HUMAN MADE Inc.

The majority of the Company's sales depend on the single HUMAN MADE brand, meaning that fluctuations in brand value directly affect business performance and corporate value. Hasty business expansion without accompanying quality improvement, or a decline in brand image, could have a significant impact on business results. As countermeasures, the Company is promoting collaborations with celebrities and global companies, formulating brand policies, and codifying quality control standards, but the risk of brand impairment cannot be completely eliminated.

Continuous recruitment and development of personnel is essential to maintaining and growing the business model that is based on brand strength. If recruitment does not proceed as planned, or if internal development systems fail to function, this could lead to a decline in competitive advantage, potentially having a significant impact on business results. The Company strives to maintain and improve retention rates through active recruitment activities, dissemination of its Mission, Vision, and Values, and the development of various HR and educational systems.

Under plans to accelerate overseas expansion, if unforeseen conflicts or similar events occur in regions of expansion, this could have a material impact on business activities, including logistics disruption, uncollected accounts receivable, delayed payments, and foreign exchange losses. As countermeasures, the Company is diversifying its business areas, considering measures such as forward exchange contracts, developing a credit management system for overseas transactions, and organizing and monitoring risks related to local laws and regulations.

The direction of product and store planning as well as brand development for the HUMAN MADE brand relies on the contract with creative director Mr. NIGO. If he becomes unable to perform his duties or if the contract terms are changed, the foundation of brand value could be shaken, potentially having a significant impact on business results. The contract has a five-year term with automatic renewal, and all intellectual property rights are vested in the Company; however, there is a provision to discuss the validity of contract terms after three years from conclusion. Although the Company is promoting the external recruitment and development of in-house creative personnel as a countermeasure, the high degree of dependence remains a structural risk.

Sales of fashion and apparel products are highly susceptible to economic fluctuations, changes in personal disposable income, and shifts in consumer preferences. Unexpected economic downturns or a divergence in preferences could result in a significant decline in sales. As countermeasures, under a two-axis policy of regional and brand diversification, the Company is strengthening e-commerce sales, developing sales channels both domestically and internationally, and preparing brands other than HUMAN MADE; however, the risk could materialize if global expansion or the enrichment of the brand portfolio does not proceed as targeted.

Currently, business activities such as production, logistics, stores, and e-commerce are concentrated domestically. If a natural disaster exceeding expectations—such as an earthquake, tsunami, typhoon, or volcanic eruption—or a large-scale power outage occurs, this could have a material impact on business activities. The Company has formulated a BCP including simulations for responding to a major earthquake directly beneath the greater Tokyo metropolitan area and initial response plans, and has also established a crisis management public relations system and scenarios for responding to system outages; however, a risk remains that events exceeding expectations may not be fully addressed.

If customers' personal information obtained through the operation of the e-commerce site is leaked or lost due to unauthorized external intrusion, cyberattacks, virus infection, or similar causes, this could give rise to damage claims and a decline in social credibility, potentially affecting business results. The Company has established personal information management regulations and basic information security regulations, obtained Privacy Mark certification, installed anti-virus software on all terminals, and conducts educational and awareness-raising activities such as targeted email attack drills.

The Company is subject to a variety of domestic and international laws and regulations (including the Act on Specified Commercial Transactions, the Act against Unjustifiable Premiums and Misleading Representations, and the Act on the Protection of Personal Information). If legal violations occur due to regulatory amendments or the introduction of unforeseen new regulations, this could result in penalties, revocation of licenses, litigation, and loss of stakeholder trust, potentially affecting business results and financial position. The Company strives to promote compliance through the establishment of risk and compliance regulations, the establishment of a Risk and Compliance Committee, and internal training and awareness-raising activities.

In some countries and regions, intellectual property protection systems may be insufficient, creating a risk that counterfeit versions of the Company's products may circulate in the market, or conversely, that the Company may infringe on third parties' intellectual property rights and be subject to litigation. Either case could lead to damage to brand image and the incurrence of damages or response costs. The Company conducts infringement investigations and gathers information on counterfeit products through a specialized department, and conducts intellectual property education and awareness-raising activities for employees.

Mr. NIGO and NIGOLD Inc., a company wholly owned by him, together hold 64.6% of the Company's total issued shares. If these shares are sold for any reason in the future, this could affect the market price of the Company's shares. While Mr. NIGO maintains a policy of being a stable shareholder that also gives consideration to the interests of minority shareholders, the possibility of a share sale cannot be completely ruled out.