Quarterly Consolidated Financial Results for First Three Months of Fiscal
Year Ending March 31, 2022 (Japanese Accounting Standards)
Name of listed company: Digital Arts Inc.
Securities code:

Listed on:

2326

July 30, 2021
Tokyo Stock
Exchange 1st Section

URL https://www.daj.jp

Representative Director,(Name) Toshio Dogu
President and CEO
General Manager of theContact:(Title)(Name) Isao Konishi
TEL: 03-5220-6045
Administration Department
Scheduled date for submission
Scheduled date to start dividends
August 6, 2021
―of quarterly report:
distribution:
Representative:(Title)Preparation of supplementary explanatory
documents for quarterly results:

YesNo

Holding of quarterly results briefing:(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, 2022 (April
1, 2021 – June 30, 2021)(Percentage figures represent changes from same periodof previous year.)
Profit attributable to owners
Operating profit
Ordinary profitof parent(1) Consolidated operating results (cumulative totals)
Net sales
Million yen%

Million yen

1,919

35.773150.873249.8506

51.6

1,413

13.2

485

17.2

489

18.8334

19.1

First three months of year
ending March 31, 2022
First three months of year
ended March 31, 2021

% Million yen% Million yen%(Note) Comprehensive First three months of year 507 million yen (53.2%) First three months of year331 million yen (19.4%)
income:ending March 31, 2022
ended March 31, 2021
Profit per share (basic)
First three months of year ending
March 31, 2022
First three months of year ended
March 31, 2021

Profit per share (diluted)

YenYen

36.13

35.29

23.86

23.33(2) Consolidated financial position
Total assets
As of June 30, 2021
As of March 31, 2021
(Reference)

Net assets

Million yen
16,476
14,856Equity ratio

Million yen
10,157
10,062Equity capital: As of June 30, 2021: 10,137 million yen

Net assets per share％

Yen

61.5
67.6

722.42715.79As of March 31, 2021: 10,041 million yen

2. Dividends
Annual dividends
1Q-endYear ended March 31, 2021
Year ending March 31, 2022
Year ending March 31, 2022
(forecast)(Note)

2Q-end3Q-endYear-end

AnnualYenYen

Yen

Yen

Yen－－25.00－30.00

55.00

30.00

－35.0065.00

Revisions to most recently announced dividend forecast:―1―No3. Forecast of consolidated financial results for the year ending March 31, 2022 (April 1, 2021 – March31, 2022)(Percentage figures represent changes from previous year for full year figures and from same period of previous yearfor interim period figures.)
Profit attributableto owners ofProfit per share
Net sales
Operating profit
Ordinary profit
parentMillion yen%

Million yen%

Million yen%

Million yen%

Yen

3,900
8,700

25.7
27.5

1,4703,700

12.2
24.3

1,470
3,700

11.7
23.7

1,020
2,550

12.2
23.8

72.71
181.77First six months
Full year(Note)

Revisions to most recently announced results forecasts:

No* Notes(1) Changes in important subsidiaries during the first three months of fiscal year ending March 31, 2022: 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 financialYes
statements:(Note) For details, please refer to “2. Quarterly Consolidated Financial Statements and Primary Notes (3) Notes toquarterly consolidated financial statements (Application of special accounting methods to the preparation of quarterly
consolidated financial statements)" on page 8 of the attached materials.

(3) Changes in accounting policies, changes of accounting estimates and restatement
1) Changes in accounting policies due to revisions ofYes
accounting standards, etc.:
2) Changes in accounting policies due to reasons other thanNone
those stated in 1):
None3) Changes in accounting estimates:
4) Restatement:None(4) Number of shares outstanding (common stock)1) Number of shares issued and outstanding As of June 30, 2021
(including treasury shares)
As of June 30, 2021
2) Number of treasury shares
three months
3) Average number of shares issued and Firstofyear
endingoutstanding in each period (cumulative total) March 31, 2022

