Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box:
[X]
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Preliminary
Proxy Statement
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[
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Confidential,
for Use of the SEC Only (as permitted by
Rule 14a-6(e)(2))
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[
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Definitive
Proxy Statement
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[
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Definitive
Additional Materials
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[
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Soliciting
Material Pursuant to 14a-12
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AZURRX BIOPHARMA, INC.
(Name
of Registrant as Specified in Its Charter)
_________________________________
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
[X]
No fee required.
[
] Fee computed on table below
per Exchange Act Rules 14a-6(i)(4) and 0-11.
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Title
of each class of securities to which transaction
applies:
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Aggregate
number of securities to which transaction applies:
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Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined):
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4.
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Proposed
maximum aggregate value of transaction:
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5.
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Total
fee paid:
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[
] Fee paid previously
with preliminary materials.
[
] Check box if any part of the
fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
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Amount
Previously Paid:
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2.
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Form,
Schedule or Registration Statement No.:
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Filing
Party:
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Date
Filed:
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AzurRx BioPharma, Inc.
760 Parkside Avenue
Downstate Biotechnology Incubator, Suite 304
Brooklyn, New York 11226
(646) 699-7855
Dear
Fellow Stockholder,
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November
_,
2019
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On
behalf of the Board of Directors and management of AzurRx
BioPharma, Inc., (the “Company”, “we”, “us” and “our”), a Delaware corporation,
you are invited to attend the Company’s 2019 Annual Meeting
of Stockholders (the “Annual
Meeting”) to be held on December 19, 2019 at 9:00 A.M., Eastern Time and at any
adjournment or postponement thereof, at the offices of
Lowenstein Sandler LLP located
at One Lowenstein Drive, Roseland, New Jersey,
07068.
Details
of the business to be conducted at the Annual Meeting are described
in this Proxy Statement. We have also made available a copy of our
Annual Report on Form 10-K for the year ended December 31, 2018
(the “Annual
Report”) with this Proxy Statement. We encourage you
to read our Annual Report. It includes our audited financial
statements and provides information about our business and
services.
Your vote is important. Regardless of whether
you plan to attend the Annual Meeting in
person, please
read the accompanying Proxy Statement and then vote by internet,
telephone or e-mail as promptly as possible. Returning your proxy
will help us assure that a quorum will be present at the Annual
Meeting and avoid the additional expense of duplicate proxy
solicitations. Any stockholder attending the Annual Meeting may
vote in person, even if he or she has returned a proxy. Please
refer to the “Voting” section contained within this
Proxy Statement for instructions on submitting your vote. Voting
promptly will save us additional expense in soliciting proxies and
will ensure that your shares are represented at the Annual
Meeting.
Our Board of Directors has unanimously approved the proposals set
forth in the Proxy Statement and recommends that you vote in favor
of each such proposal. We look forward to seeing you at the Annual
Meeting.
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Sincerely,
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/s/ Edward J.
Borkowski
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EDWARD
J. BORKOWSKI
Chair of the Board
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NOTICE OF THE AZURRX BIOPHARMA, INC. ANNUAL MEETING OF
STOCKHOLDERS
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Date and Time
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December 19, 2019 at 9:00 A.M., Eastern Time.
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Place
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The offices of Lowenstein Sandler LLP located at One Lowenstein Drive, Roseland,
New Jersey, 07068.
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Items of Business
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1.
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Election of six director nominees named in this Proxy Statement,
each for a term of one year expiring at the Company’s 2020
annual meeting of stockholders or until their respective successors
are duly elected and qualified;
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2.
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Approval to amend the Company’s Amended and Restated
Certificate of Incorporation, as amended
(“Charter”),
to authorize the Board to effect a reverse stock split of both our
issued and outstanding and authorized shares of common stock, par
value $0.0001 per share, (“Common
Stock”), at a specific
ratio, ranging from one-for-two (1:2) to one-for-five (1:5), at any
time prior to the one year anniversary date of the Annual
Meeting, with the exact
ratio to be determined by the Board of Directors
(the “Reverse
Split”);
and
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3.
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Ratification of Mazars USA LLP, as our independent registered public accounting
firm for the fiscal year ending December 31,
2019.
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Adjournments and Postponements
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Any action on the items of business described above may be
considered at the Annual Meeting at the time and on the date
specified above or at any time and date to which the Annual Meeting
may be properly adjourned or postponed.
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Record Date
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October 24, 2019. Only holders of record of our Common Stock as of
the Record Date are entitled to notice of and to vote at the Annual
Meeting.
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Meeting Admission
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You are invited to attend the Annual Meeting if you are a
stockholder of record or a beneficial owner of shares of the
Company’s Common Stock as of the Record Date.
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Availability of Proxy Materials
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The Company’s proxy materials and the Annual Report for the
year ended December 31, 2018 are also available on the internet
at: www.colonialstock.com/azurrx2019.
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Voting
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If your
shares are held in the name of a bank, broker or other fiduciary,
please follow the instructions on the proxy card. Whether or not you expect to attend in person,
we urge you to vote your shares as promptly as possible by
following the proxy card instructions attached to this Proxy
Statement that you received in the mail so that your shares may be
represented and voted at the Annual Meeting. Your vote is very
important.
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BY ORDER OF THE BOARD OF DIRECTORS,
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/s/ James
Sapirstein
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Brooklyn,
New York
November _, 2019
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JAMES
SAPIRSTEIN
President and Chief Executive Officer
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760 Parkside Avenue
Downstate Biotechnology Incubator, Suite 304
Brooklyn, New York 11226
(646) 699-7855
PROXY STATEMENT
The
enclosed proxy is solicited on behalf of the Board of Directors
(the “Board”)
of the Company, for use at the upcoming 2019 Annual Meeting to be
held on December 19, 2019 at 9:00 A.M. Eastern Time, and at any
adjournment or postponement thereof, at the offices of Lowenstein
Sandler LLP located at One
Lowenstein Drive, Roseland, New Jersey, 07068.
This
Proxy Statement, the enclosed proxy card and a copy of our Annual
Report are first being mailed on or about November _, 2019 to
stockholders entitled to vote as of October 24, 2019 (the
“Record Date”).
These proxy materials contain instructions on how to access this
Proxy Statement and our Annual Report online at: www.colonialstock.com/azurrx2019,
and how to submit your vote via the internet, telephone and/or
e-mail.
Voting
The
specific proposals to be considered and acted upon at our Annual
Meeting are each described in this Proxy Statement. Only
holders of our Common Stock as of the close of business on
the Record Date are entitled to
notice of and to vote at the Annual Meeting. As of October 24,
2019, there were 26,155,111
shares of Common Stock issued
and outstanding. Each holder of Common Stock is entitled to one
vote for each share held as of the Record Date.
Quorum
In
order for any business to be conducted at the Annual Meeting,
holders of more than 50% of the shares entitled to vote must be
represented at the Annual Meeting, either in person or by properly
executed proxy. If a quorum is not present at the scheduled time of
the Annual Meeting, the stockholders who are present, whether in
person or by proxy, may adjourn the Annual Meeting until a quorum
is present. The time and place of the adjourned Annual Meeting will
be announced at the time the adjournment is taken, and no other
notice will be given. An adjournment will have no effect on the
business that may be conducted at the Annual Meeting.
Required Vote for Approval
No.
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Proposal
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1.
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Election of Directors. The six
director nominees who receive the greatest number of votes cast at
the Annual Meeting by shares present, either in person or by proxy,
and entitled to vote will be elected.
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2.
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Approval to Amend Our
Charter. To approve an
amendment to our Amended and Restated Certificate of Incorporation,
as amended (“Charter”), to authorize the Board to effect a
reverse stock split of both our issued and outstanding and
authorized shares of Common Stock, at a specific ratio, ranging
from one-for-two (1:2) to one-for-five (1:5), any time prior
to the one-year anniversary date of the Annual Meeting,
with the exact ratio to be
determined by the Board of Directors (the “Reverse
Split”). The number of
votes cast “FOR” must exceed the number of votes cast
“AGAINST” this Proposal.
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3.
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Ratification of Appointment of Auditors. To ratify the appointment of Mazars USA LLP, as
our independent auditors for the fiscal year ending December 31,
2019. The number of votes cast “FOR” must exceed the
number of votes cast “AGAINST” this
Proposal.
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Abstentions and Broker Non-Votes
All votes will be tabulated by the inspector of election appointed
for the Annual Meeting, who will separately tabulate affirmative
and negative votes, abstentions and broker non-votes. An abstention
is the voluntary act of not voting by a stockholder who is present
at an Annual Meeting and entitled to vote. A broker
“non-vote” occurs when a broker nominee holding shares
for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary power for that
particular item and has not received instructions from the
beneficial owner. If you hold your shares in “street
name” through a broker or other nominee, your broker or
nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. If you
do not give your broker or nominee specific instructions regarding
such matters, your proxy will be deemed a “broker
non-vote.”
Under Delaware law, abstentions and broker non-votes are not
counted as votes cast on an item and therefore will not affect the
outcome of any proposal presented in this Proxy Statement, although
they are counted for purposes of determining whether there is a
quorum present at the Annual Meeting.
Voting and Revocation of Proxies
If your
proxy is properly returned to the Company, the shares represented
thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If you return your proxy without
specifying how the shares represented thereby are to be voted, the
proxy will be voted (i) FOR the election of the
six director nominees named in this Proxy Statement;
(ii) FOR the
amendment to our Charter authorizing the Board to effect a Reverse
Split at any time prior to the one year anniversary date of the
Annual Meeting; (iii) FOR ratification of the
appointment of Mazars as our independent auditors for the current
fiscal year; and (iv) at the discretion of the proxy holders, on
any other matter that may properly come before the Annual Meeting
or any adjournment or postponement thereof.
You may
revoke or change your proxy at any time before the Annual Meeting
by filing, with our Corporate Secretary at 760 Parkside Avenue,
Downstate Biotechnology Incubator, Suite 304, Brooklyn, New York
11226, a notice of revocation or another signed proxy with a later
date. You may also revoke your proxy by attending the Annual
Meeting and voting in person. Attendance at the Annual Meeting
alone will not revoke your proxy. If you are a stockholder
whose shares are not registered in your own name, you will need
additional documentation from your broker or record holder to vote
personally at the Annual Meeting.
No Appraisal Rights
The stockholders of the Company have no dissenter’s or
appraisal rights in connection with any of the proposals described
herein.
Solicitation
We will
bear the entire cost of solicitation, including the preparation,
assembly, printing and mailing of this Proxy Statement and the
Annual Report, as well as the preparation and posting of this Proxy
Statement, the Annual Report and any additional solicitation
materials furnished to the stockholders. Copies of any solicitation
materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially
owned by others so that they may forward this solicitation material
to such beneficial owners. In addition, we may reimburse such
persons for their costs in forwarding the solicitation materials to
such beneficial owners. The original solicitation of proxies may be
supplemented by a solicitation by telephone, e-mail or other means
by our directors, officers or employees. No additional compensation
will be paid to these individuals for any such services. Except as
described above, we do not presently intend to solicit proxies
other than by e-mail, telephone and mail.
PROPOSAL NO. 1:
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ELECTION OF DIRECTORS
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General
The
Company’s Amended and Restated Bylaws (“Bylaws”) provide that the Board
shall consist of one or more members, and that upon any change in
the number of directors, any newly created directorships or
eliminated directorships will be apportioned by the remaining
members of the Board or by stockholders.
Our
Board currently consists of six directors. Each of the director
nominees identified below has confirmed that he is able and willing
to serve as a director if elected. If any of the director nominees
become unable or unwilling to serve, your proxy will be voted for
the election of a substitute director nominee recommended by the
current Board.
Upon
recommendation of the Corporate Governance and Nominating
Committee, the Board has nominated Edward J. Borkowski, Charles J.
Casamento, Alastair Riddell, Vern L. Schramm, James Sapirstein and
Johan M. (Thijs) Spoor for election at the Annual Meeting, each to
serve for a one-year term until the conclusion of the 2020 annual
meeting of stockholders or until their successor is duly elected
and qualified.
As previously disclosed by the Company on its Current Report on
Form 8-K filed October 11, 2019, former director Maged Shenouda
resigned from his position as a director effective October 8, 2019
but continues to serve as the Company’s Chief Financial
Officer. Effective that same day, Mr. Spoor resigned from his
position as the Company’s President and Chief Executive
Officer but continues to serve as a director on the Board.
Simultaneously, the Board appointed Mr. Sapirstein as President and
Chief Executive Officer of the Company in addition to appointing
him as a director to the Board to fill the vacancy created by Mr.
Shenouda’s resignation as a director effective October 8,
2019. The Board wishes to formally thank Mr. Shenouda for his
dedication and service on the Board.
Please
see “Directors” below for more information, including
the background and business experience of each director nominee
taken into consideration by the Corporate Governance and Nominating
Committee.
Required Vote and Recommendation
The
election of directors requires the affirmative vote of a plurality
of the voting shares present in person or represented by proxy and
entitled to vote at the Annual Meeting. The six director nominees
receiving the highest number of affirmative votes will be elected.
Unless otherwise instructed or unless authority to vote is
withheld, shares represented by executed proxies will be voted
“FOR” the election of the aforementioned director
nominees.
OUR BOARD RECOMMENDS A VOTE
“FOR” THE ELECTION OF MESSRS. BORKOWSKI,
CASAMENTO, SAPIRSTEIN AND SPOOR, AND DRS. RIDDELL AND SCHRAMM UNDER
PROPOSAL ONE.
DIRECTOR COMPENSATION
The
following section sets forth certain information regarding the
nominees for election as directors of the Company. There are no
family relationships between any of the directors and the
Company’s Named Executive Officers.
Director Nominee, Title
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Age
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Edward J. Borkowski – Chair and Independent
Director
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60
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Charles J. Casamento – Independent Director
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74
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Alastair Riddell, MSc.,MDChB.,DSc. – Independent
Director
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70
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Vern L. Schramm, Ph.D. – Independent Director
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77
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James Sapirstein – President, Chief Executive Officer and
Non-Independent Director
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58
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Johan M. (Thijs) Spoor – Non-Independent
Director
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47
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Edward J. Borkowski was appointed to
the Board in May 2015, and currently serves as its Chair. Mr.
