Turn Therapeutics Inc (TTRX) Risk Analysis

Under our amended and restated certificate of incorporation, we expressly renounce any interest or expectancy in, or right to be offered participation with respect to, certain business opportunities that may from time to time be presented to any of our directors, officers, agents, stockholders, members, partners or affiliates, other than those opportunities expressly offered to such persons in their capacities as directors or officers of our Company. As a result, our directors or officers may pursue, directly or indirectly, business ventures or investments that may compete with our business, overlap with our strategic objectives, or otherwise be complementary to our operations. For example, an officer or director could identify an investment, acquisition, or partnership that could enhance our growth prospects, but instead allocate that opportunity to another company or to their own personal interests. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations, and prospects. Relevant provisions under our Amended and Restated Certificate of Incorporation are more fully described in "Description of Capital Stock."

As of December 31, 2025, our founder, Bradley Burnam, beneficially owned or controlled, directly or indirectly, common stock representing approximately 52% of the combined voting power of our outstanding voting securities on a fully diluted basis after giving effect to the issuance of the Commitment Fee Shares, the full exercise of the GEM Warrant and purchase of all draw-down shares issued to GEM as of December 31, 2025.  As a result of this ownership or control of our voting securities, our founder has control over the outcome of substantially all matters submitted to our shareholders for approval, including the election of directors. This may delay or prevent an acquisition or cause the public price of our common stock to decline. Our founder may have interests different from yours. Therefore, the concentration of voting power with our founder may have an adverse effect on the price of our common stock. In addition, in connection with the direct listing, we entered into a stockholders agreement with our controlling shareholder pursuant to which our controlling shareholder has certain consent rights over our corporate affairs. The stockholders agreement provides that the approval of our controlling shareholder must be obtained, in addition to any other required approval by our board of directors or shareholders, prior to us engaging in certain actions. See "Certain Relationships and Related Party Transactions?-?Stockholders Agreement with Bradley Burnam." As a result, our controlling shareholder has significant influence over our management and affairs and, so long as he beneficially owns at least 10% of our outstanding common stock, will have approval rights over certain corporate actions, including, among others, any merger, consolidation or sale of all or substantially all of our assets; any dissolution, liquidation or reorganization or any acquisition of any asset for consideration in excess of 20% of our total assets; the issuance of equity securities, or any other ownership interests, for consideration exceeding $50 million; any amendments to our certificate of incorporation or bylaws; any incurrence, guarantee, assumption or refinancing of indebtedness, or grant of a security interest, in each case in excess of 20% of our total assets; the declaration or payment of dividends on our common stock; and hiring or compensation decision with respect to any senior management or key employee.

Our founder and Chief Executive Officer, Mr. Burnam, controls more than 50% of our outstanding shares of common stock on a fully diluted basis. As a result, we are a "controlled company." Under Nasdaq Listing Rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group, or another company is a "controlled company" and may elect not to comply with certain corporate governance requirements, including the requirements that, within one year of the date of the listing of our common stock, we have a: - board that is composed of a majority of "independent directors," as defined under the rules of such exchange;- compensation committee that is composed entirely of independent directors; and - nominating and corporate governance committee that is composed entirely of independent directors. These exemptions do not modify the requirement for a fully independent audit committee, which is permitted to be phased-in as follows: (1) one independent committee member at the time of our initial public offering; (2) a majority of independent committee members within 90 days of our initial public offering; and (3) all independent committee members within one year of our initial public offering. Similarly, once we are no longer a "controlled company," we must comply with the independent board committee requirements as they relate to the compensation committee and the nominating and corporate governance committee, on the same phase-in schedule as set forth above, with the trigger date being the date we are no longer a "controlled company" as opposed to our initial public offering date. Additionally, we will have 12 months from the date we cease to be a "controlled company" to have a majority of independent directors on our board of directors. Although we do not currently rely on any such exemptions, we may do so in the future and if we utilize any of the "controlled company exemptions," you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq. See "Management?-?Controlled Company Status."

