As filed with the Securities and Exchange Commission on July 29 , 2016
 
 
Registration No. 333-212511


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
AMENDMENT NO. 1
TO
 
FORM S-1
 
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
AZURRX BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
2834
46-4993860
(State or other jurisdiction of
incorporation or organization)
(Primary standard industrial
classification code number)
(I.R.S. employer
identification number)
 
760 Parkside Avenue
Downstate Biotechnology Incubator, Suite 217
Brooklyn, New York 11226
(646) 699-7855
 
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
 
Johan M. (Thijs) Spoor, President and Chief Executive Officer
AzurRx BioPharma, Inc.
760 Parkside Avenue
Downstate Biotechnology Incubator, Suite 217
Brooklyn, New York 11226
(646) 699-7855
 
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
 
Copies to:
 
Fran Stoller, Esq.
David J. Levine, Esq.
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
Tel: (212) 407-4000
Fax: (212) 937-3943
Martin T. Schrier, Esq.
Christopher J. Bellini, Esq.
Cozen O’Connor
277 Park Avenue
New York, NY 10172
Tel: (212) 883-4900
Fax: (212) 986-0604
 
 
 

 
 
     Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
 
     If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  o
 
     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
 
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer        ¨
Accelerated filer                        ¨
Non-accelerated filer          ¨
(Do not check if smaller reporting company)
Smaller reporting company      x
 
 
CALCULATION OF REGISTRATION FEE
 
Title of Each Class of Security Being Registered
 
Proposed Maximum Aggregate Offering Price (1)(2)
   
Amount of
Registration Fee (3)
 
Common Stock, $0.0001 par value
  $ 15,000,000     $ 1,510.50  
 
(1) 
Includes common stock that may be issued upon exercise of a 45-day option granted to the underwriters to cover over-allotments, if any.
(2) 
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(3) 
Previously paid. Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 

 
 



 
 
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
PRELIMINARY PROSPECTUS   SUBJECT TO COMPLETION DATED JULY 29, 2016
 
2,142,857    Shares
 
Common Stock
 
AZURRX BIOPHARMA, INC.
 
 


This is our initial public offering of common stock.  No public market currently exists for our common stock.  We anticipate the initial public offering price will be between $6.00 and $8.00 per share.
 
We are selling 2,142,857   shares of common stock.
 
We have applied to list the common stock on The NASDAQ Capital Market, or NASDAQ, under the symbol “AZRX.”
 
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and, as such, may elect to comply with certain reduced reporting requirements after this offering. See “Prospectus Summary—Emerging Growth Company Status.”
 
Investing in our securities involves a high degree of risk.  You should carefully consider the risk factors beginning on page 6 of this prospectus before purchasing shares of our common stock.
_______________________
 
   
Price to Public
   
Underwriting Discounts and Commissions (1)
   
Proceeds to Us
 
Per Share
 
$
7.00 
   
$
0.49 
   
$
6.51 
 
Total
 
$
15,000,000 
   
$
1,050,000 
   
$
13,950,000 
 
_______________________________________
(1) See “Underwriting” for additional information regarding underwriting compensation.
 
We have granted the underwriters the right to purchase an additional 321,429 shares of our common stock to cover over-allotments.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
_______________________
 
The underwriters expect to deliver the shares of common stock to purchasers on             , 2016.
 
 
WallachBeth Capital, LLC   Network 1 Financial Securities, Inc.
 
 
The date of this prospectus is              , 2016

 
 

 
 
TABLE OF CONTENTS
 
    Page
     
 
1
 
4
 
5
 
6
 
23
 
24
 
24
 
25
 
26
 
27
28
 
35
 
48
 
50
 
53
 
58
 
59
 
60
 
62
64
 
65
 
69
 
69
 
69
 
F-1
 

 
SUMMARY
 
This summary highlights certain information appearing elsewhere in this prospectus. For a more complete understanding of this offering, you should read the entire prospectus carefully, including the information under “Risk Factors” and our financial statements and the related notes included elsewhere in this prospectus before investing in our common stock.
 
In this prospectus, unless otherwise stated or the context otherwise requires, references to “AzurRx,” “Company,” “we,” “us,” “our,” or similar references mean AzurRx BioPharma, Inc. and its subsidiaries on a consolidated basis. References to “AzurRx BioPharma” refer to AzurRx BioPharma, Inc. on an unconsolidated basis. References to “AzurRx SAS” refer to AzurRx BioPharma SAS, AzurRx BioPharma’s wholly-owned subsidiary through which we conduct our European operations.

Our Company
 
We are engaged in the research and development of non-systemic biologics for the treatment of patients with gastrointestinal disorders. Non-systemic biologics are non-absorbable drugs that act locally without reaching the systemic circulation, i.e. the intestinal lumen, skin or mucosa.  Our current product pipeline consists of two therapeutic proteins under development:
 
 
MS1819 - an autologous (from the same organism) yeast recombinant lipase for exocrine pancreatic insufficiency (EPI) associated with chronic pancreatitis (CP) and cystic fibrosis (CF). A recombinant lipase is an enzyme that breaks up fat molecules, which is created from new combinations of genetic material in yeast.
 
 
AZX1101 - a recombinant β -lactamase combination of bacterial origin for the prevention of hospital-acquired infections by resistant bacterial strains induced by parenteral administration of β-lactam antibiotics, as well as prevention of antibiotic-associated diarrhea (AAD). A recombinant β -lactamase is an enzyme that breaks up molecules with a beta-lactam ring as is often seen in antibiotics, which is created from new combinations of genetic material in yeast.
 
Our initial product, MS1819, is intended to treat patients suffering from EPI who are currently treated with porcine pancreatic extracts, or PPEs, which have been on the market since 1938.  The PPE market is well established and growing with estimated sales of $880 million in the U.S. in 2015 (based on a 20% discount to IMS Health’s 2015 prescription data) and has been growing for the past five years at a compound annual growth rate of 22% according to IMS Health 2009-2014 data. In spite of their long-term use, however, PPEs suffer from poor stability, formulation problems, possible transmission of conventional and non-conventional infectious agents due to their animal origins, possible adverse events at high doses in patients with CF and limited effectiveness. We believe that MS1819, if successfully developed and approved for commercialization, can address these shortcomings associated with PPEs.
 
