AXEL MARK INC.

The Group has recorded significant operating losses, ordinary losses, and net losses for two consecutive periods, the previous fiscal year and the current consolidated fiscal year, giving rise to material doubt about its going concern assumption. As countermeasures, the Group is pursuing profit assurance through reduction of cost of sales and SG&A expenses, the issuance of the 31st and 32nd stock acquisition rights to Cantor Fitzgerald Europe dated November 19, 2025 (expected maximum fundraising amount of ¥1,446 million), and improvement of the earnings structure centered on the Trading Card Business and the Beauty & Wellness Business. However, as these countermeasures are still in the process of implementation and fundraising through exercise of the stock acquisition rights remains uncertain, material uncertainty continues to exist.

As of the end of September 2025, the Company does not satisfy the "market capitalization" criterion among the listing maintenance standards of the Growth Market of the Tokyo Stock Exchange. The Company is in a one-year improvement period starting October 2025, and if it fails to meet the standard within the improvement period, it will be delisted after being designated as a securities under supervision (under confirmation) and subsequently as a securities to be delisted. If delisting occurs, it could have a material impact on the business and financial results, including loss of fundraising means and loss of investor confidence.

The Company has issued convertible bond-type bonds with stock acquisition rights and stock acquisition rights, and as of the end of November 2025, the number of potential shares stands at 24,178,066 shares, equivalent to 123.39% of the 19,594,600 shares issued and outstanding at the same date. If the stock acquisition rights are exercised, the share value and voting rights ratio of existing shareholders could be significantly diluted, potentially affecting the share price. While exercise of the stock acquisition rights is essential as a fundraising means related to the going concern assumption, there is a trade-off with dilution risk.

The card game and trading card market size in FY2024 expanded to ¥302.4 billion, or 109.0% year on year, but if the pace of expansion slows or the market contracts, it could affect the Group's business and financial results. The Group positions the Trading Card Business as a key earnings pillar, and deterioration in the market environment risks affecting its overall business strategy. Growth plans premised on inventory holdings, store expansion, and synergy creation with subsidiaries (crafty Inc. and Spiral Sense Inc.) could be impaired by changes in these underlying assumptions.

The Group holds inventory for some products based on demand forecasts, but if forecasted demand does not materialize due to market changes or customer circumstances, losses from excess inventory could occur and affect financial results. In addition, if store opening plans do not proceed as planned, or if lease agreements cannot be renewed or rents increase, this could also affect the business and financial results. The Group plans to expand multiple stores aimed at strengthening buy-back sales, which also carries the risk of increased fixed costs.

The Beauty & Wellness Business in which the Group participates is premised on growth in the Japanese beauty and personal care market (compound annual growth rate of 4.3%, expected to reach approximately ¥4.5 trillion by 2033) and the K-Beauty market (compound annual growth rate of 8.3%, expected to reach approximately ¥217.3 billion by 2035). If the pace of expansion slows or the market contracts, the Group may be unable to achieve initially expected results, affecting financial performance. In addition, the Group's manufacturing, sales, and system development structure depends on multiple partner companies, creating a risk of partnership dissolution due to changes in partners' business policies or deterioration of their management.

Given the nature of its business, the Group qualifies as a personal information handling business operator and strives to manage information through obtaining information security management system certification and establishing internal systems. However, if personal information is leaked for any reason, this could affect the business and financial results through response costs, damage claims, and loss of credibility. In addition, if a system failure occurs due to computer viruses, hacker attacks, or similar causes, the stable operation of the communication network and infrastructure underlying service provision could be undermined, affecting financial results.

The businesses operated by the Group are subject to various legal regulations, and future legal amendments or enforcement of new laws could restrict business activities. Regarding ensuring the wholesomeness of content, there is a risk that continued provision of content could become difficult due to tightening of legal regulations or changes in standards. In addition, although the Compliance Committee conducts awareness-raising and education activities, if a situation arises in which laws and regulations are violated, this could lead to loss of credibility and affect the business and financial results.

The Group has a policy of actively considering M&A and business alliances aimed at expanding existing businesses and introducing new services, and strives to reduce risk through due diligence. However, if the business of an alliance partner or M&A target company does not progress as planned due to unforeseen circumstances or changes in external factors, and expected results are not achieved, this could affect financial results. In addition, if planned investments of funds (expansion of the Beauty & Wellness Business, Trading Card Business store development and EC site construction, growth investments in subsidiaries, etc.) do not produce the expected effects, this could also affect financial results.

The Group plans to hold cryptoassets in wallets it manages, and although it has implemented cybersecurity measures, there is a risk that cryptoassets could be lost due to computer viruses, hacker attacks, or similar causes. In addition, cryptoasset prices fluctuate significantly due to supply and demand, announcements by regulatory authorities, media influence, technological changes, and economic trends, and although the Group takes a medium- to long-term holding policy, price fluctuations could affect financial results. Cryptoasset management is a new area for the Group and entails risks unique to it, distinct from its existing businesses.