Quarterly Consolidated Financial Results for First Three Months of Fiscal
Year Ending March 31, 2021 (Japanese Accounting Standards)
Name of listedcompany:
Securities code:

Digital Arts Inc.

July 31, 2020
Tokyo Stock Exchange
1st Section

Listed on:2326

URL https://www.daj.jp

Representative Director,Representative:(Title)
President and CEO
General Manager of theContact:(Title)Administration
Department
Scheduled date for submission ofAugust 7, 2020
quarterly report
Preparation of supplementary explanatory : Yes
documents for quarterly results
Holding of quarterly results briefing: No(Name)Toshio Dogu(Name)Isao Konishi

TEL: 03-5220-6045

Scheduled date to start
dividends distribution:-(Figures shown are rounded down to the nearest million yen.)

1. Consolidated financial results for the first three months of the fiscal year ending March 31, 2021
(April 1, 2020 – June 30, 2020)(1) Consolidated operating results (cumulative totals) (Percentage figures represent changes from same period of previous year.)Net sales

Operating profit

Million yen

First three months of year
1,413
ending March 31, 2021
First three months of year
1,249
ended March 31, 2020(Note) Comprehensive First three months ofincome:year ending March 31,
2021

Profit attributable toowners of parent

Ordinary profit%

Million yen%

Million yen%

Million yen%

13.2

485

17.2

489

18.8

334

19.1

2.6

413

40.0

411

39.8

280

60.2

331millionyen(19.4%)First three months ofyear ended March 31,
2020

Profit per share (basic)

277million
yen(53.7%)

Profit per share (diluted)
Yen

Yen

First three months of year ending March 31, 2021

23.86

23.33

First three months of year ended March 31, 2020

20.19

20.15

(2) Consolidated financial position
Total assets

Net assets

Million yen

Equity ratio

Million yen

As of June 30, 2020
10,769As of March 31, 2020
10,852(Reference) Equity capital: As of June 30, 2020
8,635million yen

Net assets per share%

Yen

8,652
80.2
616.108,680
79.7
617.27
As of March 31, 2020
8,652million yen

2. Dividends
Annual dividends
1Q-end2Q-end3Q-endYear-end

Annual

Yen

Yen

Yen

Yen

Yen

Year ended March 31, 2020

－25.00－25.0050.00

Year ending March 31, 2021

－25.00－30.0055.00

Year ending March 31, 2021 (forecast)(Note) Revisions to most recently announced dividend forecast: No―1―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 toNet sales
Operating profit
Ordinary profit
Profit per shareowners of parent%

Million yen%

Million yen%

YenFirst six months
3,300
19.4
1,490
35.8
Full year
7,500
32.9
3,550
52.5(Note) Revisions to most recently announced results forecasts

Million yen%

Million yen

1,490
3,550

36.4
52.6

1,030
2,450: No

38.2
54.0

73.48
174.79* Notes(1) Changes in important subsidiaries during the first three months of fiscal
year ending March 31, 2021

:

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 to quarterly
consolidated financial statements (Application of special accounting methods to the preparation of quarterly consolidated financialstatements)” on page 9 of the attached materials.

(3) Changes in accounting policies, changes of accounting estimates and restatement
1) Changes in accounting policies due to revisions of accounting standards, etc.

:

None

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

:

None

3) Changes in accounting estimates:

None4) Restatement:None(4) Number of shares outstanding (common stock)1) Number of shares issued and outstanding(including treasury shares)
2) Number of treasury shares
3) Average number of shares issued andoutstanding in each period (cumulative total)**

As of June 30, 2020

14,133,000

As of June 30, 2020

115,942First three monthsof year ending
March 31, 2021

As of March 31,
2020
As of March 31,
2020

14,133,000
116,042First three months
14,017,028

of year ended

13,906,554

March 31, 2020

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 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 concerning results forecasts, please refer to “1. Qualitative Information on Financial Results for the First Three
Months of Fiscal Year Ending March 31, 2021 (3) Explanation about information on future forecasts such as consolidated
results forecasts” on page 5 of the attached materials.
(How to obtain supplementary materials for quarterly results)
The material is available at Digital Arts Inc. corporate website.

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○Table of Contents for the Attached Document

1. Qualitative Information on Financial Results for the First Three Monthsof Fiscal Year Ending March 31, 2021…………………………………………………………….…………2(1) Explanation about business results……………………………………………………………….…………… 2(2) Explanation about financial position …………………………………………………………….…………… 3(3) Explanation about information on future forecasts such as consolidated results forecasts…………………… 3
2. Quarterly Consolidated Financial Statements and Primary Notes ………………………………..…………… 4(1) Quarterly consolidated balance sheet………………………………………………………………………… 4(2) Quarterly consolidated statement of income and comprehensive income…………………………………… 5Quarterly consolidated statement of income
Consolidated first three months………………………………………………………………………… 5Quarterly consolidated statement of comprehensive income
Consolidated first three months………………………………………………………………………… 6(3) Notes to quarterly consolidated financial statements………………………………………………………… 7(Notes on the premise of a going concern)…………………………………………………………………… 7(Notes on significant changes in the amount of shareholders’ equity)……………………………………… 7(Application of special accounting methods to the preparation of quarterly consolidated
financial statements)………………………………………………………………………………………… 7―3―