Phase I/IIa testing of MS1819 was completed in March 2011 and we anticipate initiating a phase IIb clinical trial during the middle of 2016.  We expect to use a substantial portion of the proceeds of this offering to conduct the necessary formulation work and validation and stabilization testing on the MS1819 capsules that will be used in future clinical studies, as well as to conduct the trial. While enrollment criteria and statistical considerations for the phase IIb clinical trial will be dependent on the outcome of discussions we expect to have with the U.S. Food and Drug Administration ("FDA"), we expect enrollment in this trial to last for up to 18 months depending on a number of factors, including but not limited to the number of clinical trial sites and local patient demographics. The trial is expected to have both an open-label and randomized component and we anticipate having initial results from the open-label, dose-escalation arm of the trial available approximately six months following the initiation of the trial.


Our second non-systemic biologic product under preclinical development, AZX1101, is designed to protect the gut microbiome (gastrointestinal (GI) microflora) from the effects of certain commonly used intravenous (IV) antibiotics for the prevention of C. difficile infection (CDI) and antibiotic-associated diarrhea (AAD).  CDIs are a leading type of hospital acquired infection (HAI) and are frequently associated with IV antibiotic treatment. Designed to be given orally and co-administered with a broad range of IV beta-lactam antibiotics (e.g., penicillins, cephalosporins and aminogycosides), AZX1101 is intended to protect the gut while the IV antibiotics fight the primary infection. AZX1101 is believed to have the potential to protect the gut from a broad spectrum of IV beta-lactam antibiotics. Beta-lactam antibiotics are a mainstay in hospital infection management and include the commonly used penicillin and cephalosporin classes of antibiotics. AZX1101’s target market is significant and, according to IMS Health and CDM Hospital 2012 databases, represented by U.S. hospitals’ purchases of approximately 118 million doses of IV beta-lactam antibiotics annually, which are administered to approximately 14 million patients. Currently there are no approved treatments designed to protect the gut microbiome from the damaging effects of IV antibiotics.
 
We intend to use a portion of the proceeds of this offering to fund the additional preclinical studies needed to file an Investigational New Drug Application, or IND, with the FDA.
 
Emerging Growth Company Status
 
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. Accordingly, we have included detailed compensation information for only our three most highly compensated executive officers and have not included a compensation discussion and analysis, or CD&A, of our executive compensation programs in this prospectus. In addition, for so long as we are an “emerging growth company,” we will not be required to:
 
 
engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes–Oxley Act of 2002, or the Sarbanes–Oxley Act;
 
 
comply with any requirement that may be adopted by the Public Company Accounting Oversight Board, or the PCAOB, regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
 
 
submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “say-on-golden parachutes;” or
 
 
disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparison of the chief executive officer’s compensation to median employee compensation.
 
In addition, the JOBS Act provides that an “emerging growth company” can use the extended transition period for complying with new or revised accounting standards.


We will remain an “emerging growth company” until the earliest to occur of:
 
 
our reporting $1 billion or more in annual gross revenues;
 
  
our issuance, in a three -year period, of more than $1 billion in non-convertible debt;
 
 
the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million on the last business day of our second fiscal quarter; and
 
 
March 31, 2021.
 
Our Corporate Information
 
We were incorporated on January 30, 2014 in the State of Delaware. In June 2014, we acquired 100% of the issued and outstanding capital stock of AzurRx BioPharma   SAS (formerly ProteaBio Europe SAS), a company incorporated in October 2008 under the laws of France that had been a wholly-owned subsidiary of Protea Biosciences, Inc., or Protea Sub, in turn a wholly-owned subsidiary of Protea Biosciences Group, Inc., a publicly-traded company.  Our principal executive offices are located at 760 Parkside Avenue, Downstate Biotechnology Incubator, Suite 217, Brooklyn, NY 11226. Our telephone number is 646-699-7855. We maintain a website at www.azurrx.com. The information contained on our website is not, and should not be interpreted to be, a part of this prospectus.

 
 
Common stock being offered by us............................................................
 
2,142,857 shares
Common stock to be outstanding immediately after this offering..........
 
10,813,945 shares (1)
Over-allotment option...................................................................................
 
321,429 shares
Use of proceeds.............................................................................................
We intend to use the net proceeds from this offering to continue clinical development and testing of MS1819, to advance our preclinical AZX1101 program to pay back convertible debt notes note converted in the IPO and for working capital and other general corporate purposes.
 
Proposed NASDAQ trading symbol...........................................................
 
“AZRX”
Risk factors.....................................................................................................
The securities offered by this prospectus are speculative and involve a high degree of risk and investors purchasing securities should not purchase the securities unless they can afford the loss of their entire investment. See “Risk Factors” beginning on page 6.
 
(1) The number of shares of our common stock to be outstanding immediately after this offering excludes:
 
 
1,092,800  shares of common stock issuable upon the exercise of outstanding options and warrants at a weighted average exercise price of $5.75 per share; and
 
 
1,081,395  shares reserved for issuance under our equity incentive plans.
 
Unless otherwise stated, all information in this prospectus assumes:
 
 
the conversion of our outstanding shares of preferred stock into 878,171 shares of common stock;
 
 
the conversion of our outstanding convertible notes into 2,642,160 shares of common stock immediately prior to the closing of this offering based on the assumed initial public offering price of $7.00 per share, the midpoint of the price range set forth on the cover page of this prospectus; and
 
 
no exercise of the underwriters’ over-allotment option to purchase additional shares.
 
 
SUMMARY CONSOLIDATED  FINANCIAL AND OTHER DATA
 
The following table presents our summary consolidated historical financial data for the periods presented and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included elsewhere in this prospectus. The consolidated statements of operations data for the fiscal years ended December 31, 2014 and 2015 are derived from our audited consolidated financial statements included elsewhere in this prospectus.  The summary consolidated statements of operations data for the three months ended March 31, 2016 and 2015 and the consolidated balance sheet data as of March 31, 2016 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus.
 
