Kaga Electronics : Consolidated Financial Statements and Independent Auditors’ Report (1,162KB)

Consolidated Financial Statements for the Year Ended March 31, 2025

and Independent Auditor's Report

Millions of Yen

Thousands of

U.S. Dollars

(Note 1)

NONCURRENT ASSETS:

PROPERTY, PLANT AND EQUIPMENT

INTANGIBLE ASSETS

Thousands of

U.S. Dollars

The accompanying notes are an integral part of these financial statements.

Thousands of

U.S. Dollars

Millions of Yen

Thousands of

U.S. Dollars

(Note 1)

Share of other comprehensive income of entities accounted for

(82) 127 850

using equity method

Total OTHER COMPREHENSIVE INCOME ※5 6,889 4,023 26,908

Comprehensive income ¥ 27,213 ¥ 20,744 $ 138,739

Comprehensive income attributable to:

The accompanying notes are an integral part of these financial statements.

Fiscal year ended March 31, 2024

Millions of Yen

Shareholders' equity

than shareholders' equity

Total changes of items

during period － 28 14,304 10 14,344

Total ¥ 12,133 ¥ 14,849 ¥ 110,250 ¥ (5,603) ¥ 131,629

Millions of Yen

Accumulated other comprehensive income

Changes in the fair value of available-for-sale

securities

Deferred gains or losses on hedges

Foreign currency translation adjustment

Remeasure-ment of

defined benefit plans

Total

accumulated other

comprehen

-sive income

Non-controlling interests

Total net assets

Fiscal year ended March 31, 2025

Millions of Yen

Shareholders' equity

than shareholders' equity

Total changes of items

during period － 36 11,302 23 11,363

Total ¥ 12,133 ¥ 14,855 ¥ 121,553 ¥ (5,579) ¥ 142,993

Millions of Yen

Accumulated other comprehensive income

Changes in the fair value of available-for-sale

securities

Deferred gains or losses on hedges

Foreign currency translation adjustment

Remeasure-ment of

defined benefit plans

Total

accumulated other

comprehen

-sive income

Non-controlling interests

Total net assets

Fiscal year ended March 31, 2025

Thousands of U.S. Dollars (Note 1)

Shareholders' equity

Total $ 80,137 $ 99,558 $ 812,957 $ (37,318) $ 956,348

Thousands of U.S. Dollars (Note 1)

Accumulated other comprehensive income

Changes in the fair value of available-for-sale securities

Deferred gains or losses on hedges

Foreign currency translation adjustment

Remeasure-ment of

defined benefit plans

Total

accumulated other

comprehen

-sive income

Non-controlling interests

Total net assets

The accompanying notes are an integral part of these financial statements.

Millions of Yen

Thousands of

U.S. Dollars

(Note 1)

Millions of Yen

Thousands of

U.S. Dollars

(Note 1)

1. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

   The 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 conformity with accounting principles generally accepted in Japan ("Japanese GAAP"), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.

   The consolidated financial statements are stated in Japanese yen, the currency of the country in which Kaga Electronics Co., Ltd. (the "Company") is incorporated and operates. Amounts less than ¥1 million have been omitted. As a result, the total shown in the consolidated financial statements and notes thereto do not

   necessarily agree with the sum of the individual account balances. 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 ¥149.52 to $1, the rate of exchange at March 31, 2025. 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   1. Consolidation

      The consolidated financial statements include accounts of the Company and all of its subsidiaries (60 in 2024 and 60 in 2025) (together, the "Group").

      Under the control and influence concept, 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

      Company has the ability to exercise significant influence are accounted for by the equity method.

      There are four affiliates accounted for under the equity method. For those companies whose fiscal year end date differs from the consolidated fiscal year end date, the financial statements of those companies for their respective fiscal years are used.

      All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profits and losses included in assets resulting from transactions within the Group is eliminated.

      The fiscal year end date of some of the Company's consolidated subsidiaries (20 in 2024 and 20 in 2025) is December 31. The consolidated financial statements incorporate accounts of these companies with

      adjustments for significant intercompany transactions arising during the period from January 1 to March 31.

   2. Cash Equivalents

      Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalents include time deposits and short-term investments, all of which mature or become due within three months of the date of acquisition.

   3. Inventories

      The Company and its domestic subsidiaries state specific merchandise inventories ordered by customers at the lower of cost, determined by the specific identification method, or market value and that other merchandise inventories at the lower of cost, determined principally by the moving-average method, or market value.

   4. Marketable and Investment Securities

      Marketable and investment securities are classified and accounted for, depending on management's intent, as follows: (1) trading securities, which are held for the purpose of earning capital gains in the near term

      are measured at fair value, and the related unrealized gains and losses are included in earnings, and

      (2) available-for-sale securities, which are measured at fair value, with unrealized gains and losses, net of applicable taxes, reported in a component of other comprehensive income.

      Non-marketable available-for-sale securities are stated at cost as determined by the moving-average method. For other than temporary declines in fair value, investment securities are reduced to net realizable value by charging to income.

   5. Property, Plant and Equipment

      Property, plant and equipment are stated at cost. Significant replacements and additions are capitalized; maintenance and repairs, and minor replacements and improvements are charged to the consolidated statement of income as incurred.

      Depreciation of property, plant and equipment of the Company and its consolidated domestic subsidiaries is computed substantially by the declining-balance method at rates based on the estimated useful lives of the assets, while the straight-line method is applied to buildings acquired after April 1, 1998, facilities attached to buildings and structures acquired after April 1, 2016, lease assets of the Company and its consolidated domestic subsidiaries, and all property, plant and equipment of foreign subsidiaries.

