LAPINE CO.,LTD.

The company has recorded operating losses for seven consecutive periods from the 71st fiscal year (FY2019, ended February 2019) through the 77th fiscal year (FY2025, ended February 2025), giving rise to events that raise material doubt about the going concern assumption. Negotiations regarding the repayment schedule for loan principal with financial institutions are ongoing, and cash and deposits stand at only ¥760 million on a consolidated basis and ¥328 million on a standalone basis. Countermeasures (cost reduction, fixed cost reduction, and discussions with financial institutions) are still in progress, and material uncertainty exists regarding the extent and duration of the impact on operating results and financial condition.

Rapid changes in fashion trends, diversification of consumer preferences, competitor movements, and sluggish personal consumption due to economic fluctuations directly affect sales. The Group responds by grasping domestic and overseas fashion trend information and offering attractive products at affordable prices, but this is recognized as a risk that can always materialize due to changes in economic conditions and consumption trends.

Apparel products are highly susceptible to weather conditions, and demand can fluctuate significantly due to unseasonable weather such as cool summers, warm winters, or prolonged rain, and store operations may be interrupted by natural disasters such as earthquakes or pandemics. As countermeasures, the company is working on shortening production cycles, controlling production, and establishing internal emergency response systems, but this is recognized as a risk that is always present and difficult to reasonably foresee.

Some products are manufactured on a consignment basis at overseas factories, including in China, and there are risks of cost increases or difficulty in importing products due to exchange rate fluctuations, terrorism, natural disasters, or infectious diseases. The company also operates brand businesses under licenses for intellectual property rights from leading overseas companies, and if licensing agreements cannot be continued due to contract expiration, unexpected termination, or changes in terms, this could have a material impact on the business foundation. The company addresses this by strengthening its production management system through closer collaboration with suppliers and by strengthening its intellectual property rights management system.

If various risks such as changes in consumption trends, weather, or quality issues materialize and the profitability of brands or sales floors deteriorates, impairment losses may occur on held fixed assets, affecting business results. To reduce additional impairment risk, the company continuously checks for indications of impairment each period, but declines in value in use due to changes in the business environment are considered difficult to predict.

The company is subject to legal regulations such as the Act against Unjustifiable Premiums and Misleading Representations, the Subcontract Act, the Antimonopoly Act, and the Act on the Protection of Personal Information in connection with product sales, procurement, and information management, and increased regulation may raise compliance costs and require responses to unexpected legal amendments or new administrative rules. Each business department works with the Corporate Management Division to ensure legal compliance, but if events occur beyond the scope of these efforts, business results may be affected.

The company holds a large amount of personal information for purposes such as customer management, and if this information were to leak externally, it could result in decreased sales due to loss of social trust and losses from damages claims by customers. The company is working to build a company-wide information management system, but this is recognized as a risk that is always present and difficult to reasonably foresee.

The company conducts business operations using computer systems and communication networks, and system downtime or the loss or leakage of important data could occur due to natural disasters, accidents, computer viruses, or unauthorized external intrusion. Risks such as increased incident response costs, damages claims, and loss of creditworthiness are anticipated, and the company addresses these through defenses against unauthorized external access and virus infection, as well as strengthening internal management systems.

If a product accident related to product liability occurs, in addition to incurring compensation costs and reduced sales, the loss of brand credibility could significantly affect business results. The Group as a whole works to maintain and manage product quality, but the occurrence of defects due to unforeseen circumstances is recognized as a risk that can always occur.

The company thoroughly conducts routine information gathering and credit management using research agencies and industry information to assess the creditworthiness of business partners, but if a sudden event occurs beyond the scope of these efforts, uncollectible receivables could affect business results. This is recognized as a risk that is always present and difficult to reasonably foresee.