0493. Matters related to dividends(1) Dividends paid

Resolution
Annualshareholders’meeting on June 24,
2019
Board of Directors
meeting on October
29, 2019

Class of shares

Total amount of
Dividends per share
dividends(yen)(thousand yen)

Record date

Effective dateCommon shares

417,020

30

March 31, 2019

June 25, 2019

Common shares

351,352

25

September 30, 2019

December 3, 2019(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 ofsharesAnnualshareholders’meeting on June 19,
2020

CommonsharesTotal amountFinancial source Dividends perof dividendsof dividends
share (yen)(thousand yen)

Record date

Effective date

Retainedearnings

March 31, 2020

June 22, 2020

350,423―17―

25

(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 sheets
Fiscal 2019(from April 1, 2018
to March 31, 2019)
Cash and deposit accountTime deposits whose deposit period
is more than three months
Securities

6,169,172 thousand yen

Cash and cash equivalents

Fiscal 2020
(from April 1, 2019
to March 31, 2020)
7,651,645 thousand yen(600,000)－－－

5,569,172

7,651,645(Lease transactions)
There are no applicable matters.
(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 verysafe 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.
Securities and investment securities are short-term investments in investment trusts and public and corporate bonds and are
exposed to the market price fluctuation risk.
(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 of operatingreceivables at the main trading partners under the Company’s credit management regulations and control the due dates andbalances for individual partners. In this way, the Company strives to identify concerns over collections caused by deteriorationin 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 asmuch 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 asmuch 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 a timely
manner.
(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 areavailable. The calculated prices include variable factors, which may change if different assumptions are used.

―18―

2. Matters related to the market prices of financial instruments, etc.
Consolidated balance sheet amounts, market prices and differences between them are as follows:
Fiscal 2019 (As of March 31, 2019)
Consolidated balance sheet
Market price (thousand yen)amount (thousand yen)

Difference (thousand yen)

(1) Cash and deposits

6,169,172

6,169,172－(2) Notes and accounts
receivable - trade

1,172,515

1,172,515－

402,971404,079

1,107

7,744,658

7,745,766

1,107

330,672

330,672－

330,672

330,672－

Consolidated balance sheet
Market price (thousand yen)amount (thousand yen)

Difference (thousand yen)

(3) Securities and investment securities
Bonds held to maturity
Total assets(1) Income taxes payable
Total liabilities

Fiscal 2020 (As of March 31, 2020)(1) Cash and deposits

7,651,645

7,651,645－(2) Notes and accounts
receivable - trade994,793994,793－

102,529

101,805(724)

8,748,969

8,748,244(724)

469,079

469,079－

469,079

469,079－(3) Securities and investment securities
Bonds held to maturity
Total assets(1) Income taxes payable
Total liabilities―19―

(Note) 1. Matters related to calculation methods for the market prices of financial instruments
Assets(1) Cash and deposits, (2) Notes and accounts receivable - trade
These are settled in the short term, and their market prices are close to their book values. Thus, their market prices are
deemed to be their book values.
(3) Securities and investment securities
The market prices of public and corporate bonds are presented by financial institutions, etc. As for investment trusts, themarket prices are similar to the book values, because their yields are similar to those of deposits and their investment
results are distributed in the short term. Thus, their market prices are close to their book values and are deemed to be theirbook values.
For information on securities according to holding purposes, refer to the note on securities.
Liabilities(1) Income taxes payable
They are settled in the short term, and their market prices are similar to their book values. Thus, the market prices are
deemed to be their book values.
2. Monetary claims and securities with maturity periods to be redeemed after the consolidated closing dateFiscal 2019 (As of March 31, 2019)
More than fiveMore than a year,
More than 10
years, within 10
Within a year
years
within five years
years(thousand yen)(thousand yen)(thousand yen)(thousand yen)
Cash and deposits

6,169,172－－－

Notes and accounts receivable - trade

1,172,515－－－

300,000

－

－

－

－

－

100,000－

7,641,687－

100,000－

Securities and investment securities
Bonds held to maturity(1) Government bonds, local government bonds(2) Corporate bonds
Total
Fiscal 2020 (As of March 31, 2020)
More than fiveMore than a year,
More than 10
Within a year
years, within 10
years
within five years(thousand yen)
years
(thousand yen)(thousand yen)(thousand yen)
7,651,645－－－

994,793－－－(1) Government bonds, local government bonds

－

－

－

－

(2) Corporate bonds－－

100,000－

8,646,439－

100,000－

Cash and deposits
Notes and accounts receivable - trade
Securities and investment securities
Bonds held to maturity

Total

―20―

(Securities)
Bonds held for maturity
Fiscal 2019 (As of March 31, 2019)

Type

Market price exceeds
consolidated balance sheet
amountConsolidated balance
sheet amount(thousand yen)

Difference(thousand yen)

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

299,968

300,180

211(2) Corporate bonds

103,002103,899

896

－

－

－

402,971404,0791,107(1) Government bonds,
local government
bonds, etc.

