K Pharma, Inc.

The Company has continuously recorded operating losses due to substantial research and development expenses and a long investment recovery period, and recognizes that there exists an event raising material doubt about the going concern assumption. Although the Company judges that no material uncertainty currently exists following a fund-raising through convertible bond-type bonds with stock acquisition rights implemented in December 2025, a stable revenue base and funding base have not yet been established, and if delays or discontinuation occur in the monetization of licensing-out activities or in fund-raising, this could have a material adverse effect on the continuation and expansion of the business.

The Company's revenue model is based fundamentally on licensing out to major pharmaceutical companies and others, but there is a risk that contracts could be terminated before the end of their term due to changes in the counterparty's business policy or deterioration of the business environment. The timing of milestone income is uncertain, as it depends on development progress, and revenue recognition under the regenerative medicine business's proprietary manufacturing and sales model also fluctuates depending on development progress. While the Company is responding by advancing monetization across multiple pipelines, development delays or discontinuation could affect business performance and financial position.

There is a risk that the Company may not be able to obtain licenses for intellectual property rights it requires, that not all patent applications currently pending will be granted, and that the Company's patented technology could be superseded by superior research and development conducted by other companies. Although the Company conducts patent infringement prevention investigations in cooperation with external intellectual property firms, if disputes over intellectual property rights arise with third parties, this could affect business performance and financial position.

From the clinical trial stage through to post-launch, there is a possibility that unexpected adverse reactions could occur with pharmaceutical products and regenerative medicine products. Although the Company is responding by establishing an information provision system and obtaining appropriate insurance coverage, the occurrence of adverse reactions could adversely affect trust in the Company and affect business performance and financial position.

Regenerative medicine products use human cells and tissues as raw materials, and the risk of infection arising from these characteristics cannot be completely eliminated. Although the Company has established thorough safety evaluation at the preclinical and clinical research stages and a system of cooperation with external experts, if safety risks materialize after transplantation into a patient's body, this could affect business performance and financial position.

The Company has entered into an agreement to bear the costs of joint research with Keio University and an exclusive license agreement for patents held by the university, and founders and directors Hideyuki Okano and Masaya Nakamura both play central roles in research and development. Although appropriate management is conducted through the establishment of a conflict-of-interest management policy and prior approval by the Board of Directors, if a situation arises that raises suspicion of improper benefit provision, this could damage the Company's interests and social reputation, and affect business performance and financial position.

As of the end of the current fiscal year, the proportion of the Company's shares held by venture capital firms and others reaches 18.4% of the total number of issued shares, and sales are expected following the expiration of the lock-up period. If venture capital firms and others sell their shares, the market supply-demand balance could be disrupted, potentially causing the market price of the Company's shares to decline.

In the iPS Drug Discovery business and regenerative medicine business, research and development may not proceed as planned due to clinical trial data analysis results differing from expectations or other reasons, creating a risk of delayed or discontinued market launch. Even after obtaining approval, there is a possibility that approval could be revoked upon reexamination or that additional investigation costs could arise. While risk diversification is being pursued through the advancement of multiple pipelines and collaboration with universities and research institutions, delays or discontinuation of market launch could have a material impact on business performance and financial position.

The Company was established for the purpose of commercializing the research achievements of Keio University professors Hideyuki Okano and Masaya Nakamura, both of whom play central roles in research and development activities, business promotion, and joint research with the university, and are also major shareholders. Although the Company is strengthening its research and development structure by securing excellent human resources domestically and internationally, if for any reason the involvement of these two individuals becomes difficult, this could affect business performance and financial position.

The Company may raise funds through capital increases or other means to meet mid- to long-term research and development funding needs, creating a risk that per-share value could be diluted due to an increase in the total number of issued shares. In addition, as of the end of the current fiscal year, the number of potential shares reaches 27.2% of the total number of issued shares (up to a maximum of 3,154,998 shares), and further dilution could occur through the exercise of stock acquisition rights, including those attached to the convertible bond-type bonds with stock acquisition rights issued in December 2025.