S.T. Corporation and Subsidiaries
Consolidated Financial Statements
for the Year Ended March 31, 2022,
and Independent Auditor’s ReportConsolidated Balance Sheets
S.T.CORPORATION and Consolidated Subsidiaries
March 31, 2022 and 2021

Thousands of
U.S. dollars (Note 2)

Millions of yen

Assets

2022

2021

2022

$ 97,129

Current assets:
Cash and time deposits (Notes 8, 12 and 18)¥ 11,888¥ 11,864

Trade notes and accounts receivable (Note 8)

—

5,790

—

Notes receivable - trade

82

—

673

5,721

—

46,741

Accounts receivable - tradeMarketable securities (Note 8)

—

74

—

6,617

7,072

54,064Work in process

187

206

1,530

Raw materials and supplies

989

991

8,082

Other current assets

657

521

5,364

Less - allowance for doubtful accounts

(34)

(35)

(282)

26,10626,483

213,301Land (Notes 3 and 11)

3,594

3,582

29,361

Buildings and structures (Note 3)

8,886

8,871

72,602

Machinery, equipment and vehicles (Note 3)

8,079

8,554

66,007

Tools, furniture and fixtures (Note 3)

2,734

2,691

22,336

Construction in progress

157

76

1,281

Leased assets (Note 19)

744

778

6,080

(14,072)(14,093)(114,979)

10,12010,45882,689

—

1,264

—

1,445

644

11,804

1,445

1,907

11,804

277

442

2,262

5,377

6,828

43,932Long-term loans

5

5

41

Net defined benefit asset (Notes 1 and 14)

7

8

61

Deferred tax assets other than unrealized revaluation loss on land (Note 13)

452

84

3,696

Other assets

613

600

5,009

6,732

7,967

55,001¥ 44,402¥ 46,817$ 362,795

Merchandise and finished goods

Total current assets

Property, plant and equipment, at cost:Less - accumulated depreciation
Property, plant and equipment, net

Intangible assets, net of accumulated amortization
Goodwill (Note 3)
Other intangible assets (Note 3)
Total intangible assets

Investments and other assets:
Investments in non-consolidated subsidiaries and affiliates
Investment securities (Notes 8 and 10)

Total investments and other assets
Total assets1Thousands of
U.S. dollars (Note 2)

Millions of yen

Liabilities and net assets

2022

2021

2022

¥ 2,195¥ 2,934$ $17,938

Current liabilities:
Trade payables (Note 8)

2,835

3,187

23,166

Short-term borrowings

Electronically recorded obligations-operating (Note 8)

413

464

3,377

Lease liabilities

50

55

407

1,802

2,866

14,727

Accrued expenses

Other payables (Note 8)

685

789

5,600

Electronically recorded obligations-non-operating

179

83

1,463

Income taxes payable

423

779

3,457

Consumption taxes payable

93

398

762

Allowance for sales returns

—

119

—

2,024

87

16,537

10,701

11,76187,433

Other current liabilities
Total current liabilities
Long-term liabilities:
Lease liabilities

94

91

770

Provision for directors’ retirement and severance benefits

108

108

879

Provision for executive officers’ incentive plan (Note 6)

82

69

670

1,301

1,337

10,632

Deferred tax liabilities (Note 13)

—

553

—

Deferred tax liabilities - unrealized revaluation gain on land (Note 11)

262

262

2,142

7

2

55

1,854

2,422

15,148

7,066

7,066

57,729Net defined benefit liability (Notes 1 and 14)

Other non-current liabilities
Total long-term liabilities
Net assets (Note 15):
Shareholders’ equity:
Common stock:
Authorized - 96,817,000 shares in 2022 and 2021
Issued and outstanding - 23,000,000 shares in 2022 and 2021
Capital surplus

7,047

7,036

57,580Retained earnings

16,97816,982

138,721

Treasury stock, at cost

(1,021)(1,040)(8,339)Total shareholders’ equity

30,07030,044

245,691

Unrealized holding gain on other securities, net of taxes

1,867

2,886

15,253

Unrealized revaluation loss on land, net of taxes (Note 11)

(537)

(537)

(4,389)Translation adjustments

(178)

(314)

(1,451)

52

11

426
9,838

Accumulated other comprehensive income (loss):

Remeasurements of defined benefit plans

1,204

2,046

Subscription rights

—

2

—

Non-controlling interests

573

541

4,685

Total net assets

31,84832,633

260,214¥ 44,402¥ 46,817$ 362,795

Total accumulated other comprehensive income (loss)

Total liabilities and net assets
See notes to consolidated financial statements.

2

Consolidated Statements of Income
S.T.CORPORATION and Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2021

Thousands of
U.S. dollars (Note 2)

Millions of yen

Net sales (Note 20)
Cost of sales (Notes 17 and 23)
Gross profit before reversal of allowance for sales returns
Allowance for sales returns
Reversal of allowance for sales returns
Gross profit
Selling, general and administrative expenses (Note 17)
Operating income
Non-operating income (expenses):
Interest income
Dividend income
Interest expense
Purchase discounts
Sales discounts
Share of loss of entities accounted for using equity method
Other, net
Total non-operating income (expenses)
Ordinary income
Special gains (losses), net:
Gain on sale of non-current assets
Loss on disposition of property, plant and equipment, net
Impairment loss (Note 24)
Gain on sales of investment securities, net
Gain on redemption of investment securities
Loss on valuation of investment securities
Loss on sale of shares of subsidiaries and associates
Loss on sales of investments in capital of subsidiaries
Gain on reversal of subscription rights to shares
Total special gains (losses), net
Profit before income taxes
Income taxes (Note 13):
Current
Deferred
Total income taxes
Profit

2022

2021

2022

¥ 45,470
27,66517,805——17,805
14,5543,251¥ 49,674
28,35821,316
119
118
21,315
17,3703,945$ 371,514
226,037
145,478——
145,478
118,916
26,562

6
113
(5)
126
—
(69)
59
231
3,481

6
103
(9)
149
(510)
(19)
72
(208)
3,737

46
924
(38)
1,033
—
(564)
483
1,884
28,4460(27)(1,665)
44
12
—
(144)
—
0
(1,781)
1,700

—
(4)
—
69
—
(31)
—
(90)
4
(51)
3,686

0
(218)
(13,606)357
94—(1,181)—
2(14,552)
13,893

837
(347)
490
1,210
101
¥ 1,109

1,106
(28)
1,078
2,608
82
¥ 2,526

6,841(2,836)
4,006
9,888
825
9,063

$

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
S.T.CORPORATION and Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2021

Thousands of
U.S. dollars (Note 2)

Millions of yen

2021

2022

2022

Profit¥ 1,210¥ 2,608$

Other comprehensive income (Note 7)
Unrealized holding gain on other securities, net of taxes
Translation adjustments
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income (loss) of entities accounted for using equity method
Total other comprehensive income
Comprehensive income(1,019)
130
41
70
(779)
¥ 431

658
36
29
1
725
¥ 3,332(8,330)
1,059
333
574
(6,364)$ 3,523

267
164

3,240
92

2,182
1,341

Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

3

9,888

Consolidated Statements of Changes in Net Assets
S.T.CORPORATION and Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2021
Millions of yen
Number of sharesof common stock(Thousands)

Balance at April 1, 2021
Cumulative effects of changes in accounting policies
Restated balance
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders' equity
Balance at March 31, 2022

Commonstock

CapitalsurplusRetainedearnings

Treasury stock,at cost23,000¥ 7,066¥ 7,036¥ (1,040)

23,000

7,066

7,036

¥ 16,982(256)
16,726(852)

Total
shareholders’equity

11

(5)

(0)
20

¥ 30,044(256)
29,787
(852)
1,109
(0)
25

¥ 7,047¥ 16,982¥ (1,021)¥30,070

Subscription
rightsNon-controllinginterests

Total net
assets(1,040)1,109

23,000¥ 7,066

Translation
adjustments

Remeasurements Total accumulatedofothercomprehensive
plansincomeMillions of yen
Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 11)

Balance at April 1, 2021
Cumulative effects of changes in accounting policies
Restated balance
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders' equity¥ 2,886¥ (537)¥ (314)¥ 11¥ 2,046¥2¥ 541¥ 2,886

(537)

(314)

11

2,046

2

541

(1,020)

—

137

41

(842)

(2)

33

¥ 32,633(256)
32,376
(852)
1,109
(0)
25
(812)

Balance at March 31, 2022

¥ 1,867¥ (537)¥ (178)¥ 52¥ 1,204¥—¥ 573¥ 31,848

Total
shareholders’equityMillions of yen
Number of sharesof common stock(Thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasury stock,at costBalance at April 1, 2020
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Change in scope of consolidation
Net changes in items other than those in shareholders' equity

