REFINVERSE Group, Inc.

The volume of used carpet tile procurement depends on corporate office relocation and rebuilding demand, and new office supply in the five central Tokyo wards fell sharply to 160 thousand tsubo in 2024 from 455 thousand tsubo in 2023. If procurement volume fails to keep pace with increasing demand for REFINE POWDER, the production volume of recycled resin may be constrained, potentially affecting business results. Currently, domestic office relocation needs remain solid and the company expects to be able to secure procurement volume.

More than half of the Materials Business's sales are ultimately destined for interior manufacturers, resulting in a high degree of dependence on various interior manufacturers, including shareholder SUMINOE Co., Ltd. As the company has not entered into long-term supply contracts with each customer regarding delivery volumes and prices, fluctuations in demand in the carpet tile market directly affect business results and financial condition. Although the company recognizes increasing demand for environmentally friendly products, the lack of contractual protection remains a risk.

The industrial waste treatment business requires a permit from the prefectural governor (valid for five to seven years) under the Act on Waste Management and Public Cleansing, and if renewal, modification, or new acquisition of the permit is not approved, continuation of the business would become difficult. Violations such as illegal dumping or false statements in manifests could result in administrative sanctions such as business suspension orders or permit revocation. The Waste Management Act has been amended almost every year since 2003, and future trends in laws, regulations, and administrative guidance may affect business results.

The company is advancing research and development toward the manufacture of recycled nylon using Steelmaking Auxiliary Materials, automotive airbag base fabric, and used fishing nets as raw materials, and is making capital investments in nylon recycling equipment. There are risks such as failure of technology development, difficulty in stabilizing quality, misalignment between selling prices and customer requirement levels, and delays in market launch, and there is a possibility that research and development expenses and capital investment amounts may not be recovered. There is no guarantee that the products will gain broad market support, which could reduce future growth and profitability.

The cutting/processing and crushing/classification technology for soft resin products, which is the core technology for recycled resin manufacturing, is proprietary to the Group and is a source of competitive advantage, enabling the production of higher-quality recycled resin at lower cost than competitors. Since detailed technical information is kept confidential without patent filing, if competitors develop equivalent technology, key personnel leave, or know-how leaks to licensees, the Group's competitive advantage could decline, potentially affecting business strategy and results. There is also a risk of infringing on the intellectual property rights of other companies.

The Group's recycled resin has price competitiveness compared to petroleum-derived virgin resin as one of its differentiating factors. If virgin resin prices fall significantly due to a decline in crude oil prices or a stronger yen, the price advantage of recycled resin could be lost, potentially affecting sales volume and business results. Currently, the company maintains a price advantage over virgin resin.

The company has borrowed from financial institutions to invest in collection and transport vehicles, intermediate treatment plants, and raw material production plants, and as of the end of June 2025, the ratio of interest-bearing debt to consolidated assets was as high as 74.6%. Interest expenses for the same period were ¥38,425 thousand, and in a future rising interest rate environment, increased interest expense burden could affect business results. Additionally, once accumulated losses carried forward are eliminated, corporate income tax based on the standard tax rate will apply, which could affect net income and cash flow.

In the Resources Business, there are numerous hazardous operations involving the operation of large machinery such as trucks and forklifts in demolition work and waste sorting operations. If an accident or industrial accident occurs, business results and reputation could be affected due to potential damages claims and other consequences. The Group conducts its business with careful attention to labor and safety management, but complete elimination of risk is considered difficult.

The company leases factory sites and buildings in Futtsu City and Yachiyo City in Chiba Prefecture and Ichinomiya City in Aichi Prefecture, as well as intermediate treatment facilities in the Tokyo waterfront area and Horikiri, and there is a possibility that lessors could give unexpected notice of cancellation due to changes in their circumstances. Securing alternative sites for industrial waste intermediate treatment facilities is not easy, and if alternative facilities cannot be secured in a timely manner, business continuity could be hindered, affecting business results. Currently, relationships with each lessor are good and the likelihood of cancellation is considered low, but there is also a risk from the concentration of multiple facilities within Tokyo.

Representative Director and President Akira Ochi plays an important role in various aspects of Group business promotion, including determining management policy and strategy. If unforeseen circumstances make it difficult for him to continue executing his duties, business results could be affected. The company states that it is actively delegating authority as the business expands and working to eliminate an overreliance on any single individual.