Consolidated Financial Results for the Fiscal Year Ended March 31, 2019
[Japan GAAP]
Name of listedcompany:
Securities code:

Digital Arts Inc.
2326

Representative:(Title)Contact:(Title)May 9, 2019
Tokyo Stock Exchange
1st Section

Listed on:

URL https://www.daj.jp/
Representative Director,(Name) Toshio Dogu
President and CEO
Director and General
Manager of the(Name) Hidenobu Akazawa TEL: 03-5220-6045
Administration Department

Scheduled date to hold theordinary general meeting ofJune 24, 2019
shareholders:
Scheduled date for filing annual
June 25, 2019financial report:
Supplementary materials prepared : Yes
Results information meeting held
: Yes

Scheduled date to start dividends
June 25, 2019
distribution:(for institutional investors and financial analysts)(Figures shown are rounded down to the nearest million yen.)

1. Consolidated financial results for the year ended March 31, 2019 (April 1, 2018 – March 31, 2019)(1) Consolidated operating results(Percentage figures represent changes from same period of previous year.)Net sales

Operating profit

Million yen％

Million yen％

Million yen％

Million yen

％

2,630

37.8

1,961

53.0

1,909

5.4

1,281

13.9

Year ended March
5,841
14.2
2,629
38.2
31, 2019
Year ended March
5,116
1.2
1,902
4.3
31, 2018(Note)
Comprehensive income: Year ended March 31, 2019:
1,977 million yen (55.1%)
Profit per share(basic)Profit per share(diluted)

Yen

Profit attributable toowners of parent

Ordinary profit

Year ended March 31, 2018:
1,275 million yen (13.1%)
Ordinary profit tototal assets

Operating profit to
net sales

％

％

％

28.1

29.6

45.0

22.5

24.9

37.2

Return on equity

Yen

Year ended March
141.11140.8031, 2019
Year ended March
92.46
92.13
31, 2018
Reference: Equity-method
Year ended March 31, 2019:
investment profit (loss):－ million yen

Year ended March 31, 2018:－ million yen(2) Consolidated financial position
Total assets
As of March 31,
2019
As of March 31,
2018
Reference: Equity capital:

Net assets

Equity ratio

Net Assets per share

Million yen

Million yen

％

Yen

9,859

7,802

78.7

558.33

7,928

6,247

78.2

446.43

Year ended March 31, 2019:
7,761 million yen

Year ended March 31, 2018:
6,198 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, 2019
Year ended March
31, 2018

Million yen

Million yen

Million yen

Million yen

3,091

(908)

(429)

5,569

1,663

(774)

(293)

3,826

―1―

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

Annual dividends
1Q-endYen

2Q-endYen

3Q-endYen

Year-end

Year ended March
—
14.00
—
31, 2018
Year ended March
—
18.00
—
31, 2019
Year ending March
—
25.00
—
31, 2020 (forecast)(Note) Revisions to most recently announced dividend forecast: No

AnnualYen

YenMillion yen

％

％

14.00

28.00

388

30.3

6.8

30.00

48.00

667

34.0

9.6

25.00

50.00

30.5

3. Forecast of consolidated financial results for the year ending March 31, 2020 (April 1, 2019 – March 31, 2020)(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

3,100
6,800

12.2
16.4

1,340
3,300

29.3
25.5

1,340
3,300

28.8
25.4

924
2,277

(6.8)
16.1

66.52
163.83―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.

: Yes2) Changes in accounting policies due to reasons other than those stated in 1): None3) Changes in accounting estimates: None4) Restatement: None(Note) For details, refer to (Change in the Accounting Policy) in (5) Notes to consolidated financial statements in 3. Consolidated
financial statements and major notes on page 14 of the Attached Document.

(3) Number of shares outstanding (common stock)1) Number of shares issued and outstanding Year ended March
31, 2019(including treasury shares)
Year ended March

2) Number of treasury shares

31, 2019

3) Average number of shares issued and Year ended March
31, 2019
outstanding in each period

14,133,000
232,320
13,898,934

Year ended March
31, 2018

14,133,000

Year ended March

248,01831, 2018
Year ended March
31, 2018

13,864,531(Reference) Overview of the non-consolidated business results
1. Non-consolidated financial results for the year ended March 31, 2019 (April 1, 2018 – March 31, 2019)(Percentage figures represent changes from previous year.)(1) Non-consolidated operating results
Net salesYear ended March
31, 2019
Year ended March
31, 2018

Operating profit

Ordinary profit

ProfitMillion yen%

Million yen%

Million yen%

Million yen

%

5,752

14.0

2,774

32.9

2,777

32.4

1,784

107.4

5,046

(1.1)

2,087

1.0

2,097

2.0

860

(35.7)

Profit per share
Year ended March
31, 2019
Year ended March
31, 2018

Diluted profit per share
Yen

Yen

128.42

128.14

62.07

61.85

(2) Non-consolidated financial position
Total assets
As of March 31,
2019
As of March 31,
2018
Reference: Equity capital:

Net assets

Equity ratio

Net assets per share

Million yen

Million yen

%

Yen

9,870

7,804

78.8

559.74

8,149

6,451

78.7

462.20

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

As of March 31, 2018: 6,417 million yen

2. Forecast of non-consolidated financial results for the year ending March 31, 2020 (April 1, 2019 – March 31, 2020)(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

3,000
6,600

9.5
14.7

1,340
3,300

12.6
18.8

930
2,290

13.7
28.3

66.91
164.76* 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 5 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……………………………………………………

4(3) Overview of cash flows in the fiscal year under review ……………………………………………………………

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

5

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

6

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

7(1) Consolidated balance sheet …………………………………………………………………………………………

7(2) Consolidated statement of income and consolidated statement of comprehensive income…………………………