Borkowski is a healthcare executive who currently serves as
Executive Vice President of MiMedx Group, Inc.
(NASDAQ: MDGX). Mr. Borkowski also currently serves as a director
for Co-Diagnostics, Inc. (NASDAQ: CODX), since May 2017. Previously
he served as the Chief Financial Officer of Aceto Corporation (NASDAQ: ACET) from
February 2018 to April 2018, and has held several executive
positions with for Concordia
International, an international specialty pharmaceutical company,
between May
2015 to February 2018. Mr. Borkowski has
also served as Chief Financial Officer of Amerigen Pharmaceuticals,
a generic pharmaceutical company with a focus on oral, controlled
release products and as the Chief
Financial Officer and Executive Vice President of Mylan N.V. In
addition, Mr. Borkowski previously held the position of Chief
Financial Officer with Convatec, a global medical device company
focused on wound care and ostomy, and Carefusion, a global medical
device company for which he helped lead its spin-out from Cardinal
Health into an independent public company. Mr. Borkowski has also
served in senior financial positions at Pharmacia and American Home
Products (Wyeth). He started his career with Arthur Andersen &
Co. after receiving his MBA in accounting from Rutgers University
subsequent to having earned his degree in Economics and Political
Science from Allegheny College. Mr. Borkowski is currently a
Trustee and a member of the Executive Committee of Allegheny
College.
Mr. Borkowski’s extensive healthcare and financial expertise,
together with his public company experience provides the Board and
management with valuable insight in the growth of the
Company’s business plan.
Charles J. Casamento was appointed to
the Board in March 2017. Since 2007, Mr. Casamento has been
executive director and principal of The Sage Group, a health care
advisory group. Prior to that, Mr. Casamento was president and
Chief Executive Officer of Osteologix, a startup company which he
oversaw going public, from October 2004 until April 2007. Mr.
Casamento was the founder of Questcor Pharmaceuticals where he was
President, Chief Executive Officer and Chair from 1999 through
2004. During his time at Questcor, the company acquired Acthar, a
product with sales that would eventually exceed $1.0 billion. Mr.
Casamento also served as President, Chief Executive Officer and
Chair of RiboGene Inc. until 1999 when RiboGene was merged another
company to form Questcor. He was also the Co-Founder, President and
Chief Executive Officer of Indevus (formerly Interneuron
Pharmaceuticals) and has held senior management positions at
Genzyme Corporation, where he was Senior Vice President, American
Hospital Supply, where he was Vice President of Business
Development for the Critical Care division, Johnson & Johnson,
Hoffmann-LaRoche and Sandoz. He currently serves on the Boards of
Directors of Relmada Therapeutics (OTCQB: RLMD) and Eton
Pharmaceuticals, and was previously a Director and Vice Chair of
the Catholic Medical Missions Board, a large not for profit
international organization. Mr. Casamento holds a bachelor's degree
in Pharmacy from Fordham University and an MBA from Iona
College.
Mr. Casamento’s expertise and knowledge of the financial
community combined with his experience in the healthcare sector
makes him a valued member of the Board
Dr. Alastair Riddell was
appointed to the Board in September 2015. Since June 2016, Dr.
Riddell has served as Chair of Nemesis Biosciences Ltd and Chair of
Feedback plc (LON: FDBK). He has also served as Chair of the South
West Academic Health Science network in the UK since January 2016.
Since his appointment in December 2015, Dr. Riddell he has served
as Non-Executive Director of Cristal Therapeutics in The
Netherlands. From September 2012 to February 2016, he served as
Chair of Definigen Ltd., and from November 2013 to September 2015
as Chair of Silence Therapeutics Ltd., and from October 2009 to
November 2012 as Chair of Procure Therapeutics. Between
2007 to 2009, Dr. Riddell served as the Chief Executive Officer of
Stem Cell Sciences plc. and between 2005 to 2007, served at
Paradigm Therapeutics Ltd. as the Chief Executive Officer. Between
1998 to 2005, Dr. Riddell also served as the Chief Executive
Officer of Pharmagene plc. Dr. Ridell began his career as a
doctor in general practice in a variety of hospital specialties and
holds both a Bachelor of Science and a Bachelor of Medical Sciences
degrees. He was recently awarded a Doctorate of Science, Honoris
Causa by Aston University.
Dr. Riddell’s medical background coupled with his expertise
in the life sciences industry, directing all phases of clinical
trials, before moving to sales, marketing and general management,
makes him a well-qualified member of the Board.
Dr. Vern L. Schramm was
appointed to the Board in October 2017. Dr. Schramm has served as
Professor of the Albert Einstein College of Medicine since 1987 and
Chair of the Department of Biochemistry from 1987 to 2015, and was
awarded the Ruth Merns Endowed Chair in Biochemistry. His
fields of interest include enzymatic transition state analysis,
transition state inhibitor design, biological targets for inhibitor
design, and mechanisms of N-ribosyltransferases. Dr. Schramm was
elected to the National Academy of Sciences in 2007, and served as
the Associate Editor for the Journal of the American
Chemical Society between
2003 to 2012. A frequent lecturer and presenter in topics related
to chemical biology, Dr. Schramm has been a consultant and advisor
to Pico Pharmaceuticals, Metabolon Inc., Sirtris Pharmaceuticals,
and BioCryst Pharmaceuticals. Dr. Schramm obtained his BS in
Bacteriology with an emphasis in chemistry from South Dakota State
College and holds a Master’s Degree in Nutrition with an
emphasis in biochemistry from Harvard University, a Ph.D. in
Mechanism of Enzyme Action from the Australian National University
and completed his postdoctoral training at NASA Ames Research
Center, Biological Sciences, with an NSF-NRC
fellowship.
Dr. Schramm’s substantial experience in biochemistry and
expertise in the chemistry related to non-systemic biologics makes
him a respected member of the Board and an asset to the Company
specifically in the development of its product
candidates.
James Sapirstein was appointed
to the Board on October 8, 2019 and as the Company’s
President and Chief Executive Officer effective that same day.
Prior to joining the Company, Mr. Sapirstein served as Chief
Executive Officer and as a director of ContraVir Pharmaceuticals,
Inc. (now known as Hepion Pharmaceuticals, Inc.) from March 2014 to
October 2018. Previously, Mr. Sapirstein was the Chief Executive
Officer of Alliqua Therapeutics from October 2012 to February 2014.
He founded and served as Chief Executive Officer of Tobira
Therapeutics from October 2006 to April 2011 and served as
Executive Vice President, Metabolic and Endocrinology for Serono
Laboratories from June 2002 to May 2005. Mr. Sapirstein’s
earlier career included a number of senior level positions in the
area of marketing and commercialization, including as Global
Marketing Lead for Viread (tenofovir) while at Gilead Sciences and
as Director of International Marketing of the Infectious Disease
Division at Bristol Myers Squibb. Mr. Sapirstein is currently the
Chair Emeritus of BioNJ, the New Jersey affiliate of the
Biotechnology Innovation Organization, and also serves on the
Emerging Companies and Health Section Boards of the Biotechnology
Innovation Organization. Mr. Sapirstein received his
bachelor’s degree in pharmacy from Rutgers University and
holds an MBA degree in management from Fairleigh Dickinson
University.
Mr. Sapirstein’s nearly 36 years of pharmaceutical industry
experience which spans areas such as drug development and
commercialization, including participation in 23 product launches,
six of which were global launches led by him makes him a valuable
asset to the Board and in his oversight and execution of the
Company’s business plan.
Johan M. (Thijs) Spoor was appointed to
the Board on May 14, 2014. He was the former Chief Executive
Officer of the Company since January 2016 and President since April
2015 until his resignation as President and Chief Executive Officer
effective October 8, 2019 but continues to serve as a director on
the Company’s Board. From September 2010 until December 2015,
he was the Chief Executive Officer of FluoroPharma Medical, Inc.
(OTCQB: FPMI), during which time he also served as Chair of the
Board from June 2012 to December 2015. From December 2008 to
February 2010, Mr. Spoor worked at Oliver Wyman as a consultant to
pharmaceutical and medical device companies. Prior to that, Mr.
Spoor was an equity research analyst at J.P. Morgan from July 2007
to October 2008 and at Credit Suisse from November 2005 to July
2007, covering the biotechnology and medical device industries. He
holds a Pharmacy degree from the University of Toronto as well as
an MBA from Columbia University.
Mr. Spoor’s background in the pharmaceutical industry
combined with his historical knowledge of the daily operations of
the Company provides him with a broad familiarity of the range of
issues confronting the Company makes him a qualified member of the
Board.
Non-Executive Director Compensation
Currently, each of the Company’s non-executive directors
receive (i) an annual retainer of $35,000 for their service on the
Board which is payable in either cash or shares of Common Stock in
quarterly installments, at the Company’s discretion; and (ii)
an annual grant of 30,000 shares of Common Stock. During the year
ended December 31, 2018, the Company elected to pay the annual
retainer to non-executive directors in cash.
The following table provides information regarding compensation
paid to non-employee directors for the year ended December 31,
2018. Messrs. Sapirstein, Shenouda and Spoor did not receive
compensation for their service on the Board as employee directors
for the year ended December 31, 2018. Information regarding
executive compensation paid to Messrs. Sapirstein, Shenouda and
Spoor during 2018 is reflected in the Summary Compensation table
under “Executive Compensation” of this Proxy Statement.
Name
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Fees Earned or Paid in Cash
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Edward
J. Borkowski
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$35,000
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$76,575
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-
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-
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$111,575
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Charles
J. Casamento
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$35,000
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$76,575
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-
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-
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$111,575
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Alastair
Riddell
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$35,000
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$76,575
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-
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-
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$111,575
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Vern
L. Schramm
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$35,000
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$76,575
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-
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-
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$111,575
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(1)
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Represents the aggregate grant date fair value of shares of the
Company’s Common Stock issued to each of our non-employee
directors in 2018 as partial payment of fees payable for each
director’s service on the Board in 2018, calculated in
accordance with ASC Topic 718.
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(2)
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Represents the aggregate grant date fair value of stock options
issued to each of our non-employee directors in 2018, calculated in
accordance with ASC Topic 718. As of December 31, 2018, Mr. Borkowski held a
total of 30,000 outstanding stock options, and Dr. Riddell held a
total of 30,000 outstanding stock options.
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Compensation Committee Interlocks and Insider
Participation
None of our executive officers currently serves, or has served
during the last three years, on the Compensation Committee of any
other entity that has one or more officers serving as a member of
our Board.
CORPORATE GOVERNANCE AND BOARD MATTERS
Board Leadership Structure
Currently, Messrs. Borkowski and Sapirstein serve as Chair of the
Board, and as President and Chief Executive Officer,
respectively. Our Board has determined that it is in the best
interests of the Board and the Company to maintain separate roles
for the both the Chair of the Board and the Chief Executive
Officer. The Board believes that this structure increases its
independence from management and, in turn, encourages the
appropriate level of oversight by management. Although the Board
believes the Company is currently best served by separation between
the role of Chair of the Board and Chief Executive Officer, the
Board reviews and considers the continued appropriateness of this
structure on an annual basis.
Director Independence
The Board has determined that all of its members, other than
Messrs. Sapirstein and Spoor, the Company’s President and
Chief Executive Officer and former President and Chief Executive
Officer, respectively, are “independent” within the
meaning of Rule 5605(a)(2) under the rules of the Nasdaq Stock
Market (“NASDAQ”), and the Securities and Exchange
Commission (“SEC”) rules regarding
independence.
Director Nomination Process
The Corporate Governance and Nominating Committee identifies
director nominees by first considering those current members of the
Board who are willing to continue service. Current members of the
Board with skills and experience that are relevant to our business
and are willing to continue their service as a director are
considered for re-election, balancing the value of continuity of
service by existing members of the Board with that of obtaining a
new perspective. Nominees for director are selected by a majority
of the members of the Board. Although the Company does not have a
formal diversity policy, in considering the suitability of director
nominees, the Corporate Governance and Nominating Committee
considers such factors as it deems appropriate to develop a Board
and its committees that are diverse in nature and comprised of
experienced and seasoned advisors. Factors considered by the
Corporate Governance and Nominating Committee include sound
judgment, knowledge, skill, diversity, integrity, experience with
businesses and other organizations of comparable size, including
experience in the biopharma industry, clinical studies, U.S. Food
and Drug Administration (“FDA”) compliance, intellectual property,
business, finance, administration or public service, the relevance
of a candidate’s experience to our needs and experience of
other Board members, experience with accounting rules and
practices, the desire to balance the considerable benefit of
continuity with the periodic injection of the fresh perspective
provided by new members, and the extent to which a director
candidate would be a desirable addition to the Board and its
committees.
The Board may consider suggestions for persons to be nominated for
director that are submitted by stockholders. The Corporate
Governance and Nominating Committee will evaluate stockholder
suggestions for director nominees in the same manner as it
evaluates suggestions for director nominees made by management,
then-current directors or other appropriate sources.
The Role of the Board in Risk Oversight
Our Board oversees a company-wide approach to risk management,
determines the appropriate risk level for the Company in general,
assesses the specific risks faced by the Company and reviews steps
taken by management to manage those risks. Although our Board has
ultimate oversight responsibility for the risk management process,
specific areas of risk are overseen by designation of such duties
and responsibilities to certain committees of the
Board.
Specifically, the Board has designated certain fiduciary duties to
its Compensation Committee, which is responsible for overseeing the
management of risks relating to our executive compensation plans
and arrangements, and the incentives created by the compensation
awards it administers. The Board has also designated specific
fiduciary duties to its Audit Committee, which is responsible for
overseeing the management of enterprise risks and financial risks,
as well as potential conflicts of interests. The Board is
responsible for overseeing the management of risks associated with
the independence of the Board.
