Azora Therapeutics (AZR) Risk Analysis

Under the terms of the Merger Agreement, we are obligated to obtain stockholder approval for the conversion of all outstanding shares of Series A Preferred Stock issued in the Merger into shares of our common stock, as required by the Nasdaq Listing Rules. Under the terms of the Purchase Agreement and Exchange Agreements, we are obligated to obtain stockholder approval for the exercise of all outstanding issued or issuable Initial Closing Pre-Funded Warrants and the Milestone Warrants as required by the Nasdaq Listing Rules. We are seeking such approval at the 2026 Annual Meeting. If our stockholders do not approve the conversion of the Series A Preferred Stock, the Series A Preferred Stock will remain outstanding and unconvertable, and we are obligated to seek such approval at one or more subsequent stockholders meetings until such approval is obtained, which would result in additional cost and delay. If our stockholders do not approve the exercise of the Initial Closing Pre-Funded Warrants, the Initial Closing Pre-Funded Warrants will remain outstanding and not exercisable, and we are obligated to seek such approval at one or more subsequent stockholders meetings until such approval is obtained. If our stockholders do not approve the exercise of the Milestone Warrants, any Milestone Pre-Funded Warrants and/or Milestone Incentive Warrants issued, if any, will not be exercisable and we will be obligated to seek such approval at subsequent stockholders meetings, resulting in additional cost and delay and we do not believe the PIPE Investors or Azora Noteholders will seek to acquire any Milestone Warrants until stockholder approval of their exercise is obtained. If the conversion of the Series A Preferred Stock is approved, the conversion of all such Series A Preferred Stock will result in the issuance of a maximum of 12,930,617 shares of our common stock, causing dilution to existing holders of our common stock and an increase in the number of shares eligible for resale in the public market. If the exercise of the Initial Closing Pre-Funded Warrant Proposal is approved, the exercise of all such Initial Closing Pre-Funded Warrants issuable will result in the issuance of a maximum of 11,780,948 shares of our common stock, causing dilution to existing holders of our common stock and an increase in the number of shares eligible for resale in the public market. If the issuance and exercise of the Milestone Warrants is approved, the exercise of all such Milestone Pre-Funded Warrants and Milestone Incentive Warrants will result in the issuance of a maximum of 23,561,896 shares of our common stock, causing dilution to existing holders of our common stock and an increase in the number of shares eligible for resale in the public market. We also have a contractual obligation under the Merger Agreement and RRA to register all shares of common stock issuable upon exercise of the Initial Closing Pre-Funded Warrants for resale within 80 days of the closing of the Financing and to file, within 30 days after a Milestone Registration Trigger Date a registration statement registering for resale the common stock issuable upon exercise of the Milestone Warrants that have not yet been registered.

The business of Azora differs from that of our legacy ADO4 business in important respects, and, accordingly, our results of operations after the Merger, as well as the market price of our common stock, may be affected by factors different from those that historically affected the results of operations of the Company. Additionally, the market price of our common stock may fluctuate significantly following the Merger. Moreover, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, our common stock, regardless of our actual operating performance.

We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our common stock. Additionally, in connection with the Merger, we issued 12,930.617 shares of Series A Preferred stock to the former stockholders of Azora, which are convertible into an aggregate of 12,930,617 shares of our common stock. Subject to certain beneficial ownership limitations, the outstanding shares of our Series A Preferred Stock will automatically convert into shares of our common stock upon stockholder approval of such conversions, which we intend to seek at our 2026 Annual Meeting of Stockholders (the "2026 Annual Meeting"). Pursuant to our 2017 equity incentive plan, which became effective on the business day prior to the public trading date of our common stock, our management is authorized to grant equity awards to our employees, officers, directors and consultants. At June 30, 2026, we had outstanding (i) warrants to purchase 1,240,076 shares of common stock outstanding with a weighted average exercise price of $18.79, (ii) options to purchase 1,646,685 shares of common stock at a weighted average exercise price of $4.56 per share, (iii) 557,248 restricted stock units, and (iv) shares of Series A Preferred Stock convertible into an aggregate of 12,930,617 shares of our common stock. The issuance of the shares of common stock underlying the options. warrants and Series A Convertible Preferred Stock will have a dilutive effect on the percentage ownership held by holders of our common stock.

