Avex : FY2026 Audited Financial Statements

About this update from Avex Inc.

Avex Inc. and Consolidated Subsidiaries Consolidated Financial Statements for the Year Ended March 31, 2026, and Independent Auditor's Report Deloitte Touche Tohmatsu LLC Marunouchi Nijubashi Building 3-2-3 Marunouchi Chiyoda-ku, Tokyo 100-8360 Japan Tel: +81 (3) 6213 1000 Fax: +81 (3) 6213 1005 https://www.deloitte.com/jp/en INDEPENDENT AUDITOR'S REPORT To the Board of Directors of Avex Inc.: Opinion We have audited the consolidated financial statements of Avex Inc. and its consolidated subsidiaries (the "Group"), which comprise the consolidated balance sheet as of March 31, 2026, and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, all expressed in Japanese yen. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of March 31, 2026, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in Japan. Convenience Translation Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made in accordance with the basis stated in Note 1 to the consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the provisions of the Code of Professional Ethics in Japan, including the ethical requirements that are relevant to audits of the financial statements of public interest entities, and we have fulfilled our other ethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Member of Deloitte Touche Tohmatsu Limited Judgment regarding the recoverability of deferred tax assets The key audit matter and the basis of our determination How the key audit matter was addressed in the audit In the Group's consolidated balance sheet as of March 31, 2026, deferred tax assets were recorded for ¥5,307 million (4.7% of total assets). As described in Note 13, "Income Taxes" to the consolidated financial statements, the amount of deferred tax assets that were determined to be recoverable before being offset against deferred tax liabilities was ¥5,698 million, which consisted of total deferred tax assets of ¥8,616 million and a valuation allowance of ¥(2,917) million. Additionally, in Note 3, "Significant Accounting Estimates, Deferred tax assets" to the consolidated financial statements, the details of accounting estimates are described as follows: The amount of deferred tax assets is the amount expected to be recovered in light of future taxable income based on profitability and tax planning, and in light of the scheduling of the fiscal period in which deductible temporary differences are expected to be reversed. In calculating the amount expected to be recovered, future taxable income based on profitability is estimated on the basis of the Group's business plan, which includes key assumptions relating to future sales projections and market trends. The assumptions used in these estimates may be affected by changes in uncertain economic conditions in the future. For the above reasons, we have determined the appropriateness of management's judgment on the recoverability of deferred tax assets based on future sales projections and market trends as a key audit matter. In examining the appropriateness of management's judgment related to the recoverability of deferred tax assets based on future sales projections and market trends, we performed the following audit procedures, among others: We evaluated the design and operating effectiveness of controls related to the recoverability of deferred tax assets, including the setting of key assumptions regarding future forecasts that form the basis for estimated taxable income based on profitability. Regarding the process by which management assessed the recoverability of deferred tax assets, we performed the following procedures: We examined the occurrence of taxable income and relevant documentation to evaluate the appropriateness of the classification of the company. To evaluate the appropriateness of the expected reversal of future deductible temporary differences at the end of the period, we inquired of management about the key assumptions used in future forecasts and inspected the minutes of the Board of Directors and other decision-making bodies meeting. We inspected scheduling tables of Avex Inc. ("the Company") and examined the appropriateness of offsetting the estimated amount of future taxable income exclusive of reversing temporary differences and future deductible temporary differences. Regarding the estimated amount of pre-adjustment taxable income for temporary differences, we performed the following procedures: We examined the approval of business plan figures by inspecting the minutes of the Board of Directors' meetings. We examined the consistency between the business plan approved by the Board of Directors and the documentation related to the recoverability of deferred tax assets. (3) Regarding the business plan, we performed the following procedures: ―We compared past business plan figures with actual results, and in the case of shortfalls, we examined the reasons and tested whether they were reflected in the current estimated taxable income. ―We inquired of management and inspected relevant documentation about the sales plans for live performances and events included in the future business projections and market trends in the live entertainment market. ―We examined whether the key assumptions were consistent with historical results. Valuation of Goodwill for S10 Entertainment & Media LLC The key audit matter and the basis of our determination How the key audit matter was addressed in the audit In the Group's consolidated balance sheet as of March 31, 2026, goodwill was recorded for ¥2,535 million. This goodwill arose from the acquisition of S10 Entertainment & Media LLC ("S10"), a consolidated subsidiary in the United States of America. As described in Note 3, "Significant Accounting Estimates, Valuation of goodwill for equity-method affiliates" to the consolidated financial statements, goodwill was initially recognized based on the future excess earning power and other factors forecast at the time of acquiring S10. In calculating the recoverable amount for impairment testing of goodwill, the Company used future cash flows based on a business plan that incorporates key assumptions such as the expected number and value of future contracts for S10 and market trends. Since the future cash flows are projected over a long period and are subject to fluctuations mainly due to external factors such as market conditions, the estimate involves uncertainty and requires significant management judgment. For the above reasons, we have determined the evaluation of the goodwill recognized from the acquisition of S10 as a key audit matter. In evaluating goodwill related to S10, we performed the following procedures, among others: Evaluation of internal controls: We evaluated the design and operating effectiveness of controls over management's process for identifying any indications of goodwill impairment, including the comparative analyses between the initial business plan at the acquisition date and post-acquisition operating performance, and the determination whether revisions to future business plans are necessary. Regarding the business plan used in the goodwill impairment test, we performed the following procedures: We inquired of management of the Company and management of S10 regarding future outlook for the overall music market, including the local market environment in the S10's region, and examined whether there were any events or circumstances—such as a significant deterioration in the business environment after the acquisition—that could significantly reduce the recoverable amount of goodwill, or that would require changes in the estimation approach used for future business plans. We inquired of management regarding the key assumptions in the business plan (e.g., the expected number of future contracts, contract values, and market trends). We also examined trend analyses based on historical results and performed an analysis of the external business environment of the music market using available publicly disclosed external data, to assess the feasibility of the plan. Other Information Other information comprises the information included in the Group's disclosure documents accompanying the audited consolidated financial statements, but does not include the consolidated financial statements and our auditor's report thereon. We determined that no such information existed and therefore, we did not perform any work thereon. Responsibilities of Management and the Audit and Supervisory Committee for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally accepted in Japan and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. The Audit and Supervisory Committee is responsible for overseeing the Directors' execution of duties relating to the design and operating effectiveness of the controls over the Group's financial reporting process. Auditor's Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in Japan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks. The procedures selected depend on the auditor's judgment. In addition, we obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain, when performing risk assessment procedures, an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate whether the overall presentation and disclosures of the consolidated financial statements are in accordance with accounting principles generally accepted in Japan, as well as the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Group as a basis for forming an opinion on the group financial statements. We are responsible for the direction, supervision and review of the audit work performed for purposes of the group audit. We remain solely responsible for our audit opinion. We communicate with the Audit and Supervisory Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with it all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the Audit and Supervisory Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Fees for audit and other services for the year ended March 31, 2026, which were charged by us and our network firms to Avex Inc. and its subsidiaries were ¥84 million and ¥20 million, respectively. Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan. Deloitte Touche Tohmatsu LLC August 21, 2026 Avex Inc. and Consolidated Subsidiaries Consolidated Balance Sheet March 31, 2026 Millions of Yen Thousands of U.S. Dollars (Note 1) ASSETS 2026 2025 2026 CURRENT ASSETS: Cash and cash in banks (Notes 17 and 20) ¥ 34,305 ¥ 35,690 $ 214,567 Notes and accounts receivable—trade (Notes 5 and 17) 25,678 22,952 160,607 Inventories: Merchandise and finished products 1,273 910 7,962 Work in process 4,157 3,683 26,000 Raw materials and supplies 380 315 2,376 Advance payments—trade 1,946 1,471 12,171 Prepaid expenses 1,970 1,917 12,321 Prepaid royalties 4,140 2,789 25,894 Accounts receivable—other (Note 17) 4,632 5,641 28,971 Other 3,406 2,654 21,303 Allowance for doubtful accounts (136 ) (253 ) (850 ) Total current assets 81,755 77,774 511,352 PROPERTY, PLANT AND EQUIPMENT: Land 2,986 2,690 18,676 Buildings and structures—net (Note 7) 5,380 4,214 33,650 Other property—net 1,207 1,595 7,549 Total property, plant and equipment 9,574 8,500 59,882 INVESTMENTS AND OTHER ASSETS: Investment securities (Notes 6 and 17) 6,977 9,839 43,638 Goodwill (Notes 3 and 4) 2,535 22 15,855 Intangible assets (Note 7) 2,432 2,637 15,211 Deferred tax assets (Notes 3 and 13) 5,307 5,183 33,193 Asset for retirement benefits (Note 9) 193 42 1,207 Other assets 2,964 3,583 18,538 Allowance for doubtful accounts (947 ) (1,624 ) (5,923 ) Total investments and other assets 19,464 19,685 121,741 TOTAL ¥ 110,793 ¥ 105,960 $ 692,975 Avex Inc. and Consolidated Subsidiaries Consolidated Balance Sheet March 31, 2026 Millions of Yen Thousands of U.S. Dollars (Note 1) LIABILITIES AND EQUITY 2026 2025 2026 CURRENT LIABILITIES: Notes and accounts payable—trade (Note 17) ¥ 2,778 ¥ 2,972 $ 17,375 Current portion of long-term loans (Notes 8 and 17) 3 Accounts payable—other (Note 17) 30,299 29,511 189,510 Accrued royalties (Note 17) 8,435 6,790 52,758 Income taxes payable (Note 17) 554 2,105 3,465 Refund liabilities 1,163 1,323 7,274 Advances received (Note 12) 5,962 4,097 37,290 Provision for bonuses 819 310 5,122 Other 6,184 5,719 38,679 Total current liabilities 56,198 52,834 351,501 LONG-TERM LIABILITIES: Other 1,705 2,013 10,664 Total long-term liabilities 1,705 2,013 10,664 COMMITMENTS AND CONTINGENT LIABILITIES (Notes 16 and 18) EQUITY (Notes 10 and 11): Shareholders' equity: Common stock—authorized, 184,631,000 shares; issued, 45,919,300 shares in 2026 and 45,792,500 shares in 2025 4,836 4,755 30,247 Capital surplus 5,125 5,649 32,055 Retained earnings 45,069 43,677 281,892 Treasury stock—at cost, 3,410,828 shares in 2026 and 3,410,680 shares in 2025 (4,933) (4,933) (30,854) Total 50,098 49,149 313,347 Accumulated other comprehensive income: Unrealized gain on available-for-sale securities 929 700 5,810 Foreign currency translation adjustments 360 (49) 2,251 Defined retirement benefit plans 184 308 1,150 Total 1,474 960 9,219 Noncontrolling interests 1,317 1,003 8,237 Total equity 52,889 51,112 330,804 TOTAL ¥ 110,793 ¥ 105,960 $ 692,975 See notes to consolidated financial statements. Avex Inc. and Consolidated Subsidiaries Consolidated Statement of Income Year Ended March 31, 2026 Millions of Yen Thousands of U.S. Dollars (Note 1) 2026 2025 2026 NET SALES (Note 12) ¥ 146,571 ¥ 131,691 $ 916,756 COST OF SALES 104,791 95,852 655,435 Gross profit 41,779 35,839 261,314 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 14) 37,694 37,658 235,764 Operating income (loss) 4,085 (1,819) 25,550 OTHER INCOME (EXPENSES): Interest income 117 51 731 Dividend income 13 19 81 Interest expense (5) (5) (31) Commission fee (36) (36) (225) Equity in earnings of associated companies 502 310 3,139 Loss on valuation of investment securities (313) (243) (1,957) Loss on investments in partnership (49) (16) (306) Foreign exchange losses (33) (23) (206) Gain on sales of investment securities 1,034 6,467 Gain on sales of shares of subsidiaries 133 4,520 831 Gain on change in equity 1,965 Loss on impairment of long-lived assets (Note 7) (372) (496) (2,326) Loss on disaster Loss on liquidation of business (Note 15) (79) (159) (494) Other—net (69) (303) (431) Other income—net 842 5,581 5,266 INCOME BEFORE INCOME TAXES 4,927 3,762 30,816 INCOME TAXES (Note 13): Current 1,395 3,068 8,725 Deferred (443) (648) (2,770) Total income taxes 951 2,420 5,948 NET INCOME 3,975 1,342 24,862 NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 422 203 2,639 NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT ¥ 3,553 ¥ 1,138 $ 22,222 Avex Inc. and Consolidated Subsidiaries Consolidated Statement of Income Year Ended March 31, 2026 Yen U.S. Dollars 2026 2025 2026 PER SHARE OF COMMON STOCK (Notes 2.t and 22): Basic net income ¥ 83.68 ¥ 26.11 $0.52 Cash dividends applicable to the year 50.00 50.00 0.31 See notes to consolidated financial statements. Avex Inc. and Consolidated Subsidiaries Consolidated Statement of Comprehensive Income Year Ended March 31, 2026 Millions of Yen Thousands of U.S. Dollars (Note 1) 2026 2025 2026 NET INCOME ¥ 3,975 ¥ 1,342 $ 24,862 OTHER COMPREHENSIVE INCOME (Note 19): Unrealized gain (loss) on available-for-sale securities 229 (94) 1,432 Foreign currency translation adjustments 486 (1) 3,039 Defined retirement benefit plans (142) 208 (888) Share of other comprehensive (loss) income in associates (41 ) 91 (256 ) Total other comprehensive income 531 203 3,321 COMPREHENSIVE INCOME ¥ 4,506 ¥ 1,545 $ 28,183 TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the parent ¥ 4,067 ¥ 1,341 $ 25,437 Noncontrolling interests 439 203 2,745 See notes to consolidated financial statements. Avex Inc. and Consolidated Subsidiaries Consolidated Statement of Changes in Equity Year Ended March 31, 2026 Millions of Yen Accumulated Other Comprehensive Income Shareholders' Equity Unrealized Gain on Foreign Currency Defined Retirement Common Stock Capital Surplus Retained Earnings Treasury Stock Total Available-for- Sale Securities Translation Adjustments Benefit Plans Total Noncontrolling Interests Total Equity BALANCE, APRIL 1, 2024 ¥ 4,678 ¥ 5,598 ¥ 44,746 ¥ (590) ¥ 54,432 ¥ 795 ¥ (98) ¥ 60 ¥ 757 ¥ 910 ¥ 56,099 Issuance of new stock 77 77 155 155 Net income attributable to owners of the parent 1,138 1,138 1,138 Cash dividends, ¥50 per share (2,207) (2,207) (2,207) Purchase of treasury stock Change in ownership interest of parent due to transactions with noncontrolling interests (26) (4,342) (4,342) (26) (4,342) (26) Net change in the year (94 ) 49 248 203 92 295 BALANCE, MARCH 31, 2025 4,755 5,649 43,677 (4,933) 49,149 700 (49) 308 960 1,003 51,112 Issuance of new stock 80 80 161 161 Net income attributable to owners of the parent 3,553 3,553 3,553 Cash dividends, ¥50 per share (2,122) (2,122) (2,122) Change in scope of equity method Change in ownership interest of parent due to transactions with noncontrolling interests (604) (39) (39) (604) (39) (604) Net change in the year 229 409 (124 ) 514 314 828 BALANCE, MARCH 31, 2026 ¥ 4,836 ¥ 5,125 ¥ 45,069 ¥ (4,933 ) ¥ 50,098 ¥ 929 ¥ 360 ¥ 184 ¥ 1,474 ¥ 1,317 ¥ 52,889 Thousands of U.S. Dollars (Note 1) Accumulated Other Comprehensive Income Shareholders' Equity Unrealized Gain on Foreign Currency Defined Retirement Common Stock Capital Surplus Retained Earnings Treasury Stock Total Available-for- Sale Securities Translation Adjustments Benefit Plans Total Noncontrolling Interests Total Equity BALANCE, MARCH 31, 2025 $ 29,741 $ 35,332 $ 273,186 $ (30,854) $ 307,411 $ 4,378 $ (306) $ 1,926 $ 6,004 $ 6,273 $ 319,689 Issuance of new stock 500 500 1,007 1,007 Net income attributable to owners of the parent 22,222 22,222 22,222 Cash dividends, $0.31 per share (13,272) (13,272) (13,272) Change in scope of equity method Change in ownership interest of parent due to transactions with noncontrolling interests (3,777) (243) (243) (3,777) (243) (3,777) Net change in the year 1,432 2,558 (775 ) 3,214 1,963 5,178 BALANCE, MARCH 31, 2026 $ 30,247 $ 32,055 $ 281,892 $ (30,854 ) $ 313,347 $ 5,810 $ 2,251 $ 1,150 $ 9,219 $ 8,237 $ 330,804 See notes to consolidated financial statements. - 12 - Avex Inc. and Consolidated Subsidiaries Consolidated Statement of Cash Flows Year Ended March 31, 2026 Millions of Yen Thousands of U.S. Dollars (Note 1) 2026 2025 2026 OPERATING ACTIVITIES: Income before income taxes ¥ 4,927 ¥ 3,762 $ 30,816 Adjustments for: Depreciation 1,442 1,607 9,019 Loss on impairment of long-lived assets 372 496 2,326 Interest and dividend income (130) (70) (813) Interest expense 5 5 31 (Gain) loss on sales of investment securities (1,034) 90 (6,467) Equity in earnings of associated companies (502) (310) (3,139) Gain on change in equity (1,965) Gain on sale of shares of subsidiaries (94) (4,520) (587) Loss on valuation of investment securities 313 246 1,957 Changes in assets and liabilities: Increase in trade accounts receivable (2,532) (448) (15,836) Increase in inventories (930) (1,025) (5,816) Increase in advance payments—trade (471) (3) (2,945) Increase in prepaid royalties (1,130) (445) (7,067) (Decrease) increase in trade accounts payable (225) 1,539 (1,407) Decrease (increase) in accounts receivable—other 995 (1,992) 6,223 Increase (decrease) in other accounts payable 599 (1,224) 3,746 Increase in accrued royalties 1,599 76 10,001 Increase in advances received 1,872 2,242 11,708 Decrease in refund liabilities (159) (382) (994) (Decrease) increase in allowance for doubtful accounts (790) 1,233 (4,941) Increase (decrease) in provision for bonuses 490 (249) 3,064 Decrease in liability for retirement benefits (199) (85) (1,244) Other—net 1,060 (2,204 ) 6,629 Subtotal 5,476 (3,626) 34,250 Interest and dividends received 154 79 963 Interest paid (7) (5) (43) Income taxes—refunded 247 1,122 1,544 Income taxes—paid (3,795 ) (2,246 ) (23,736 ) Net cash provided by (used in) operating activities— (Forward) ¥ 2,076 ¥ (4,675 ) $ 12,984 Avex Inc. and Consolidated Subsidiaries Consolidated Statement of Cash Flows Year Ended March 31, 2026 Millions of Yen Thousands of U.S. Dollars (Note 1) 2026 2025 2026 Net cash provided by (used in) operating activities—(Forward) ¥ 2,076 ¥ (4,675 ) $ 12,984 INVESTING ACTIVITIES: Purchase of property, plant and equipment (1,803) (2,694) (11,277) Purchase of intangible assets (609) (2,132) (3,809) Purchase of investment securities (67) (1,603) (419) Proceeds from sales of investment securities 1,710 729 10,695 Proceeds from collection of loans receivable 2,000 Payments for lease and guarantee deposits (101) (105) (631) Proceeds from collection of lease and guarantee deposits 21 3 131 Proceeds from withdrawal of time deposits 141 Proceeds from sale of shares of subsidiaries 180 4,650 1,125 Other—net 4 (58 ) 25 Net cash (used in) provided by investing activities (665 ) 928 (4,159 ) FINANCING ACTIVITIES: Proceeds from long-term debt 53 331 Repayments of long-term loans (3) (3) (18) Repayments of lease obligations (76) (92) (475) Proceeds from share issuance to noncontrolling shareholders 2,899 Purchase of treasury stock (4,358) Purchase of shares not resulting in change in scope of consolidation (665) (337) (4,159) Dividends paid (2,126) (2,206) (13,297) Dividends paid to noncontrolling shareholders (88 ) (13 ) (550 ) Net cash used in financing activities (2,906 ) (4,111 ) (18,176 ) FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS 74 55 462 NET DECREASE IN CASH AND CASH EQUIVALENTS (1,422) (7,803) (8,894) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 35,690 46,933 223,229 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS RESULTING IN CHANGE IN SCOPE OF CONSOLIDATION 36 (3,439 ) 225 CASH AND CASH EQUIVALENTS, END OF YEAR (Note 20) ¥ 34,305 ¥ 35,690 $ 214,567 See notes to consolidated financial statements. Avex Inc. and Consolidated Subsidiaries Notes to Consolidated Financial Statements Year Ended March 31, 2026 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in accordance with accounting principles generally accepted in Japan ("Japanese GAAP"), which are different in certain respects as to the application and disclosure requirements of IFRS Accounting Standards. In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2025 consolidated financial statements to conform to the classifications used in 2026. The consolidated financial statements are stated in Japanese yen, the currency of the country in which Avex Inc. (the "Company") is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥159.88 to $1, the approximate rate of exchange at March 31, 2026. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate. Japanese yen figures less than a million yen are rounded down to the nearest million, except for per share data. U.S. dollar figures less than a thousand dollars are rounded down to the nearest thousand, except for per share data. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cons olidation —The consolidated financial statements as of March 31, 2026, include the accounts of the Company and its 28 significant (32 in 2025) subsidiaries (together, the "Avex Group"). Consolidation of the remaining subsidiaries would not have a material effect on the accompanying consolidated financial statements. Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Avex Group has the ability to exercise significant influence are accounted for by the equity method. (Consolidated Subsidiaries) Avex Entertainment Inc. Avex Live Creative Inc. Avex Music Creative Inc. Avex Creative Factory Inc. Avex Alliance & Partners Inc. Avex Music Publishing Inc. Avex Classics International Inc. Avex Management Inc. Avex Clan Inc. Avex Styles Inc. Avex Management Agency Inc. Avex Creator Agency Inc. Avex Pictures Inc. Avex Animation Labels Inc. FLAGSHIP LINE, Inc. Avex Film Labels Inc. AN Inc.* 6 The Anime Times Company AVEX AY FACTORY LLC. Avex Southeast Asia Pte. Ltd.* 3 Avex China Inc. Avex Hong Kong Ltd. Avex Taiwan Inc. Avex USA Inc. Avex Music Group LLC Avex Catalog Fund 1 LLC* 8 Avex Song Fund 1 LLC* 8 S10 Entertainment & Media LLC* 2 * 1 Avex Technologies Inc. was excluded from the scope of consolidation from the year ended March 31, 2026, since it was merged into Avex Entertainment Inc. in absorption-type merger. * 2 S10 Entertainment & Media LLC was included in the scope of consolidation from the year ended March 31, 2026, as it became a subsidiary under the substantial control criteria. * 3 The company name of Avex Asia Pte. Ltd. was changed to Avex Southeast Asia Pte. Ltd. in the year ended March 31, 2026. * 4 Virtual Avex Inc., fuzz, Inc. and LIVESTAR Inc. were excluded from the scope of consolidation in the year ended March 31, 2026, due to the sale of their shares. * 5 Avex ASUNARO Company Inc. was excluded from the scope of consolidation from the year ended March 31, 2026, since it was merged into AVEX AY FACTORY LLC. in absorption-type merger. * 6 For the year ended March 31, 2026, aNCHOR Inc. carried out an incorporation-type company demerger in which it was the demerging company, and changed its company name to AN Inc. effective January 7, 2026. * 7 Avex Fan Marketing Inc. and Avex Saudi Arabia LLC were excluded from the scope of consolidation in the year ended March 31, 2026, due to their liquidation. * 8 Avex Catalog Fund 1 LLC and Avex Song Fund 1 LLC were included in the scope of consolidation from the year ended March 31, 2026, due to their establishment. Investments in five (six in 2025) associated companies are accounted for by the equity method. (Associated Companies Accounted for by Equity Method) Memory-Tech Holdings Inc. AWA Co. Ltd. HI&max Inc. Fashion Freak Show International Ltd. Show-What Entertainment LLC* 3 * 1 S10 Entertainment & Media LLC was excluded in the scope of equity method from the year ended March 31, 2026, as it became a consolidated subsidiary during the period under the substantial control criteria. * 2 SANRIO SOUTH EAST ASIA Pte. Ltd. was excluded from the scope of equity method from the year ended March 31, 2026, due to the sale of its shares. * 3 Show-What Entertainment LLC was included in the scope of consolidation from the year ended March 31, 2026, as its materiality has increased in terms of financial significance. Investments in the remaining associated companies are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the impact on the accompanying consolidated financial statements would be immaterial. The excess of the cost of acquisition over the fair value of the net assets of an acquired subsidiary at the date of acquisition is amortized over 5 to 8 years. All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Avex Group is also eliminated. Accounts of subsidiaries whose year-ends differ from March 31 have been consolidated using pro forma financial information prepared as of March 31. Unification of Accounting Policies Applied to Foreign Subs idiaries for