Processa Pharmaceuticals, Inc.

Risks Related to the Vidya Acquisition

Our business is highly dependent on the success of VT-7208. VT-7208 will require additional clinical and manufacturing development before we may be able to seek regulatory approval for and launch a product commercially and we may not be successful in our efforts.

We currently have no products that are approved for commercial sale and may never be able to develop marketable products. Following the Vidya Acquisition, we are focusing the majority of our resources on the development of VT-7208 in food allergy, CSU and RMS and continuing the development of our legacy pharmaceutical assets, including PCS499, PCS12852 and PCS11T, while evaluating strategic opportunities designed to maximize their clinical and long-term value. If VT-7208, across the various target indications, encounters safety or efficacy problems, development delays, regulatory issues or other problems, our development plans and forecasted timelines and business could be significantly harmed. Because we are focusing the vast majority of our resources on a single product candidate, any failure or significant delay in VT-7208’s development would have a disproportionate impact on our business, financial condition and prospects, and our other clinical-stage programs would not be able to offset such a setback.

We cannot provide you with any assurance that we will be able to successfully advance VT-7208 or any additional product candidates through the development process in any particular target indication. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development or commercialization for many reasons, including the following:

If any of these events occur, we may be forced to abandon our development efforts for a program or programs, or we may not be able to identify, discover, develop, or commercialize additional product candidates, which could have a material adverse effect on our business and could potentially cause us to cease operations.

If we do not successfully develop, secure regulatory approval for, and commercialize product candidates or collaborate with others to do so, we will not be able to obtain product revenue in future periods, which would significantly harm our financial position and adversely affect the trading price of our common stock.

Pursuant to the terms of the Vidya Acquisition, we are required to recommend that our stockholders approve the conversion of all outstanding shares of our Series A Preferred Stock into shares of our common stock. We cannot guarantee that our stockholders will approve this matter, and if they fail to do so we may be required to settle such shares in cash and our operations may be materially harmed.

Under the terms of the Merger Agreement and the Purchase Agreement, as promptly as practicable following the date of the Merger Agreement and pursuant to the Nasdaq Stock Market Rules, we will call and hold a meeting of our stockholders to obtain the requisite approval from our legacy stockholders for, among other things, (i) the approval, in accordance with the applicable rules of Nasdaq, of the conversion of the Series A Preferred Stock into shares of our common stock, or the Preferred Stock Conversion Proposal, (ii) the approval of a 2026 Equity Incentive Plan, subject to approval by the Board, (iii) the approval of a 2026 Employee Stock Purchase Plan, and (iv) to the extent deemed necessary or advisable by us and/or Vidya, approval of an amendment to our certificate of incorporation to effect a reverse stock split (the matters contemplated in items (i) through (iv) collectively, the “Stockholder Matters”). If we fail to receive sufficient proxies to constitute a quorum or to obtain the required vote on the Stockholder Matters, we would be required to adjourn the meeting one or more times for up to 30 days per adjournment. If stockholder approval of the Stockholder Matters is 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 legacy stockholders will approve the Stockholder Matters. Additionally, if at any time following the date that is six months following the initial issuance date of the Series A Preferred Stock, we fail to deliver to the holders of the Series A Preferred Stock shares of common stock underlying such shares of Series A Preferred Stock, (other than in certain circumstances set forth in the Certificate of Designation, as defined below) the holders of the Series A Preferred Stock would be entitled to require us to settle such undelivered shares for cash in an amount equal to the fair value of such undelivered shares of common stock at such time, as described in the Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock, or 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.

There is no guarantee that the Vidya Acquisition will increase stockholder value.

In July 2026, we consummated the Vidya Acquisition, pursuant to which we acquired Vidya, and we closed the 2026 Private Placement. We cannot guarantee that implementing the Vidya Acquisition and related transactions will not impair stockholder value or otherwise adversely affect our business. The Vidya Acquisition poses significant integration challenges between our businesses and employees which could result in management and business disruptions, any of which could harm our results of operation, business prospects, and impair the value of the Vidya Acquisition to our stockholders.

The failure to successfully integrate the businesses of our company and Vidya in the expected timeframe could adversely affect our results of operations, financial condition, and future results.