   
01/30/14 (Date of Inception) through 12/31/14
   
01/01/15 through 12/31/15
    Three Months Ended March 31,  
           
2016
   
2015
 
               
(unaudited)
   
(unaudited)
 
Statements of Operations Data:
                       
Operating expenses
 
$
2,329,106
   
$
4,728,808
   
$
1,347,216
   
$
1,072,416
 
Loss from operations
   
(2,329,106
)
   
(4,728,808
)
   
(1,347,216
)
   
(1,072,416
)
Total other expense
   
(36,042)
     
(1,201,428
)
 
 $
      (644,104)
     
(118,891
)
Net loss
 
$
(2,365,148)
   
$
(5,930,236
)
 
$
(1,991,320
)
 
$
(1,191,307
)
Net loss per share, basic and diluted
 
$
    (0.67)
   
$
(1.63
)
 
$
(0.42
)
 
$
(0.33
)
 
               
As of March 31, 2016
 
   
As of
December 31, 2015
   
As of
December 31, 2014
   
Pro Forma (1)
   
Pro Forma
As Adjusted (2)
 
               
(unaudited)
       
Balance Sheet Data:
                       
Cash
  $ 94,836     $ 581,668     $ 2,178,036     $
15,062,178
 
Total assets
  $ 6,575,753     $ 6,685,682     $
8,167,821
    $
20,661,248
 
Total current liabilities
  $ 2,430,855     $ 8,815,512     $ 2,295,827     $ 1,966,328  
Total liabilities
  $ 3,930,855     $ 10,315,512     $ 3,795,827     $ 3,466,328  
Total stockholders’ equity (deficit)
  $ 2,644,898     $ (3,629,830 )   $
4,371,994
    $
17,194,920
 
 
(1) 
The pro forma balance sheet data as of March 31, 2016 reflects (i) the conversion of our outstanding shares of preferred stock into 878,171 shares of common stock that has no effect on Total stockholders’ equity (deficit); (ii) the settlement in cash of other receivable for OID convertible debt of $150,000 that increases Cash by that amount but has no effect on Total assets; (iii) the conversion of $135,000 of convertible promissory notes into OID convertible notes that has no effect on Total current liabilities; (iv) the proceeds of $1,859,000 in additional OID convertible debt that increases Cash and Total current liabilities by that amount; and (v) the issuance of 2,642,160 shares of common stock immediately prior to the closing of this offering upon the mandatory conversion portion of OID convertible notes (based on the assumed initial public offering price of $7.00 per share, the midpoint of the price range set forth on the cover page of this prospectus that decreases Total current liabilities and Total liabilities by $9,791,501 and increases Total stockholders’ equity (deficit) by that same amount.
 
(2) 
The pro forma as adjusted balance sheet data as of March 31, 2016 reflects the pro forma adjustments described in footnote (1) above as adjusted to give effect to (i) the receipt by us of the estimated net proceeds from this offering, based on an assumed initial public offering price of $7.00 per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us of $2,150,000 that increases Cash by $13,240,715, increases Total assets by $12,850,000 and increases Total stockholders’ equity (deficit) by $12,850,000; (ii) the grant of 107,143 warrants with a five-year life to the underwriters at 120% of the IPO price with an estimated value of $562,501 with no effect on Total stockholders’ equity; and (iii) retiring in cash $356,573 of OID convertible debt and accreted interest not mandatorily converted at time of the IPO that decreases cash by $356,573, decreases Total current liabilities and Total liabilities by $329,499 and decreases Total stockholders’ equity (deficit) by $27,074.
 
 
RISK FACTORS
 
You should carefully consider the risks described below and elsewhere in this report, which could materially and adversely affect our business, results of operations or financial condition. Our business faces significant risks and the risks described below may not be the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may materially affect our business, results of operations, or financial condition. If any of these risks occur, the trading price of our common stock could decline and you may lose all or part of your investment.
 
Risks Related to Our Business and Industry
 
We are a development stage company and have a limited operating history upon which to base an investment decision.
 
We are a clinical development stage biopharmaceutical company. Since inception, we have engaged primarily in research and development activities, have not generated any revenues from product sales and have incurred significant net losses. As of March 31, 2016, we had an accumulated deficit of approximately $10.3 million. We have not demonstrated our ability to perform the functions necessary for the successful commercialization of any products. The successful commercialization of any of our products will require us to perform a variety of functions, including:
 
 
continuing to undertake pre-clinical development and clinical trials;
 
 
participating in regulatory approval processes;
 
 
formulating and manufacturing products; and
 
 
conducting sales and marketing activities.
 
Our operations to date have been limited to organizing and staffing our company, acquiring, developing and securing the proprietary rights for, and undertaking pre-clinical development and clinical trials of our product candidates. These operations provide a limited basis for our stockholders and prospective investors to assess our ability to complete development of or commercialize any products and the advisability of investing in our securities.
 
Our product candidates are at an early stage of development and may not be successfully developed or commercialized.
 
Our two product candidates, MS1819 and AZX1101, are in the early stages of development and will require substantial further capital expenditures, development, testing, and regulatory clearances prior to commercialization. The development and regulatory approval process takes several years and it is not likely that either of such products, even if successfully developed and approved by the FDA or any comparable foreign regulatory authority, would be commercially available for at least four to five years or more. Of the large number of drugs in development, only a small percentage successfully completes the regulatory approval process and is commercialized. Accordingly, even if we are able to obtain the requisite financing to fund our development programs, we cannot assure you that our product candidates will be successfully developed or commercialized. Our failure to develop, manufacture or receive regulatory approval for or successfully commercialize any of our product candidates, could result in the failure of our business and a loss of all of your investment in our company.
 
 
Any product candidates we advance into clinical development are subject to extensive regulation, which can be costly and time consuming, cause unanticipated delays or prevent the receipt of the required approvals to commercialize our product candidates.
 
The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our product candidates are subject to extensive regulation by the FDA in the United States and by comparable health authorities in foreign markets, including Health Canada’s Therapeutic Products Directorate, or the TPD, the European Medicines Agency, or the EMA. In the United States, we are not permitted to market our product candidates until we receive approval of a New Drug Application, or NDA, or Biologics License Application, or BLA, from the FDA. The process of obtaining such approval is expensive, often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved. In addition to the significant clinical testing requirements, our ability to obtain marketing approval for these products depends on obtaining the final results of required non-clinical testing, including characterization of the manufactured components of our product candidates and validation of our manufacturing processes. The FDA may determine that our product manufacturing processes, testing procedures or facilities are insufficient to justify approval. Approval policies or regulations may change and the FDA has substantial discretion in the pharmaceutical approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed.
 