      Buildings and structures 2 to 50 years

      Machinery, equipment and vehicles 2 to 12 years

      Tools, furniture and fixtures 2 to 20 years

   6. Goodwill

      Goodwill is amortized using the straight-line method principally over a period of 5 years.

   7. Software

      Software is amortized using the straight-line method over its estimated useful life.

      Internal use software 5 years

      Software for sale 3 years

   8. Retirement and Pension Plans

      To prepare for disbursement of employees' retirement benefits under the defined benefit plan, a defined benefit liability, which is the amount of defined benefit obligations less plan assets based on the expected benefit obligation at the end of the fiscal year, is recognized. The retirement benefit obligations are calculated by allocating the estimated retirement benefit amount until the end of the current fiscal year on the benefit formula basis. Past service cost is primarily amortized on a straight-line method over a fixed number of years (principally 10 years), which is shorter than the average remaining years of service of the eligible employees. Net actuarial gain or loss is primarily amortized from the following year on a straight-

      line method over a fixed number of years (principally 10 years), which is shorter than the average remaining years of service of the eligible employees. Actuarial gain and loss and past service costs that are yet to be recognized as gains or losses are recorded as remeasurements of defined benefit obligations presented in other comprehensive income, after being adjusted for tax effects.

      Some of the consolidated subsidiaries apply the simplified method, by which they use the amount of

      retirement benefit which would be required to be paid for voluntary retirement at the end of the fiscal year as retirement benefit obligation, in order to calculate the retirement benefit liability and retirement benefit expenses.

   9. Leases

      The Company applies the lease accounting standard, which requires all finance lease transactions be capitalized in the balance sheet.

   10. Allowance for doubtful accounts

       The Company and its consolidated subsidiaries provide for doubtful accounts principally at an amount based on the historical bad debt ratio during a certain reference period in addition to an estimated

       uncollectible amount based on the analysis of certain individual accounts.

   11. Provision for directors' bonuses

       Bonuses to directors and corporate auditors are accrued during the year in which such bonuses are attributable.

   12. Provision for directors' retirement benefits

       Certain domestic consolidated subisiaries accrues liabilities related to retirement benefit obligations for directors and corporate auditors, which is, in general, based upon the amounts required by the internal rules.

   13. Translation of Foreign Currencies

       Receivables and payables denominated in foreign currencies are translated into yen at the exchange rates prevailing at the balance sheet date, and differences arising from the translation are debited or credited to the consolidated statement of income and comprehensive income.

       Assets and liabilities of the foreign subsidiaries are translated into yen at the exchange rates prevailing at the balance sheet date, and revenue and expense accounts are translated at the average rates of exchange in effect during the year. Differences arising from the translation are presented as foreign

       currency translation adjustments after being adjusted for non-controlling interests and tax effects.

   14. Derivatives and Hedging Activities

       1. Hedge accounting method

          The Company applies the deferred hedge method. The Company, however, adopts the allocation method to account for forward exchange contracts if the requirements for the allocation method are met. The Company also adopts the special method to account for interest rate swaps, which meet the requirements for specific matching criteria.

       2. Hedging instruments and hedged items (Hedging instruments)

          Foreign currency forward contract transactions Non-Deliverable Forward ("NDF") transactions Interest rate swaps

          (Hedged items)

          Assets and liabilities denominated in foreign currencies Interest rates on long-term loans payable

       3. Hedging policy

          The Company determines the hedging policy based on the internal rules. Foreign currency forward contracts where there is expected risk such as fluctuation in foreign exchange are used interest rate swaps where there is expected risk such as fluctuation in interest rates on long-term loans payable are used.

       4. Assessment of hedge effectiveness

          Hedge effectiveness is assessed by comparing the changing ratio of cash flows arising from the hedged items to the hedging instruments during the periods from the respective start dates of the hedges to the assessment dates. In addition, regarding interest rate swaps, the Company omits assessment of hedge effectiveness based upon the fulfillment of the requirements for specific matching criteria.

   15. Recognition of significant revenue and expense

       The Group consists of four segments, Electronic Components, Information Equipment, Software and other. The Company and its subsidiaries recognize their revenue basically when goods are transferred to customers since the title, significant risks of ownership and economic value of the goods are transferred when goods are transferred, and reflects when performance obligations are satisfied. For the sales of some goods, revenue is recognized when the goods are shipped. For those sales of goods for which the

       Company or its subsidiaries are determined to have acted as an agent, the net amount after deducting costs is recognized as revenue. In contracts with some customers in Information Equipment segment that

       include rebates and other variable consideration, revenue is recognized in the net amount, with the rebate and other variable consideration amount deducted from the consideration agreed with customers. The estimation of rebates is based on past transactions. The consideration of transactions is received within one year after satisfaction of performance obligations and any significant financing components are not included.

   16. Significant Accounting Estimates

       1. Valuation of unlisted securities, including investments in startup companies

          1. Amount recorded in the consolidated financial statements for this fiscal year

             Millions of Yen

             Thousands of

             U.S. Dollars

             2024 2025 2025

             Investment securities	¥ 830	¥ 622	$ 4,161
             Loss on valuation of investment securities	238	219	1,465

          2. Information on the nature of significant accounting estimates for identified items

       With respect to unlisted securities, the Company calculates the actual value based on the net asset value per share, based on the latest financial statements available from the investees, and recognizes a valuation loss when the net asset value has declined significantly. In particular,

       investments in startup companies are sometimes acquired at a higher price than the net asset value, reflecting the impact of excess earning capacity. If those projected excess earning capacity is no longer expected or are no longer considered reasonable based on the investee's recent

       performance compared to the medium-to-long term business plan obtained at the time of acquisition, a valuation loss is recognized to reflect any significant decline in net asset value which is reflected excess earning capacity. Due to uncertainties around future changes in the corporate environment, etc., which may negatively impact on the net asset value reflected the projected

       excess earning capacity, reassessment may be required which may result in additional losses in the subsequent consolidated fiscal year.