23,000¥ 7,066¥ 7,068¥15,270
(805)
2,526

¥ (1,108)

Balance at March 31, 2021

23,000

(8)

(1)
68

¥ 16,982¥ (1,040)¥ 30,044

Subscription
rightsNon-controllinginterests

Total net
assets

¥ 10

¥ 499

(32)
¥ 7,066¥ 7,036¥ 28,295
(805)
2,526
(1)
60
(32)

Millions of yen
Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 11)¥ (537)

Translation
adjustments¥ (342)Remeasurements Total accumulatedof
other
defined benefit comprehensive
plansincomeBalance at April 1, 2020
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Change in scope of consolidation
Net changes in items other than those in shareholders' equity¥ 2,228¥ (18)¥ 1,332

658

—

27

29

714

(8)

41

¥ 30,136
(805)
2,526
(1)
60
(32)
748

Balance at March 31, 2021

¥ 2,886¥ (537)¥ (314)¥ 11¥ 2,046¥2¥ 541¥32,633

Total
shareholders’equityThousands of U.S. dollars (Note 2)
Number of sharesof common stock(Thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasury stock,at costBalance at April 1, 2021
Cumulative effects of changes in accounting policies
Restated balance
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders' equity

23,000$ 57,729$ 57,491

57,72957,491$ 138,754(2,095)
136,659(6,958)
9,063$(8,498)

23,000

89

(43)

(3)
161

$245,476(2,095)
243,381(6,958)
9,063
(3)
208

Balance at March 31, 2022

23,000$57,580$ 138,721($ 8,339)$ 245,691$ 57,729(8,498)

Thousands of U.S. dollars (Note 2)
Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 11)

Remeasurements Total accumulatedof
other
defined benefit comprehensive
plansincomeTranslation
adjustments

Balance at April 1, 2021
Cumulative effects of changes in accounting policies
Restated balance
Cash dividends paid by distribution of retained earnings
Profit attributable to owners of parent
Purchases of treasury stock
Disposal of treasury stock
Net changes in items other than those in shareholders' equity$ 23,584($ 4,389)($ 2,569)$ 93$ 16,719

23,584(4,389)(2,569)93

16,719(8,331)

—

1,118

333

(6,880)(19)

Balance at March 31, 2022

$ 15,253($ 4,389)($ 1,451)$ 426$ 9,838$—

Subscription
rightsNon-controllinginterests

Total net
assets$ 19$ 4,417

19

4,417

269

$ 266,630(2,095)
264,535(6,958)
9,063
(3)
208
(6,631)$ 4,685$ 260,214

See notes to consolidated financial statements.

4Consolidated Statements of Cash Flows
S.T.CORPORATION and Consolidated Subsidiaries
For the Years Ended March 31, 2022 and 2021
Thousands of
U.S. dollars (Note 2)

Millions of yen

2021

2022
Cash flows from operating activities:
Profit before income taxes
Adjustments to reconcile profit before income taxes to net cash
provided by operating activities:
Depreciation and amortization
Amortization of goodwill
Impairment loss
Gain on reversal of subscription rights to shares
Loss on sales of property, plant and equipment
Loss (gain) on sales and valuation of investment securities
Loss (gain) on redemption of investment securities
Loss (gain) on sale of shares of subsidiaries and associates
Loss (gain) on sale of investments in capital of subsidiaries
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in net defined benefit asset and liability
Increase (decrease) in provision for directors' retirement and severance benefits
Increase (decrease) in provision for executive officers' incentive plan
Increase (decrease) in allowance for sales returns
Interest and dividends received
Interest expenses
Foreign exchange losses (gains)Share of (profit) loss of entities accounted for using equity method
Changes in operating assets and liabilities:
Receivables
Inventories
Payables and accrued expenses
Accrued consumption taxes
Increase (decrease) in lease and guarantee deposits
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

¥

1,700

¥

3,686

2022
$

13,893

1,197
97
1,665
(0)
27
(44)
(12)
144
—
(0)
(44)
—
13
—
(119)
5
10
69

1,350
97
—
(4)
4
(38)
—
—
90
30
22
(7)
(7)
1
(109)
9
(16)
19

9,778
794
13,606
(2)
218
(357)
(94)
1,181
—
(1)
(358)
—
105
—
(970)
38
83
564

(312)
640
(1,100)
(305)
5
99
3,736
119
(5)
(1,184)(8)(1,107)
922
121
(5)
276
5,325
113
(10)
(1,004)(2,553)
5,230(8,988)(2,491)38
808
30,523970(38)(9,671)

2,666

4,423

21,784

Cash flows from investing activities:
Payments into deposits (more than three months)
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchases of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Proceeds from sale of shares of subsidiaries and associates
Purchase of investments in capital of subsidiaries
Other investments, net
Net cash used in investing activities

(0)
(864)
0
(895)
(54)
62
78
3
—
1
(1,670)(0)(1,155)
1
(418)
(111)
87
—
—
(24)
55
(1,564)(0)(7,062)
2(7,311)
(440)
506
634
22
—
7
(13,641)

Cash flows from financing activities:
Net increase (decrease) in short-term borrowings
Proceeds from share issuance to non-controlling shareholders
Purchases of treasury stock
Proceeds from disposal of treasury stock
Payments of dividends
Payments of dividends to non-controlling interests
Other finance, net
Net cash used in financing activities

(50)
—
(0)
23
(852)
(131)
(65)
(1,076)

(232)
10
(1)
56
(805)
(95)
(86)
(1,152)

(412)
—
(3)
190
(6,958)(1,072)(534)(8,789)Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 18)90
1111,832
11,843

2
1,709
10,122
11,832739
93
96,67396,765

See notes to consolidated financial statements.

5

¥

¥

$

Notes to Consolidated Financial Statements
S.T.CORPORATION and Consolidated Subsidiaries
March 31, 2022

1 Summary of Significant Accounting Policies(a) Basis of presentation
S.T. CORPORATION (the “Company”) and its domestic subsidiaries
maintain their books of account in conformity with accounting principles
generally accepted in Japan, and its overseas subsidiaries maintain theirbooks of account in conformity with those of their countries of domicile.
Effective April 1, 2008, the Company adopted the “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” (PITF No. 18, issued by the
Accounting Standards Board of Japan (ASBJ) on May 17, 2006).
The accompanying consolidated financial statements have been preparedin accordance with accounting principles generally accepted in Japan,
which are different in certain respects as to the application and disclosure
requirements of IFRS, and are compiled from the consolidated financial
statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements, certain
reclassifications have been made to the consolidated financial statements
issued domestically for readers outside Japan. The notes to theconsolidated financial statements include information which is not required
under accounting principles generally accepted in Japan but is presented
herein as additional information. Furthermore, certain amounts in the prioryear’s financial statements have been reclassified to conform to thecurrent year’s presentation.
As permitted by the Financial Instruments and Exchange Act, amounts arerounded to the nearest million. Consequently, the totals shown in theaccompanying consolidated financial statements (both in yen and U.S.
dollars) do not necessarily agree with the sum of the individual amounts.
(b) Scope of consolidation(1) Number of consolidated subsidiaries:
7 companies(2) Names of consolidated subsidiaries:
S.T. PRO Co., Ltd., S.T. Business Support Co., Ltd., S.T. MYCOAL
CO., LTD., S.T. (Thailand) Co., Ltd., Family Glove Co., Ltd. (Taiwan),
S.T. Korea Corporation (South Korea), and Shaldan (Thailand) Co.,Ltd.
(3) Name of major non-consolidated subsidiary:
JAPAN AROMA LABORATORY CO., LTD.
(Reasons for exclusion from scope of consolidation)
The non-consolidated subsidiary has been excluded from the scopeof consolidation because the total amounts of its assets, net sales,
profit or loss (amount equivalent to equity interests), retained earnings(amount equivalent to equity interests) and other amounts are limited,
and the effect on the consolidated financial statements as a whole isnot significant.
(c) Scope of application of equity-method accounting(1) Number of affiliated companies accounted for by the equity method:
2 companies(2) Names of major companies accounted for by the equity method:
Aekyung S.T. Co., Ltd., and NS FaFa Japan Co., Ltd.
We sold all the shares we owned for Shaldan (Philippines), Inc., which
was the affiliated company accounted for by the equity method, as ofMarch 31, 2022 and therefore it is excluded from the scope of
consolidation.
(3) Name of non-consolidated subsidiary for which equity method is notappliedThe non-consolidated subsidiary to which the equity method does not
apply (JAPAN AROMA LABORATORY CO., LTD) is accounted forusing the cost method rather than the equity method because thetotal amounts of its profit or loss (amount equivalent to equity
interests), retained earnings (amount equivalent to equity interests)
and other amounts are limited, and the effect on the consolidated
financial statements as a whole is not significant.