Code of Business Conduct and Ethics
The Board adopted a code of business conduct and ethics (the
“Code”) that applies to our directors, officers
and employees. A copy of this Code is available on our website
at www.azurrx.com/investors.
We intend to disclose on our website any amendments to and waivers
of the Code that apply to our principal executive officer,
principal financial officer, principal accounting officer,
controller, or persons performing similar
functions.
Stockholder Communications
If you
wish to communicate with the Board, you may send your communication
in writing to AzurRx BioPharma, Inc., Attention: Corporate
Secretary – 760 Parkside Avenue, Downstate Biotechnology
Incubator, Suite 304, Brooklyn, New York 11226.
You
must include your name and address in the written communication and
indicate whether you are a stockholder of the Company. The
Corporate Secretary will review any communication received from a
stockholder, and all material and appropriate communications from
stockholders will be forwarded to the appropriate director or
directors or committee of the Board based on the subject
matter.
Meetings of the Board
Each of the Company’s directors who served during 2018
attended or participated in no less than 75% or more of the
aggregate of (i) the total number of meetings of the Board;
and (ii) the total number of meetings held by all committees
of the Board on which such director served as a member during the
year ended 2018. Although directors are not required to attend the
Company’s annual meeting of stockholders, they are encouraged
to attend.
The following table represents the current composition of each
committee of the Board and meetings held as well as actions taken
by unanimous written consent (“UWC”) in lieu of holding a meeting, during the
fiscal year ended December 31, 2018:
|
|
|
Director
|
|
|
|
Corporate
Governance and Nominating
|
Edward J.
Borkowski
|
C
|
|
X
|
|
Charles J.
Casamento
|
X
|
X
|
X
|
X
|
Alastair
Riddell
|
X
|
X
|
|
X
|
Vern L.
Schramm
|
X
|
|
|
|
James
Sapirstein
|
X
|
|
|
|
Johan M. (Thijs)
Spoor
|
X
|
|
|
|
Meetings
Held During 2018
|
3
|
4
|
1
|
-
|
Actions
Taken by UWC During 2018
|
4
|
-
|
1
|
-
|
C
– Chair of the Board
CC
– Committee Chair
X
– Member
|
|
|
|
|
Board Committees
The standing committees of the Board consist of the Audit
Committee, Compensation Committee, and Corporate Governance and
Nominating Committee. Our Board has adopted written charters
for each of these committees, copies of which are available on our
website at www.azurrx.com/investors.
Our Board may establish other committees as it deems necessary or
appropriate from time to time.
Audit Committee
|
The
duties and responsibilities of the Audit Committee include but are
not limited to:
●
appointing,
compensating, retaining, evaluating, terminating, and overseeing
our independent registered public accounting firm;
●
discussing with the
Company’s independent registered public accounting firm the
independence of its members from its management;
●
reviewing with the
Company’s independent registered public accounting firm the
scope and results of their audit;
●
approving all audit
and permissible non-audit services to be performed by the
Company’s independent registered public accounting
firm;
●
overseeing the
financial reporting process and discussing with management and the
Company’s independent registered public accounting firm the
interim and annual financial statements that are filed with the
SEC;
●
reviewing and
monitoring our accounting principles, accounting policies,
financial and accounting controls, and compliance with legal and
regulatory requirements;
●
coordinating
oversight of the Code and the Company’s disclosure controls
and procedures on behalf of the Board;
●
establishing
procedures for the confidential and/or anonymous submission of
concerns regarding accounting, internal controls or auditing
matters; and
●
reviewing and
approving related-person transactions.
|
The
rules of NASDAQ require our Audit Committee to consist of at least
three directors, all of whom must be deemed to be independent
directors under NASDAQ rules. The Board has affirmatively
determined that Messrs. Borkowski and Casamento, and Dr. Riddell,
each meet the definition of “independent director” for
purposes of serving on an Audit Committee under NASDAQ rules.
Additionally, the Board has determined that Messrs. Borkowski and
Casamento each qualify as an “audit committee financial
expert,” as such term is defined in Item 407(d)(5) of
Regulation S-K.
|
Compensation Committee
|
The
duties and responsibilities of the Compensation Committee include
but are not limited to:
●
reviewing key
employee compensation goals, policies, plans and
programs;
●
reviewing and
approving the compensation of our directors and executive
officers;
●
reviewing and
approving employment agreements and other similar arrangements
between the Company and its executive officers; and
●
appointing and
overseeing any compensation consultants or advisors to the
Company.
|
The rules of NASDAQ require our Compensation Committee to consist
entirely of independent directors. The Board has affirmatively
determined that Mr. Borkowski and Dr. Riddell meet the definition
of “independent director” for purposes of serving on
the Compensation Committee under NASDAQ rules.
|
|
|
Corporate Governance and Nominating Committee
|
The
duties and responsibilities of the Corporate Governance and
Nominating Committee include but are not limited to:
●
assisting the Board
in identifying qualified individuals to become members of the
Board;
●
determining the
composition of the Board and monitoring the activities of the Board
to assess overall effectiveness; and
●
developing and
recommending to our Board corporate governance guidelines
applicable to the Company and advising our Board on corporate
governance matters.
|
|
|
EXECUTIVE COMPENSATION
The
following table sets forth information regarding the
Company’s current executive officers as appointed by the
Board, each to serve in such position until their respective
successors have been duly appointed and qualified or until their
earlier death, resignation or removal from office.
Executive Officer
|
|
Title
|
James
Sapirstein
|
58
|
President,
Chief Executive Officer and Director
|
Maged
Shenouda
|
55
|
Chief
Financial Officer
|
James
E. Pennington
|
76
|
Chief
Medical Officer
|
The
Company’s executive officers are appointed by and serve at
the discretion of the Board, subject to the terms of any employment
agreements they may have with the Company. The following is a brief
description of the qualifications and business experience of each
of the Company’s current executive officers.
James Sapirstein. Please see Mr. Sapirstein’s
biography under the “Directors” section of this Proxy
Statement.
Maged Shenouda was
appointed as Chief Financial Officer of the Company in September
2017 after serving as a director on the Board since his appointment
in October 2015. Effective October 8, 2019, Mr. Shenouda resigned
as a director but continues to serve as the Company’s Chief
Financial Officer. Mr. Shenouda’s financial experience in the
biotechnology industry includes Head of Business Development at
Retrophin, Inc. from January 2014 to November 2014. From January
2012 to September 2013, he served as Head of East Coast Operations
for the Blueprint Life Science Group. Prior to that, he was a
financial analyst at UBS from January 2004 to March 2010 and later
at Stifel Nicolaus from June 2010 to November 2011. He currently
serves on the Board of Directors of Relmada Therapeutics, Inc.
(OTCQB: RLMD). Mr. Shenouda received an MBA from Rutgers Graduate
School of Management and a BS in Pharmacy from St. John's
College of Pharmacy and is a Registered Pharmacist in New Jersey
and California.
Dr. James E. Pennington was appointed as Chief Medical
Officer of the Company in May 2018. Prior to joining the Company, Dr. Pennington
served as Senior Clinical Fellow from 2010 to 2018 and as Executive
Vice President and Chief Medical Officer from 2007 to 2010 at
Anthera Pharmaceuticals, Inc. (NASDAQ: ANTH). From 2004 to 2007,
Dr. Pennington served as Executive Vice President and Chief Medical
Officer at CoTherix, Inc., and has held various executive positions
at a number of pharmaceutical companies, including InterMune Inc.,
Shaman Pharmaceuticals and Bayer Corporation. He has served on
several editorial boards, and has authored numerous original
research publications and reviews. Dr. Pennington is currently a
Clinical Professor of Medicine with the University of California
San Francisco, where he has taught since 1986. Prior to that, he
was a professor at Harvard Medical School. Dr. Pennington received
a Bachelor of Arts from the University of Oregon and a Doctor of
Medicine from the University of Oregon School of Medicine, and is
Board Certified in internal medicine and infectious
diseases.
Summary Compensation
The
table set forth below reflects certain information regarding the
compensation paid or accrued during
the years ended December 31, 2018 and 2017 to our Chief Executive
Officer and our executive officers, other than our Chief Executive
Officer, who were serving as an executive officer as of December
31, 2018, and whose annual compensation exceeded $100,000 during
such year (collectively the “Named Executive
Officers”).
As previously reported on the Company’s Current Report on
Form 8-K filed on March 28, 2019, Dr. Dupret retired and resigned
from his position as President of AzurRx SAS, a wholly owned French
subsidiary of the Company effective July 1, 2019. Due to the
resignation of Mr. Spoor as President and Chief Executive Officer
effective October 8, 2019, Mr. Sapirstein was appointed as
President and Chief Executive Officer of the Company effective that
same day. Compensation paid to Dr. Dupret and Mr. Spoor during the
years ended December 31, 2018 and 2017 is reflected in the table
below.
Current Named Executive Officers
|
Year
|
Salary
|
Bonus
|
Equity
Awards
|
All Other
Compensation
|
Total
|
James
Sapirstein (1)
|
2018
|
-
|
-
|
-
|
-
|
-
|
President and Chief Executive Officer
|
2017
|
-
|
-
|
-
|
-
|
-
|
Maged Shenouda (2)
|
2018
|
$296,666
|
$82,500
|
$207,300 (3)
|
-
|
$586,466
|
Chief Financial Officer
|
2017
|
$91,667
|
-
|
$336,500 (4)
|
-
|
$428,167
|
James
E. Pennington (3)
|
2018
|
$148,718
|
-
|
$155,475
|
-
|
$304,193
|
Chief Medical Officer
|
2017
|
-
|
-
|
-
|
-
|
-
|
Former Named Executive Officers
|
|
|
|
|
|
|
Johan M. (Thijs) Spoor
|
2018
|
$425,000
|
$212,500
|
$608,000 (3)
|
-
|
$1,245,500
|
Former President and Chief Executive Officer
|
2017
|
$454,167
|
$170,000
|
$386,900 (4)
|
-
|
$1,011,067
|
Daniel Dupret
|
2018
|
$234,999
|
-
|
$169,980 (3)
|
-
|
$404,979
|
Former Chief Scientific Officer
|
2017
|
$208,673
|
-
|
$213,000 (4)
|
-
|
$421,673
|
(1)
|
Mr.
Sapirstein received no compensation during this period or prior to
his appointments as the Company’s President and Chief
Executive Officer effective October 8, 2019.
|
|
(2)
|
Mr. Shenouda received no compensation prior to his appointment as
the Company’s Chief Financial Officer effective September 26,
2017.
|
|
(3)
|
Dr. Pennington received no compensation prior to his appointment as
the Company’s Chief Medical Officer effective May 30,
2018.
|
|
(4)
|
Represents the grant date fair value of restricted stock and stock
options issued during the year ended December 31, 2018, calculated
in accordance with ASC Topic 718. The assumptions used in the
calculation of these amounts are included in Note 13 of the notes
to the consolidated financial statements contained in the
Company’s Annual Report, filed with the SEC on April 1,
2019.
The restricted stock and stock options issued to Mr. Shenouda and
Dr. Dupret in 2018 are fully vested. $278,665 of the shares of
restricted stock issued to Mr. Spoor in 2018 is currently unvested
and is scheduled to vest either over time or upon achievement of
certain performance criteria. The Company is unable to determine
the probability of achieving the performance criteria associated
with the stock options and instead has reported the grant date fair
value of the stock options assuming the maximum award amount is
achieved.
|
|
(5)
|
Represents the grant date fair value of stock options issued during
the year ended December 31, 2017, calculated in accordance with ASC
Topic 718. The assumptions used in the calculation of these amounts
are included in Note 13 of the notes to the consolidated financial
statements contained in the Company’s Annual Report on Form
10-K for the year ended December 31, 2017, filed with the SEC on
March 16, 2018.
The stock options issued to Mr. Spoor in 2017 are fully vested. The
stock options issued to Mr. Shenouda and Dr. Dupret are currently
unvested and are scheduled to vest upon achievement of certain
performance criteria. The Company is unable to determine the
probability of achieving the performance criteria associated with
the stock options and instead has reported the grant date fair
value of the stock options assuming the maximum award amount is
achieved.
|
|
Employment Arrangements and Potential Payments upon Termination or
Change of Control
Sapirstein Employment Agreement. Effective October 8, 2019, the Company entered
into an employment agreement with Mr. Sapirstein to serve as its
President and Chief Executive Officer for a term of three years,
subject to further renewal upon agreement of the parties. The
employment agreement with Mr. Sapirstein provides for a base salary
of $450,000 per year. In addition to the base salary, Mr.
Sapirstein is eligible to receive (i) a bonus of up to 40% of his
base salary on an annual basis, based on certain milestones that
are yet to be determined; (ii) 1% of net fees received by the
Company upon entering into license agreements with any third-party
with respect to any product current in development or upon the sale
of all or substantially all assets of the Company; (iii) a grant of
200,000 restricted shares of the Company’s Common Stock which
are subject to vest as follows (a) 100,000 upon the first
commercial sale of MS1819 in the United States, and (b) 100,000
upon the total market capitalization of the Company exceeding $1.0
billion for 20 consecutive trading days; (iv) a grant of 300,000
10-year stock options to purchase shares of the Company’s
Common Stock which are subject to vest as follows (a) 50,000 upon
the Company initiating its next Phase II clinical trial in the
United States for MS1819, (b) 50,000 upon the Company completing
its next or subsequent Phase II clinical trial in the United States
for MS1819, (c) 100,000 upon the Company initiating a Phase III
clinical trial in the United States for MS1819, and (d) 100,000
upon the Company initiating a Phase I clinical trial in the United
States for any product other than MS1819. Mr. Sapirstein is
entitled to receive 20 days of paid vacation, participate in full
employee health benefits and receive reimbursement for all
reasonable expenses incurred in connection with his services to the
Company.
In the event that Mr. Sapirstein’s employment is terminated
by the Company for Cause, as defined in his employment agreement,
or by Mr. Sapirstein voluntarily, then will not be entitled to
receive any payments beyond amounts already earned, and any
unvested equity awards will terminate. In the event that Mr.
