AnGes, Inc.

The Company has recorded continuous net losses attributable to owners of the parent from the 23rd to the 27th fiscal year (27th fiscal year: ¥5,123,269 thousand) and negative operating cash flow (27th fiscal year: -¥5,750,366 thousand), and the Company itself has determined that circumstances exist that raise material uncertainty about the going concern assumption. Exercise of the 46th Series Stock Acquisition Rights (allotted to Cantor Fitzgerald Europe) is uncertain as it depends on stock price movements, and the method, amount, and timing of any additional fundraising have not been determined. Cash and cash equivalents at the end of the 27th fiscal year had shrunk to ¥1,796,068 thousand, and the risk of fund depletion has become apparent.

There is a possibility that research and development may not proceed as planned due to difficulty securing the necessary number of clinical trial cases, delays in CRO operations, failure to confirm expected efficacy, or the occurrence of unacceptable safety issues. This applies to the core pipeline products, the HGF Gene Therapy Product (Beperminogene Perplasmid) (with U.S. FDA approval as the top priority) and NF-κB Decoy Oligo DNA (currently in Phase II clinical trials in Japan), and if development is discontinued, it would have a material impact on business strategy and results. Since manufacturing of products and investigational drugs is entirely outsourced, quality problems or supply shortages could also lead to development delays or product supply shortages.

The Group's pharmaceutical research and development is subject to regulation under the pharmaceutical laws of Japan, the United States, Europe, and other countries, and changes in approval requirements or regulatory systems may prevent approval from being obtained as planned. Although the HGF Gene Therapy Product (Beperminogene Perplasmid) has received Breakthrough Therapy designation from the U.S. FDA, final marketing approval has not been confirmed. If approval is delayed or not obtained, it would have a material impact on business strategy and results.

Competing products and products under development exist in Japan, the United States, and Europe, and if competitors obtain approval or acquire market share earlier than expected, the Company's products may not achieve the expected revenue even after launch. In Japan and Europe, drug prices are determined by government or other public authorities, while in the United States they are determined through negotiations with insurance companies, managed care, and government Medicare programs, creating a risk that prices may fall below expected levels. In addition, if unexpected side effects occur after sales commence, sales may decrease.

Research and development of the HGF Gene Therapy Product (Beperminogene Perplasmid), NF-κB Decoy Oligo DNA, and other products is based on patents owned or licensed by the Company, and there is no guarantee that all pending patent applications will be registered, or that the Company's patents will not be superseded by superior research and development by other companies. In addition, if licenses necessary for future business development cannot be obtained, or if a third party asserts infringement of intellectual property rights, this would have a material impact on business strategy and operating results. As of the end of the consolidated fiscal year, no litigation or claims have arisen, but there is no guarantee that no other company is conducting similar research and development.

While the state-of-the-art genome editing technology held by EmendoBio is highly novel and expected to be effective, unknown risks cannot be ruled out at the current stage, and it may not achieve widespread commercialization. If commercialization is delayed or proves difficult, this would affect the Group's business strategy and results. Given that the Company acquired EmendoBio in 2020 to expand its business platform, there is also a risk that the investment in the company may not be recovered.

Consolidated subsidiary EmendoBio has a research facility (Emendo R&D) near Tel Aviv in central Israel, and the Company has already reviewed its research and development structure in response to the impact of conflict in the Middle East. The Company is proceeding with a plan to consolidate research and development functions centered on AI utilization and reorganize Emendo R&D, while gradually transferring other functions to the United States; however, if the Middle East conflict expands, it could delay EmendoBio's research and development activities and affect the Company's management strategy.

The Company has recorded net losses attributable to owners of the parent for five consecutive fiscal years from the 23rd to the 27th fiscal year, and net assets have significantly shrunk from ¥38,634,741 thousand in the 23rd fiscal year to ¥3,076,080 thousand in the 27th fiscal year. Operating cash flow has also been negative for five consecutive fiscal years, and the Company has continued to cover this through fundraising via financing activities (such as issuance of stock acquisition rights). If pharmaceutical research, development, and sales do not proceed as planned under the current business plan, net income and operating cash flow may fail to turn positive in the future as well.

Representative Director Hide Yamada has significant influence over the determination of management strategy, research and development, business development, and administrative operations, and Medical Advisor Ryuichi Morishita also plays an important role in research and development. As a small organization dependent on limited human resources, if these specific individuals become unable to continue their duties, it could affect business strategy and operating results. While the Company is working to strengthen its management organization, a high degree of dependence on specific individuals is expected to continue for the time being.

Foreign currency-denominated transactions exist in overseas research and development activities, licensing agreements with overseas companies, and procurement of products and investigational drugs from overseas, and if exchange risk materializes due to sharp currency fluctuations, it could affect business results. With commercialization of the HGF Gene Therapy Product (Beperminogene Perplasmid) in the United States as the top priority, foreign exchange exposure is expected to increase as sales in the U.S. market expand going forward.