We are an "emerging growth company" and have the option to utilize certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, election to defer the adoption of recently issued accounting standards, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company." We will remain an "emerging growth company" until the earlier of (i) the last day of the fiscal year (A) following the fifth anniversary of the listing of our common stock on Nasdaq, (B) in which we have total annual revenue of at least $1.235 billion, or (C) in which we are deemed to be a large accelerated filer, with at least $700 million of equity securities held by non-affiliates as of the prior June 30th, and (ii) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period. Under the JOBS Act, "emerging growth companies" can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an "emerging growth company" or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may or may not be comparable to companies that comply with new or revised accounting pronouncements as of public companies' effective dates. Further, we may take advantage of some of the other reduced regulatory and reporting requirements that will be available to us so long as we qualify as an "emerging growth company." Among other things, this means that our independent registered public accounting firm is not required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an "emerging growth company," which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected. Likewise, so long as we qualify as an "emerging growth company," we may elect not to provide you with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate our company. As a result, investor confidence in our company and the trading price of our common stock may be adversely affected. Further, we cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our trading price may be more volatile. We are also a "smaller reporting company" as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our common stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and common stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter. It is possible that some investors will find our common stock less attractive as a result of the foregoing, which may result in a less active trading market for our common stock and higher volatility in our stock price.

Sales of substantial amounts of our common stock in the public market by our founder, affiliates, or non-affiliates, or the perception that such sales could occur, could adversely affect the public price of our common stock and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate. Moreover, (i) a non-affiliate who has beneficially owned common stock for at least six months may rely on Rule 144 to sell their common stock, and (ii) an affiliate who has beneficially owned common stock for at least six months, would be entitled to sell within any three-month period a number of shares of common stock that does not exceed the greater of either of the following: (a) 1% of the number of shares of common stock then outstanding, and (b) the average weekly reported volume of trading of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Prior to the direct listing, there was no public market for any of our securities. Our common stock has been listed on Nasdaq only for a limited period of time, and an active market for our common stock may not develop or be sustained after the listing, which could depress the market price of shares of our common stock and could affect the ability of our stockholders to sell our common stock. In the absence of an active public trading market, investors may not be able to liquidate their investments in our common stock. An inactive market may also impair our ability to raise capital by selling shares of our common stock, our ability to motivate our employees through equity incentive awards and our ability to acquire other companies, products or technologies by using shares of our common stock as consideration. Since our listing on Nasdaq, the market price and trading volume of our common stock have been, and may continue to be, highly volatile, including within a single trading day. Such volatility could result in substantial losses for purchasers of our common stock. For example, on October 8, 2025, the first day of trading on Nasdaq, the price of our common stock fluctuated between an intraday high of $10.00 and an intraday low of $6.23, on trading volume of approximately 219,124 shares. We cannot predict if or when similar volatility will occur or how long such conditions may persist. The public price of our common stock following the listing may continue to be subject to wide fluctuations in response to the risk factors described in this Annual Report and others beyond our control, including: - changes in the industries in which we operate;- variations in our operating performance and the performance of our competitors in general;- actual or anticipated fluctuations in our quarterly or annual operating results;- publication of research reports by securities analysts about us or our competitors or our industry;- the public's reaction to our press releases, our other public announcements and our filings with the SEC;- our failure or the failure of our competitors to meet analysts' projections or guidance that we or our competitors may give to the market;- additions and departures of key team members and personnel;- changes in laws and regulations affecting our business;- commencement of, or involvement in, litigation involving us;- changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;- the volume of shares of our common stock available for public sale; and - general economic and political conditions such as recessions, interest rates, fuel prices, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism. In addition, securities exchanges have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner often unrelated to the operating performance of those companies. These fluctuations may be even more pronounced in the trading market for our common stock shortly following the listing of our common stock on Nasdaq as a result of the supply and demand forces described above. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and harm our business, results of operations and financial condition.

