MOONBAT Co.,Ltd.

There is a risk that macroeconomic conditions and changes in the pricing strategies, store strategies, and competitive environment of major sales outlets such as department stores, chain stores, and specialty stores may affect business performance. Given the high dependence on domestic retail stores, changes in the sales channel environment translate directly into changes in sales.

There is a risk that business performance may be affected by changes in fashion trends, lifestyles, and preferences, as well as intensifying competition with other companies in the same industry. Macro income trends and changes in the economic environment also significantly affect consumer behavior, making demand forecasting highly difficult.

Since the Company handles many seasonal products such as parasols and Apparel Accessories & Hats made of fur, there is a risk that unusual weather such as cool summers, warm winters, or low rainfall may reduce net sales. Unpredictable weather conditions resulting from recent climate change further heighten the risk of lost sales opportunities.

Approximately 85% of products sold are produced overseas, creating a risk that political instability, changes in laws and regulations, or large-scale disasters in producing countries could disrupt or halt the supply of products. Since a supply disruption directly leads to lost sales opportunities, the impact on business continuity is significant.

In import transactions from various countries in Europe and Asia, there is a risk that a weaker yen could adversely affect business performance through higher procurement costs. Although forward exchange contracts are used within the normal scope of transactions, medium- to long-term foreign exchange risk cannot be completely hedged.

The Company has entered into license agreements with numerous overseas companies regarding the acquisition of trademark usage rights and the manufacture and sale of design-replica products, creating a risk that the termination of such agreements could directly affect business performance. Although the Company currently maintains good relationships with each contracting party, renewal of these agreements is not guaranteed.

Although the Company has established an inspection system through its Quality Control Room and third-party inspection agencies, there is a risk that unforeseen quality issues or product liability incidents could damage brand image and result in substantial losses. Given the high proportion of overseas production, the difficulty of quality control is relatively high.

Although the Company has established a strict management system for personal information, there is a risk that an unforeseen incident such as a cyberattack could cause a serious information security breach, damaging social trust and corporate image and affecting management. Since the Company operates e-commerce sites, addressing the risk of customer data leakage is an important issue.

There is a risk that if e-commerce sites or operational systems experience failures due to power outages, network failures, human error, viruses, unauthorized access, or other causes, repair costs may be incurred, and important data may be lost or operations disrupted. Damage to important information, including customer data and trade secrets related to sales strategy and product development, could have a serious impact on business continuity.

While the Company strives to comply with laws and regulations such as the Antimonopoly Act, the Subcontract Act, the Act against Unjustifiable Premiums and Misleading Representations, and the Consumer Product Safety Act, there is a risk that misconduct or illegal acts by employees or business partners could reduce social trust and result in substantial damages. Although the Company continuously enforces thorough compliance management and promotes awareness of internal control procedures, complete elimination of such risk is difficult.