the Cons olidated Financial Statements —Under Accounting Standards Board of Japan ("ASBJ") Practical Issues Task Force ("PITF") No. 18, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements," the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the preparation of the consolidated financial statements. However, financial statements prepared by foreign subsidiaries in accordance with either IFRS Accounting Standards or generally accepted accounting principles in the United States of America (Financial Accounting Standards Board Accounting Standards Codification) tentatively may be used for the consolidation process, except for the following items that should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of R&D; (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting; and (e) recording a gain or loss through profit or loss on the sale of an investment in an equity instrument for the difference between the acquisition cost and selling price, and recording impairment loss through profit or loss for other-than-temporary declines in the fair value of an investment in an equity instrument, where a foreign subsidiary elects to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument. Unification of Accounting Policies Applied to Foreign As s ociated Companies for the Equity Method —ASBJ Statement No. 16, "Accounting Standard for Equity Method of Accounting for Investments," requires adjustments to be made to conform the associate's accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate's financial statements are used in applying the equity method, unless it is impracticable to determine such adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either IFRS Accounting Standards or generally accepted accounting principles in the United States of America tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of R&D; (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting; and (e) recording a gain or loss through profit or loss on the sale of an investment in an equity instrument for the difference between the acquisition cost and selling price, and recording impairment loss through profit or loss for other-than-temporary declines in the fair value of an investment in an equity instrument, where a foreign subsidiary elects to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument. Bus ines s Combinations —Business combinations are accounted for using the purchase method. Acquisition-related costs, such as advisory fees or professional fees, are accounted for as expenses in the periods in which the costs are incurred. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and that would have affected the measurement of the amounts recognized as of that date. Such adjustments shall be recognized as if the accounting for the business combination had been completed at the acquisition date. The acquirer recognizes any bargain purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been identified after a review of the procedures used in the purchase price allocation. A parent's ownership interest in a subsidiary might change if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrolling interest is adjusted to reflect the change in the parent's ownership interest in its subsidiary while the parent retains its controlling interest in its subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted is accounted for as capital surplus as long as the parent retains control over its subsidiary. Cas h Equivalents —Cash equivalents are short-term investments that are readily convertible into cash and exposed to insignificant risk of changes in value. Cash equivalents include time deposits, certificates of deposit, commercial paper and bond funds, all of which mature or become due within three months of the date of acquisition. Inventories —Merchandise, finished products and supplies are stated at the lower of cost, determined by the moving average cost method, or net selling value. Raw materials are stated at the lower of most recent purchase price, which approximates cost determined by the first-in, first-out method, or net selling value. Work in process (including the right to use audiovisual) is stated at the lower of cost, determined by the specific identification method, or net selling value. Valuation losses due to declines in profitability included in cost of sales for the years ended March 31, 2026 and 2025, were ¥1,767 million ($11,052 thousand) and ¥2,662 million, respectively. Marketable and Inves tment Securities —Marketable and investment securities classified as available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. Nonmarketable available-for-sale equity securities are stated at cost determined by the moving-average method. For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income. Investments in limited partnerships are accounted for by the equity method. Property, Plant and Equipment —Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its consolidated domestic subsidiaries is computed by the declining-balance method based on the estimated useful lives of the assets, while the straight-line method is applied to buildings (excluding accompanying facilities) acquired after April 1, 1998, and building improvements and structures acquired after April 1, 2016. Depreciation of property, plant and equipment of consolidated foreign subsidiaries is computed by the straight-line method. The range of useful lives is principally from 3 to 43 years for buildings and structures and from 2 to 20 years for other. Accumulated depreciation of property, plant and equipment as of March 31, 2026 and 2025, was ¥7,877 million ($49,268 thousand) and ¥7,176 million, respectively. Long-Lived As s ets —The Avex Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition. Intangible As s ets —Intangible assets are amortized by the straight-line method over the estimated useful life (2–5 years). Leas es —The Avex Group leases certain tools, furniture and fixtures and vehicles as finance leases that do not transfer ownership of the leased property to the lessee. Finance leases that do not transfer ownership of the leased property to the lessee are depreciated by the straight-line method over the terms of the respective leases with no residual value. Allowance for Doubtful Accounts —The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the Company's past credit loss experience and a valuation of potential losses in the receivables outstanding. Provis ion for Bonus es —Provision for bonuses is provided for the bonus payments to employees in estimated bonus amounts attributable to the current fiscal year. Retirement and Pens ion Plans —The Avex Group (excluding certain consolidated subsidiaries) has defined benefit pension plans. Additional retirement benefits are paid in certain circumstances. The Company accounts for the liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. The projected benefit obligations are attributed to periods on a benefit formula basis. Actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are recognized within equity (accumulated other comprehensive income), after adjusting for tax effects and are recognized in profit or loss over 1 year and 11 years, respectively, no longer than the expected average remaining service period of the employees. The discount rate is determined using a single weighted-average discount rate reflecting the estimated timing and amount of benefit payment. Net Sales —The Avex Group recognizes revenue in accordance with that core principle by applying the following steps: Step 1: Identify the contracts with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation The Avex Group provides a wide variety of goods and services, including through its music business, anime & visual content business and overseas business. In the sale of merchandise and products, the Avex Group determines that control of merchandise and products transfers to the customer at the time of shipment, and recognizes revenue at the time of shipment. However, for merchandise and products shipped before the release date, the Avex Group recognizes revenue at the time of sale according to accepted business practices since the time from shipment to delivery is very short. For merchandise and products sold where the Avex Group determines its role is that of an agent, it recognizes revenue as the net amount obtained by deducting the amount of payment to a third party from the total amount of the consideration. Regarding the holding of live events, the Avex Group determines that services promised transfer to customers and performance obligations are satisfied at the time the event is held. Thus, the Avex Group recognizes revenue at the time of the event. Various types of music and other distribution are classified as transactions that grant licenses to customers. With respect to sales or usage-based royalties received from customers, the Avex Group recognizes revenue from such distribution at the time the