   17. Changes in Accounting Policies

       Effective from the beginning of the current consolidated fiscal year, the Company adopted the Accounting Standard for Corporate Income Taxes, Inhabitant Taxes, and Enterprise Taxes (ASBJ Statement No. 27, revised October 28, 2022; the "2022 Revised Accounting Standard") and the related Implementation

       Guidance (ASBJ Guidance No. 28, revised October 28, 2022; the "2022 Revised Implementation Guidance").

       For the amendments related to the classification of income taxes related to other comprehensive income, the Company applied the transitional provisions set forth in the proviso to paragraph 20-3 of the 2022 Revised Accounting Standard and the proviso to paragraph 65-2(2) of the 2022 Revised Implementation Guidance. This change in accounting policy had no impact on the consolidated financial statements.

       In addition, with respect to the amendments related to the accounting treatment in the consolidated financial statements of gains and losses arising from the sale of shares of subsidiaries within the consolidated group that are deferred for tax purposes, the Company applied the 2022 Revised

       Implementation Guidance from the beginning of the current consolidated fiscal year. This change in

       accounting policy had no impact on the consolidated financial statements for the prior consolidated fiscal year.

   18. Standards and Guidance not yet adopted

       The following standards and guidance were issued but not yet adopted.

       ・Accounting Standard for Leases (ASBJ Statement No. 34, September 13, 2024)

       ・Guidance on Accounting Standard for Leases (ASBJ Guidance No. 33, September 13, 2024)

       1. Overview

          As part of efforts by the Accounting Standards Board of Japan (ASBJ) to align Japanese accounting standards with international practices, the ASBJ has developed a new accounting standard for leases

          that requires lessees to recognize right-of-use assets and corresponding lease liabilities for all leases. This development was based on a review of international accounting standards, particularly IFRS 16.

          While the fundamental policy adopts a single accounting model similar to IFRS 16, the new standard does not incorporate all provisions of IFRS 16. Instead, it selectively adopts key provisions to ensure simplicity and usability. The aim is to enable entities to apply the requirements of IFRS 16 in their separate financial statements with minimal adjustments.

          Under this model and consistent with IFRS 16, lessees recognize depreciation of right-of-use assets and interest expense on lease liabilities for all leases, irrespective of prior finance or operating lease classifications.

       2. Effective date

          To be applied from the beginning of the fiscal year ending March 31, 2028

       3. The impact of the adoption of the standard

          The Group are currently in the process of determining the impact of this new standard on the consolidated financial statements.

3. NOTES TO CONSOLIDATED BALANCE SHEET

   ※1. Investment securities

   Investment securities include the following accounts of affiliated companies.

   Millions of Yen

   Thousands of

   U.S. Dollars

   2024 2025 2025

   Investment securities ¥ 822 ¥ 858 $ 5,744

   ※2. Notes receivable and payable

   The Company and its domestic consolidated subsidiaries recognize actual cash settlement of the notes on the date of clearance. Since the closing date of March 31, 2025 was not a business day for financial institutions, the following notes due to mature on the closing date are included in the year-end balances.

   Millions of Yen

   Thousands of

   U.S. Dollars

   		2024	2025	2025
   	Notes receivable - trade	¥ 57	¥ －	$ －
   	Electronically recorded monetary claims	622	-	-
   	Notes payable - trade	87	-	-
   ※3.	Contingent liabilities

   Contingent liabilities for guaranteed employees' loans amounted to ¥6 million and ¥3 million (US$ 20 thousands) as of March 31, 2024 and 2025, respectively.

   ※4. Commitment line contract

   The Company has entered into commitment line contracts with four banks for effective fund-raising:

   Millions of Yen

   Thousands of

   U.S. Dollars

   2024 2025 2025

   Total limit of contract	¥ 15,000		¥ 15,000		$ 100,321
   Loan balances	-		-		-
   Available amounts	15,000		15,000		100,321

4. NOTES TO CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME

   ※1. Revenue recognized from contracts with customers

   In terms of net sales, revenue recognized from contracts with customers and other revenue are not stated separately. Disaggregated information of revenue recognized from contracts with customers is described in Note 14.1.

   ※2. Until the previous consolidated fiscal year, the Company disclosed the amount of inventory valuation losses included in cost of sales. As the amount is immaterial in the current consolidated fiscal year, this disclosure has been omitted. The amount included in cost of sales in the prior consolidated fiscal year was ¥341 million.

   ※3. Selling, general and administrative expenses

   Major items and the amounts under "Selling, general and administrative expenses" are as follows:

   Thousands of

   Millions of Yen U.S. Dollars

   		2024		2025	2025
   Salaries and bonuses	¥	20,007	¥	20,730	$ 138,648
   Retirement benefit expenses		953		964	6,451
   Provision for directors' bonuses		447		440	2,943
   Provision for doubtful accounts		279		(5)	(35)

   ※4. Research and development costs

   Research and development costs charged to expenses are ¥589 million and ¥779million (US$5,212 thousands) for the years ended March 31, 2024 and 2025, respectively.