9

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

9

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

10(3) Consolidated statement of changes in equity ………………………………………………………………………

11(4) Consolidated statement of cash flows ………………………………………………………………………………

13(5) Notes to consolidated financial statements…………………………………………………………………………

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

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

14(Change in accounting policy)………………………………………………………………………………………

15(Consolidated balance sheet) …………………………………………………………………………………………

16(Consolidated statement of income) …………………………………………………………………………………

16(Consolidated statements of comprehensive income)…………………………………………………………………

16(Consolidated statement of changes in equity) ………………………………………………………………………

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

19(Lease transactions) ……………………………………………………………………………………………………

19(Financial instruments) ………………………………………………………………………………………………

19(Securities) ……………………………………………………………………………………………………………

22(Derivatives transactions) ……………………………………………………………………………………………

23(Retirement benefits) …………………………………………………………………………………………………

23(Stock options) ………………………………………………………………………………………………………

24(Asset retirement obligations) ………………………………………………………………………………………

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

28(Related party information) …………………………………………………………………………………………

29(Per share information) ………………………………………………………………………………………………

30(Significant subsequent events)………………………………………………………………………………………

30

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

31(1) Balance sheet ………………………………………………………………………………………………………

31(2) Statement of income …………………………………………………………………………………………………

33(3) Statement of changes in equity ………………………………………………………………………………………

35(4) Notes to non-consolidated financial statements………………………………………………………………………

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

36

5. Other………………………………………………………………………………………………………………………

36

―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, 2018 – March 31, 2019), the Japanese economy saw a continued
recovery in employment and corporate income amid the turnaround in consumer spending and capital investment. Meanwhile, theoutlook for the world economy remains uncertain given concern about the intensifying trade war between the United States andChina and about political management of the U.S. administration and mounting geopolitical risks.
In the security industry where the Digital Arts Group (hereinafter “the Group”) operates, demand is expanding amid successive
cases of diversifying cyberattacks including ransomware. Apart from demand from large-sized organizations as conventionally main
sources of demand, demand for the new introduction of security measures is growing from medium- and small-sized enterprises,
which are comparatively lagging in such measures. Amid the spread of IoT, AI and other technologies and the implementation of thework style reform, security personnel need to address increasingly diversifying and sophisticating risks. Accordingly, demand for
security services will continue to expand.
Under these circumstances, the Group’s domestic operations continuously endeavored to expand sales of i-FILTER Ver. 10 and mFILTER 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. In addition, the Group launched a cloud service for i-FILTER and m-FILTER in May 2018 in light of a rapid
shift to cloud-based web services and email environment. The Group will open a prospect of viewing webpages without anxiety andreading email messages without hesitation in the cloud environment. FinalCode added support for a browser view feature highly
awaited by existing users and prospective customers. This feature enables outside users receiving encrypted files to view themwithout installing any client software. The Group will continue its efforts to enhance the features of the product for boosting its sales.
In the consumer sector market, smartphones are increasingly used not only by senior high schoolers but by junior high schoolers 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 to young people, which
had been compulsory before the revision. The Group continued to work with mobile network carriers and mobile virtual network
operations (MVNOs) to further promote i-FILTER for smartphones.
Outside Japan, marketing operations have been limited to FinalCode. The Group carried out its reorganization in a bid to globallypromote the Digital Arts brand in the future as it does in the Japanese market as a general security solution provider.
As a result of the above, consolidated net sales for the fiscal year under review stood at 5,841,287 thousand yen, up 14.2% year on
year. In terms of profit, while the Group incurred costs from reorganization and other initiatives after a revision of its overseas
strategy, the more focused application of management resources began to produce the effect of improving profitability in the third
quarter. Operating profit rose 38.2% year on year to 2,629,092 thousand yen, ordinary profit climbed 37.8% to 2,630,963 thousand
yen, and profit attributable to owners of parent surged 53.0% to 1,961,276 thousand yen.
The following describes business performance in separate markets.
Enterprise Sector Market
In this market, a mainstay product of m-FILTER attained healthy sales after steadily gaining renewals of contracts from thepreceding consolidated fiscal year. FinalCode introduced the highly demanded Browser View feature. That gave impetus to theacquisition of deals after a temporary stagnation, and the Group made one of the largest deals ever. With regard to i-FILTER Ver. 10
and m-FILTER Ver. 5 as high-end models for which marketing activities were geared up earlier in the consolidated fiscal year underreview, active promotion helped increase recognition of their product features and a certain quantity of new orders were received.
More large-scale contracts, which have a greater contribution to sales, were won in the public sector market, but potential contracts
also exist in the enterprise sector market. In the next fiscal year, the Group will strive to expand sales of new products in earnest,
taking advantage of its experience in the public sector market.
Chiefly due to shortages in security personnel, the use of cloud services is increasing to reduce the burden of security. Sales ofcloud service products account for increasing percentages of sales in the Company’s entire product lineup. Sales of licenses areposted when they are shipped, but sales of cloud service are posted monthly during the period when the service is provided. As aresult, the balance of advances received expanded. The balance will be posted from the next consolidated fiscal year.

―2―Net sales in this market reached 3,133,580 thousand yen, up 4.1% year on year.
Public Sector Market
In this market, the Company has earned high recognition and market share as a security provider with a focus on internal dataleakage. Highly regarded for its track record and reliability, it bolstered its presence as a general security solution provider in themarket 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. Similar to the enterprise sector market, the use of cloud services
increased, and sales of cloud service products accounted for a larger percent. As a result, sales to be posted from the next
consolidated fiscal year expanded.
As a consequence, net sales in this market stood at 2,191,579 thousand yen, up 26.5% 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 i-FILTER
for Multiple Devices, which can be used on multiple operating systems with a single serial ID. Advances in the introduction offiltering amid widespread use of smartphones among young people and strong direct sales of multi-year packages and i-FILTER for
Multiple Devices, which can be used on several terminals, contributed to sales growth.
Net sales in this market amounted to 516,127 thousand yen, up 37.4% year on year.

―3―(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 1,930,814 thousand yen from the end of the previous
consolidated fiscal year to 9,859,347 thousand yen, chiefly reflecting a rise in cash and deposits due to cash provided in operating
activities and increases in property, plant and equipment and intangible assets.
(Liabilities)
Total liabilities at the end of the consolidated fiscal year under review rose 375,522 thousand yen from the end of the previous
fiscal year to 2,056,452 thousand yen. This was due chiefly to a rise in advances received.
(Net assets)
Net assets at the end of the consolidated fiscal year under review climbed 1,555,292 thousand yen from the end of the previous
consolidated fiscal year to 7,802,894 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 1,742,729 thousand yen from the end of theprevious consolidated fiscal year to 5,569,172 thousand yen. Cash flows in each category are as follows:(Cash flows from operating activities)
Net cash provided by operating activities stood at 3,091,862 thousand yen (net cash provided of 1,663,158 thousand yen in theprevious consolidated fiscal year), chiefly reflecting a profit before income taxes of 2,563,232 thousand yen and depreciation of662,496 thousand yen.
(Cash flows from investing activities)
Net cash used in investing activities came to 908,784 thousand yen (net cash used of 774,868 thousand yen in the previous
consolidated fiscal year) mainly due to the purchase of intangible assets.
(Cash flows from financing activities)
Net cash used in financing activities was 429,712 thousand yen (net cash used of 293,407 thousand yen in the previous consolidated
fiscal year) primarily due to dividends paid.
The table below shows trends of cash flow indicators.
As of March 31,
2016