customer records revenue in connection with the license or the licensee uses the license. Income Taxes —The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted income tax rates to the temporary differences. The Avex Group files a tax return under the group tax sharing system. Foreign Currency Trans actions —All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged by forward exchange contracts. Foreign Currency Financial Statements —The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for equity, which is translated at the historical rate. Differences arising from such translation are shown as "Foreign currency translation adjustments" under accumulated other comprehensive income in a separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the average exchange rate. Derivatives and Hedging Activities —The Avex Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange. Foreign exchange forward contracts are utilized by the Avex Group to reduce foreign currency exchange risks. The Avex Group does not enter into derivatives for trading or speculative purposes. Derivative financial instruments are classified and accounted for as follows: (1) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statement of income; and (2) for derivatives used for hedging purposes, if such derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions. Foreign currency forward contracts applied for forecasted transactions are measured at fair value, but the unrealized gains/losses are deferred until the underlying transactions are completed. Per Share Information —Basic net income per share is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits. Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into common stock. Diluted net income per share of common stock assumes full conversion of the outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants. Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective fiscal years, including dividends to be paid after the end of the year. Change in Pres entation Cons olidated Balance Sheet —"Goodwill" of ¥22 million for the year ended March 31, 2025, which was included in "Intangible assets" in investments and other assets, has been presented separately to conform to the current year's presentation. Cons olidated Statement of Income —"Loss on investments in partnership" of ¥16 million for the year ended March 31, 2025, which was included in "Other—net" in other income (expenses), has been presented separately to conform to the current year's presentation. Cons olidated Statement of Cas h Flows —"Share based compensation expenses" of ¥155 million for the year ended March 31, 2025, which was presented separately in prior periods, has been reclassified into "Other—net" in operating activities to conform to the current year's presentation. New Accounting Pronouncements Accounting Standard for Leas es , Etc. —On September 13, 2024, the ASBJ revised ASBJ Statement No. 34, "Accounting Standard for Leases" and ASBJ Guidance No. 33, "Guidance on Accounting Standard for Leases," etc. Overview As part of its efforts to align Japanese GAAP with international standards, the ASBJ has developed a new accounting standard for leases under which lessees are required to recognize all leases as assets and liabilities. This standard is based on the single accounting model adopted in IFRS 16 "Leases." However, rather than incorporating all provisions of IFRS 16, the ASBJ has selectively adopted the main elements in order to achieve a simplified and practical approach. The aim is to make the new standard user-friendly while minimizing the need for adjustments when using IFRS 16 in preparing non-consolidated financial statements. Under the lessee accounting model, depreciation of the right-of-use assets and interest expense on the lease liabilities are recognized for all leases, regardless of whether they are classified as finance leases or operating leases, in accordance with the IFRS 16 model. Scheduled effective date The Company applies the new standards from the start of the year ending March 31, 2028. Effects of application of new standards The Company is currently in the process of determining the effects of the new standards on its consolidated financial statements. Accounting Standard for Subs equent Events , Etc. —On January 9, 2026, the ASBJ revised ASBJ Statement No. 41, "Accounting Standard for Subsequent Events" and ASBJ Guidance No. 35, "Guidance on Accounting Standard for Subsequent Events." Overview The Accounting Standard for Subsequent Events prioritizes the establishment of a comprehensive accounting standard addressing the definition, accounting treatment, and disclosure of subsequent events. As a fundamental policy, it will generally follow the accounting content outlined in the Japan Institute of Certified Public Accountants (JICPA) Audit and Assurance Standards Committee's Audit Standard Report No. 560, Practice Guide No. 1, "Audit Considerations Regarding Subsequent Events," and to organize the evaluation period for subsequent events, while also requiring new notes regarding the approval of financial statement disclosure. Scheduled effective date The Company applies the new standards from the start of the year ending March 31, 2028. SIGNIFICANT ACCOUNTING ESTIMATES Deferred Tax As s ets (1) Carrying amounts Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Deferred tax assets ¥ 5,307 ¥ 5,183 $ 33,193 (2) Information on the s ignificant estimate As stated in Note 13, "Income Taxes," the Avex Group recorded deferred tax assets determined to be recoverable before being offset against deferred tax liabilities of ¥5,698 million ($35,639 thousand) (total deferred tax assets of ¥8,616 million ($53,890 thousand) and valuation allowance of ¥(2,917) million ($(18,244) thousand)). The amount of deferred tax assets is the amount expected to be recovered in light of future taxable income based on profitability and tax planning, and in light of the scheduling of the fiscal period in which deductible temporary differences are expected to be reversed. In calculating the amount expected to be recovered, future taxable income based on profitability is estimated on the basis of the Group's business plan, which includes key assumptions relating to future sales projections and market trends. The assumptions used in these estimates may be affected by changes in uncertain economic conditions, and should it become necessary to revise the amount of future taxable income, this could have a significant impact on the amount of deferred tax assets recognized in the consolidated financial statements for the following fiscal year. Valuation of Goodwill for Equity-Method Affiliates (1) Carrying amounts Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Goodwill ¥ 2,535 ¥ 22 $ 15,855 Note: "Goodwill" of S10 Entertainment & Media LLC as of the year ended March 31, 2025, was nil. (2) Information on the s ignificant estimate Goodwill associated with S10 Entertainment & Media LLC is recognized as the excess earning power expected from the acquired company's future business activities, representing the difference between the acquisition cost and the fair value of the acquired entity's identifiable assets and liabilities at the date of the business combination. It is systematically amortized using the straight-line method over the period of its expected benefit. Recoverability of the goodwill amounts is determined with reference to future cash flows, based on the business plan prepared by the acquired company. Major assumptions of the plans involve the number and amounts of future contracts and market trends. The assumptions used in these estimates are highly uncertain. If the recoverable amount falls below the book value due to changes in future economic conditions or other factors, it may be necessary to record an impairment loss, which could have a significant impact on the consolidated financial statements for the year ended March 31, 2026. BUSINESS COMBINATION Bus ines s Combination through Additional Acquis ition Outline of business combination Name of acquired company and its business outline Name of the acquired company: S10 Entertainment & Media LLC Business outline: Artist management business Major reason for the business combination As S10 Entertainment & Media LLC ("S10") conducts a management business for prominent international artists and talent in the United States of America, the Avex Group deemed that the business combination would broaden opportunities for the Avex Group artists to expand overseas and support their activities in a wider range of markets, and that, through these efforts, it could expect to accelerate the global development of intellectual property originating in Japan and expand business growth in the global market. Date of business combination April 1, 2025 Legal form of business combination The acquired company has become a subsidiary based on the substantial control criteria. Name of company after