The FDA, the TPD and/or the EMA can delay, limit or deny approval of a product candidate for many reasons, including, but not limited to:
 
 
disagreement with the design or implementation of our clinical trials;
 
 
failure to demonstrate to their satisfaction that a product candidate is safe and effective for any indication;
 
 
failure to accept clinical data from trials which are conducted outside their jurisdiction;
 
 
the results of clinical trials may not meet the level of statistical significance required for approval;
 
 
we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
 
 
such agencies may disagree with our interpretation of data from preclinical studies or clinical trials;
 
 
failure to approve the manufacturing processes or facilities of third-party manufacturers with which we or our collaborators contract for clinical and commercial supplies; or
 
 
changes in the approval policies or regulations of such agencies may significantly change in a manner rendering our clinical data insufficient for approval.
 
Any delay in obtaining, or inability to obtain, applicable regulatory approvals would prevent us from commercializing our product candidates.

 
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
 
We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons.  The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion.  The enrollment of patients depends on many factors, including:
 
 
the number of clinical trials for other product candidates in the same therapeutic area that are currently in clinical development, and our ability to compete with such trials for patients and clinical trial sites;
 
 
the patient eligibility criteria defined in the protocol;
 
 
the size of the patient population;
 
 
the proximity and availability of clinical trial sites for prospective patients;
 
 
the design of the trial;
 
 
our ability to recruit clinical trial investigators with the appropriate competencies and experience;
 
 
our ability to obtain and maintain patient consents; and
 
 
the risk that patients enrolled in clinical trials will drop out of the trials before completion.
 
Our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates.  This competition will reduce the number and types of patients and qualified clinical investigators available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors or clinical trial sites may not allow us to conduct our clinical trial at such site if competing trials are already being conducted there.  Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials in such clinical trial site.  We may also encounter difficulties finding a clinical trial site at which to conduct our trials.
 
Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our planned clinical trials, which could prevent completion of these clinical trials and adversely affect our ability to advance the development of our product candidates.
 
Because the results of preclinical studies and early clinical trials are not necessarily predictive of future results, any product candidate we advance into clinical trials may not have favorable results in later clinical trials, if any, or receive regulatory approval.
 
Pharmaceutical development has inherent risk. We will be required to demonstrate through well-controlled clinical trials that our product candidates are effective with a favorable benefit-risk profile for use in their target indications before we can seek regulatory approvals for their commercial sale. Our principal product candidate, MS1819 has only completed a phase I/IIa clinical trial, while our second product, AZX1101 has only been tested in a pre-clinical setting.  Success in pre-clinical studies or early clinical trials does not mean that later clinical trials will be successful as product candidates in later-stage clinical trials may fail to demonstrate sufficient safety or efficacy despite having progressed through initial clinical testing. We also may need to conduct additional clinical trials that are not currently anticipated. Companies frequently suffer significant setbacks in advanced clinical trials, even after earlier clinical trials have shown promising results.

 
Any product candidate we advance into clinical trials may cause unacceptable adverse events or have other properties that may delay or prevent their regulatory approval or commercialization or limit their commercial potential.
 
Unacceptable adverse events caused by any of our product candidates in clinical trials could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications and markets. This, in turn, could prevent us from commercializing the affected product candidate and generating revenues from its sale.  We have not yet completed testing of any of our product candidates for the treatment of the indications for which we intend to seek product approval in humans, and we currently do not know the extent of adverse events, if any, that will be observed in patients who receive any of our product candidates.  If any of our product candidates cause unacceptable adverse events in clinical trials, we may not be able to obtain regulatory approval or commercialize such product or, if such product candidate is approved for marketing, future adverse events could cause us to withdraw such product from the market.
 
Delays in the commencement or completion of our clinical trials could result in increased costs and delay our ability to pursue regulatory approval.
 
Although we intend to use the proceeds of this offering to commence a Phase II clinical trial for MS1819 in the second half of 2016 and to complete the preclinical work necessary to file an IND for AZX1101 by the first quarter of 2017, the commencement of clinical trials can be delayed for a variety of reasons, including delays in:
 
 
obtaining regulatory clearance to commence a clinical trial;
 
 
identifying, recruiting and training suitable clinical investigators;
 
 
reaching agreement on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive negotiation, may be subject to modification from time to time and may vary significantly among different CROs and trial sites;
 
 
obtaining sufficient quantities of a product candidate for use in clinical trials;
 
 
obtaining Investigator Review Board, or IRB, or ethics committee approval to conduct a clinical trial at a prospective site;
 
 
identifying, recruiting and enrolling patients to participate in a clinical trial;
 
 
retaining patients who have initiated a clinical trial but may withdraw due to adverse events from the therapy, insufficient efficacy, fatigue with the clinical trial process or personal issues; and
 
 
availability of cash.
 
Any delays in the commencement of our clinical trials will delay our ability to pursue regulatory approval for our product candidates. In addition, many of the factors that cause, or lead to, a delay in the commencement of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate.
 
Once a clinical trial has begun, patient recruitment and enrollment may be slower than we anticipate. Clinical trials may also be delayed as a result of ambiguous or negative interim results or difficulties in obtaining sufficient quantities of product manufactured in accordance with regulatory requirements.
 
We may be required to suspend, repeat or terminate our clinical trials if they are not conducted in accordance with regulatory requirements, the results are negative or inconclusive or the trials are not well designed.
 
Regulatory agencies, IRBs or data safety monitoring boards may at any time recommend the temporary or permanent discontinuation of our clinical trials or request that we cease using investigators in the clinical trials if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements, or that they present an unacceptable safety risk to participants.  Clinical trials must be conducted in accordance with current Good Clinical Practices, or cGCPs, or other applicable foreign government guidelines governing the design, safety monitoring, quality assurance and ethical considerations associated with clinical studies.  Clinical trials are subject to oversight by the FDA, other foreign governmental agencies and IRBs at the study sites where the clinical trials are conducted.  In addition, clinical trials must be conducted with product candidates produced in accordance with applicable Current Good Manufacturing Practices, or cGMPs, which are the FDA's regulations governing the design, monitoring and control of manufacturing processes and facilities.  Clinical trials may be suspended by the FDA, other foreign governmental agencies, or us for various reasons, including:

 
 
deficiencies in the conduct of the clinical trials, including failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols;
 
 
deficiencies in the clinical trial operations or trial sites;
 
 
the product candidate may have unforeseen adverse side effects;
 
 
deficiencies in the trial design necessary to demonstrate efficacy;
 
 
fatalities or other adverse events arising during a clinical trial due to medical problems that may not be related to clinical trial treatments;
 
 
the product candidate may not appear to be more effective than current therapies; or
 
 
the quality or stability of the product candidate may fall below acceptable standards.
 