As of March 31,
2017

As of March 31,
2018

As of March 31,
2019

Equity ratio (%)

74.7

70.2

78.2

78.7

Equity ratio based on market value (%)

556.0

570.2

719.8

1,276.0

124,308.7―――

Interest coverage ratio (times)

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).)c) Interest coverage ratio: Net cash from operating activities / Interest payment
2. Each indicator is calculated based on consolidated financial numbers.
3. Net cash is net cash provided by (used in) operating activities on the consolidated statement of cash flows. Interest payment isinterest paid on the consolidated statement of cash flows.

―4―(4) Outlook
The outlook for the next fiscal year (April 1, 2019 to March 31, 2020) is as follows:
In the security industry where the Group operates, the challenges that companies and other entities face are expanding worldwide,
including the sophisticated and diversified threats of attacks targeting specific companies, organizations, and government institutions,and other attacks from the outside as well as shortages of security personnel. In this environment, the use of cloud services has
expanded as users, who have difficulty with security operations, are outsourcing them and are striving to reduce the burden of security.
To provide solutions for customers regardless of their size to enjoy a secure Internet environment against this backdrop, the Groupwill continue to enhance i-FILTER Ver. 10 and m-FILTER Ver. 5 and add functions to them, thereby providing a more accurate
security environment in the enterprise sector market and the public sector market. Meanwhile, the Group will increase the visibility of
DigitalArts@Cloud, which was released in the previous fiscal year, and promote its sales to provide a cloud environment wherewebpages can be viewed without anxiety and emails can be read without hesitation. As for FinalCode, the Group will add functions
that are highly awaited by existing users and prospective customers to expand the number of users and sales.
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. Under suchcircumstances, the Company will continue to help promote i-FILTER for smartphones through educational activities andcollaborations with mobile network carriers.
Outside Japan, the Group will suspend its expansion policy, which had been implemented until the previous fiscal year, and will
focus its resources on activities to boost its presence as a general security solution provider in the Japanese market. The Group will
monitor the Company’s presence in the domestic security market and trends in the global security market to decide on the timing of
the start to accelerate overseas expansion again.
As the Group pursues those initiatives, it expects to post net sales of 6,800 million yen, an ordinary profit of 3,300 million yen, anda profit attributable to owners of parent of 2,277 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, 2019. 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

6,800

3,300

2,277

5,841

2,630

1,961

Year ending March 31, 2020
(forecast)Year ended March 31, 2019(results)

Results forecasts for the next fiscal year (non-consolidated)
Net salesYear ending March 31, 2020
(forecast)Year ended March 31, 2019(results)

Ordinary profit

ProfitMillion yen

Million yen

Million yen

6,600

3,300

2,290

5,752

2,777

1,784

(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, 2019. Actual results may be different from the forecasts due to a variety of factors.

―5―

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.

―6―

3. Consolidated Financial Statements and Major Notes(1) Consolidated balance sheet(Thousand yen)
Fiscal 2018
(As of March 31, 2018)

Fiscal 2019
(As of March 31, 2019)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Securities
Finished goods
Other
Total current assets

4,426,443
1,125,067

6,169,172
1,172,515－
695

299,968290

155,443

87,863

5,707,649

7,729,809

130,140(96,596)

205,990(104,980)

33,543101,00917,519(4,718)17,519(9,816)

Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
VehiclesAccumulated depreciation
Vehicles, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Total property, plant and equipment
Intangible assets
SoftwareOther

12,8007,703

361,367(251,204)

416,174(290,055)

110,163

126,119－

26,254

156,508

261,087

971,257

1,044,163

314,637

367,390

1,285,895

1,411,553

Investment securities
Deferred tax assets

403,347
73,884

103,00280,886

Shares of subsidiaries and associates
Other

32,788268,459

1,097
271,910

Total intangible assets
Investments and other assets

Total investments and other assets
Total non-current assets
Total assets―7―778,479

456,896

2,220,882

2,129,537

7,928,532

9,859,347

(Thousand yen)
Fiscal 2018
(As of March 31, 2018)

Fiscal 2019
(As of March 31, 2019)

Liabilities
Current liabilities
Accounts payable - trade
Income taxes payable

22,106305,391

22,744
330,672

Provision for bonuses
Advances received

112,280
917,210

128,192
1,225,258

Other

278,936

303,494

Total current liabilities

1,635,924

2,010,363

Non-current liabilities
Asset retirement obligations

44,36045,444

645

645

Other
Total non-current liabilities

45,00546,0891,680,930

2,056,452

Share capital
Capital surplus

713,590825,560

713,590827,730

Retained earnings
Treasury shares

4,991,931(327,671)

6,518,256(306,939)

Total shareholders' equity

6,203,410

7,752,637(4,703)

8,499

Total liabilities
Net assets
Shareholders' equity

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―8―(4,703)8,499

33,812
15,082

23,587
18,1696,247,602

7,802,894

7,928,532

9,859,347

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

Net sales
Cost of sales

Fiscal 2018(from April 1, 2017
to March 31, 2018)
5,116,969
1,075,437(Thousand yen)
Fiscal 2019(from April 1, 2018
to March 31, 2019)
5,841,287
1,059,444

Gross profit

4,041,531

4,781,842

Selling, general and administrative expenses

2,138,614

2,152,750

Operating profit

1,902,917

2,629,092

Non-operating income
Interest income

1,071

1,079

Foreign exchange gains
Commission income

3,503
212

－
198

Gain on forfeiture of unclaimed dividends
Miscellaneous income

945
1,003

1,168
1,759

Total non-operating income

6,736

4,204

－
276

2,224

Miscellaneous loss
Total non-operating expenses

276

2,333

1,909,377

2,630,963

Non-operating expenses
Foreign exchange losses

Ordinary profit
Extraordinary income
Gain on reversal of share acquisition rights