business combination No change Percentage of voting rights acquired Percentage of voting rights held immediately before the business combination: 40.0% Percentage of voting rights additionally acquired on the day of the business combination: —% Percentage of voting rights held after acquisition: 40.0% Major basis for determining the acquired company As the CEO of S10 assumed the position of CEO of Avex Music Group LLC, a consolidated subsidiary, S10 transitioned from an associated company accounted for by equity method of the Company to a consolidated subsidiary, based on the substantial control criteria. Period of the acquired company's results included in the consolidated financial statements April 1, 2025 to December 31, 2025 Acquisition cost of the acquired company and related details of each class of consideration March 31, 2026 Millions of Yen Thousands of U.S. Dollars Consideration for acquisition: Fair value of the acquiree's interest at the date of the business combination ¥ 2,779 $ 17,381 Acquisition cost ¥ 2,779 $ 17,381 Major acquisition-related costs Not applicable Amount of goodwill incurred, reason for the goodwill incurred, and the method and period of amortization Amount of goodwill incurred ¥2,759 million ($17,256 thousand) Reason for the goodwill incurred Goodwill represents the excess earning power expected from future business activities. The method and period of amortization Straight-line method over eight years The assets acquired and the liabilities assumed at the acquisition date March 31, 2026 Millions of Yen Thousands of U.S. Dollars Current assets ¥ 102 $ 637 Total assets ¥ 102 $ 637 Current liability ¥ 53 $ 331 Total liabilities ¥ 53 $ 331 NOTES AND ACCOUNTS RECEIVABLE Receivables from contracts with customers, included in notes and receivables—trade, at March 31, 2026 and 2025, were as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Accounts receivables—trade ¥ 25,678 ¥ 22,952 $ 160,607 MARKETABLE AND INVESTMENT SECURITIES The costs and aggregate fair values of marketable and investment securities at March 31, 2026 and 2025, were as follows: Millions of Yen March 31, 2026 Cost Unrealized Gains Unrealized Losses Fair Value Securities classified as available-for-sale— equity securities ¥ 712 ¥ 1,555 ¥ 2,268 March 31, 2025 Securities classified as available-for-sale— equity securities ¥ 674 ¥ 1,553 ¥ 2,228 Thousands of U.S. Dollars March 31, 2026 Cost Unrealized Gains Unrealized Losses Fair Value Securities classified as available-for-sale— equity securities $ 4,453 $ 9,726 $ 14,185 Note: "Cost" for the years ended March 31, 2026 and 2025, represents the carrying amount after impairment. The information for available-for-sale securities which were sold during the year ended March 31, 2026, was as follows: Millions of Yen March 31, 2026 Proceeds Realized Gains Realized Losses Available-for-sale equity securities ¥ 99 ¥ 78 Thousands of U.S. Dollars March 31, 2026 Proceeds Realized Gains Realized Losses Available-for-sale equity securities $ 619 $ 487 The information for available-for-sale securities which were sold during the year ended March 31, 2025, is not disclosed since the Avex Group did not sell any available-for-sale securities. The impairment losses on available-for-sale securities for the year ended March 31, 2026, were ¥97 million ($606 thousand) (¥97 million ($606 thousand) for unlisted stocks). The impairment losses on available-for-sale securities for the year ended March 31, 2025, were ¥103 million (¥103 million for unlisted stocks). Investments in associated companies included in investment securities for the years ended March 31, 2026 and 2025, were as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Equity securities ¥ 1,627 ¥ 4,613 $ 10,176 LONG-LIVED ASSETS The Avex Group performs asset groupings in units that facilitate the ongoing assessment of earnings based on reportable segment classifications for business assets, as a minimum unit that generates independent cash flow. For the year ended March 31, 2026, revising down the book value of asset groups to their recoverable value, the Company recorded an impairment loss of ¥372 million ($2,326 thousand) as other expense for the amount of this downward revision for business assets in the music business and the anime & visual content business since recovery could not be expected in line with the originally anticipated schedule. The Company measures recoverable amounts based on value in use, which has been assessed to be nil due to the likelihood of negative future cash flow. Details of the impairment losses for the year ended March 31, 2026, are as follows: Purpose of Use Location Type of Assets Millions of Yen Thousands of U.S. Dollars Business use (music business) Tokyo Facilities attached to buildings, etc. ¥ 84 $ 525 Software in progress 183 1,144 Business use Tokyo Software 103 644 (anime & visual content business) For the year ended March 31, 2025, revising down the book value of asset groups to their recoverable value, the Company recorded an impairment loss of ¥496 million as other expense for the amount of this downward revision for business assets in the music business and the anime & visual content business since recovery could not be expected in line with the originally anticipated schedule. The Company measures recoverable amounts based on value in use, which has been assessed to be nil due to the likelihood of negative future cash flow. Details of the impairment losses for the year ended March 31, 2025, are as follows: Purpose of Use Location Type of Assets Millions of Yen Business use Tokyo Software ¥ 244 (music business) Goodwill 176 Business use Tokyo Software 74 (anime & visual content business) LONG-TERM DEBT Long-term debt at March 31, 2026 and 2025, consisted of the following: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Long-term loans: Current portion of lease obligations ¥ 66 71 $ 412 Lease obligations excluding current portion 177 184 1,107 Total ¥ 244 ¥ 259 $ 1,526 Current portion of long-term loans ¥ 3 Lease obligation: Annual maturities of long-term debt at March 31, 2026, were as follows: Year Ending March 31 Millions of Yen Lease Obligation 2027 ¥ 66 2028 103 2029 45 2030 23 2031 and thereafter 4 Year Ending March 31 Thousands of U.S. Dollars Lease Obligation 2027 $ 412 2028 644 2029 281 2030 143 2031 and thereafter 25 For the purpose of obtaining working funds effectively, for the years ended March 31, 2026 and 2025, the Avex Group has entered into commitment lines with four financial institutions. Information on loan commitment agreements was as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Contract amounts Borrowings outstanding ¥ 11,000 ¥ 11,000 $ 68,801 Unused balance ¥ 11,000 ¥ 11,000 $ 68,801 RETIREMENT AND PENSION PLANS The Avex Group (excluding certain consolidated subsidiaries) has defined benefit pension plans. Additional retirement benefits are paid in certain circumstances. The changes in defined benefit obligation for the years ended March 31, 2026 and 2025, were as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Balance at beginning of year ¥ 5,148 ¥ 5,631 $ 32,199 Current service cost 408 435 2,551 Interest cost 102 33 637 Actuarial losses (gains) 59 (543) 369 Benefits paid (295 ) (408 ) (1,845 ) Balance at end of year ¥ 5,425 ¥ 5,148 $ 33,931 The changes in plan assets for the years ended March 31, 2026 and 2025, were as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Balance at beginning of year ¥ 5,190 ¥ 5,249 $ 32,461 Expected return on plan assets 103 104 644 Actuarial gains (losses) 253 (117) 1,582 Contributions from the employer 365 362 2,282 Benefits paid (295 ) (408 ) (1,845 ) Balance at end of year ¥ 5,618 ¥ 5,190 $ 35,138 Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation and plan assets was as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Funded defined benefit obligation ¥ 5,425 ¥ 5,148 $ 33,931 Plan assets (5,618 ) (5,190 ) (35,138 ) Net asset arising from defined benefit obligation ¥ (193 ) ¥ (42 ) $ (1,207 ) Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Asset for retirement benefits ¥ (193 ) ¥ (42 ) $ (1,207 ) Net asset arising from defined benefit obligation ¥ (193 ) ¥ (42 ) $ (1,207 ) The components of net periodic benefit costs for the years ended March 31, 2026 and 2025, were as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Service cost ¥ 408 ¥ 435 $ 2,551 Interest cost 102 33 637 Expected return on plan assets (103) (104) (644) Recognized actuarial gains (426) (160) (2,664) Amortization of prior service cost 28 31 175 Net periodic benefit costs ¥ 10 ¥ 235 $ 62 Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans for the years ended March 31, 2026 and 2025, were as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Prior service cost ¥ 28 ¥ 31 $ 175 Actuarial (gains) losses (232 ) 265 (1,451 ) Total ¥ (203 ) ¥ 296 $ (1,269 ) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement benefit plans as of March 31, 