   ※5. Gain on sales of property, plant and equipment

   Details of gain on sales of property, plant and equipment are as follows:

   Millions of Yen

   Thousands of

   U.S. Dollars

   2024 2025 2025

   Buildings and structures	¥	-	¥	1	$ 8
   Machinery, equipment and vehicles		14		8	53
   Tools, furniture and fixtures		3		1	9
   Land		-		32	214
   Total	¥ 18		¥ 42		$ 285

   ※6. Loss on disposal of property, plant and equipment

   Details of loss on disposal of property, plant and equipment are as follows:

   Millions of Yen

   Thousands of

   U.S. Dollars

   2024 2025 2025

   Buildings and structures	¥	2	¥	28	$ 188
   Machinery, equipment and vehicles		1		7	48
   Tools, furniture and fixtures		2		5	37
   Others (Intangible assets)	8		1		13
   Total	¥ 14		¥ 42		$ 287

   ※7. Reversal of Impairment loss

   For the year ended March 31, 2024 No applicable items.

   For the year ended March 31, 2025

   This represents a reversal of impairment losses on fixed assets recognized by our consolidated subsidiary, TAXAN MEXICO S. A. DE C. V. in accordance with International Financial Reporting Standards (IFRS).

   ※8. Impairment loss

   For the year ended March 31, 2024

   This information is not presented due to its insignificance.

   For the year ended March 31, 2025 No applicable items.

   ※9. Amount of reclassification and income tax effect associated with other comprehensive income

   Thousands of

   Millions of Yen U.S. Dollars

   2024 2025 2025

   Net unrealized gain or loss on available-for-sale securities
   Amount arising during the period	¥ 2,129	¥	996	$ 6,663
   Amount of reclassification	(1,351)	(622)		(4,164)
   Net gain before income tax effect	777	373		2,499
   Income tax effect	(240)	(190)		(1,271)
   Net unrealized gain or loss on available-for-sale securities, net of Tax	537	183		1,228
   Deferred gains or losses on hedges
   Amount arising during the period	31	(41)		(277)
   Amount of reclassification	27	(31)		(207)
   Net gain before income tax effect	58	(72)		(484)
   Income tax effect	(18)	22		149
   Deferred gains or losses on hedges	40	(50)		(335)
   Foreign currency translation adjustment
   Amount arising during the period	6,662	3,034		20,297
   Amount of reclassification	(332)	-		-
   Foreign currency translation adjustment	6,329	3,034		20,297
   Remeasurements of defined benefit obligations
   Amount arising during the period	110	1,159		7,753
   Amount of reclassification	(22)	(86)		(576)
   Net gain before income tax effect	88	1,073		7,176
   Income tax effect	(24)	(345)		(2,308)
   Remeasurements of defined benefit obligations	64	727		4,868
   Share of other comprehensive income of entities
   accounted for using equity method Amount arising during the period	(82)	127		850
   Total other comprehensive income	¥ 6,889	¥ 4,023		$ 26,909

5. NOTES TO CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

   For the year ended March 31, 2024

   1. Type and number of issued shares of common stock and treasury shares

      	Number of shares as of April 1, 2023	Increase in the number of shares	Decrease in the number of shares	Number of shares as of March 31, 2024
      Number of outstanding shares
      Common shares	28,702,118	-	-	28,702,118
      Number of treasury shares
      Common shares (Note)	2,440,983	1,036	7,475	2,434,544

      Note:

      Increase as a result of fractional share repurchases: 1,036 shares

      Decrease as a result of the payment of restricted stock to the directors and executive officers: 7,475 shares

   2. Dividends

   1. Dividends paid

      Resolution Type of share

      General

      Amount of dividends (Millions of yen)

      Dividend per

      share (Yen) Record date Effective date

      shareholders' Common meeting held on shares June 27, 2023	3,151 (US$20,815 thousands)	120 March 31, 2023 June 28, 2023 (US$0.79)
      Board of Directors' Common	2,889	110
      meeting held on shares	(US$19,085 thousands)	(US$0.72) September 30, 2023 December 1, 2023

      November 8, 2023

   2. Dividends whose effective date is after March 31, 2024 with record date during the year ended March 31, 2025.

   		Amount of dividends	Source of	Dividend per
   Resolution	Type of share	(Millions of yen)	dividends	share (Yen)	Record date	Effective date

   General

   shareholders' meeting held on June 26,

   2024

   Common shares

   2,889

   (US$19,085 thousands)

   Retained earnings

   110 March 31, 2024 June 27, 2024 (US$0.72)

   For the year ended March 31, 2025

   	Number of shares as of April 1, 2024	Increase in the number of shares	Decrease in the number of shares	Number of shares as of March 31, 2025
   Number of outstanding shares
   Common shares	28,702,118	28,702,118	-	57,404,236
   Number of treasury shares
   Common shares (Note)	2,434,544	2,424,255	10,957	4,847,842

   1. Type and number of issued shares of common stock and treasury shares

      ※The Company has conducted a 2-for-1 stock split of its common shares effective October 1, 2024. Note:

      Increase as a result of stock split: 28,702,118 outstanding shares, 2,423,856 treasury shares

      Increase as a result of fractional share repurchases: 399 treasury shares (Before stock split269 shares, After stock split130 shares)

      Decrease as a result of the payment of restricted stock to the directors: 10,957 treasury shares

   2. Dividends

   1. Dividends paid

      Resolution Type of share

      General

      Amount of dividends (Millions of yen)

      Dividend per share

      (Yen) Record date Effective date

      shareholders' Common meeting held on shares June 26, 2024	2,889 (US$19,326 thousands)	110 March 31, 2024 June 27, 2024 (US$0.73)
      Board of Directors' Common	2,890	110
      meeting held on shares	(US$19,334 thousands)	(US$0.73) September 30, 2024 December 6, 2024

      November 6, 2024

      Note:

      The Company has conducted a 2-for-1 stock split of its common shares effective October 1, 2024. The amount of "dividends per share" is presented based on the figures prior to the stock split.