－

－

－

(2) Corporate bonds

－

－

－

(3) Other

－

－

－

－

－

－

402,971404,079

1,107(3) Other
SubtotalMarket price does notexceed consolidatedbalance sheet amountMarket value(thousand yen)

Subtotal
Total

Fiscal 2020 (As of March 31, 2020)

Type

Consolidated balance
sheet amount(thousand yen)

(1) Government bonds,
local government
bonds, etc.
Market price exceeds
consolidated balance sheet
amountDifference(thousand yen)

－

－

－

102,529

101,805

(724)

－

－

－

102,529

101,805(724)(1) Government bonds,
local government
bonds, etc.

－

－

－

(2) Corporate bonds

－

－

－

(3) Other

－

－

－

－

－

－

102,529

101,805(724)(2) Corporate bonds(3) Other
SubtotalMarket price does notexceed consolidatedbalance sheet amountMarket value(thousand yen)

Subtotal
Total

―21―

(Derivatives transactions)
Previous consolidated fiscal year (from April 1, 2018 to March 31, 2019) and consolidated fiscal year under review (from April
1, 2019 to March 31, 2020)
The Group did not conduct any derivatives transactions.
(Retirement benefits)
1. Outline of the retirement benefits system
The Company and its consolidated subsidiaries have a defined contribution pension plan.
2. Retirement benefit expenses
Fiscal 2019 (from April 1, 2018 to March 31, 2019)
The amount that was required for contribution to the defined contribution pension plan was 19,928 thousand yen.
Fiscal 2020 (from April 1, 2019 to March 31, 2020)
The amount that was required for contribution to the defined contribution pension plan was 22,285 thousand yen.
(Stock options)
1. Amount posted as profit due to the forfeiture of unexercised stock options
Fiscal 2020
(from April 1, 2019
to March 31, 2020)

Fiscal 2019(from April 1, 2018
to March 31, 2019)
Gain on reversal of share acquisition rights

2,135

―22―

561

2. Description of stock options, their scale and changes(1) Description of stock options
2010
stock options

2015
stock options

Reporting company

Same as left

Classification and number of persons
subject to grants

Three directors
80 employees

Four directors
151 employees

Stock options by class of shares (Note)

Common stock 99,300 shares

Common stock 350,100 shares

June 8, 2010

November 27, 2015

Being an officer (an officer includes acompany auditor) or an employee at thereporting company or a subsidiary or an
associate of the reporting company andnot being subject to salary reduction or
stricter disciplinary action provided forin the rules of employment of thereporting company or a subsidiary or an
associate of the reporting company fromthe grant date (June 8, 2010) to thevesting date (May 26, 2012)
The vesting dates are as follows:(i) May 26, 2012 for a third of the stock
options(ii) May 26, 2013 for a third of the stock
options(iii) May 26, 2014 for a third of thestock options

Being a director or an employee of thereporting company and not being
subject to salary reduction or stricter
disciplinary action provided for in therules of employment of the reporting
company from the grant date(November 27, 2015) to the vesting date(July 1, 2017)
Share acquisition rights can be
exercised up to the percentage of theallocated share acquisition rights
specified in each item below by eachholder of share acquisition rights only if
operating profit reaches the levelspecified in each item below in thefiscal year ending March 31, 2017, thefiscal year ending March 31, 2018, orthe fiscal year ending March 31, 2019.
(i) If operating profit exceeds ¥1.5
billion, 20% of share acquisition rights
can be exercised(ii) If operating profit exceeds ¥2.0
billion, 50% of share acquisition rights
can be exercised(iii) If operating profit exceeds ¥2.5
billion, 100% of share acquisition rights
can be exercised
In the items above, the operating profit
stated in the consolidated statements ofincome in the Company’s annual
securities report (or the statements ofincome if no consolidated statements ofincome are prepared) shall bereferenced. If the concept of items to bereferenced changes significantly due tothe application of the International
Financial Reporting Standards, etc.
indicators to be referenced shall be
determined by the Board of Directors.