(d) Accounting period
The accounting period of the Company begins on April 1 and ends on
March 31 of the following year. The four overseas subsidiaries have fiscal
years ending on December 31. The necessary adjustments for significant
transactions, if any, during the intervening period are made on
consolidation.
(e) Translation of foreign currency transactions and financial
statements
Monetary assets and liabilities denominated in foreign currencies aretranslated into yen at the rates of exchange in effect at the balance sheet
date and the accounts of the overseas consolidated subsidiaries aretranslated into yen at the rates of exchange in effect at the balance sheet
date. Foreign exchange gains and losses are credited or charged toincome and translation adjustments are included in net assets.
(f) Securities
Other securities having market value available are recorded at market
value with fluctuations in unrealized gains and losses after deducting theassociated deferred tax assets or liabilities contained in net assets. Other
securities having no market value available are stated at cost determinedby the moving average method, and the cost of other securities sold is
calculated based on the moving average method. During the years ended
March 31, 2022 and 2021, the Company and its consolidated subsidiaries
did not have any trading securities.
(g) Inventories
Inventories are stated at the lower of cost or net selling value, cost being
determined by the average method.
(h) Property, plant and equipment, except for leased assets, anddepreciation
Property, plant and equipment are stated at cost. Depreciation of property,
plant and equipment of the Company and its domestic subsidiaries,
except for buildings (excluding structures attached to the buildings)
acquired on or after April 1, 1998, and facilities attached to the buildings
and structures acquired on or after April 1, 2016, is computed by the
declining-balance method in conformity with the Corporation Tax Law ofJapan. Depreciation of property and equipment of overseas subsidiaries
and buildings (excluding structures attached to the buildings) acquired on
or after April 1, 1998 and facilities attached to the buildings and structuresacquired on or after April 1, 2016 of the Company and domestic
subsidiaries is computed by the straight-line method.
The estimated useful lives of the major depreciable assets are as follows:
Buildings and structures
3 to 50 years
Machinery, equipment and vehicles
2 to 17 years
Tools, furniture and fixtures
2 to 20 years(i) Intangible assets, except for leased assets, and amortization
Intangible assets, except for leased assets, are amortized by thestraight-line method. Cost of software purchased for internal use isamortized by the straight-line method over a period of mainly 5 years, theuseful life applicable to commercially available software.
(j) Leases
Non-cancelable lease transactions that transfer substantially all the risks
and rewards associated with the ownership of the leased assets areaccounted for as finance leases. All other lease transactions areaccounted for as operating leases and related payments are charged toincome as incurred.
Depreciation is computed by the straight-line method over the respective
lease terms assuming a nil residual value.
(k) Allowance for doubtful receivables
The allowance for doubtful receivables is provided based on pastexperience for normal receivables and on an estimate of the collectabilityof receivables from companies in financial difficulty.

6Notes to Consolidated Financial Statements(l) Provision for directors’ retirement and severance benefits
The Company has accrued provision for directors’ retirement andseverance benefits at the amount which would be required to be paid if all
directors resigned from their positions and left the Company as of thebalance sheet date in accordance with its internal regulations.
(m) Provision for executive officers’ incentive plan
The Company has established an executive officers’ incentive plan trust
and a provision is made at the amount required for stock awards based on
the Company’s internal regulations for awarding stock.
(n) Employees’ retirement and severance benefits(1) Method of attributing expected benefit payments to the period
In calculating the retirement benefit obligation, the method of
attributing expected benefit payments to periods is based on thebenefit formula.
(2) Amortization method of actuarial gains/losses
Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized by the straight-line method over a
period of a certain number of years (5 years) which is shorter than the
average remaining years of service of the employees.

have recognized revenue at the time the control of promised goods orservices is transferred to the customer at the amount expected to bereceived upon exchange of said goods or services. The time when thecustomer gains control of the product is determined to be the time when
the product arrives at the customer in domestic sales and the time when
the product arrives at the point agreed with the customer in export sales.
These revenues are measured by deducting rebates and returns from theconsideration promised in the contract with the customer.
The promised consideration is collected within approximately two months
from the time the performance obligation is fulfilled. The amount ofconsideration does not include important financial factors.
(p) Accounting for significant hedges(1) Hedge accounting
The Company mainly applies the deferred hedged accounting method.
Foreign exchange contracts have applied the appropriation process.
(2) Hedging instrument and risk hedged
Hedging instrument: Forward exchange contracts
Risk hedged: Foreign currency-denominated forecasted transactions(3) Hedging policy
The Company mainly applies forward exchange contracts to avoid therisk of short-term exchange fluctuations on foreign
currency-denominated forecasted transactions.

(3) Adoption of a simplified method in some consolidated subsidiaries
Some consolidated subsidiaries adopt the simplified method whichassumes retirement benefit obligation to be equal to the benefits
payable if all eligible employees voluntarily terminated their employment
at the end of fiscal year for the calculation of net defined benefit liability
and retirement benefit expenses.

(q) Amortization of goodwill
Goodwill is amortized on a straight-line basis over periods not exceeding
20 years.

(o) Standards for recording important income and expenses
The Company and domestic consolidated subsidiaries have applied“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29,
March 31, 2020) and “Implementation Guidance on Accounting Standard
for Revenue Recognition (ASBJ Guidance No. 30, March 26, 2021) and(r) Cash and cash equivalents
Cash and cash equivalents in the accompanying consolidated statementsof cash flows consist of cash on hand, demand deposits and liquid
short-term investments with a maturity of three months or less from theirrespective dates of acquisition.

2 Basis of Translation
The consolidated financial statements presented herein are expressed inyen and, solely for the convenience of the reader, have been translated into
U.S. dollars at ¥122.39 = U.S.$1.00, the approximate exchange rate
prevailing on the Tokyo Foreign Exchange Market on March 31, 2022. Thistranslation should not be construed as a representation that all amounts
shown could have been, or could in the future be, converted into U.S.
dollars at that or any other rate.

3 Significant Accounting Estimatesearning power expected at the time of the transfer in the disposable
warmer business from MYCOAL CO., LTD will be realized in the future.

(Years ended March 31, 2022)
Not applicable(Years ended March 31, 2021)(Goodwill)(a) Amount recorded in the consolidated financial statements for the
fiscal year ended March 31, 2021
Millions of yen

2021
Goodwill
Impairment loss

¥ 1,264—(b) Information about the content of significant accounting estimates
related to the identified item
(1) Calculation method of amount recorded in the consolidated financial
statements for the fiscal year ended March 31, 2021
The Company determines an asset group with considering the way ofmanaging accounting and regards corporate assets such as the head
office as the entire business unit. If there are indications of impairment,
the Company makes measurements based on future cash flow
estimates. Goodwill has an estimated future cash flow with a payback
period based on the business plan approved by the board of executive
officers. The business plan is formulated with the idea that the excess

7(2) Significant assumptions used in significant accounting estimates
Significant assumptions in estimating future cash flow based on thebusiness plan include the sales growth rate by goods and the grossprofit margin.
(3) Impact of significant accounting estimates on the consolidated
financial statements for the following year
Sales growth rate and the gross profit margin includes uncertainties.
Changes in the significant assumptions due to unpredictable changes
in business assumptions in the future may have an impact on the
consolidated financial statements for the following year.
(Tangible and intangible fixed assets in the disposable warmer business(Exclude Goodwill))(a) Amount recorded in the consolidated financial statements for the
fiscal year ended March 31, 2021
Millions of yen

2021
Tangible and intangible fixed
assetsImpairment loss

¥ 2,580—

(b) Information about the content of significant accounting estimates
related to the identified item
(1) Calculation method of amount recorded in the consolidated financial
statements for the fiscal year ended March 31, 2021
The Company determines an asset group with considering the way ofmanaging accounting and regards corporate assets such as the head
office as the entire business unit. If there are indications of impairment,
the Company makes measurements based on future cash flow
estimates. For tangible and intangible fixed assets related to thedisposable warmer business, future cash flows are estimated based on
the business plan as well as goodwill, which is excess earning power.

(2) Significant assumptions used in significant accounting estimates
Significant assumptions in estimating future cash flow based on thebusiness plan include the sales growth rate by goods and the grossprofit margin.
(3) Impact of significant accounting estimates on the consolidated
financial statements for the following year
Sales growth rate by goods and the gross profit margin includes
uncertainties. Changes in the significant assumptions due tounpredictable changes in business assumptions in the future may havean impact on the consolidated financial statements for the followingyear.