2026 and 2025, were as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Unrecognized prior service cost Unrecognized actuarial gains ¥ (193 ) ¥ 28 (426 ) $ (1,207 ) Total ¥ (193 ) ¥ (397 ) $ (1,207 ) (7) Plan assets a. Components of plan assets Plan assets consisted of the following: 2026 2025 General insurance account 31 % 33 % Debt investments 30 26 Alternative investments 19 20 Equity investments 18 18 Others 2 3 Total 100 % 100 % Alternative investments are mainly investment funds. b. Method of determining the expected rate of return on plan assets The expected rate of return on plan assets is determined considering the long-term rates of return which are expected currently and in the future from the various components of the plan assets. (8) Assumptions used for the years ended March 31, 2026 and 2025, were set forth as follows: 2026 2025 Discount rate 2.0% 2.0% Expected rate of return on plan assets 2.0 2.0 EQUITY Japanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below: Dividends Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders' meeting. Additionally, for companies that meet certain criteria including (1) having a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service of the directors being prescribed as one year rather than the normal two-year term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Company does not meet all the above criteria. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million. Increas es /Decreas es and Trans fer of Common Stock, Res erve and Surplus The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus), depending on the equity account charged upon the payment of such dividends, until the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts within equity under certain conditions upon resolution of the shareholders. Treas ury Stock and Treas ury Stock Acquis ition Rights The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights. INFORMATION RELATED TO CONSOLIDATED CHANGES IN EQUITY Changes in the outstanding number of shares of common stock and treasury stock for the years ended March 31, 2026 and 2025, were as follows: Shares 2026 2025 Issued—Common stock: Balance at beginning of year 45,792,500 45,663,400 Increase 126,800 129,100 Balance at end of year 45,919,300 45,792,500 Treasury stock—Common stock: Balance at beginning of year 3,410,680 410,546 Increase 148 3,000,134 Balance at end of year 3,410,828 3,410,680 Notes: 1. For the year ended March 31, 2026, the increase in common stock of 126,800 shares resulted from issuance of new stock as compensation through restricted stock. For the year ended March 31, 2026, the increase in treasury stock of 148 shares resulted from purchase of shares comprising less than one unit. For the year ended March 31, 2025, the increase in common stock of 129,100 shares resulted from issuance of new stock as compensation through restricted stock. For the year ended March 31, 2025, the major breakdown of changes in treasury stock was as follows: March 31, 2025 Shares Increase: Purchase of shares based on the resolution approved by the Board of Directors' meeting held on May 9, 2024 3,000,000 Purchase of shares comprising less than one unit 134 Dividends paid to shareholders for the years ended March 31, 2026 and 2025, were as follows: Amount Millions Amount per Share March 31, 2026 Type of Shares of Yen Yen Record Date Effective Date Resolution approved by: The Board of Directors' meeting held on May 8, 2025 Common stock ¥ 1,059 ¥ 25.00 March 31, 2025 June 12, 2025 The Board of Directors' meeting held on November 13, 2025 Common stock 1,062 25.00 September 30, 2025 December 4, 2025 March 31, 2025 Resolution approved by: The Board of Directors' meeting held on May 9, 2024 Common stock ¥ 1,131 ¥ 25.00 March 31, 2024 June 7, 2024 The Board of Directors' meeting held on November 7, 2024 Common stock 1,076 25.00 September 30, 2024 December 5, 2024 March 31, 2026 Type of Shares Amount Thousands of U.S. Dollars Amount per Share U.S. Dollars Record Date Effective Date Resolution approved by: The Board of Directors' meeting held on May 8, 2025 Common stock $ 6,623 $0.16 March 31, 2025 June 12, 2025 The Board of Directors' meeting held on November 13, 2025 Common stock 6,642 0.16 September 30, 2025 December 4, 2025 Dividends declared after the fiscal year ended March 31, 2026, were as follows: Amount Millions Amount per Share March 31, 2026 Type of Shares of Yen Yen Record Date Effective Date Resolution approved by—The Board of Directors' meeting held on May 14, 2026 Common stock ¥ 1,062 ¥ 25.00 March 31, 2026 June 11, 2026 March 31, 2026 Type of Shares Amount Thousands of U.S. Dollars Amount per Share U.S. Dollars Record Date Effective Date Resolution approved by—The Board of Directors' meeting held on May 14, 2026 Common stock $ 6,642 $0.16 March 31, 2026 June 11, 2026 NET SALES Dis aggregation of Revenue Millions of Yen 2026 Reportable Segment Anime & Music Business Visual Content Business Overseas Business Other Total Live ¥ 53,482 ¥ 53,482 Merchandising 8,238 8,238 Management 12,102 12,102 Music package 19,741 19,741 Digital music distribution 15,644 15,644 Music publication 3,262 3,262 E-commerce 17,834 17,834 Anime ¥ 17,138 17,138 Live-action visual content 4,377 4,377 Overseas ¥ 4,040 4,040 Other 8,792 208 ¥ 685 9,685 Intercompany transaction adjustments (17,659 ) (600 ) (88 ) (628 ) (18,976 ) Revenue from contracts with customers 121,438 21,123 3,952 57 146,571 Sales to external customers ¥ 121,438 ¥ 21,123 ¥ 3,952 ¥ 57 ¥ 146,571 Millions of Yen 2025 Reportable Segment Anime & Music Business Visual Content Business Overseas Business Other Total Live ¥ 45,571 ¥ 45,571 Merchandising 7,465 7,465 Management 9,706 9,706 Music package 21,445 21,445 Digital music distribution 13,909 13,909 Music publication 3,214 3,214 E-commerce 16,535 16,535 Fan clubs 1,585 1,585 Anime ¥ 13,508 13,508 Live-action visual content 4,724 4,724 Overseas ¥ 3,447 3,447 Other 8,172 260 ¥ 662 9,095 Intercompany transaction adjustments (17,350 ) (544 ) (1 ) (620 ) (18,517 ) Revenue from contracts with customers 110,255 17,948 3,445 42 131,691 Sales to external customers ¥ 110,255 ¥ 17,948 ¥ 3,445 ¥ 42 ¥ 131,691 Thousands of Dollars 2026 Reportable Segment Anime & Music Business Visual Content Business Overseas Business Other Total Live $ 334,513 $ 334,513 Merchandising 51,526 51,526 Management 75,694 75,694 Music package 123,473 123,473 Digital music distribution 97,848 97,848 Music publication 20,402 20,402 E-commerce 111,546 111,546 Anime $ 107,192 107,192 Live-action visual content 27,376 27,376 Overseas $ 25,268 25,268 Other 54,991 1,300 $ 4,284 60,576 Intercompany transaction adjustments (110,451 ) (3,752 ) (550 ) (3,927 ) (118,689 ) Revenue from contracts with customers 759,557 132,117 24,718 356 916,756 Sales to external customers $ 759,557 $ 132,117 $ 24,718 $ 356 $ 916,756 Bas ic Information to Unders tand Revenues from Contracts with Cus tomers Basic information to understand revenues from contracts with customers is described in Note 2, "Summary of Significant Accounting Policies," "o. Net Sales." Contract Balances Contract liabilities and advances received at the beginning and end of the year are as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Balance at beginning of year ¥ 47 ¥ 45 $ 293 Balance at end of year 45 47 281 dvances received: Balance at beginning of year 4,097 2,014 25,625 Balance at end of year 5,962 4,097 37,290 Contract liabilities: A Notes: 1. Contract liabilities are mainly the balance of point card certificates granted by the Avex Group for which the performance obligation was not satisfied as of the end of the year. They are included in "Other" in current liabilities in the consolidated balance sheet. 