Sapirstein’s employment is terminated as a result of an
Involuntary Termination Other than for Cause, as defined in the
Agreement, Mr. Sapirstein will be entitled to receive the following
compensation: (i) severance in the form of continuation of his
salary (at the Base Salary rate in effect at the time of
termination, but prior to any reduction triggering Good Reason) for
a period of 12 months following the termination date; (ii) payment
of Executive’s premiums to cover COBRA for a period of 12
months following the termination date; and (iii) a prorated annual
bonus.
Shenouda Employment Agreement. Effective September 26, 2017, the Company entered
into an employment agreement with Mr. Shenouda to serve as its
Executive Vice-President of Corporate Development and Chief
Financial Officer for a term of three years, during which time he
receives a base salary of $275,000, which amount may be increased
by the Company at any time during the term of the agreement. In
addition to the base salary, Mr. Shenouda is eligible to receive an
annual milestone cash bonus based on the achievement of certain
financial, clinical development, and/or business milestones, which
milestones will be established annually by the Company’s
Board or the Compensation Committee. Upon execution of Mr.
Shenouda’s employment agreement, Mr. Shenouda became entitled
to receive options to purchase 100,000 shares of the
Company’s Common Stock pursuant to the Company’s 2014
Plan, which options will vest as follows so long as Mr. Shenouda is
serving as either Executive Vice-President of Corporate
Development or as Chief Financial Officer: (i) 75% upon
acceptance of a US IND for MS1819, and (ii) 25% upon the completion
of a Phase II clinical trial for MS1819. These stock options are
exercisable for $4.39 per share and will expire on September 25,
2027.
The Company may terminate Mr. Shenouda’s employment agreement
at any time, with or without Cause, as such term is defined in the
agreement. If the Company terminates the agreement without Cause,
or if the agreement is terminated due to a Change of Control, as
such term is defined in the agreement, Mr. Shenouda will be
entitled to (i) all salary owed through the date of termination;
(ii) any unpaid annual milestone bonus; (iii) severance in the
form of continuation of his salary for the greater of a period of
12 months following the termination date or the remaining term of
the employment agreement; (iv) payment of premiums to cover COBRA
for a period of 12 months following the termination date; (v) a
prorated annual bonus equal to the target annual milestone bonus,
if any, for the year of termination multiplied by the formula set
forth in the agreement; and (vi) immediate accelerated vesting of
any unvested options or other unvested awards.
Pennington Employment Agreement. Effective May 28, 2018, the Company entered into
an employment agreement with Mr. Pennington to serve as its Chief
Medical Officer. The employment agreement with Dr. Pennington
provides for a base annual salary of $250,000. In addition to his
salary, Dr. Pennington is eligible to receive an annual milestone
bonus, awarded at the sole discretion of the Board based on his
attainment of certain financial, clinical development, and/or
business milestones established annually by the Board or
Compensation Committee. The employment agreement is terminable by
either party at any time. In the event of termination by the
Company other than for cause, Dr. Pennington is entitled to three
months’ severance payable over such period. In the event of
termination by the Company other than for cause in connection with
a Change of Control, Dr. Pennington will receive six months’
severance payable over such period.
On June 28, 2018, Mr. Pennington was granted stock options to
purchase 75,000 shares of the Company’s Common Stock,
issuable pursuant to the 2014 Plan, subject to vesting conditions
as follows: (i) 50% upon U.S. acceptance of an IND for MS1819-SD,
and (ii) 50% upon the first CF patient doses with MS1819-SD
anywhere in the world. These options had an estimated fair value at
the grant date of $155,475 to be expensed when the above milestones
are probable. 37,500 of these options vested and $77,738 was
expensed in 2018 due to the FDA acceptance of the Company’s
IND application for MS1819-SD in 2018.
Spoor Employment Agreement. Effective January 1, 2016, the Company entered
into an employment agreement with Mr. Spoor to serve as President
and Chief Executive Officer for a term of three years. The
employment agreement with Mr. Spoor provided for a base annual
salary of $350,000, which annual salary was increased to $425,000
upon completion of the Company’s initial public offering and
listing of its Common Stock on NASDAQ in October 2016. In addition
to his salary, Mr. Spoor was eligible to receive an annual
milestone bonus, awarded at the sole discretion of the Board based
on his attainment of certain financial, clinical development,
and/or business milestones established annually by the Board or
Compensation Committee. The employment agreement was
terminable by either party at any time. In the event of termination
by the Company without Cause or by Mr. Spoor for Good Reason not in
connection with a Change of Control, as those terms were defined in
the agreement, he was entitled to 12 months’ severance
payable over such period. In the event of termination by the
Company without Cause or by Mr. Spoor for Good Reason in connection
with a Change of Control, as those terms were defined in the
agreement, he would have received eighteen months’ worth of
his base salary in a lump sum as severance.
Per his employment agreement, Mr. Spoor was granted 100,000 shares
of restricted Common Stock on February 3, 2017, which shares were
subject to vesting as follows: (i) 50,000 upon the first commercial
sale in the United States of MS1819, and (ii) 50,000 upon our total
market capitalization exceeding $1.0 billion for 20 consecutive
trading days, in each case subject to the earlier determination of
a majority of the Board. In addition, Mr. Spoor was entitled to
receive stock options issuable under the terms of the Amended and
Restated 2014 Omnibus Equity Incentive Plan (the
“2014 Plan”) to purchase 380,000 shares of Common
Stock at a price per share equal to the closing price of the
Company’s Common Stock on the trading day immediately prior
to the date of issuance.
On June 8, 2016, the Board reviewed and modified Mr. Spoor’s
agreement as follows: the 380,000 stock options described in the
agreement had neither been granted nor priced since certain key
provisions, particularly the underlying exercise price, had not
been determined. The Board determined that the options will be
granted at a future date, at the discretion of the Board, and
priced at that future date when they are granted. In the first
quarter of 2017, the Board elected to issue 100,000 stock options
to Mr. Spoor with an exercise price of $4.48 per share. On
September 29, 2017, Mr. Spoor was granted 100,000 shares of
restricted Common Stock subject to vesting conditions as follows:
(i) 75% upon FDA acceptance of a U.S. IND application for MS1819,
and (ii) 25% upon the Company completing a Phase IIa clinical trial
for MS1819, in satisfaction of the Company’s obligation to
issue the additional 280,000 options to Mr. Spoor described above,
with an estimated fair value at the grant date of $425,000 to be
expensed when the Company determines that achievement of the
milestones are probable.
In connection with Mr. Spoor’s resignation as the
Company’s President and Chief Executive Officer effective
October 8, 2019, he received no additional or severance
compensation.
Outstanding Equity Incentive Awards at Fiscal Year-End
The following table sets forth information regarding unexercised
options, stock that has not vested and equity incentive awards held
by each of the Named Executive Officers outstanding as of
December 31, 2018 and 2017:
|
|
Option Awards
|
Stock Awards
|
|
Name
|
Grant Date
|
Number of securities underlying unexercised options (#)
exercisable
|
Equity incentive plan awards: Number of underlying unexercised
unearned options (#)
|
Option exercise price
($)
|
Option expiration
date
|
Number of shares or units of stock that have not vested
(#)
|
Market value of shares or units of stock that have not vested
($)
|
Equity incentive plan awards: Number of Unearned shares, units or
other rights that have not vested (#)
|
Equity incentive plan awards: Market or Payout value of unearned
shares, units or other rights that have not vested ($)
|
|
James
Sapirstein
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Maged Shenouda
|
7/12/2016
|
-
|
-
|
-
|
-
|
-
|
-
|
30,000
|
$112,500
|
|
|
2/3/2017
|
30,000
|
-
|
$4.48
|
2/2/2027
|
-
|
-
|
-
|
-
|
|
|
9/26/2017 (1)
|
100,000
|
-
|
$4.39
|
9/24/2027
|
-
|
-
|
-
|
-
|
|
|
6/28/2018
|
100,000
|
|
$3.04
|
6/27/2023
|
-
|
-
|
-
|
-
|
|
James
E. Pennington
|
6/28/2018
|
37,500
|
37,500
|
$3.04
|
6/27/2023
|
-
|
-
|
-
|
-
|
|
Former Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
Johan (Thijs) Spoor
|
1/4/2016 (2)
|
100,000
|
-
|
$1.00
|
1/4/2021
|
-
|
-
|
-
|
-
|
|
|
2/3/2017
|
100,000
|
-
|
$4.48
|
2/3/2027
|
-
|
-
|
-
|
-
|
|
|
2/3/2017 (3)
|
-
|
-
|
-
|
-
|
-
|
-
|
100,000
|
$364,000
|
|
|
9/29/2017 (4)
|
-
|
-
|
-
|
-
|
100,000
|
$425,000
|
-
|
-
|
|
|
6/28/2018
|
-
|
-
|
-
|
-
|
108,334
|
$329,336
|
91,666
|
$278,665
|
|
Daniel Dupret
|
8/24/2017 (5)
|
100,000
|
-
|
$3.60
|
8/23/2022
|
-
|
-
|
-
|
-
|
|
(1)
|
Represents stock options issued to Mr. Shenouda on September 26,
2017, which options were subject to the following vesting schedule
so long as Mr. Shenouda is serving as either Executive
Vice-President of Corporate Development or as Chief Financial
Officer of the Company: (i) 75% upon FDA acceptance of a U.S. IND
application for MS1819, and (ii) 25% upon the Company completing a
Phase IIa clinical trial for MS1819.
|
(2)
|
Represents options to purchase shares of the Company’s Common
Stock issued to Mr. Spoor by a third party, prior to the
Company’s initial public offering in October
2016.
|
(3)
|
Represents the restricted stock award issued to Mr. Spoor on
February 3, 2017 under the terms of his employment agreement, which
shares will only vest as follows: (i) 50,000 upon the first
commercial sale in the United States of MS1819, and (ii) 50,000
upon our total market capitalization exceeding $1.0 billion for 20
consecutive trading days. The value reported for this award was
calculated using the closing price of the Company’s Common
Stock on February 3, 2017, as
reported by NASDAQ, assuming achievement if the maximum award
amount.
|
(4)
|
Represents the restricted stock award issued to Mr. Spoor on
February 3, 2017 under the terms of his employment agreement, which
shares will only vest as follows: (i) 50,000 upon the first
commercial sale in the United States of MS1819, and (ii) 50,000
upon our total market capitalization exceeding $1.0 billion for 20
consecutive trading days. The value reported for this award was
calculated using the closing price of the Company’s Common
Stock on September 29, 2017, as
reported by NASDAQ, assuming achievement if the maximum award
amount.
|
(5)
|
Represents stock options issued to Dr. Dupret on August 24, 2017,
which options were subject to the following vesting schedule so
long as Dr. Dupret is serving as the Company’s Chief
Scientific Officer: (i) 75% upon FDA acceptance of a U.S. IND
application for MS1819, and (ii) 25% upon the Company completing a
Phase IIa clinical trial for MS1819.
|
Securities Authorized for Issuance Under Equity Compensation
Plans
The following table provides information as of December 31, 2018
regarding equity compensation plans approved by our security
holders and equity compensation plans that have not been approved
by our security holders:
Plan category
|
Number of securities to be issued upon exercise of outstanding
options, warrants and rights
|
Weighted-average exercise price of outstanding options,
warrants and rights
|
Number of securities remaining available for future issuance under
equity compensation plans (1)
|
Equity
compensation plans approved by security holders
|
994,000
|
$3.58
|
471,764
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
Total
|
994,000
|
$3.58
|
471,764
|
(1)
|
Excludes securities reflected in first column, “Number of
securities to be issues upon exercise of outstanding options,
warrants and rights”.
|
Amended and Restated 2014 Omnibus Equity Incentive
Plan
The Board and stockholders have adopted and approved the 2014 Plan,
which is a comprehensive incentive compensation plan under which we
can grant equity-based and other incentive awards to our officers,
employees, directors, consultants and advisers. The purpose of the
2014 Plan is to help us attract, motivate and retain such persons
with awards under the 2014 Plan and thereby enhance stockholder
value.
Administration. The 2014 Plan
is administered by the Compensation Committee of the Board, which
consists of three members of the Board, each of whom is a
“non-employee director” within the meaning of Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), an “outside
director” within the meaning of Section 162(m) of the
Internal Revenue Code (the “Code”). Among other things, the Compensation
Committee has complete discretion, subject to the express limits of
the 2014 Plan, to determine the directors, employees and
nonemployee consultants to be granted an award, the type of award
to be granted the terms and conditions of the award, the form of
payment to be made and/or the number of shares of Common Stock
subject to each award, the exercise price of each option and base
price of each stock appreciation right (“SAR”), the term of each award, the vesting
schedule for an award, whether to accelerate vesting, the value of
the Common Stock underlying the award, and the required
withholding, if any. The Compensation Committee may amend, modify
or terminate any outstanding award, provided that the
participant’s consent to such action is required if the
action would impair the participant’s rights or entitlements
with respect to that award. The Compensation Committee is also
authorized to construe the award agreements, and may prescribe
rules relating to the 2014 Plan. Notwithstanding the foregoing, the
Compensation Committee does not have any authority to grant or
modify an award under the 2014 Plan with terms or conditions that
would cause the grant, vesting or exercise thereof to be considered
nonqualified “deferred compensation” subject to Code
Section 409A.