4 Change in Accounting Policies (Application of Accounting Standard for Revenue Recognition)
The Company and domestic consolidated subsidiaries have applied the“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29,
March 31, 2020) and relevant ASBJ guidance from the beginning of thecurrent consolidated fiscal year, and have recognized revenue at the time
the control of promised goods or services is transferred to the customer at
the amount expected to be received upon exchange of the said goods orservices. As a result, some of the sales promotion expenses andpromotion expenses previously recorded in selling, general and administrative expenses, and sales discounts previously recorded in non-operating
expenses, have been deducted from sales. Moreover, the Company had
been handling projected merchandise returns by recording respective
gross profit amounts in the provision for sales returns, but has changed toan approach that involves not recognizing revenue at the time of sale inaccordance with provisions regarding variable consideration with respect
to projected merchandise returns.
In applying “Accounting Standard for Revenue Recognition” and relevant
ASBJ guidance, the Company has applied the transitional treatment
provided for in the provision of paragraph 84 of “Accounting Standard for
Revenue Recognition”. Accordingly, the new accounting standard isapplied from the beginning balance of the current fiscal year, such thatcumulative effects of retroactively applying the new accounting standard
with respect to the periods prior to the beginning of the current fiscal year
are to be added to or subtracted from retained earnings at the beginningof the current fiscal year.
For the current consolidated fiscal year, as a result of this change, net(Application of Accounting Standard for Fair Value Measurement, etc.)
The Company has applied “Accounting Standard for Fair Value
Measurement” (ASBJ Statement No. 30, July 4, 2019) and relevant ASBJ
guidance from the beginning of the current fiscal year, and decided toapply new accounting standards set forth in “Accounting Standard for Fair
Value Measurement” and relevant ASBJ guidance prospectively inaccordance with the transitional treatment provided for in paragraph 19 of“Accounting Standard for Fair Value Measurement” and in paragraph 44-2
of “Accounting Standard for Financial Instruments” (ASBJ Statement No.
10, July 4, 2019). The application of the above standards and regulations

sales decreased by ¥3,411 million (U.S.$27,869 thousand), cost of sales
increased by ¥7 million (U.S.$59 thousand), selling, general and administrative expenses decreased by ¥3,089 million (U.S.$25,238 thousand) andoperating profit decreased by ¥329 million (U.S.$2,690 thousand), while
ordinary profit and profit before income taxes each increased by ¥159
million (U.S.$1,302 thousand). In addition, retained earnings at the
beginning of the current fiscal year decreased by ¥256 million (U.S.$2,095
thousand).
The impact on the amounts per share is described in the relevant section.
Whereas the provision for sales returns had been presented under current
liabilities in the consolidated balance sheet for the previous fiscal year, as aresult of having applied “Accounting Standard for Revenue Recognition”
and relevant ASBJ guidance, the provision for sales returns is to bepresented such that returns assets are to be included in other undercurrent assets and refund liabilities are to be included in other undercurrent liabilities, beginning with the current fiscal year. In accordance withthe transitional treatment provided for in paragraph 89-2 of “AccountingStandard for Revenue Recognition”, figures for the previous fiscal year
have not been restated in accordance with the new approach topresentation.
In accordance with the transitional treatment provided for in paragraph89-3 of “Accounting Standard for Revenue Recognition”, the notes on“Revenue Recognition” related to the previous consolidated fiscal year are
not described.

does not have any impact on the consolidated financial statements.
In addition, in the " Financial Instruments " note, we will make a note ofmatters related to the breakdown of financial instruments by market valuelevel. However, in accordance with the transitional treatment provided forin paragraph 7-4 of "Application Guidelines for Disclosure of Market Valuesof Financial Instruments" (ASBJ Guideline No. 19, July 4, 2019), theprevious consolidated accounting of the notes. It does not describe theitems related to the fiscal year.

5 Changes in Presentation (Consolidated Statements of Cash Flows)“Purchase of intangible assets”, which had been included in “Other, net” of“Net cash provided by investing activities” for the previous fiscal year were
presented separately for the fiscal year ended March 31, 2021 due to anincrease in materiality. In order to reflect this change in presentation, theconsolidated financial statements for the previous fiscal year have been
reclassified.

As a result of this change, “Other, net” of ¥(363) million (U.S.$(2,964)
thousand) under “Net cash provided by investing activities” has been
reclassified as “Purchase of intangible assets” of ¥(418) million (U.S.$(3,411) thousand) and “Other, net” of ¥55 million (U.S.$447 thousand)under “Net cash provided by investing activities” in the consolidated
statement of cash flows for the previous fiscal year.

8Notes to Consolidated Financial Statements

6 Additional Information(Transactions of Delivering the Company’s Own Stock to Employees etc.
through Trusts)(a) Board Benefit Trust (BBT)The Company introduced a “Board Benefit Trust” with the goal ofincreasing awareness of the importance of contributing to further
enhancing the Company’s corporate value and performance over the
medium-to-long-term.
(1) Summary
The Company awards the Company’s stock to the executive officers
who satisfy certain requirements based on predetermined regulations
for awarding stocks. Executive officers are granted a certain number ofpoints depending on the financial results, and upon their retirement,
the officers will receive stock depending on the number of points they
have accumulated.
The Company has established the Trust by contributing funds to be
used for the acquisition of the Company’s stock on behalf of executive
officers. The Trust will acquire the Company’s stock to be awarded tothe executive officers in the future, and the shares are managed astrust assets.
(2) The Company’s stock in the Trust
The Company’s own stock in the Trust is recorded in treasury shares
under net assets based on the book value of the shares in the Trust(excluding ancillary expenses). The book value and the number ofthese treasury shares in the Trust as of March 31, 2022 were ¥214
million (U.S. $1,748 thousand) and 164,100 shares, respectively.
(b) Employee Stock Ownership Plan (ESOP) Trust
The Company introduced an Employee Stock Ownership Plan (ESOP)
Trust as an employee incentive plan with the aim of raising awareness of
the Company’s share price and strengthening financial performance.
(1) Summary
The Company awards the Company’s stock to the employees who
satisfy certain requirements based on predetermined regulations forawarding stocks.
If the Company’s profit is higher than a pre-determined standard, theCompany awards a certain number points to employees. Upon theirretirement, employees will receive the Company’s stock depending on
the number of points they have accumulated.
The Company has established the Trust by contributing funds to be
used for the acquisition of the Company’s stock on behalf ofparticipating employees. The Trust will acquire the Company’s stock
to be awarded to employees in the future, and the shares aremanaged as trust assets.
(2) The Company’s stock in the Trust
The Company’s own stock in the Trust is recorded in treasury shares
under net assets based on the book value of the shares in the Trust(excluding ancillary expenses). The book value and the number ofthese treasury shares in the Trust as of March 31, 2022 were ¥126
million (U.S. $1,027 thousand) and 120,000 shares, respectively.
(Impact of COVID-19)
The impact of COVID-19 on the consolidated financial statements forthe current fiscal year is limited because there are no major impacts
such as on the procurement of raw materials in terms of production,or on sales as refraining from going out is not relevant due to the factthat the Group’s manufactured goods are largely consumed within thehousehold.
The impact on the consolidated financial statements for the next fiscal
year will be minor as a result of incorporating information known by theGroup regarding COVID-19 disease at the end of the current fiscal
year.
However, if further situations occur and are not resolved or become
serious for a long period of time, the consolidated financial statements
for the next fiscal year may be affected by delays or suspensions of
raw material procurement, production activities, and declines in sales
activities.

