EXHIBIT 3.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2022
OR
☐ | TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
From the transition period from to
Commission File Number 001-37853
|
(Exact name of registrant as specified in its charter) |
Delaware |
| 46-4993860 |
(State or other jurisdiction of incorporation or organization) | (I.R.S Employer Identification No.) |
777 Yamato Road, Suite 502
Boca Raton, Florida 33431
(Address of principal executive offices) (Zip Code)
(561) 589-7020
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol |
| Name of Each Exchange on Which Registered |
Common stock, par value $0.0001 per share |
| FWBI |
| The Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 41,590,308 shares of the registrant’s common stock, par value $0.0001 per share (the “Common Stock”), outstanding as of August 11, 2022.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28 | |
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38 | ||
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41 | ||
PART I
FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations, and cash flows for the interim periods presented. We have consolidated such financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, such financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. In preparing these unaudited condensed consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the unaudited condensed consolidated financial statements were issued by filing with the SEC.
These financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2021 included in our Annual Report filed on Form 10-K, filed with the SEC on March 31, 2022 (as amended on Form 10-K/A filed with the SEC on May 10, 2022).
The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2022.
-1-
FIRST WAVE BIOPHARMA, INC.
Condensed Consolidated Balance Sheets
| June 30, |
| ||||
2022 | December 31, | |||||
(unaudited) | 2021 | |||||
ASSETS | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | 1,155,009 | $ | 8,248,684 | ||
Other receivables |
| 70,429 |
| — | ||
Prepaid expenses |
| 563,661 |
| 1,176,268 | ||
Total Current Assets |
| 1,789,099 |
| 9,424,952 | ||
Property, equipment, and leasehold improvements, net |
| 58,475 |
| 73,110 | ||
Other Assets: | ||||||
Goodwill |
| 1,755,870 |
| 1,911,705 | ||
Operating lease right-of-use assets |
| 289,504 |
| 336,197 | ||
Deposits |
| 34,326 |
| 44,012 | ||
Total Other Assets |
| 2,079,700 |
| 2,291,914 | ||
Total Assets | $ | 3,927,274 | $ | 11,789,976 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current Liabilities: | ||||||
Accounts payable | $ | 3,966,363 | $ | 2,707,731 | ||
Accrued expenses | 426,235 | 393,253 | ||||
Accrued dividend payable |
| 653,278 |
| 465,361 | ||
Note payable |
| 161,909 |
| 641,236 | ||
Operating lease liabilities | 62,673 | 77,989 | ||||
Payable related to acquisition - current | 12,000,000 | 8,000,000 | ||||
Other current liabilities |
| 13,408 |
| 14,818 | ||
Total Current Liabilities |
| 17,283,866 |
| 12,300,388 | ||
Non-current operating lease liabilities | 248,226 | 311,138 | ||||
Payable related to acquisition - long term |
| 585,045 |
| 7,000,000 | ||
Total Liabilities |
| 18,117,137 |
| 19,611,526 | ||
Commitments and Contingencies | ||||||
Stockholders’ Deficit: | ||||||
Common stock - Par value $0.0001 per share; 50,000,000 shares authorized; 22,699,812 and 14,855,848 shares and at June 30, 2022 and December 31, 2021, respectively |
| 2,270 |
| 1,485 | ||
Series B preferred stock- Par value $0.0001 per share; 5,194.81 shares designated; 631.34 and 662.25 shares and at June 30, 2022 and December 31, 2021, respectively |
| — |
| — | ||
Series C preferred stock- Par value $0.0001 per share; 57,000 shares designated; 0 shares issued and outstanding at June 30, 2022 and December 31, 2021 |
| — |
| — | ||
Additional paid-in capital |
| 156,166,384 |
| 147,305,147 | ||
Accumulated deficit |
| (168,939,031) |
| (153,904,047) | ||
Accumulated other comprehensive loss |
| (1,419,486) |
| (1,224,135) | ||
Total Stockholders’ Deficit |
| (14,189,863) |
| (7,821,550) | ||
Total Liabilities and Stockholders’ Deficit | $ | 3,927,274 | $ | 11,789,976 | ||
See accompanying notes to unaudited condensed consolidated financial statements
-2-
FIRST WAVE BIOPHARMA, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2022 |
| 2021 |
| 2022 |
| 2021 | ||||||
Operating expenses: | ||||||||||||
Research and development expenses | $ | 2,906,896 | $ | 5,647,798 | $ | 7,883,413 | $ | 8,163,825 | ||||
General and administrative expenses |
| 2,498,957 |
| 3,629,090 |
| 6,904,512 |
| 9,326,604 | ||||
Total operating expenses |
| 5,405,853 |
| 9,276,888 |
| 14,787,925 |
| 17,490,429 | ||||
Loss from operations |
| (5,405,853) |
| (9,276,888) |
| (14,787,925) |
| (17,490,429) | ||||
Other (expenses) income: |
|
|
|
|
|
| ||||||
Interest expense |
| (3,218) |
| (2,954) |
| (8,823) |
| (8,098) | ||||
Interest income |
| 926 |
| — |
| 1,065 |
| — | ||||
Other income (expense) |
| — |
| 898 |
| (239,301) |
| 1,601 | ||||
Change in fair value of liability |
| — |
| — |
| — |
| 532,353 | ||||
Total other (expenses) income |
| (2,292) |
| (2,056) |
| (247,059) |
| 525,856 | ||||
Net loss | $ | (5,408,145) | $ | (9,278,944) | $ | (15,034,984) | $ | (16,964,573) | ||||
Other comprehensive loss: |
|
|
|
|
|
| ||||||
Foreign currency translation adjustment |
| (136,946) |
| 21,840 |
| (195,351) |
| (112,957) | ||||
Total comprehensive loss | $ | (5,545,091) | $ | (9,257,104) | $ | (15,230,335) | $ | (17,077,530) | ||||
Net loss | $ | (5,408,145) | $ | (9,278,944) | $ | (15,034,984) | $ | (16,964,573) | ||||
Deemed dividend on preferred stock issuances |
| — |
| — |
| — |
| (4,507,125) | ||||
Deemed dividend on preferred stock exchanges |
| — |
| (3,424,205) |
| — |
| (21,008,253) | ||||
Deemed dividend on warrant modifications | (47,300) | — | (47,300) | — | ||||||||
Preferred stock dividends |
| (97,125) |
| (26,661) |
| (187,917) |
| (231,043) | ||||
Net loss applicable to common shareholders | $ | (5,552,570) | $ | (12,729,810) | $ | (15,270,201) | $ | (42,710,994) | ||||
Basic and diluted weighted average shares outstanding |
| 21,807,333 |
| 7,812,440 |
| 18,693,306 |
| 6,679,918 | ||||
Loss per share - basic and diluted | (0.25) | (1.63) | (0.82) | (6.39) | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements
-3-
FIRST WAVE BIOPHARMA, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Deficit (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
| |||||||
Series B Convertible | Additional | Other | Total | |||||||||||||||||||
Preferred Stock | Common Stock | Paid In | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Deficit | |||||||||||||||
Balance, April 1, 2022 |
| 645 | $ | — |
| 21,548,835 | $ | 2,154 | $ | 155,571,487 | $ | (163,530,886) | $ | (1,282,540) | $ | (9,239,785) | ||||||
Issuance of common stock at-the-market for cash, net of offering costs |
| — |
| — |
| 1,064,474 |
| 107 |
| 317,124 |
| — |
| — |
| 317,231 | ||||||
Deemed dividend of Series B preferred stock |
| — |
| — |
| — |
| — |
| (97,125) |
| — |
| — |
| (97,125) | ||||||
Warrant modification |
| — |
| — |
| — |
| — |
| 47,300 |
| — |
| — |
| 47,300 | ||||||
Deemed dividend on warrant modification |
| — |
| — |
| — |
| — |
| (47,300) |
| — |
| — |
| (47,300) | ||||||
Conversion of Series B preferred shares into common stock |
| (14) |
| — |
| 86,503 |
| 9 |
| (9) |
| — |
| — |
| — | ||||||
Stock-based compensation |
| — |
| — |
| — |
| — |
| 374,907 |
| — |
| — |
| 374,907 | ||||||
Foreign currency translation adjustment |
| — |
| — |
| — |
| — |
| — |
| — |
| (136,946) |
| (136,946) | ||||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| (5,408,145) |
| — |
| (5,408,145) | ||||||
Balance, June 30, 2022 |
| 631 | $ | — |
| 22,699,812 | $ | 2,270 | $ | 156,166,384 | $ | (168,939,031) | $ | (1,419,486) | $ | (14,189,863) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
| |||||||
Series B Convertible |
|
| Additional |
| Other | Total | ||||||||||||||||
Preferred Stock | Common Stock | Paid In | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Deficit | |||||||||||||||
Balance, April 1, 2021 |
| 1,209 | $ | — |
| 7,492,690 | $ | 7,493 | $ | 118,693,364 | $ | (103,051,827) | $ | (1,247,343) | $ | 14,401,687 | ||||||
Issuance of Series C preferred stock upon exchange of Series B preferred stock |
| (533) |
| — |
| — |
| — |
| (422) |
| — |
| — |
| (422) | ||||||
Warrants issued in connection with exchange of Series B preferred stock |
| — |
| — |
| — |
| — |
| 3,424,626 |
| — |
| — |
| 3,424,626 | ||||||
Deemed dividend related to exchange of Series B preferred stock |
| — |
| — |
| — |
| — |
| (3,424,205) |
| — |
| — |
| (3,424,205) | ||||||
Dividends on preferred stock |
| — |
| — |
| — |
| — |
| (26,661) |
| — |
| — |
| (26,661) | ||||||
Common stock and pre-funded warrants issued upon conversion of Series C preferred stock |
| — |
| — |
| 563,916 |
| 564 |
| (564) |
| — |
| — |
| — | ||||||
Issuance of common stock at-the-market for cash, net of offering costs |
| — |
| — |
| 149,565 |
| 150 |
| 1,174,198 |
| — |
| — |
| 1,174,348 | ||||||
Common stock issued upon exercise of warrants |
| — |
| — |
| 32,837 |
| 33 |
| 282,755 |
| — |
| — |
| 282,788 | ||||||
Common stock and warrants issued to consultants |
| — |
| — |
| 19,500 |
| 20 |
| 147,791 |
| — |
| — |
| 147,811 | ||||||
Stock-based compensation |
| — |
| — |
| — |
| — |
| 314,056 |
| — |
| — |
| 314,056 | ||||||
Foreign currency translation adjustment |
| — |
| — |
| — |
| — |
| — |
| — |
| 21,840 |
| 21,840 | ||||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| (9,278,944) |
| — |
| (9,278,944) | ||||||
Balance, June 30, 2021 |
| 676 | $ | — |
| 8,258,508 | $ | 8,260 | $ | 120,584,938 | $ | (112,330,771) | $ | (1,225,503) | $ | 7,036,924 | ||||||
See accompanying notes to unaudited condensed consolidated financial statements
-4-
FIRST WAVE BIOPHARMA, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Deficit (unaudited)
Accumulated | |||||||||||||||||||||||||||
Series C Convertible | Series B Convertible | Additional | Other | Total | |||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Paid In | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Deficit | ||||||||
Balance, January 1, 2022 |
| — | $ | — | 662 |
| $ | — |
| 14,855,848 |
| $ | 1,485 |
| $ | 147,305,147 |
| $ | (153,904,047) |
| $ | (1,224,135) |
| $ | (7,821,550) | ||
Issuance of common stock, pre-funded warrants and warrants in registered direct offering, net of issuance costs |
| — | — | — |
| — |
| 1,650,000 |
| 165 |
| 7,971,926 |
| — |
| — |
| 7,972,091 | |||||||||
Issuance of common stock at-the-market for cash, net of offering costs | — | 1,064,474 | 107 | 317,124 | — | — | 317,231 | ||||||||||||||||||||
Exercise of pre-funded warrants into common stock |
| — | — | — |
| — |
| 4,848,195 |
| 485 |
| 47,997 |
| — |
| — |
| 48,482 | |||||||||
Deemed dividend of Series B preferred stock |
| — | — | — |
| — |
| — |
| — |
| (187,917) |
| — |
| — |
| (187,917) | |||||||||
Warrant modification | — | — | — | 47,300 | — | — | 47,300 | ||||||||||||||||||||
Deemed dividend on warrant modification | — | — | — | (47,300) | — | — | (47,300) | ||||||||||||||||||||
Conversion of Series B preferred shares into common stock |
| — | — | (31) |
| — |
| 191,238 |
| 19 |
| (19) |
| — |
| — |
| — | |||||||||
Common stock issued to consultants |
| — | — | — |
| — |
| 90,057 |
| 9 |
| 118,990 |
| — |
| — |
| 118,999 | |||||||||
Stock-based compensation |
| — | — | — |
| — |
| — |
| — |
| 593,136 |
| — |
| — |
| 593,136 | |||||||||
Foreign currency translation adjustment |
| — | — | — |
| — |
| — |
| — |
| — |
| — |
| (195,351) |
| (195,351) | |||||||||
Net loss |
| — | — | — |
| — |
| — |
| — |
| — |
| (15,034,984) |
| — |
| (15,034,984) | |||||||||
Balance, June 30, 2022 |
| — | $ | — | 631 | $ | — |
| 22,699,812 | $ | 2,270 | $ | 156,166,384 | $ | (168,939,031) | $ | (1,419,486) | $ | (14,189,863) | ||||||||
Accumulated | |||||||||||||||||||||||||||
Series C Convertible | Series B Convertible | Additional | Other | Total | |||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Paid In | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Deficit | ||||||||
Balance, January 1, 2021 | — | $ | — | 2,774 | $ | — | 3,115,031 | $ | 3,115 | $ | 93,834,936 | $ | (95,366,198) | $ | (1,112,546) | $ | (2,640,693) | ||||||||||
Issuance of Series C preferred stock and warrants for cash, net of offering costs |
| 10,667 |
| — |
| — |
| — | — |
| — |
| 7,105,167 |
| — | — |
| 7,105,167 | |||||||||
Issuance of Series C preferred stock to for license acquired |
| 3,290 |
| — |
| — |
| — | — |
| — |
| 2,467,648 |
| — | — |
| 2,467,648 | |||||||||
Beneficial conversion feature of Series C preferred stock |
| — |
| — |
| — |
| — | — |
| — |
| 4,507,125 |
| — | — |
| 4,507,125 | |||||||||
Deemed dividend of Series C preferred stock |
| — |
| — |
| — |
| — | — |
| — |
| (4,507,125) |
| — | — | (4,507,125) | ||||||||||
Issuance of Series C preferred stock upon exchange of Series B preferred stock |
| 19,140 |
| — |
| (1,839) |
| — | — |
| — |
| (1,431) |
| — | — |
| (1,431) | |||||||||
Warrants issued in connection with exchange of Series B preferred stock |
| — |
| — |
| — |
| — | — |
| — |
| 21,009,683 |
| — | — |
| 21,009,683 | |||||||||
Deemed dividend related to exchange of Series B preferred stock |
| — |
| — |
| — |
| — | — |
| — |
| (21,008,253) |
| — | — |
| (21,008,253) | |||||||||
Common stock issued upon conversion of Series B preferred stock |
| — |
| — |
| (259) |
| — | 258,278 |
| 258 |
| (258) |
| — | — |
| — | |||||||||
Dividends on preferred stock |
| — |
| — |
| — |
| — | — |
| — |
| (231,043) |
| — | — |
| (231,043) | |||||||||
Common stock and pre-funded warrants issued upon conversion of Series C preferred stock |
| (33,097) |
| — |
| — |
| — | 3,125,460 |
| 3,126 |
| (3,123) |
| — | — |
| 3 | |||||||||
Issuance of common stock, pre-funded warrants and warrants for cash, net of offering costs |
| — |
| — |
| — |
| — | 580,000 |
| 580 |
| 9,058,710 |
| — | — |
| 9,059,290 | |||||||||
Issuance of common stock at-the-market for cash, net of offering costs |
| — |
| — |
| — |
| — | 149,565 |
| 150 |
| 1,174,198 |
| — | — |
| 1,174,348 | |||||||||
Common stock issued upon exercise of warrants |
| — |
| — |
| — |
| — | 945,644 |
| 946 |
| 4,905,684 |
| — | — |
| 4,906,630 | |||||||||
Common stock and warrants issued to consultants |
| — |
| — |
| — |
| — | 77,030 |
| 78 |
| 1,092,232 |
| — | — |
| 1,092,310 | |||||||||
Issuance of common stock in connection with settlement with former investment bank |
| — |
| — |
| — |
| — | 7,500 |
| 7 |
| 94,492 |
| — | — |
| 94,499 | |||||||||
Stock-based compensation |
| — |
| — |
| — |
| — | — |
| — |
| 1,086,296 |
| — | — |
| 1,086,296 | |||||||||
Foreign currency translation adjustment |
| — |
| — |
| — |
| — | — |
| — |
| — |
| — | (112,957) |
| (112,957) | |||||||||
Net loss | — | — | — | — | — | — | — | (16,964,573) | — | (16,964,573) | |||||||||||||||||
Balance, June 30, 2021 |
| — | $ | — |
| 676 | $ | — | 8,258,508 | $ | 8,260 | $ | 120,584,938 | $ | (112,330,771) | $ | (1,225,503) | $ | 7,036,924 | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements
-5-
FIRST WAVE BIOPHARMA, INC.