Grant of Awards; Shares Available for Awards. The 2014 Plan provides for the grant of stock
options, SARs, performance share awards, performance unit awards,
distribution equivalent right awards, restricted stock awards,
restricted stock unit awards and unrestricted stock awards to
non-employee directors, officers, employees and nonemployee
consultants of the Company or its affiliates. The aggregate number
of shares of Common Stock that may be issued under the 2014 Plan
shall not exceed 10% of the issued and outstanding shares of Common
Stock on an as converted basis (the “As Converted
Shares”), on a rolling
basis. For calculation purposes, the As Converted Shares shall
include all shares of Common Stock and all shares of Common Stock
issuable upon the conversion of outstanding preferred stock and
other convertible securities, but shall not include any shares of
Common Stock issuable upon the exercise of options, warrants and
other convertible securities issued pursuant to the 2014 Plan. The
number of authorized shares of Common Stock reserved for issuance
under the 2014 Plan shall automatically be increased concurrently
with our issuance of fully paid and non-assessable shares of As
Converted Shares. Shares shall be deemed to have been
issued under the 2014 Plan solely to the extent actually issued and
delivered pursuant to an award. If any award expires, is cancelled,
or terminates unexercised or is forfeited, the number of shares
subject thereto is again available for grant under the 2014
Plan.
The number of shares of Common Stock for which awards may be
granted under the 2014 Plan to a participant who is an employee in
any calendar year is limited to 300,000 shares. Future new hires
and additional non-employee directors and/or consultants would be
eligible to participate in the 2014 Plan as well. The number of
stock options and/or shares of restricted stock to be granted to
executives and directors cannot be determined at this time as the
grant of stock options and/or shares of restricted stock is
dependent upon various factors such as hiring requirements and job
performance.
Stock Options. The 2014 Plan
provides for either “incentive stock options”
(“ISOs”), which are intended to meet the
requirements for special federal income tax treatment under the
Code, or “nonqualified stock options”
(“NQSOs”). Stock options may be granted on such
terms and conditions as the Compensation Committee may
determine; provided,
however, that the per share
exercise price under a stock option may not be less than the fair
market value of a share of Common Stock on the date of grant and
the term of the stock option may not exceed 10 years (110% of such
value and five years in the case of an ISO granted to an employee
who owns (or is deemed to own) more than 10% of the total combined
voting power of all classes of the Company's capital stock or a
parent or subsidiary of the Company). ISOs may only be granted to
employees. In addition, the aggregate fair market value of Common
Stock covered by one or more ISOs (determined at the time of
grant), which are exercisable for the first time by an employee
during any calendar year may not exceed $100,000. Any excess is
treated as a NQSO.
Stock Appreciation Rights. A
SAR entitles the participant, upon exercise, to receive an amount,
in cash or stock or a combination thereof, equal to the increase in
the fair market value of the underlying Common Stock between the
date of grant and the date of exercise. SARs may be granted in
tandem with, or independently of, stock options granted under the
2014 Plan. A SAR granted in tandem with a stock option (i) is
exercisable only at such times, and to the extent, that the related
stock option is exercisable in accordance with the procedure for
exercise of the related stock option; (ii) terminates upon
termination or exercise of the related stock option (likewise, the
Common Stock option granted in tandem with a SAR terminates upon
exercise of the SAR); (iii) is transferable only with the related
stock option; and (iv) if the related stock option is an ISO, may
be exercised only when the value of the stock subject to the stock
option exceeds the exercise price of the stock option. A SAR that
is not granted in tandem with a stock option is exercisable at such
times as the Compensation Committee may
specify.
Performance Shares and Performance Unit Awards. Performance share and performance unit awards
entitle the participant to receive cash or shares of Common Stock
upon the attainment of specified performance goals. In the case of
performance units, the right to acquire the units is denominated in
cash values.
Distribution Equivalent Right Awards. A distribution equivalent right award entitles
the participant to receive bookkeeping credits, cash payments
and/or Common Stock distributions equal in amount to the
distributions that would have been made to the participant had the
participant held a specified number of shares of Common Stock
during the period the participant held the distribution equivalent
right. A distribution equivalent right may be awarded as a
component of another award under the 2014 Plan, where, if so
awarded, such distribution equivalent right will expire or be
forfeited by the participant under the same conditions as under
such other award.
Restricted Stock Awards and Restricted Stock Unit
Awards. A restricted stock
award is a grant or sale of Common Stock to the participant,
subject to our right to repurchase all or part of the shares at
their purchase price (or to require forfeiture of such shares if
issued to the participant at no cost) in the event that conditions
specified by the Compensation Committee in the award are not
satisfied prior to the end of the time period during which the
shares subject to the award may be repurchased by or forfeited to
us. Our restricted stock unit entitles the participant to receive a
cash payment equal to the fair market value of a share of Common
Stock for each restricted stock unit subject to such restricted
stock unit award, if the participant satisfies the applicable
vesting requirement.
Unrestricted Stock Awards. An
unrestricted stock award is a grant or sale of shares of our Common
Stock to the participant that is not subject to transfer,
forfeiture or other restrictions, in consideration for past
services rendered to the Company or an affiliate or for other valid
consideration.
Change-in-Control Provisions.
In connection with the grant of an award, the Compensation
Committee may provide that, in the event of a change in control,
such award will become fully vested and immediately
exercisable.
Amendment and Termination. The
Compensation Committee may adopt, amend and rescind rules relating
to the administration of the 2014 Plan, and amend, suspend or
terminate the 2014 Plan, but no such amendment or termination will
be made that materially and adversely impairs the rights of any
participant with respect to any award received thereby under the
2014 Plan without the participant’s consent, other than
amendments that are necessary to permit the granting of awards in
compliance with applicable laws.
Compensation Committee Interlocks and Insider
Participation
No executive officers of the Company serve on the Compensation
Committee (or in a like capacity) for the Company or any other
entity.
Policy and Procedures Governing Related Party
Transactions
The Board is committed to upholding the highest legal and ethical
conduct in fulfilling its responsibilities and recognizes that
related party transactions can present a heightened risk of
potential or actual conflicts of interest.
The SEC rules define a related party transaction to include any
transaction, arrangement or relationship which: (i) we are a
participant; (ii) the amount involved exceeds $120,000; and (iii)
executive officer, director or director nominee, or any person who
is known to be the beneficial owner of more than 5% of our Common
Stock, or any person who is an immediate family member of an
executive officer, director or director nominee or beneficial owner
of more than 5% of our Common Stock had or will have a direct or
indirect material interest.
Although we do not maintain a formal written procedure for the
review and approval of transactions with such related persons, it
is our policy for the disinterested members of our Board to review
all related party transactions on a case-by-case basis. To
receive approval, a related-party transaction must have a
legitimate business purpose for us and be on terms that are fair
and reasonable to us and our stockholders and as favorable to us
and our stockholders as would be available from non-related
entities in comparable transactions.
All related party transactions must be disclosed in our applicable
filings with the SEC as required under SEC rules.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act, requires our officers,
directors, and persons who beneficially own more than 10% of our
Common Stock to file reports of ownership and changes in ownership
with the SEC. Officers, directors, and greater-than-ten-percent
shareholders are also required by the SEC to furnish us with copies
of all Section 16(a) forms that they file.
Based solely upon a review of these forms that were furnished to
us, we believe that all reports required to be filed by these
individuals and persons under Section 16(a) were filed during the
year ended December 31, 2018 and that such filings were
timely, except for the
following:
●
Mr. Borkowski, a
director, filed two late Form 4s reporting an aggregate of four
transactions;
●
Mr. Casamento, a
director, filed a late Form 4 reporting one
transaction;
●
Dr. Dupret, the
former Chief Scientific Officer, filed a late Form 4 reporting two
transactions;
●
Dr. Pennington, the
Chief Medical Officer, filed a late Form 4 reporting one
transaction;
●
Dr. Riddell, a
director, filed a late Form 4 reporting one
transaction;
●
Mr. Ross Jr., an
individual who owns in excess of 10% of our Common Stock, filed a
late Form 4 reporting five transactions; and
●
Dr. Schramm, a
director, filed a late Form 4 reporting one
transaction.
PROPOSAL NO. 2:
|
AMENDMENT TO OUR CHARTER TO AUTHORIZE OUR BOARD TO EFFECT A REVERSE
STOCK SPLIT
|
Overview
The Board of the Company has determined that it is advisable in the
best interests of the Company and its stockholders, for the Company
to amend its Charter (the “Charter
Amendment”), to authorize
the Board to effect a reverse stock split of the issued and
outstanding shares of our Common Stock at a specific ratio, ranging
from one-for-two (1:2) to one-for-five (1:5) (the
“Approved Split
Ratios”), to be
determined by the Board (the “Reverse
Split”). A vote for this
Proposal will constitute approval of the Reverse Split that, once
authorized by the Board and affected by filing the Charter
Amendment with the Delaware Division of Corporations, will combine
between two and five shares of our Common Stock into one share of
Common Stock. If implemented, the Reverse Split will have the
effect of decreasing the number of shares of our Common Stock
issued and outstanding.
Accordingly, stockholders are asked to approve the Charter
Amendment set forth in Appendix
B to effect the Reverse
Split consistent with those terms set forth in this Proposal, and
to grant authorization to the Board to determine, in its sole
discretion, whether or not to implement the Reverse Split, as well
as its specific ratio within the range of the Approved Split
Ratios, and on or prior to the one-year anniversary date of the
Annual Meeting. The text of Appendix
B remains subject to modification to include such
changes as may be required by the Secretary of State of the State
of Delaware and as our Board deems necessary or advisable to
implement the Reverse Split.
If approved by the holders of our outstanding voting securities,
the Reverse Split proposal would permit, but not require, our Board
to implement a reverse stock split of our authorized Common Stock
for the Approved Split Ratios, at any time prior to the
one-year anniversary date of the Annual Meeting. The Board reserves the right to elect to abandon
the Reverse Split if it determines, in its sole discretion,
that the Reverse Split is no longer in the best interests of the
Company and its stockholders.
Purpose and Rationale for the Reverse Split
Avoid Delisting from the NASDAQ. Failure to approve the Reverse Split may
potentially have serious, adverse effects on the Company and its
stockholders. Our Common Stock could be delisted from the NASDAQ
because shares of our Common Stock may continue to trade below the
requisite $1.00 per share price needed to maintain our listing in
accordance with NASDAQ Listing Rule 5550(a)(2) and we may be
provided an initial 180-calendar day period, to regain compliance.
If we are unable to increase the closing price of our Common Stock
on NASDAQ for ten consecutive trading days, NASDAQ will delist our
Common Stock. Our shares may then trade on the OTC Bulletin Board
or other small trading markets, such as the pink sheets. In that
event, the Company’s Common Stock could trade thinly as a
microcap or penny stock, adversely decrease to nominal levels of
trading and may be avoided by retail and institutional investors,
resulting in the impaired liquidity of our Common
Stock.
As of the Record Date, our Common Stock closed at $0.67 per share
on NASDAQ. The Reverse Split, if effected, will have the immediate
effect of increasing the price of our Common Stock as reported on
NASDAQ, therefore reducing the risk that our Common Stock could be
delisted from NASDAQ.
Our Board strongly believes that the Reverse Split is necessary to
maintain our listing on NASDAQ. Accordingly, the Board has approved
resolutions proposing the Charter Amendment to effect the Reverse
Split and directed that it be submitted to our stockholders for
approval at the Annual Meeting.
Management and the Board has considered the potential harm to the
Company and its stockholders should NASDAQ delist our Common Stock
from trading on NASDAQ. Delisting could adversely affect the
liquidity of our Common Stock since alternatives, such as the OTC
Bulletin Board and the pink sheets, are generally considered to be
less efficient markets. An investor likely would find it less
convenient to sell, or to obtain accurate quotations in seeking to
buy, our Common Stock on an over-the-counter market. Many investors
likely would not buy or sell our Common Stock due to difficulty in
accessing over-the-counter markets, policies preventing them from
trading in securities not listed on a national exchange, or other
reasons.
Other Effects. The Board
also believes that the increased market price of our Common Stock
expected as a result of implementing the Reverse Split could
improve the marketability and liquidity of our Common Stock and
will encourage interest and trading in our Common Stock. The
Reverse Split, if effected, could allow a broader range of
institutions to invest in our Common Stock (namely, funds that are
prohibited from buying stock whose price is below a certain
threshold), potentially increasing the trading volume and liquidity
of the Company’s Common Stock. The Reverse Split could help
increase analyst and broker’s interest in Common Stock, as
their policies can discourage them from following or recommending
companies with low stock prices. Because of the trading volatility
often associated with low-priced stocks, many brokerage houses and
institutional investors have internal policies and practices that
either prohibit them from investing in low-priced stocks or tend to
discourage individual brokers from recommending low-priced stocks
to their customers. Some of those policies and practices may make
the processing of trades in low-priced stocks economically
unattractive to brokers. Additionally, because brokers’
commissions on low-priced stocks generally represent a higher
percentage of the stock price than commissions on higher-priced
stocks, a low average price per share of Common Stock can result in
individual stockholders paying transaction costs representing a
higher percentage of their total share value than would be the case
if the share price were higher.
Our Board does not intend for this transaction to be the first step
in a series of plans or proposals effect a “going private
transaction” within the meaning of Rule 13e-3 of the Exchange
Act.
Risks of the Proposed Reverse Split
We cannot assure
you that the proposed Reverse Split will increase the price of our
Common Stock and have the desired effect of maintaining compliance
with NASDAQ.
If the Reverse Split is implemented, our Board expects that it will
increase the market price of our Common Stock so that we are able
to regain and maintain compliance with the NASDAQ minimum bid price
requirement. However, the effect of the Reverse Split upon the
market price of our Common Stock cannot be predicted with any
certainty, and the history of similar stock splits for companies in
like circumstances is varied. It is possible that (i) the per
share price of our Common Stock after the Reverse Split will not
rise in proportion to the reduction in the number of shares of our
Common Stock outstanding resulting from the Reverse Split,
(ii) the market price per post-Reverse Split share may not
exceed or remain in excess of the $1.00 minimum bid price for a
sustained period of time, or (iii) the Reverse Split may not
result in a per share price that would attract brokers and
investors who do not trade in lower priced stocks. Even if the
Reverse Split is implemented, the market price of our Common Stock
may decrease due to factors unrelated to the Reverse Split. In any
case, the market price of our Common Stock will be based on other
factors which may be unrelated to the number of shares outstanding,
including our future performance. If the Reverse Split is
consummated and the trading price of our Common Stock declines, the
percentage decline as an absolute number and as a percentage of our
overall market capitalization may be greater than would occur in
the absence of the Reverse Split. Even if the market price per
post-Reverse Split share of our Common Stock remains in excess of
$1.00 per share, we may be delisted due to a failure to meet other
continued listing requirements, including NASDAQ requirements
related to the minimum number of shares that must be in the public
float and the minimum market value of the public
float.