Company

Grant date

Vesting conditions

Requisite service period

Exercise period(i) May 26, 2010 to May 25, 2012 for athird of the stock options(ii) May 26, 2010 to May 25, 2013 for athird of the stock options(iii) May 26, 2010 to May 25, 2014 fora third of the stock options
These periods correspond to (i),(ii), and (iii) of the vesting
conditions.
From the vesting date to June 24, 2019.
The person needs to continue to be an
officer (an officer includes a company
auditor) or an employee of theCompany or a subsidiary or an associateof the Company until the exercise ofstock options.

―23―

No requisite
determined.

serviceperiods

are

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

2016
stock options

2018
stock options

Reporting company

Same as left

Classification and number of persons
subject to grants

Three directors
96 employees

Three directors
151 employees

Stock options by class of shares (Note)

Common stock 848,000 shares

Common stock 1,413,300 shares

December 13, 2016

March 5, 2018

Company

Grant date

Vesting conditions

Requisite service period

Exercise period

Being a director or an employee of thereporting company and not being
subject to salary reduction or stricter
disciplinary action provided for in therules of employment of the reporting
company from the grant date (December
13, 2016) to the vesting date (July 1,
2018)
Share acquisition rights can be
exercised up to the percentage of theallocated share acquisition rights
specified in each item below by eachholder of share acquisition rights only if
operating profit reaches the levelspecified in each item below in thefiscal year ending March 31, 2018, thefiscal year ending March 31, 2019, orthe fiscal year ending March 31, 2020.
(i) If operating profit exceeds ¥2.0
billion, 20% of share acquisition rights
can be exercised(ii) If operating profit exceeds ¥2.5
billion, 50% of share acquisition rights
can be exercised(iii) If operating profit exceeds ¥2.8
billion, 100% of share acquisition rights
can be exercised
In the items above, the operating profit
stated in the consolidated statements ofincome in the Company’s annual
securities report (or the statements ofincome if no consolidated statements ofincome are prepared) shall bereferenced. If the concept of items to bereferenced changes significantly due tothe application of the International
Financial Reporting Standards, etc.
indicators to be referenced shall be
determined by the Board of Directors.
No requisite service periods are
determined.
From the vesting date to May 31, 2028.
The person must continue to be adirector or an employee of the Company
to exercise share acquisition rights.

Being a director or an employee of thereporting company and not being
subject to salary reduction or stricter
disciplinary action provided for in therules of employment of the reporting
company from the grant date (March 5,2018) to the vesting date (July 1, 2021)
Each holder of share acquisition rights
can exercise the share acquisition rights
allocated to them only if operating profit
exceeds ¥4.0 billion in the fiscal year
ending March 31, 2021.
To determine whether the condition
above is met, the operating profit statedin the consolidated statements ofincome in the Company’s annual
securities report (or the statements ofincome if no consolidated statements ofincome are prepared) shall bereferenced. If the concept of items to bereferenced changes significantly due tothe application of the International
Financial Reporting Standards, etc.
indicators to be referenced shall be
determined by the Board of Directors.

No requisite
determined.

serviceperiods

are

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

(Note) The Company conducted a 100-for-1 common stock split on April 1, 2013. In the description above, the number of shares
has been converted to the number of shares after the stock split.

―24―

(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, 2020). The numberof stock options has been converted to the number of shares.
(i) Number of stock options
2010
stock options

2015
stock options

2016
stock options

2018
stock options

Before vesting (shares)
As of March 31, 2019－

218,000

775,400

1,294,000

Granted

－

－

－

－

Forfeited－－

18,500105,700

Vested－218,000

384,600－

Yet to be vested－－

372,300

1,188,300

8,100

32,400－－

Vested－218,000

384,600－

Exercised

8,100

90,40067,200－Forfeited

－

－

500

－

Yet to be exercised－

160,000

316,900－

After vesting (shares)
As of March 31, 2019

(Note) The Company conducted a 100-for-1 stock split on April 1, 2013. The number of stock options is the number after the stock
split.
(ii) Unit price information
2010
stock options
Exercise price (yen)Average stock price when
exercised (yen)2015stock options

2016
stock options

2018
stock options

593

2,034

2,639

3,400

9,570

10,607

10,340－(i) 375 yen(ii) 386 yen
2 yen
24 yen1 yen(iii) 396 yen(Note) 1(Note) 1. The vesting conditions and requisite service period for each fiscal year in (1) Description of stock options in the
Description of stock options, their scale and changes correspond to (i), (ii) and (iii) above.
2. The Company conducted a 100-for-1 stock split on April 1, 2013. The numbers in the unit price information are thoseafter the stock split.