Condensed Consolidated Statements of Cash Flows (unaudited)
| Six Months Ended June 30, | |||||
2022 |
| 2021 | ||||
Cash flows from operating activities: | ||||||
Net loss | $ | (15,034,984) | $ | (16,964,573) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Depreciation |
| 14,635 |
| 3,014 | ||
Amortization |
| — |
| 263,774 | ||
Change in right-of-use assets |
| 46,693 |
| (4,855) | ||
Change in fair value liability | — | (532,353) | ||||
Stock-based compensation |
| 593,136 |
| 1,086,296 | ||
Common stock and warrants granted to consultants |
| 118,999 |
| 1,186,809 | ||
Changes in assets and liabilities: | ||||||
Other receivables |
| (70,429) |
| 551,489 | ||
Prepaid expenses |
| 612,607 |
| 715,368 | ||
Lease liabilities |
| (78,228) |
| (316,541) | ||
Deposits |
| 9,686 |
| (41,676) | ||
Accounts payable |
| 1,258,632 |
| 3,424,266 | ||
Accrued expenses | 32,982 | (465,984) | ||||
Other liabilities |
| (1,410) |
| 398,838 | ||
Net cash used in operating activities |
| (12,497,681) |
| (10,696,128) | ||
Cash flows from investing activities: | ||||||
Purchase of property and equipment |
| — |
| (73,928) | ||
Net cash used in investing activities |
| — |
| (73,928) | ||
Cash flows from financing activities: | ||||||
Proceeds from issuance of preferred stock, net |
| — |
| 7,105,168 | ||
Proceeds from issuance of common stock, net |
| 8,289,322 |
| 10,233,638 | ||
Proceeds from exercise of warrants |
| 48,482 |
| 4,906,630 | ||
Payment made related to license agreement |
| — |
| (9,000,000) | ||
Payment made related to acquisition | (2,414,955) | — | ||||
Repayments of note payable |
| (479,327) |
| (412,836) | ||
Net cash provided by financing activities |
| 5,443,522 |
| 12,832,600 | ||
Net (decrease) increase in cash |
| (7,054,159) |
| 2,062,544 | ||
Effect of exchange rate changes on cash |
| (39,516) |
| (50,194) | ||
Cash, beginning balance |
| 8,248,684 |
| 6,062,141 | ||
Cash, ending balance | $ | 1,155,009 | $ | 8,074,491 | ||
Non-cash investing and financing activities: | ||||||
Deemed dividend on preferred stock issuances | $ | — | $ | (4,507,125) | ||
Deemed dividend on preferred stock exchanges | $ | — | $ | (21,008,253) | ||
Deemed dividend on warrant modifications | $ | (47,300) | $ | — | ||
Accrued dividends on preferred stock | $ | (187,917) | $ | (231,043) | ||
Common stock issued upon conversion of preferred stock | $ | (19) | $ | — | ||
Issuance of Series C preferred stock to settle liability related to license agreement | $ | — | $ | 2,467,649 | ||
See accompanying notes to unaudited condensed consolidated financial statements
-6-
FIRST WAVE BIOPHARMA, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2022
Note 1 - The Company and Basis of Presentation
The Company
First Wave BioPharma, Inc. (“First Wave”) and its wholly owned subsidiaries, First Wave Bio, Inc. and AzurRx SAS, are collectively referred to as the “Company”. The Company is engaged in the research and development of targeted, non-systemic therapies for the treatment of patients with gastrointestinal (“GI”) diseases. Non-systemic therapies are non-absorbable drugs that act locally, i.e., in the intestinal lumen, skin or mucosa, without reaching an individual’s systemic circulation.
The Company is currently focused on developing its pipeline of gut-restricted GI clinical drug candidates, including the biologic adrulipase (formerly MS1819), a recombinant lipase enzyme designed to enable the digestion of fats and other nutrients, and niclosamide, an oral small molecule with anti-viral and anti-inflammatory properties. The Company’s adrulipase programs are focused on the development of an oral, non-systemic, biologic capsule for the treatment of exocrine pancreatic insufficiency (“EPI”) in patients with cystic fibrosis (“CF”) and chronic pancreatitis (“CP”). The Company’s niclosamide programs leverage proprietary oral and topical formulations to address multiple GI conditions, including inflammatory bowel disease (“IBD”) indications and viral diseases.
The Company is developing its product candidates for a host of GI diseases where there are significant unmet clinical needs and limited therapeutic options, resulting in painful, life threatening and discomforting consequences for patients. Since its inception, the Company has devoted substantially all its efforts to research and development, business development, and raising capital, and has financed its operations through issuance of common stock, convertible preferred stock, convertible debt, and other debt/equity instruments.
Risks and Uncertainties
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development and regulatory success, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and ability to secure additional capital to fund clinical trials and operations.
The Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its business. The extent to which the ongoing COVID-19 pandemic impacts the Company’s business, clinical development and regulatory efforts, corporate development objectives and the value of and market for its Common Stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the U.S., Europe, Asia and other countries, and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
-7-
In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its strategy, as well as risks and uncertainties common to companies in the biotechnology and pharmaceutical industries with development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its drug candidates; delays or problems in the manufacture and supply of its drug candidates, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or drug candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.
Principles of Consolidation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of First Wave and its wholly owned subsidiaries, First Wave Bio, Inc. (“FWB”) and AzurRx SAS. Intercompany transactions and balances have been eliminated upon consolidation.
In our opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2021, has been derived from audited financial statements of that date. The unaudited interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the SEC. The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously distributed in our Annual Report Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022 (as amended on Form 10-K/A filed with the SEC on May 10, 2022).
Going Concern Uncertainty
The accompanying unaudited interim condensed consolidated financial statements have been prepared as if the Company will continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. On June 30, 2022, the Company had cash and cash equivalents of approximately $1.2 million, an accumulated deficit of approximately $168.9 million, and negative working capital of approximately $15.5 million. The Company has incurred recurring losses, has experienced recurring negative operating cash flows, and requires significant cash resources to execute its business plans. Based on its cash on hand at June 30, 2022, and the approximately $4.6 million in net proceeds received from at-the-market sales through July 14, 2022, the Company anticipates having sufficient cash to fund planned operations into September of 2022, however, the acceleration or reduction of cash outflows by Company management can significantly impact the timing for the need to raise additional capital to complete development of its products. Historically, the Company’s major sources of cash have been comprised of proceeds from various public and private offerings of its capital stock. The Company is dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute its development plans and continue operations.
Without adequate working capital, the Company may not be able to meet its obligations and continue as a going concern. These conditions raise substantial doubt about the Company’s ability to continue as a going concern one year from the date these financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 - Significant Accounting Policies and Recent Accounting Pronouncements
Use of Estimates
The accompanying unaudited condensed consolidated financial statements are prepared in conformity with GAAP and include certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements (including goodwill and intangible assets), and the reported amounts of revenue and expense during the reporting period, including contingencies. Accordingly, actual results may differ from those estimates.
-8-
Reverse Stock Split
On September 13, 2021, the Company effected a reverse stock split, whereby every ten shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, with a corresponding 1-for-10 reduction in the number of authorized shares of common stock, but without any change in the par value per share. All share and per share amounts have been retroactively restated to reflect the reverse stock split.
Reclassifications
Certain prior period balance sheet amounts have been reclassified to conform to the fiscal 2022 presentation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less from date of purchase to be cash equivalents. All cash balances were highly liquid on June 30, 2022, and December 31, 2021, respectively.
Concentrations of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist of cash. The Company primarily maintains its cash balances with financial institutions in federally insured accounts in the U.S. The Company may from time to time have cash in banks in excess of FDIC insurance limits. On June 30, 2022, and December 31, 2021, the Company had approximately $0.6 million and $7.5 million, respectively, in one account in the U.S. in excess of these limits. The Company has not experienced any losses to date resulting from this practice.
The Company also has exposure to foreign currency risk as its subsidiary in France has a functional currency in Euros.
Fair Value Measurements
The Company follows Accounting Standards Codification (“ASC”) Topic 820-10, Fair Value Measurements and Disclosures (“ASC 820”), which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions, which reflect those that a market participant would use.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.
The Company recognizes transfers between levels as if the transfers occurred on the last day of the reporting period.
Foreign Currency Translation
The Company’s foreign subsidiary has operations denominated in a foreign currency, and assets and liabilities are translated to U.S. dollars, which is the functional currency, at period end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the periods presented. Gains and losses from translation adjustments are accumulated in a separate component of stockholders’ equity.
-9-
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of the acquired business over the fair value of amounts assigned to assets acquired and liabilities assumed. Goodwill and other intangible assets with indefinite useful lives are reviewed for impairment annually or more frequently if events or circumstances indicate impairment may be present. Any excess in carrying value over the estimated fair value is charged to results of operations. The Company has recognized any impairment charges through June 30, 2022.
Intangible assets subject to amortization consist of in process research and development, license agreements, and patents reported at the fair value at date of the acquisition less accumulated amortization. Amortization expense is provided using the straight-line method over the estimated useful lives of the assets as follows:
Patents 7.2 years
The carrying amounts of finite-lived intangible assets are evaluated for recoverability whenever events or changes in circumstances indicate that the Company may be unable to recover the asset’s carrying amount. Given changes in the projected usage of the patents, the Company recognized of approximately $2.4 million at December 31, 2021.
Impairment of Long-Lived Assets
The Company periodically evaluates its long-lived assets for potential impairment in accordance with ASC Topic 360, Property, Plant and Equipment (“ASC 360”). Potential impairment is assessed when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability of these assets is assessed based on undiscounted expected future cash flows from the assets, considering a number of factors, including past operating results, budgets and economic projections, market trends and product development cycles. If impairments are identified, assets are written down to their estimated fair value. The Company has not recognized any impairment charges through June 30, 2022.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (“ROU”) assets, and lease liability obligations are included in the Company’s balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liability obligations represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases typically do not provide an implicit rate, the Company estimates its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The ROU asset also includes any lease payments made and excludes lease incentives and lease direct costs. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. Please refer to Note 13 for additional information.
Research and Development
Research and development costs are charged to operations when incurred and are included in operating expense, except for goodwill related to patents. Research and development costs consist principally of compensation of employees and consultants that perform the Company’s research activities, payments to third parties for preclinical and non-clinical activities, expenses with clinical research organizations (“CROs”), investigative sites, consultants and contractors that conduct or provide other services relating to clinical trials, costs to acquire drug product, drug supply and clinical trial materials from contract development and manufacturing organization (“CDMOs”) and third-party contractors relating to chemistry, manufacturing and controls (“CMC”) efforts, the fees paid for and to maintain the Company’s licenses, amortization of intangible assets related to the acquisition of adrulipase, and research and development costs related to adrulipase and niclosamide. Depending upon the timing of payments to the service providers, the Company recognizes prepaid expenses or accrued expenses related to these costs. These accrued or prepaid expenses are based on management’s estimates of the work performed under service agreements, milestones achieved and experience with similar contracts. The Company monitors each of these factors and adjusts estimates accordingly.
-10-
Research and Development – Intellectual Property Acquired
The Company records intellectual property in asset acquisitions that have not reached technological feasibility and which have no alternative future use, as an expense at the acquisition date. On December 31, 2020, the Company entered into a license agreement (the “FWB License Agreement”) with FWB, pursuant to which FWB granted the Company an exclusive license to certain patents and patent applications related to a proprietary formulation of niclosamide for use in the fields of ICI-AC and COVID-19 GI infections. The acquisition of intellectual property and patents for the worldwide, exclusive right to develop, manufacture, and commercialize proprietary formulations of niclosamide for the fields of treating ICI-AC and COVID-19 in humans was accounted for as an asset acquisition and initial liabilities of approximately $13.3 million in connection with the license acquisition were recorded as research and development expense, because it was determined to have no alternative future uses and therefore no separate economic value, which included cash payments totaling approximately $10.3 million and the issuance of approximately $3.0 million worth of preferred stock (see Note 12). Upon consummation of the Merger (see Note 4) on September 13, 2021, the FWB License Agreement was effectively canceled and the total purchase price of $22.0 million was recorded as an expense at the Merger date.
Stock-Based Compensation
The Company’s board of directors (the “Board”) and stockholders have adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan (the “2014 Plan”) which took effect on May 12, 2014, and the 2020 Omnibus Equity Incentive Plan, which took effect on September 11, 2020 (the “2020 Plan”). From the effective date of the 2020 Plan, no new awards have been or will be made under the 2014 Plan. The Company accounts for its stock-based compensation awards to employees, consultants, and Board members in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees, consultants, and Board members, including grants of employee stock options, to be recognized in the statements of operations by measuring the fair value of the award on the date of grant and recognizing this fair value as stock-based compensation using a straight-line method over the requisite service period, generally the vesting period.
For awards with performance conditions that affect their vesting, such as the occurrence of certain transactions or the achievement of certain operating or financial milestones, recognition of fair value of the award occurs when vesting becomes probable.
The Company estimates the grant date fair value of stock option awards using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the Common Stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the Common Stock.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (the “FASB”) issued accounting pronouncement (ASU 2020-06) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity’s own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. As a smaller reporting company, as defined by the U.S. Securities and Exchange Commission (the “SEC”), this pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company early adopted ASU 2020-06 effective January 1, 2022.
In June 2016, the FASB issued accounting pronouncement ASU 2016-13 – Measurement of Credit Losses on Financial Statements. The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. In November 2019, the FASB issued ASU 2019-10 – Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which amended the effective date for certain companies. The standard is effective for public companies eligible to be smaller reporting companies for annual and interim periods beginning after December 15, 2022. Early adoption is available. The Company is currently evaluating the potential impact ASU 2016-13, and related updates, will have on its consolidated financial statements and disclosures.
-11-
In June 2022, the FASB issued ASU 2022-03 - Fair Value Measurement, or Topic 820: Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, or ASU 2016-13. This new standard clarifies the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The Company has assessed the impact the update and determined it does not have a material impact on the accompanying financial statements.
The Company has evaluated other recently issued accounting pronouncements and has concluded that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.
Note 3 - Fair Value Disclosures
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value.
The fair value of the Company’s financial instruments are as follows:
Fair Value Measured at Reporting Date | |||||||||||||||
Using | |||||||||||||||
Carrying | |||||||||||||||
| Amount |
| Level 1 |
| Level 2 |
| Level 3 |
| Fair Value | ||||||
June 30, 2022 (unaudited): | |||||||||||||||
Money market funds | $ | 502,371 | $ | 502,371 | $ | — | $ | — | $ | 502,371 | |||||
Note payable |
| 161,909 |
| — |
| 161,909 |
| — |
| 161,909 | |||||
December 31, 2021: | |||||||||||||||
Money market funds | 501,607 | 501,607 | — | — | 501,607 | ||||||||||
Note payable | $ | 641,236 | $ | — | $ | 641,236 | $ | — | $ | 641,236 | |||||
At June 30, 2022 and December 31, 2021, the Company had no other assets or liabilities that are subject to fair value methodology and estimation in accordance with U.S. GAAP.
Note 4 – Asset Acquisition
The Asset Acquisition
On September 13, 2021, the Company completed its acquisition of FWB, in accordance with the terms of an Agreement and Plan of Merger dated as of September 13, 2021 (the “Merger Agreement”) by and among the Company, Alpha Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and FWB. On September 13, 2021, pursuant to the Merger Agreement, Merger Sub was merged with and into FWB (the “Merger”), with FWB being the surviving corporation and becoming a wholly-owned subsidiary of the Company. In connection with the Merger, AzurRx changed its name to First Wave BioPharma, Inc.
At the effective time of the Merger, the former FWB stockholders received an applicable pro rata share of (i) $3.0 million in cash and (ii) 624,025 shares of the Common Stock (equivalent to cash of $4.0 million). The remaining non-contingent purchase price was payable to the former FWB stockholders on a pro rata basis upon the Company’s payment of (i) $8.0 million in cash, payable within 45 days of the Merger, and (ii) $7.0 million in cash, payable by March 31, 2022 for a total purchase price of $22.0 million.
The former FWB stockholders are entitled to up to a total of $207 million of cash milestone payments contingent upon the achievement of specified development, regulatory and sales goals relating to the use of the acquired assets. All milestone payments will be payable in cash, provided that 25% of the milestone payments attributable to a certain IBD indications may be payable in Common Stock, at the option of the Company. In addition, the former FWB stockholders are entitled to 10% of certain specified revenue received by the Company from any third-party with a pre-existing niclosamide development program relating to COVID.
-12-
On October 29, 2021, Fortis Advisors LLC, the hired representative (in such capacity, the “Representative”) of the former stockholders of FWB, in connection with the Merger Agreement filed a complaint against the Company in the Court of Chancery of the State of Delaware, seeking to enforce rights to payment of $8.0 million due October 28, 2021, pursuant to the Merger Agreement and the $2.0 million milestone payment for initiation of the FW-UP Part 2 trial.
On November 15, 2021, the Company reached an agreement (the “November 2021 Settlement Agreement”) with the Representative of the former stockholders of FWB to substantially reduce the immediate payment obligations of the Company and defer certain remaining milestone and other payment obligations over time. The November 2021 Settlement Agreement called for an immediate payment of $2.0 million related to the FW-UP milestone payment. Additionally, it called for periodic installments of the up-front cash payments due of $500,000 per month payable from January 2022 through August 2022, $1.0 million per month payable from September 2022 through July 2023, and payment of 10% in excess of $10.0 million in financing transactions consummated by the Company after the effective date of the November 2021 Settlement Agreement until an aggregate of $15.0 million is paid. In addition, the Company cancelled 332,913 shares of Common Stock held by FWB immediately prior to the Merger for no additional consideration, which shares of Common Stock are authorized and unissued.
During the three and six months ended June 30, 2022 the Company paid an aggregate of $0 million and $2.4 million in cash towards the purchase price. During the year ended December 31, 2021, the Company paid an aggregate of $7.0 million (in cash and shares) towards the purchase price and $2.0 million in milestone payments.
On May 19, 2022, the Representative filed a complaint against the Company in the Court of Chancery in the State of Delaware (the “FWB Action”) for breach of contract and anticipatory repudiation or for unjust enrichment. The FWB Action seeks specific performance of the Company’s obligations under the Merger Agreement and the November 2021 Settlement Agreement, including all payments currently owed and to be owed to the Representative, and damages at the maximum amount permitted by law. On July 29, 2022, the Company reached an agreement with the Representative to settle the FWB Action and to restructure the Company’s obligations to the former FWB stockholders (see Note 16 – The FWB Action).
Accounting Treatment
The Company concluded that the Merger should be accounted for as an asset acquisition under ASC 805 because substantially all the fair value of the assets being acquired are concentrated in a single asset - intellectual property, which does not constitute a business. Because the acquired intellectual property has not received regulatory approval, the $21.3 million non-contingent purchase price was immediately expensed in the Company’s statements of operations as research and development – intellectual property acquired in the year ended December 31, 2021. The $0.9 million of transaction expenses paid at closing were classified in general and administrative expenses in the year ended December 31, 2021. The Common Stock issued for the asset acquisition was valued at $4.0 million, which is equal to the 624,025 common shares issued multiplied by $6.41 per share.
The unachieved potential milestone payments and revenue share are not yet considered probable, therefore no milestone payments have been accrued as of June 30, 2022. Depending on the status of development at the time a contingent payment is recognized, the Company may determine that the payment should be expensed as research and development or be capitalized as an intangible asset. This determination will be based on the facts and circumstances that exist at the time a contingent payment is recognized.