14,133,000
100,396
14,031,398

As of March 31, 2021 14,133,000
As of March 31, 2021

104,462First three months ofyear ended March 31, 14,017,028
2021* Quarterly financial statements are not subject to quarterly audits by certified public accountants or audit corporations.
* Explanation concerning the appropriate use of financial result forecasts and other special notes(Forward looking statements)
Business forecasts and other forward-looking statements in this material contain predictions based on futureassumptions, outlooks and plans as of the date of publication of this material. The Company does not warrant theaccomplishment of the forecasts. Actual results may different significantly from the forecasts due to risks and uncertain
factors associated with the world economy, the state of competition, and fluctuations in foreign exchange rates andinterest rates.
For matters concerning results forecasts, please refer to “1. Qualitative Information on Financial Results for the First
Three Months of Fiscal Year Ending March 31, 2022 (3) Explanation about information on future forecasts such as
consolidated results forecasts” on page 4 of the attached materials.
(How to obtain supplementary materials for quarterly results)
The material is available at Digital Arts Inc. corporate website.

―2―

○Table of Contents for the Attached Document

1. Qualitative Information on Financial Results for the First Three Months of Fiscal Year EndingMarch 31, 2022 ............................................................................................................... 2(1) Explanation about business results ................................................................................... 2(2) Explanation about financial position ................................................................................. 4(3) Explanation about information on future forecasts such as consolidated results forecasts . 42. Quarterly Consolidated Financial Statements and Primary Notes ...................................... 4(1) Quarterly consolidated balance shee ................................................................................ 5(2) Quarterly consolidated statement of income and comprehensive income .......................... 6Quarterly consolidated statement of income
Consolidated first three months ............................................................................. 6
Quarterly consolidated statement of comprehensive income
Consolidated first three months ............................................................................. 7(3) Notes to quarterly consolidated financial statements(Notes on the premise of a going concern) ..................................................................... 8(Notes on significant changes in the amount of shareholders' equity) ............................. 8(Application of special accounting methods to the preparation of quarterly consolidated financialstatements) ....................................................................................................................... 8(Change in accounting policy) ........................................................................................ 8―3―

1. Qualitative Information on Financial Results for the First Three Months of Fiscal Year Ending March 31,
2022(1) Explanation about business results
During the first three months of the consolidated fiscal year under review (April 1 through June 30, 2021), thecircumstances encountered by the Japanese economy were adverse. The effects of the COVID-19 pandemic continued
to be felt, and corporate earnings continued to decline due to the stagnation and contraction of economic activity. Whilst
government measures to stimulate the economy and the rollout of vaccinations have fueled expectations for a
resumption of economic activity, the outlook is still very uncertain, with a series of state of emergency declarations in
response to further outbreaks.
In the security industry, in which the Digital Arts Group (the “Group”) operates, the importance of security solutions
grew in response to the risk of information leaks and increasingly sophisticated and diverse cyber attacks, including
targeted attacks targeting specific enterprises, government agencies and other organizations. At the same time, demandfor Japan-made security products also expanded as the world was plunged into chaos. Additionally, in the enterprise
sector market, demand for software products for developing teleworking environments and conducting businessprocesses securely and efficiently increased as the effects of the pandemic dragged on and enterprises were forced toencourage working from home. Meanwhile, progress was also made in the public sector market, with the strengtheningof security measures by local governments, in addition to the GIGA School Concept, which envisions the developmentof an environment with one learning terminal for each school-aged child.
Under these conditions, in the enterprise sector market, the Group took advantage of the fact that more and morepeople are working from home and web services and e-mail environments are shifting to the cloud and expanded salesof its i-FILTER@Cloud and m-FILTER@Cloud services, creating a world in which the Internet and emails can be usedwithout hesitation in the cloud environment. The Group also developed the Desk@Cloud communication tool equipped
not only with online conferencing and chat features but also with security functions and sought to raise awareness ofsolutions that achieve not only security but also improve work efficiency. In the public sector market, the Company
provided a special version of i-FILTER that caters to needs arising from the GIGA School Concept. At the same time, it
continued to run campaigns, including the provision of free services that conform to the Guidelines on Education
Information Security Policy, in its ongoing efforts to expand sales from schools. In addition, the Company focused on
proposing solutions to support local government efforts to strengthen security measures, which will be ramped up fromthe next fiscal year.
Demand in the enterprise and public sector markets has soared for cloud service products due to the effects of theCOVID-19 pandemic. A large part of the amount of the contract for traditional mainstay license sales products isrecorded as sales in a lump at the time of shipment. For cloud service products, recorded sales are apportioned on amonthly basis throughout the service provision period. Therefore, as in the previous fiscal year, the proportion ofcontracts for cloud service products to the total contract amounts grew in the fiscal year under review, which led to arise in sales to be deferred to the next fiscal year and onwards.