108

3,193

2,135

Gain on sales of non-current assets
Gain on liquidation of subsidiaries

1,498
2,607

－
－

Total extraordinary income

7,299

2,135

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

10,204
－

4,374
2,200

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

56,135
7,156

Extraordinary losses

Total extraordinary losses

10,204

69,866

1,906,472

2,563,232

Income taxes - current

577,834

605,870

Income taxes - deferred

44,881(7,001)

Total income taxes

622,715

598,869

1,283,756

1,964,363

1,832

3,087

1,281,924

1,961,276

Profit before income taxes

ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent―9―Consolidated statement of comprehensive income
Fiscal 2018(from April 1, 2017
to March 31, 2018)
1,283,756(Thousand yen)
Fiscal 2019(from April 1, 2018
to March 31, 2019)
1,964,363

Foreign currency translation adjustment(8,534)

13,203

Total other comprehensive income(8,534)

13,203Comprehensive income

1,275,222

1,977,567

Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests

1,273,389

1,974,480

1,832

3,087

ProfitOther comprehensive income―10―(3) Consolidated statement of changes in equity
Fiscal 2018 (from April 1, 2017 to March 31, 2018)(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 of treasury
sharesNet changes in
items other thanshareholders' equity
Total changes in items
during period
Balance at end of
periodSharecapitalCapitalsurplusRetainedearnings

Treasuryshares713,590

778,435

4,098,920(410,665)(387,675)

Accumulated othercomprehensive income
Share
NonTotal
Foreign
Total
accumulated acquisition controllin
currency
rights g interests
shareholders'othertranslation
equitycomprehensiv
adjustmente income
5,180,280

3,830

3,830

81,152

5,075(387,675)(2,174)

Total net
assets5,270,339(387,675)(2,174)

8,174

6,000

1,281,924

1,281,924

1,281,924(1,238)(1,238)(1,238)83,552

132,852

132,852

(558)

(558)

(558)

49,299－(8,534)(8,534)(47,340)

1,832(54,042)－

47,125893,01082,994

1,023,130(8,534)(8,534)(47,340)

10,007977,262

713,590825,560

4,991,931(327,671)

6,203,410(4,703)(4,703)33,812

15,082

6,247,602―11―

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 of treasury
sharesNet 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 controllin Total net assets
currency
rights g interests
shareholders'othertranslation
equitycomprehensiv
adjustmente income
6,203,410(4,703)(4,703)33,812

15,082

6,247,602(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―12―

(4) Consolidated statement of cash flows(Thousand yen)
Fiscal 2019(from April 1, 2018
to March 31, 2019)

Fiscal 2018(from April 1, 2017
to March 31, 2018)
Cash flows from operating activities
Profit before income taxes
Depreciation
Loss on valuation of golf club membership

1,906,472

2,563,232

573,514

662,496
2,200

Increase (decrease) in provision for bonuses
Interest income－(53,466)(1,071)

Foreign exchange losses (gains)
Interest expenses(5,387)
77

Gain on reversal of share acquisition rights
Loss on valuation of shares of subsidiaries(3,193)

15,911(1,079)2,878－(2,135)
7,156

Loss on retirement of non-current assets
Loss (gain) on sales of non-current assets－
10,204(1,498)Decrease (increase) in trade receivables
Decrease (increase) in inventories

80,820(166)－
298,266
404

Increase (decrease) in trade payables
Increase (decrease) in accounts payable - other

4,117(3,622)450(34,743)

Decrease (increase) in other current assets
Increase (decrease) in other current liabilities(13,078)(75,396)

85,10245,582

4,374

Other

(23,051)

19,598Subtotal

2,395,273

3,669,697

1,389
(77)

1,390

Interest and dividends received
Interest paid
Income taxes paid

(733,426)－(579,225)

Net cash provided by (used in) operating activities

1,663,158

3,091,862

Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment(103,913)
7,660(167,827)

Purchase of intangible assets
Other(671,817)(6,797)－(741,907)
950

Net cash provided by (used in) investing activities(774,868)(908,784)

98,291

14,822

(558)
1,413

(10)

0

－

(387,554)(444,524)(4,999)－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(293,407)(429,712)(1,465)(2,267)593,417

1,751,098

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

3,298,836

3,826,443(65,811)(8,369)3,826,443

5,569,172

Cash flows from investing activities

Cash flows from financing activities
Proceeds from disposal of treasury shares
Purchase of treasury shares
Proceeds from issuance of share acquisition rights
Proceeds from share issuance to non-controllingshareholders
Dividends paid
Other payments

―13―

－

(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 Ltd.
(Changes in scope of consolidation)
The liquidation of FinalCode, Inc. was completed in the consolidated fiscal year under review, and it has been excluded fromthe scope of consolidation.
Digital Arts America, Inc. has been included in the scope of consolidation in the consolidated fiscal year under review due to its
increased importance.
(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―14―based on reduction in profitability.)(2) Depreciation/amortization method for significant depreciable/amortizable assets
a. Property, plant and equipment
The declining balance method is applied.
The useful life and the residual value are calculated based on the same standards as those set out in the Corporation Tax Act.
The straight-line method is applied for facilities attached to buildings 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.
(Change in accounting policy)
Practical Solution on Transactions Granting Employees and Others Stock Acquisition Rights, which Involve Considerations, with
Vesting Conditions (PITF No. 36; January 12, 2018), etc. has been applied from April 1, 2018, and the accounting for transactions
granting employees and others stock acquisition rights which involve considerations with vesting conditions are subject to the
Accounting Standard for Share-based Payment (ASBJ Statement No. 8; December 27, 2005), etc.
The application of PITF No. 36 is subject to the transitional treatment provided for in Paragraph 10 (3) of PITF No. 36, and theaccounting before the application of PITF No. 36 is applied to transactions granting employees and others stock acquisition rights
which involve considerations with vesting conditions before the applied day of PITF No. 36.