If we elect or are forced to suspend or terminate a clinical trial of any other of our product candidates, the commercial prospects for that product will be harmed and our ability to generate product revenue from that product may be delayed or eliminated.  Furthermore, any of these events could prevent us or our partners from achieving or maintaining market acceptance of the affected product and could substantially increase the costs of commercializing our product candidates and impair our ability to generate revenue from the commercialization of these products either by us or by our collaboration partners.
 
Because we in-licensed our product candidates from third parties, any dispute with our licensors or non-performance by us or by our licensors may adversely affect our ability to develop and commercialize the applicable product candidates.
 
Some of our product candidates, including related intellectual property rights, were in-licensed from third parties. Under the terms of our license agreements, the licensors generally have the right to terminate such agreements in the event of a material breach by us. Our licenses require us to make annual, milestone or other payments prior to commercialization of any product and our ability to make these payments depends on our ability to generate cash in the future. These agreements generally require us to use diligent and reasonable efforts to develop and commercialize the product candidate. In the case of MS1819, Laboratoires Mayoly Spindler SAS, or Mayoly, licenses MS1819 from a third party and, accordingly, our rights to MS1819 are also subject to Mayoly’s performance of its obligations to its licensor, any breach of which we may be required to remedy in order to preserve our rights.
 
If there is any conflict, dispute, disagreement or issue of non-performance between us and our licensing partner regarding our rights or obligations under the license agreement, including any conflict, dispute or disagreement arising from our failure to satisfy payment obligations under such agreement, our ability to develop and commercialize the affected product candidate may be adversely affected. Similarly, any such dispute or issue of non-performance between Mayoly and its licensor that we are unable to cure could adversely affect our ability to develop and commercialize MS1819. Any loss of our rights under our license agreements could delay or completely terminate our product development efforts for the affected product candidate.

 
We may form or seek strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.
 
From time to time, we may form or seek strategic alliances, create joint ventures or collaborations or enter into additional licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop.  Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business.  These relationships also may result in a delay in the development of our product candidates if we become dependent upon the other party and such other party does not prioritize the development of our product candidates relative to its other development activities.  In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex.  Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy.  If we license products or businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture.  We cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. We rely completely on third parties to manufacture our preclinical and clinical pharmaceutical supplies and expect to continue to rely on third parties to produce commercial supplies of any approved product candidate, and our dependence on third party suppliers could adversely impact our business.
 
We rely completely on third parties to manufacture our preclinical and clinical pharmaceutical supplies and expect to continue to rely on third parties to produce commercial supplies of any approved product candidate, and our dependence on third party suppliers could adversely impact our business.
 
The proprietary yeast strain used to manufacture MS1819 API is located in a storage facility maintained by Charles River Laboratories in Malvern, PA and such manufacturing is conducted by DSM Capua SPA in Italy.  We are completely dependent on these third parties for product supply and our MS1819 development programs would be adversely affected by a significant interruption in our ability to receive such materials.  Furthermore, our third-party suppliers will be required to maintain compliance with cGMPs and will be subject to inspections by the FDA or comparable regulatory authorities in other jurisdictions to confirm such compliance. In the event that the FDA or such other authorities determine that our third-party suppliers have not complied with cGMP, our clinical trials could be terminated or subjected to a clinical hold until such time as we are able to obtain appropriate replacement material.  Any delay, interruption or other issues that arise in the manufacture, packaging, or storage of our products as a result of a failure of the facilities or operations of our third party suppliers to pass any regulatory agency inspection could significantly impair our ability to develop and commercialize our products.
 
We do not expect to have the resources or capacity to commercially manufacture any of our proposed products, if approved, and will likely continue to be dependent upon third party manufacturers. Our dependence on third parties to manufacture and supply us with clinical trial materials and any approved products may adversely affect our ability to develop and commercialize our products on a timely basis or at all.
 
We rely on third parties to conduct our clinical trials. If these third parties do not meet our deadlines or otherwise conduct the trials as required, our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.
 
We do not have the ability to conduct all aspects of our preclinical testing or clinical trials ourselves. We intend to use CROs to conduct our planned clinical trials and will rely upon such CROs, as well as medical institutions, clinical investigators and consultants, to conduct our trials in accordance with our clinical protocols. Our future CROs, investigators and other third parties will play a significant role in the conduct of these trials and the subsequent collection and analysis of data from the clinical trials.


There is no guarantee that any CROs, investigators and other third parties upon which we rely for administration and conduct of our clinical trials will devote adequate time and resources to such trials or perform as contractually required. If any of these third parties fail to meet expected deadlines, fail to adhere to our clinical protocols or otherwise perform in a substandard manner, our clinical trials may be extended, delayed or terminated. If any of our clinical trial sites terminate for any reason, we may experience the loss of follow-up information on patients enrolled in our ongoing clinical trials unless we are able to transfer the care of those patients to another qualified clinical trial site. In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical trial site may be jeopardized.
 
We will face intense competition and may not be able to compete successfully.
 
We operate in highly competitive segments of the biotechnology and biopharmaceutical markets. We face competition from many different sources, including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies, and private and public research institutions. Our product candidates, if successfully developed and approved, will compete with established therapies, as well as new treatments that may be introduced by our competitors. Many of our competitors have significantly greater financial, product development, manufacturing and marketing resources than us. Large pharmaceutical companies have extensive experience in clinical testing and obtaining regulatory approval for drugs. In addition, many universities and private and public research institutes are active in cancer research, some in direct competition with us. We also may compete with these organizations to recruit management, scientists and clinical development personnel. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. New developments, including the development of other biological and pharmaceutical technologies and methods of treating disease, occur in the pharmaceutical and life sciences industries at a rapid pace. Developments by competitors may render our product candidates obsolete or noncompetitive. We will also face competition from these third parties in recruiting and retaining qualified personnel, establishing clinical trial sites and patient registration for clinical trials and in identifying and in-licensing new product candidates.
 