The Lender has the right to convert initially up to $2.0 million of the outstanding principal of the Loans (the "Conversion Option") into shares of common stock at a price per share equal to 80% of the trading price on the date of conversion, subject to certain terms and conditions, including beneficial ownership limitations. Upon draw-down of Tranche 2, the Conversion Option will be increased by $1.0 million. The exercise of the Conversion Option by the Lender could result in dilution for our existing stockholders.

On August 29, 2025, we entered into the GEM Purchase Agreement with GEM, which was further amended by a side letter dated as of September 24, 2025, pursuant to which GEM has committed to purchase up to $85.0 million of our common stock at our sole discretion, subject to certain limitations and conditions set forth in the GEM Purchase Agreement. We may sell shares to GEM from time to time by delivering drawdown notices, and GEM will purchase shares at a price equal to 90% of the average daily closing price of our stock over the 15 consecutive trading days beginning on the date of such drawdown, provided that such purchase price shall not be less than $1.00 per share and provided further that any requested drawdown may not exceed 300% of the average daily trading volume of our common stock during the 15 trading days immediately preceding the notice. As of December 31, 2025, we have sold 750,000 shares of common stock to GEM under the GEM Purchase Agreement. In addition, in connection with the GEM Purchase Agreement, on the listing date, we issued GEM a warrant to purchase 1,192,207 shares of our common stock, equal to 4.0% of our fully diluted equity interests outstanding as of that date, at an exercise price of $5.03 per share, subject to adjustments provided under the GEM Warrant. Because the purchase price per share to be paid by GEM for the common stock will fluctuate based on the market prices of our common stock at the time we elect to sell shares pursuant to the GEM Purchase Agreement, it is not possible for us to predict, as of the date of this Annual Report and prior to any such sales, the number of shares, the purchase price per share, or the aggregate gross proceeds that we will receive under the GEM Purchase Agreement. Although the GEM Purchase Agreement provides that we shall, in our discretion and during the term of the GEM Purchase Agreement, direct GEM to purchase shares from us in one or more purchases under the GEM Purchase Agreement, for a maximum aggregate purchase price of up to $85.0 million, only 7,000,000 shares of common stock have been registered for resale. However, the market prices of shares of our common stock may fluctuate from time to time and, as a result, the actual purchase prices to be paid by GEM for our shares of common stock that we direct GEM to purchase under the GEM Purchase Agreement also may fluctuate significantly based on the market price of our common stock. Accordingly, if we decide to issue and sell to GEM under the GEM Purchase Agreement more than the 7,000,000 shares registered for resale to receive additional proceeds (which we may elect to do, at our sole discretion, up to aggregate gross proceeds of $85.0 million), we must first file with the SEC one or more additional registration statements or post-effective amendments to the existing registration statement to register the resale under the Securities Act by GEM of any such additional common stock sold under GEM Purchase Agreement, and any such registration statement or amendment must be declared effective by the SEC before we may elect to sell any such additional shares. Any issuance and sale by us under the GEM Purchase Agreement of a substantial amount of common stock in excess of the 7,000,000 shares registered for resale by GEM could result in substantial additional dilution to our shareholders. The number of shares of common stock ultimately offered for sale by GEM is dependent upon the number of shares, if any, we ultimately elect to sell to GEM under the GEM Purchase Agreement.

We must meet certain financial and liquidity criteria to maintain our common stock being listed on Nasdaq. If we fail to meet any of Nasdaq's continued listing standards or we violate Nasdaq listing requirements, our common stock may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from Nasdaq may materially impair our stockholders' ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock may result in a determination that the common stock is a "penny stock" which will require brokers trading in the common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment. In addition, our ability to draw down capital under the GEM Purchase Agreement is contingent upon our common stock being listed on a national securities exchange. If we are unable to maintain our listing on Nasdaq or another national securities exchange, we may lose access to capital available under the GEM Purchase Agreement, which could materially adversely affect our liquidity and financial condition.