1. Qualitative Information on Financial Results for the First Three Months of Fiscal Year Ending March 31, 2021
(1) Explanation about business results
During the first three months of the consolidated fiscal year under review (April 1 through June 30, 2020), the Japanese
economy saw consumer spending and corporate earnings plummet sharply due to the stagnation and contraction of economic
activities under the COVID-19 pandemic. The outlook remains extremely uncertain.
In the security industry in which the Digital Arts Group (the “Group”) operates, demand expanded amid successive cases ofdamages caused by diversifying cyberattacks, including ransomware and Emotet. Apart from demand from large-sizedorganizations, new demand for security measures is growing from medium- and small-sized enterprises, which werecomparatively lagging in these measures. In addition, IoT, AI and other technologies were increasingly used and the practice ofworking 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. In thepublic sector market, after the Japanese cabinet 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 the Japanese Cabinet in April 2020. It is urgent to swiftly create an environment using ICT to ensure
all children’s learning, even during an emergency, by rapidly providing every school-aged child with a terminal.
Amid these circumstances, the Group's domestic operations continued efforts to improve i-FILTER Ver. 10 and m-FILTER Ver.
5 by enhancing performance and adding functions, and to provide higher-precision security environments for the enterprise sector
and public sector markets to offer solutions for a secure Internet environment regardless of the size of the businesses operated bycustomers. In addition, for the enterprise sector market, the Group implemented activities for increasing recognition and sales
promotion of DigitalArts@Cloud, released in May 2018, in view of the rapid introduction of cloud technologies to online services
and e-mail environments amid the spread of teleworking. The Group worked towards allowing users to view webpages withoutworry and to open e-mail messages without hesitation in the cloud environment. The Group also endeavored to develop acommunication tool for online meetings and prepared to offer cloud services not only for security but also for enhancing work
efficiency under the circumstances where it is rapidly becoming common to work from home or other styles of teleworking amidthe COVID-19 crisis.
For the public sector market, the GIGA School Concept sets out a policy of newly supplying around 7.5 million tablets toschool-aged children to ensure that each one has a terminal. In line with acceleration of this concept, the Company is working
more closely with sales partners to offer an extensive lineup of i-FILTER at special prices and is running a campaign to provide
service that matches the standard specifications that conform to the Guidelines on Education Information Security Policy free ofcharge. With these actions, the Company retained its current market share of around 60% among 1,741 boards of education andconstructed a system for holding a larger market share.
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. Given these circumstances, the Company continued its educational activities and conductedefforts to popularize i-FILTER in collaboration with mobile network carriers.
As a result, net sales for the first three months of the consolidated fiscal year under review stood at 1,413,949 thousand yen, up
13.2% year on year, operating profit at 485,051 thousand yen, up 17.2% year on year, ordinary profit at 489,200 thousand yen, up
18.8% year on year, and profit attributable to owners of parent at 334,399 thousand yen, up 19.1% year on year.
The following describes business performance in separate markets.
Enterprise Sector MarketIn the enterprise sector market, active sales promotion efforts enhanced recognition of functionality for i-FILTER Ver. 10 and mFILTER Ver. 5, which are both high-end models, and helped acquire new contracts. The shortage of security professionals and thespread of teleworking accelerated the use of cloud services to reduce the burden of security operations. The sales share of cloudservice products in the i-FILTER series in the Company's product lineup gradually increased and net sales soared. 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―4―the service provision period. As a result, the balance of advances received increased. In addition, Digital Arts Consulting Inc., asubsidiary offering security consulting services, won new projects, contributing to the rise in net sales.
Net sales in this market reached 847,245 thousand yen, up 16.7% year on year.
Public Sector Market
In the public sector market, the Group traditionally enjoyed high recognition and a large market share as a provider of Japanmade security solutions with a focus on internal data leakage. Highly rated for its track record and reliability, it continuously
gained new contracts for i-FILTER Ver. 10 and m-FILTER Ver. 5, which provide advanced security measures, including thoseagainst internal data leakage and targeted attacks. As in the enterprise sector market, there is a gradual trend towards security
products with cloud technologies for the public sector market. The Group's steady acquisition of new contracts for cloud service
products in the i-FILTER series meant growth in advances received. The GIGA School Concept envisions the integrated
development of providing every school-aged child with a learning terminal and constructing high-speed and high-capacity
communication networks. In association, the Group already obtained orders for i-FILTER from some boards of education. It is
anticipated that these orders will gather momentum in and after the second quarter of the current consolidated fiscal year.
As a consequence, net sales in this market stood at 451,588 thousand yen, up 17.8% 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 theintroduction of filtering amid the widespread use of smartphones among young people and strong sales of i-FILTER for Multiple
Devices, for which the Group implemented intensive sales activities, contributed to an increase in licenses. However, net sales
tumbled due to revisions to the prices for sales to mobile network carriers.
Net sales in this market amounted to 115,115 thousand yen, shrunk 18.1% year on year.

