Edesa Biotech (EDSA) Risk Analysis

In the event of any liquidation, dissolution or winding-up of the Company, a holder of the Preferred Shares will be entitled to receive, before any distribution or payment may be made with respect to the holders of our common shares, an amount equal to 100% of the stated value, plus a return equal to 10% of the stated value per Preferred Share per annum, calculated daily.

As previously approved by our shareholders, our board of directors ("Board") has the authority to authorize up to an unlimited number of a new series of our preferred shares and to fix and determine the special rights and restrictions of that series without further shareholder approval, subject to the terms set out in the Articles and unless otherwise required by the Business Corporations Act (British Columbia). As a result, our board of directors could authorize the creation of a series of our preferred shares that would grant to holders of the preferred shares a right to our assets upon liquidation before a distribution to the holders of our common shares. In addition, our board of directors could authorize the creation of a new series of our preferred shares that is convertible into our common shares, which could result in dilution to existing shareholders. On October 30, 2024, we filed Amended Articles to amend the rights, preferences, restrictions and other matters pertaining to our newly designated Series A-1 Convertible Preferred Shares (the "Preferred Shares"). The Preferred Shares have no par value and a stated value of $10,000 per share and rank, with respect to redemption payments, rights upon liquidation, dissolution or winding-up of the Company, or otherwise, senior in preference and priority to our common shares.

As of December 11, 2024, Dr. Nijhawan, our Chief Executive Officer, beneficially owns 19.99% of our outstanding common shares and all of our executive officers and directors, including Dr. Nijhawan, beneficially own 23.9% of our common shares. As a result, such individuals will have the ability, acting together, to significantly influence the election of our directors and the outcome of corporate actions requiring shareholder approval, such as: (i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our Articles. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other shareholders and be disadvantageous to our shareholders with interests different from those individuals. See "Security Ownership of Certain Beneficial Owners and Management" below for more information regarding the ownership of our outstanding common shares by our executive officers, directors and holders of more than 5% of our common stock, together with their affiliates.

The trading market for our common shares relies in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts. The price of our common shares could decline if one or more equity analysts downgrade our common shares or if analysts issue other unfavorable commentary or cease publishing reports about us or our business.

The price of our common shares could decline as a result of sales of a large number of our common shares or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. In addition, in the future, we may issue additional common shares, warrants or other equity or debt securities convertible into common shares in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial dilution to our existing shareholders and could cause the price of our common shares to decline.

Market prices for securities of clinical-stage pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile, and the market price of our common shares has been subject to significant fluctuations. This volatility can be exacerbated by low trading volume. Some of the factors that may cause the market price of our shares to fluctuate include: - sales or potential sales of substantial amounts of our common shares;- announcements about us or our competitors, including funding announcements, corporate or business updates, updates on manufacturing of our products, clinical trial results, regulatory approvals or new product introductions;- developments concerning our product manufacturers;- litigation and other developments relating to our licensed patents or other proprietary rights or those of our competitors;- governmental regulation and legislation;- change in securities analysts' estimates of our performance, or failure to meet analysts' expectations;- the terms and timing of any future collaborative, licensing or other arrangements that we may establish;- our ability to raise additional capital to carry through with our development plans and current and future operations;- the timing of achievement of, or failure to achieve, our manufacturing, pre-clinical, clinical, regulatory and other milestones, such as the commencement of clinical development, the completion of a clinical trial or the receipt of regulatory approval;- actions taken by regulatory agencies with respect to our product candidates;- uncontemplated problems in the supply of the raw materials used to produce our product candidates;- introductions or announcements of technological innovations or new products candidates by us, our potential future collaborators, or our competitors, and the timing of these introductions or announcements;- market conditions for equity investments in general, or the biotechnology or pharmaceutical industries in particular;- actual or anticipated fluctuations in our results of operations;- hedging or arbitrage trading activity that may develop regarding our common shares;- regional or worldwide recession;- sales of our common shares by our executive officers, directors and significant shareholders;- changes in accounting principles; and - the loss of any of our key scientific or management personnel. Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our common shares. In the past, following periods of volatility in the market price of a company's securities, shareholders have often instituted class action securities litigation. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation.

The ownership of our common shares is highly concentrated among insiders and affiliates. Accordingly, these shareholders will have substantial influence over the outcome of corporate actions requiring shareholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of the Company's assets or any other significant corporate transaction. These shareholders may also delay or prevent a change of control of the Company, even if such a change of control would benefit the other shareholders of the Company. The significant concentration of share ownership may adversely affect the trading price of our common shares due to investors' perception that conflicts of interest may exist or arise.