   2. Dividends whose effective date is after March 31, 2025 with a record date during the year ended March 31, 2026.

   		Amount of dividends	Source of	Dividend per
   Resolution	Type of share	(Millions of yen)	dividends	share (Yen)	Record date	Effective date

   General

   shareholders' meeting held on June 26,

   2025

   Common shares

   2,890

   (US$19,334 thousands)

   Retained earnings

   55 March 31, 2025 June 27, 2025 (US$0.36)

6. NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS

   ※1. Cash and cash equivalents at March 31, 2024 and 2025 are reconciled to the accounts reported in the consolidated balance sheet as follows:

   Thousands of

   	Millions of Yen	U.S. Dollars
   	2024 2025	2025
   Cash and bank deposits	¥ 66,596 ¥ 80,188	$ 536,308
   Time deposits with a deposit period of more than 3 months	(4,178) (7,507)	(50,209)
   Cash and cash equivalents	¥ 62,417 ¥ 72,681	$ 486,098

7. LEASES

   Finance leases that do not transfer ownership of the leased assets to lessees. Leased assets:

   The Group leases buildings, machinery, equipment and vehicles and other assets.

   As described in Note 2.i, the lease accounting standard requires that all finance lease transactions should be capitalized to recognize lease assets and lease obligations in the balance sheet.

   As of March 31, 2024 and 2025, future lease payments under non-cancelable operating leases have been omitted due to immateriality.

8. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

   1. Group Policy for Financial Instruments

      The Group has financial instruments, mainly debt from financial institutions, consistent with its capital financing plan. Cash surpluses, if any, are invested in low risk financial assets. Derivatives are not used for speculative purposes, but rather to manage exposure to foreign exchange risks.

   2. Nature and Extent of Risks Arising from Financial Instruments

      Receivables and Payables in foreign currencies are exposed to the risk of fluctuation in foreign currency exchange rates.

   3. Risk Management for Financial Instruments

      Credit risk management

      The Company manages its credit risk from receivables on the basis of internal guidelines, which include monitoring the payment terms and balances of major customers by each business administration

      department to identify the default risk of customers in an early stage.

      Market risk management (foreign exchange risk)

      Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations in foreign currency exchange rates. Such foreign exchange risk is hedged principally by forward foreign

      currency contracts.

      Marketable and investment securities are managed by monitoring market values and financial position of issuers on a regular basis.

   4. Supplementary Explanation for Fair Values of Financial Instruments

      Fair values of financial instruments are based on quoted prices in active markets. If quoted prices are not available, other rational valuation techniques are used. Please see Note 10 for the detail of fair value for derivatives.

      1. Fair Value of Financial Instruments

         Millions of Yen
         March 31, 2024	Carrying Amount	Fair Value	Unrealized Loss
         Short-term investment securities	171	171	-
         Investment securities ※2 ※3	8,754	8,754	-
         Total	¥8,925	¥ 8,925	¥ －
         Bonds payable	10,000	9,952	47
         Long-term loans payable	10,500	10,402	97
         Total	¥20,500	¥ 20,355	¥ 144
         Derivatives ※4	¥ (29 )	¥ (29 )	¥ －
         Millions of Yen
         March 31, 2025	Carrying Amount	Fair Value	Unrealized Loss
         Short-term investment securities	150	150	-
         Investment securities ※2 ※3	10,582	10,582	-
         Total	¥10,732	¥ 10,732	¥ －
         Bonds payable	5,000	4,901	98
         Long-term loans payable	5,500	5,373	126
         Total	¥10,500	¥ 10,274	¥ 225
         Derivatives ※4	¥ (62 )	¥ (62 )	¥ －
         Thousands of U.S. Dollars
         March 31, 2025	Carrying Amount	Fair Value	Unrealized Loss
         Short-term investment securities	1,004	1,004	-
         Investment securities ※2	70,777	70,777	-
         Total	$ 71,782	$ 71,782	$ －
         Bonds payable	33,440	32,781	658
         Long-term loans payable	36,784	35,936	847
         Total	$ 70,224	$ 68,718	$ 1,506
         Derivatives ※4	$ (415 )	$ (415 )	$ －

         ※1 "Cash and bank deposits", "Accounts receivable-trade", "Notes receivable-trade",

         "Electronically recorded monetary claims", "Short-term loans payable", "Accrued expenses", "Income taxes payable", "Current portion of bonds payable" are settled in cash and others are settled in a short period of time. Therefore, since the market price is close to the book value, the description is omitted.

         ※2 Stocks which do not have quoted market price are not included in "Investment securities". The amount recorded on the consolidated balance sheet of the relevant financial instrument is as follows.

         	Millions of Yen	Thousands of U.S. Dollars
         	2024 2025	2025
         Shares of related companies	¥ 822 ¥ 858	$ 5,744
         Non-marketable equity securities	830 622	4,161

         ※3 The description of investments in partnerships and other similar entities for which the amount equivalent to the Company's equity is presented on a net basis in the consolidated balance sheet is omitted. The amount recorded on the consolidated balance sheet of the investment is

         ¥64 million and ¥492 million (US$ 3,294 thousands) for the years ended March 31, 2024 and 2025 respectively.