Under the terms of the Merger Agreement, the Purchase Agreement and the Exchange Agreements, as promptly as practicable following the date of the Merger Agreement, we are required to call and hold a meeting of our stockholders to obtain the requisite approval from our stockholders, in accordance with Nasdaq Stock Market Rules, for, among other things: (i) the conversion of the shares of our Series A Preferred Stock into shares of common stock, (ii) the exercise of the Assumed Options by the holders thereof, (iii) the exercise of the Initial Closing Pre-Funded Warrants by the holders thereof, (iv) the exercise of the Milestone Warrants by the holders thereof, (v) the amendment of our certificate of incorporation to increase the number of shares of common stock authorized for issuance thereunder to 500,000,000 shares, (vi) the adoption of a new 2026 Equity Incentive Plan and (vii) the adoption of a new 2026 Employee Stock Purchase Plan (collectively, the "Transaction Stockholder Matters"). If we fail to have enough shares present in person or by proxy to constitute a quorum, fail to obtain the required vote on the Transaction Stockholder Matters and/or the Nasdaq Listing Application is not approved, we will be required to adjourn the 2026 Annual Meeting one or more times for up to 30 days per adjournment. If stockholder approval of the Transaction Stockholder Matters or approval of the Nasdaq Listing Application are still not obtained following such adjournment(s), we will be obligated to continue soliciting stockholder approval at subsequent annual or special meetings of our stockholders, held at intervals of no more than six months, until such approvals are obtained, which would be time consuming and costly. There can be no assurance that our stockholders will approve the Transaction Stockholder Matters. Additionally, if the conversion of the shares of our Series A Preferred Stock into shares of our common stock is not approved by the date that is six months following the initial issuance date of the Series A Preferred Stock, the holders of the Series A Preferred Stock would be entitled to require us to settle the shares of our common stock underlying the Series A Preferred Stock for cash at a price per share equal to the fair value of our common stock at such time as described in the Certificate of Designation. If we are forced to cash settle a significant amount of the shares of our common stock underlying the Series A Preferred Stock, it could materially affect our results of operations, business and financial condition.

The expected dilution caused by the issuance of new shares of our common stock in connection with the conversion of the Series A Preferred Stock issued to former Azora stockholders, and the issuance of common stock upon the exercise of the Assumed Options, the Initial Closing Pre-Funded Warrants, the Milestone Warrants either alone or in combination with any negative impact on the market price of our common stock following the release of lock-up restrictions entered by the respective directors, officers and certain stockholders of Azora and the Company in connection with the Merger, may result in fluctuations in the market price of our common stock, including a stock price decrease.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

Our Certificate of Incorporation and our bylaws provide that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (iii) any action arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws (as either may be amended from time to time), or (iv) any action asserting a claim governed by the internal affairs doctrine. The exclusive forum provision does not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. These exclusive-forum provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, employees, control persons, underwriters, or agents, which may discourage lawsuits against us and our directors, employees, control persons, underwriters, or agents. Additionally, a court could determine that the exclusive forum provision is unenforceable, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. If a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.

Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions: - our board of directors is divided into three classes, one class of which is elected each year by our stockholders with the directors in each class to serve for a three-year term;- the authorized number of directors can be changed only by resolution of our board of directors;- directors may be removed only by the affirmative vote of the holders of at least sixty percent (60%) of our voting stock, whether for cause or without cause;         - our bylaws may be amended or repealed by our board of directors or by the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of our stockholders;         - stockholders may not call special meetings of the stockholders or fill vacancies on the board of directors;- our board of directors will be authorized to issue, without stockholder approval, preferred stock, the rights of which will be determined at the discretion of the board of directors and that, if issued, could operate as a "poison pill" to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our board of directors does not approve;- our stockholders do not have cumulative voting rights, and therefore our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors; and - our stockholders must comply with advance notice provisions to bring business before or nominate directors for election at a stockholder meeting. Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Our cash requirements may vary from those now planned depending upon numerous factors, including the result of future research and development activities. We will require additional funds in the future to complete our clinical trials of AD04. There are no other commitments by any person for future financing. In addition, the issuance of securities in any future financing using our securities may dilute an investor's equity ownership. Moreover, we may issue derivative securities, including options and/or warrants, from time to time, to procure qualified personnel or for other business reasons. The issuance of any such derivative securities, which is at the discretion of our board of directors, may further dilute the equity ownership of our stockholders. No assurance can be given as to our ability to procure additional financing, if required, and on terms deemed favorable to us. To the extent additional capital is required and cannot be raised successfully, we may then have to limit our then current operations and/or may have to curtail certain, if not all, of our business objectives and plans.