Note 5 – Property, Equipment and Leasehold Improvements
Property, equipment, and leasehold improvements consisted of the following:
June 30, | ||||||
| 2022 |
| December 31, | |||
(unaudited) | 2021 | |||||
Computer equipment and software | $ | 11,540 | $ | 11,540 | ||
Office equipment |
| 48,278 |
| 48,278 | ||
Leasehold improvements |
| 28,000 |
| 28,000 | ||
Total property, plant, and equipment |
| 87,818 |
| 87,818 | ||
Less accumulated depreciation |
| (29,343) |
| (14,708) | ||
Property, plant and equipment, net | $ | 58,475 | $ | 73,110 | ||
-13-
Depreciation expense for the three months ended June 30, 2022 and 2021 was approximately $7,300 and $2,000, respectively, and for the six months ended June 30, 2022 and 2021 was approximately and $3,000, respectively.
Note 6 – Intangible Assets and Goodwill
Patents
Pursuant to the Mayoly asset purchase agreement entered in March 2019 (see Note 12), in which the Company purchased all remaining rights, title and interest in and to adrulipase from Mayoly, the Company recorded Patents in the amount of approximately $3.8 million as follows:
Common stock issued at signing to Mayoly |
| $ | 1,740,959 |
Due to Mayoly at December 31, 2019 |
| 449,280 | |
Due to Mayoly at December 31, 2020 |
| 393,120 | |
Assumed Mayoly liabilities and forgiveness of Mayoly debt |
| 1,219,386 | |
$ | 3,802,745 |
Intangible assets are as follows:
June 30, | ||||||
| 2022 |
| December 31, | |||
(unaudited) | 2021 | |||||
Patents | $ | — | $ | 3,802,745 | ||
Less accumulated amortization |
| — |
| (1,450,757) | ||
Intangible asset impairment |
| — |
| (2,351,988) | ||
Patents, net | $ | — | $ | — | ||
Amortization expense was approximately $132,000 and $264,000 for the three and six months ended June 30, 2021, respectively.
During the year ended December 31, 2021, the Company recorded of approximately $2.4 million related to patents that the Company determined were no longer sufficient for the commercialization of adrulipase.
Goodwill is as follows:
Note 7 - Accrued Expenses
Accrued expenses consisted of the following:
June 30, | ||||||
| 2022 |
| December 31, | |||
(unaudited) | 2021 | |||||
Professional fees | $ | 263,616 | $ | 15,000 | ||
Consulting fees | 92,124 | 104,100 | ||||
Payroll and benefits | 70,495 | 274,153 | ||||
Total accrued expenses | $ | 426,235 | $ | 393,253 | ||
-14-
Note 8 – Note Payable
Directors and Officer’s Liability Insurance
On November 30, 2021, the Company entered into a financing agreement for its directors and officer’s liability insurance in the amount of approximately $957,000 that bears interest at an annual rate of 3.99%. Monthly payments, including principal and interest, are approximately $81,000 per month. The balance due under this financing agreement was approximately $162,000 and $641,000 at June 30, 2022 and December 31, 2021, respectively.
Note 9 – Capital Stock
Common Stock and Preferred Stock
The Company’s certificate of incorporation, as amended and restated on February 14, 2022, (the “Charter”) authorizes the issuance of up to 50,000,000 shares of Common Stock (increased from 25,000,000 shares of Common Stock authorized), par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share.
On September 13, 2021, the Company effected a reverse stock split, whereby every ten shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, with a corresponding 1-for-10 reduction in the number of authorized shares of common stock, but without any change in the par value per share. All share and per share amounts have been retroactively restated to reflect the reverse stock split.
The Company had 22,699,812 and 14,855,848 shares of its Common Stock and on June 30, 2022 and December 31, 2021, respectively.
The Company has designated 5,194.805195 shares as Series B Preferred Stock and had approximately 631.34 and 662.25 shares of Series B preferred stock and on June 30, 2022 and December 31, 2021, respectively.
The Company has designated 57,000 shares as Series C Preferred Stock and had 0 shares of Series C preferred stock issued and outstanding on June 30, 2022 and December 31, 2021, respectively.
Series B Convertible Preferred Stock
Pursuant to the Certificate of Designation of Rights and Preferences of the Series B Preferred Stock (the “Series B Certificate of Designation”), the Series B Preferred Stock will rank senior to the Common Stock with respect to distributions of assets upon the liquidation, dissolution or winding up of the Company. Each share of Series B Preferred Stock has a stated value of $7,700, subject to adjustment for stock splits, combinations and similar events (the “Series B Stated Value”). Each holder of shares of Series B Preferred Stock, in preference and priority to the holders of all other classes or series of stock of the Company, is entitled to receive dividends, commencing from the date of issuance. Such dividends may be paid by the Company only when, as and if declared by the Board, out of assets legally available therefor, semiannually in arrears on the last day of June and December in each year, commencing December 31, 2020, at the dividend rate of 9.0% per year, which is cumulative and continues to accrue on a daily basis whether or not declared and whether or not the Company has assets legally available therefor. The Company may pay such dividends at its option either in cash or in kind in additional shares of Series B Preferred Stock (rounded down to the nearest whole share), provided the Company must pay in cash the fair value of any such fractional shares in excess of $100.00. On June 30, 2022 and December 31, 2021, aggregate dividends payable amounted to approximately $653,000 and $465,000, respectively.
Series B Preferred Stock Waiver Agreements
Between February 1 and February 7, 2022, the Company entered into waiver agreements (the “Waiver”) with certain holders of Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), pursuant to which the Company agreed to pay a cash waiver fee equal to ten percent of the stated value of the shares of Series B Preferred Stock held by such holder (other than holders who are insiders who did not receive a cash waiver fee) and such holder agreed to irrevocably waive its Series B Exchange Right (as defined below) with respect to any Subsequent Financing (as defined below) that occurs from and after the date of the Waiver until December 31, 2022.
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Pursuant to the Series B Certificate of Designation, in the event of any issuance by the Company or any of its subsidiaries of Common Stock or common stock equivalents for cash consideration or a combination of units thereof (a “Subsequent Financing”), each holder of Series B Preferred Stock has the right, subject to certain exceptions set forth in the Series B Certificate of Designations, at its option, to exchange (in lieu of cash subscription payments) all or some of the Series B Preferred Stock then held (with a value per share of Series B Preferred Stock equal to the stated value of each share of Series B Preferred Stock, or $7,700.00, plus accrued and unpaid dividends thereon, of the Series B Preferred Stock) for any securities or units issued in a Subsequent Financing on a dollar-for-dollar basis (the “Series B Exchange Right”).
The Company entered into Waivers with holders of approximately $2.88 million of stated value of Series B Preferred Stock. The Company also entered into Waivers with Company insiders holding approximately $0.047 million of stated value of Series B Preferred Stock for which the Company did not pay a waiver fee. The cash waivers paid of approximately $0.233 million were recorded as other expense on the Company’s condensed consolidated statements of operations for the six months ending June 30, 2022.
Series B Exchange Right Permanent Waiver
Effective May 12, 2022, the holders of 81.3% of the outstanding shares of the Series B Preferred Stock permanently waived for themselves and all other holders of the Series B Preferred Stock the Series B Exchange Right with respect to any Subsequent Financing occurring on or after January 1, 2022 (the “Permanent Waiver”). Holders of Series B Preferred Stock as of the April 27, 2022 record date were entitled to notice of and to consent to the Permanent Waiver (the “Record Holders”).
Pursuant to the terms of the Series B Certificate of Designation, the written consent of the holders of at least a majority of the Series B Preferred Stock outstanding was required to consent to the Permanent Waiver (the “Required Consent”). The Company requested that the Record Holders consent to the Permanent Waiver by executing and delivering a joinder to the Waiver Agreement (as defined below). The execution and delivery of the joinder to the Waiver Agreement was deemed, for purposes of Section 228 of the General Corporation Law of the State of Delaware, to be an action by written consent in lieu of a meeting to approve the Permanent Waiver. The Company’s solicitation of consents to the Permanent Waiver terminated in accordance with its terms at 5:00 p.m., Eastern Time, on May 12, 2022 (the “Expiration Date”). The Record Holders who consented to the Permanent Waiver prior to the Expiration Date are referred to herein as the “Consenting Holders”.
The Required Consent was obtained from the Consenting Holders and the solicitation terminated in accordance with its terms as of the Expiration Date. The Permanent Waiver was effective immediately upon the Expiration Date and was binding on all holders of the Series B Preferred Stock, including those holders that did not timely consent to the Permanent Waiver prior to the Expiration Date. The Permanent Waiver will also be applicable to any future holder of Series B Preferred Stock. A notation of the Permanent Waiver was made on the books and records of the Company’s transfer agent and a legend reflecting the Permanent Waiver was placed on any physical share certificate representing shares of Series B Preferred Stock.
Pursuant to the terms of a Waiver Agreement entered into by the Company and the Consenting Holders (the “Waiver Agreement”), the Company permanently reduced the exercise price of the Series B Warrants originally issued on July 16, 2020 (the “Series B Warrants”) held by the Consenting Holders to $0.25 per share or, in the case of Consenting Holders who are officers and directors of the Company, $0.3294 (the “Exercise Price Reduction”). Only Consenting Holders are entitled to the Exercise Price Reduction. Series B Warrants to purchase an aggregate of approximately 251,742 shares of Common Stock received the Exercise Price Reduction which was effective as of the Expiration Date. As a result of the Exercise Price Reduction of the Series B Warrants described above, the Company recorded a deemed dividend of approximately $0.047 million in the three and six months ended June 30, 2022.
Series B Exchanges into the January 2021 Offerings
During the six months ended June 30, 2021, pursuant to the Series B Exchange Right, the Company issued an aggregate of 13,501.08 shares of Series C Preferred Stock and warrants to purchase an aggregate of 1,350,066 shares of Common Stock in connection with the exchange of approximately 1,306.30 shares of Series B Preferred Stock. The Company analyzed the exchanges pursuant to the Series B Exchange Right from preferred stock to preferred stock qualitatively and determined that the exchanges resulted in a substantive change and should be accounted for as an extinguishment. As such, for the six months ended June 30, 2021, the Company recognized an aggregate deemed dividend of approximately $17.6 million as calculated by the difference in the carrying value of the Series B Preferred Stock exchanged and the fair value of the Series C Preferred Stock and January 2021 Investor Warrants issued on each exchange date.
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Equity Line with Lincoln Park
In November 2019, the Company entered into a purchase agreement (the “Equity Line Agreement”), together with a registration rights agreement (the “Lincoln Park Registration Rights Agreement”), with Lincoln Park. Under the terms of the Equity Line Agreement, Lincoln Park had committed to purchase up to $15,000,000 of Common Stock (the “Equity Line”). Upon execution of the Equity Line Agreement, the Company issued Lincoln Park 48,716 shares of Common Stock (the “Commitment Shares”) as a fee for its commitment to purchase shares of Common Stock under the Equity Line Agreement, which had a grant date fair value of approximately $297,000 and had no effect on expenses or stockholders’ equity.
The Company did not issue shares of Common Stock, during either of the three or six months ended June 30, 2022 and 2021, in connection with the Equity Line Agreement. The Equity Line Agreement expired by its terms on July 31, 2022.
At The Market Agreement with H.C. Wainwright
On May 26, 2021, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, pursuant to which the Company may issue and sell, from time to time, through Wainwright, shares of its Common Stock, and pursuant to which Wainwright may sell its Common Stock by any method permitted by law deemed to be an “at the market offering” as defined by Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. The Company will pay Wainwright a commission of 3.0% of the aggregate gross proceeds from each sale of Common Stock. As of May 24, 2022, the Company was authorized to offer and sell up to $8.0 million of its Common Stock pursuant to the ATM Agreement. During each of the three and six months ended June 30, 2021, the Company issued and sold an aggregate of 149,565 shares of Common Stock under the ATM Agreement for which the Company received gross proceeds of approximately $1.3 million, less issuance costs incurred of approximately $46,000. During each of the three and six months ended June 30, 2022, the Company issued and sold an aggregate of 1,064,474 shares of Common Stock under the ATM Agreement for which the Company received gross proceeds of approximately $334,000, less issuance costs incurred of approximately $17,000.
March 2022 Registered Direct Offering
On March 2, 2022, the Company completed a registered direct offering (the “March 2022 Offering”) priced at the market under Nasdaq rules for an aggregate of 1,650,000 shares of Common Stock, pre-funded warrants exercisable for an aggregate of up to 4,848,195 shares of Common Stock (the “March 2022 Pre-Funded Warrants”), and Series C Warrants (the “March 2022 Warrants”) exercisable for an aggregate of up to 6,498,195 shares of Common Stock. The public offering price for each share of Common Stock and accompanying March 2022 Warrant to purchase one share of Common Stock was $1.385, and the public offering price for each March 2022 Pre-Funded Warrant and accompanying March 2022 Warrant to purchase one share of Common Stock was $1.375. The total net proceeds from the March 2022 Offering were approximately $8.0 million. The March 2022 Warrants have an exercise price of $1.26 per share and will be exercisable for five years from the issuance date. The March 2022 Pre-Funded Warrants are exercisable for one share of Common Stock at an exercise price of $0.01 per share and will expire when exercised in full. Additionally, the Company issued warrants to the placement agent (the “March 2022 Placement Agent Warrants”) to purchase 389,891 shares of Common Stock equal to 6.0% of the aggregate number of shares of Common Stock and March 2022 Pre-Funded Warrants placed in the March 2022 Offering. The March 2022 Placement Agent Warrants have a term of five years from the date of the prospectus supplement relating to the March 2022 Offering and an exercise price of $1.73 per share.
The proceeds from the March 2022 Offering were allocated to the Common Stock, Pre-Funded warrants, and March 2022 Investor Warrants based on their relative fair values. The total proceeds of approximately $9.0 million, net of $1.0 million offering costs, were allocated as follows: approximately $2.3 million to the Common Stock, approximately $0.3 million to the Pre-Funded Warrants, and approximately $6.4 million to the March 2022 Warrants. The total offering costs of approximately $1.0 million were recognized in equity.
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March 2021 Registered Direct Offering
On March 10, 2021, the Company completed a registered direct offering (the “March 2021 Offering”) priced at the market under Nasdaq rules for an aggregate of 580,000 shares of Common Stock, pre-funded warrants to purchase up to 205,854 shares of Common Stock (the “March 2021 Pre-Funded Warrants”), with an exercise price of $0.10 per share and no expiration term, and warrants (the “March 2021 Warrants”) to purchase an aggregate of 392,927 shares of Common Stock with an exercise price of $12.10 per share and an expiration term of five years from the date of issuance. The price per share of this offering was $12.725. The Company also issued warrants to the placement agent (the “March 2021 Placement Agent Warrants”) exercisable for up to 55,008 shares of Common Stock, which is equal to 7.0% of the amount determined by dividing the gross proceeds of the March 2021 Offering by the offering price per share of Common Stock, or $12.725. The March 2021 Placement Agent Warrants have substantially the same terms as the March 2021 Warrants, except they are exercisable at $15.906 per share, or 125% of the effective purchase price per share of Common Stock issued. The Company concluded that the freestanding March 2021 Warrants and the March 2021 Placement Agent Warrants did not contain any provisions that would require liability classification and therefore should be classified in stockholder’s equity.
The proceeds from the March 2021 Offering were allocated to the Common Stock, March 2021 Pre-Funded Warrants, and March 2021 Warrants based on their relative fair values. The total proceeds of approximately $9.1 million, net of $0.9 million offering costs, were allocated as follows: approximately $3.9 million to the Common Stock, approximately $2.6 million to the pre-funded warrants, and approximately $3.5 million to the March 2021 Warrants. The total offering costs of approximately $0.9 million were recognized in equity.
Common Stock Issuances
Issuances for the Three and Six Months Ended June 30, 2022
During the three months ended June 30, 2022, the Company issued and sold an aggregate of 1,064,474 shares of Common Stock under the ATM Agreement for which the Company received net proceeds of approximately $317,000.
During the three months ended June 30, 2022, the Company issued an aggregate of 86,503 shares of Common Stock and accompanying warrants (the “Exchange Warrants”) upon the exchange of an aggregate of 13.87 shares of Series B Preferred Stock with a stated value of approximately $107,000 plus accrued dividends of approximately $13,000. The Exchange Warrants have an exercise price of $1.26 per share and will be exercisable for five years from the issuance date.
During the six months ended June 30, 2022, the Company issued 1,650,000 shares of Common Stock under the March 2022 Offering for which the Company received net proceeds of approximately $8.0 million.
During the six months ended June 30, 2022, the Company issued an aggregate of 4,848,195 shares of Common Stock upon the conversion of the March 2022 Pre-Funded Warrants issued at a par value of $0.01 (See Note 10).
During the six months ended June 30, 2022, the Company issued an aggregate of 191,238 shares of Common Stock and accompanying Exchange Warrants upon the exchange of an aggregate of 30.92 shares of Series B Preferred Stock with a stated value of approximately $238,000 plus accrued dividends of approximately $27,000.
During the six months ended June 30, 2022, the Company issued an aggregate of 90,057 shares of its Common Stock to consultants with a grant date fair value of approximately $119,000 for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.
During the six months ended June 30, 2022, the Company issued and sold an aggregate of 1,064,474 shares of Common Stock under the ATM Agreement for which the Company received net proceeds of approximately $317,000.
Issuances for the Three and Six Months Ended June 30, 2021
During the three months ended June 30, 2021, the Company issued and sold an aggregate of 149,565 shares of Common Stock under the ATM Agreement for which the Company received net proceeds of approximately $1.2 million.
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During the three months ended June 30, 2021, the Company issued an aggregate of 19,500 shares of its Common Stock to consultants with a grant date fair value of approximately $147,000 for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.
During the three months ended June 30, 2021, the Company issued an aggregate of 563,916 shares of Common Stock upon the conversion of an aggregate of 5,639.15 shares of Series C Preferred Stock with a stated value of approximately $4.1 million plus accrued dividends of approximately $122,000.
During the three months ended June 30, 2021, the Company issued an aggregate of 32,838 shares of Common Stock upon the exercise of an aggregate of 32,838 investor warrants (See Note 11).
During the six months ended June 30, 2021, the Company issued and sold an aggregate of 149,565 shares of Common Stock under the ATM Agreement for which the Company received net proceeds of approximately $1.2 million.
During the six months ended June 30, 2021, the Company issued an aggregate of 77,030 shares of its Common Stock to consultants with a grant date fair value of approximately $1.1 million for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.
