unbanked inc.

In December 2025, trade receivables of ¥1,340 million related to gold bullion transactions became uncollectible, and as a result of recording a substantial allowance for doubtful accounts, the Company posted large operating losses, ordinary losses, and net losses, with cash flow from operating activities also becoming significantly negative. Due to this deterioration in financial condition and the materialization of delisting risk, material doubt has arisen regarding the going concern assumption. Countermeasures are still being implemented or planned, and material uncertainty remains at this point in time.

As of May 26, 2026, the Company was designated as a Securities on Alert by the Tokyo Stock Exchange and was also required to pay a listing contract penalty of ¥14 million. If, upon review approximately one year after the designation, problems are found to exist in the internal management system, the Company will, in principle, be delisted, and the designation may continue for up to three fiscal years. While fundamental improvement of the internal management system is regarded as the most important management priority, countermeasures remain at an interim stage.

Between July and November 2025, the Company repeatedly conducted credit sales of scrap gold products without sufficiently verifying the creditworthiness of its sales counterparties, resulting in ¥1,340 million of uncollected accounts receivable. An investigative committee revealed that management neglected risk assessment due to undue confidence in the largest shareholder, provided explanations to the Board of Directors that differed from the actual situation, and that the checks and balances system had failed to function. The root cause was identified as the failure to continue effective operation of improvement measures following the lifting of the Securities on Alert designation in 2022.

In the event of a violation of the Securities Listing Regulations, the Company may be subject to sanctions such as a business improvement order or delisting, and may also be held liable under the Companies Act, the Financial Instruments and Exchange Act, the Civil Code, the Penal Code, and other laws. The Company has already been found to be in violation of matters to be observed under the Corporate Code of Conduct (development of systems necessary to ensure appropriate business operations), and if the improvement of the internal management system is judged to be insufficient, delisting will result. Although a monitoring system utilizing experts such as attorneys and certified public accountants has been established, ensuring the effectiveness of improvements remains an urgent priority.

Crowdbank Capital Co., Ltd. and Crowdbank Financial Services Co., Ltd. are subject to the Money Lending Business Act and are also bound by the self-regulatory basic rules of the Japan Financial Services Association. In the event of a violation of laws and regulations, the companies may be subject to a business improvement order, penalty fees, or other legal measures, and if business regulations are strengthened through legislative amendments, this may affect business activities, financial condition, and operating results. The Company is promoting thorough legal compliance awareness and developing its internal management system, but the risk of intensified regulation continues to exist.

Japan Crowd Securities Co., Ltd. is required under the Financial Instruments and Exchange Act to maintain a capital adequacy ratio of 120% or higher, and if the ratio falls below 100%, the company may be ordered to suspend all or part of its business operations. As of the end of March 2025, the ratio stood at 224.8%, above the regulatory threshold; however, if the ratio declines due to changes in the market environment, fluctuations in the value of held assets, or an increase in the amount of risk associated with business expansion, the company could become subject to administrative sanctions. The Company strives to maintain an appropriate level through daily monitoring.

In the business-to-business money lending operations conducted by Crowdbank Capital Co., Ltd. and Crowdbank Co., Ltd., if borrower companies experience difficulty in repayment due to an economic downturn, rising interest rates, or deterioration in the counterparty's business performance, this may result in increased bad debt-related expenses and decreased interest income. In addition, in bullion transactions, there is a risk that accounts receivable become uncollectible due to deterioration in a counterparty's creditworthiness or fraudulent transactions, and the recent case of ¥1,340 million in uncollected receivables materialized as a specific example of this risk. The Company is promoting thorough dissemination of credit management regulations, strengthening of counterparty verification procedures, and continuous monitoring of credit conditions, but states that not all such risks can be avoided.

In the Gold Bullion Business, competition with other bullion dealers may lead to rising procurement costs and a decrease in sales counterparties, while in the business-to-business finance business, intensified competition with banks, money lenders, and new entrants from other industries may create downward pressure on lending interest rates and lead to increased lending to higher-risk borrowers, which could result in an increase in non-performing loans in the future. Deterioration of the competitive environment directly affects financial condition and operating results through increased bad debt-related expenses.

The Company group issues the crypto asset "Kinka (XNK)", which is backed by gold bullion, and is currently designated by two overseas crypto asset trading platforms. If legal regulation of crypto asset trading is strengthened worldwide, sales of the crypto asset may decrease or be suspended, and intensified regulation in major countries could force the Company to scale down or withdraw from the business.

Even transactions that comply with laws and self-regulatory rules may develop into complaints or disputes due to insufficient communication with customers, potentially resulting in settlement payments or damages expenses. As of the end of March 2026, there is one claim for damages (claim amount of ¥129 million) against the Company group as defendant relating to the acceptance of commodity futures transactions.