―15―

(Consolidated balance sheet)*1 The item related to non-consolidated subsidiaries is as follows.
Fiscal 2018
(As of March 31, 2018)
Shares of subsidiaries and associates

Fiscal 2019
(As of March 31, 2019)

32,788thousand yen

1,097thousand yen(Consolidated statement of income)*1 The major items of selling, general and administrative expenses and the amounts are as follows.
Fiscal 2018(from April 1, 2017
to March 31, 2018)

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

Advertising expenses

287,617thousand yen

290,527thousand yen

Salaries and allowances

657,248626,386

Provision for bonuses

53,04370,766

Commission expenses

111,194

108,709*2 Total amount of research and development expenses included in general and administrative expenses
Fiscal 2018(from April 1, 2017
to March 31, 2018)

Fiscal 2019(from April 1, 2018
to March 31, 2019)15,210thousand yen

13,176thousand yen*3 The details of gain on sales of non-current assets are as follows.
Fiscal 2018(from April 1, 2017
to March 31, 2018)
Vehicles

1,498thousand yen

Fiscal 2019(from April 1, 2018
to March 31, 2019)－thousand yen*4 The details of loss on retirement of non-current assets are as follows.
Fiscal 2018(from April 1, 2017
to March 31, 2018)
Buildings
Tools, furniture and fixtures
Software5,738thousand yen
4,465－

Fiscal 2019(from April 1, 2018
to March 31, 2019)－thousand yen
3,163
1,211

(Consolidated statements of comprehensive income)*1 Reclassification adjustment and tax effect related to other comprehensive income
Fiscal 2018(from April 1, 2017
to March 31, 2018)
Foreign currency translation
adjustment:
Amount that occurred in the fiscal
year under review
Reclassification adjustment(8,534)thousand yen

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

2,214thousand yen-

10,989Before tax effect adjustment(8,534)

13,203Tax effectForeign currency translation
adjustment
Total other comprehensive income--(8,534)

13,203(8,534)

13,203―16―

(Consolidated statement of changes in equity)
Fiscal 2018 (from April 1, 2017 to March 31, 2018)
1. Class and number of issued shares and class and number of treasury shares
Increase in number of
Number of shares atshares during
beginning of consolidated
consolidated fiscal year
fiscal year under review
under review

Decrease in number of
Number of shares at end
shares duringof consolidated fiscal year
consolidated fiscal year
under review
under review

Issued shares
Common shares

14,133,000－－

14,133,000

Total

14,133,000－－

14,133,000

Common shares(Note)

311,175

143

63,300248,018

Total

311,175

143

63,300248,018

Treasury shares(Note)

An increase in the number of common shares in treasury shares, 143, is due to the purchase of treasury shares. A decrease in
the number of treasury shares, 63,300, 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)

―

―

―

―

―

33,812

Total

―

―

―

―

―

33,812

3. Matters related to dividends(1) Dividends paid

Resolution
Annual shareholders’meeting on June 23,
2017
Board of Directors
meeting on October30, 2017

Class of shares

Total amount ofdividends(thousand yen)

Dividends per share(yen)

Common shares

193,505

Common shares

194,169

Record date

Effective date

14

March 31, 2017

June 26, 201714

September 30, 2017

December 4, 2017(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 22,
2018

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

Record date

Effective date

Retainedearnings

March 31, 2018

June 25, 2018

194,389―17―

14

Fiscal 2019 (from April 1, 2018 to March 31, 2019)
1. Class and number of issued shares and class and number of treasury shares
Increase in number of
Number of shares atshares during
beginning of consolidated
consolidated fiscal year
fiscal year under review
under review

Decrease in number of
Number of shares at end
shares duringof consolidated fiscal year
consolidated fiscal year
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
Annual shareholders’meeting on June 23,
2018
Board of Directors
meeting on October30, 2018

Class of shares

Total amount ofdividends(thousand yen)

Dividends per share(yen)

Common shares

194,389

Common shares

250,203

Record date

Effective date

14

March 31, 2018

June 25, 201818

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 dividendsof dividends
share (yen)(thousand yen)

Record date

Effective date

Retainedearnings

March 31, 2019

June 25, 2019

417,020―18―

30

(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 2018(from April 1, 2017
to March 31, 2018)

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

Cash and deposit accountTime deposits whose deposit period ismore than three months
Securities

4,426,443thousand yen

6,169,172thousand yen(600,000)(600,000)－－

Cash and cash equivalents

3,826,443

5,569,172(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 deterioration in
partners’ financial situation early and mitigate them. The Company conducts similar credit management at consolidated
subsidiaries under its credit management regulations.
As for short-term fund management, the Company only uses bank deposits and investments in highly rated funds to avoid 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 as muchas 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.

―19―

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 2018 (As of March 31, 2018)
Consolidated balance sheet
Market price (thousand yen)amount (thousand yen)

Difference (thousand yen)

(1) Cash and deposits

4,426,443

4,426,443－(2) Notes and accounts receivable trade

1,125,067

1,125,067－

403,347

404,943

1,595

5,954,858

5,956,453

1,595

305,391

305,391－

305,391

305,391－

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 2019 (As of March 31, 2019)(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－(3) Securities and investment securities
Bonds held to maturity
Total assets(1) Income taxes payable
Total liabilities―20―

(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 their bookvalues.
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 2018 (As of March 31, 2018)
More than a More than fiveMore than 10
Within a year year, within years, within
years(thousand yen) five years
10 years(thousand yen)(thousand yen) (thousand yen)
Cash and deposits

4,426,443－－－

Notes and accounts receivable - trade

1,125,067－－－(1) Government bonds, local government bonds－

300,000－－(2) Corporate bonds－－

100,000－

5,551,510

300,000

100,000－

Securities and investment securities
Bonds held to maturity

Total
Fiscal 2019 (As of March 31, 2019)

More than a More than fiveMore than 10
Within a year year, within years, within
years(thousand yen) five years
10 years(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

―21―

(Securities)
Bonds held for maturity
Fiscal 2018 (As of March 31, 2018)

Type

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

Difference(thousand yen)

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

299,869

300,840970(2) Corporate bonds

103,477

104,103

625

－

－

－

403,347

404,943

1,595(1) Government bonds,
local government bonds,
etc.

－

－

－

(2) Corporate bonds

－

－

－

(3) Other

－

－

－

－

－

－

403,347

404,9431,595(3) Other
SubtotalMarket price does notexceed consolidated balance
sheet amountMarket value(thousand yen)

Subtotal
Total

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 consolidated balance
sheet amountMarket value(thousand yen)

Subtotal
Total

―22―

(Derivatives transactions)
Previous consolidated fiscal year (from April 1, 2017 to March 31, 2018) and consolidated fiscal year under review (from April 1,2018 to March 31, 2019)
The Group did not conduct any derivatives transactions.
(Retirement benefits)
1. Outline of the retirement benefits system
The Company has a defined contribution pension plan.
2. Retirement benefit expenses
Fiscal 2018 (from April 1, 2017 to March 31, 2018)
The amount that was required for contribution to the defined contribution pension plan was 17,511 thousand yen.
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.