During the six months ended June 30, 2021, the Company issued an aggregate 7,500 shares of its Common Stock with a grant date fair value of approximately $94,000 in connection with the settlement with the Company’s former investment bank, which was recorded as stock-based compensation and included as part of general and administrative expense.
During the six months ended June 30, 2021, the Company issued an aggregate of 3,125,460 shares of Common Stock upon the conversion of an aggregate of 33,097.10 shares of Series C Preferred Stock with a stated value of approximately $24.7 million plus accrued dividends of approximately $198,000.
During the six months ended June 30, 2021, the Company issued an aggregate of 945,644 shares of Common Stock upon the exercise of an aggregate of 945,644 investor warrants, including an aggregate of 399,187 pre-funded warrants (See Note 11).
During the six months ended June 30, 2021, the Company issued an aggregate of 258,278 shares of Common Stock upon the conversion of an aggregate of 26 shares of Series B Preferred Stock with a stated value of approximately $2.0 million plus accrued dividends of approximately $3,000.
During the six months ended June 30, 2021, the Company issued 580,000 shares of Common Stock under the March 2021 Offering for which the Company received net proceeds of approximately $9.1 million.
Series C Purchase Agreement
On January 5, 2021, the Company closed on a securities purchase agreement (the “Series C Purchase Agreement”), pursuant to which the Company agreed to sell in a registered direct offering 5,333.33 shares of Series C Preferred Stock, at a price of $750.00 per share, initially convertible into an aggregate of 533,333 shares of Common Stock, at an initial stated value of $750.00 per share and a conversion price of $7.50 per share (the “January 2021 Registered Direct Offering”).
Concurrently with the January 2021 Registered Direct Offering, in a private placement offering pursuant to the Series C Purchase Agreement (the “January 2021 Private Placement”), the Company agreed to sell an additional 5,333.33 shares of Series C Preferred Stock at the same price as the Series C Preferred Stock offered in the January 2021 Registered Direct Offering and convertible on the same terms and warrants (the “January 2021 Investor Warrants”) to purchase up to an aggregate of 1,066,666 shares of Common Stock, with an exercise price of $8.00 per share and a maturity date of July 6, 2026.
The net proceeds to the Company from the offerings described above (the “January 2021 Offerings”), after deducting the placement agent’s fees and expenses, was approximately $7.1 million.
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The Company also issued warrants to the placement agent (the “January 2021 Placement Agent Warrants”) exercisable for up to 74,667 shares of Common Stock, which is equal to 7.0% of the amount determined by dividing the gross proceeds of the January 2021 Offerings by the offering price per share of Common Stock, or $7.50. The January 2021 Placement Agent Warrants have substantially the same terms as the January 2021 Investor Warrants, except they are exercisable at $9.375 per share, or 125% of the effective purchase price per share of the Series C Preferred Stock issued.
The proceeds from the January 2021 Offerings were allocated to the Series C Preferred Stock and the January 2021 Investor Warrants based on their relative fair values. The total proceeds of approximately $7.1 million, net of $0.9 million offering costs, were allocated as follows: approximately $4.6 million to the Series C Preferred Stock and approximately $3.4 million to the January 2021 Investor Warrants. After allocation of the proceeds, the effective conversion price of the Series C Preferred Stock was determined to be beneficial and, as a result, the Company recorded a deemed dividend of approximately $4.5 million equal to the intrinsic value of the beneficial conversion feature and recognized on the closing date and recorded as a reduction of income available to common stockholders in computing basic and diluted loss per share. The total offering costs of approximately $0.9 million were recognized in equity.
During the six months ended June 30, 2021, all outstanding shares of Series C Preferred Stock were converted to Common Stock.
Note 10 – Warrants
Warrant activity for the six months ended June 30, 2022 and 2021 was as follows:
Weighted | Weighted | ||||||
Average | Average | ||||||
Number of | Exercise Price | Remaining | |||||
| Warrants |
| Per Share |
| Term in Years | ||
Outstanding and exercisable on January 1, 2022 |
| 5,527,390 | $ | 9.49 |
| 3.95 | |
Issued |
| 11,927,519 |
| 0.77 |
| 4.67 | |
Expired |
| (121,639) |
| 36.93 |
| — | |
Exercised |
| (4,848,195) |
| 0.01 |
| 4.67 | |
Warrants outstanding and exercisable on June 30, 2022 |
| 12,485,075 | $ | 3.49 |
| 4.18 | |
Warrants outstanding and exercisable on January 1, 2021 |
| 2,517,722 | $ | 12.20 |
| 4.04 | |
Issued |
| 3,922,426 |
| 7.78 |
| 4.88 | |
Expired |
| (32,117) |
| 20.07 |
| — | |
Exercised |
| (952,588) |
| 5.32 |
| 2.36 | |
Warrants outstanding and exercisable on June 30, 2021 |
| 5,455,443 | $ | 10.18 |
| 4.38 | |
The outstanding warrants expire from 2022 through 2027.
In connection with the March 2022 Offering, the Company entered into a warrant amendment agreement with an investor pursuant to which the Company agreed to amend the investor’s existing warrants to purchase up to 1,066,666 shares of Common Stock at an exercise price of $8.00 per share issued in January 2021 and warrants to purchase up to 392,927 shares of Common stock at an exercise price of $12.10 per share issued in March 2021 (the “Existing Warrants”), in consideration for such investor’s purchase of $9.0 million of securities in the March 2022 Offering and payment of $0.0281 per share for each share of common stock issuable upon exercise of the Existing Warrants to (i) lower the exercise price of the Existing Warrants to $1.26 per share and (ii) extend the termination date of the Existing Warrants to March 2, 2027.
During the six months ended June 30, 2022, the Company issued March 2022 Warrants, March 2022 Pre-Funded Warrants, and March 2022 Placement Agent Warrants to purchase 11,736,281 shares of Common Stock in connection with the March 2022 Offering, as well as Exchange Warrants to purchase 191,238 shares of Common Stock in connection with a Series B Preferred Stock exchange (See Note 9).
During the six months ended June 30, 2021, the Company issued warrants, pre-funded warrants, and placement agent warrants to purchase 1,334,664 and 653,789 shares of the Company’s Common Stock in connection with the January 2021 Offerings and the March 2021 Offering, respectively, and warrants to purchase 1,350,066 shares of the Company’s Common Stock in connection with exchanges made pursuant to the Series B Exchange Right (See Note 9).
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Additionally, on February 8, 2021, warrants to purchase 20,000 shares of Common Stock were issued to a consultant at an exercise price of $16.90 per share and expire four years from the date of issuance. The total grant date fair value of these warrants was determined to be approximately $214,000, as calculated using the Black-Scholes model. For the six months ended June 30, 2021, warrants to purchase a total of 5,000 shares of Common Stock vested, with a grant date fair value of approximately $53,000, which was recorded as stock-based compensation as part of general and administrative expense.
Note 11 – Equity Incentive Plan
The Company’s Board and stockholders adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan (the “2014 Plan”), which took effect on May 12, 2014. Upon adoption of the 2020 Plan on September 11, 2020, the Company ceased making grants under the 2014 Plan.
The Company’s Board and stockholders adopted and approved the 2020 Omnibus Equity Incentive Plan (the “2020 Plan”), which took effect on September 11, 2020. The initial number of shares of Common Stock available for issuance under the 2020 Plan is 1,000,000 shares, which will, on January 1 of each calendar year, unless the Board decides otherwise, automatically increase to equal ten percent (10%) of the total number of shares of Common Stock outstanding on December 31 of the immediately preceding calendar year, calculated on an As Converted Basis. As Converted Shares include all outstanding shares of Common Stock and all shares of Common Stock issuable upon the conversion of outstanding preferred stock, warrants and other convertible securities, but will not include any shares of Common Stock issuable upon the exercise of options and other convertible securities issued pursuant to either the 2014 Plan or the 2020 Plan. The number of shares permitted to be issued as “incentive stock options” (“ISOs”) is 1,500,000 under the 2020 Plan.
As of January 1, 2022, the number of shares of Common Stock available for issuance under the 2020 Plan automatically increased to 2,114,360.
As of June 30, 2022, there were an aggregate of 2,114,360 shares available under the 2020 Plan, of which 716,506 shares were issued and outstanding and 1,397,854 shares were available for potential issuances.
As of June 30, 2022, there were an aggregate of 260,426 shares available under the 2014 Plan, of which 197,559 shares were issued and outstanding and 62,867 shares are reserved subject to issuance of restricted stock and restricted stock unit awards (“RSUs”).
During the six months ended June 30, 2022 and 2021, stock option activity under the 2014 Plan and 2020 Plan was as follows:
During the six months ended June 30, 2022 and 2021, the Board approved the grant of options to purchase 678,392 and 156,465 shares of Common Stock, respectively. All option grants were pursuant to the 2020 Plan. In general, options granted under the 2020 Plan vest monthly over a 36-month period.
During the six months ended June 30, 2022 and 2021, stock options to purchase an aggregate of 60,271 and 133,976 shares of Common Stock under the 2020 Plan were cancelled. During the six months ended June 30, 2022, stock options to purchase 143,248 shares of Common Stock were forfeited.
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For the six months ended June 30, 2022 and 2021, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes Option Pricing Model with the following weighted-average assumptions:
| 2022 |
|
| 2021 |
| |
Contractual term (in years) |
| 6.50 | 10.00 | |||
Expected Volatility |
| 90.92 | % | 88.64 | % | |
Risk-free interest rate |
| 1.11 | % | 1.38 | % | |
Expected Dividend yield |
| 0 | % | 0 | % |
Using the Black-Scholes Option Pricing Model, the estimated weighted average fair value of an option to purchase one share of common stock granted during the six months ended June 30, 2022 and 2021 was $1.23 and $6.81, respectively.
As of June 30, 2022, the Company had unrecognized stock-based compensation expense of approximately $1.1 million. Approximately $0.6 million of this unrecognized expense will be recognized over the average remaining vesting term of the stock options of years. Approximately $0.5 million of this unrecognized expense will vest upon achieving certain clinical and/or corporate milestones. The Company will recognize the expense related to these milestones when the milestones become probable.
As of June 30, 2021, the Company had unrecognized stock-based compensation expense of approximately $1.1 million. Approximately $0.8 million of this unrecognized expense will be recognized over the average remaining vesting term of the stock options of 1.93 years. Approximately $320,000 of this unrecognized expense will vest upon achieving certain clinical and/or corporate milestones. The Company will recognize the expense related to these milestones when the milestones become probable.
As of June 30, 2022 and 2021, the Company had 27,500 shares of restricted stock that had not yet vested and unrecognized restricted common stock expense of approximately $394,000. Approximately $197,000 of this unrecognized expense vests upon the first commercial sale in the United States of Adrulipase and approximately $197,000 of this unrecognized expense vests upon the total market capitalization of the Company exceeding $1.0 billion for 20 consecutive trading days. These milestones were not considered probable as of June 30, 2022.
The total stock-based compensation expense for employees and non-employees is included in the accompanying condensed consolidated statements of operations and as follows:
Note 12 – Agreements
License Agreement with First Wave Bio, Inc. (FWB)
On December 31, 2020, the Company entered into the FWB License Agreement, pursuant to which FWB granted us a worldwide, exclusive right to develop, manufacture, and commercialize FWB’s proprietary immediate release and enema formulations of niclosamide (the “Niclosamide Product”) for the fields of treating ICI-AC and COVID-19 in humans.
In consideration of the license and other rights granted by FWB, the Company agreed to pay FWB a $9.0 million upfront cash payment due within 10 days, which was paid in January 2021, and was obligated to make an additional payment of $1.25 million due on June 30, 2021, which was paid in July 2021. In addition, the Company was obligated to pay potential milestone payments to FWB totaling up to $37.0 million for each indication, based upon the achievement of specified development and regulatory milestones. In September 2021, the Company achieved a milestone related to clinical development of niclosamide in the COVID-19 field and has expensed $1.0 million in research and development. Under the FWB License Agreement, the Company was obligated to pay FWB royalties as a mid-single digit percentage of net sales of the Niclosamide Product, subject to specified reductions. The Company was also obligated to issue to FWB junior convertible preferred stock, initially convertible into $3.0 million worth of Common Stock based upon the volume weighted average price of the Common Stock for the five-day period immediately preceding the date of the FWB License Agreement, or $9.118 per share, convertible into an aggregate of 329,019 shares of Common Stock.
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On January 8, 2021, the Company entered into a securities purchase agreement with FWB (the “FWB Purchase Agreement”) to issue junior convertible preferred stock to FWB. Pursuant to the FWB Purchase Agreement, the Company issued to FWB 3,290.1960 shares of Series C Preferred Stock, at an initial stated value of $750.00 per share and a conversion price of $7.50 per share, which is convertible into an aggregate of 32,902 shares of Common Stock. The shares of Series C Preferred Stock automatically converted into Common Stock upon the stockholder approval on February 24, 2021. The FWB Purchase Agreement contains demand and piggyback registration rights with respect to the Common Stock issuable upon conversion.
The conversion price of the Series C Preferred Stock was determined to be beneficial and, as a result, the Company recorded a deemed dividend of approximately $230,000 equal to the intrinsic value of the beneficial conversion feature and recognized on the issuance date and recorded as a reduction of income available to common stockholders in computing basic and diluted loss per share.
Upon the 2021 Stockholder Approval on February 24, 2021, the Company recognized a change in fair value of approximately $0.5 million based on the difference in fair value of the $3.0 million liability initially recorded pursuant to the FWB License Agreement as of December 31, 2020 and the fair value of approximately $2.5 million of Series C Preferred Stock issued pursuant to the FWB Purchase Agreement to settle the liability.
Following the 2021 Stockholder Approval, the shares of Series C Preferred Stock were automatically converted into Common Stock.
Upon consummating the Merger on September 13, 2021, the FWB License Agreement was effectively canceled.
Mayoly Agreement
On March 27, 2019, the Company and Laboratories Mayoly Spinder (“Mayoly”) entered into an Asset Purchase Agreement (the “Mayoly APA”), pursuant to which the Company purchased substantially all remaining rights, title and interest in and to adrulipase. Further, upon execution of the Mayoly APA, the Joint Development and License Agreement (the “JDLA”) previously executed by AzurRx SAS and Mayoly was assumed by the Company. In addition, the Company granted to Mayoly an exclusive, royalty-bearing right to revenue received from commercialization of adrulipase within certain territories.
Note 13 – Leases
The Company leases its offices under operating leases which are subject to various rent provisions and escalation clauses.
The Company is a party to real property operating leases for the rental of office space. The Company has office space of 3,472 square feet in Boca Raton, Florida that is used for its corporate headquarters with a term through August 31, 2026. The Company also has office space in in Brooklyn, New York on a month-to-month basis. The Company was previously a party to office space in Hayward, California with a term through May 31, 2022, which was not be renewed upon its expiration.
The Company’s leases expire at various dates through 2026. The escalation clauses are indeterminable and considered not material and have been excluded from minimum future annual rental payments.
Lease expense was approximately $50,000 and $57,000, respectively, for the three months ended June 30, 2022 and 2021 and $78,000 and $110,000, respectively, for the six months ended June 30, 2022 and 2021.
The weighted-average remaining lease term and weighted-average discount rate under operating leases as of June 30, 2022 are:
June 30, |
| ||
| 2022 |
| |
Lease term and discount rate |
|
| |
Weighted-average remaining lease term (years) |
| 4.1 | |
Weighted-average discount rate |
| 7.00 | % |
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Maturities of operating lease liabilities as of June 30, 2022, were as follows:
2022 (remainder of year) |
| $ | 41,126 |
2023 |
| 83,691 | |
2024 |
| 86,202 | |
2025 |
| 88,788 | |
2026 |
| 60,593 | |
Total lease payments |
| 360,400 | |
Less imputed interest |
| (49,501) | |
Present value of lease liabilities | $ | 310,899 |
Note 14 - Net Loss per Common Share
Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants and conversion of convertible debt that are not deemed to be anti-dilutive. The dilutive effect of the outstanding stock options and warrants is computed using the treasury stock method. In periods where the Company records a net loss, unvested restricted common stock and potential common stock equivalents are not included in the calculation of diluted net loss per share as their effect would be anti-dilutive.
All shares of Common Stock that may potentially be issued in the future are as follows:
| (1) | Convertible preferred stock is assumed to be converted at the rate of $7.70 per common share, which is the conversion price as of June 30, 2022. |
During the three months ended June 30, 2022, the Company determined that approximately $0.595 million was incorrectly classified as a deemed dividend in the three months ended March 31, 2022. The Company corrected this misclassification as presented in its condensed consolidated financial statements for the six-month periods presented ending June 30, 2022.
Note 15 - Employee Benefit Plans
401(k) Plan
Since 2015, the Company has sponsored a multiple employer defined contribution benefit plan, which complies with Section 401(k) of the Internal Revenue Code covering substantially all employees of the Company.
All employees are eligible to participate in the plan. Employees may contribute from 1% to 100% of their compensation and the Company matches an amount equal to 100% on the first 6% of the employee contribution and may also make discretionary profit-sharing contributions.
Employer contributions under this 401(k) plan amounted to approximately $29,000 and $23,000 for the three months ended June 30, 2022 and 2021, respectively, and approximately $76,000 and $55,000 for the six months ended June 30, 2022 and 2021, respectively.
Note 16 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were available to be issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements except for the items noted below.
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ATM Issuances
During July of 2022, the Company issued and sold an aggregate of 18,890,496 shares of Common Stock under the ATM Agreement for which the Company received gross proceeds of approximately $4.8 million, less issuance costs incurred of approximately $202,000.
Nasdaq Listing Extension
On November 26, 2021, the Company received a deficiency notice from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”), indicating that the Company was not in compliance with the $2.5 million minimum stockholders’ equity requirement for continued listing of the Common Stock on Nasdaq as set forth in Nasdaq Listing Rule 5550(b)(1) (the “Minimum Stockholders’ Equity Rule”). In that regard, the Company reported a stockholders’ deficit of $(6,969,988) in its Quarterly Report on Form 10-Q for the period ended September 30, 2021 (the Company did not then, and does not now, meet the alternative compliance standards relating to the market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years).
On January 10, 2022, the Company submitted a plan to the Staff to regain compliance with the Minimum Stockholders’ Equity Rule and on February 15, 2022, the Staff notified the Company that Nasdaq had granted it an extension through May 25, 2022, to regain compliance (this represented the maximum extension period available to the Staff under the Nasdaq Listing Rules). On May 26, 2022, the Company received a letter from the Nasdaq Staff indicating that, based upon its continued non-compliance with the Minimum Stockholders’ Equity Rule, the Staff had determined to delist the Company’s securities from Nasdaq unless it timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”).
