Green Earth Institute Co., Ltd.

The Company conducts its business under a license to implement patents related to RITE Bioprocess® held by the Research Institute of Innovative Technology for the Earth (RITE), a public interest incorporated foundation, which is also a major shareholder holding 900,000 shares as of the end of the fiscal year under review. In addition, the building housing the Green Earth Laboratory, the Company's research and development base, is also leased from RITE, and if it were to become difficult to continue the patent license agreement or the building lease agreement, this could have a material impact on the Company's business performance and financial condition. The Company is proceeding with the acquisition of its own patents in order to reduce its dependence on external patents, and this dependence is currently on a declining trend.

The Company's research and development bases are the Green Earth Laboratory and the Biofoundry Laboratory. If a large-scale disaster or similar event were to damage these laboratories or damage or lose research and development equipment, research and development activities would halt, which could have a material impact on business performance related to research and development contracts, which account for a large proportion of net sales. As countermeasures, the Company has taken out earthquake insurance, secured cash on hand, and stored bacterial strains safely with an external party (using services of the National Institute of Technology and Evaluation, an independent administrative agency), and the risk has been dispersed and mitigated since the Biofoundry Laboratory began operations in April 2023.

The Company has continued to make upfront investments, including the introduction of research and development equipment, purchases of consumables, and increases in research personnel, and had recorded continuous operating losses through the fiscal year ended September 2025. In the fiscal year ended September 2025, the Company achieved ordinary income exceeding ¥100 million for the first time, owing to net sales exceeding ¥1,000 million and subsidy income from the government; however, if the upfront investments do not lead to the expected results, this may affect the Company's business performance and financial condition. The Company plans to continue research and development investment aimed at strengthening its technological foundation going forward, and progress toward monetization will be key to financial stability.

As each pipeline progresses through the conclusion and execution of multiple contracts at each Stage, contracts may not be concluded, or progress may be delayed or stalled, due to the status of achievement of research and development targets or changes in partner companies' policies. If there are delays in the timing of concluding license agreements or if the development period of large-scale research and development contracts becomes prolonged, this could affect business performance and financial condition. The Company mitigates the risk of falling short of budget by recording revenue primarily from contracts that have already been concluded or for which revenue is expected with a high degree of certainty.

The Company's revenue model is centered on royalty income based on license agreements, and since sales activities for products depend on licensees, a structure in which the Company itself does not undertake sales planning or execution, discrepancies between short-term performance forecasts and actual results tend to arise. If there are changes in the business conditions of licensees, royalty income may fall short of expectations, affecting business performance and financial condition. The Company aims to improve the accuracy of its performance forecasts by carefully examining licensees' sales plans, setting contract terms on an individual basis, and accumulating knowledge from actual results.

Target products in the Company's major pipelines are exposed to the risk of significant supply-demand fluctuations caused by force majeure. As an actual example, the spread of African swine fever, which expanded mainly in China from 2018 onward, caused a sharp decline in the number of pigs raised in China, resulting in a significant decrease in sales of the feed additive valine compared to expectations. The Company is working on multiple pipelines to build a business structure that minimizes the impact of risks associated with any specific pipeline on overall management.

The Company conducts business in the Asian region and is exposed to risks such as unforeseeable changes in laws, regulations, and tax systems, the occurrence of unfavorable political factors, exchange rate fluctuations, and contract violations or technology leakage due to differences in culture and customs. If these risks materialize, this could affect business performance and financial condition. The Company plans to diversify the products and partners subject to research and development, and to disperse risk by expanding licenses across multiple regions and business partners.

While biomanufacturing technology requires a mid- to long-term research and development period and upfront investment for commercialization, if a technology superior to the Company's is commercialized by a third party, the Company's competitiveness may decline, affecting business performance and financial condition. The Company will continue research and development activities aimed at strengthening its technological foundation, while also working on multiple pipelines to reduce the risk of dependence on any specific technology.

The source of the Company's competitive advantage lies in technology and know-how that can be implemented without special equipment, but there is a risk of information leakage due to cyberattacks, unauthorized access, computer viruses, and the like. If information assets were to leak, this could lead to unauthorized use by third parties, or claims for injunctions against patent implementation or damages from licensors, affecting business performance and financial condition. The Company has implemented security measures such as the introduction of VPN and UTM, centralized management via LAN, and appropriate setting of access privileges.

The Company grants stock acquisition rights as incentives to directors and employees, and as of the date of submission, the number of potential shares is 497,400 shares, representing 4.20% of the total of 11,852,500 shares comprising the total number of issued shares and potential shares. If these stock acquisition rights are exercised in the future, this may dilute the value of shares and voting rights held by existing shareholders.