Fair unit value(grant date)(yen)

3. 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 of stock
options forfeited is reflected.

―25―

(Additional information)
The Company continues to implement conventional accounting treatment in accordance with Paragraph 10 (3) of the Practical
Solution on Transactions Granting Employees and Others Stock Acquisition Rights, which Involve Considerations, with Vesting
Conditions (PITF No. 36: January 12, 2018; hereinafter “PITF No. 36”) for transactions granting employees and others shareacquisition rights, which involve considerations, with vesting conditions prior to the day on and after which PITF No. 36 applies.
1. Outline of share acquisition rights, which involve considerations, with vesting conditions
The note is omitted, given that identical descriptions are found in 2. Description of stock options, their scale and changes above.
2. Outline of accounting treatment adopted
When a share acquisition right is issued, the amount of the payment for the issuance of the right is posted as share acquisitionrights in the section of net assets. When a new share is issued in response to the exercise of a share acquisition right, the amount of
the payment for the issuance of the right and the amount of the payment associated with the exercise of the right are transferred toshare capital and legal capital surplus.
When a share acquisition right is forfeited, the amount associated with the forfeiture is treated as profit for the accounting period
when the forfeiture is confirmed.
(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 eight to 15 years from the acquisition. The discount rate is 0.12% to 1.73%. The amount ofasset retirement obligations is calculated based on those assumptions.
(3) Increase/decrease in the asset retirement obligations
Fiscal 2019(from April 1, 2018
to March 31, 2019)
Balance at beginning of fiscal year
Increase due to purchase of property,
plant and equipment
Adjustment due to passage of time

44,360 thousand yen

Balance at end of fiscal year

Fiscal 2020
(from April 1, 2019
to March 31, 2020)
45,444 thousand yen

655

－

428

433

45,44445,877(Segment information, etc.)
Segment information
Previous consolidated fiscal year (from April 1, 2018 to March 31, 2019) and consolidated fiscal year under review (from April
1, 2019 to March 31, 2020)
The Group has only one segment, which is the security business, and segment information is omitted.
Related information
Fiscal 2019 (from April 1, 2018 to March 31, 2019)
1. Information by product/service
The Group has only one product and service classification, and information by product/service is omitted.

―26―

2. Information by region(1) Net sales
Sales to external customers in Japan are more than 90% of net sales in the consolidated statements of income, and information
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 and equipment 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.
(Thousand yen)
Customer name

Net sales

SB C&S Corp.

1,247,566

Daiwabo Information System Co., Ltd.

1,160,228(Note) The name of SoftBank Commerce & Service Corp. changed to SB C&S Corp. on January 1, 2019.
Fiscal 2020 (from April 1, 2019 to March 31, 2020)
1. Information by product/service
The Group has only one product and service classification, 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 statements of income, and information
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 and equipment 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.
(Thousand yen)
Customer name

Net sales

SB C&S Corp.

1,166,937

Daiwabo Information System Co., Ltd.

1,109,164

Information on impairment loss in non-current assets by reporting segment
There are no applicable matters.
Information on amortization of goodwill and unamortized balance by reporting segment
There are no applicable matters.
Information on gain on bargain purchase by reporting segment
There are no applicable matters.

―27―

(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 2019 (from April 1, 2018 to March 31, 2019)
There are no applicable matters.
Fiscal 2020 (from April 1, 2019 to March 31, 2020)
There are no applicable matters.
(Per share information)
Fiscal 2019(from April 1, 2018
to March 31, 2019)

Fiscal 2020
(from April 1, 2019
to March 31, 2020)

Net assets per share

558.33 yen

617.27 yen

Profit per share141.11 yen

113.69 yen

Diluted profit per share

140.80 yen

110.83 yen(Note) Base for calculating profit per share and diluted profit per share
Item

Fiscal 2019(from April 1, 2018
to March 31, 2019)

Fiscal 2020
(from April 1, 2019
to March 31, 2020)

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

1,961,276

1,590,784－－

1,961,276

1,590,784

13,898,934

13,991,859－－

Increase in the number of common shares

30,455

361,483(Of the increase, the number of share acquisition rights)(shares)

30,455

361,483

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

Share acquisition rights

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

Resolution on November 12,
2015
Number of potential shares:
218,000
Resolution on November 10,
2016
Number of potential shares:
775,400
Resolution on February 16,
2018
Number of potential shares:
1,294,000―28―

Share acquisition rights
Resolution on November 10,
2016
Number of potential shares:
372,300
Resolution on February 16,
2018
Number of potential shares:
1,188,300

(Significant subsequent events)
There are no applicable matters.