―23―

(Stock options)
1. Amount posted as profit due to the forfeiture of unexercised stock options
Fiscal 2018(from April 1, 2017
to March 31, 2018)
Gain on reversal of share acquisition rights

Fiscal 2019(from April 1, 2018
to March 31, 2019)
3,193

2,135

2. Description of stock options, their scale and changes(1) Description of stock options
2009
stock options

2010
stock options

Reporting company

Same as left

Classification and number of persons subject
to grants

Three directors
90 employees
One employee at a subsidiary

Three directors
80 employees

Stock options by class of shares (Note)

Common stock 99,700 shares

Common stock 99,300 shares

June 12, 2009

June 8, 2010

Being an officer (an officer includes acompany auditor) or an employee atthe reporting company or a subsidiaryor an associate of the reporting
company and not being subject tosalary reduction or stricter disciplinary
action provided for in the rules of
employment of the reporting company
or a subsidiary or an associate of thereporting company from the grant date(June 12, 2009) to the vesting date
(May 30, 2011)
The vesting dates are as follows:(i) May 30, 2011 for a third of thestock options(ii)May 30, 2012 for a third of thestock options(iii)May 30, 2013 for a third of thestock options(i)May 30, 2009 to May 29, 2011 for athird of the stock options(ii)May 30, 2009 to May 29, 2012 fora third of the stock options(iii)May 30, 2009 to May 29, 2013 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,
2018.
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
associate of the Company until theexercise of stock options.

Being an officer (an officer includes acompany auditor) or an employee atthe reporting company or a subsidiaryor an associate of the reporting
company and not being subject tosalary reduction or stricter disciplinary
action provided for in the rules of
employment of the reporting company
or a subsidiary or an associate of thereporting company from the grant date(June 8, 2010) to the vesting date (May26, 2012)
The vesting dates are as follows:(i) May 26, 2012 for a third of thestock options(ii)May 26, 2013 for a third of thestock options(iii)May 26, 2014 for a third of thestock options(i)May 26, 2010 to May 25, 2012 for athird of the stock options(ii)May 26, 2010 to May 25, 2013 fora third 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
associate of the Company until theexercise of stock options.

Company

Grant date

Vesting conditions

Requisite service period

Exercise period―24―Company
Classification and number of persons subject
to grants
Stock options by class of shares (Note)
Grant date

Vesting conditions

Requisite service period

Exercise period

2015
stock options

2016
stock options

Reporting company

Same as left

Four directors
151 employees

Three directors
96 employees

Common stock 350,100 shares

Common stock 848,000 shares

November 27, 2015

December 13, 2016

Being a director or an employee of the Being a director or an employee of thereporting company and not being reporting company and not being
subject to salary reduction or stricter subject to salary reduction or stricter
disciplinary action provided for in the disciplinary action provided for in therules of employment of the reporting rules of employment of the reporting
company from the grant date company from the grant date(November 27, 2015) to the vesting (December 13, 2016) to the vestingdate (July 1, 2017)
date (July 1, 2018)
Share acquisition rights can be Share acquisition rights can be
exercised up to the percentage of the exercised up to the percentage of theallocated share acquisition rights allocated share acquisition rights
specified in each item below by each specified in each item below by eachholder of share acquisition rights only holder of share acquisition rights only
if operating profit reaches the level if operating profit reaches the levelspecified in each item below in the specified in each item below in thefiscal year ending March 31, 2017, the fiscal year ending March 31, 2018, thefiscal year ending March 31, 2018, or fiscal year ending March 31, 2019, orthe fiscal year ending March 31, 2019. the fiscal year ending March 31, 2020.
(i)If operating profit exceeds ¥1.5 (i)If operating profit exceeds ¥2.0
billion, 20% of share acquisition rights billion, 20% of share acquisition rights
can be exercised
can be exercised(ii)If operating profit exceeds ¥2.0 (ii)If operating profit exceeds ¥2.5
billion, 50% of share acquisition billion, 50% of share acquisitionrights can be exercisedrights can be exercised(iii)If operating profit exceeds ¥2.5 (iii)If operating profit exceeds ¥2.8
billion, 100% of share acquisition billion, 100% of share acquisitionrights can be exercisedrights can be exercised
In the items above, the operating profit In the items above, the operating profit
stated in the consolidated statements of stated in the consolidated statements ofincome in the Company’s annual income in the Company’s annual
securities report (or the statements of securities report (or the statements ofincome if no consolidated statements income if no consolidated statements
of income are prepared) shall be of income are prepared) shall bereferenced. If the concept of items to referenced. If the concept of items to
be referenced changes significantly be referenced changes significantly
due to the application of the due to the application of theInternational Financial Reporting International Financial ReportingStandards, etc. indicators to be Standards, etc. indicators to bereferenced shall be determined by the referenced shall be determined by the
Board of Directors.
Board of Directors.
No requisite service periods are No requisite service periods are
determined.
determined.
From the vesting date to May 31,
2027.
The person must continue to be adirector or an employee of theCompany to exercise share acquisitionrights.

―25―

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

2018
stock options
Company
Classification and number of persons subject
to grants
Stock options by class of shares (Note)
Grant date

Vesting conditions

Requisite service period

Exercise period

Reporting company
Three directors
151 employees
Common stock 1,413,300 shares
March 5, 2018
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 acquisitionrights 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
stated in the consolidated statements ofincome in the Company’s annual
securities report (or the statements ofincome if no consolidated statements
of income are prepared) shall bereferenced. If the concept of items to
be referenced changes significantly
due to the application of theInternational Financial ReportingStandards, etc. indicators to bereferenced shall be determined by the
Board of Directors.
No requisite service periods are
determined.
From the vesting date to May 31,
2028.
The person must continue to be adirector or an employee of theCompany to exercise share acquisitionrights.

(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.