         ※4 The value of assets and liabilities arising from derivatives is shown at net value.

         Note 1. Redemption Schedule of Monetary Assets and Securities with Contractual Maturities

         March 31, 2024

         Millions of Yen

         	Within 1 year		Over 1 year within 5 years		Over 5 years within 10 years		Over 10 years
         Cash and bank deposits	¥ 66,596		¥ －		¥ －		¥	-
         Notes receivable-trade	900		-		-			-
         Accounts receivable-trade	101,528		-		-			-
         Electronically recorded monetary claims	10,146		-		-			-
         Investment securities with maturities	49		-		-			-
         Total	¥	179,221	¥	-	¥	-	¥	-
         March 31, 2025
         Millions of Yen
         			Over 1 year		Over 5 years
         			within 5		within 10		Over 10
         	Within 1 year		years		years		years
         Cash and bank deposits	¥ 80,188		¥ －		¥ －		¥	-
         Notes receivable-trade	892		-		-			-
         Accounts receivable-trade	106,091		-		-			-
         Electronically recorded monetary claims	7,155		-		-			-
         Investment securities with maturities	-		-		-			-

         Total ¥ 194,328 ¥ － ¥ － ¥ －

         Thousands of U.S. Dollars

         Over 1 year

         within 5

         Over 5 years

         within 10

         Over 10

         Within 1 year years years years

         Cash and bank deposits	$ 536,308	$ －	$ －	$ －
         Notes receivable-trade	5,970	-	-	-
         Accounts receivable-trade	709,549	-	-	-
         Electronically recorded monetary claims	47,853	-	-	-
         Investment securities with maturities	-	-	-	-

         Total $ 1,299,681 $ － $ － $ －

         Note 2. The payment schedule for bonds payable, long-term loans, lease obligations and other interest-bearing liabilities by payment due date at March 31, 2024 and 2025 is as follows:

         March 31, 2024

         Millions of Yen

         Within 1 year

         Over 1 year

         within 2 years

         Over 2 years

         within 3 years

         Over 3 years

         within 4 years

         Over 4 years

         within 5 years

         Over 5 years

         Short-term loans	¥ 10,504	¥	-	¥	-	¥	-	¥	-	¥ －
         Long-term loans
         Including current portion of long-term loans payable	100		5,000		1,000		4,500		-	-
         Bonds payable	-		5,000		-		5,000		-	-
         Total	¥ 10,604	¥	10,000	¥	1,000	¥	9,500	¥	-	¥ －

         March 31, 2025

         Millions of Yen

         Within 1 year

         Over 1 year

         within 2 years

         Over 2 years

         within 3 years

         Over 3 years

         within 4 years

         Over 4 years

         within 5 years

         Over 5 years

         Short-term loans	¥ 9,890	¥		-	¥	-	¥ －	¥	-	¥ －
         Long-term loans
         Including current portion of long-term loans payable	5,000			1,000		4,500	-		-	-
         Bonds payable	5,000			-		5,000	-		-	-
         Total	¥ 19,890		¥	1,000	¥	9,500	¥ －	¥	-	¥ －

         March 31, 2025

         Thousands of U.S. Dollars

         	Within 1 year	Over 1 year within 2 years	Over 2 years within 3 years	Over 3 years within 4 years	Over 4 years within 5 years	Over 5 years
         Short-term loans	$ 66,150	$ －	$ －	$ －	$ －	$ －
         Long-term loans
         Including current portion of long-term loans payable	33,440	6,688	30,096	-	-	-
         Bonds payable	33,440	-	33,440	-	-	-

         Total $133,031 $ 6,688 $ 63,536 $ － $ － $ －

      2. Matters concerning the breakdown of financial products by market price level

         The market price of financial instruments is classified into the following three levels according to the

         observability and importance of the input related to the calculation of the market price.

         Level 1 market price: The market price calculated based on the market price of the asset or liability formed in the active market and subject to the calculation of the market price among the inputs related to the calculation of the observable market price.

         Level 2 market price: The market price calculated using the inputs related to the calculation of market price other than the level 1 input among the inputs related to the calculation of the observable

         market price.

         Level 3 market price: Market price calculated using inputs related to the calculation of unobservable market price.

         When multiple inputs that have a significant influence on the market price calculation are used, the market price is classified into the lowest priority level in the market price calculation among the levels to which those inputs belong.

         1. Financial instruments recognized on the consolidated balance sheet at market price March 31, 2024

            Market price (Millions of Yen) Level 1 Level 2 Level 3 Total
            Short-term investment securities Marketable equity securities	¥	171	-	-	¥	171
            Investment securities
            Marketable equity securities		7,122		-	-	7,122
            Investment trusts		1,581		-	-	1,581
            Corporate bonds		-		49	-	49
            Total	¥	8,875	¥	49	-	¥ 8,925
            Derivatives Currency related transactions		-	¥	29	-	¥ 29
            Total		-	¥	29	-	¥ 29
            March 31, 2025
            Market price (Millions of Yen) Level 1 Level 2 Level 3 Total
            Short-term investment securities Marketable equity securities	¥	150	-	-	¥	150
            Investment securities
            Marketable equity securities	9,020			-	-	9,020
            Investment trusts Corporate bonds	1,561 -			- -	- -	1,561 -
            Total	¥ 10,732		¥	-	-	¥ 10,732
            Derivatives Currency related transactions	-		¥	62	-	¥ 62
            Total	-		¥	62	-	¥ 62