7 Consolidated Statements of Comprehensive Income
The amount of recycling and amount of income tax effect associated with other comprehensive income for the years ended March 31, 2022 and 2021 were as
follows:
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

¥ (1,440)(55)(1,495)475(1,019)¥ 1,014
(69)
945
(287)
658

$ (11,764)(451)(12,214)3,885(8,330)Translation adjustments
Amount recognized in the year

130

36

1,059

Remeasurements of defined benefit plans, net of tax
Amount recognized in the year
Reclassification adjustments included in the statement of income
Before income tax effect adjustment
Amount of income tax effectRemeasurements of defined benefit plans, net of tax

59
0
59
(18)
41

34
8
42
(13)
29

479
4
483
(150)
333

Other comprehensive income (loss) on equity method companies
Amount recognized in the year
Reclassification adjustments included in the statement of income
Other comprehensive income (loss) on equity method companies
Total other comprehensive income

5
65
70
(779)

1
—
1
725

42
531
574
$ (6,364)

Unrealized holding gain (loss) on other securities, net of taxes
Amount recognized in the year
Reclassification adjustments included in the statement of income
Before income tax effect adjustment
Amount of income tax effectUnrealized holding gain (loss) on other securities, net of taxes

9

¥

¥

8 Financial Instruments(1) Current status of financial instruments(a) Policy in relation to financial instruments
The Company and its consolidated subsidiaries (collectively, the“Group” ) raise necessary funds following capital investment plans forundertaking the manufacturing-and-selling businesses. Surplus funds ofthe Group are only invested in highly secure financial assets.
(b) Details of financial instruments and related risk
Trade receivables−trade notes and accounts receivable,−are exposedto credit risk in relation to customers. In addition, receivables
denominated in foreign currencies are exposed to foreign currency
exchange risk.
Marketable securities and investment securities, most of which arestocks of other companies with which the Group has business
relationships, are exposed to market price fluctuation risk.
Substantially all trade payables−notes and accounts payable-trade,electronically recorded obligations-operating and other payables,−havepayment due dates within one year. In addition, payables denominatedin foreign currencies are exposed to foreign currency exchange risk.
(c) Risk management system for financial instruments(Credit risk management−the risk that customers or counterparties
may default)
The Company has established a management policy whereby theCompany evaluates the financial conditions of its customers andmonitors due dates and outstanding balances regularly to identify andmitigate risks of bad debts from customers who are having financial
difficulties.
The consolidated subsidiaries perform equivalent management
procedures as the Company.
(Market risk management−the risk arising from fluctuations in
exchange rates and interest rates)
The Company uses forward exchange contract transactions with theaim of avoiding risk related to fluctuation in future foreign exchange.
For marketable securities and investment securities, the Company
periodically confirms the market value of such financial instruments andreports to the director in charge. The Company reviews the status ofthese investments on a continuing basis.
(Liquidity risk management−the risk that the Group may not able tomeet its payment obligations on the scheduled dates)
The Company manages liquidity risk by means of preparing monthly
financial plans.
(d) Supplementary explanation of items relating to the fair value of financial
instruments
Because estimation of fair values incorporates variable factors,
adopting different assumptions can change the value.

(2) Estimated fair value of financial instruments
The carrying value of financial instruments recognized on the consolidated balance sheets as of March 31, 2022 and 2021, the estimated fair value of suchitems and the differences between them are shown below.
Millions of yen
Year ended March 31, 2022

Carrying value

Investment securities
Other securities¥ 5,252

Fair value¥ 5,252

Difference—

Thousands of U.S. dollars
Year ended March 31, 2022

Carrying value

Fair value

Investment securities
Other securities$ 42,911$ 42,911

Difference—(*1) “Cash and time deposits”, “Notes receivable - trade”, “Accounts receivable - trade”, “Trade payables”, “Electronically recorded obligations – operating”, and “Other payables” have been omitted because these are settled withina short period of time and their fair values approximate book values.
(*2) Unlisted equity securities with no market price of ¥125 million (U.S. $1,021 thousand) are not included in "Investment securities".
Millions of yen
Year ended March 31, 2021

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Investment securities
Assets¥ 11,864
5,790
6,777
¥ 24,431¥ 11,864
5,790
6,777
¥ 24,431————

a Trade payables
b Electronically recorded obligations-operatingc Other payables
Liabilities¥ 2,934
3,187
2,866¥ 8,986¥ 2,934
3,187
2,866¥ 8,986————

Difference(*1) Method of estimating the fair value of financial instruments and other matters relating to investment securities
Assetsa. Cash and time deposits and b. Trade notes and accounts receivable
Because these items are settled over the short term, the fair value and carrying value are nearly equivalent. Therefore, the relevant carrying value is used.
c. Investment securities
Stocks are valued at the exchange trading price. Bonds are valued at the exchange trading price or at the price provided by the financial institutions offering these securities. For information on securities classified by purpose ofholding, please refer to the “Investment securities” section of the notes to the financial statements.
Liabilities
a. Trade payables, b. Electronically recorded obligations-operating and c. Other payables
Because these items are settled over the short term, the fair value and carrying value are nearly equivalent. Therefore, the relevant carrying value is used.
(*2) Financial instruments for which fair value is extremely difficult to determine
Carrying value
Millions of yen

Unlisted equity securities

2021
¥ 125

Because these instruments have no quoted market price and the fair value is extremely difficult to determine, they are not included in the above table.

10Notes to Consolidated Financial Statements

Notes. Redemption schedule for receivables and other securities with maturity dates at March 31, 2022 and 2021 are summarized as follows:Year ended March 31, 2022

Time deposits
Notes receivable - trade
Accounts receivable – trade
Total

Year ended March 31, 2021

Time deposits
Trade notes and accounts receivable
Investment securities
Other
Total

One year or lessMillions of yen
More than 1 year and More than 5 years andwithin 5 years
within 10 years¥ 11,886
82
5,721¥ 17,689

One year or less

—
—
—
—

More than 10 years

—
—
—
—

Millions of yen
More than 1 year and More than 5 years andwithin 5 years
within 10 years

—
—
—
—

More than 10 years¥ 11,863
5,790

—
—

—
—

—
—

100
¥ 17,752

—
—

—
—

—
—

Year ended March 31, 2022

One year or lessTime deposits
Notes receivable - trade
Accounts receivable - tradeTotal$ 97,117
673
46,741$ 144,530

Thousands of U.S. dollars
More than 1 year and More than 5 years andwithin 5 years
within 10 years

—
—
—
—

More than 10 years

—
—
—
—

—
—
—
—

(3) The details related to each level of fair value of financial instruments
There are three levels to the fair value hierarchy (Level 1 is the highest priority and Level 3 is the lowest priority) based on the observability and materiality.
Level 1: Of the inputs related to the observable market value calculation, the market price calculated based on the market price of the asset or liability forwhich the market value is calculated, which is formed in an active market.
Level 2: Of the inputs related to the calculation of the observable market value, the market value calculated using the inputs related to the calculation of themarket value other than the inputs categorized within Level 1.
Level 3: Market value calculated using inputs related to the calculation of unobservable market value.
When multiple inputs that have a significant influence on the market value calculation are used, the market value is classified into the lowest priority level in themarket value calculation among the levels to which those inputs belong.
(a) Financial instruments recorded on the consolidated balance sheet at market value.

Year ended March 31, 2022

Level 1

Level 2

Investment securities
Other securities
Stock¥ 5,150—

Year ended March 31, 2022

Level 1

Investment securities
Other securities
Stock$ 42,079

Fair value
Millions of yen

Level 3

Total—

¥ 5,150

Fair value
Thousands of U.S. dollars
Level 2
Level 3

—

—

Total

$ 42,079(*) In accordance with the transitional treatment provided for in paragraph 26 of "Application Guidelines for Fair Value Measurement" (ASBJ Guideline No. 31, July 4, 2019), investment trusts are not included in the above table.
The amount of the investment trust on the consolidated balance sheet is ¥102 million (U.S. $831 thousand).

(b) Financial instruments other than those listed on the consolidated balance sheet at market value(Years ended March 31, 2022)
It is omitted because it is not important.
Notes. Explanation of the valuation technique used to calculate the market value and the inputs related to the calculation of the market value
Investment securities
Listed stocks are valued using market prices. Listed stocks are traded in active markets, so their market value is classified into Level 1.

9 Derivatives
The Company and its consolidated subsidiaries had no derivative instruments outstanding at March 31, 2022 and 2021.

11

10 Investment Securities(1) Other securities
The acquisition cost and related carrying value of other securities with a determinable market value at March 31, 2022 and 2021 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Acquisition cost
Carrying value
Total unrealized gain
Total unrealized loss

2022
¥ 2,586
5,252
2,680
(14)

2021
¥ 2,616
6,777
4,164
(3)

2022
$ 21,128
42,911
21,897(114)

At March 31, 2022 and 2021, unlisted stocks (whose carrying value was ¥125 million (U.S.$1,021 thousand) and ¥125 million, respectively) are not includedin the above table because they have no quoted market price.
(2) Sales of other securities(Year ended March 31, 2022)
Millions of yen(1) Stocks(2) Bonds
a Government bonds
b Corporate bondsc Others(3) Other securities
Total

Proceeds from sales

Gain on sales

Loss on sales

¥ 62

¥ 44

—

—
—
—
—
¥ 62

—
—
—
—
¥ 44

—
—
—
—
—

(Year ended March 31, 2021)
Millions of yen
Proceeds from sales(1) Stocks(2) Bonds
a Government bonds
b Corporate bondsc Others(3) Other securities
Total

Gain on sales

Loss on sales

¥ 87

¥ 69

—

—
—
—
—
¥ 87

—
—
—
—
¥ 69

—
—
—
—
—

(Year ended March 31, 2022)
Thousands of U.S. dollars(1) Stocks(2) Bonds
a Government bonds
b Corporate bondsc Others(3) Other securities
Total

Proceeds from sales

Gain on sales

Loss on sales

$ 506

$ 357

—

—
—
—
—
$ 506

—
—
—
—
$ 357

—
—
—
—
—

(3) Impairment of investment securities
There were no significant impairment losses on investment securities for the years ended March 31, 2022.
The Company recognized impairment loss on investment securities of ¥31 million for the year ended March 31, 2021.