Our success will depend upon intellectual property, proprietary technologies and regulatory market exclusivity periods, and we may be unable to protect our intellectual property.
 
Our success will depend, in large part, on obtaining and maintaining patent protection and trade secret protection for our product candidates and their formulations and uses, as well as successfully defending these patents against third-party challenges. Under our license agreement with Mayoly, enforcement of patents relating to MS1819 is the responsibility of Mayoly. If we or our licensors fail to appropriately prosecute and maintain patent protection for our product candidates, our ability to develop and commercialize these product candidates may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products. This failure to properly protect the intellectual property rights relating to these product candidates could have a material adverse effect on our financial condition and results of operations.
 
The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or our partners will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:
 
 
patent applications may not result in any patents being issued;
 
 
patents that may be issued or in-licensed may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable, or otherwise may not provide any competitive advantage;
 
 
 
our competitors, many of which have substantially greater resources than we or our partners and many of which have made significant investments in competing technologies, may seek, or may already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell our potential products;
 
 
there may be significant pressure on the United States government and other international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful as a matter of public policy regarding worldwide health concerns;
 
 
countries other than the United States may have patent laws less favorable to patentees than those upheld by United States courts, allowing foreign competitors a better opportunity to create, develop, and market competing products; and
 
 
we may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming and unsuccessful.
 
In addition to patents, we and our partners also rely on trade secrets and proprietary know-how. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and advisors, third parties may still obtain this information or come upon this same or similar information independently. We may become subject to claims that we or consultants, advisors or independent contractors that we may engage to assist us in developing our product candidates have wrongfully or inadvertently disclosed to us or used trade secrets or other proprietary information of their former employers or their other clients.
 
We intend to rely on market exclusivity periods that may not be or remain available to us .
 
We intend to rely on our ability to obtain and maintain a regulatory period of market exclusivity for any of our biologic product candidates that are successfully developed and approved for commercialization. Although this period in the United States is currently 12 years from the date of marketing approval, reductions to this period have been proposed. This exclusivity period in Europe is currently 10 years from the date of marketing approval by the EMA. Once any regulatory period of exclusivity expires, depending on the status of our patent coverage and the nature of the product, we may not be able to prevent others from marketing products that are biosimilar to or interchangeable with our products, which would materially adversely affect us.
 
In addition, United States patent laws may change which could prevent or limit us from filing patent applications or patent claims to protect our products and/or technologies or limit the exclusivity periods that are available to patent holders. For example, on September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law, and includes a number of significant changes to United States patent law. These include changes to transition from a “first-to-invent” system to a “first-to-file” system and to the way issued patents are challenged. These changes may favor larger and more established companies that have more resources to devote to patent application filing and prosecution. The United States Patent and Trademark Office is currently developing regulations and procedures to administer the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act will not become effective until one year or 18 months after its enactment. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will ultimately have on the cost of prosecuting our patent applications, our ability to obtain patents based on our discoveries and our ability to enforce or defend our issued patents.

 
If we are unable to establish sales and marketing capabilities or fail to enter into agreements with third parties to market, distribute and sell any products we may successfully develop, we may not be able to effectively market and sell any such products and generate product revenue.
 
We do not currently have the infrastructure for the sales, marketing and distribution of any of our product candidates, and must build this infrastructure or make arrangements with third parties to perform these functions in order to commercialize any products that we may successfully develop. The establishment and development of a sales force, either by us or jointly with a partner, or the establishment of a contract sales force to market any products we may develop will be expensive and time-consuming and could delay any product launch. If we, or our partners, are unable to establish sales and marketing capability or any other non-technical capabilities necessary to commercialize any products we may successfully develop, we will need to contract with third parties to market and sell such products. We may not be able to establish arrangements with third-parties on acceptable terms, if at all.
 
If any product candidate that we successfully develop does not achieve broad market acceptance among physicians, patients, healthcare payors and the medical community, the revenues that it generates from their sales will be limited.
 
Even if our product candidates receive regulatory approval, they may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Coverage and reimbursement of our product candidates by third-party payors, including government payors, generally is also necessary for commercial success. The degree of market acceptance of any approved products will depend on a number of factors, including:
 
 
 
 
 
 
 
 
 
 
 
 
 
the efficacy and safety as demonstrated in clinical trials;
 
the clinical indications for which the product is approved;
 
acceptance by physicians, major operators of hospitals and clinics and patients of the product as a safe and effective treatment;
 
acceptance of the product by the target population;
 
the potential and perceived advantages of product candidates over alternative treatments;
 
the safety of product candidates seen in a broader patient group, including its use outside the approved indications;
 
the cost of treatment in relation to alternative treatments;
 
the availability of adequate reimbursement and pricing by third parties and government authorities;
 
relative convenience and ease of administration;
 
the prevalence and severity of adverse events;
 
the effectiveness of our sales and marketing efforts; and
 
unfavorable publicity relating to the product.
 
If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we may not generate sufficient revenue from these products and may not become or remain profitable.

 
We may incur substantial product liability or indemnification claims relating to the clinical testing of our product candidates.
 
We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials, and claims could be brought against us if use or misuse of one of our product candidates causes, or merely appears to have caused, personal injury or death. While we have and intend to maintain product liability insurance relating to our clinical trials, our coverage may not be sufficient to cover claims that may be made against us and we may be unable to maintain such insurance. Any claims against us, regardless of their merit, could severely harm our financial condition, strain our management and other resources or destroy the prospects for commercialization of the product which is the subject of any such claim. We are unable to predict if we will be able to obtain or maintain product liability insurance for any products that may be approved for marketing. Additionally, we have entered into various agreements where we indemnify third parties for certain claims relating to the testing and use of our product candidates. These indemnification obligations may require us to pay significant sums of money for claims that are covered by these indemnifications.
 
If we fail to attract and retain key management and clinical development personnel, we may be unable to successfully develop or commercialize our product candidates.
 
