OncoTherapy Science, Inc.

The Company Group has continuously incurred operating losses and negative operating cash flows, and conditions exist that raise material doubt about its ability to continue as a going concern. Cash and deposits at the end of the current consolidated fiscal period stood at ¥2,089 million, and while the Company judges there is no immediate concern regarding business continuity, the structure in which research and development expenses continue to be incurred ahead of revenue persists, as pharmaceutical development typically requires ten years or more from basic research to market launch. As countermeasures, the Company is pursuing the conclusion of alliance agreements with pharmaceutical companies, fundraising through third-party allotment of stock acquisition rights, cost reductions, and other measures.

On December 8, 2025, the Company issued the 38th Series of Stock Acquisition Rights with exercise price revision provisions, totaling 796,000 units (79,600,000 potential shares), through a third-party allotment, with an exercise period of two years until December 8, 2027. If these stock acquisition rights are exercised, significant dilution of share value will occur relative to the total number of issued shares of 383,643,700, which may affect the share price. Additionally, depending on stock market conditions, fundraising as planned may not be achieved.

The Company Group is conducting multiple clinical developments jointly with partner pharmaceutical companies or independently, but there is no guarantee that these will progress as planned, and expected results may not be obtained. In joint development, there is a risk that delays or failure to achieve milestones may delay or prevent the receipt of future revenue. If independent clinical development fails, the Company may be unable to recover substantial research and development expenses (¥534 million recorded in the current consolidated fiscal year), which may adversely affect business performance.

The Company Group's main sources of revenue are upfront payments, milestones, and royalties based on technology out-licensing agreements with pharmaceutical companies and others, much of which depends on the research and development progress of partners and the launch and sales status of pharmaceuticals. Revenue recognition may take a long time or may not occur at all, and business performance tends to fluctuate significantly depending on the timing of contract conclusion and revenue generation. Dependence on specific sales partners is high, and if a business partner terminates a contract or significantly changes its management policy, the impact on business performance could be substantial.

While the genomic research and Cancer Precision Medicine field is expected to expand rapidly, many companies, including domestic and overseas venture companies, have entered the market, and entrants from other industries such as IT-related companies, in addition to pharmaceutical companies, are also increasing. The isolation and identification of cancer-related genes and large-scale analytical testing involve strong elements of speed-based competition, and if competitors move ahead, the Company Group's business advantage may decline. Intensifying competition may also require more funding than the Company Group anticipates.

As of the end of March 2026, the Company Group has filed 494 patent applications, but there is no guarantee that all patents will be granted, and complex issues exist in the laws, regulations, and examination practices of various countries regarding gene-related patents. If intellectual property infringement issues with third parties arise, resolving them may require significant time and expense, potentially having a material impact on business strategy and operating results. In addition, disputes may arise in the future regarding the adequacy of compensation for employee inventions, potentially requiring additional compensation payments.

The Company Group's business activities are subject to the Pharmaceuticals and Medical Devices Act, the Act on the Safety of Regenerative Medicine, the Clinical Trials Act, and other laws domestically, and FDA regulations and other laws overseas, and changes in laws or strengthened regulations may adversely affect business strategy and operating results. The clinical testing business requires permission as a sanitary testing laboratory, and there is a risk of business suspension or revocation due to legal violations, as well as increased costs to comply with legal amendments. The Company Group conducts its business in compliance with relevant laws and regulations, but the possibility of unexpected legal violations cannot be completely ruled out.

The biotechnology field to which the Company Group belongs is characterized by remarkably rapid technological innovation and progress, and there is no guarantee that the advantage of the Company Group's comprehensive analysis scheme for cancer-related genes will continue if new research methods are established. If rapid research progress makes it difficult to respond to research findings deemed effective, this may seriously adversely affect business development. The Company Group aims to build a system capable of promptly incorporating cutting-edge research results, but pursuing the necessary research results requires significant expense and time.

The Company Group manages confidential information, including clinical trial information, large-scale cancer gene analysis testing information, and personal information and personal genetic information, using computer systems, and if communication infrastructure is destroyed or malfunctions, or system failures occur, business activities may be disrupted. If information leakage occurs, this may result in loss of social credibility and impact business performance and financial condition. The Company Group addresses this through establishing regulations, thoroughly informing employees, and enhancing system security, but the risk cannot be completely eliminated.

The Company was established as a research and development-oriented company for the purpose of commercializing the research results of Yusuke Nakamura, former Director of the Human Genome Center at the Institute of Medical Science, the University of Tokyo, and his research results form the foundation of the Company's research and development activities. If, for any reason, his cooperation can no longer be obtained, this may affect research and development activities. In addition, multiple researchers from universities and research institutions concurrently serve as advisors and in similar capacities, and if conflicts of interest occur, this may harm the interests of the Group and result in disadvantages such as public criticism.