            March 31, 2025

            Market price (Thousands of U.S. Dollars)

            Level 1 Level 2 Level 3				Total
            Short-term investment securities Marketable equity securities	$ 1,004	-	-	$ 1,004
            Investment securities Marketable equity securities	60,332	-	-	60,332
            Investment trusts	10,445	-	-	10,445
            Corporate bonds	-	-	-	-
            Total	$ 71,782	$ －	-	$ 71,782
            Derivatives Currency related transactions	-	$ 415	-	$ 415
            Total	-	$ 415	-	$ 415

         2. Financial instruments other than those recorded on the consolidated balance sheet at market price March 31, 2024

   Market price (Millions of Yen)

   	Level 1	Level 2	Level 3	Total
   Bonds payable	-	9,952	-	9,952
   Long-term loans payable	-	10,402	-	10,520
   Total	-	¥ 20,355	-	¥ 20,355
   March 31, 2025
   Market price (Millions of Yen)
   	Level 1	Level 2	Level 3	Total
   Bonds payable	-	4,901	-	4,901
   Long-term loans payable	-	5,373	-	5,373
   Total	-	¥ 10,274	-	¥ 10,274
   March 31, 2025
   Market price (Thousands of U.S. Dollars)
   	Level 1	Level 2	Level 3	Total
   Bonds payable	-	32,781	-	32,781
   Long-term loans payable	-	35,936	-	35,936
   Total	-	$ 68,718	-	$ 68,718

   Note. Explanation of the valuation technique used to calculate the market price and the inputs related to the calculation of the market price

   Short-term investment securities, investment securities

   Listed stocks are evaluated using market prices and are traded in active markets. Therefore their market price is classified as Level 1 market price.

   Derivative

   The market price of exchange contracts is calculated by the discounted present value method using observable inputs such as exchange rates, and is classified as Level 2 market price. Since the allocation of forward exchange contracts is treated together with the receivables and payables

   (accounts receivable-trade, notes and accounts payable-trade) that are hedged items the market price is included in the market price of the receivables and payables.

   Bonds payable

   The market price of bonds payable is calculated by the discounted present value method based on

   the total amount of principal and interest, the remaining period of the debt and the interest rate that takes credit risks into account, and is classified as Level 2 market price.

   Long-term loans payable

   The market price of long-term loans payable is calculated by the discounted present value method based on the total amount of principal and interest, the remaining period of the debt and the interest rate that takes credit risks into account, and is classified as Level 2 market price.

9. MARKETABLE AND INVESTMENT SECURITIES

   Marketable and investment securities as of March 31, 2024 and 2025 consisted of the following:

   1. Current-Marketable equity securities

      Millions of Yen

      Thousands of

      U.S. Dollars

      Unrealized gains included in net

      2024 2025 2025

      ¥ (24) ¥ (21 ) $ (141)

      income for the year

   2. Held -to-maturity debt securities For the year ended March 31, 2024 No significant items to be reported.

      For the year ended March 31, 2025 No significant items to be reported.

   3. Investment securities with a readily determinable fair value March 31, 2024

      Millions of Yen

      Carrying

      Acquisition

      Difference

      Securities for which the carrying amount exceeds the acquisition costs

      Non-current:

      amount

      cost

      Marketable equity securities	¥6,802	¥2,893	¥3,909
      Government and corporate bonds	-	-	-
      Others	1,517	893	623
      Subtotal	¥8,319	¥3,786	¥4,533

      Securities for which the carrying

      amount does not exceed the acquisition costs Non-current:

      Marketable equity securities	320	374	(54 )
      Government and corporate bonds	49	50	(0 )
      Others	64	76	(11 )
      Subtotal	¥ 434	¥ 500	¥ (66 )
      Total	¥8,754	¥4,287	¥4,467

      Note:

      Non-marketable equity securities of ¥830 million (US$ 5,486 thousands) and Shares of subsidiaries and related companies of ¥ 822 million (US$ 5,434 thousands) are not included in the above due to stocks with no market price. In addition, investments in partnerships and other similar business entities for which the amount equivalent to the Company's equity is presented on a net basis in the amount of ¥64 million

      (US$ 427 thousands) in the consolidated balance sheet is omitted.

      March 31, 2025

      Millions of Yen

      Carrying

      Acquisition

      Difference

      Securities for which the carrying amount exceeds the acquisition costs

      Non-current:

      amount

      cost

      Marketable equity securities	¥7,386	¥2,934	¥4,452
      Government and corporate bonds	-	-	-
      Others	1,286	747	538
      Subtotal	¥8,672	¥3,681	¥4,990

      Securities for which the carrying

      amount does not exceed the acquisition costs Non-current:

      Marketable equity securities	1,634	1,767	(132 )
      Government and corporate bonds	-	-	-
      Others	275	296	(21 )
      Subtotal	¥1,910	¥2,064	¥ (153 )
      Total	¥10,582	¥5,746	¥4,836

      Thousands of

      U.S. Dollars

      Carrying

      Acquisition

      Difference

      Securities for which the carrying amount exceeds the acquisition costs

      Non-current:

      Amount

      cost

      Marketable equity securities	$ 49,398	$ 19,623	$29,775
      Government and corporate bonds	-	-	-
      Others	8,602	5,001	3,600
      Subtotal	$ 58,001	$ 24,625	$33,375

      Securities for which the carrying

      amount does not exceed the acquisition costs Non-current:

      Marketable equity securities	10,933	11,818	(885 )
      Government and corporate bonds	-	-	-
      Others	1,842	1,986	(143 )
      Subtotal	$ 12,776	$ 13,805	$(1,028 )
      Total	$ 70,777	$ 38,430	$ 32,347

      Note:

      Non-marketable equity securities of ¥622 million (US$ 4,161 thousands) and Shares of subsidiaries and related companies of ¥ 858 million (US$ 5,744 thousands) are not included in the above due to stocks with no market price. In addition, investments in unions and other similar business entities that record the amount equivalent to their equity in the consolidated balance sheet in net amount of ¥492 million

      (US$ 3,294 thousands) is omitted.