Our ability to successfully integrate the operations of our company and Vidya will depend, in part, on our ability to realize the anticipated benefits from the Vidya Acquisition. If we are not able to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits of the Vidya Acquisition may not be realized fully, or at all, or may take longer to realize than expected, and the value of our common stock may be adversely affected. In addition, the integration of our company’s and Vidya’s respective businesses will be a time-consuming and expensive process. Proper planning and effective and timely implementation will be critical to avoid any significant disruption to our operations. There can be no assurance that we will effectively manage the increased complexity of our business without experiencing operating inefficiencies or control deficiencies. Delays encountered in the integration process could have a material adverse effect on our expenses, operating results and financial condition, including the value of shares of our common stock.

We expect to incur substantial expenses related to the integration of Vidya.

We have incurred, and expect to continue to incur, substantial expenses in connection with the Vidya Acquisition and the integration of Vidya. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including accounting and finance, billing, payroll, and benefits. Both our company and Vidya have incurred significant transaction expenses in connection with the drafting and negotiation of the Merger Agreement, and the related ancillary agreements. While we have assumed that a certain level of expenses will be incurred, there are many factors beyond our control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These integration expenses likely will result in our taking significant charges against earnings following the completion of the Vidya Acquisition, and the amount and timing of such charges are uncertain at present.

A substantial number of shares of our common stock will become available for sale and may be sold upon conversion of our Series A Preferred Stock, and additional shares may be sold by existing common stockholders, which could cause the price of our common stock to decline.

If stockholders approve the Preferred Stock Conversion Proposal, the up to 307,063,330 shares of our common stock issuable upon conversion of the Series A Preferred Stock issued in connection with the Vidya Acquisition and the 2026 Private Placement, subject to beneficial ownership limitations, will represent approximately 99.0% of the issued and outstanding shares of our common stock as of August 7, 2026, on an as-converted basis. The sale of a substantial number of shares of our securities in the public market, or the perception that such sales may occur, could adversely affect the price of our common stock on Nasdaq. We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those shares of common stock for sale will have on the market price of our common stock.

Concurrently and in connection with the execution of the Merger Agreement, certain officers, directors and stockholders of Vidya, and the directors and officers of the Company as of immediately following the Vidya Acquisition entered into lock-up agreements with the Company, pursuant to which each such stockholder will be subject to a 180-day lock-up on the sale or transfer of shares of our common stock and Series A Preferred Stock held by each such stockholder at the closing of the Vidya Acquisition, including those shares received by former Vidya securityholders in the Vidya Acquisition. Upon expiration of this 180-day lock-up period, these shares will become eligible for sale in the public market.

In connection with the closing of the 2026 Private Placement, we entered into a Registration Rights Agreement with the investors, and pursuant to the Merger Agreement, we are required to register the resale of all shares of common stock underlying the Series A Preferred Stock issued in connection with the Vidya Acquisition and the 2026 Private Placement. Under the Registration Rights Agreement, we are required to prepare and file a resale registration statement with the SEC within 75 calendar days following the closing of the 2026 Private Placement. We are obligated to use our reasonable best efforts to cause this registration statement to be declared effective by the SEC within five business days of the date we are notified by the SEC that the registration statement will not be reviewed or will not be subject to further review (or within 60 calendar days following the filing deadline if the SEC reviews the registration statement). Once this registration statement is declared effective and the restricted securities legends on the shares issued in connection with the Vidya Acquisition and the 2026 Private Placement are removed, the shares subject to such registration statement will no longer constitute restricted securities and may be sold freely in the public markets, subject to any beneficial ownership limitations set by the holder of Series A Preferred Stock or lapse on any related contractual restrictions of any Investor. If our stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after legal restrictions on resale lapse, the trading price of our common stock could decline. In addition, shares of our common stock that are subject to outstanding options will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements and Rules 144 and 701 under the Securities Act of 1933, as amended.

In the past, litigation, including securities class action litigation, has often followed certain significant business transactions, such as the Vidya Acquisition. These events may also result in investigations by the SEC or other government agencies. We may be exposed to such litigation and resulting costs in connection with the Vidya Acquisition even if no wrongdoing occurred.

Furthermore, the stock market in general, and Nasdaq 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. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. The market price of our common stock may be volatile, and we may be the target of this type of litigation in the future.

Litigation is usually expensive and diverts management’s attention and resources from other business concerns, which could adversely affect our business and cash resources.