REPLOID Group AG

Philip Pauer, resident in Wels, as Chairman of the Board of Directors of the project owner, has undertaken within the framework of a guarantee to vouch for the possible non-payment of claims for interest and/or repayment resulting from the investment in the amount of €250,000.

The value of collaterals/guarantees can fluctuate, especially in the event of default, potentially resulting in diminished return.

i) Project dependencies such as financing, legal aspects, licensing, copyrights:

The crowdfunding offer may raise less capital than planned. This may result in the project owner not being able to successfully implement its planned project due to a lack of funds. This would lead to lower income for the project owner from its business activities and have a negative impact on its net assets, financial position and results of operations. This may have the consequence that the claims from the bonds cannot be fulfilled or cannot be fulfilled in the planned amount. In the worst case, there is a total loss of the capital invested. Violations of legal or regulatory requirements can lead to measures by authorities (fines, closure of businesses, etc.). This would lead to lower income for the project owner from its business activities and have a negative impact on the project owner's net assets, financial position and results of operations. For the holders of the bonds (hereinafter "bondholders"), this may mean that interest and redemption payments are not made in whole or in part.

The timely obtaining of building permits and financing commitments regarding each RFU to be constructed are strategically important for the achievement of the planned installation capacities and thus for the planned growth of the project owner. Even though currently 15 facilities have been sold to farmers and will be handed over by the end of 2026, corresponding to a sales volume of around € 67 million, initial problems with the construction of the RFUs due to delays in completion (e.g. due to delayed building permits or financing commitments) cannot be ruled out. Even though material costs are postponed in the event of delays, any delay in completion of the RFUs would have a negative impact on the planned cash flows, especially as personnel expenses cannot be adjusted quite flexibly. In addition, the booked revenues result largely from planning services rendered for the preparation of the RFUs, which will only become cash-effective once the respective building permit has been granted. There is a risk that these revenues may not be realised if building permits are not granted. For the bondholders, this may mean that interest and redemption payments are not made in whole or in part.

In addition, there is a legal risk, resulting from the fact that animal farming (including BSF) is subject to many laws and regulations, which are also subject to change. In the event of changes in the legal and/or regulatory requirements the project owner might not be able to comply with the new requirements on time, which can lead to measures by authorities (fines, closure of businesses, etc.). This would lead to lower income for the project owner from its business activities and have a negative impact on the project owner's net assets, financial position and results of operations. For the bondholders this may mean that interest and redemption payments are not made in whole or in part. Furthermore, even though patent protection for RFUs or processes as a whole cannot be implemented, as the process itself has been in use for years and does not constitute technical progress in the sense of patent law, the special fattening tray is protected by patent. With regard to this patent protection, there is a risk that the project owner's patent protection could be challenged, which would lead to costly legal proceedings. This would have a negative impact on the project owner's financial position and results of operations. For the bondholders, this may mean that interest and redemption payments are not made in whole or in part.

ii) Occurrence of adverse scenarios with negative impacts:

The project owner's plans assume that the nutrient mix from organic waste will be compiled individually for each RFU based on the organic waste materials available in the region, thus avoiding dependencies on individual suppliers. The assumptions made by the project owner in the planning regarding the consistent supply with nutrient mix in the required composition could prove to be incorrect. Any failure to procure nutrient mix in the required composition could lead to a lower output of the RFUs and as a result reduce the profitability. For the bondholders, this could mean that interest and redemption payments are not made in whole or in part. Furthermore, even though multiple suppliers for individual components are maintained, scenarios such as a pandemic and/or political tensions could lead to supply chain problems, meaning that the project owner may temporarily not be able to quickly procure the components required for the construction of the breeding containers from contractual partners with comparable terms and conditions and therefore temporary not be able to construct RFUs in the required quantity and/or quality and sell them at a profit. This could lead to temporary reductions in the project owner’s income and make it more difficult for the project owner to properly service the claims of investors or bondholders.

iii) (technological) development of competitors or competing products:

The project owner may be unable to compete effectively with existing and potential new competitors or to respond to changes in the competitive environment, which may adversely affect its business performance. In particular, risks to the project owner's business could arise if these competitors expand their business more successfully than the project owner, which could worsen the project owner's business situation.

iv) risks associated with the project owner:

Although the project owner is not an early-stage company, it is nevertheless in a growth phase and the financing of such a company is associated with specific risks. If the already established business idea is no longer accepted by the market in the future or if the planned business development cannot be implemented as hoped, there is a risk of the project owner becoming insolvent. The company's success depends on various factors, such as financing, the team, specialists and consultants, the market environment, technological developments, property rights, legal framework conditions, competitors and other factors. For the bondholders investing in a company in a growth phase, this increases the risk that they will lose their invested capital.

The project owner has a management risk because the Chairman of the Board Philip Pauer is also holding the majority of shares in the project owner. Any absence of the Chairman of the Board could slow down the decision-making process, which could lead to lower income for the project owner from its business activities and have a negative impact on the project owner's net assets, financial position and results of operations. For the bondholders this may mean that interest and redemption payments are not made in whole or in part. There is a risk of management errors on the part of the project owner. Technical, legal or economic misjudgments may occur. It also cannot be ruled out that the shareholder structure may change in the future and that third parties may gain a controlling influence over the project owner. There is a risk that the project owner will not be able to retain or recruit the necessary number of qualified staff to implement the business strategy. Due to the loss of staff with the relevant key qualifications, there is a risk that specialist knowledge will no longer be available. If the key personnel cannot be permanently replaced by qualified staff, this can have a significant negative impact on the economic development of the project owner. This could reduce the amount of interest payments to bondholders and the repayment of the investment amount, or these could be cancelled. In the worst case, there is a total loss of the capital invested. There is a risk that the project owner will get negative media attention. This may lead to significant sales decline and losses for the project owner because there is insufficient demand for the project owner’s products because of the negative media attention. In the worst case, this can also lead to a total loss of the capital invested.

In accordance with Article 2(1)(a) of Regulation (EC) No 1893/2006 of the European Parliament and of the Council 5(Regulation), the project owner's business is best described by the classification of Section C in Annex 1 of the Regulation. Although the insect protein market is on the upswing, pet food and fertilizer markets require continuous compliance with evolving EU rules. In addition, inflation and consumer acceptance challenges are having a dampening effect on the aforementioned market. A further continuation or even increase in inflation and/or a low consumer acceptance may lead to a worsening of market conditions, which could reduce demand for the project owner’s range of services and thus result in a total loss of the capital invested.

The bondholders bear the full risk of the project owner’s insolvency, i.e., the risk that the project owner is temporarily or permanently unable to meet its payment obligations to the bondholders and or third parties on time. Especially in the context of insolvency proceedings, the bondholders could suffer a total loss. The following specific occurrences could lead to this:

• (a) (serious) change in the macroeconomic situation,
• (b) mismanagement,
• (c) lack of experience,
• (d) fraud,
• (e) financing that is not in line with the business purpose,
• (f) unsuccessful introduction of the project owner’s service,
• (g) lack of cash flow.

There is a risk that, as a result of all of the risks mentioned in Part C, return may be lower than expected, delayed or no principal or interest payments may flow from the project. Furthermore, the value of the return could be reduced by inflation. If the inflation rate is higher than the interest rate on bonds, the return on bonds will be negative. The bonds will be issued in Euro and the interest payable on the bonds will also be calculated and paid in Euro. For this reason, investors who have earned income or assets in a currency other than Euro or who do not require the income from the investment in the bonds to be denominated in Euro are exposed to a currency risk because they are exposed to exchange rate fluctuations which may reduce the yield of the bonds. Furthermore, in the event of a necessary sale of the bonds for the bondholder, additional costs (transaction costs such as consultancy fees) may arise which reduce the return.

The individual return of the respective investor may vary in individual cases and depends on the individual tax situation in each case, which may lead to a reduction in the return.