11 Land Revaluation
In accordance with the Land Revaluation Law (Proclamation No. 34 dated
March 31, 1998), land used for business activities was revalued at March
31, 2002. The revaluation difference, net of taxes, is stated as “Unrealized
revaluation loss on land, net of taxes” in net assets. Deferred tax liabilities
arising from this revaluation difference are presented separately fromdeferred tax liabilities for other temporary differences in the accompanying
consolidated balance sheets. The market value of the land as of March 31,
2022 and 2021 decreased by ¥197 million (U.S.$1,612 thousand) and¥168 million, respectively, after the revaluation.

12

Notes to Consolidated Financial Statements

12 Pledged Assets
Pledged assets at March 31, 2022 and 2021 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2022
Time deposits

2022

¥5

¥5

$ 37

Time deposits were pledged as collateral mainly for leased office space at March 31, 2022 and 2021.

13 Income Taxes
At March 31, 2022 and 2021, the tax effect of the temporary differences which gave rise to a significant portion of the deferred tax assets (excluding deferredtaxes on unrealized revaluation loss on land) was as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2022
Deferred tax assets:
Accrued business taxes¥

41

Accrued employees’ bonuses

139

Refund liabilities
Allowance for sales returns
Loss on valuation of inventories

¥

2022
52

$

332

169

1,139

145

—

1,186

—

37

—

8

14

67

Tax loss carryforwards

92

90

752

Net defined benefit liability

374

398

3,054

Provision for directors’ retirement and severance benefits

33

33

273

Provision for executive officers’ incentive plan

25

21

208

Impairment losses

499

—

4,077

Write-downs of securities

53

64

437

Other

195

238

1,591

1,605

1,117

13,117

(92)

(89)

(752)

Valuation allowance

(115)
(208)

(117)
(206)

(943)
(1,695)

Total deferred tax assets

1,398

911

11,422

Deferred gain on sales of property

(10)

(11)

(83)

Net defined benefit asset

(2)

(15)

(19)

Returns assets

(87)

—

(709)

Gross deferred tax assets
Valuation allowance for tax loss carryforwards
Valuation allowance for the total of future deductible temporary differences etc.

Deferred tax liabilities:

Undistributed earnings of controlled foreign companies

(42)

(70)

(339)

Unrealized holding gain on other securities, net of taxes(797)(1,272)(6,512)

Other
Total deferred tax liabilities
Net deferred tax assets
Net deferred tax liabilities

¥

(8)

(12)

(63)

(946)

(1,380)—(7,725)

452
—

¥

(469)

$

3,696
—

At March 31, 2022 and 2021, net deferred tax assets and net deferred tax liabilities were included in the following items in the consolidated balance sheets.

13Thousands of
U.S. dollars

Millions of yen

Non-current assets - deferred tax assets
Non-current liabilities - deferred tax liabilities

2022

2021

2022

¥ 452
—

¥

$ 3,696
—

84
(553)

Amounts of tax loss carryforward and related deferred tax assets by tax loss carryforward for the years ended March 31, 2022 and 2021, were as follows:Year ended March 31, 2022

Tax loss carryforwards
Valuation allowance
Deferred tax assets

Due in one year or lessDue after one year
through two years

Due after two years
through three years

Millions of yen
Due after three years
through four years

Due after four years
through five years

After five years

¥ 15
(15)
—

¥ 46
(46)
—

¥ 16
(16)
—

¥ 14
(14)
—

—
—
—

Due after one year
through two years

Due after two years
through three years

Due after three years
through four years

Due after four years
through five years

After five years

—
—
—

¥ 26
(26)
—

Due after one year
through two years

Due after two years
through three years

$ 124
(124)
—

$ 378
(378)
—

—
—
—

Total

¥ 92
(92)
—

Millions of yen
Year ended March 31, 2021

Tax loss carryforwards
Valuation allowance
Deferred tax assets

Due in one year or less

¥1
—
1

¥ 46
(46)
—

¥ 16
(16)
—

—
—
—

Total

¥ 90
(89)
—

Thousands of U.S. dollars
Year ended March 31, 2022

Tax loss carryforwards
Valuation allowance
Deferred tax assets

Due in one year or less———Due after three years
through four years

$ 134
(134)
—

Due after four years
through five years

After five years

$ 117
(117)
—

—
—
—

Total

¥ 752
(752)
—

Note: Figures for tax loss carryforward were the amounts multiplied by effective statutory tax rate.

A reconciliation of the statutory tax rates to the Company’s effective tax rates for the years ended March 31, 2022 and 2021 is summarized as follows:
2022
Japanese statutory tax rate
Permanent differences, such as entertainment expenses, etc.
Permanent differences, such as dividend income
Tax credit
Undistributed earnings of controlled foreign companies
Equity in loss of affiliates
Increase in valuation allowance
Other
Effective tax rate

31.00%
0.55(0.52)(7.68)(0.97)(1.26)
1.64
6.07
28.83%

2021
31.00%
0.16(0.27)(1.77)
0.02
0.16
0.03
(0.08)
29.25%

14 Employees’ Retirement and Severance Benefits
The Company and its consolidated subsidiaries have defined benefit plansfor payments of employees’ retirement (either funded or unfunded), andthe Company and some consolidated subsidiaries have a defined
contribution pension plan.
The Group pays a pension or lump sum based on length of service andsalary in the defined benefit corporate pension plan.
In unfunded retirement benefit plans, the Company pays a lump sum

based on length of service and salary as a retirement benefit.
Some consolidated subsidiaries adopt the simplified method whichassumes retirement benefit obligation to be equal to the benefits payable if
all eligible employees voluntarily terminated their employment at fiscal year
end for the calculation of net defined benefit liability and retirement benefit
expenses.

14

Notes to Consolidated Financial Statements(1) Defined benefit plans
Adjustments of beginning and ending balance of retirement benefit obligations
Thousands of
U.S. dollars

Millions of yen

Balance at the beginning of the year
Service cost
Interest cost
Actuarial gain or loss
Payment of retirement benefits
Other
Balance at the end of the year

2022

2021

2022

¥ 1,386
66
10
(59)
(73)
8
¥ 1,338¥ 1,381
67
10
(35)
(34)
(3)
¥ 1,386$ 11,325
542
81
(485)
(600)
67
$ 10,930

Adjustments of beginning and ending balance of plan assets
Thousands of
U.S. dollars

Millions of yen

Balance at the beginning of the year
Expected return on plan assets
Actuarial loss
Payment of retirement benefits
Balance at the end of the year

2022

2021

2022

¥

¥

$

57
1
(1)
(13)
44

¥

70
1
(1)
(13)
57

¥

463
6
(6)
(103)
360

$

Adjustments of ending balance of retirement benefit obligations and plan assets, and net defined benefit asset and liability on consolidated balance sheet
Thousands of
U.S. dollars

Millions of yen

Funded retirement benefit obligations
Plan assets
Unfunded retirement benefit obligations
Net defined benefit asset and liability on consolidated balance sheet
Net defined benefit liability
Net defined benefit asset
Net defined benefit asset and liability on consolidated balance sheet

2022

2021

2022

¥

¥

$

37
(44)
(7)
1,301
1,294
1,301
(7)
¥ 1,294

49
(57)
(8)
1,337
1,329
1,337
(8)
¥ 1,329

299
(360)
(61)
10,632
10,571
10,632(61)$ 10,571

The following table summarizes the components of net retirement benefit expenses:
Thousands of
U.S. dollars

Millions of yen

2021

2022
Service cost
Interest cost on benefit obligation
Expected return on plan assets
Amortization of actuarial loss
Extraordinary additional retirement payments
Net retirement benefit expenses

¥ 66
10
(1)
0
12
¥ 88

2022

¥ 67
10
(1)
8
11
¥ 95

$

$

542
81
(6)
4
100
721

Remeasurements of defined benefit plans, before tax, in the consolidated statements of comprehensive income
Thousands of
U.S. dollars

Millions of yen

2021

2022
Actuarial gain (loss)

¥ 59

¥

2022
42

$

483

Remeasurements of defined benefit plans, before tax, in the consolidated balance sheets
Thousands of
U.S. dollars

Millions of yen

2022
Unrecognized actuarial gain (loss)15¥ (76)

2021¥ (17)

2022$ (617)

Plan assets(a) Plan assets
The fair value of plan assets, by major category, as a percentage of total plan assets is as follows:
2022
General accounts
Total

100.0%
100.0

2021
100.0%
100.0(b) Calculation method of expected long-term rate of return on plan assets
The expected return on assets has been estimated based on the anticipated allocation to each asset class and the expected long-term returns on assets
held in each category.
The assumptions used in the actuarial calculation
The main assumptions used in the actuarial calculation (presented as a weighted average) are as follows:
2022
Discount rate
Expected rate of return on plan assets

2021
0.8%
1.3%

0.8%
1.3%

(2) Other retirement benefits
Contributions to the defined contribution pension plans of the Company and its consolidated subsidiaries for the years ended March 31, 2022 and 2021
amounted to ¥129 million (U.S. $1,051 thousand) and ¥131 million, respectively.