Additionally, on May 16, 2022, the Company received notice from the Staff indicating that, based upon the closing bid price of the Common Stock for the prior 30 consecutive business days, it was not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). The Company has 180 days from May 16, 2022, or through November 14, 2022, to regain compliance with the Bid Price Rule.
The Company timely requested a hearing before the Panel. Following the hearing, on July 11, 2022 the Panel granted its request for continued listing of the Common Stock (the “Exception”).
The Exception is subject to a number of significant conditions that must be satisfied on or before specific deadlines set forth in the Exception, including the completion of a significant equity financing, the receipt of stockholder approval for a reverse stock split that would enable us to comply with the Bid Price Rule and the completion of an agreement with the Representative of the former stockholders of First Wave Bio, Inc., on terms described in the Exception. The final term of the Exception expires on November 22, 2022.
Pursuant to the Exception, the Company is required to provide the Panel with prompt notification of any significant events that occur including any event that may call into question the Company’s ability to satisfy the terms of the Exception. The Panel has reserved the right to reconsider the terms of the Exception based on any event, condition or circumstance that exists or develops that would, in the Panel’s opinion, make continued listing of our securities on Nasdaq inadvisable or unwarranted.
Dismissal of Previous Independent Registered Public Accounting Firm
On July 5, 2022, the Audit Committee of the Company’s Board of Directors (the “Board”) approved the dismissal of Marcum LLP as the Company’s independent registered public accounting firm, effective immediately and the engagement of Mazars USA LLP as the Company’s new independent registered public accounting firm as of and for the year ending December 31, 2022. Marcum LLP was engaged as the Company’s independent registered public accounting firm from April 27, 2022 to July 5, 2022 (the “Marcum Engagement Period”). During the Marcum Engagement Period, Marcum did not audit the Company’s financial statements or issue any reports on the Company’s financial statements.
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Private Placement
On July 15, 2022, pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) with the investors named therein (the “Purchasers”), we closed a private placement offering (the “Private Placement”) in which we issued an aggregate of (i) 150 shares (the “Series D Preferred Shares”) of the our Series D Convertible Preferred Stock (the “Series D Preferred Stock”), stated value $1,000 per share, convertible into an aggregate of 1,000,000 shares of the Common Stock, (ii) 150 shares (the “Series E Preferred Shares” and, collectively with the Series D Preferred Shares, the “Preferred Shares”) of our Series E Convertible Preferred Stock (the “Series E Preferred Stock”), stated value $1,000 per share, convertible into an aggregate of 1,000,000 shares of Common Stock (the shares of Common Stock issuable upon conversion of the Preferred Shares, collectively, the “Conversion Shares”), and (iii) Series D Warrants (the “Series D Warrants”), to purchase up to an aggregate of 2,000,000 shares of Common Stock the (the “Warrant Shares”). The Series D Preferred Shares are convertible, following the effectiveness of the Reverse Split Amendment (as defined below), into an aggregate of 1,000,000 shares of Common Stock at a conversion price of $0.15 per share and the Series E Preferred Shares are convertible, following the effectiveness of the Reverse Split Amendment, into an aggregate of 1,000,000 shares of Common Stock at a conversion price of $0.15 per share. The Series D Warrants have an exercise price of $0.15 per share, are exercisable commencing upon the effectiveness of the Reverse Split Amendment and will expire five years from the initial exercise date. The Company received gross proceeds of approximately $300,000 from the Private Placement, before deducting the offering expenses payable by the Company, including fees payable to H.C. Wainwright & Co., LLC (“Wainwright”).
As compensation to Wainwright, as the exclusive placement agent in connection with the Private Placement, we paid Wainwright a cash fee of 7% of the aggregate gross proceeds raised in the Private Placement and reimbursement of certain expenses and legal fees. We also issued to designees of Wainwright in a private placement, warrants (the “Placement Agent Warrants”) to purchase up to 120,000 shares of Common Stock (the “Placement Agent Warrant Shares”). The Placement Agent Warrants are exercisable for $0.1875 per share (which is 125% of the conversion price of the Preferred Shares) and will be exercisable commencing upon the effectiveness of the Reverse Split Amendment and will expire five years from the initial exercise date.
In connection with the Private Placement, on July 15, 2022, we entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Purchasers pursuant to which we are required to file a registration statement with the Securities and Exchange Commission (the “SEC”) to register for resale the shares that are issuable upon conversion of the Preferred Shares, and the shares issuable upon exercise of the Warrants. Under the terms of the Registration Rights Agreement, we are obligated to file a registration statement covering these shares with the SEC on or before July 30, 2022 and to use our commercially reasonable efforts to cause the registration statement declared effective by the SEC within five days after the Reverse Stock Split Amendment is effective.
Annual Meeting and Proposed Reverse Stock Split
On July 25, 2022, the Company mailed its definitive proxy materials for its annual meeting of stockholders (the “Annual Meeting”) to be held on August 25, 2022. One of the proposals to be considered and voted upon by the stockholders is a proposal for stockholder approval for a proposed amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Charter”) to effect a reverse stock split of our issued and outstanding shares of Common Stock at a specific ratio, ranging from one-for-ten to one-for-forty, at any time prior to the one-year anniversary date of the Annual Meeting, with the exact ratio to be determined by the Company’s board of directors (the “Reverse Split Amendment”). Under the terms of the Exception, the Company is required to effect the Reverse Split Amendment no later than August 26, 2022.
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The FWB Action
On May 19, 2022, the Representative filed the FWB Action. On July 29, 2022, the Company reached an agreement with the Representative to settle the FWB Action and to restructure the Company’s obligations to the former FWB stockholders (the “July 2022 Settlement Agreement”). The Company agreed to pay the Representative: (i) $1.5 million in cash on July 29, 2022; (2) $1.0 million in cash no later than September 29, 2022 (the “Second Payment”); and (iii) $2.0 million on the earlier of November 30, 2022 and the completion by the Company of one or more qualifying equity offerings (collectively, the “Payments”). The Representative is also entitled to receive future cash payments conditioned on the achievement of certain development milestones for adrulipase and to a percentage of any consideration received by the Company in the event of a license or sale of adrulipase, subject to a cap. The Representative also is entitled receive a percentage of the consideration received by the Company in the event of a license or sale of niclosamide and will retain its existing milestone payment rights with respect to niclosamide. In the event that the consideration received by the Company in connection with the sale or license of adrulipase or niclosamide consists of securities or other non-cash consideration, the Representative will have the right to elect either to receive its payment in such form of consideration or to cause the licensee or acquirer to assume the obligations described herein. In the event of a “Company Sale” (as defined in the Term Sheet), the Representative is entitled to receive a pro rata share of the total consideration received by the Company or its stockholders up to $4.0 million (plus any unpaid Payments whether or not then due) based on a formula set forth in the Term Sheet. In certain circumstances, the Representative has the right to treat a “Company Sale” as a sale of ardulipase or niclosamide, as applicable, and to treat the Company Sale as a sale of the related asset and to receive the consideration with respect thereto described herein.
In the Term Sheet, the Representative has agreed to stay the FWB Action for a period of days and to eliminate the Company’s obligation to pay a portion of any offering proceeds to the Representative. In addition, the Company’s obligation to use commercially reasonable efforts to develop niclosamide will be deferred for a period of months from the date of the Term Sheet. Effective upon the Second Payment, the Representative has agreed to dismiss the FWB Action with prejudice and to extinguish the remaining fixed payment obligations owed to the former FWB shareholders.
In the Term Sheet the Company and the Representative have also agreed to enter into a formal settlement agreement embodying the terms described above and containing mutual releases and other customary terms that will become effective upon the payment of the Second Payment. In addition, certain related parties of the Representative will agree to vote their shares of Common Stock for a reverse stock split intended to enable the Company to regain compliance with the Bid Price Rule.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report to “First Wave,” “AzurRx,” “Company,” “we,” “us,” “our,” or similar references mean First Wave BioPharma, Inc. and its subsidiaries on a consolidated basis. References to “First Wave BioPharma” refer to First Wave BioPharma, Inc. on an unconsolidated basis. References to “AzurRx SAS” refer to First Wave BioPharma’s wholly owned subsidiary through which we conduct our European operations. References to the “SEC” refer to the U.S. Securities and Exchange Commission.
Forward-Looking Statements
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this interim report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” included in our Annual Report filed on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022 (as amended on Form 10-K/A filed with the SEC on May 10, 2022). Readers are cautioned not to place undue reliance on these forward-looking statements.
Overview
We are engaged in the research and development of targeted, non-systemic therapies for the treatment of patients with gastrointestinal (“GI”) diseases. Non-systemic therapies are non-absorbable drugs that act locally, i.e., in the intestinal lumen, skin or mucosa, without reaching an individual’s systemic circulation.
We are currently focused on developing our pipeline of gut-restricted GI clinical drug candidates, including the biologic adrulipase (formerly MS1819), a recombinant lipase enzyme designed to enable the digestion of fats and other nutrients, and niclosamide, an oral small molecule with anti-viral and anti-inflammatory properties.
Our adrulipase programs are focused on the development of an oral, non-systemic, biologic capsule for the treatment of exocrine pancreatic insufficiency (“EPI”) in patients with cystic fibrosis (“CF”) and chronic pancreatitis (“CP”). Our goal is to provide CF and CP patients with a safe and effective therapy to control EPI that is non-animal derived and offers the potential to dramatically reduce their daily pill burden. In March 2021, we announced topline results from our Phase 2b OPTION 2 monotherapy trial, and in 2021, we announced positive topline results from our Phase 2 Combination trial in Europe. We are currently focused on formulation development for adrulipase and expect to initiate a Phase 2b monotherapy trial during the second half of 2022.
Our niclosamide programs leverage proprietary oral and topical formulations to address multiple GI conditions, including inflammatory bowel diseases (“IBD”) indications and viral diseases. We are currently advancing two separate clinical programs of our niclosamide formulations currently in Phase 2 clinical trials, including FW-COV for Severe Acute Respiratory Syndrome Coronavirus 2 (“COVID-19”) GI infections, and FW-UP for ulcerative proctitis (“UP”) and ulcerative proctosigmoiditis (“UPS”).
In April 2021, we launched the Phase 2 RESERVOIR COVID-19 GI clinical trial using a proprietary oral immediate-release tablet formulation of micronized niclosamide in the U.S., Ukraine and India, and in April 2022, announced that the trial did not meet its efficacy endpoint, but FW-COV was demonstrated to be safe with no serious adverse events reported by the more than 150 patients that participated in the trial. We are awaiting the complete set of data for analysis, including anti-inflammatory biomarkers, abdominal discomfort changes, and medium-term safety follow-up, in order to report the full data set along with next steps for the FW-COV program.
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In September 2021, we announced the initiation of patient screening for the stage 2 portion of the ongoing Phase 2 UP/UPS trial in Italy and in October 2021 we announced the dosing of the first patient in the trial. In August 2022, we concluded the trial. The trial data indicated that while niclosamide was safe and well tolerated with no serious adverse events, the data failed to demonstrate efficacy based on the study design. We are evaluating whether to conduct a future study under a new trial design.
In October 2021, we received FDA clearance for an investigational new drug (“IND”) application for a Phase 2 trial (“FW-ICI-AC”) for Immune Checkpoint Inhibitor-associated colitis (“ICI-AC”) and diarrhea in advanced stage oncology patients. The FW-ICI-AC program is currently on hold due to financial constraints. We are also evaluating our further development of a new oral formulation for niclosamide therapies for additional IBD indications, including FW-UC for ulcerative colitis (“UC”) and FW-CD for Crohn’s disease (“CD”).
The FWB Action
As a result of the topline data from the Phase 2 RESERVOIR COVID-19 GI clinical trial and the ongoing volatility in the biotechnology sector, we have initiated certain measures to reduce our expenses and conserve capital. Included in these measures is a reduction in our headcount, as well as the closure of our California office at the end of May 2022 and our facility in Langlade, France. We also determined to suspend payments related to our acquisition of First Wave Bio, Inc. (“FWB”), in order to conserve capital. On May 19, 2022, Fortis Advisors LLC, the hired representative (in such capacity, the “Representative”) of the former stockholders of FWB in connection with the Agreement and Plan of Merger dated as of September 13, 2021, by and among us, Alpha Merger Sub, Inc. and FWB (the “Merger Agreement”), filed a complaint in the Court of Chancery of the State of Delaware (the “FWB Action”), for breach of contract and anticipatory repudiation or for unjust enrichment. The FWB Action seeks specific performance of the Company’s obligations under the Merger Agreement and the settlement agreement by and between us and the Representative, dated November 15, 2021 (the “November 2021 Settlement Agreement”), including all payments currently owed and to be owed to the Representative, and damages at the maximum amount permitted by law.
On July 29, 2022, we reached an agreement with the Representative to settle the FWB Action and to restructure our obligations to the former FWB stockholders (the “July 2022 Settlement Agreement”). We agreed to pay the Representative: (i) $1.5 million in cash on July 29, 2022; (2) $1.0 million in cash no later than September 29, 2022 (the “Second Payment”); and (iii) $2.0 million on the earlier of November 30, 2022 and our completion of one or more qualifying equity offerings (collectively, the “Payments”). The Representative is also entitled to receive future cash payments conditioned on the achievement of certain development milestones for adrulipase and to a percentage of any consideration received by us in the event of a license or sale of adrulipase, subject to a cap. The Representative also is entitled receive a percentage of the consideration received by us in the event of a license or sale of niclosamide and will retain its existing milestone payment rights with respect to niclosamide. In the event that the consideration received by us in connection with the sale or license of adrulipase or niclosamide consists of securities or other non-cash consideration, the Representative will have the right to elect either to receive its payment in such form of consideration or to cause the licensee or acquirer to assume the obligations described herein. In the event of a “Company Sale” (as defined in the Term Sheet), the Representative is entitled to receive a pro rata share of the total consideration received by us or our stockholders up to $4.0 million (plus any unpaid Payments whether or not then due) based on a formula set forth in the Term Sheet. In certain circumstances, the Representative has the right to treat a “Company Sale” as a sale of ardulipase or niclosamide, as applicable, and to treat the Company Sale as a sale of the related asset and to receive the consideration with respect thereto described herein.
In the Term Sheet, the Representative has agreed to stay the FWB Action for a period of 90 days and to eliminate our obligation to pay a portion of any offering proceeds to the Representative. In addition, our obligation to use commercially reasonable efforts to develop niclosamide will be deferred for a period of 24 months from the date of the Term Sheet. Effective upon the Second Payment, the Representative has agreed to dismiss the FWB Action with prejudice and to extinguish the approximately $12.5 million of fixed payment obligations currently owed to the former FWB shareholders.
In the Term Sheet, we and the Representative have also agreed to enter into a formal settlement agreement embodying the terms described above and containing mutual releases and other customary terms that will become effective upon the payment of the Second Payment. In addition, certain related parties of the Representative will agree to vote their shares of our common stock for a reverse stock split intended to enable us to regain compliance with the Bid Price Rule (as defined below).
In the event that we are not able to meet the obligations under the Merger Agreement or the July 2022 Settlement Agreement, we may have to further curtail our operations or take other actions to preserve our capital, including the filing of a petition for protection under applicable bankruptcy law.
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Nasdaq Listing Extension
On November 26, 2021, we received a letter from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that we were not in compliance with the $2.5 million minimum stockholders’ equity requirement for continued listing of our common stock on Nasdaq as set forth in Nasdaq Listing Rule 5550(b)(1) (the “Minimum Stockholder’s Equity Rule”). In that regard, we reported a stockholders’ deficit of $(6,969,988) in our Quarterly Report on Form 10-Q for the period ended September 30, 2021 (we did not then, and do not now, meet the alternative compliance standards relating to the market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years).
On January 10, 2022, we submitted a plan to the Staff to regain compliance with the Minimum Stockholders’ Equity Rule and on February 15, 2022, the Staff notified us that Nasdaq had granted us an extension through May 25, 2022, to regain compliance (this represented the maximum extension period available to the Staff under the Nasdaq Listing Rules). On May 26, 2022, we received a letter from the Staff indicating that, based upon our continued non-compliance with the Minimum Stockholders’ Equity Rule, the Staff had determined to delist our securities from Nasdaq unless we timely requested a hearing before the Nasdaq hearings Panel (the “Panel”).
Additionally, on May 16, 2022, we received notice from the Staff indicating that, based upon the closing bid price of our common stock for the prior 30 consecutive business days, we were not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). We have 180 days from May 16, 2022, or through November 14, 2022, to regain compliance with the Bid Price Rule.
We requested a hearing before the Panel. Following the hearing, on July 11, 2022, the Panel granted our request for continued listing of our common stock (the “Exception”). The Exception is subject to a number of significant conditions that must be satisfied on or before specific deadlines set forth in the Exception, including the completion of a significant equity financing and the receipt of stockholder approval for a reverse stock split that would enable us to comply with the Bid Price Rule. The final term of the Exception expires on November 22, 2022.
Pursuant to the Exception, we are required to provide the Panel with prompt notification of any significant events that occur including any event that may call into question our ability to satisfy the terms of the Exception. The Panel has reserved the right to reconsider the terms of the Exception based on any event, condition or circumstance that exists or develops that would, in the Panel’s opinion, make continued listing of our securities on Nasdaq inadvisable or unwarranted.
Series B Exchange Right Waivers
Between February 1 and February 7, 2022, we entered into waiver agreements (the “Temporary Waiver”) with certain holders of our Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), pursuant to which we agreed to pay a cash waiver fee equal to ten percent of the stated value of the shares of Series B Preferred Stock held by such holder (other than holders who are insiders who did not receive a cash waiver fee) and such holder agreed to irrevocably waive its Series B Exchange Right (as defined below) with respect to any Subsequent Financing (as defined below) that occurs from and after the date of the Temporary Waiver until December 31, 2022.
Pursuant to the Series B Preferred Stock Certificate of Designations (the “Series B Certificate of Designations”), in the event of any issuance by us or any of our subsidiaries of our common stock or common stock equivalents for cash consideration or a combination of units thereof (a “Subsequent Financing”), each holder of our Series B Preferred Stock has the right, subject to certain exceptions set forth in the Series B Certificate of Designations, at its option, to exchange (in lieu of cash subscription payments) all or some of the Series B Preferred Stock then held (with a value per share of Series B Preferred Stock equal to the stated value of each share of Series B Preferred Stock, or $7,700.00, plus accrued and unpaid dividends thereon, of the Series B Preferred Stock) for any securities or units issued in a Subsequent Financing on a dollar-for-dollar basis (the “Series B Exchange Right”).