―26―

(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, 2019). The number ofstock options has been converted to the number of shares.
Number of stock options

(i)

2009
stock options

2010
stock options

2015
stock options

2016
stock options

2018
stock options

As of March 31, 2018－－

235,500

820,200

1,413,300

Granted

－

－

－

－

－

Forfeited－－

17,50044,800

119,300

Vested

－

－

－

－

－

Yet to be vested－－

218,000

775,400

1,294,000

15,2008,200

34,400

－

－

－

－

－

－

－

Exercised

13,700

－

2,000

－

－

Forfeited

1,500

100

－

－

－

－

8,100

32,400－－

Before vesting (shares)

After vesting (shares)
As of March 31, 2018
VestedYet to be exercised(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

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

2009
stock options

2010
stock options

2015
stock options

2016
stock options

2018
stock options

785

593

2,034

2,639

3,400

－

5,676

－

－

(i) 375 yen(ii) 386 yen(iii) 396 yen(Note) 1

2 yen

24 yen

1 yen

4,460
(i) 572 yen(ii) 586 yen(iii) 599 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 ofstock 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 those after thestock split.
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.
(Asset retirement obligations)
Asset retirement obligations posted in the consolidated balance sheetsa. Outline of the asset retirement obligations
Obligations of restoration related to lease agreements at the head office and other offices―27―

b. 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.
c. Increase/decrease in the asset retirement obligations
Fiscal 2018(from April 1, 2017
to March 31, 2018)
Balance at beginning of fiscal year
Increase due to purchase of property,
plant and equipment
Adjustment due to passage of time

43,937thousand yen

Balance at end of fiscal year

Fiscal 2019(from April 1, 2018
to March 31, 2019)
44,360thousand yen

－

655

422

428

44,36045,444(Segment information, etc.)
Segment information
Previous consolidated fiscal year (from April 1, 2017 to March 31, 2018) and consolidated fiscal year under review (from April 1,2018 to March 31, 2019)
The Group has only one segment, which is the security business, and segment information is omitted.
Related information
Previous consolidated fiscal year (from April 1, 2017 to March 31, 2018)
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 byregion 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

SoftBank Commerce & Service Corp.

1,037,408

Daiwabo Information System Co., Ltd.

976,669

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.
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―28―

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.
Information on impairment loss in non-current assets by reporting segment
Previous consolidated fiscal year (from April 1, 2017 to March 31, 2018) and consolidated fiscal year under review (April 1, 2018 toMarch 31, 2019)
There are no applicable matters.
Information on amortization of goodwill and unamortized balance by reporting segment
Previous consolidated fiscal year (from April 1, 2017 to March 31, 2018) and consolidated fiscal year under review (April 1, 2018
to March 31, 2019)
There are no applicable matters.
Information on gain on bargain purchase by reporting segment
Previous consolidated fiscal year (from April 1, 2017 to March 31, 2018) and consolidated fiscal year under review (April 1, 2018
to March 31, 2019)
There are no applicable matters.
(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 2018 (from April 1, 2017 to March 31, 2018)

Type

Capital orCompany nameinvestment
Addressor name(thousandyen)

Officer

Toshio Dogu－－

Business or
occupation

Holding(held) rateof votingrights (%)

Relationshipwith related
party

Representative
Director of theCompany(Held)
Direct17.9%

Exercise ofstock options

Transaction

Amount oftransaction(thousand
yen)

Item

Balance at
end of fiscal
year(thousandyen)

Exercise ofstock options

28,443－－(Note) 1. The exercise of share acquisition rights issued by resolution at the annual shareholders’ meeting held on June 21, 2007,
in the fiscal year under review is described above. The amount of transaction is the number of shares granted as aresult of the exercise of stock options in the fiscal year under review multiplied by the amount paid per share.
(Note) 2. The holding (held) rate of voting rights is calculated based on the number of issued shares less the number of treasury
shares.
Fiscal 2019 (from April 1, 2018 to March 31, 2019)
There are no applicable matters.

―29―

(Per share information)
Fiscal 2018(from April 1, 2017
to March 31, 2018)

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

Net assets per share

446.43 yen

558.33 yen

Profit per share

92.46 yen141.11 yen

Diluted profit per share

92.13 yen

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

Fiscal 2018(from April 1, 2017
to March 31, 2018)

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

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

1,281,924

1,961,276－－

1,281,924

1,961,276

13,864,531

13,898,934－－

Increase in the number of common shares

49,61630,455(Of the increase, the number of share acquisition rights)(shares)

49,61630,455

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

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

Share acquisition rights

Share acquisition rights

Resolution on November 12,
2015
Number of potential shares:
235,500

Resolution on November 12,
2015
Number of potential shares:
218,000

Resolution on November 10,
2016
Number of potential shares:
820,200

Resolution on November 10,
2016
Number of potential shares:
775,400

Resolution on February 16,
2018
Number of potential shares:
1,413,300

Resolution on February 16,
2018
Number of potential shares:
1,294,000(Significant subsequent events)
There are no applicable matters.

―30―

4. Non-consolidated Financial Statements and Major Notes(1) Balance sheet(Thousand yen)
Fiscal 2018
(As of March 31, 2018)

Fiscal 2019
(As of March 31, 2019)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Securities
Finished goods
Advance payments - trade
Prepaid expenses
Other

4,191,007
1,241,893

5,982,081
1,143,621－
695

299,968
290

24,71888,459807
65,27889,94820,523

5,636,722

7,512,572

Buildings
Vehicles

33,54312,800101,009
7,703

Tools, furniture and fixturesLand

106,265－

124,985
26,254

Total property, plant and equipment

152,609259,953

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

Intangible assets
Software736,951

1,043,645

Software in progress
Telephone subscription right282,373190

367,199
190

Other

23,67115

1,043,186

1,411,051

Investment securities
Shares of subsidiaries and associates

403,347
291,081

103,002
168,585

Investments in capital
Long-term prepaid expenses

10
26,05010
28,890

Leasehold and guarantee deposits
Deferred tax assets

181,212354,960

182,990145,913

Total intangible assets
Investments and other assets

Other
Total investments and other assets
Total non-current assets
Total assets―31―

60,57657,426

1,317,238

686,818

2,513,034

2,357,823

8,149,757

9,870,395

(Thousand yen)
Fiscal 2018
(As of March 31, 2018)

Fiscal 2019
(As of March 31, 2019)

Liabilities
Current liabilities
Accounts payable - trade
Accounts payable - other

