Potential Breach of Financial Covenants and Material Doubt About the Going-Concern Assumption
First written in FY2021-Q1. 5 of 16 entries say "Mitigated", first in FY2021-Q2. Latest entry: FY2025.
The whole theme swung hardest in 2022: 4 of 13 companies on the "Worse" side.
14 other companies' latest entry also says "Mitigated".
- FY2025MitigatedAnnual report
「Total net assets at the end of the fiscal year were ¥4,293 million … ordinary profit for the fiscal year was ¥1,933 million … and interest-bearing debt at the end of the fiscal year was ¥3,128 million.」
The company’s operating performance and financial position met the financial covenant thresholds of net assets of ¥2,000 million or more, no ordinary loss, and interest-bearing debt of ¥13,000 million or less. - FY2024-Q3MitigatedAnnual report
「As a result, owing to the marked recent recovery in business performance during the third quarter accounting period, the company does not expect to record an operating loss for the fiscal year, and the likelihood of breaching the financial covenants at the end of the fiscal year is low. Accordingly, the company has determined that the events or conditions giving rise to material uncertainty about the going concern assumption had been resolved as of the end of the third quarter accounting period.」
Regarding the breach of financial covenants and material uncertainty regarding the going concern assumption that arose at the end of the previous fiscal year, the company determined that the events and conditions had been resolved as of the end of the third quarter accounting period because of the recovery in business performance and the lower likelihood of a breach. - FY2024-Q2RestatedAnnual report
「Accordingly, events or conditions exist that raise material uncertainty about the going concern assumption, including the recording of a significant quarterly net loss and negative operating cash flow. We have determined that no material uncertainty exists regarding the going concern assumption because we continue to implement the measures described in “2. Analysis of Financial Position, Operating Results and Cash Flows by Management, (6) Analysis and Review of Material Events, etc. Described in Risks Related to the Business, and Measures to Resolve or Improve Such Material Events, etc.” in order to resolve these events or conditions.」
The company continues to state that events and conditions giving rise to material uncertainty exist, while maintaining its judgment that no material uncertainty exists as a result of the continued implementation of its response measures. - FY2024-Q1RestatedAnnual report
「Accordingly, events or conditions exist that raise material uncertainty about the going concern assumption, including the recording of a significant quarterly net loss and a substantial decline in total net assets. …We have determined that no material uncertainty exists regarding the going concern assumption.」
The company continues to disclose the existence of events and conditions giving rise to material uncertainty and its judgment that no material uncertainty exists as a result of the continued implementation of its response measures, as it did in the previous fiscal year. - FY2023RestatedAnnual report
「The full-year ordinary loss was ¥704 million, and total net assets at the end of the fiscal year stood at ¥1,759 million. As a result, the company breached financial covenants attached to certain borrowing agreements, specifically the total amount of net assets at the end of fiscal 2023 and ordinary loss for fiscal 2023, and events or conditions exist that raise material uncertainty about the going concern assumption.」
The company continues to disclose the breach of financial covenants that actually occurred in the previous fiscal year and the material uncertainty regarding the going concern assumption. Meanwhile, it has obtained consent from financial institutions not to demand immediate full repayment. - FY2023-Q3RestatedAnnual report
「As a result, there is a risk of breaching financial covenants attached to certain borrowing agreements, and events or conditions exist that raise material uncertainty about the going concern assumption.」
The risk of breaching financial covenants and material uncertainty regarding the going concern assumption continue. Meanwhile, the company maintains its judgment that no material uncertainty exists regarding the going concern assumption as a result of the continued implementation of its response measures. - FY2023-Q2Change in the threshold amounts for financial covenantsAnnual report
「Second quarter accounting period (30 September 2022) ① Maintain total net assets as reported in the unconsolidated balance sheet at the end of each fiscal year from fiscal 2023 onward at ¥2,000 million or more.」
The net asset threshold under the financial covenants was stated as ¥2,000 million or more from fiscal 2023 onward. Net assets stood at ¥479 million, and the risk of breaching the financial covenants and material uncertainty regarding the going concern assumption continued to be disclosed. - FY2023-Q1RestatedAnnual report
「In addition, the company has breached financial covenants attached to certain borrowing agreements, specifically the total amount of net assets at the end of fiscal 2022 and ordinary loss for fiscal 2022, and events or conditions exist that raise material uncertainty about the going concern assumption. …The company has maintained close relationships with financial institutions and obtained their consent not to demand immediate full repayment in connection with the breach of the financial covenants.」
The company continues to disclose the breach of financial covenants and material uncertainty that arose at the end of the previous fiscal year. Meanwhile, it has maintained consent from financial institutions not to demand immediate full repayment and stated its judgment that no material uncertainty exists. - FY2022MaterialisedAnnual report
「As a result, operating cash flow remains negative, and the company has breached financial covenants attached to certain borrowing agreements, specifically the total amount of net assets at the end of fiscal 2022 and ordinary loss for fiscal 2022. Events or conditions therefore exist that raise material uncertainty about the going concern assumption.」
The disclosure changed from a “risk of breach” to a statement that an actual breach of the financial covenants concerning net assets and ordinary loss had occurred. Meanwhile, the company had obtained consent from financial institutions not to demand immediate full repayment. - FY2022-Q3WorsenedAnnual report