We entered into Temporary Waivers with holders of approximately $2.88 million of stated value of our Series B Preferred Stock. We also entered into Temporary Waivers with Company insiders holding approximately $474,000 of stated value of our Series B Preferred Stock for which we did not pay a waiver fee.
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Effective May 12, 2022, the holders of 81.3% of the outstanding shares of the Series B Preferred Stock permanently waived for themselves and all other holders of the Series B Preferred Stock the Series B Exchange Right with respect to any Subsequent Financing (as defined below) occurring on or after January 1, 2022 (the “Permanent Waiver”). Holders of Series B Preferred Stock as of the April 27, 2022 record date were entitled to notice of and to consent to the Permanent Waiver (the “Record Holders”).
Pursuant to the terms of the Series B Certificate of Designations, the written consent of the holders of at least a majority of the Series B Preferred Stock outstanding was required to consent to the Permanent Waiver (the “Required Consent”). We requested that the Record Holders consent to the Permanent Waiver by executing and delivering a joinder to the Waiver Agreement (as defined below). The execution and delivery of the joinder to the Waiver Agreement was deemed, for purposes of Section 228 of the General Corporation Law of the State of Delaware, to be an action by written consent in lieu of a meeting to approve the Permanent Waiver. Our solicitation of consents to the Permanent Waiver terminated in accordance with its terms at 5:00 p.m., Eastern Time, on May 12, 2022 (the “Expiration Date”). The Record Holders who consented to the Permanent Waiver prior to the Expiration Date are referred to herein as the “Consenting Holders”.
The Required Consent was obtained from the Consenting Holders and the solicitation terminated in accordance with its terms as of the Expiration Date. The Permanent Waiver was effective immediately upon the Expiration Date and is binding on all holders of the Series B Preferred Stock, including those holders that did not timely consent to the Permanent Waiver prior to the Expiration Date. The Permanent Waiver will also be applicable to any future holder of Series B Preferred Stock. A notation of the Permanent Waiver was made on the books and records of the Company’s transfer agent and a legend reflecting the Permanent Waiver will be placed on any physical share certificate representing shares of Series B Preferred Stock.
Pursuant to the terms of a Waiver Agreement entered into by us and the Consenting Holders (the “Waiver Agreement”), we have permanently reduced the exercise price of the Series B Warrants originally issued on July 16, 2020 (the “Series B Warrants”) held by the Consenting Holders to $0.25 per share or, in the case of Consenting Holders who are officers and directors of the Company, $0.3294 (the “Exercise Price Reduction”). Only Consenting Holders are entitled to the Exercise Price Reduction. Series B Warrants to purchase an aggregate of approximately 251,742 shares of our common stock received the Exercise Price Reduction which was effective as of the Expiration Date.
Risks and Uncertainties
In March 2020, the World Health Organization declared the novel coronavirus disease, or COVID-19, outbreak a global pandemic. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and physical distancing guidelines. Accordingly, businesses have adjusted, reduced or suspended operating activities. Beginning in March 2020, the majority of our workforce began working from home. Disruptions caused by the COVID-19 pandemic, including the effects of the stay-at-home orders and work-from-home policies, have impacted productivity, including delayed enrollment of new patients at certain of our clinical trial sites, and may further disrupt our business and delay our development programs and regulatory timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct business in the ordinary course. As a result, our expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of our clinical trials and other related business activities.
We have implemented business continuity plans designed to address and mitigate the impact of the ongoing COVID-19 pandemic on our employees and our business. We continue to operate normally with the exception of enabling all of our employees to work productively at home and abiding by travel restrictions issued by federal, state and local governments. Our current plans to return to the office remain fluid as federal, state and local guidelines, rules and regulations continue to evolve.
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Liquidity and Capital Resources
To date, we have not generated any revenues and have experienced net losses and negative cash flows from our activities.
As of June 30, 2022, we had cash and cash equivalents of approximately $1.2 million and have sustained cumulative losses attributable to common stockholders of approximately $168.9 million. Based on our cash on hand at June 30, 2022, and the approximately $4.6 million in net proceeds received from sales made pursuant to our At The Market Offering Agreement (the “ATM Agreement”) through July 14, 2022, we anticipate having sufficient cash to fund planned operations into September of 2022, however, the acceleration or reduction of cash outflows by management can significantly impact the timing for the need to raise additional capital to complete development of our products. We have not yet achieved profitability and anticipate that we will continue to incur net losses for the foreseeable future. We expect that our expenses will continue to grow and, as a result, we will need to generate significant product revenues to achieve profitability. We may never achieve profitability. As such, we are dependent on obtaining, and are continuing to pursue, the necessary funding from outside sources, including obtaining additional funding from the sale of securities in order to continue our operations. Without adequate funding, we may not be able to meet our obligations. We believe these conditions may raise substantial doubt about our ability to continue as a going concern.
Our primary sources of liquidity come from capital raises through additional equity and/or debt financings. This may be impacted by the COVID-19 pandemic and other geopolitical events, including the war in Ukraine, which are evolving and could negatively impact our ability to raise additional capital in the future.
We have funded our operations to date primarily through the issuance of debt, convertible debt securities, preferred stock, as well as the issuance of our common stock in various public offerings and private placement transactions. We expect to incur substantial expenditures in the foreseeable future for the development of adrulipase, niclosamide and any other drug candidates. We will require additional financing to develop our drug candidates, run clinical trials, prepare regulatory filings and obtain regulatory approvals, fund operating losses, and, if deemed appropriate, establish manufacturing, sales and marketing capabilities. Our current financial condition raises substantial doubt about our ability to continue as a going concern. Our failure to raise capital as and when needed would have a material adverse impact on our financial condition, our ability to meet our obligations, and our ability to pursue our business strategies. We will seek funds through additional equity and/or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing.
Although, we are primarily focused on the development of our drug candidates, including adrulipase and niclosamide, we are also opportunely focused on expanding our product pipeline of clinical assets through collaborations, and also through acquisitions of products and companies. We are continually evaluating potential asset acquisitions business combinations, and other partnership opportunities. To finance such acquisitions, we might raise additional equity capital, incur additional debt, or both.
We are able to sell securities on a shelf registration statement pursuant to the ATM Agreement with H.C. Wainwright & Co., LLC. Under current Securities and Exchange Commission regulations, because our public float was less than $75 million at the relevant measurement period pursuant to General Instruction I.B.6. to Form S-3, the amount we can raise through primary public offerings of securities in any subsequent twelve-month period under our shelf registration statement is limited to an aggregate of one-third of our public float until such time, if any, as our public float is $75 million or more.
Our ability to issue securities is subject to market conditions. Each issuance under the shelf registration statements will require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued.
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On July 29, 2022, we entered into the July 2022 Settlement Agreement with the Representative of the former FWB stockholders. Pursuant to the July 2022 Settlement Agreement, we paid the Representative $1.5 million in cash and we have agreed to pay the Representative $1.0 million in cash no later than September 29, 2022 and $2.0 million on the earlier of November 30, 2022 and our completion of one or more qualifying equity offerings. The Representative is also entitled to receive future cash payments conditioned on the achievement of certain development milestones for adrulipase and to a percentage of any consideration received by us in the event of a license or sale of adrulipase, subject to a cap. The Representative also is entitled receive a percentage of the consideration received by us in the event of a license or sale of niclosamide and will retain its existing milestone payment rights with respect to niclosamide. In the event that the consideration received by us in connection with the sale or license of adrulipase or niclosamide consists of securities or other non-cash consideration, the Representative will have the right to elect either to receive its payment in such form of consideration or to cause the licensee or acquirer to assume the obligations described herein. In the event of a “Company Sale” (as defined in the Term Sheet), the Representative is entitled to receive a pro rata share of the total consideration received by us or our stockholders up to $4.0 million (plus any unpaid Payments whether or not then due) based on a formula set forth in the Term Sheet. In certain circumstances, the Representative has the right to treat a “Company Sale” as a sale of ardulipase or niclosamide, as applicable, and to treat the Company Sale as a sale of the related asset and to receive the consideration with respect thereto described herein. Effective upon the Second Payment of $1.0 million in cash no later than September 29, 2022, the approximately $12.5 million of fixed payment obligations currently owed to the former FWB stockholders will be extinguished.
In the event that we are not able to meet our obligations under the Merger Agreement or the July 2022 Settlement Agreement, we may have to further curtail our operations or take other actions to preserve our capital, including the filing of a petition for protection under applicable bankruptcy law.
Consolidated Results of Operations for the Three Months Ended June 30, 2022 and 2021
The following table summarizes our consolidated results of operations for the periods indicated:
Research and Development Expenses
Research and development expenses include expenses primarily relating to the development of our adrulipase and niclosamide drug candidates.
Research and development expenses for the three months ended June 30, 2022 totaled approximately $2.9 million, a decrease of approximately $2.7 million, or 49%, over the approximately $5.6 million recorded for the three months ended June 30, 2021.
The approximately $2.7 million decrease in total research and development expenses was primarily attributable to decreases of approximately $1.7 million in clinical related expenses in connection with two Phase 2 clinical trials related to adrulipase and one clinical trial for niclosamide during the three months ended June 30, 2021 as compared to our Phase 2 RESERVOIR COVID-19 GI clinical trial during the three months ended June 30, 2022, and a $1.0 million milestone payment during the three months ended June 30, 2021 pursuant to the license agreement with FWB (the “FWB License Agreement”).
We expect research and development expense to decrease during the remainder of this fiscal year as we near completion of two clinical trials for niclosamide (FW-COV and FW-UP), while continuing the pursuit of additional CMC activities in connection with formulation development of adrulipase for the treatment of EPI in patients with CF and CP. While the top-line efficacy measure from the FW-COV trial did not show any anti-viral activity, the drug was well-tolerated without any serious adverse events. We believe this will continue to be the case for our ongoing clinical program of niclosamide (FW-UP) as a potential treatment for patients with UP and UPS, two forms of UC. In addition, we are initiating measures to conserve capital including headcount reductions.
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General and Administrative Expenses
General and administrative expenses include expenses primarily relating to our overall operations and being a public company, including personnel, legal and financial professional services, insurance, corporate communication and investor relations, listing and compliance related costs, rent, and expenses associated with obtaining and maintaining intellectual property and patents, among others.
General and administrative expenses for the three months ended June 30, 2022 totaled approximately $2.5 million, a decrease of approximately $1.1 million, or 31% over the approximately $3.6 million recorded for the three months ended June 30, 2021.
The decrease in general and administrative was primarily due to decreases of approximately $1.4 million in public company costs, including investor relations and corporate communications, partially offset by an increase of $0.2 million for professional fees and insurance.
We expect general and administrative expenses to decrease during the remainder of this fiscal year as a result of our capital conservation efforts.
Other Expenses
Other expenses for the three months ended June 30, 2022 were essentially flat with other expense recorded for the three months ended June 30, 2021.
Net Loss
As a result of the factors above, our net loss for the three months ended June 30, 2022 totaled approximately $5.4 million, a decrease of approximately $3.9 million, or 42%, over the approximately $9.3 million recorded for the three months ended June 30, 2021.
Consolidated Results of Operations for the Six Months Ended June 30, 2022 and 2021
The following table summarizes our consolidated results of operations for the periods indicated:
Research and Development Expenses
Research and development expenses include expenses primarily relating to the development of our adrulipase and niclosamide drug candidates.
Research and development expenses for the six months ended June 30, 2022 totaled approximately $7.9 million, a decrease of approximately $0.3 million, or 3%, over the approximately $8.2 million recorded for the six months ended June 30, 2021.
The approximately $0.3 million decrease in total research and development expenses was primarily attributable to a $1.0 million milestone payment during the six months ended June 30, 2021 pursuant to the FWB License Agreement, partially offset by an increase of approximately $0.8 million in clinical related expenses in connection with our Phase 2 RESERVOIR COVID-19 GI clinical trial during the six months ended June 30, 2022, as compared to two Phase 2 clinical trials related to adrulipase and one clinical trial for niclosamide during the six months ended June 30, 2021.
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We expect research and development expense to decrease during the remainder of this fiscal year as we near completion of two clinical trials for niclosamide (FW-COV and FW-UP), while continuing the pursuit of additional CMC activities in connection with formulation development of adrulipase for the treatment of EPI in patients with CF and CP. While the top-line efficacy measure from the FW-COV trial did not show any anti-viral activity, the drug was well-tolerated without any serious adverse events. We believe this will continue to be the case for our ongoing clinical program of niclosamide (FW-UP) as a potential treatment for patients with UP and UPS, two forms of UC. In addition, we are initiating measures to conserve capital including headcount reductions.
General and Administrative Expenses
General and administrative expenses include expenses primarily relating to our overall operations and being a public company, including personnel, legal and financial professional services, insurance, corporate communication and investor relations, listing and compliance related costs, rent, and expenses associated with obtaining and maintaining intellectual property and patents, among others.
General and administrative expenses for the six months ended June 30, 2022 totaled approximately $6.9 million, a decrease of approximately $2.4 million, or 26% over the approximately $9.3 million recorded for the six months ended June 30, 2021.
The decrease in general and administrative was primarily due to decreases of approximately $1.9 million in public company costs, including investor relations and corporate communications, $1.2 million of stock-based compensation expense, and $0.3 million in advisory fees. These decreases were partially offset by increases of approximately $0.5 million for personnel related costs, $0.3 million in professional fees, and $0.2 million in insurance costs.
We expect general and administrative expenses to decrease during the remainder of this fiscal year as a result of our capital conservation efforts.
Other Expenses (Income)
Other expenses (income) for the six months ended June 30, 2022 totaled approximately $0.2 million, an increase of approximately $0.7 million, or 147% over the approximately $(0.5) million of other income recorded for the six months ended June 30, 2021. The increase in other expenses (income) was mainly due to $0.2 million of Waiver fees paid in the six months ended June 30, 2022, as compared to income of approximately $0.5 million recorded for the six months ended June 30, 2021 related to the extinguishment of the $3.0 million liability in connection with FWB License Agreement pursuant to the issuance of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) with a fair value of approximately $2.5 million for the six months ended June 30, 2021.
Net Loss
As a result of the factors above, our net loss for the six months ended June 30, 2022 totaled approximately $15.0 million, a decrease of approximately $1.9 million, or 11%, over the approximately $16.9 million recorded for the six months ended June 30, 2021.
Cash Flows for the Six Months Ended June 30, 2022 and 2021
The following table summarizes our cash flows for the periods indicated:
Six Months Ended | ||||||
June 30, | ||||||
| 2022 |
| 2021 | |||
Net cash (used in) provided by: |
|
|
|
| ||
Operating activities | $ | (12,497,681) | $ | (10,696,128) | ||
Investing activities |
| — |
| (9,073,928) | ||
Financing activities |
| 5,443,522 |
| 21,832,600 | ||
Net (decrease) increase in cash and cash equivalents | $ | (7,054,159) | $ | 2,062,544 | ||
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Operating Activities
Net cash used in operating activities during the six months ended June 30, 2022 of approximately $12.5 million was primarily attributable to our net loss of approximately $15.0 million, partially offset by non-cash expenses of approximately $0.8 million, mainly related to common stock issued to consultants of approximately $0.1 million and stock-based compensation of approximately $0.6 million, as well as increases in accounts payable and accrued expense of approximately $1.3 million and a decrease in prepaid expenses of $0.6 million.
Net cash used in operating activities during the six months ended June 30, 2021 of approximately $10.7 million was primarily attributable to our net loss of approximately $17.0 million adjusted for addbacks of non-cash expenses of approximately $2.0 million, mostly related to common stock and warrants issued to consultants of approximately $1.2 million, depreciation and amortization of approximately $0.3 million, and stock-based compensation of approximately $1.0 million partially offset by a change in the fair value of liability $0.5 million and a net increase of working capital of approximately $4.3 million.
Investing Activities
Net cash used in investing activities during the six months ended June 30, 2021 was approximately $9.1 million, consisting of $9.0 million in cash payments related to the FWB License Agreement and approximately $74,000 related to the purchase of office furniture and equipment.
Financing Activities
Net cash provided by financing activities of approximately $5.4 million for the six months ended June 30, 2022 was primarily due to the net proceeds of approximately $8.0 million from the March 2022 registered direct offering of our common stock and warrants, partially offset by approximately $2.4 million of cash payments made related to the Merger Agreement repayments of approximately $0.5 million related to the note payable.
Net cash provided by financing activities of approximately $21.8 million for the six months ended June 30, 2021 was primarily due to the issuance of the Series C Preferred Stock and warrants of approximately $7.1 million from the January 2021 registered direct and concurrent private placement offerings, the issuance of our common stock and warrants of approximately $9.1 million from the March 2021 registered direct offering, the issuance of our common stock of approximately $1.2 million from ATM Agreement sales and the cash proceeds from warrant exercises of approximately $4.9 million, offset by repayments of approximately $0.4 million related to the note payable.
Critical Accounting Policies and Estimates
Our accounting policies are essential to understanding and interpreting the financial results reported on the consolidated financial statements. The significant accounting policies used in the preparation of our consolidated financial statements are summarized in Note 2 to the consolidated financial statements and notes thereto found in our Annual Report on Form 10-K for the year ended December 31, 2021. Certain of those policies are considered to be particularly important to the presentation of our financial results because they require us to make difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain.
During the six months ended June 30, 2022, there were no material changes to matters discussed under the heading “Critical Accounting Policies and Significant Judgments and Estimates” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (as amended on Form 10-K/A filed with the SEC on May 10, 2022).
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not applicable.
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ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, our CEO and our CFO each concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act, (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) is accumulated and communicated to our management, including our CEO and our CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 19, 2022, the Representative filed the FWB Action against us for breach of contract and anticipatory repudiation or for unjust enrichment. The FWB Action sought specific performance of our obligations under the Merger Agreement and the November 2021 Settlement Agreement, including all payments owed and to be owed to the former stockholders of FWB, and damages at the maximum amount permitted by law.