―29―

4. Non-consolidated Financial Statements and Major Notes(1) Balance sheet(Thousand yen)
Fiscal 2019
(As of March 31, 2019)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Securities
Finished goods
Supplies
Advance payments - trade
Prepaid expenses
Other

5,982,081
1,143,621
299,968290－
807
65,27820,523

Total current assets

Fiscal 2020
(As of March 31, 2020)

7,517,412
916,532－
771
654－
63,5353,395

7,512,572

8,502,301

Non-current assets
Property, plant and equipment
Buildings
Vehicles

101,009
7,703

100,617
4,637

Tools, furniture and fixtures
Land
Construction in progress

124,985
26,254－112,947
26,284822

Total property, plant and equipment

259,953

245,308

Intangible assets
Software
Software in progress
Telephone subscription rightOther

1,043,645
367,199
190
15

Total intangible assets

1,411,051

1,331,822
79,060190－
1,411,073

Investments and other assets
Investment securities
Shares of subsidiaries and associates
Investments in capital

103,002
168,58510

102,529
153,635
10

Long-term prepaid expenses
Leasehold and guarantee deposits
Deferred tax assets
Other

28,890182,990145,91357,426

26,948186,271
154,887
56,139Total investments and other assets
Total non-current assets
Total assets―30―

686,818

680,4212,357,823

2,336,803

9,870,395

10,839,105

(Thousand yen)
Fiscal 2019
(As of March 31, 2019)

Fiscal 2020
(As of March 31, 2020)

Liabilities
Current liabilities
Accounts payable - trade
Accounts payable - otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Deposits received
Provision for bonuses

19,236
151,964
52,604
329,70399,1251,215,782
23,273
128,192

7,067
126,723
41,438469,079
77,337
1,223,090
13,122
119,788

Total current liabilities

2,019,882

2,077,649

Non-current liabilities
Asset retirement obligations

45,44445,877

Other

645

645

46,08946,522

2,065,972

2,124,171

713,590

713,590

Legal capital surplus
Other capital surplus

700,222
129,682

700,222274,134

Total capital surplus

829,905

974,357

6,544,279

7,389,064

6,544,279

7,389,064

Total non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Share capital
Capital surplus

Retained earnings
Other retained earnings
Retained earnings brought forward
Total retained earnings
Treasury shares(306,939)(380,126)

Total shareholders' equity

7,780,835

8,696,884

Share acquisition rights
Total net assets
Total liabilities and net assets―31―

23,58718,0497,804,423

8,714,933

9,870,395

10,839,105

(2) Statement of income

Net sales
Cost of sales
Beginning finished goods inventory
Cost of Internet service

Fiscal 2019(from April 1, 2018
to March 31, 2019)5,752,991(Thousand yen)
Fiscal 2020
(from April 1, 2019
to March 31, 2020)
5,336,838

695
1,028,520

290
1,098,585

1,029,215

1,098,875

14

24

Total
Transfer to other accountEnding finished goods inventory

290

771

1,028,910

1,098,080

Gross profit

4,724,081

4,238,758

Selling, general and administrative expenses

1,949,449

1,881,313

Operating profit

2,774,631

2,357,444

Cost of finished goods sold

Non-operating income
Interest income

182

193

Interest on securities
Commission income
Gain on forfeiture of unclaimed dividends
Miscellaneous income

896
2,598
1,168
834

600
3,615
840
2,312

Total non-operating income

5,678

7,562

2,878

Non-operating expenses
Foreign exchange losses
Commission for purchase of treasury shares
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on reversal of share acquisition rights
Distribution from the liquidation of subsidiaries

－

5,555
299

2,878

5,854

2,777,431

2,359,152

2,135
37,25739,393561－
561

Extraordinary losses
Loss on retirement of non-current assets
Loss on valuation of golf club membership

4,374
2,200

10
1,400

Loss on valuation of shares of subsidiaries

219,860

14,949Total extraordinary income

226,434

16,360

Profit before income taxes

Total extraordinary losses

2,590,390

2,343,353

Income taxes – current
Income taxes – deferred

596,476
209,047

739,171(8,974)

Total income taxes
Profit―32―

805,523

730,196

1,784,866

1,613,156

Detailed statement of cost of Internet service

Fiscal 2019(from April 1, 2018 to March 31, 2019)
ClassificationNote
numberFiscal 2020
(from April 1, 2019 to March 31, 2020)