「As a result, operating cash flow remains negative, and there is a risk of breaching financial covenants attached to certain borrowing agreements, specifically the total amount of net assets at the end of each fiscal year. Events or conditions therefore exist that raise material uncertainty about the going concern assumption. We have determined that no material uncertainty exists regarding the going concern assumption because we continue to implement the measures described in “2. Analysis of Financial Position, Operating Results and Cash Flows by Management, (5) Analysis and Review of Material Events, etc. Described in Risks Related to the Business, and Measures to Resolve or Improve Such Material Events, etc.” in order to resolve these events or conditions.」
The company continues to judge that no material uncertainty exists regarding the going concern assumption as a result of the continued implementation of its response measures. However, net assets declined from ¥3,035 million at the end of the previous quarter to ¥2,551 million, while negative operating cash flow and concerns over breaches of financial covenants continue. - FY2022-Q2MitigatedAnnual report
「As a result, operating cash flow remains negative, and there is a risk of breaching financial covenants attached to certain borrowing agreements, specifically the total amount of net assets at the end of each fiscal year. Events or conditions therefore exist that raise material uncertainty about the going concern assumption. We have determined that no material uncertainty exists regarding the going concern assumption because we continue to implement the measures described in “2. Analysis of Financial Position, Operating Results and Cash Flows by Management, (6) Analysis and Review of Material Events, etc. Described in Risks Related to the Business, and Measures to Resolve or Improve Such Material Events, etc.” in order to resolve these events or conditions.」
Although negative operating cash flow, concerns over breaches of financial covenants, and material uncertainty continue, the company again stated its judgment that no material uncertainty exists regarding the going concern assumption as a result of the continued implementation of its response measures. - FY2022-Q1WorsenedAnnual report
「As a result, operating cash flow remains negative, and there is a risk of breaching financial covenants attached to certain borrowing agreements, specifically the total amount of net assets at the end of each fiscal year. Events or conditions therefore exist that raise material uncertainty about the going concern assumption.」
Although the loss narrowed year on year, negative operating cash flow, concerns over breaches of financial covenants, and conditions giving rise to material uncertainty about the going concern assumption continue. Net assets stood at ¥4,221 million. - FY2021MitigatedAnnual report
「In March 2021, the company amended its commitment line agreement and syndicated loan agreement to relax the financial covenants. In addition, the Board of Directors resolved at its meeting held on 25 December 2020 to issue class shares and share acquisition rights by way of a private placement, among other matters, and payment for the issuance of the class shares and share acquisition rights was completed on 9 March 2021. As a result, the company determined that there would be no problem with cash management for the foreseeable future (the next 1 year) and that no material uncertainty existed regarding the going concern assumption.」
Although concerns over breaches of financial covenants remain, the company’s judgment changed to one that no material uncertainty exists regarding the going concern assumption following the relaxation of contractual terms and completion of the capital raising. - FY2021-Q3WorsenedAnnual report
「As a result, there is a risk of breaching financial covenants attached to some borrowing agreements, specifically the total amount of net assets at the end of each fiscal year, and events or circumstances exist that could raise significant doubt about the going concern assumption.」
The risk of breaching financial covenants and the events and conditions giving rise to material uncertainty continue. Although net assets had declined to ¥94 million at the end of the third quarter, the company stated its judgment that no material uncertainty exists regarding the going concern assumption as a result of the continued implementation of its response measures. - FY2021-Q2MitigatedAnnual report
「As a result, there is a risk of breaching financial covenants attached to certain borrowing agreements, specifically the total amount of net assets at the end of each fiscal year, and events or conditions exist that raise material uncertainty about the going concern assumption. We have determined that no material uncertainty exists regarding the going concern assumption because we continue to implement the measures described in “2. Analysis of Financial Position, Operating Results and Cash Flows by Management, (6) Analysis and Review of Material Events, etc. Described in Risks Related to the Business, and Measures to Resolve or Improve Such Material Events, etc.” in order to resolve these events or conditions.」
Although the risk of breaching financial covenants and the events and conditions giving rise to material uncertainty continue, the company stated its judgment that no material uncertainty exists regarding the going concern assumption as a result of the continued implementation of its response measures. - FY2021-Q1First statedAnnual report
「Although the Company has reduced or suspended domestic and international services since March, when the impact became more pronounced, to mitigate the effects on results, it recorded a quarterly net loss of ¥3,773 million for the first quarter, reducing total net assets to ¥3,264 million at the end of the first quarter. As a result, there is a risk of breaching financial covenants attached to certain loan agreements, and events or conditions exist that raise substantial doubt about the going-concern assumption.」
This is the first standalone disclosure of the potential breach of financial covenants and events or conditions raising substantial doubt about the going-concern assumption, against a quarterly net loss of ¥3,773 million and net assets of ¥3,264 million.