115,570
112,754

19,236
151,964

Accrued expenses
Income taxes payable

55,736
290,757

52,604
329,703

Accrued consumption taxes
Advances received

37,402906,313

99,1251,215,782

Deposits received
Provision for bonuses

22,464112,280

23,273
128,192

Total current liabilities

1,653,279

2,019,882

Asset retirement obligations
Other

44,360645

45,444645

Total non-current liabilities

45,00546,0891,698,284

2,065,972

Non-current liabilities

Total liabilities
Net assets
Shareholders' equity
Share capital

713,590

713,590

Capital surplus
Legal capital surplus

700,222700,222

Other capital surplus

127,511

129,682

Total capital surplus

827,734

829,905

Other retained earnings
Retained earnings brought forward

5,204,006

6,544,279

Total retained earnings

5,204,006

6,544,279

Retained earnings

Treasury shares(327,671)(306,939)

Total shareholders' equity

6,417,660

7,780,835

Share acquisition rights
Total net assets
Total liabilities and net assets―32―

33,812

23,587

6,451,473

7,804,423

8,149,757

9,870,395

(2) Statement of income
Fiscal 2018(from April 1, 2017
to March 31, 2018)
5,046,537(Thousand yen)
Fiscal 2019(from April 1, 2018
to March 31, 2019)5,752,991

Beginning finished goods inventory
Cost of Internet service

528
1,060,531

695
1,028,520

Total

1,061,060

1,029,21535

14

Net sales
Cost of sales

Transfer to other accountEnding finished goods inventory

695

290

1,060,330

1,028,910

Gross profit

3,986,207

4,724,081

Selling, general and administrative expenses

1,898,597

1,949,449

Operating profit

2,087,609

2,774,631

Interest income
Interest on securities

176
894

182
896

Commission income
Foreign exchange gains

2,612
5,345

2,598

Cost of finished goods sold

Non-operating income

945
322

－
1,168
834

10,297

5,678

－

2,878

－

2,878

2,097,906

2,777,431

Gain on sales of non-current assets
Gain on reversal of share acquisition rights

1,498
3,193

－
2,135

Gain on liquidation of subsidiaries
Distribution from the liquidation of subsidiaries

2,607
－

－
37,257

Total extraordinary income

7,299

39,393

10,204

4,374
2,200

Gain on forfeiture of unclaimed dividends
Miscellaneous income
Total non-operating income
Non-operating expenses
Foreign exchange losses
Total non-operating expenses
Ordinary profit
Extraordinary income

Extraordinary losses
Loss on retirement of non-current assets
Loss on valuation of golf club membership
Loss on valuation of shares of subsidiaries－
916,198

219,860

Total extraordinary losses

926,403

226,434

Profit before income taxes

1,178,802

2,590,390

Income taxes – current
Income taxes – deferred

562,761(244,570)

596,476
209,047

Total income taxes

318,190805,523

Profit

860,611

1,784,866―33―

Detailed statement of cost of Internet service
Fiscal 2018
Fiscal 2019(from April 1, 2017 to March 31, 2018) (from April 1, 2018 to March 31, 2019)
Classification

Note
Amount (thousand yen)numberComposition
rate
(%)

Amount (thousand yen)

Composition
rate
(%)

167,246

10.6

179,986

10.6

I Material cost
II Labor cost

*1

673,88942.7

668,153

39.4

III Expenses*2

738,16446.7

848,375

50.0

1,579,300

100.0

1,696,515

100.0

Total expenses
Transfer to other account*3

Cost of Internet service

518,768

667,995

1,060,531

1,028,520(Notes)Fiscal 2018(from April 1, 2017 to March 31, 2018)*1 Major items in labor cost
Salaries and allowances
Legal welfare expenses
Bonuses
Provision for bonuses
Other salaries*1 Major items in labor cost
436,416
thousand yen
83,748thousand yen
58,635thousand yen
43,088thousand yen
46,772
thousand yen*2 Major items in expenses
Outsourcing expenses
Depreciation
Rent expenses*3 Major items in transfer to other accountSelling, general andadministrative expenses
Non-current assets
Total

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

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

425,274
thousand yen
88,208thousand yen
57,372
thousand yen
57,425thousand yen
33,372
thousand yen*2 Major items in expenses
113,130
thousand yen
381,528
thousand yen
98,510thousand yen
40,049thousand yen
478,718
thousand yen
518,768
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*3 Major items in transfer to other accountSelling, general andadministrative expenses
Non-current assets
Total
4 Costing method
Same as left

―34―

100,459
thousand yen
484,645thousand yen
93,946thousand yen
34,115thousand yen
633,880thousand yen
667,995
thousand yen

(3) Statement of changes in equity
Fiscal 2018 (from April 1, 2017 to March 31, 2018)(Thousand yen)
Shareholders' equity
Capital surplus

Balance at beginningof period
Changes in items
during period
Dividends ofsurplusRetained earnings

SharecapitalLegalcapitalsurplus

Othercapitalsurplus

Total capitalsurplusOtherretainedearnings
Retainedearnings
brought
forward713,590

700,222

78,212

778,435

4,731,069

4,731,069(387,675)(387,675)(387,675)(387,675)

860,611

860,611

860,611

860,61183,552

132,852

132,852

(558)

(558)

(558)

ProfitDisposal oftreasury shares
Purchase oftreasury shares
Net changes in
items other thanshareholders'equityTotal changes in
items during period
Balance at end of
period49,299Total
retainedearnings

Treasuryshares(410,665)

49,299

Share
Total
acquisition
shareholders'
rightsequity5,812,429

70,154

Total net
assets5,882,583(36,341)(36,341)－－

49,29949,299472,936472,936

82,994605,230(36,341)

568,889

713,590

700,222

127,511827,734

5,204,006

5,204,006(327,671)

6,417,660

33,812

6,451,473

Fiscal 2019 (from April 1, 2018 to March 31, 2019)(Thousand yen)
Shareholders' equity
Capital surplus

Balance at beginningof period
Changes in items
during period
Dividends ofsurplusRetained earnings

SharecapitalLegalcapitalsurplus

Othercapitalsurplus

Total capitalsurplusOtherretainedearnings
Retainedearnings
brought
forward713,590

700,222

127,511827,734

5,204,006

5,204,006(444,592)(444,592)(444,592)(444,592)

1,784,866

1,784,866

1,784,866

1,784,866

20,741

22,912

22,912

(10)

(10)

(10)

ProfitDisposal oftreasury shares
Purchase oftreasury shares
Net changes in
items other thanshareholders'equityTotal changes in
items during period
Balance at end of
period

2,170

Total
retainedearnings

Treasuryshares(327,671)

2,170

Share
Total
acquisition
shareholders'
rightsequity6,417,660

33,812

Total net
assets6,451,473(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―35―

(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.

―36―