Statera BioPharma (STAB) Risk Analysis

As of August 31, 2022, Mr. David Davidovich, a venture capital investor, beneficially owns or controls approximately 13% of the voting power of our outstanding common stock. As a result of his being the single largest holder of the voting power of our outstanding common stock and the fact that much of the remaining voting power of Statera is held diffusely among a larger number of retail investors who are historically less likely to participate in stockholder meetings, Mr. Davidovich has the potential to significantly influence all matters requiring approval by our stockholders, including the election and removal of directors, amendments to our certificate of incorporation and bylaws, any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions. Mr. Davidovich may have interests that are different from those of other stockholders and may vote in a way with which other stockholders disagree and that may be adverse to other stockholders' interests.

Currently, our common stock trades on the Nasdaq Capital Market. During 2019 and 2020, the Company received notifications from Nasdaq Stock Market LLC ("NASDAQ") informing us of certain listing deficiencies related to the minimum bid price listing requirements, which led to the issuance of delisting notices. On March 23, 2022, we received written notice from NASDAQ's Listing Qualifications staff notifying us that for the preceding 30 consecutive business days, our common stock did not maintain a minimum closing bid price of $1.00 per share ("Minimum Bid Price Requirement") as required by Nasdaq Listing Rule 5550(a)(2). The notice had no immediate effect on the listing or trading of our common stock, and our common stock continues to trade on The Nasdaq Capital Market under the symbol "STAB". In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a grace period of 180 calendar days, or until September 19, 2022, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Compliance will be achieved automatically and without further action when the closing bid price of our common stock is at or above $1.00 for a minimum of 10 consecutive business days at any time during the 180-day compliance period, in which case NASDAQ will notify us of our compliance and the matter will be closed. If, however, we do not achieve compliance with the Minimum Bid Price Requirement by September 19, 2022, we may be eligible for additional time to comply. In order to be eligible for such additional time, we will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and we must notify NASDAQ in writing of its intention to cure the deficiency during the second compliance period. There can be no guarantee that we will regain compliance with the Minimum Bid Price Requirement, that we will maintain compliance with other NASDAQ Listing Rules, or that we will be eligible for a second compliance period. In order to regain compliance, we intend to obtain approval of our board of directors and shareholders of (i) a reverse stock split of the issued and outstanding shares of our common stock to regain compliance with the Minimum Bid Price Requirement and, possibly, (ii) an increase of our authorized number of shares of common stock. Even if the Company obtains approval and regain compliance, it is possible that it could fall out of compliance again in the future. If we fail to satisfy the continued listing requirements of Nasdaq Capital Market or fail to secure a second compliance period, NASDAQ may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would expect to take actions to restore our compliance with NASDAQ's listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the NASDAQ Minimum Bid Price Requirement, or prevent future non-compliance with NASDAQ's listing requirements. On August 17, 2022, we received written notice from NASDAQ notifying us that we are delinquent due to the failure to file our Form 10-K for the year ended December 31, 2021 and our Form 10-Q for the period ended March 31, 2022. NASDAQ has provided an exception to allow us to regain compliance with all delinquent filings by October 17, 2022. In order to regain compliance, we intend to file our Form 10-K for the year ended December 31, 2021 and our Form 10-Q for the period ended March 31, 2022 by October 17, 2022.

As of December 31, 2021, we owned 67.57% of the equity interests in Panacela and 50% of the equity interests in GPI. Rusnano, a fund regulated by the Russian government, is a significant shareholder, along with other minority shareholders, in Panacela. Everon, a Buffalo, New York-based biopharmaceutical company, holds the other 50% of the equity interest in GPI. Additionally, as a result of its investment in GPI, Norma was granted a number of governance and other rights with respect to GPI. As such, we share ownership and management of Panacela and GPI with other parties who may not have the same goals, strategies, priorities or resources as we do. With respect to Panacela, both we and Rusnano have certain rights, including the right to designate board members and the need for either supermajority votes or consent of all members of Panacela's board of directors in order to take certain actions. Additionally, the right to transfer ownership is restricted by rights of first refusal, tag-along and drag-along rights. Consequently, if a co-owner sells its equity interest to a new party, the new party may adversely affect the operation of Panacela. These restrictions lead to organizational formalities that may be time-consuming. In addition, the benefits from a successful product development effort are shared among the co-owners. With respect to GPI, under the terms of Norma's investment, upon the occurrence of a number of different events, Norma has the right to require GPI to issue to Norma a number of shares in GPI, thereby further diluting our interest. Additionally, the Company, Everon, GPI and Norma each made certain commitments as to voting and transfer of their shares of GPI and GPI's governance, including an agreement that the board of directors of GPI will consist of four members, two of whom will be selected by Norma, one of whom will be selected by the Company and one of whom will be selected by Everon. GPI is also prohibited from taking a number of actions without the unanimous consent of all of the members of GPI's board of directors, including, among other things, effecting a change of control transaction, terminating its operations, dissolving or liquidating, amending its organizational documents, transferring or licensing its intellectual property, or issuing any shares of capital stock. We understand that until February 2022, Norma was majority controlled or owned, indirectly, by Roman Abramovich, a global investor with ties to high-level members of the government of Russia. While neither Norma nor Mr. Abramovich have been the subject of sanctions by the US Government , the government of the UK has ordered asset freezes, imposed travel bans and otherwise imposed sanctions on Mr. Abramovich. Major media organizations have reported that ownership in Norma was transferred from Mr. Abramovich to David Davidovich, the holder of approximately [20]% of our common stock who is not, as of the filing date of this Annual Report on Form 10-K, subject to sanctions by the US or UK governments. If governing authorities in the UK unwind this transfer or if Norma or Mr. Davidovich become subject to sanctions by the US or UK governments, it may be difficult or impossible for Norma, which is a British Virgin Islands company subject to UK jurisdiction, to invest further funds in GPI and/or for GPI to issue shares or remit funds to Norma should the contractual terms of Norma's investment in GPI otherwise require it to. This could materially and adversely affect the value of our investment in GPI, which could have a material adverse effect on our business prospects, financial condition, results of operations and cash flows.