A decline in the market price of our Common Stock after the Reverse
Split is implemented may result in a greater percentage decline
than would occur in the absence of a reverse stock
split.
If the Reverse Split is implemented and the market price of our
Common Stock declines, the percentage decline may be greater than
would occur in the absence of a reverse stock split. The market
price of our Common Stock will, however, also be based upon our
performance and other factors, which are unrelated to the number of
shares of Common Stock outstanding.
The proposed
Reverse Split may decrease the liquidity of our Common
Stock.
The liquidity of our Common Stock may be harmed by the proposed
Reverse Split given the reduced number of shares of Common Stock
that would be outstanding after the Reverse Split, particularly if
the stock price does not increase as a result of the Reverse
Split.
In addition, investors might consider the increased proportion of
unissued authorized shares to issued shares to have an
anti-takeover effect under certain circumstances, since the
proportion allows for dilutive issuances, which could prevent
certain stockholders from changing the composition of our Board or
render tender offers for a combination with another entity more
difficult to successfully complete. Our Board does not intend for
the Reverse Split to have any anti-takeover effects.
Determination of the Ratio for the Reverse Stock Split
If this
Proposal is approved by stockholders and the Board determines that
it is in the best interests of the Company and stockholders to move
forward with the Reverse Split, the Approved Split Ratio will be
selected by the Board, in its sole discretion. However, the ratio
will not be less than a ratio of one-for-two (1:2) or exceed a
ratio of one-for-five (1:5). In determining which Approved Split
Ratio to use, the Board will consider numerous factors, including
the historical and projected performance of our Common Stock,
prevailing market conditions and general economic trends, and will
place emphasis on the expected closing price of our Common Stock in
the period following the effectiveness of the Reverse Split. The
Board will also consider the impact of the Reverse Split Ratio on
investor interest. The purpose of selecting a range is to give the
Board the flexibility to meet business needs as they arise, to take
advantage of favorable opportunities and to respond to a changing
corporate environment. Based on the number of shares of Common
Stock issued and outstanding as of the Record Date, after
completion of the Reverse Split, we will have approximately between
5,231,022 and 13,077,556 shares of Common Stock issued and
outstanding, depending on the Approved Split Ratio selected by the
Board of Directors.
Principal Effects of the Reverse Split
After the effective date of the proposed Reverse Split, each
stockholder will own a reduced number of shares of Common Stock.
Except for adjustments that may result from the treatment of
fractional shares as described below, the proposed Reverse Split
will affect all stockholders uniformly. The proportionate voting
rights and other rights and preferences of the holders of our
Common Stock will not be affected by the proposed Reverse Split
(other than as a result of the payment of cash in lieu of
fractional shares). For example, a holder of 2% of the voting power
of the outstanding shares of our Common Stock immediately prior to
a Reverse Split would continue to hold 2% (assuming there is no
impact as a result of the payment of cash in lieu of issuing
fractional shares and no other shares of Common Stock issuable upon
exercise or conversion of any other derivative securities are
issued) of the voting power of the outstanding shares of our Common
Stock immediately after such Reverse Stock Split. The number
of stockholders of record also will not be affected by the proposed
Reverse Split, except to the extent that any stockholder holds only
a fractional share interest and receives cash for such interest
after the Reverse Split.
The following table contains approximate number of issued
and outstanding shares of Common Stock, the estimated per share
trading price following a 1:2 to 1:5 Reverse Split, without giving effect to any adjustments for
fractional shares of Common Stock or the issuance of any derivative
securities, as of the Record Date, as well as the effect on the
number of shares of Common Stock authorized based on the Reverse
Split Ratio selected by the Board.
|
|
After
a 1:2
Reverse
Split
|
After
a 1:3
Reverse
Split
|
After
a 1:4
Reverse
Split
|
After
a 1:5 Reverse Split
|
Common
Stock Authorized
|
100,000,000
|
50,000,000
|
33,333,333
|
25,000,000
|
20,000,000
|
Common
Stock Issued and Outstanding
|
26,155,111
|
13,077,556
|
8,718,370
|
6,538,778
|
5,231,022
|
Number
of Shares of Common Stock Reserved for Issuance (1)
|
5,806,727
|
2,903,364
|
1,935,576
|
1,451,682
|
1,161,345
|
Number
of Shares of Common Stock Authorized but Unissued and
Unreserved
|
68,038,162
|
34,019,080
|
22,679,387
|
17,009,540
|
13,607,633
|
Price
per share, based on the closing price of our Common Stock on
October 24, 2019
|
$0.67
|
$1.34
|
$2.01
|
$2.68
|
$3.35
|
After the effective date of the Reverse Split, our Common Stock
would have a new committee on uniform securities identification
procedures (CUSIP) number, a number used to identify our Common
Stock.
Our Common Stock is currently registered under Section 12(b)
of the Exchange Act, and we are subject to the periodic reporting
and other requirements of the Exchange Act. The proposed Reverse
Split will not affect the registration of our Common Stock under
the Exchange Act. Our Common Stock would continue to be reported on
NASDAQ under the symbol “AZRX,” assuming that we are
able to regain compliance with the minimum bid price requirement,
although it is likely that NASDAQ would add the letter
“D” to the end of the trading symbol for a period of
twenty trading days after the effective date of the Reverse Split
to indicate that the Reverse Split had occurred.
Effect on Warrants
The Reverse Split will require that proportionate adjustments be
made to the conversion rate, the per share exercise price and the
number of shares issuable upon the exercise or conversion of the
following outstanding derivative securities issued by the Company,
in accordance with the Reverse Split Ratio (all figures are as of
September 30, 2019 and are on a pre-Reverse Split basis),
including warrants to purchase 3,388,378 shares of Common
Stock.
The adjustments to the warrants, as required by the Reverse Split
and in accordance with the Reverse Split Ratio, would result in
approximately the same aggregate price being required to be paid
under such securities upon exercise, and approximately the same
value of shares of Common Stock being delivered upon such exercise
or conversion, immediately following the Reverse Split as was the
case immediately preceding the Reverse Split.
Effect on Stock Option Plans
As of the Record Date, we had 1,877,500 shares of Common Stock
reserved for issuance pursuant to the exercise of outstanding
options issued under our 2014 Plan, as well as 530,849 shares of
Common Stock available for issuance under the 2014 Plan. Pursuant
to the terms of the 2014 Plan, the Board, or a designated committee
thereof, as applicable, will adjust the number of shares of Common
Stock underlying outstanding awards, the exercise price per share
of outstanding stock options and other terms of outstanding awards
issued pursuant to the 2014 Plan to equitably reflect the effects
of the Reverse Split. The number of shares subject to vesting under
restricted stock awards and the number of shares issuable as
contingent consideration as part of an acquisition by the Company
will be similarly adjusted, subject to our treatment of fractional
shares. Furthermore, the number of shares available for future
grant under the 2014 Plan will be similarly
adjusted.
Potential Anti-Takeover Effects of a Reverse Split
Release No. 34-15230 of the staff of the SEC requires
disclosure and discussion of the effects of any action, including
the proposals discussed herein, that may be used as an
anti-takeover mechanism. The Reverse Split, if effected, will also
result in a relative increase in the number of authorized but
unissued shares of our Common Stock vis-à-vis the outstanding
shares of our Common Stock and, could, under certain circumstances,
have an anti-takeover effect, although this is not the purpose or
intent of our Board. A relative increase in the number of
authorized shares of Common Stock could have other effects on our
stockholders, depending upon the exact nature and circumstances of
any actual issuances of authorized but unissued shares. A relative
increase in our authorized shares could potentially deter
takeovers, including takeovers that our Board has determined are
not in the best interest of our stockholders, in that additional
shares could be issued (within the limits imposed by applicable
law) in one or more transactions that could make a change in
control or takeover more difficult. For example, we could issue
additional shares so as to dilute the stock ownership or voting
rights of persons seeking to obtain control without our agreement.
Similarly, the issuance of additional shares to certain persons
allied with our management could have the effect of making it more
difficult to remove our current management by diluting the stock
ownership or voting rights of persons seeking to cause such
removal. The Reverse Split therefore may have the effect of
discouraging unsolicited takeover attempts. By potentially
discouraging initiation of any such unsolicited takeover attempts,
the Reverse Split may limit the opportunity for our stockholders to
dispose of their shares at the higher price generally available in
takeover attempts or that may be available under a merger
proposal.
Although the Reverse Split has been prompted by business and
financial considerations and not by the threat of any known or
threatened hostile takeover attempt, stockholders should be aware
that the effect of the Reverse Split could facilitate future
attempts by us to oppose changes in control of our Company and
perpetuate our management, including transactions in which the
stockholders might otherwise receive a premium for their shares
over then current market prices. We cannot provide assurances that
any such transactions will be consummated on favorable terms or at
all, that they will enhance stockholder value, or that they will
not adversely affect our business or the trading price of
our Common Stock.
Effective Date
The proposed Reverse Split would become effective on the date of
filing of the Amendment with the office of the Secretary of State
of the State of Delaware. On the effective date, shares of Common
Stock issued and outstanding shares of Common Stock held in
treasury, in each case, immediately prior thereto will be combined
and converted, automatically and without any action on the part of
our stockholders, into new shares of Common Stock in accordance
with the Reverse Split Ratio set forth in this Proposal. If the
proposed Charter Amendment is not approved by our stockholders, a
Reverse Split will not occur.
Treatment of Fractional Shares
No fractional shares of Common Stock will be issued as a result of
the Reverse Split. Instead, in lieu of any fractional shares to
which a stockholder of record would otherwise be entitled as a
result of the Reverse Split, we will pay cash (without interest)
equal to such fraction multiplied by the average of the closing
sales prices of our Common Stock on the NASDAQ during regular
trading hours for the five consecutive trading days immediately
preceding the effective date of the Reverse Split (with such
average closing sales prices being adjusted to give effect to the
Reverse Split). After the Reverse Split, a stockholder otherwise
entitled to a fractional interest will not have any voting,
dividend or other rights with respect to such fractional interest
except to receive payment as described above.
Upon stockholder approval of this Proposal, if the Board elects to
implement the proposed Reverse Split, stockholders owning
fractional shares will be paid out in cash for such fractional
shares. For example, assuming the Board elected to consummate a
Reverse Split Ratio of 1:2, if a stockholder held three shares of
Common Stock immediately prior to the Reverse Split, then such
stockholder would be paid in cash for the one share of Common Stock
but will maintain ownership of the remaining two shares of Common
Stock.
Record and Beneficial Stockholders
If the Reverse Split is authorized by our stockholders and our
Board elects to implement the Reverse Split, stockholders of record
holding some or all of their shares of Common Stock electronically
in book-entry form under the direct registration system for
securities will receive a transaction statement at their address of
record indicating the number of shares of Common Stock they hold
after the Reverse Split along with payment in lieu of any
fractional shares. Non-registered stockholders holding Common Stock
through a bank, broker or other nominee should note that such
banks, brokers or other nominees may have different procedures for
processing the consolidation and making payment for fractional
shares than those that would be put in place by us for registered
stockholders. If you hold your shares with such a bank, broker or
other nominee and if you have questions in this regard, you are
encouraged to contact your nominee.
If the Reverse Split is authorized by the stockholders and our
Board elects to implement the Reverse Split, stockholders of record
holding some or all of their shares in certificate form will
receive a letter of transmittal, as soon as practicable after the
effective date of the Reverse Split. Our transfer agent will act as
“exchange agent” for the purpose of implementing the
exchange of stock certificates. Holders of pre-Reverse Split shares
will be asked to surrender to the exchange agent certificates
representing pre-Reverse Split shares in exchange for post-Reverse
Split shares and payment in lieu of fractional shares (if any) in
accordance with the procedures to be set forth in the letter of
transmittal. Until surrender, each certificate representing shares
before the Reverse Split would continue to be valid and would
represent the adjusted number of whole shares based on the approved
exchange ratio of the Reverse Split selected by the Board. No new
post-Reverse Split share certificates will be issued to a
stockholder until such stockholder has surrendered such
stockholder’s outstanding certificate(s) together with the
properly completed and executed letter of transmittal to the
exchange agent.
STOCKHOLDERS SHOULD NOT DESTROY ANY PRE-SPLIT STOCK CERTIFICATE AND
SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL THEY ARE REQUESTED TO DO
SO.
Accounting Consequences
The par value per share of Common Stock would remain unchanged at
$0.0001 per share after the Reverse Split. As a result, on the
effective date of the Reverse Split, the stated capital on our
balance sheet attributable to the Common Stock will be reduced
proportionally, based on the approved exchange ratio of the Reverse
Split selected by the Board, from its present amount, and the
additional paid-in capital account shall be credited with the
amount by which the stated capital is reduced. The per share Common
Stock net income or loss and net book value will be increased
because there will be fewer shares of Common Stock outstanding. The
shares of Common Stock held in treasury, if any, will also be
reduced proportionately based on the approved exchange ratio of the
Reverse Split selected by the Board. Retroactive restatement will
be given to all share numbers in the financial statements, and
accordingly all amounts including per share amounts will be shown
on a post-split basis. We do not anticipate that any other
accounting consequences would arise as a result of the Reverse
Split.
No Appraisal Rights
The Company’s stockholders are not entitled to
dissenters’ or appraisal rights under the Delaware General
Corporation Law with respect to this Proposal and we will not
independently provide our stockholders with any such right if the
Reverse Split is implemented.