15 Net Assets
The Corporation Law of Japan (the “Law”), which superseded most of theprovisions of the Commercial Code of Japan, went into effect on May 1,
2006. The Law provides that an amount equal to 10% of the amount to be
disbursed as distributions of capital surplus (other than the capital reserve)
and retained earnings (other than the legal reserve) be transferred to thecapital reserve and the legal reserve, respectively, until the sum of thecapital reserve and the legal reserve equals 25% of the capital stock
account. Such distributions can be made at any time by resolution of theshareholders or by the Board of Directors if certain conditions are met.

Capital surplus and the legal reserve are not available for the distribution ofdividends but may be used to reduce or eliminate a deficit or may betransferred to stated capital. At March 31, 2022, the legal reserve of theCompany included in retained earnings amounted to ¥550 million(U.S.$4,492 thousand).
The maximum amount which the Company can distribute as dividends is
calculated based on the non-consolidated financial statements of theCompany and in accordance with the Corporation Law of Japan.

16 Amounts per Share
Net assets per share as of March 31, 2022 and 2021 were ¥1,407.03(U.S.$11.50) and ¥1,445.14, respectively. Basic earnings per share for theyears ended March 31, 2022 and 2021 were ¥49.91 (U.S.$0.41) and¥113.90, respectively.
Diluted earnings per share for the years ended March 31, 2022 and 2021
were ¥49.91 (U.S.$0.41) and ¥113.78, respectively.

The basis for the calculation of basic earnings per share and diluted earnings per share for the years ended March 31, 2022 and 2021 was as follows:
Thousands of
U.S. dollars

Millions of yen

Basic earnings per share:
Profit attributable to owners of parent
Amount not attributable to shareholders of common stock
Amount attributable to shareholders of common stock
Weighted-average number of shares outstanding(millions of shares)
Diluted earnings per share:
Adjustments to profit attributable to owners of parent
Increase in number of shares outstanding(millions of shares)(Subscription rights to shares)
Shares having an anti-dilutive effect(millions of shares)

2022

2021

2022

¥ 1,109—1,109¥ 2,526—
2,526$ 9,063
—
9,063

22

22

—

—

—

—

0
(0)

0
(0)

—
—

—

—

—

16

Notes to Consolidated Financial Statements

The basis for calculation of total net assets per share as of March 31, 2022 and 2021 was as follows:
Thousands of
U.S. dollars

Millions of yen

Total net assets per share:
Total net assets
Deductions:
Subscription rights
Non-controlling interests
Amounts attributable to shareholders of common stock
Number of shares outstanding at year end(millions of shares)

2022

2021

2022

¥ 31,848
573—
573
31,274¥ 32,633
543
2
541
32,090$ 260,214
4,685
—
4,685
255,52922

22—

17 Major Expenses
Major expenses included in selling, general and administrative expenses for the years ended March 31, 2022 and 2021 were as follows:
Thousands of
U.S. dollars

Millions of yen

Sales promotion expenses
Advertising costs
Salaries
Shipment and storage expenses
Provision for employees’ retirement and severance benefits
Provision for executive officers’ incentive plan
Provision of allowance for doubtful accounts

2022
¥ 555
2,606
2,487
1,657
158
13
-

2021
¥ 3,658
2,560
2,448
1,711
167
11
30

2022
$ 4,535
21,28920,32013,536
1,288
105—

Research and development expenses included in general and administrative expenses and cost of sales for the years ended March 31, 2022 and 2021
amounted to ¥851 million (U.S.$6,955 thousand) and ¥790 million, respectively.

18 Cash and Time Deposits
A reconciliation of cash and cash equivalents in the accompanying consolidated statements of cash flows to cash and time deposits in the accompanying
consolidated balance sheets at March 31, 2022 and 2021 is as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and time deposits
Time deposits with a maturity in excess of three months
Other current assets (*)
Cash and cash equivalents

2022¥ 11,888(68)
23¥ 11,843

2021¥ 11,864(60)
28¥ 11,832

2022$ 97,129(552)
188$ 96,765(*) These represent the Company’s contributions of funds to a bank in order to establish the “Board Benefit Trust (BBT)” and “Employee Stock Ownership Plan (ESOP) Trust.”

19 Leases(Finance leases)
Leased assets included in property, plant and equipment are buildings and structures, machinery, equipment and vehicles, tools, furniture and fixtures in thedaily necessities segment. Leased assets included in intangible assets are software.
(Operating leases)
The Company and its consolidated subsidiaries had no significant operating leases at March 31, 2022 and 2021.

17

20 Revenue recognition(1) The disaggregation of revenue recognized from contracts with customers
a. Breakdown by type of goods or services
Millions of yen

Air Care
Cloth Care
Thermal Care
Hand Care
Dehumidify Care
Home Care
Total of revenue from contracts with customers

2022

2022

¥ 19,984
8,213
4,364
5,834
2,846
4,229
¥ 45,470$ 163,279
67,10635,656
47,66923,25334,551$ 371,514

Millions of yen

Thousands of
U.S. dollars

b. Breakdown by revenue recognition period

Goods or services to be transferred at one time
Goods or services that are transferred over a period of time
Total of revenue from contracts with customers

Thousands of
U.S. dollars

2022

2022

¥ 45,470—¥ 45,470$ 371,514—$ 371,514(2) Information that is the basis for understanding the revenue generated from contracts with customers
Recognized revenue at the time the control of promised goods or services is transferred to the customer at the amount expected to be received uponexchange of said goods or services. The time when the customer gains control of the product is determined to be the time when the product arrives at thecustomer in domestic sales and the time when the product arrives at the point agreed with the customer in export sales.
These revenues are measured by deducting rebates and returns from the consideration promised in the contract with the customer.
The promised consideration is collected within approximately two months from the time the performance obligation is fulfilled. The amount of consideration
does not include important financial factors.
(3) Information regarding the relationship between the fulfillment of performance obligations under the contract with the customer and the cash
flows arising from this contract, and the amount and timing of revenue expected to be recognized from the contract with the customer existingat the end of the current consolidated fiscal year after the next consolidated year.

(Balance of receivables and contract liabilities arising from contracts with customers)

Thousands of
U.S. dollars

Millions of yen

Receivables arising from contracts with customers
Notes receivable – trade
Accounts receivable – trade

Balance at
March 31, 2022

Balance atApril 1, 2021

Balance at
March 31, 2022

82¥
¥ 5,721¥98¥ 5,691$673$ 46,741

21 Segment Information(1) Summary of Reporting Segments
Segment information for the years ended March 31, 2022 and 2021 is omitted as the Group operates the daily necessities segment as a single segment.
(2) Calculation method of sales, profits or losses, and other items by reportable segment
Information on the calculation method is omitted as the Group operates as a single segment.
(3) Information on the amounts of sales, income, and other items by reportable segment
Information on the amounts of sales and other items for the years ended March 31, 2022 and 2021 is omitted as the Group operates as a single segment.

18

Notes to Consolidated Financial Statements(4) Related Information(a) Information by products and service

Millions of yen

Year ended March 31, 2022

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties¥ 19,984¥ 8,213¥ 4,364¥ 5,834¥ 7,075¥ 45,470

Year ended March 31, 2021

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties¥ 21,355¥ 9,424¥ 4,490¥ 6,923¥ 7,482¥ 49,674

Year ended March 31, 2022

Air Care

Cloth Care

Thermal Care

Hand Care

Others

Total

Sales to third parties$ 163,279$ 67,106$ 35,656$ 47,669$ 57,804$ 371,514

Millions of yen

Thousands of U.S. dollars(b) Information by geographical segment(Sales)Geographical segment information is not presented as overseas sales
were less than 10% of consolidated net sales for the years ended March
31, 2022 and 2021.
(c) Information by major customers(Property, plant and equipment)
Geographical segment information is not presented as the amount ofproperty, plant and equipment in Japan exceeded 90% of the total ofproperty, plant and equipment at March 31, 2022 and 2021.