(2) Explanation about financial position(Assets)
Total assets at the end of the first quarter of the consolidated fiscal year under review decreased 83,173 thousand yen from theend of the previous consolidated fiscal year to 10,769,060 thousand yen. This was due mainly to a slide in cash and deposits.
(Liabilities)
Total liabilities at the end of the first quarter of the consolidated fiscal year under review declined 55,120 thousand yen fromthe end of the previous consolidated fiscal year to 2,116,890 thousand yen. This was due chiefly to a decrease in income taxes
payable.
(Net assets)
Net assets at the end of the first quarter of the consolidated fiscal year under review decrease 28,053 thousand yen to 8,652,170
thousand yen. This resulted from a decrease following payment of dividends, though profit attributable to owners of parent led to
growth in retained earnings.

(3) Explanation about information on future forecasts such as consolidated results forecasts”
Operating results for the first three months 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, 2021 announced on May 8,2020.
The Company has determined the results forecasts based on information available on the day of these financial results for thefirst three months of the year ending 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.

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2. Quarterly Consolidated Financial Statements and Primary Notes(1) Quarterly consolidated balance sheet(Thousand yen)
Fiscal 2020
(As of March 31, 2020)

First quarter of fiscal 2021(As of June 30, 2020)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - tradeFinished goods
Supplies
Other
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Software
Other
Total intangible assets
Investments and other assets
Total non-current assets
Total assets

7,651,645
994,7937,609,185
953,717

771
654

759
623

85,614

107,353

8,733,479

8,671,639

249,474

244,869

1,331,410

1,301,566

79,251

92,4301,410,661

1,393,996

458,619458,555

2,118,755

2,097,421

10,852,234

10,769,060

Liabilities
Current liabilities
Accounts payable - trade32,46924,372

Income taxes payable
Provision for bonuses

469,079
119,788

179,585
73,995

Advances received
Other

1,229,998
274,151

1,310,899
478,872

Total current liabilities

2,125,487

2,067,725

Non-current liabilities
Asset retirement obligations

45,87748,519

645

645

Other
Total non-current liabilities

46,522

49,1642,172,010

2,116,890

Share capital
Capital surplus

713,590972,058

713,590971,997

Retained earnings
Treasury shares

7,340,668(380,126)

7,324,643(379,799)

Total shareholders' equity

8,646,190

8,630,432

Foreign currency translation adjustment

6,120

5,493

Total accumulated other comprehensive income

6,120

5,493

Share acquisition rights

18,0499,060

Non-controlling interests

9,864

7,184

Total liabilities
Net assets
Shareholders' equity

Accumulated other comprehensive income

Total net assets
Total liabilities and net assets―6―

8,680,224

8,652,170

10,852,234

10,769,060

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

Net sales
Cost of sales(Thousand yen)First three months of fiscal 2020 First three months of fiscal 2021
(from April 1, 2019(from April 1, 2020
to June 30, 2019)
to June 30, 2020)
1,249,447
1,413,949
286,767
427,792

Gross profit

962,680

986,157

Selling, general and administrative expenses

548,911501,105

Operating profit

413,768

485,051

253

143

Commission income
Gain on forfeiture of unclaimed dividends

15－
593

Foreign exchange gains
Subsidy income

340
1,629

Miscellaneous income－－115Total non-operating income

384

4,148

Foreign exchange losses

2,214－

Total non-operating expenses

2,214－

411,939489,200

75

8,986

75

8,986

Loss on retirement of non-current assets

0－

Total extraordinary losses

0－Profit before income taxes

412,014498,186

Income taxes

132,017

166,466

Profit279,996

331,720(804)(2,679)280,800

334,399

Non-operating income
Interest income

－

1,441

Non-operating expenses

Ordinary profit
Extraordinary income
Gain on reversal of share acquisition rights
Total extraordinary income
Extraordinary losses

Loss attributable to non-controlling interests
Profit attributable to owners of parent―7―

Quarterly consolidated statement of comprehensive income
Consolidated first three months

ProfitOther comprehensive income(Thousand yen)First three months of fiscal 2020 First three months of fiscal 2021
(from April 1, 2019(from April 1, 2020
to June 30, 2019)
to June 30, 2020)
279,996
331,720

Foreign currency translation adjustment(2,674)(626)

Total other comprehensive income(2,674)(626)

Comprehensive income

277,322331,093

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

278,126

333,772(804)(2,679)―8―

(3) 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 rate establishedafter applying tax accounting to profit before income taxes for the consolidated fiscal year, which includes the first quarter ofthe consolidated fiscal year under review, and such tax expenses are calculated by multiplying this estimated effective tax rateby profit before income taxes.

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