Amount (thousand yen)

Composition
rate
(%)

Amount (thousand yen)

Composition
rate
(%)

179,986

10.6

32,483

1.8

I Material cost
II Labor cost

*1

668,15339.4

691,909

37.1

III Expenses*2848,37550.0

1,138,653

61.1

1,696,515

100.0

1,863,046

100.0

Total expenses
Transfer to other account*3

Cost of Internet service

667,995

764,461

1,028,520

1,098,585(Notes)Fiscal 2019(from April 1, 2018 to March 31, 2019)*1 Major items in labor cost
Salaries and allowances
Legal welfare expenses
Bonuses
Provision for bonuses
Other salaries*1 Major items in labor cost
425,274
thousand yen
88,208thousand yen
57,372
thousand yen
57,425thousand yen
33,372
thousand yen*2 Major items in expenses
Outsourcing expenses
Depreciation
Rent expenses

Fiscal 2020
(from April 1, 2019 to March 31, 2020)

Salaries and allowances
Legal welfare expenses
Bonuses
Provision for bonuses
Other salaries

429,138
thousand yen
88,538thousand yen
71,749thousand yen
55,495thousand yen
35,028thousand yen*2 Major items in expenses
100,459
thousand yen
484,645thousand yen
93,946thousand yen*3 Major items in transfer to other accountSelling, general and34,115administrative expenses
thousand yen
633,880
Non-current assets
thousand yen
667,995
Total
thousand yen
4 Costing method
The job order cost system based on actual costs is
employed for the Company’s costing.

Outsourcing expenses
Depreciation
Rent expenses

92,616thousand yen
753,165
thousand yen
93,950thousand yen*3 Major items in transfer to other accountSelling, general and
32,020administrative expenses
thousand yen
732,441
Non-current assets
thousand yen
764,461
Total
thousand yen
4 Costing method
Same as left―33―

(3) Statement of changes in equity
Fiscal 2019 (from April 1, 2018 to March 31, 2019)(Thousand yen)
Shareholders' equity
Capital surplus

Balance at beginning of
periodChanges in items during
periodSharecapitalLegalcapitalsurplus

Othercapitalsurplus713,590

700,222

127,511Retained earnings

Otherretainedearnings
Total capital
Retained
surplusearnings
brought
forward827,734

5,204,006

Total
retainedearnings

Treasuryshares5,204,006(327,671)

Share
Total
acquisition
shareholders' rights
equity6,417,660

33,812

Total net
assets6,451,473

Dividends of surplus(444,592)(444,592)(444,592)(444,592)

Profit

1,784,866

1,784,866

1,784,866

1,784,866

20,741

22,912

22,912

(10)

(10)

(10)

Disposal of treasury
sharesPurchase of treasury
sharesNet changes in items
other than shareholders'equityTotal changes in items
during period
Balance at end of period

2,170

2,170

(10,225)(10,225)

－

－

2,170

2,170

1,340,273

1,340,273

20,731

1,363,175(10,225)

1,352,950

713,590

700,222

129,682829,905

6,544,279

6,544,279(306,939)

7,780,835

23,587

7,804,423

Fiscal 2020 (from April 1, 2019 to March 31, 2020)(Thousand yen)
Shareholders' equity
Capital surplus

713,590

700,222

129,682

Total net
assets6,544,279

6,544,279(306,939)

Dividends of surplus(768,372)(768,372)(768,372)(768,372)

Profit

1,613,156

1,613,156

1,613,156

1,613,156

226,542

370,994

370,994(299,730)(299,730)(299,730)

Balance at end of period

Other
capitalsurplus

Share
Total
acquisition
shareholders' rights
equityTotal
retainedearnings

Disposal of treasury
sharesPurchase of treasury
sharesNet changes in items
other than shareholders'equityTotal changes in items
during period

LegalcapitalsurplusOtherretainedearnings
Total capital
Retained
surplusearnings
brought
forwardTreasurysharesBalance at beginning of
periodChanges in items during
periodSharecapitalRetained earnings

144,451

829,905

144,451

7,780,835

23,587

7,804,423(5,538)(5,538)－－144,451

144,451

844,784

844,784(73,187)

916,048(5,538)910,510

713,590

700,222274,134

974,357

7,389,064

7,389,064(380,126)

8,696,884

18,0498,714,933―34―

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

5. Other
There are no applicable matters.

―35―