On July 29, 2022, we reached an agreement with the Representative to settle the FWB Action and to restructure our obligations to the former FWB stockholders (the “July 2022 Settlement Agreement”). We agreed to pay the former stockholders of FWB: (i) $1.5 million in cash on July 29, 2022; (2) $1.0 million in cash no later than September 29, 2022, or the “Second Payment”; and (iii) $2.0 million on the earlier of November 30, 2022 and our completion of one or more qualifying equity offerings, or collectively, the “Payments”. The former stockholders of FWB are also entitled to receive future cash payments conditioned on the achievement of certain development milestones for adrulipase and to a percentage of any consideration received by us in the event of a license or sale of adrulipase, subject to a cap. The former stockholders of FWB are also entitled to receive a percentage of the consideration received by us in the event of a license or sale of niclosamide and will retain its existing milestone payment rights with respect to niclosamide. In the event that the consideration received by us in connection with the sale or license of adrulipase or niclosamide consists of securities or other non-cash consideration, the Representative will have the right to elect either to receive payment for the former stockholders of FWB in such form of consideration or to cause the licensee or acquirer to assume the obligations described herein. In the event of a “Company Sale” (as defined in the Term Sheet), the former stockholders of FWB are entitled to receive a pro rata share of the total consideration received by us or our stockholders up to $4.0 million (plus any unpaid Payments whether or not then due) based on a formula set forth in the Term Sheet. Additionally, in the event of a “Company Sale”, if any of the milestone payments described herein have not yet occurred or been paid, our obligations to make such payments upon the subsequent occurrence of such milestone events will survive the “Company Sale” and will be assumed by any successor, acquirer or surviving company in such “Company Sale”. In certain circumstances, the Representative has the right to treat a “Company Sale” as a sale of adrulipase or niclosamide, as applicable, and to treat the Company Sale as a sale of the related asset and to receive the consideration with respect thereto described herein.
In the Term Sheet, the Representative has agreed to stay the FWB Action for a period of 90 days and to eliminate our obligation to pay a portion of any offering proceeds to the former stockholders of FWB. In addition, our obligation to use commercially reasonable efforts to develop niclosamide will be deferred for a period of 24 months from the date of the Term Sheet. Effective upon the Second Payment, the Representative has agreed to dismiss the FWB Action with prejudice and to extinguish the approximately $12.5 million of fixed payment obligations currently owed to the former FWB shareholders.
In the event that we are not able to meet the obligations under the Merger Agreement or the July 2022 Settlement Agreement, we may have to further curtail our operations or take other actions to preserve our capital, including the filing of a petition for protection under applicable bankruptcy law.
ITEM 1A. RISK FACTORS
Our results of operations and financial condition are subject to numerous risks and uncertainties set forth below and described in our Annual Report on Form 10-K for our fiscal year ended December 31, 2021, filed on March 31, 2022 (as amended on Form 10-K/A filed with the SEC on May 10, 2022) and our Form 10-Q for the quarter ended March 31, 2022, filed on May 23, 2022. You should carefully consider these risk factors in conjunction with the other information contained in this Quarterly Report. Should any of these risks materialize our business, financial condition and future prospects could be negatively impacted. Except as set forth below, as of August 15, 2022, there have been no material changes to the disclosures made in the above referenced Form 10-K (as amended on Form 10-K/A filed with the SEC on May 10, 2022) and Form 10-Q.
Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our Common Stock.
Our common stock is currently listed for trading on The Nasdaq Capital Market. We must satisfy the continued listing requirements of Nasdaq, to maintain the listing of our common stock on The Nasdaq Capital Market.
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On November 26, 2021, we received notice from the Staff of Nasdaq indicating that we were not in compliance with the $2.5 million minimum stockholders’ equity requirement for continued listing of our common stock on Nasdaq, as set forth in Nasdaq Listing Rule 5550(b)(1). In that regard, we reported a stockholders’ deficit of $(6,969,988) in our Quarterly Report on Form 10-Q for the period ended September 30, 2021 (we did not then, and do not now, meet the alternative compliance standards relating to the market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years).
On January 10, 2022, we submitted a plan to the Staff to regain compliance with the Minimum Stockholders’ Equity Rule and on February 15, 2022, the Listing Qualifications Staff notified us that Nasdaq had granted us an extension through May 25, 2022, to regain compliance (this represented the maximum extension period available to the Staff under the Nasdaq Listing Rules). On May 26, 2022, we received a letter from the Staff indicating that, based upon our continued non-compliance with the Minimum Stockholders’ Equity Rule, the Staff had determined to delist the Company’s securities from Nasdaq unless we timely requested a hearing before the Panel.
Additionally, on May 16, 2022, we received notice from the Staff indicating that, based upon the closing bid price of our common stock for the prior 30 consecutive business days, we were not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2). We have 180 days from May 16, 2022, or through November 14, 2022, to regain compliance with the Bid Price Rule.
We timely requested a hearing before the Panel. Following the hearing, on July 11, 2022 the Panel granted our request for continued listing of our common stock.
The Exception is subject to a number of significant conditions that must be satisfied on or before specific deadlines set forth in the Exception, including the completion of a significant equity financing, the receipt of stockholder approval for a reverse stock split that would enable us to comply with the Bid Price Rule and the completion of an agreement with the Representative of the former stockholders of First Wave Bio, Inc., on terms described in the Exception. The final term of the Exception expires on November 22, 2022.
Pursuant to the Exception, we are required to provide the Panel with prompt notification of any significant events that occur including any event that may call into question our ability to satisfy the terms of the Exception. The Panel has reserved the right to reconsider the terms of the Exception based on any event, condition or circumstance that exists or develops that would, in the Panel’s opinion, make continued listing of our securities on Nasdaq inadvisable or unwarranted.
There can be no assurance that we will be able to satisfy the conditions set forth in the Exception on a timely basis, if at all, or that we will ultimately regain and sustain compliance with all applicable requirements for continued listing on The Nasdaq Capital Market. Without limiting the generality of the foregoing, although we have had discussions with the Representative regarding the terms of an agreement that would satisfy the terms of the Exception, no agreement has been reached between the parties and no assurance can be given that an agreement with the Representative on the terms required by the Exception will be entered into on a timely basis. In the event that we are unable to comply with the terms of the Exception, our common stock may be delisted from Nasdaq.
If our common stock were delisted from Nasdaq, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQB or the Pink Market maintained by OTC Markets Group Inc. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely 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. In addition, as a delisted security, our common stock would be subject to SEC rules as a “penny stock,” which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our common stock. In addition, delisting would materially and adversely affect our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and to raise capital.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
(b) | Exhibits |
Exhibit |
| Description |
3.1* |
| Amended and Restated Certificate of Incorporation of First Wave BioPharma, Inc., as amended to date. |
3.2* | Amended and Restated Bylaws of First Wave BioPharma, Inc., as amended to date. | |
10.1 | ||
10.2 | ||
31.1* |
| |
31.2* |
| |
32.1** |
| |
101.INS* |
| Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
| Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101) |
*filed herewith
**furnished, not filed
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FIRST WAVE BIOPHARMA, INC. | ||
By | /s/ James Sapirstein | |
James Sapirstein | ||
President, Chief Executive Officer and | ||
(Principal Executive Officer) | ||
By | /s/ Sarah Romano | |
Sarah Romano | ||
Chief Financial Officer | ||
Date: August 15, 2022 | (Principal Financial and Accounting |
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EXHIBIT 3.1
ARTICLE I
STOCKHOLDERS
1.1Place of Meetings. All meetings of stockholders shall be held at such place, if any, as may be designated from time to time by the Board of Directors (the “Board”) of AzurRx BioPharma, Inc. (the “Corporation”), the Chairman of the Board or the Chief Executive Officer or, if not so designated, at the principal office of the Corporation. The Board may, in its sole discretion, determine that a meeting shall not be held at any place, but may instead be held solely by means of remote communication in accordance with Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “DGCL”).
1.2Annual Meeting. The annual meeting of stockholders for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly be brought before the meeting shall be held on a date and at a time designated by the Board, the Chairman of the Board or the Chief Executive Officer. The Board may postpone, recess, reschedule or cancel any previously scheduled annual meeting of stockholders.
1.3Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time by the Board, the Chairman of the Board or the Chief Executive Officer of the Corporation, and may not be called by any other person or persons. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. The Board may postpone, recess, reschedule or cancel any previously scheduled special meeting of stockholders. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.
1.4Notice of Meetings. Except as otherwise provided by law, notice of each meeting of stockholders, whether annual or special, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting. The notices of all meetings shall state the place, if any, date and time of the meeting, the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting). The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called.
1.5Voting List. The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the Corporation. If the meeting is to be held at a place, then the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Except as otherwise provided by law, the list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.
1.6Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the presence, in person, by remote communication, if applicable, or by proxy, of both (i) the holders of one-third of the voting power of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote at the meeting, and (ii) the holders of at least one-third of the shares of common stock of the Corporation issued and outstanding and entitled to vote at the meeting, shall constitute a quorum at all meetings of stockholders for the transaction of business; provided, however, that where a separate vote by a class or classes or series of capital stock is required by law or the Certificate of Incorporation, the holders of one-third of the voting power of the shares of such
class or classes or series of the capital stock of the Corporation issued and outstanding and entitled to vote on such matter, present in person, present by means of remote communication in a manner, if any, authorized by the Board in its sole discretion, or represented by proxy, shall constitute a quorum entitled to take action with respect to the vote on such matter. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum.
1.7Adjournments. Any meeting of stockholders, annual or special, may be adjourned from time to time to any other time and to any other place at which a meeting of stockholders may be held under these Bylaws by the Board, the chairman of the meeting or, if directed to be voted on by the chairman of the meeting, by the stockholders present or represented at the meeting and entitled to vote thereon, although less than a quorum. Notice need not be given of the adjourned meeting other than an announcement at the meeting at which the adjournment is taken of the hour, date and place, if any, to which the meeting is adjourned and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting; provided, however, that if the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting.
1.8Proxies. Each stockholder of record entitled to vote at a meeting of stockholders may vote in person (including by means of remote communications, if any, by which stockholders may be deemed to be present in person and vote at such meeting) or may authorize another person or persons to vote for such stockholder by a proxy executed or transmitted in a manner permitted by applicable law. No such proxy shall be voted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of the proxy or a new proxy bearing a later date. Except as otherwise limited therein or as otherwise provided by law, proxies authorizing a person to vote at a specific meeting shall entitle the persons authorized thereby to vote at any adjournment or postponement of such meeting, but they shall not be valid after final adjournment of such meeting.
1.9Action at Meeting. When a quorum is present at any meeting, any matter other than the election of directors to be voted upon by the stockholders at such meeting shall be decided by the vote of the holders of shares of stock having a majority in voting power of the votes cast by the holders of all of the shares of stock present or represented at the meeting and voting affirmatively or negatively on such matter (or if there are two or more classes or series of stock entitled to vote as separate classes, then in the case of each such class or series, the holders of a majority in voting power of the shares of stock of that class or series present or represented at the meeting and voting affirmatively or negatively on such matter), except when a different vote is required by express provision of applicable law, regulation applicable to the Corporation or its securities, the rules or regulations of any stock exchange applicable to the Corporation, the Certificate of Incorporation or these Bylaws, in which case such express provisions shall govern. Voting at meetings of stockholders need not be by written ballot. At all meetings of stockholders for the election of directors at which a quorum is present a plurality of the votes cast shall be sufficient to elect.
1.10Action Without a Meeting. Except as otherwise provided in the Certificate of Incorporation, the stockholders are required or permitted to take any action by vote, such action may be taken without a meeting, without prior notice and without a vote, if a written consent or electronic transmission, setting forth the action so taken, shall be signed or e-mailed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting called for such purpose.
1.11Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only (a) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (b) by or at the direction of the
Board or any committee thereof or (c) by any stockholder of the Corporation who was a stockholder of record of the Corporation at the time the notice provided for in this Section 1.10 is delivered by such stockholder to the Secretary of the Corporation, who is entitled to vote at the meeting upon such election of directors or upon such other business, as the case may be, and who complies with the notice procedures set forth in this Section 1.10.
(2) For any nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Section 1.10, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation (and must timely provide any updates or supplements to such notice at such times and in such forms provided by this Section 1.10) and any such proposed business (other than the nominations of persons for election to the Board) must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one hundred twentieth (120th) day, prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation); provided, further, that for purposes of the 2020 annual meeting of stockholders, which is the first annual meeting following the adoption of these Bylaws, notice by the stockholders must be so delivered not later than the close of business on the tenth (10th) day following the day on which public announcement of the adoption of these Bylaws is first made by the Corporation. In no event shall the public announcement of an adjournment, postponement or recess of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. The number of nominees a stockholder may nominate for election at the annual meeting (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at the annual meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such annual meeting. To be in proper form for purposes of this Section 1.10, such stockholder’s notice shall set forth: (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business and residence address, and principal occupation or employment of the nominee, (ii) and all other information relating to such nominee that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, (iii) a reasonably detailed description of any compensatory, payment or other financial agreement, arrangement or understanding that such nominee has with any other person or entity other than the Corporation including the amount of any payment or payments received or receivable thereunder, in each case in connection with candidacy or service as a director of the Corporation, (iv) such person’s written consent to being named in the Corporation’s proxy statement and associated proxy card as a nominee of the stockholder and to serving as a director if elected and (v) all information with respect to such nominee that would be required to be set forth in a stockholder’s notice pursuant to this Section 1.10 if such nominee were the stockholder giving notice hereunder; (b) as to any other business that the stockholder proposes to bring before the meeting, (i) a brief description of the business desired to be brought before the meeting, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment), (iii) the reasons for conducting such business at the meeting, (iv) any direct or indirect material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made and any other person or persons with whom such stockholder or beneficial owner, if any, has any agreement, arrangement or understanding in connection with such proposal and (v) such other information relating to any proposed item of business as the Corporation may reasonably require to determine whether such proposed item of business is a proper matter for stockholder action; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class or series and number of shares of capital stock of the Corporation which are, directly or indirectly, owned beneficially (within the meaning of Rule 13d-3 under the Exchange Act) or of record by such stockholder and such beneficial owner (provided, that such stockholder and the beneficial owner, if any, on whose behalf the nomination or proposal is made shall in all events be deemed to beneficially own any shares of any class or series and number of shares of capital stock of the Corporation as to which such stockholder or beneficial owner, if any, has a right to acquire beneficial ownership at any time in the future), (iii) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such
stockholder and/or such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing (including their names), including, in the case of a nomination, the nominee, (iv) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder’s notice by, or on behalf of, such stockholder and such beneficial owners, whether or not such instrument or right shall be subject to settlement in underlying shares of capital stock of the Corporation, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to securities of the Corporation, (v) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting upon such business or nomination, as the case may be, and intends to appear in person or by proxy at the meeting to propose such business or nomination, (vi) a representation as to whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies or votes from stockholders in support of such proposal or nomination, and (vii) any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder. The foregoing notice requirements of this paragraph (A) of this Section 1.10 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as the Corporation may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation. If requested by the Corporation, the information required by clause (c) of this paragraph (A)(2) shall be supplemented by such stockholder and any such beneficial owner not later than ten (10) days after the record date for the meeting to disclose such information as of the record date. In addition, a stockholder seeking to nominate a director candidate or bring other business before the annual meeting shall promptly provide any other information reasonably requested by the Corporation.
(3)Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 1.10 to the contrary, in the event that the number of directors to be elected to the Board at the annual meeting is increased effective after the time period for which nominations would otherwise be due under paragraph (A)(2) of this Section 1.10 and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 1.10 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (1) by or at the direction of the Board or any committee thereof or (2) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 1.10 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 1.10. The number of nominees a stockholder may nominate for election at the special meeting (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at the special meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such special meeting. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (A)(2) of this Section 1.10 shall be delivered to the Secretary at the principal executive offices of the
Corporation not earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which the public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall the public announcement of an adjournment, postponement or recess of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.
(C) General. (1) Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with the procedures set forth in this Section 1.10 shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.10. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.10 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made, solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholder’s nominee or proposal in compliance with such stockholder’s representation as required by clause (A)(2)(c)(vi) of this Section 1.10) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section 1.10, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 1.10, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 1.10, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of such writing or electronic transmission, at the meeting of stockholders.
(2)For purposes of this Section 1.10, “public announcement” shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or other national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.
(3)Notwithstanding the foregoing provisions of this Section 1.10, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 1.10; provided however, that any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 1.10 (including paragraphs (A)(1)(c) and (B) hereof), and compliance with paragraphs (A)(1)(c) and (B) of this Section 1.10 shall be the exclusive means for a stockholder to make nominations or submit other business (other than, as provided in the penultimate sentence of (A)(2), business other than nominations brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time). Nothing in this Section 1.10 shall be deemed to affect any rights (a) of stockholders to request inclusion of proposals or nominations in the Corporation’s proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act or (b) of the holders of any series of Preferred Stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation, including any Preferred Stock Designation.
1.12Conduct of Meetings; Inspectors of Election.
(A)Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the Chairman’s absence by the Vice Chairman of the Board, if any, or in the Vice Chairman’s absence by the Chief Executive Officer, or in the Chief Executive Officer’s absence, by the President, or in the President’s absence by a Vice President, or in the absence of all of the foregoing persons by a chairman designated by the Board. The Secretary
shall act as secretary of the meeting, but in the Secretary’s absence the chairman of the meeting may appoint any person to act as secretary of the meeting.
(B)The Board may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of stockholders of the Corporation as it shall deem appropriate including, without limitation, such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of stockholders and proxyholders not physically present at a meeting. Except to the extent inconsistent with such rules, regulations and procedures as adopted by the Board, the chairman of any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as shall be determined; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
(C)The chairman of the meeting shall announce at the meeting when the polls for each matter to be voted upon at the meeting will be opened and closed. After the polls close, no ballots, proxies or votes or any revocations or changes thereto may be accepted.
(D)The Corporation may, and if required by law, shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by law, inspectors may be officers, employees, agents or representatives of the Corporation. Each inspector, before entering upon the discharge of such inspector’s duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector shall have the duties prescribed by law and, when the vote is completed, shall certify the inspector’s determination of the result of the vote taken and of such other facts as may be required by law. Every vote taken by ballots shall be counted by a duly appointed inspector or duly appointed inspectors.
ARTICLE II
DIRECTORS
2.1General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all of the powers of the Corporation except as otherwise provided by law or the Certificate of Incorporation.
2.2Number, Election; Term and Qualification.
(A)Subject to the rights of holders of any series of Preferred Stock to elect directors, the number of the directors of the Corporation shall be fixed from time to time solely by resolution of the Board. Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, each director of the Corporation shall hold office until the expiration of the term for which he or she is elected and until his or her successor has been duly elected and qualified or until his or her earlier resignation, death or removal. Election of directors need not be by written ballot. Directors need not be stockholders of the Corporation.