The trading price of our common stock has been and is expected to continue to be volatile and has been and may continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. On March 4, 2026, the reported low sale price of our common stock was $1.90, the reported high sale price was $2.28 and closing price of our common stock was $1.99 while on December 31, 2025 the closing price of our common stock was $5.50. We may incur rapid and substantial decreases in our stock price in the foreseeable future that are unrelated to our operating performance for prospects. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this Annual Report, these factors include: - the commencement, enrollment or any future clinical trials we may conduct, or changes in the development status of AD04 or any product candidates;- any delay in our regulatory filings for our product candidate and any adverse development or perceived adverse development with respect to the applicable regulatory authority's review of such filings, including without limitation the FDA's issuance of a "refusal to file" letter or a request for additional information;- adverse results or delays in clinical trials;- our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;- adverse regulatory decisions, including failure to receive regulatory approval of our product candidate;- changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;- adverse developments concerning our manufacturers;- our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices;- our inability to establish collaborations if needed;- our failure to commercialize AD04;- additions or departures of key scientific or management personnel;- unanticipated serious safety concerns related to the use of AD04;- introduction of new products or services offered by us or our competitors;- announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;- our ability to effectively manage our growth;- the size and growth of our initial target markets;- our ability to successfully treat additional types of indications or at different stages;- actual or anticipated variations in quarterly operating results;- our cash position;- our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;- publication of research reports about us or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;- changes in the market valuations of similar companies;- overall performance of the equity markets;- sales of our common stock by us or our stockholders in the future;- trading volume of our common stock and declines in the market prices of stocks generally;- changes in accounting practices;- ineffectiveness of our internal controls;- disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our or our licensee's technologies;- significant lawsuits, including patent or stockholder litigation;- general political and economic conditions; and - other events or factors, many of which are beyond our control, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, including the conflict in Eastern Europe, public health issues including health epidemics or pandemics, such as the recent outbreak of the novel coronavirus (COVID-19), and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability. In addition, the stock market in general, and The Nasdaq Capital Market and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. Since the stock price of our common stock has fluctuated in the past, has recently been volatile and may be volatile in the future, investors in our common stock could incur substantial losses. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company's securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management's attention and resources, which would harm our business, operating results or financial condition.

To date, there have been many days on which limited trading of our common stock took place. We cannot predict the extent to which investors' interests will lead to an active trading market for our common stock or whether the market price of our common stock will be volatile. If an active trading market does not develop, investors may have difficulty selling any of our common stock that they buy. We are likely to be too small to attract the interest of many brokerage firms and analysts. We cannot give you any assurance that an active public trading market for our common stock will develop or be sustained. The market price of our common stock could be subject to wide fluctuations in response to quarterly variations in our revenues and operating expenses, announcements of new products or services by us, significant sales of our common stock, including "short" sales, the operating and stock price performance of other companies that investors may deem comparable to us, and news reports relating to trends in our markets or general economic conditions.

As a public company, and particularly since we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Capital Market and other applicable securities rules and regulations impose various requirements on public companies, including the obligation to file with the SEC annual and quarterly information and other reports that are specified in the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and to establish and maintain effective disclosure and financial controls and corporate governance practices. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

We are a "smaller reporting company", as defined in Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will cease to be a smaller reporting company if we have (i) more than $700 million in market value of our shares held by non-affiliates as of the last business day of our most recently completed second fiscal quarter or (ii) more than $100 million of annual revenues in our most recent fiscal year completed before the last business day of our second fiscal quarter and a market value of our shares held by non-affiliates more than $250 million as of the last business day of our second fiscal quarter. We intend to take advantage of exemptions from various reporting requirements that are applicable to most other public companies, whether or not they are classified as "emerging growth companies," including, but not limited to, an exemption from the provisions of Section 404(b) of Sarbanes-Oxley requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. An attestation report by our auditor would require additional procedures by them that could detect problems with our internal control over financial reporting that are not detected by management. If our system of internal control over financial reporting is not determined to be appropriately designed or operating effectively, it could require us to restate financial statements, cause us to fail to meet reporting obligations, and cause investors to lose confidence in our reported financial information. The JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in the Securities Act, for complying with new or revised accounting standards. However, we have chosen to "opt out" of this extended transition period and, as a result, we will comply with new or revised accounting standards on or prior to the relevant dates on which adoption of such standards is required for all public companies that are not emerging growth companies. Our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. We cannot predict if investors will find our common stock less attractive because we have relied, and intend to rely on, certain of these exemptions and benefits.

Our board of directors is authorized to issue 5,000,000 shares of preferred stock in series. The issuance of any preferred stock having rights superior to those of the common stock may result in a decrease in the value or market price of our common stock. Holders of preferred stock may have the right to receive dividends, certain preferences in liquidation and conversion rights and rights to elect directors. The issuance of preferred stock could, under certain circumstances, have the effect of delaying, deferring or preventing a change in control of us without further vote or action by the stockholders and may adversely affect the voting and other rights of the holders of our common stock.

Our Certificate of Incorporation authorizes the issuance of 100,000,000 shares of common stock and 5,000,000 shares of preferred stock. The common stock and preferred stock, as well as the awards available for issuance under our 2017 equity incentive plan, can be issued by our board of directors, without stockholder approval. Any future issuances of such stock would further dilute the percentage ownership in us held by holders of our common stock and may be issued at prices below the initial price offering. In addition, the issuance of preferred stock may be used as an "anti-takeover" device without further action on the part of our stockholders, and may adversely affect the holders of the common stock.