We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition. Thus, holders of the ADSs bear the risk that our future offerings may reduce the market price of the ADSs and dilute their shareholdings in us.
If we fail to obtain necessary funds for our operations, we will be unable to maintain and improve our services, other businesses, and technology, and we will be unable to develop and commercialize our services, other businesses, and technologies.
Our present and future capital requirements depend on many factors, including:
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future revenues and profits generated from the expected launch of new services;
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the level of research and development investment required to develop our services, and maintain and improve our technology positions;
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our ability and willingness to enter into new agreements with strategic partners and the terms of these agreements;
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the costs of recruiting and retaining qualified personnel;
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the time and costs involved in obtaining regulatory approvals should such be required; and
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the costs of filing, prosecuting, defending, and enforcing trademark, patent claims and other intellectual property rights.
If we are unable to obtain the funds necessary for our operations, we will be unable to develop and commercialize our services and technologies, which would materially and adversely affect our business, liquidity and results of operations.
Our level of indebtedness could materially and adversely affect our business, financial condition and results of operations.
Our total indebtedness as of June 30, 2024 was JPY1,604,197 thousand (US$9,971 thousand) on a consolidated basis, including the corporate convertible bonds in the aggregate amount of JPY500,000 thousand (US$3,108 thousand) issued to Kufu Company Inc., a Japanese company, in December 2022, the terms of which we amended on November 1, 2024. In addition, we issued a convertible bond in October 2024 in the aggregate amount of JPY300,000 thousand (US$1,865 thousand) to Triple One Investment Partnership, a Japanese limited liability investment partnership. We intend to take on additional indebtedness in the principal amount of at least JPY1,400,000 thousand (US$8,702 thousand) to partially finance our planned acquisition of 70% of JGMC, although the amount and terms of such indebtedness are subject to further negotiation as of the date of this prospectus and may change. We may enter into additional financing arrangements, and may also take on additional indebtedness, in connection with the Initial Acquisition, our potential purchase of Remaining Shares of JGMC, and any other existing or future acquisitions or investment transactions, depending on the terms and conditions offered by financial institutions. Our indebtedness could have significant effects on our business, such as:
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limiting our ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of our growth strategy and other purposes;
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requiring us to dedicate a substantial portion of our cash flow from operations to pay principal and interest on our debt, which would reduce availability of our cash flow to fund working capital, capital expenditures, acquisitions, execution of our growth strategy and other general corporate purposes;
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making us more vulnerable to adverse changes in general economic, industry and competitive conditions, in government regulation and in our business by limiting our ability to plan for and react to changing conditions;
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diluting the economic and voting rights of our existing shareholders, or reducing the market price of the ADSs or both upon conversion of the convertible bonds; and
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placing us at a competitive disadvantage compared with our competitors that have less debt.