(B)During any period when the holders of any series of Preferred Stock have the right to elect additional directors as provided for or fixed pursuant to the provisions of the Certificate of Incorporation, including any Preferred Stock Designation, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total number of authorized directors of the Corporation shall automatically be increased by such specified number of directors, and the holders of such Preferred Stock shall be entitled to elect the additional directors
so provided for or fixed pursuant to said provisions, and (ii) each such additional director shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his earlier death, disqualification, resignation or removal. Except as otherwise provided for or fixed pursuant to the provisions of the Certificate of Incorporation, including any Preferred Stock Designation, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate and the total authorized number of directors of the Corporation shall be reduced accordingly.
2.3Chairman of the Board; Vice Chairman of the Board. The Board may appoint from its members a Chairman of the Board and a Vice Chairman of the Board, neither of whom need be an employee or officer of the Corporation. If the Board appoints a Chairman of the Board, such Chairman shall perform such duties and possess such powers as are assigned by the Board and, if the Chairman of the Board is also designated as the Corporation’s Chief Executive Officer, shall have the powers and duties of the Chief Executive Officer prescribed in Section 3.7 of these Bylaws. If the Board appoints a Vice Chairman of the Board, such Vice Chairman shall perform such duties and possess such powers as are assigned by the Board. Unless otherwise provided by the Board, the Chairman of the Board or, in the Chairman’s absence, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board.
2.4Quorum. The greater of (a) a majority of the directors at any time in office and (b) one-third of the whole Board shall constitute a quorum of the Board. If at any meeting of the Board there shall be less than a quorum, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.
2.5Action at Meeting. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board, unless a greater number is required by law or by the Certificate of Incorporation, including any Preferred Stock Designation.
2.6Terms of Office. Subject to the rights of holders of any series of Preferred Stock to elect directors, each director shall serve for a term ending on the date of the annual meeting of stockholders following the annual meeting of stockholders at which such director was elected; provided that the term of each director shall continue until the election and qualification of his or her successor and be subject to his or her earlier death, disqualification, resignation or removal.
2.7Newly Created Directorships; Vacancies. Subject to the rights of holders of any series of Preferred Stock, any newly created directorship that results from an increase in the number of directors or any vacancy on the Board that results from the death, disability, resignation, disqualification or removal of any director or from any other cause shall be filled solely by the affirmative vote of a majority of the total number of directors then in office, even if less than a quorum, or by a sole remaining director and shall not be filled by the stockholders; provided that a vacancy created by the removal of a director by the stockholders may be filled by the stockholders. Any director elected in accordance with the preceding sentence shall, in the case of a newly created directorship, hold office for the full term of the class in which the newly created directorship was created or, in the case of a vacancy, hold office for the remaining term of his or her predecessor and in each case until his or her successor shall be elected and qualified, subject to his or her earlier death, disqualification, resignation or removal.
2.8Removal. Subject to the rights of holders of any series of Preferred Stock, any director or the entire Board may be removed from office at any time by the affirmative vote of the holders of at least a majority in voting power of the shares then entitled to vote at an election of Directors.
2.9Resignation. Any director may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairman of the Board, the Chief Executive Officer, the President or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at some later time or upon the happening of some later event.
2.10Regular Meetings. Regular meetings of the Board may be held without notice at such time and place as shall be determined from time to time by the Board; provided that any director who is absent when such a
determination is made shall be given notice of the determination. A regular meeting of the Board may be held without notice immediately after and at the same place as the annual meeting of stockholders.
2.11Special Meetings. Special meetings of the Board may be called by the Chairman of the Board, the Chief Executive Officer, the affirmative vote of a majority of the directors then in office, or by one director in the event that there is only a single director in office.
2.12Notice of Special Meetings. Notice of the date, place and time of any special meeting of the Board shall be given to each director (a) in person or by telephone at least twenty-four (24) hours in advance of the meeting, (b) by sending written notice by reputable overnight courier, telecopy, electronic mail, facsimile or other means of electronic transmission, or delivering written notice by hand, to such director’s last known business, home or means of electronic transmission address at least twenty-four (24) hours in advance of the meeting, or (c) by sending written notice by first-class mail to such director’s last known business or home address at least seventy-two (72) hours in advance of the meeting. Such notice may be given by the Secretary or by the Chairman of the Board, the Chief Executive Officer or one of the directors calling the meeting. A notice or waiver of notice of a meeting of the Board need not specify the purposes of the meeting.
2.13Meetings by Conference Communications Equipment. Directors may participate in meetings of the Board or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting.
2.14Action by Consent. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent to the action in writing or by electronic transmission. After an action is taken, the consent or consents relating thereto shall be filed with the minutes of proceedings of the Board, or the committee thereof, in the same paper or electronic form as the minutes are maintained.
2.15Committees. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation with such lawfully delegable powers and duties as the Board thereby confers, to serve at the pleasure of the Board. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board and subject to the provisions of law, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Board may from time to time request. Except as otherwise provided in the Certificate of Incorporation, these Bylaws, or the resolution of the Board designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.
2.16Compensation of Directors. Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board may from time to time determine. No such payment shall preclude any director from serving the Corporation or any of its parent or subsidiary entities in any other capacity and receiving compensation for such service.
ARTICLE III
OFFICERS
3.1Titles. The officers of the Corporation may consist of a Chief Executive Officer, a President, a Chief Financial Officer, a Treasurer and a Secretary and such other officers with such other titles as the Board shall from time to time determine. The Board may appoint such other officers, including one or more Vice Presidents and one or more Assistant Treasurers or Assistant Secretaries, as it may deem appropriate from time to time. The only individuals
who shall be considered the officers of the Corporation shall be those individuals who have been appointed or elected as an officer of the Corporation by the Board.
3.2Election. The officers of the Corporation shall be elected by the Board.
3.3Qualification. No officer need be a stockholder. Any two or more offices may be held by the same person.
3.4Tenure. Except as otherwise provided by law, by the Certificate of Incorporation or by these Bylaws, each officer shall hold office until such officer’s successor is duly elected and qualified, unless a different term is specified in the resolution electing or appointing such officer, or until such officer’s earlier death, resignation, disqualification or removal.
3.5Resignation and Removal. Any officer may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Board, the Chief Executive Officer, the President or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event. Any officer may be removed at any time, with or without cause, by the affirmative vote of a majority of the directors then in office. Except as the Board may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following such officer’s resignation or removal, or any right to damages on account of such removal, whether such officer’s compensation be by the month or by the year or otherwise, unless such compensation is expressly provided for in a duly authorized written agreement with the Corporation
3.6Vacancies. The Board may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled, for such period as it may determine, any offices. Each such successor shall hold office for the unexpired term of such officer’s predecessor and until a successor is duly elected and qualified, or until such officer’s earlier death, resignation, disqualification or removal.
3.7President; Chief Executive Officer. Unless the Board has designated another person as the Corporation’s Chief Executive Officer, the President shall be the Chief Executive Officer of the Corporation. The Chief Executive Officer shall have general charge and supervision of the business of the Corporation subject to the direction of the Board, and shall perform all duties and have all powers that are commonly incident to the office of chief executive or that are delegated to such officer by the Board. The President shall perform such other duties and shall have such other powers as the Board or the Chief Executive Officer (if the President is not the Chief Executive Officer) may from time to time prescribe. In the event of the absence, inability or refusal to act of the Chief Executive Officer or the President (if the President is not the Chief Executive Officer), the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board) shall perform the duties of the Chief Executive Officer and when so performing such duties shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer.
3.8Vice Presidents/Other Officers. Each Vice President and any other officer designated by the Board shall perform such duties and possess such powers as the Board or the Chief Executive Officer may from time to time prescribe. The Board may assign to any Vice President the title of Executive Vice President or Senior Vice President, and may assign to any Vice President or other officer any other title selected by the Board.
3.9Secretary and Assistant Secretaries. The Secretary shall perform such duties and shall have such powers as the Board or the Chief Executive Officer may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board, to attend all meetings of stockholders and the Board (other than executive sessions of the Board) and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers as the Board, the Chief Executive Officer or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board) shall perform the duties and exercise the powers of the Secretary.
The chairman of any meeting of the Board or of stockholders may designate a temporary secretary to keep a record of any meeting.
3.10Treasurer and Assistant Treasurers. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned by the Board or the Chief Executive Officer. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the Corporation, to deposit funds of the Corporation in depositories selected in accordance with these Bylaws, to disburse such funds as ordered by the Board, to make proper accounts of such funds, and to render as required by the Board statements of all such transactions and of the financial condition of the Corporation.
The Assistant Treasurers shall perform such duties and possess such powers as the Board, the Chief Executive Officer or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board) shall perform the duties and exercise the powers of the Treasurer.
3.11Salaries. Officers of the Corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board. No officer shall be prevented from receiving a salary or other compensation by reason of the fact that he is also a director.
3.12Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.
ARTICLE IV
CAPITAL STOCK
4.1Issuance of Stock. Subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the Corporation or the whole or any part of any shares of the authorized capital stock of the Corporation held in the Corporation’s treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board in such manner, for such lawful consideration and on such terms as the Board may determine.
4.2Stock Certificates; Uncertificated Shares. The shares of the Corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. Every holder of stock of the Corporation represented by certificates shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board, representing the number of shares held by such holder registered in certificate form. Each such certificate shall be signed in a manner that complies with Section 158 of the DGCL and each of the Chief Executive Officer, the President, a Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer are duly authorized to sign such certificates by, or in the name of, the Corporation, unless otherwise expressly provided in the resolution of the Board electing such officer.
Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, these Bylaws, applicable securities laws or any agreement among any number of stockholders or among such holders and the Corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction.
If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of each certificate representing shares of such class or series of stock, provided that in lieu of the foregoing requirements there may be set forth on the face or back of each certificate representing shares of such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of uncertificated shares, the registered owner thereof shall be given a notice, in writing or by electronic transmission, containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the DGCL or, with respect to Section 151 of DGCL, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
4.3Transfers. Shares of stock of the Corporation shall be transferable in the manner prescribed by law, the Certificate of Incorporation, including any Preferred Stock Designation, and these Bylaws. Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation or by transfer agents designated to transfer shares of stock of the Corporation. Subject to applicable law, shares of stock represented by certificates shall be transferred only on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the Corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, the Certificate of Incorporation, including any Preferred Stock Designation, or these Bylaws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the Corporation in accordance with the requirements of these Bylaws.
4.4Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate or uncertificated shares in place of any previously issued certificate alleged to have been lost, stolen or destroyed, upon such terms and conditions as the Board may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity and posting of such bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
4.5Record Date. In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which shall not be more than sixty (60) days prior to such action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
4.6Regulations. The issue and registration of shares of stock of the Corporation shall be governed by such other regulations as the Board may establish.
ARTICLE V
GENERAL PROVISIONS
5.1Fiscal Year. Except as from time to time otherwise designated by the Board, the fiscal year of the Corporation shall begin on the first day of January of each year and end on the last day of December in each year.
5.2Corporate Seal. The corporate seal shall be in such form as shall be approved by the Board.
5.3Waiver of Notice. Whenever notice is required to be given by law or by the Certificate of Incorporation, including any Preferred Stock Designation, or these Bylaws, a written waiver signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before, at or after the time of the event for which notice is to be given, shall be deemed equivalent to notice required to be given to such person. Neither the business nor the purpose of any meeting need be specified in any such waiver. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
5.4Voting of Securities. Except as the Board may otherwise designate, the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer may waive notice, vote, consent, or appoint any person or persons to waive notice, vote or consent, on behalf of the Corporation, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for the Corporation (with or without power of substitution and re-substitution), with respect to the securities of any other entity which may be held by this Corporation.
5.5Evidence of Authority. A certificate by the Secretary, or an Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the Corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action.
5.6Certificate of Incorporation. All references in these Bylaws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the Corporation, as amended and/or restated and in effect from time to time, including any certificate (a “Preferred Stock Designation”) setting forth the designation of any series of preferred stock of the Corporation (“Preferred Stock”).
5.7Severability. Any determination that any provision of these Bylaws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these Bylaws.
5.8Pronouns. All pronouns used in these Bylaws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require.
5.9Manner of Notice. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these Bylaws may be given in writing directed to the stockholder’s mailing address (or by electronic transmission directed to the stockholder’s electronic mail address, as applicable) as it appears on the records of the Corporation. Notice shall be given (i) if mailed, when deposited in the United States mail, (ii) if delivered by courier service, the earlier of when the notice is received or left at the stockholder’s address, or (iii) if given by electronic mail, when directed at to such stockholder’s electronic mail address (unless the stockholder has notified the Corporation in writing or by electronic transmission of an objection to receiving notice by electronic mail or such notice is prohibited by the DGCL to be given by electronic transmission). A notice by electronic mail must include a prominent legend that the communication is an important notice regarding the Corporation. A notice by electronic mail shall be deemed to include any files attached thereto and any information hyperlinked to a website if such electronic mail includes the contact information of an officer or agent of the Corporation who is available to assist with accessing such files or information. Any notice to stockholders under any provision of the DGCL, the Certificate of Incorporation or these Bylaws provided by electronic transmission (other than any such notice given by electronic mail) may only be given in a form consented to by such stockholder, and any such notice by electronic transmission shall be deemed to be given as provided by the DGCL.
5.10Electronic Transmission. For purposes of these Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, including the use of, or participation in, one or more electronic networks or databases (including one or more distributed electronic networks or databases), that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
ARTICLE VI
AMENDMENTS
These Bylaws may be altered, amended or repealed, in whole or in part, or new Bylaws may be adopted by the Board as expressly provided in the Certificate of Incorporation. In addition, notwithstanding any other provision of the Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote, and in addition to any affirmative vote of the holders of any series of Preferred Stock required by law or the Certificate of Incorporation, including any Preferred Stock Designation, these Bylaws may also be amended, altered or repealed and new Bylaws may be adopted by the stockholders of the Corporation by the affirmative vote of the holders of at least a majority in voting power of the outstanding stock of the Corporation entitled to vote thereon.
ARTICLE VII
INDEMNIFICATION AND ADVANCEMENT
7.1Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of the Corporation. Subject to Section 7.3, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, in and of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.
7.2Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 7.3, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
7.3Authorization of Indemnification. Any indemnification under this Article VII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 7.1 or Section 7.2, as the case may be. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders. Such determination shall be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of the Corporation. To the extent, however, that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding set forth in Section 7.1 or Section 7.2 or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.
7.4Good Faith Defined. For purposes of any determination under Section 7.3, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person’s conduct was unlawful, if such person’s action is based on good faith reliance on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term “another enterprise” as used in this Section 7.4 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section 7.4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 7.1 or 7.2, as the case may be.
7.5Right of Claimant to Bring Suit. Notwithstanding any contrary determination in the specific case under Section 7.3, and notwithstanding the absence of any determination thereunder, if a claim under Sections 7.1 or 7.2 of this Article VII is not paid in full by the Corporation within (i) ninety (90) days after a written claim for indemnification has been received by the Corporation, or (ii) thirty (30) days after a written claim for an advancement of expenses has been received by the Corporation, the claimant may at any time thereafter (but not before) bring suit against the Corporation in the Court of Chancery in the State of Delaware to recover the unpaid amount of the claim, together with interest thereon, or to obtain advancement of expenses, as applicable. It shall be a defense to any such action brought to enforce a right to indemnification (but not in an action brought to enforce a right to an advancement of expenses) that the claimant has not met the standards of conduct which make it permissible under the DGCL (or other applicable law) for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither a contrary determination in the specific case under Section 7.3 nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the claimant has not met any applicable standard of conduct. If successful, in whole or in part, the claimant shall also be entitled to be paid the expense of prosecuting such claim, including reasonable attorneys’ fees incurred in connection therewith, to the fullest extent permitted by applicable law.
7.6Expenses Payable in Advance. Expenses, including without limitation attorneys’ fees, incurred by a current or former director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding that is subject to this Article VII shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such current or former director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VII.
7.7Nonexclusivity of Indemnification and Advancement of Expenses. The rights to indemnification and advancement of expenses provided by or granted pursuant to this Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that, subject to Section 7.11, indemnification of the persons specified in Sections 7.1 and 7.2 shall be
made to the fullest extent permitted by law. The provisions of this Article VII shall not be deemed to preclude the indemnification of any person who is not specified in Section 7.1 or 7.2 but whom the Corporation has the power or obligation to indemnify under the provisions of the DGCL, or otherwise.
7.8Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Article VII.
7.9Certain Definitions. For purposes of this Article VII, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VII, references to “fines” shall include any excise taxes assessed on a person with respect of any employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VII.
7.10Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.
7.11Limitation on Indemnification. Notwithstanding anything contained in this Article VII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 7.5), the Corporation shall not be obligated to indemnify any director, officer, employee or agent in connection with an action, suit proceeding (or part thereof) initiated by such person unless such action, suit or proceeding (or part thereof) was authorized by the Board.
7.12Contract Rights. The obligations of the Corporation under this Article VII to indemnify, and advance expenses to, a person who is or was a director or officer of the Corporation shall be considered a contract between the Corporation and such person, and no modification or repeal of any provision of this Article VII shall affect, to the detriment of such person, such obligations of the Corporation in connection with a claim based on any act or failure to act occurring before such modification or repeal.
ARTICLE VIII
Forum Selection
Unless the Corporation consents in writing to the selection of an alternative forum, (A) (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Certificate of Incorporation or these Bylaws (as either may be amended or restated) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware; and (B) the federal district courts of the
United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. Notwithstanding the foregoing, this Article VIII shall not apply to claims seeking to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article VIII.
EXHIBIT 31.1
CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James Sapirstein, Chief Executive Officer of First Wave BioPharma, Inc. (the “Company”), certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of the Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 15, 2022 | /s/ James Sapirstein |
| James Sapirstein |
| Chief Executive Officer |
| (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sarah Romano, Chief Financial Officer of First Wave BioPharma, Inc. (the “Company”), certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of the Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 15, 2022 | /s/ Sarah Romano |
| Sarah Romano |
| Chief Financial Officer |
| (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of First Wave BioPharma, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Sapirstein, Chief Executive Officer of the Company, and Sarah Romano, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 15, 2022 | /s/ James Sapirstein |
| James Sapirstein |
| President and Chief Executive Officer |
| (Principal Executive Officer) |
| |
| /s/ Sarah Romano |
| Sarah Romano |
| Chief Financial Officer |
| (Principal Financial and Accounting Officer) |