A temporary or permanent failure of the crowdfunding platform or the payment service provider specified in Part D, letter d) may lead to the temporary cancellation of interest and repayments. Since the crowdfunding service provider at no time acquires possession or ownership of the subscription amounts of the investors or of the interest and repayment amounts and since the payment service provider merely acts as trustee for the project owner as trustor, a loss of the invested capital based solely on a failure of the platform or the payment service provider is unlikely.

The bonds have a fixed contractual term. The transfer of the bonds is also technically restricted in that a transfer is only possible to digital safe deposit boxes registered with the project owner or the registrar. The "Registrar" that maintains the e-securities register is Smart Registry GmbH, registered in the commercial register of the Charlottenburg District Court in Berlin under registration number HRB 234468 B. "Digital safe deposit box" is an IT application used to store public keys and private keys and to interact with technology, the functionalities of which make it possible to hold and transfer e-securities. The securities are currently not tradable on a stock exchange, nor is there a liquid secondary market. Even if the securities are included in trading on one or more trading platforms for securities, it is uncertain whether trading of the bonds will actually develop. The risk that the bondholder is unable to find a buyer for the bonds or can only sell them for a price that he considers to be too low is borne solely by the bondholder. The bonds may also turn out to be completely illiquid. A sale of the bonds by the bondholder may therefore only be possible to a limited extent. There is a risk that the bonds cannot be sold or can only be sold at a financial loss. For bondholders with short-term capital requirements, this means that they may not be able to dispose of the capital invested at the desired time, especially as bondholders do not have an ordinary right of termination during the term.

The following securities-related risks also exist:

i) No rights of influence and participation

The bonds themselves only establish claims under the law of obligations against the project owner and do not grant any participation, involvement and/or voting rights in or at the shareholders' meeting of the project owner. Shareholder resolutions may be passed at the shareholders' meeting of the project owner which may have a detrimental effect on the individual bondholders. The bondholders have no opportunity to influence the business activities of the project owner. This also applies to the utilisation of the capital raised through the issue of the bonds. In particular, bondholders do not have the opportunity to terminate loss-making business activities of the project owner before the contributed capital has been utilised. For bondholders, this can lead to the total loss of the capital invested.

ii) Deterioration of the conditions by majority resolution

According to the Terms of Issue, these can also be adjusted during the term of the bonds if the necessary votes of the bondholders have been obtained by majority resolution in accordance with the Terms of Issue. In this respect, the individual bondholder bears the risk that changes to the Terms of Issue may be made against his will on the basis of the majority resolution of the bondholders, which may be to his disadvantage (e.g. lower interest rate, extended term or waivers).

iii) Technology and database risks

The technology and all related technological components and regulated services (e.g. digital custody, e-securities register management) are still at an early stage of technical development. There is a risk for bondholders that this technology may be subject to technical difficulties or that its functionality may be impaired by external influences. A partial or complete collapse of the electronic decentralised database (hereinafter ‘e-database’) relevant to the e-securities could make it temporarily and permanently impossible for bondholders to access their e-securities. There is a risk of attacks against the network or the e-database used. Various types of attacks are conceivable. These attacks could render the network or e-database unusable, making it impossible for bondholders to transfer the e-securities. If the network or e-database becomes completely unusable, there is a risk that bondholders will no longer have access to their digital safe deposit boxes. In the worst case scenario, this could lead to the irretrievable loss of the e-securities.

The project owner offers the bondholders a technical solution via an authorised e-securities custodian that serves to hold, store and dispose of e-securities. There is a risk that this solution is flawed and/or particularly vulnerable to possible hacker attacks. As a result, bondholders may be temporarily or permanently unable to access their e-securities, which in the worst case could lead to the irretrievable loss of the e-securities. Neither the e-securities custodian nor the project owner will take over the administration in the sense of the ongoing exercise of the rights and obligations arising from the e-securities.

The risks listed above are not the only risk factors affecting the operations of the project owner. Also, other risks and uncertainty factors that the project owner currently does not identify or considers presently irrelevant may have an integral effect on the business operations, business results and financial standing of the project owner.