Under Russian law, we may become liable for the obligations of our Russian subsidiary if it was determined that: (i) we had the ability to make, or exert influence on, decisions for such subsidiaries as a result of our equity interest, the terms of a binding contract with such Russian subsidiary or in any other way; and (ii) our Russian subsidiary concluded the transaction giving rise to the obligations pursuant to the Company's instructions or consent. In addition, we may have secondary liability for the obligations of our Russian subsidiary in a situation where it becomes insolvent or bankrupt and this was a result of, or was otherwise attributable to, actions of the Company. This type of liability could result in significant losses, and could have a material adverse effect on the Company's business, results of operations or financial position. Accordingly, in the Company's position as an indirect parent of a Russian subsidiary, there is a risk that it could be held liable in certain limited circumstances for the debts of our effective subsidiary. If this liability is significant, it could materially adversely affect our business, financial condition or our results of operations.

The market price of our common stock has historically experienced and may continue to experience significant volatility. From January 1, 2020 through December 31, 2021, the market price of our common stock, which is listed on the NASDAQ Capital Market, fluctuated from a high of $9.55 per share in the first quarter of 2021 to a low of $0.57 in the first quarter of 2020. The listing of our common stock on the NASDAQ Capital Market does not assure that a meaningful, consistent, and liquid trading market will exist, and in recent years, the market has experienced extreme price and volume fluctuations that have particularly affected the market prices of many smaller companies like us. Our common stock is thus subject to this volatility in addition to volatility caused by the occurrence of industry and company specific events. Factors that could cause fluctuations include, but are not limited to, the following: - our progress in developing and commercializing our products; - price and volume fluctuations in the overall stock market from time to time; - fluctuations in stock market prices and trading volumes of similar companies; - actual or anticipated changes in our earnings or fluctuations in our operating results or in the expectations of securities analysts; - general economic conditions and trends; - major catastrophic events; - sales of large blocks of our stock; - departures of key personnel; - changes in the regulatory status of our product candidates, including results of our preclinical studies and clinical trials; - status of contract and funding negotiations relating to our product candidates; - events affecting our collaborators; - events affecting our competitors; - announcements of new products or technologies, commercial relationships or other events by us or our competitors; - the recent COVID-19 pandemic; - regulatory developments in the U.S. and other countries; - failure of our common stock to be listed or quoted on the NASDAQ Capital Market, another national market system, or any national stock exchange; - changes in accounting principles; and - discussion of us or our stock price by the financial and scientific press and in online investor communities. In addition, the stock market in general, and the stock price of companies listed on the NASDAQ, and biotechnology 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 actual operating performance. As a result of the volatility of our stock price, we could be subject to securities litigation, which could result in substantial costs and divert management's attention and company resources from our business.

We are currently authorized to issue 150,000,000 shares of common stock and 1,000,000 shares of preferred stock. As of August 31, 51,141,362 shares of our common stock were issued and outstanding, we had outstanding warrants to purchase 33,208,944 shares of our common stock at an average exercise price of $0.76 per share, 567,640 restricted stock units outstanding that vest over the next 34 months, and options to purchase 1,234,527 shares of our common stock at an average exercise price of $0.44 per share. To the extent we issue shares of common stock or our outstanding options, restricted stock units and warrants are exercised, holders of our common stock will experience dilution. In the event of any other future issuances of equity securities or securities convertible into or exchangeable for, common stock, holders of our common stock may experience dilution. Furthermore, certain of our outstanding warrants contain provisions that, in certain circumstances, could result in the number of shares of common stock issuable upon the exercise of such securities to increase and/or the exercise price of such warrants to decrease. Moreover, our board of directors is authorized to issue preferred stock without any action on the part of our stockholders. Our board of directors also has the power, without stockholder approval, to set the terms of any such preferred stock that may be issued, including voting rights, conversion rights, dividend rights, preferences over our common stock with respect to dividends or if we liquidate, dissolve, or wind up our business and other terms. If we issue shares of preferred stock in the future that have preference over our common stock with respect to the payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our common stock, the market price of our common stock could decrease. Additionally, the conversion of any preferred stock issued in the future into our common stock could result in significant dilution to the holders of our common stock.

In July 2015, we issued an aggregate of 6,716,163 shares of our Company's common stock to Mr. Davidovich and Rusnano. The issuances of these shares were not registered under the Securities Act of 1933, and the shares are only able to be resold pursuant to a separate registration statement or an applicable exemption from registration (under both federal and state securities laws). Contractual restrictions prohibiting Mr. Davidovich from selling his shares have expired and pursuant to the terms of registration rights agreements entered into between the Company and each of Mr. Davidovich and Rusnano, we have filed a registration statement on Form S-3 with the SEC to register the public offer and resale of the shares held by these stockholders. The registration statement has been declared effective by the SEC and Mr. Davidovich and Rusnano are each able to freely sell some or all of their shares of our Company's common stock. If all or a substantial portion of these shares are resold into the public markets under such registration statement or otherwise, such transactions may cause a decline in the trading price of our common stock.