As a result, net sales for the first three months of the consolidated fiscal year under review stood at 1,919 million yen,
up 35.7% year on year, operating profit at 731 million yen, up 50.8% year on year, ordinary profit at 732 million yen, up
49.8% year on year, and profit attributable to owners of parent at 506 million yen, up 51.6% year on year.

―4―Overview of Consolidated Business Results(Million yen)First threemonths of year
ended March 31,2021

First threemonths of year
ending March 31,
2022

1,413

1,919＋505＋35.7

Operating profit

485731+246+50.8

Ordinary profit

489732+243+49.8

Profit attributable toowners of parent

334

506+172+51.6

Net sales

Change% Change

The following describes business performance in separate markets.

Enterprise Sector Market
In the enterprise sector market, orders increased for i-FILTER and m-FILTER cloud services which are used to reduce
costs and operations management burdens in response to the spread of COVID-19. In addition, Digital Arts Consulting
Inc., a subsidiary offering security consulting services, successfully won orders and achieved an increase in sales.
Net sales in this market reached 1,067 million yen, up 25.9% year on year.

Public Sector Market
In the public sector market, the Group has traditionally enjoyed excellent recognition and a large market share as aprovider of Japan-made security solutions. In addition, under the GIGA School Concept, the Group's i-FILTER@Cloud
was adopted by many schools during the previous fiscal year in recognition of its reliability and functionality in supportinga safe learning environment at home. Highly rated for its track record, the i-FILTER series continued to be adopted by―5―

schools that had yet to adopt paid-for filtering services during the period under review and orders exceeded expectations.
As a consequence, net sales in this market stood at 738 million yen, up 63.5% year on year.

Consumer Sector Market
In the consumer sector market, the Group focused on collaborating with mobile network carriers and MVNOs and onsales of i-FILTER for Multiple Devices, which can be used on multiple operating systems using a single serial ID. As aresult, it attained an increase of users.
Net sales in this market amounted to 113 million yen, down 1.1% year on year.

(2) Explanation about financial position(Assets)
Total assets at the end of the first three months of the consolidated fiscal year under review increased 1,620 million
yen from the end of the previous consolidated fiscal year to 16,476 million yen. This was due mainly to an increase of
1,751 million yen in cash and deposits.
(Liabilities)
Total liabilities at the end of the first three months of the consolidated fiscal year under review rose 1,525 million yen
from the end of the previous consolidated fiscal year to 6,319 million yen. This was due mainly to an increase of 1,865
million yen in advanced received.
(Net assets)
Net assets at the end of the first three months of the consolidated fiscal year under review increased 95 million yen
from the end of the previous consolidated fiscal year to 10,157 million yen. This was mainly due to an increase inretained earnings due to the recording of profit attributable to owners of parent, which outweighed a decrease individends paid.

(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, andthere was therefore no change in the forecast of consolidated financial results for the year ending March 31, 2022
announced on May 7, 2021.
The Company has determined the results forecasts based on information available on the day of these financial
results for the first three months of the year ending March 31, 2022. 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.