We are dependent on our management team and clinical development personnel and our success will depend on their continued service, as well as our ability to attract and retain highly qualified personnel. In particular, the continued service of our senior management team, including Johan M. (Thijs) Spoor, our President and Chief Executive Officer, and Daniel Dupret, our Chief Scientific Officer, is critical to our success. The market for the services of qualified personnel in the pharmaceutical industry is highly competitive. The loss of service of any member of our senior management team or key personnel could prevent, impair or delay the implementation of our business plan, the successful conduct and completion of our planned clinical trials and the commercialization of any product candidates that we may successfully develop. We do not carry key man insurance for any member of our senior management team.
 
We use biological materials and may use hazardous materials, and any claims relating to improper handling, storage or disposal of these materials could be time consuming or costly.
 
We may use hazardous materials, including chemicals and biological agents and compounds, that could be dangerous to human health and safety or the environment. Our operations also produce hazardous waste products. Federal, state and local laws and regulations govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our product development efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. We do not carry specific biological or hazardous waste insurance coverage and our property and casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.
 
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials.
 
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
 
If we or our partners are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our business.
 
Our success also depends upon our ability and the ability of any of our future collaborators to develop, manufacture, market and sell our product candidates without infringing the proprietary rights of third parties. Numerous United States and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing products, some of which may be directed at claims that overlap with the subject matter of our intellectual property. Because patent applications can take many years to issue, there may be currently pending applications, unknown to us, which may later result in issued patents that our product candidates or proprietary technologies may infringe. Similarly, there may be issued patents relevant to our product candidates of which we are not aware.
 
There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally. If a third party claims that we or any of our licensors, suppliers or collaborators infringe the third party’s intellectual property rights, we may have to:
 
 
obtain licenses, which may not be available on commercially reasonable terms, if at all;
 
 
abandon an infringing product candidate or redesign our products or processes to avoid infringement;
 
 
pay substantial damages, including the possibility of treble damages and attorneys’ fees, if a court decides that the product or proprietary technology at issue infringes on or violates the third party’s rights;
 
 
pay substantial royalties, fees and/or grant cross licenses to our technology; and/or
 
 
defend litigation or administrative proceedings which may be costly whether we win or lose, and which could result in a substantial diversion of our financial and management resources.
 
Healthcare reform and restrictions on reimbursements may limit our financial returns.
 
Our ability or the ability of our collaborators to commercialize any of our product candidates that we successfully develop may depend, in part, on the extent to which government health administration authorities, private health insurers and other organizations will reimburse consumers for the cost of these products. These third parties are increasingly challenging both the need for and the price of new drug products. Significant uncertainty exists as to the reimbursement status of newly approved therapeutics. Adequate third-party reimbursement may not be available for our product candidates to enable us or our collaborators to maintain price levels sufficient to realize an appropriate return on their and our investments in research and product development.
 
If we or any of our independent contractors, consultants, collaborators, manufacturers, vendors or service providers fail to comply with healthcare laws and regulations, we or they could be subject to enforcement actions, which could result in penalties and affect our ability to develop, market and sell our product candidates and may harm our reputation.
 
We are subject to federal, state, and foreign healthcare laws and regulations pertaining to fraud and abuse and patients’ rights. These laws and regulations include:
 
 
the U.S. federal healthcare program anti-kickback law, which prohibits, among other things, persons and entities from soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing or ordering of an item or service, for which payment may be made under a federal healthcare program such as Medicare or Medicaid;
 
 
the U.S. federal false claims and civil monetary penalties laws, which prohibit, among other things, individuals or entities from knowingly presenting or causing to be presented, claims for payment by government funded programs such as Medicare or Medicaid that are false or fraudulent, and which may apply to us by virtue of statements and representations made to customers or third parties;


 
the U.S. federal Health Insurance Portability and Accountability Act, or HIPAA, which prohibits, among other things, executing a scheme to defraud healthcare programs;
 
 
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, imposes requirements relating to the privacy, security, and transmission of individually identifiable health information, and requires notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information;
 
 
the federal Physician Payment Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to payments and other transfers of value to physicians, other healthcare providers and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members, which is published in a searchable form on an annual basis; and
 
 
state laws comparable to each of the above federal laws, such as, for example, anti-kickback and false claims laws that may be broader in scope and also apply to commercial insurers and other non-federal payors, requirements for mandatory corporate regulatory compliance programs, and laws relating to patient data privacy and security.
 
If our operations are found to be in violation of any such health care laws and regulations, we may be subject to penalties, including administrative, civil and criminal penalties, monetary damages, disgorgement, imprisonment, the curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA, or exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, any of which could adversely affect our financial results.  Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated.  Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our business, even if our defense is successful.  In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time and resources.
 
We will need to grow the size of our organization, and we may experience difficulties in managing this growth.
 
As of March 31, 2016, we had twelve employees.  As our development and commercialization plans and strategies develop, and as we transition into operating as a public company, we expect to need additional managerial, operational, sales, marketing, financial and other personnel.  Future growth would impose significant added responsibilities on members of management, including:
 
 
identifying, recruiting, integrating, maintaining and motivating additional employees;
 
 
managing our internal development efforts effectively, including the clinical, FDA and international regulatory review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and
 
 
improving our operational, financial and management controls, reporting systems and procedures.
 
Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities.

 
We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services, including substantially all aspects of regulatory approval, clinical management and manufacturing.  There can be no assurance that the services of independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements.  In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business.  There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, or at all.
 
If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development and commercialization goals.
 
Risks Relating to our Finances, Capital Requirements and Other Financial Matters
 
We are a development stage company with a history of operating losses that are expected to continue and we are unable to predict the extent of future losses, whether we will generate significant revenues or whether we will achieve or sustain profitability.
 
We are a company in the development stage and our prospects must be considered in light of the uncertainties, risks, expenses and difficulties frequently encountered by companies in their early stages of operations. We have generated operating losses since our inception, including losses of approximately $2,365,000, and $5,930,000 for the years ended December 31, 2014 and 2015, respectively, and $1,991,000 in the three months ended March 31, 2016. At March 31, 2016, we had an accumulated deficit of approximately $10,287,000.  We expect to make substantial expenditures and incur increasing operating costs in the future and our accumulated deficit will increase significantly as we expand development and clinical trial activities for our product candidates. Our losses have had, and are expected to continue to have, an adverse impact on our working capital, total assets and stockholders’ equity. Because of the risks and uncertainties associated with product development, we are unable to predict the extent of any future losses, whether we will ever generate significant revenues or if we will ever achieve or sustain profitability.
 