Sales
Thousands of
U.S. dollars

Millions of yen

Customers

PALTAC CORPORATION
ARATA CORPORATION

2022

2021

2022

¥ 17,158¥ 10,688¥ 17,612¥ 12,250$ 140,199$ 87,331

Related segment

Daily necessities
Daily necessities

22 Related Party Transactions(Years ended March 31, 2022 and 2021)
Not applicable

23 Inventory Valuation Loss Included in Cost of Sales
Inventory valuation loss write-downs below cost to net selling value are included in cost of sales and amounted to ¥478 million (U.S.$3,904 thousand) and¥308 million for the years ended March 31, 2022 and 2021, respectively.

24 Impairment Loss
The Company recognized impairment losses for the year ended March 31, 2022 as follows:
Location

Purpose of use

Type of assets

millions of yen

thousands of
U.S. dollars¥ 1,166$ 9,530

407

3,327

Tokyo

Other

Goodwill

Tochigi City, Tochigi Prefecture

Business assets

Buildings and structures, machinery, equipment and vehicles,
tools, furniture and fixtures, etc.

Tochigi City, Tochigi Prefecture

Idle assets

Land

4

36

Chon Buri Province, Thailand

Business assets

Buildings and structures, machinery, equipment and vehicles,
tools, furniture and fixtures

87

712

For business assets, the Group determines the asset group in consideration of the management accounting classification, and for shared assets such as thehead office, the entire business is the asset group. In addition, idle assets that are not used for business are grouped by individual property.
As a result of reviewing the business plan of the disposable warmers business due to the decline in profitability, the excess profitability initially expected could
no longer be expected. Therefore, the entire amount of the undepreciated balance of goodwill relating to the disposable warmers business and the carrying
amount of business assets held by the Company and its subsidiary, S.T. MYCOAL Co., Ltd., was reduced to the recoverable amount, and the reduced
amount was recorded as an extraordinary loss with an impairment loss of ¥1,574 million (U.S.$12,858 thousand).

19

For these assets, net realizable value used by the Company is based on appraisal values (for property and real estate) obtained from external valuation firms
engaged by the Company to provide valuation services. The key assumptions underlying appraisal value are the expected selling price of machinery, thereplacement cost of buildings, and the price of land when it is vacant.
Since the profitability of the business assets held by the consolidated subsidiary Shaldan (Thailand) has declined, the carrying amount was reduced to therecoverable amount and the reduced amount was recorded as an impairment loss under extraordinary loss.
The recoverable amount is measured by the value in use and is calculated assuming that the value in use is zero.
For idle assets, the carrying amount was reduced to the recoverable amount because the intended use was not currently determined, and the reduced
amount was recorded as an impairment loss under extraordinary loss. For idle assets, the recoverable amount is measured by the net realizable value, and the
net realizable value is calculated by real estate appraisal by a real estate appraiser.

25 Note to Consolidated Statements of Changes in Net Assets
Shares in issue and outstanding and treasury stock at March 31, 2022 and 2021 were as follows:(Year ended March 31, 2022)
Number of shares in issue and outstanding:Common stock
Number of shares held in treasury:
Common stock

Subscription rights at March 31, 2022 were as follows:
Subscription rights for stock options¥- million (U.S. $- thousand)

23,000 thousand
772 thousand

Note: Details of the change in the number of shares of treasury stock are as follows:
Increase due to purchase of shares less than standard unit:
Increase due to acquired by Japan Custody Bank, Ltd. (Trust E Account):
Decrease due to the exercise of stock options:
Decrease due to consists of disposal of treasury stock by third party allotment(third party allotment to Japan Custody Bank, Ltd. (Trust E Account)):
The common stock owned by the Trust (284 thousand shares) is included in thenumber of shares held in treasury stock.

0 thousand
90 thousand
22 thousand
90 thousand

Dividends paid from retained earnings for the year ended March 31, 2022 were as follows:
Total amount of dividends

Dividends per share

Resolution

Millions of yen

Thousands of U.S. dollars

Yen

U.S. dollars

Record date

Effective date

Board of directors’ meeting
held on May 17, 2021

¥ 426

$ 3,477¥ 19$ 0.16

March 31, 2021

June 1, 2021

Board of directors’ meeting
held on October 27, 2021

426

3,481

19

0.16

September 30, 2021

December 3, 2021

Dividends for which the record date was in the year ended March 31, 2022 and the effective date is in the year ending March 31, 2023 were as follows:
Total amount of dividends

Dividends per share

Resolution

Millions of yen

Thousands of U.S. dollars

Board of directors’ meeting
held on May 20, 2022

¥ 428

$ 3,495(Year ended March 31, 2021)
Number of shares in issue and outstanding:Common stock
Number of shares held in treasury:
Common stock

Source of dividends

Yen

U.S. dollars

Record date

Effective date

Retained earnings¥ 19$ 0.16

March 31, 2022

June 6, 2022

Subscription rights at March 31, 2021 were as follows:
Subscription rights for stock options

23,000 thousand¥2 million

795 thousand

Note: Details of the change in the number of shares of treasury stock are as follows:
Increase due to purchase of shares less than standard unit:
0 thousand
Decrease due to the exercise of stock options:
36 thousand
Decrease due to issuance of treasury shares by the stock benefit trust (BBT):
17 thousand
The common stock owned by the Trust (194 thousand shares) is included in the number of shares held intreasury stock.

Dividends paid from retained earnings for the year ended March 31, 2021 were as follows:
Total amount of dividends(Millions of yen)

Dividends per share(Yen)

Record date

Effective date

Board of directors’ meeting held on
May 18, 2020

¥ 403

¥ 18

March 31, 2020

June 2, 2020

Board of directors’ meeting held on
October 27, 2020

403

18

September 30, 2020

December 4, 2020

Resolution

Dividends for which the record date was in the year ended March 31, 2021 and the effective date was in the year ended March 31, 2022 were as follows:
Resolution

Board of directors’ meeting held on
May 17, 2021

Total amount of dividends(Millions of yen)

Source of dividends

Dividends per share(Yen)

Record date

Effective date

¥ 426

Retained earnings¥ 19

March 31, 2021

June 1, 2021

20

Notes to Consolidated Financial Statements

26 Stock Option Plans
At March 31, 2022, the Company had stock option plans, which were approved at the annual general meetings of the shareholders and by the Board of
Directors. Details of these stock option plans are summarized as follows:
Date of approval

Number of shares granted

Eligible participants

Exercisable period

June 17, 2014

175,000

6 officers and 11 employees

Aug 2, 2016 – Aug 1, 2021

The option price per share was determined on the date the options were granted based on an established formula for determining option prices.
The options are exercisable during the above periods provided that the recipients are still directors, officers or employees of the Company or its subsidiaries.
Description of stock options
GranteesType of stock2015
6 officers and 11 employees
Common stock

Number of stock options granted (*)
Grant dateCondition for exercise
Working period
Exercisable period

175,000
August 1, 2014
Working from August 1, 2014
to August 1, 2016
August 1, 2014 to August 1, 2016
Within 5 years after the vestingdate (those retiring after the vestingdate cannot exercise their stock
options)(*) Number of stock options in the column “Number of stock options granted” has been converted into the equivalent numbers of shares.

Stock option activity during the year ended March 31, 2021 was as follows:
Number of shares2015

Non-vested outstanding at beginning of year
Granted during the year
Forfeited during the year
Vested during the year
Outstanding at end of year
Vested outstanding at beginning of year
Vested during the year
Exercised during the year
Forfeited during the year
Outstanding at end of year

—
—
—
—
—
24,000—22,0002,000—

Price of stock options
Yen

Exercise price
Weighted-average market price
Fair value per option on grant date

¥
¥

2015
1,059
1,775
97

The fair value of each stock option grant was estimated at the grant date using the Black-Scholes option pricing model.
Method of estimating exercised stock options
The Company estimated the number of exercised stock options based on the actual number of forfeitures because it is difficult to estimate the number ofstock options which will be forfeited in the future.

211-4-10 Shimo-ochiai, Shinjuku Ward, Tokyo 161-8540 Japan
https://www.st-c.co.jp/english/
Printed in Japan, October 2022