―6―2. Quarterly Consolidated Financial Statements and Primary Notes(1) Quarterly consolidated balance sheet(Million yen)
Fiscal 2021
(As of March 31, 2021)

First quarter of fiscal 2022
(As of June 30, 2021)

AssetsCurrent assets
Cash and deposits

11,382

13,133

1,268
0

1,117
1370

3
88

12,725

14,344

233

222

Software
Other

1,274
128

1,283
134

Total intangible assets

1,403

1,417

Investments and other assets

493

492

Notes and accounts receivable - tradeFinished goods
Supplies
Other
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets

Total non-current assets
Total assets

2,130

2,132

14,856

16,476

Liabilities
Current liabilities
Accounts payable - trade

32

80

Income taxes payable
Provision for bonuses

688
194

244
97

Advances received
Other

3,370
456

5,236
611

Total current liabilities

4,743

6,269

Asset retirement obligations
Other48
1481Total non-current liabilities

5050

4,793

6,319

Shareholders' equity
Share capital

713

713

Capital surplus
Retained earnings

963
8,699

960
8,785

Treasury shares

(342)

(329)

10,034

10,130

777

78
127
12

10,062

10,157

14,856

16,476

Non-current liabilities

Total liabilities
Net assets

Total shareholders' equity
Accumulated other comprehensive income
Foreign currency translation adjustment
Total accumulated other comprehensive
incomeShare acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets―7―(2) Quarterly consolidated statement of income and comprehensive income
Quarterly consolidated statement of income
Consolidated first three months(Million yen)First three months of fiscal
2021(from April 1, 2020
to June 30, 2020)
1,413

First three months of fiscal2022(from April 1, 2021
to June 30, 2021)
1,919

Cost of sales

427

613

Gross profit

986

1,305

Selling, general and administrative expenses

501

574

Operating profit

485

731

Net sales

Non-operating income
Interest income00

Gain on forfeiture of unclaimed dividends
Foreign exchange gains

0000Subsidy income
Miscellaneous income

11－0

Total non-operating income

41489732

Gain on reversal of share acquisition rights

81

Total extraordinary income

81

Profit before income taxes

498734

Income taxes

166

226

Profit331

507

Profit (loss) attributable to non-controlling interests(2)0Profit attributable to owners of parent

334506

Ordinary profit
Extraordinary income―8―

Quarterly consolidated statement of comprehensive income
Consolidated first three months(Million yen)First three months of fiscal
2021(from April 1, 2020
to June 30, 2020)
331

First three months of fiscal2022(from April 1, 2021
to June 30, 2021)
507

Other comprehensive income
Foreign currency translation adjustment

(0)

(0)

Total other comprehensive income

(0)

(0)

331

507

333

506

(2)

0

ProfitComprehensive income
Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable to noncontrolling interests―9―(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 rateestablished after applying tax accounting to profit before income taxes for the consolidated fiscal year, which
includes the first quarter of the consolidated fiscal year under review, and such tax expenses are calculated bymultiplying this estimated effective tax rate by profit before income taxes.

(Change in accounting policy)（Application of Accounting Standard for Revenue Recognition, etc.)
The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No.29 issued on
March 31, 2020; hereinafter, “Accounting Standard for Revenue Recognition”), etc. from the beginning of the first
three months of the consolidated fiscal year under review, and recognizes revenue in the amount expected to bereceived in exchange for promised goods or services when the control of those goods or services is transferred tocustomers.
As a result, sales rebates, which were previously recorded as selling, general and administrative expenses, arenow deducted from sales. The application of the Accounting Standard for Revenue Recognition, etc. is subject to thetransitional treatment provided for in the proviso of Paragraph 84 of the Accounting Standard for Revenue Recognition.
The cumulative effect of the retrospective application, assuming the new accounting policy had been applied toperiods prior to the beginning of the first three months of the consolidated fiscal year under review was added to orsubtracted from the beginning balance of retained earnings of the first three months of the consolidated fiscal year
under review. However, this did not have any impact on such beginning balance.
As a result of application of the Accounting Standard for Revenue Recognition, etc., net sales and selling, generaland administrative expenses for the first three months of the consolidated fiscal year under review both decreased,causing gross profit to fall. However, the impact was insignificant and operating profit, ordinary profit and profit before
income taxes were not affected.

―10―