   4. Investment securities sold during 2024 and 2025

      March 31, 2024

      Millions of Yen Amounts sold Gains on sales Loss on sales

      Investment securities ¥ 3,710 ¥ 1,420 ¥ －

      Government and corporate bonds

      － － －

      Others 102 0 0 Total ¥ 3,813 ¥ 1,420 ¥ 0

      March 31, 2025

      Millions of Yen Amounts sold Gains on sales Loss on sales

      Investment securities	¥	1,451		¥	753		¥	4
      Government and corporate bonds		-			-			-
      Others	Total	4 ¥ 1,456	1 ¥ 754			0 ¥ 4

      Thousands of

      U.S. Dollars Amounts sold Gains on sales Loss on sales

      Investment securities	$ 9,710		$ 5,042		$ 30
      Government and corporate bonds	-		-		-
      Others		31	6		-
      	Total	$ 9,742	$ 5,049		$ 30

   5. Impairment losses recognized on Investment securities are as follows:

   Millions of Yen

   Thousands of

   U.S. Dollars

   2024 2025 2025

   ¥ 238 ¥ 241 $ 1,618

   Note:

   The Company recognizes an impairment loss when the book value decreases by more than 50% from its acquisition cost.

10. DERIVATIVES

Derivative Transactions to Which Hedge Accounting Is Applied

1. Currency related transactions

   Millions of Yen Contract

   Amount

   March 31, 2024 Hedged Item

   Contract

   Amount

   Due after

   One Year

   Fair

   Value

   General processing method:

   Foreign currency forward contracts:

   Selling USD	Receivables	¥ 7,135	¥	-	¥	(76 )
   Selling CNY	Receivables	2		-		(0 )
   Buying USD	Payables	2,653		-		(79 )
   Buying EUR	Payables	0		-		0

   Total ¥ 9,791 ¥ － ¥ 3

   Allocation processing of foreign exchange contracts:

   Foreign currency forward contracts:

   Selling USD		Receivables	¥ 6,727	¥ －
   Selling CNY		Receivables	33	-	(Note )
   Buying USD		Payables	5,109	-
   Buying EUR		Payables	4	-
   	Total		¥ 11,875	- ¥ －	¥ －

   Millions of Yen Contract

   Amount

   March 31, 2025 Hedged Item

   Contract

   Amount

   Due after

   One Year

   Fair

   Value

   General processing method:

   Foreign currency forward contracts:

   Selling USD	Receivables	¥ 4,949	¥	-	¥	24
   Selling CNY	Receivables	26		-		0
   Buying USD	Payables	5,328		-		(65 )
   Buying EUR	Payables	1		-		0
   Buying HKD	Payables	13		-		(0 )

   Total ¥ 10,320 ¥ － ¥ (41 )

   Allocation processing of foreign exchange contracts:

   Foreign currency forward contracts:

   Selling USD	Receivables	¥ 7,055	¥	-
   Selling CNY	Receivables	71		-	(Note )
   Buying USD	Payables	6,633		-
   Buying EUR	Payables	0		-
   Buying HKD	Payables	6		-

   Total ¥ 13,767 ¥ － ¥ －

   Thousands of U.S. Dollars Contract

   Amount

   March 31, 2025 Hedged Item

   Contract

   Amount

   Due after

   One Year

   Fair

   Value

   General processing method:

   Foreign currency forward contracts:

   Selling USD	Receivables	$ 33,104	$ －	$ 160
   Selling CNY	Receivables	180	-	0
   Buying USD	Payables	35,635	-	(438)
   Buying EUR	Payables	8	-	0
   Buying HKD	Payables	92	-	(0)

   Total $ 69,021 $ － $ (277)

   Allocation processing of foreign exchange contracts:

   Foreign currency forward contracts:

   Selling USD		Receivables	$ 47,188	$ －
   Selling CNY		Receivables	480	-	(Note )
   Buying USD		Payables	44,363	-
   Buying EUR		Payables	0	-
   Buying HKD		Payables	46	-
   	Total		$ 92,079	- $ －	$ －

   Note:

   Allocation of forward exchange contracts is accounted for as an integral part of monetary receivables and payables denominated in foreign currencies that are hedged items. Therefore, their fair value is included in the fair value of the foreign currency-denominated receivables and payables that are hedged items.

2. Interest related transactions

For the year ended March 31, 2024

Hedge

Millions of Yen Contract

Amount

Accounting

Method

Type of

Transaction Hedged Item

Contract

Amount

Due after

One Year

Fair

Value

Special

treatment for interest rate swap

Interest rate swap

Receive floating, pay fixed

Long-term loans payable

¥ 4,300 ¥ 4,300 (Note)

Note:

Interest rate swap matching specific criteria is accounted for together with long-term loans payable designated as the hedge item. Therefore, their fair values are included in the fair value of the long-term loans payable.

For the year ended March 31, 2025 No significant items to be reported.