Material Federal U.S. Income Tax Consequences of the Reverse Stock
Split
The following is a summary of the material U.S. federal income tax
consequences of a Reverse Split to our stockholders. The summary is
based on the Internal Revenue Code of 1986, as amended (the
“Code”), applicable Treasury Regulations
promulgated thereunder, judicial authority and current
administrative rulings and practices as in effect on the date of
this Proxy Statement. Changes to the laws could alter the tax
consequences described below, possibly with retroactive effect. We
have not sought and will not seek an opinion of counsel or a ruling
from the Internal Revenue Service regarding the federal income tax
consequences of a Reverse Split. This discussion is for general
information only and does not discuss the tax consequences which
may apply to special classes of taxpayers
(e.g., non-resident aliens, broker/dealers or insurance
companies). The state and local tax consequences of a Reverse Split
may vary significantly as to each stockholder, depending upon the
jurisdiction in which such stockholder resides. Stockholders are
urged to consult their own tax advisors to determine the particular
consequences to them.
In general, the federal income tax consequences of a Reverse Split
will vary among stockholders depending upon whether they receive
cash for fractional shares or solely a reduced number of shares of
Common Stock in exchange for their old shares of Common Stock. We
believe that because the Reverse Split is not part of a plan to
increase periodically a stockholder’s proportionate interest
in our assets or earnings and profits, the Reverse Split should
have the following federal income tax effects. A stockholder who
receives solely a reduced number of shares of Common Stock will not
recognize gain or loss. In the aggregate, such a
stockholder’s basis in the reduced number of shares of Common
Stock will equal the stockholder’s basis in its old shares of
Common Stock and such stockholder’s holding period in the
reduced number of shares will include the holding period in its old
shares exchanged. A stockholder who receives cash in lieu of a
fractional share as a result of the Reverse Split should generally
be treated as having received the payment as a distribution in
redemption of the fractional share, as provided in
Section 302(a) of the Code. Generally, if redemption of the
fractional shares of all stockholders reduces the percentage of the
total voting power held by a particular redeemed stockholder
(determined by including the voting power held by certain related
persons), the particular stockholder should recognize gain or loss
equal to the difference, if any, between the amount of cash
received and the stockholder’s basis in the fractional share.
In the aggregate, such a stockholder’s basis in the reduced
number of shares of Common Stock will equal the stockholder’s
basis in its old shares of Common Stock decreased by the basis
allocated to the fractional share for which such stockholder is
entitled to receive cash, and the holding period of the reduced
number of shares received will include the holding period of the
old shares exchanged. If the redemption of the fractional shares of
all stockholders leaves the particular redeemed stockholder with no
reduction in the stockholder’s percentage of total voting
power (determined by including the voting power held by certain
related persons), it is likely that cash received in lieu of a
fractional share would be treated as a distribution under
Section 301 of the Code. Stockholders should consult their own
tax advisors regarding the tax consequences to them of a payment
for fractional shares.
We will not recognize any gain or loss as a result of the proposed
Reverse Split.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN
FEDERAL U.S. INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT AND DOES
NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL
POTENTIAL TAX EFFECTS RELEVANT THERETO. YOU SHOULD CONSULT YOUR OWN
TAX ADVISORS AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN
AND OTHER TAX CONSEQUENCES OF THE REVERSE SPLIT IN LIGHT OF YOUR
SPECIFIC CIRCUMSTANCES.
Required Vote and Recommendation
In accordance with our Charter and Delaware law, approval and
adoption of this Proposal requires the affirmative vote of at least
a majority of our issued and outstanding voting securities.
Abstentions and broker non-votes will have the same effect as a
vote “AGAINST” this Proposal.
OUR BOARD RECOMMENDS A VOTE
“FOR” PROPOSAL TWO.
PROPOSAL NO. 3:
|
RATIFICATION OF THE APPOINTMENT OF MAZARS TO SERVE TO SERVE AS OUR
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL
YEAR
|
General
Upon
recommendation of the Audit Committee, the Board appointed Mazars
USA LLP (“Mazars”), as the Company’s
independent registered public accounting firm for the year ending
December 31, 2019, and hereby recommends that the stockholders
ratify such appointment. The Board may terminate the appointment of
Mazars as the Company’s independent registered public
accounting firm without the approval of the Company’s
stockholders whenever the Board deems such termination necessary or
appropriate.
Representatives
of Mazars will be present at the Annual Meeting or available by
telephone and will have an opportunity to make a statement if they
so desire and to respond to any appropriate questions from
stockholders.
Audit Fees
The following table represents fees for professional services
billed by Mazars for the fiscal years ended December 31, 2018 and
2017 in relation to services rendered in connection with the audit
of the Company’s consolidated financial statements and for
tax services rendered with respect to tax-related compliance,
advice and planning.
|
For the years ended
December 31,
|
|
|
|
Audit fees (1)
|
$129,031
|
$139,329
|
Audit-related fees (2)
|
28,101
|
33,240
|
Tax fees (3)
|
23,772
|
20,114
|
All other fees (4)
|
-
|
-
|
Total
|
$180,904
|
$192,683
|
(1)
|
Professional services rendered by the Mazars for the audit of our
annual financial statements and review of financial statements
included in our Form 10-Q’s.
|
|
(2)
|
The aggregate fees billed for assurance and related services by
Mazars that are reasonably related to the performance of the audit
or review of our financial statements and are not reported under
footnote 1 above.
|
|
(3)
|
The aggregate fees billed for professional services rendered by
Mazars for tax compliance, tax advice, and tax
planning.
|
|
(4)
|
The aggregate fees billed for products and services provided by
Mazars other than the services reported in footnotes 1, 2 and 3
above.
|
|
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has the sole authority for the appointment,
compensation and oversight of the work of our independent
accountants, who prepare or issue an audit report for
us.
Required Vote and Recommendation
Ratification
of the selection of Mazars as the Company’s independent
auditors for the fiscal year ending December 31, 2019 requires the
affirmative vote of a majority of the shares present or represented
by proxy and entitled to vote at the Annual Meeting. Unless
otherwise instructed on the proxy or unless authority to vote is
withheld, shares represented by executed proxies will be voted
“FOR” the ratification of Mazars as the Company’s
independent auditors for the fiscal year ending December 31,
2019.
OUR BOARD RECOMMENDS A VOTE
“FOR” PROPOSAL THREE.
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee of the Board of
Directors shall not be deemed to be soliciting material or to be
incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent the Company specifically incorporates
this Report therein, and shall not otherwise be deemed filed under
such Acts.
Management
is responsible for the Company’s internal controls, financial
reporting process and compliance with applicable laws and
regulations. The independent registered public accounting firm is
responsible for performing an independent audit of the
Company’s consolidated financial statements in accordance
with generally accepted auditing standards and issuing a report
thereon, and annually attesting to management’s assessments
of the effectiveness of the Company’s internal control over
financial reporting. The members of the Audit Committee are
responsible for monitoring and overseeing these
processes.
The
Audit Committee has reviewed and discussed the Company’s
audited consolidated financial statements for the year ended
December 31, 2018, with management and Mazars USA LLP
(“Mazars”), the
Company’s independent registered public accounting firm for
2018. The Audit Committee also has discussed with Mazars the
matters required to be discussed by Statement of Auditing Standards
No. 1301, Communications with Audit Committees, as currently
in effect. Finally, the Audit Committee has received the written
disclosures and the letter from Mazars required by applicable
requirements of the Public Company Accounting Oversight Board
regarding Mazars communications with the Audit Committee concerning
independence as currently in effect and discussed with Mazars their
independence. Based upon the review and discussions described in
this report, the Audit Committee recommended to the Company’s
Board of Directors that the Company’s audited consolidated
financial statements be included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2018, for
filing with the Securities and Exchange Commission.
November _, 2019
|
RESPECTFULLY SUBMITTED,
Edward J. Borkowski, Chair
Alastair Riddell
Charles J. Casamento
|
BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding shares of the
Company’s Common Stock beneficially owned as of October 24,
2019 by:
●
each
of our officers and directors;
●
all
officers and directors as a group; and
●
each person known by us to beneficially own five
percent or more of the outstanding shares of the Company’s
Common Stock. Percentage of ownership is calculated based on
26,155,111 shares of Common
Stock outstanding as of the Record
Date.
Beneficial Ownership of Common Stock
Name and Address of Beneficial Owner (1)
|
|
Percent Ownership of Class (3)
|
Edward J. Borkowski, Director Nominee
(4)
|
482,600
|
1.8%
|
Charles J. Casamento, Director Nominee
(5)
|
94,000
|
*
|
Alastair Riddell, Director
Nominee (6)
|
160,000
|
*
|
Vern L. Schramm, Director Nominee
(7)
|
67,500
|
*
|
James Sapirstein,
Director Nominee, President and Chief Executive
Officer
|
-
|
*
|
Johan M. (Thijs) Spoor, Director Nominee, Former
President and Chief Executive Officer (8)
|
703,486
|
1.6%
|
Maged Shenouda, Chief Financial
Officer (9)
|
322,500
|
1.2%
|
James E. Pennington, Chief Medical Officer
(10)
|
75,000
|
*
|
All directors and executive officers as a group (8
persons)
|
1,905,868
|
7.0%
|
5% Stockholders
|
|
|
Edmund Burke Ross, Jr. (11)
(12)
|
3,340,555
|
12.1%
|
Pelican Partners LLC (13)
|
1,525,509
|
5.8%
|
ADEC Private Equity (12)
(14)
|
2,476,009
|
9.0%
|
* Less than
1%.
(1)
|
Unless otherwise indicated, the address of such individual is c/o
AzurRx BioPharma, Inc., 760 Parkside Avenue, Downstate
Biotechnology Incubator, Suite 304, Brooklyn, NY
11226.
|
(2)
|
Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with
respect to securities. All entries exclude beneficial ownership of
shares issuable pursuant to warrants, options or other derivative
securities that have not vested or that are not otherwise
exercisable as of the date hereof or which will not become vested
or exercisable within 60 days of the Record Date.
|
(3)
|
Percentages are rounded to nearest percent. Percentages are based
on 26,155,111 shares of Common Stock outstanding. Warrants, options
or other derivative securities that are presently exercisable or
exercisable within 60 days are deemed to be beneficially owned by
the person holding the options for the purpose of computing the
percentage ownership of that person, but are not treated as
outstanding for the purpose of computing the percentage of any
other person.
|
(4)
|
Includes (i) 371,626 shares of Common Stock; (ii) 45,000 restricted
shares of Common Stock; (iii) 28,474 shares of Common Stock
issuable upon the exercise of warrants; and (iv) 37,500 shares of
Common Stock issuable upon exercise of options.
|
(5)
|
Includes (i) 86,500 shares of Common Stock and (ii) 7,500 shares of
Common Stock issuable upon exercise of options.
|
(6)
|
Includes (i) 92,500 shares of Common Stock; (ii) 30,000 restricted
shares of Common Stock; and (iii) 37,500 shares of Common Stock
issuable upon the exercise of stock options.
|
(7)
|
Includes (i) 60,000 shares of Common Stock and (ii) 7,500 shares of
Common Stock issuable upon exercise of options.
|
(8)
|
Includes (i) 138,617 shares
of Common
Stock;
(ii) 325,000 restricted
shares of Common
Stock;
(iii) 100,000 shares
of Common Stock
issuable
upon exercise of options; (iv) 100,000 shares
of Common Stock
that may be
purchased pursuant to options granted by third parties at an
exercise price of $1.00 per share; and (v) 39,851 shares
of Common Stock
held in a
trust for the benefit of Mr. Spoor’s spouse and minor
children. Mr. Spoor disclaims beneficial ownership with respect to
such shares of Common
Stock held in
trust.
|
(9)
|
Includes (i) 62,500 shares of Common Stock; (ii) 30,000 restricted
shares of Common Stock; and (iii) 230,000 shares of Common Stock
issuable upon the exercise of stock options.
|
(10)
|
Includes 75,000 shares of Common Stock issuable upon exercise of
options.
|
(11)
|
Based upon information contained in a Schedule 13D filed by Edmund
Burke Ross, Jr. on February 26, 2019 and records maintained by the
Company. Includes a total of 1,799,385 shares of Common Stock,
warrants to purchase up to 741,170 shares of Common Stock, and
800,000 shares of Common Stock issuable upon conversion of certain
Convertible Promissory Notes. Of these holdings, (i) 2,476,009
shares are held by ADEC Private Equity Investment, LLC, which
include 1,031,268 shares of Common Stock, 644,741 shares issuable
upon exercise of warrants, and 800,000 shares of Common Stock
issuable upon conversion of certain 10% Convertible Promissory
Notes; (ii) 794,545 shares are held by EBR Ventures, LLC, which
include 694,545 shares of Common Stock and 100,000 shares issuable
upon exercise of warrants; and (iii) 70,001 shares held by CEDA
Investments, LLC, which include 48,572 shares of Common Stock and
21,429 shares issuable upon exercise of warrants.
Mr. Ross, Jr. is the Manager of EBR
Ventures, LLC, ADEC Private Equity Investment, LLC and CEDA
Investments, LLC, and has voting and dispositive power over the
shares of Common Stock held by such entities. The address of Mr.
Ross, Jr. and such entities are c/o JDJ Family Office Services,
P.O. Box 962049, Boston, MA 02196.
|
(12)
|
Shares owned and percentages for Edmund Burke Ross, Jr. and ADEC
Private Equity are partially duplicative, as Mr. Ross, Jr. holds
voting and dispositive power over the shares held by ADEC Private
Equity.
|
(13)
|
Based upon information contained in a Schedule 13G filed by Matthew
Balk on December 31, 2018. The address of such entity is P.O. Box
2422, Westport, CT 06880. Matthew Balk is the managing member of
Pelican Partners LLC, and has voting and dispositive power over the
shares of Common Stock held by such entity.
|
(14)
|
Based upon information contained in a Schedule 13D filed by Edmund
Burke Ross, Jr. on February 26, 2019 and records maintained by the
Company. As indicated in Note 8 above, includes 644,741 shares of
Common Stock issuable upon the exercise of warrants and 800,000
shares of Common Stock issuable upon conversion of certain
Convertible Promissory Notes. Mr. Ross, Jr. has voting and
dispositive power over the shares held by such entity.
|
Related Party Transactions
As of 2015, the Company has employed the services of JIST
Consulting (“JIST”), a company controlled by Johan (Thijs)
Spoor, the Company’s former Chief Executive Officer and
President, as a consultant for business strategy, financial
modeling, and fundraising. Included in accounts payable at both
December 31, 2018 and 2017 is $478,400 for JIST relating to Mr.
