Kaiho's auditor will not give a conclusion on the quarter, and the reason it names first is that the state pension body has been attaching the company's money over unpaid social insurance

Progress Audit Corporation reviewed Kaiho's books for the three months to 30 June and then declined to say anything about them.

The Osaka firm issued the restaurant and renewable energy group a review report dated Friday that expresses no conclusion at all on its first quarter consolidated statements. Not an adverse conclusion, not a qualified one. The report says the audit corporation could not obtain the evidence on which any conclusion would rest, and that the effect of the uncertainty is material and pervasive.

Kaiho, which trades on the Tokyo Stock Exchange Growth Market under code 3133, disclosed the report the same afternoon.

The new fact is an attachment

Most of the auditor's reasoning was already on the record. The group has recorded operating losses, ordinary losses and net losses attributable to its owners in every year since the one to March 2023, and the company on its own account has done so since the year to March 2019.

What the basis paragraph puts alongside that history is dated last month. Kaiho owed ¥41,892,000 in unpaid social insurance premiums. On 15 July and again on 21 July the Japan Pension Service attached its right to the return of ¥32,614,000 of guarantee deposits placed under lease agreements. On 22 July it attached a further ¥2,784,000 of the company's credit card receipts under its merchant agreement. From those two dates the auditor draws a short conclusion: a state of tight funds is recognised.

What the plan rested on

The response to the going concern doubt runs to most of a page in the notes, and the auditor's objection is aimed at one line of it.

The pillar of the cash flow improvement plan is the exercise of share warrants, and the report says that is difficult because the share price is depressed. The company is instead in discussion with parties about a fresh issue of shares. Discussions are not evidence, so the audit corporation stopped there.

Warrants did work earlier in the same quarter. Net assets rose ¥446m between April and June, and the results announcement attributes that mainly to warrant exercises, which added ¥478,652,000 each to capital stock and capital surplus and took the share count from 58,355,783 to 62,415,783. The equity ratio went from 4.9 percent to 14.0 percent on the strength of it. Both things are true, in that order.

The sentence in the note

One line of the going concern note is the sharpest thing in the file, and it sits well below the figures most readers will stop at.

On borrowings from some of its transacting financial institutions, the company says, it is in breach of financial covenants. It adds in the same sentence that it has not at present received notice of the clause on loss of benefit of time, which is the Japanese formulation for acceleration. A breach without a demand is a position held at a lender's discretion.

Everything else the quarter carried

Net sales were ¥630m, down 20.4 percent. The operating loss was ¥460m against ¥231m a year earlier, so revenue fell by a fifth while the loss doubled. Ordinary loss was ¥504m and the loss attributable to owners was ¥514m, or ¥8.50 a share. There is no forecast for the full year, which the company says it cannot reasonably calculate while it is buying businesses and selling restaurants at the same time.

It is selling 16 of them, under the Shindaijidai and Shindaijidai 44 brands, to Faz Co. on 30 September. It is buying Spaem Co. by share exchange on 25 August.

Kaiho makes two points of its own about the report, and both are in it. The first is that the reason is continuity: the matters behind the disclaimer of opinion on the year to March 2026, which the company says it disclosed on 26 June, carried into the first quarter. The second is that the review disclaimer does not arise from any newly discovered wrongful act or material accounting error in the quarter. Neither of the June documents survives on the exchange service, so both statements are reported here as the company's.

The 281.4 MW that keeps moving

A separate notice filed at the same hour shows what the funding delay is costing outside the accounts.

Kaiho holds rights, through a wholly owned subsidiary, to eight Nepalese hydropower projects totalling 281.4 MW. The first of them, a 5.5 MW plant, was to start earning in July. That has moved to November. The 13.7 MW project behind it has moved from September to February 2027. Tunnelling on the 5.5 MW plant is finished and turbines are going in, and it has got that far because the local partner, SURYA MAINA HOLDING, has been fronting Kaiho's half of the roughly ¥1.12bn cost, about ¥200m of it by the end of June.

The revised dates assume the money arrives by September. The company also says, in the same notice, that the June disclaimers themselves damaged the funding environment it had been counting on.