2. Advances received are mainly the balance of ticket prices for live events received by the Avex Group prior to the event as of the end of the year. Advances received are drawn down in line with revenue recognition, and the entire balance of advances received as of the beginning of the current year is recognized as revenue for that year. Trans action Prices Allocated to Remaining Performance Obligations Since the Avex Group has no significant transactions with an initial expected contract term exceeding one year, the Company does not include notes on remaining performance obligations for practical convenience. Also, there is no significant amount of consideration from contracts with customers that is not included in the transaction price. INCOME TAXES The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 30.6% for the years ended March 31, 2026 and 2025. The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2026 and 2025, are as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Deferred tax assets: Merchandise and finished products ¥ 1,486 ¥ 1,281 $ 9,294 Tax loss carryforwards 1,460 1,884 9,131 Work in process 1,152 1,313 7,205 Depreciation 847 771 5,297 Advance payments—trade 411 329 2,570 Refund liabilities 364 405 2,276 Allowance for doubtful accounts 358 604 2,239 Asset retirement obligations 329 247 2,057 Advances received 243 142 1,519 Provision for bonuses 234 80 1,463 Other 1,728 2,059 10,808 Total of tax loss carryforwards and temporary differences 8,616 9,120 53,890 Less valuation allowance for tax loss carryforwards (1,364) (1,785) (8,531) Less valuation allowance for temporary differences (1,553 ) (1,852 ) (9,713 ) Total valuation allowance (2,917 ) (3,638 ) (18,244 ) Deferred tax assets 5,698 5,481 35,639 Deferred tax liabilities: Asset retirement obligations (212) (151) (1,325) Unrealized gain on available-for-sale securities (185) (151) (1,157) Liability for retirement benefits (56) (118) (350) Gain on valuation of investment securities (43 ) (314 ) (268 ) Deferred tax liabilities (498 ) (736 ) (3,114 ) Net deferred tax assets ¥ 5,200 ¥ 4,744 $ 32,524 Valuation allowance decreased by ¥720 million ($4,503 thousand). The main component of the decrease was in accordance with a decrease in valuation allowance for tax loss carryforwards and allowance for doubtful accounts in the consolidated subsidiaries. The expiration of tax loss carryforwards, the related valuation allowances and the resulting net deferred tax assets as of March 31, 2026, were as follows: Millions of Yen March 31, 2026 1 Year or Less After 1 Year through 2 Years After 2 Years through 3 Years After 3 Years through 4 Years After 4 Years through 5 Years After 5 Years Total Deferred tax assets relating to tax loss carryforwards ¥4 Less valuation ¥ 233 ¥ 77 ¥ 20 ¥ 258 ¥ 865 ¥ 1,460 allowances for tax loss carryforwards (4) (233) (77) (20) (227) (800) (1,364) Net deferred tax assets relating to tax loss carryforwards 31 65 96 Thousands of U.S. Dollars March 31, 2026 1 Year or Less After 1 Year through 2 Years After 2 Years through 3 Years After 3 Years through 4 Years After 4 Years through 5 Years After 5 Years Total Deferred tax assets relating to tax loss carryforwards $ 25 Less valuation $ 1,457 $ 481 $ 125 $ 1,613 $ 5,410 $ 9,131 allowances for tax loss carryforwards (25) (1,457) (481) (125) (1,419) (5,003) (8,531) Net deferred tax assets relating to tax loss carryforwards 193 406 600 A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statement of income for the year ended March 31, 2026, with the corresponding figures for 2025, is as follows: 2026 2025 Normal effective statutory tax rate 30.6 % 30.6 % Expenses not deductible for income tax purposes 7.4 6.6 Enterprise taxes through external standards taxation 4.1 11.1 Equity in earnings of associated companies (3.1) (2.5) Valuation allowance (20.4) 22.5 Equity in earnings or losses of associated companies (16.0) Other—net 0.7 12.0 Actual effective tax rate 19.3 % 64.3 % The Company and certain domestic subsidiaries applied the group tax sharing system. In addition, the Avex Group applied the "Practical Solution on the Accounting and Disclosure Under the Group Tax Sharing System" (PITF No. 42, August 12, 2021) for the accounting and disclosure of corporate tax, local corporate tax, and tax effect accounting. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses for the years ended March 31, 2026 and 2025, consisted of the following: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Advertising expenses ¥ 6,278 ¥ 5,966 $ 39,266 Promotion expenses 2,375 1,946 14,854 Provision of allowance for doubtful accounts (60) 1,228 (375) Salaries and bonuses for employees 8,177 8,308 51,144 Provision for bonuses 808 320 5,053 Net periodic retirement benefit costs 29 213 181 Depreciation 971 913 6,073 Commission fee 7,846 6,897 49,074 Other 11,266 11,863 70,465 Total ¥ 37,694 ¥ 37,658 $ 235,764 OTHER INCOME (EXPENSES) "Loss on liquidation of business" for the year ended March 31, 2026, represents additional retirement benefits and similar costs incurred in connection with the structural reform of a consolidated subsidiary. LEASES Obligations and future minimum payments under non-cancellable operating leases for the years ended March 31, 2026 and 2025, were as follows: Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Due within one year ¥ 427 ¥ 857 $ 2,670 Due after one year 1 428 6 Total ¥ 428 ¥ 1,286 $ 2,677 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES Avex Group Policy for Financial Ins truments The Avex Group uses financial instruments, mainly long-term debt including bank loans for working capital and equipment capital. Cash surpluses, if any, are invested in short-term time deposits, etc. Derivatives are not used for speculative purposes, but to manage exposure to financial risks as described in (2) below. Nature and Extent of Ris ks Aris ing from Financial Ins truments and Ris k Management for Financial Ins truments Receivables, such as notes and accounts receivable—trade, and accounts receivable—other, are exposed to customer credit risk. The Avex Group manages its credit risk from receivables on the basis of internal guidelines, which include monitoring of payment terms and balances of customers. Investment securities mainly consist of investment in partnerships and others and equity instruments of customers and suppliers of the Avex Group. Investment in partnerships and others whose fair value is not readily determinable is managed by monitoring its financial condition on a regular basis. Equity instruments are exposed to the risk of market price fluctuations. The Avex Group monitors the value of equity instruments and the financial position of the issuer (business partners, etc.) on a regular basis. Payment terms of payables, such as notes and accounts payable—trade, accounts payable—other, accrued royalties and income taxes payable are less than one year. The Avex Group uses bank loans mainly for working capital. Derivative transactions are approved by the Executive Director in charge or the Board of Directors based on the internal guidelines which prescribe the authority and the limits for each transaction. Because the counterparties to these derivatives are limited to major financial institutions, the Avex Group does not anticipate any losses arising from credit risk. Payables and loans are subject to liquidity risk (the risk of being unable to make payments on the due date). The Avex Group, however, finances the borrowing needs of its domestic subsidiaries (excluding some subsidiaries) through a cash pooling system (CPS) in order to efficiently manage liquidity based on the cash management plans drawn up by each subsidiary every month. Supplemental Explanation of Fair Values of Financial Ins truments Since the calculation of fair values of financial instruments incorporates factors that are subject to change, the Company adopts differing assumptions, which may alter fair value. Moreover, the contract amounts, etc. of derivative transactions in Note 18, "Derivatives" do not indicate the market risk of derivative transactions. Fair Values of Financial Ins truments Fair values of financial instruments are as follows: Investments in equity instruments that do not have a quoted market price in an active market are not included in the following table. Fair value of financial instruments Millions of Yen March 31, 2026 Carrying Amount Fair Value Unrealized Gain/Loss Assets—Investment securities—available-for-sale ¥ 2,268 ¥ 2,268 Total ¥ 2,268 ¥ 2,268 Derivatives March 31, 2025 Assets—Investment securities—available-for-sale ¥ 2,228 ¥ 2,228 Total ¥ 2,228 ¥ 2,228 Liabilities—Long-term loans ¥ 3 ¥ 3 Total ¥ 3 ¥ 3 Derivatives ¥ 11 ¥ 11 Thousands of U.S. Dollars March 31, 2026 Carrying Amount Fair Value Unrealized Gain/Loss Assets—Investment securities—available-for-sale $ 14,185 $ 14,185 Total $ 14,185 $ 14,185 Derivatives Carrying amount of investments in equity instruments that do not have a quoted market price in an active market Millions of Yen Thousands of U.S. Dollars 2026 2025 2026 Unlisted equity instruments ¥ 4,012 ¥ 6,960 $ 25,093 As of the years ended March 31, 2026 and 2025, information on investments in partnerships and other similar entities whose equity equivalent is recorded as a net amount on the consolidated balance sheet is omitted. The amounts recorded in the consolidated balance sheet for such investments as of the years ended March 31, 2026 and 2025, are ¥696 million ($4,353 thousand) and ¥650 million, respectively. Maturity Analys is for Financial As s ets and Securities with Contractual Maturities Millions of Yen March 31, 2026 Due in 1 Year or Less Due after 1 Year through 5 Years Due after 5 Years through 10 Years Due after 10 Years Cash and cash in banks Notes and accounts receivable—trade ¥ 34,305 25,678 Accounts receivable—other 4,632 Total ¥ 64,615 Thousands of U.S. Dollars Due in Due after 1 Year Due after 5 Years March 31, 2026 1 Year or Less through 5 Years through 10 Years Due after 10 Years Cash and cash in banks $ 214,567 Notes and accounts receivable—trade 160,607 Accounts receivable—other 28,971 Total $ 404,146

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