Spoor’s services. Mr. Spoor received no other compensation
from the Company other than as specified in his employment
agreement.
During the year ended December 31, 2015, the Company's former
President, Christine Rigby-Hutton, was employed through
Rigby-Hutton Management Services (“RHMS”). Ms. Rigby-Hutton resigned from the
Company effective April 20, 2015. Included in accounts payable at
both December 31, 2018 and 2017 is $38,453 for RHMS for Ms.
Rigby-Hutton’s services.
From October 1, 2015 through December 31, 2015, the Company used
the services of Edward J. Borkowski, a member of the
Company’s Board and Audit Committee Chair, as a financial
consultant. Included in accounts payable at December 31, 2018 and
2017 is $0 and $90,000, respectively, for Mr. Borkowski’s
services.
Starting on October 1, 2016 until his appointment as the
Company’s Chief Financial Officer on September 25, 2017, the
Company used the services of Maged Shenouda as a financial
consultant. Expense recorded in general and administration expense
in the accompanying statements of operations related to Mr.
Shenouda for the year ended December 31, 2017 was $80,000. Included
in accounts payable at December 31, 2018 and 2017 is $50,000 and
$70,000, respectively, for Mr. Shenouda’s
services.
On February 3, 2017, the Board granted 30,000 options each to
Messrs. Borkowski and Shenouda, and Dr. Riddell, with a total value
of $348,210 of which $116,073 and $222,469, respectively, vested
and was charged to expense in the years ended December 31, 2018 and
2017.
During the year ended December 31, 2018, the Company recorded cash
Board fees of $35,000 each for Mr. Borkowski, Dr. Riddell, Mr.
Casamento and Dr. Schramm. During the year ended December 31, 2017,
the Company recorded Board fees of $35,000 for Mr. Borkowski and
Dr. Riddell; $25,000 for Mr. Shenouda; $30,000 for Mr. Casamento;
and $8,750 for Dr. Schramm.
During the year ended December 31, 2018, as part of Board
compensation, the Company issued 30,000 shares of restricted Common
Stock each to Mr. Borkowski, Dr. Riddell, Mr. Casamento and Dr.
Vern Schramm with a total value of $306,300 which was vested and
charged to expense in the year ended December 31, 2018. During the
year ended December 31, 2017, as part of Board compensation, the
Company issued 30,000 shares of restricted Common Stock each to
Messrs. Borkowski and Dr. Riddell; 22,500 shares of restricted
Common Stock to Mr. Shenouda; 25,000 shares of restricted Common
Stock to Mr. Casamento; and 7,500 shares to Dr. Schramm with a
total value of $460,000 which was vested and charged to expense in
the year ended December 31, 2017.
On
February 14, 2019, the Company entered into a Note Purchase
Agreement (“NPA”) with ADEC Private Equity
Investments, LLC (“ADEC”), a company affiliated with
Edmond Burke Ross, Jr., a large holder of the Company’s
securities, pursuant to which the Company issued to ADEC two Senior
Secured Convertible Notes (the “Convertible Promissory Notes”),
in the principal amount of $1.0 million per Convertible Promissory
Note. The Convertible Promissory Notes accrue interest at a rate of
10% per annum; provided,
however, that in the event the
Company elects to repay the full balance due under the terms of
both Notes prior to December 31, 2019, then the interest rate will
be reduced to 6% per annum. The Convertible Promissory Notes shall
mature on the earlier to occur of (i) the tenth business day
following the receipt by the Company or AzurRx BioPharma SAS, a
wholly owned subsidiary of the Company (“ABS”), of certain tax credits that the Company
is expected to receive prior to July 2019 in the case of Note A
(the “2019 Tax
Credit”) and July 2020 in
the case of Note B (the “2020 Tax
Credit”), or (ii)
December 31, 2019 in the case of Note A and December 31, 2020 in
the Case of Note B (the “Maturity
Dates”). As a condition to entering into the NPA, ABS and
ADEC also entered into a Pledge Agreement, pursuant to which ABS
agreed to pledge an interest in the 2019 and 2020 Tax Credits to
ADEC in order to guarantee payment of all amounts due under the
terms of the Notes.
Prior to their respective Maturity Dates, each of the Convertible
Promissory Notes is convertible, at ADEC’s option, into
shares of the Company’s Common Stock, at a conversion price
equal to the principal and accrued interest due under the terms of
the Convertible Promissory Notes divided by $2.50
(“Conversion
Shares”); provided,
however, that pursuant to the
term of the Convertible Promissory Notes, ADEC may not convert all
or a portion of the Notes if such conversion would result in ADEC
and/or entities or persons affiliated with ADEC beneficially owning
in excess of 19.99% of the Company’s shares of Common Stock
issued and outstanding immediately after giving effect to the
issuance of the Conversion Shares.
As additional consideration for entering into the NPA, pursuant to
a Warrant Amendment Agreement, the Company agreed to reduce the
exercise price of certain warrants previously issued by the Company
to ADEC and its affiliates, totaling warrants to purchase
1,009,565 shares, to $1.50 per share. The Warrant
Amendment Agreement does not alter any other terms of
such warrants.
ADDITIONAL INFORMATION
Deadline for Receipt of Stockholder Proposals for the 2020 Annual
Meeting
Pursuant to Rule 14a-8 under the Exchange Act, stockholder
proposals to be included in our next proxy statement must be
received by our Corporate Secretary by writing to AzurRx
BioPharma, Inc., Attention: Corporate Secretary – 760
Parkside Avenue, Downstate Biotechnology Incubator, Suite 304,
Brooklyn, NY 11226, no later than 90
days nor more than 120 days prior to the first anniversary of the
preceding year’s annual meeting. Submitted proposals must
comply with applicable Delaware law, the rules and regulations
promulgated by the SEC and the procedures set forth in our
Bylaws.
We reserve the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not
comply with these and all other applicable
requirements.
Householding of Proxy Materials
The SEC
has adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for proxy statements
and annual reports with respect to two or more stockholders sharing
the same address by delivering a single proxy statement and annual
report addressed to those stockholders. This process, which is
commonly referred to as “householding,” potentially
means extra convenience for stockholders and cost savings for
companies.
A
number of brokers with account holders who are stockholders of the
Company will be “householding” the Company’s
proxy materials. A single set of the Company’s proxy
materials will be delivered to multiple stockholders sharing an
address unless contrary instructions have been received from the
affected stockholders. Once you have received notice from your
broker that they will be “householding” communications
to your address, “householding” will continue until you
are notified otherwise or until you revoke your consent. If, at any
time, you no longer wish to participate in
“householding” and would prefer to receive a separate
set of the Company’s proxy materials at no charge, please
notify your broker or direct a written request to AzurRx BioPharma,
Inc., Attention: Corporate Secretary – 760 Parkside Avenue,
Downstate Biotechnology Incubator, Suite 304, Brooklyn, NY 11226,
or contact us at (646) 699-7855. The Company undertakes to deliver
promptly, upon any such verbal or written request, a separate copy
of its proxy materials to a stockholder at a shared address to
which a single copy of these documents was delivered. Stockholders
who currently receive multiple copies of the Company’s proxy
materials at their address and would like to request
“householding” of their communications should contact
their broker, bank or other nominee, or contact the Company at the
above address or phone number.
Other Matters
At the
date of this Proxy Statement, the Company knows of no other
matters, other than those described above, that will be presented
for consideration at the Annual Meeting. If any other business
should come before the Annual Meeting, it is intended that the
proxy holders will vote all proxies using their best judgment in
the interest of the Company and the stockholders.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING IN
PERSON, PLEASE READ THE ACCOMPANYING PROXY STATEMENT AND THEN
VOTE BY INTERNET, TELEPHONE OR MAIL AS PROMPTLY AS POSSIBLE TO
ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING.
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BY ORDER OF THE BOARD OF DIRECTORS,
/s/ James
Sapirstein
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Brooklyn,
New York
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JAMES
SAPIRSTEIN
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November _, 2019
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President, Chief Executive Officer and Director
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Appendix A
AZURRX BIOPHARMA, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AZURRX
BIOPHARMA, INC.
FOR THE 2019 ANNUAL MEETING OF STOCKHOLDERS
The
undersigned revokes all previous proxies and constitutes and
appoints James Sapirstein and Maged Shenouda, and each of them, the
true and lawful agent and proxy with full power of substitution in
each, to represent and to vote on behalf of the undersigned all of
the shares of AzurRx BioPharma, Inc. (the “Company”) which the undersigned
is entitled to vote at the Company’s 2019 Annual Meeting of
Stockholders (the “Annual
Meeting”), to be held at the offices of Lowenstein
Sandler LLP located at One
Lowenstein Drive, Roseland, New Jersey, 07068 on December 19, 2019
at 9:00 A.M. Eastern Time, and at any adjournment(s) or
postponement(s) thereof, upon the following proposals, each of
which are more fully described in the Notice of Annual Meeting of
Stockholders and Proxy Statement for the Annual Meeting (receipt of
which is hereby acknowledged).
This Proxy Statement when properly executed will be voted in the
manner directed herein by the undersigned stockholder. If no
direction is made, this proxy will be voted FOR each director nominee
identified in Proposal No. 1 and FOR Proposals No. 2 and 3, each
of which have been proposed by our Board, and at the discretion of
the proxy holder upon other matters as may properly come before the
Annual Meeting.
(continued and to be signed on reverse side)
PROPOSAL NO.
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1. ELECTION OF SIX DIRECTOR
NOMINEES, EACH FOR A TERM OF ONE YEAR.
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NOMINEES:
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FOR
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WITHHELD
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Edward
J. Borkowski, Chair
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☐
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☐
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Charles
J. Casamento
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☐
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☐
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Alastair
Riddell
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☐
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☐
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Vern
L. Schramm
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☐
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☐
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James
Sapirstein
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☐
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☐
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Johan
M. (Thijs) Spoor
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☐
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☐
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2. APPROVAL TO AMEND THE
COMPANY’S CHARTER, TO AUTHORIZE THE BOARD TO EFFECT A REVERSE
STOCK SPLIT, AT THE BOARD’S DISCRETION, AT ANY TIME PRIOR TO
THE ONE YEAR ANNIVERSARY OF THE ANNUAL MEETING.
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FOR
☐
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AGAINST
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ABSTAIN
☐
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3. RATIFICATION OF MAZARS USA LLP,
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2019.
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FOR
☐
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AGAINST
☐
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ABSTAIN
☐
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☐ I PLAN TO ATTEND THE
ANNUAL MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE.
Signature of Stockholder _______________________ Signature of
Stockholder _________________________
(if held
jointly)
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Dated: ________________________________,
2019
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Note: This proxy must be signed exactly as the name appears hereon.
When shares are held by joint tenants, both should sign. If the
signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If the signer is a
partnership, please sign in partnership name by authorized
person.
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AZURRX BIOPHARMA, INC.
AzurRx BioPharma, Inc. (the “Corporation”), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
FIRST: That a resolution was
duly adopted on December __, 2019, by the Board of Directors of the
Corporation pursuant to Section 242 of the General Corporation Law
of the State of Delaware setting forth an amendment to the
Certificate of Incorporation of the Corporation and declaring said
amendment to be advisable. The stockholders of the
Corporation duly approved said proposed amendment at the 2019
annual meeting of stockholders held on December 19, 2019, in
accordance with Section 242 of the General Corporation Law of the
State of Delaware. The proposed amendment set forth as
follows:
Article FOURTH of the Amended and Restated Certificate of
Incorporation of the Corporation, as amended to date, be and hereby
is further amended by inserting the following immediately after the
first paragraph of Article FOURTH:
Upon effectiveness (“Effective
Time”) of this amendment
to the Amended and Restated Certificate of Incorporation of the
Corporation, a __ reverse stock split of the Corporation’s
Common Stock shall become effective, pursuant to which each __
share of Common Stock outstanding and held of record by each
stockholder of the Corporation (including treasury shares)
immediately prior to the Effective Time (“Old Common
Stock”) shall be
reclassified and split into __ shares of Common Stock automatically
and without any action by the holder thereof upon the Effective
Time and shall represent __ shares of Common Stock from and after
the Effective Time (“New Common
Stock”), with a
corresponding reduction in the number of authorized shares of our
Common Stock by a corresponding ratio.
No
fractional shares of Common Stock will be issued in connection with
the reverse stock split. Stockholders of record who otherwise would
be entitled to receive fractional shares, will be entitled to
receive cash (without interest) in lieu of fractional shares, equal
to such fraction multiplied by the average of the closing sales
prices of our Common Stock on the exchange the Corporation is
currently trading during regular trading hours for the five
consecutive trading days immediately preceding the effective date
of the Reverse Split (with such average closing sales prices being
adjusted to give effect to the Reverse Split).
Each
holder of record of a certificate or certificates for one or more
shares of the Old Common Stock shall be entitled to receive as soon
as practicable, upon surrender of such certificate, a certificate
or certificates representing the largest whole number of shares of
New Common Stock to which such holder shall be entitled pursuant to
the provisions of the immediately preceding paragraphs. Any
certificate for one or more shares of the Old Common Stock not so
surrendered shall be deemed to represent one share of the New
Common Stock for each five shares of the Old Common Stock
previously represented by such certificate.
SECOND: That said amendment
will have an Effective Time of 5:00 P.M., Eastern Time, on the
filing date of this Certificate of Amendment to the Amended and
Restated Certificate of Incorporation
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President and Chief Executive Officer
this __ day of December, 2019.
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/s/
James Sapirstein
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JAMES SAPIRSTEIN
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President and Chief Executive Officer
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