We will need substantial additional funding and may be unable to raise capital when needed, which would force us to delay, curtail or eliminate one or more of our research and development programs or commercialization efforts.
 
Our operations have consumed substantial amounts of cash since inception. During the years ended December 31, 2014 and 2015 and the three months ended March 31, 2016, we incurred research and development expenses of approximately $670,000, $1,398,000 and $686,000, respectively. We expect to continue to spend substantial amounts on product development, including conducting clinical trials for our product candidates and purchasing clinical trial materials from our suppliers. We believe that our cash on hand and the net proceeds from this offering will sustain our operations until January 2018 and that we will require substantial additional funds to support our continued research and development activities, as well as the anticipated costs of preclinical studies and clinical trials, regulatory approvals and potential commercialization. We have based this estimate, however, on assumptions that may prove to be wrong, and we could spend our available financial resources much faster than we currently expect. Our current financial condition raises substantial doubt about our ability to continue as a going concern.
 
Until such time, if ever, as we can generate a sufficient amount of product revenue and achieve profitability, we expect to seek to finance future cash needs through equity or debt financings or corporate collaboration and licensing arrangements. Other than this offering, we currently have no other commitments or agreements relating to any of these types of transactions and we cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital, we will have to delay, curtail or eliminate one or more of our research and development programs.
 
 
We received a report from our independent registered public accounting firm with an explanatory paragraph for the year ended December 31, 2015 and 2014 with respect to our ability to continue as a going concern.  The existence of such a report may adversely affect our stock price and our ability to raise capital.  
 
In their report dated June 15, 2016, our independent registered public accounting firm expressed substantial doubt about our ability to continue as a going concern.  We have incurred losses and negative cash flows from operations since inception, have an accumulated deficit as of March 31, 2016 and require additional financing to fund future operations. Our ability to continue as a going concern is subject to our ability to obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities.
 
Raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.
 
To the extent that we raise additional capital by issuing equity securities, the share ownership of existing stockholders will be diluted. Any future debt financing may involve covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions, among other restrictions. In addition, if we raise additional funds through licensing arrangements, it may be necessary to relinquish potentially valuable rights to our product candidates, or grant licenses on terms that are not favorable to us.
 
Risks Associated with our Capital Stock and this Offering
 
We do not know whether an active, liquid and orderly trading market will develop for our common stock in the U.S.
 
Prior to this offering, there has been no public market for our common stock. Although we have applied for listing on The NASDAQ Capital Market, an active trading market for our shares may never develop or be sustained. The lack of an active or liquid market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable.
 
The market price of our common stock may be volatile and may fluctuate in a way that is disproportionate to our operating performance.
 
Our stock price may experience substantial volatility as a result of a number of factors, including
 
 
sales or potential sales of substantial amounts of our common stock;
 
 
delay or failure in initiating or completing pre-clinical or clinical trials or unsatisfactory results of these trials;
 
 
announcements about us or about our competitors, including clinical trial results, regulatory approvals or new product introductions;
 
 
developments concerning our licensors or product manufacturers;


 
litigation and other developments relating to our patents or other proprietary rights or those of our competitors;
 
 
conditions in the pharmaceutical or biotechnology industries;
 
 
governmental regulation and legislation;
 
 
variations in our anticipated or actual operating results;
 
 
change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations; foreign currency values and fluctuations; and
 
 
overall economic conditions.
 
Many of these factors are beyond our control. The stock markets in general, and the market for pharmaceutical and biotechnological companies in particular, have historically experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors could reduce the market price of our common stock, regardless of our actual operating performance.
 
Future sales of shares of our common stock by existing stockholders could depress the market price of our common stock.
 
Upon the closing of this offering, we will have an aggregate of 10,813,945 outstanding shares of common stock. The shares sold in this offering will be immediately tradable without restriction.  623,011 shares, or approximately 6% of our outstanding shares of common stock are currently restricted as a result of lock-up agreements. These shares will be available for sale into the public market 180 days following the date of this Prospectus, subject to certain exceptions and also to potential extensions under certain circumstances, and will be subject to volume and other sale restrictions. The representative of the underwriters may, in its sole discretion and at any time without notice, release all or any portion of the securities subject to lock-up agreements.
 
Also, in the future, we may issue additional securities in connection with investments and acquisitions. The amount of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then outstanding stock. Due to these factors, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.
 
Holders of approximately 5,331,108 shares, or 48% , of our common stock have registration rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders in the future. Once we register the shares for the holders of registration rights, they can be freely sold in the public market upon issuance, subject to the restrictions contained in the lock-up agreements. If a large number of these shares are sold in the public market, the sales could reduce the trading price of our common stock. See “Shares Eligible for Future Sale” for a more detailed description of sales that may occur in the future.
 
We have never paid and do not intend to pay cash dividends.  As a result, capital appreciation, if any, will be your sole source of gain.
 
We have never paid cash dividends on any of our capital stock and we currently intend to retain future earnings, if any, to fund the development and growth of our business.  In addition, the terms of existing and future debt agreements may preclude us from paying dividends.  As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
 
 
Provisions in our restated certificate of incorporation, our restated by-laws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.
 
Provisions of our restated certificate of incorporation, our restated by-laws and Delaware law may have the effect of deterring unsolicited takeovers or delaying or preventing a change in control of our company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices. In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. These provisions include:
 
 
the inability of stockholders to call special meetings; and
 
 
the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could include the right to approve an acquisition or other change in our control or could be used to institute a rights plan, also known as a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our board of directors.
 
In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years, has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
 
The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
 
We have broad discretion in the use of the net proceeds of this offering and may not use them effectively.
 
We intend to use the net proceeds from this offering for general corporate purposes and to continue preclinical and clinical development of our product candidates. However, our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by management to utilize these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.
 
You will experience immediate and substantial dilution in the net tangible book value per share of the common stock you purchase.
 
Because the public offering price per share of our common stock is substantially higher than the net tangible book value per share of our common stock, you will suffer substantial dilution in the net tangible book value of the common stock you purchase in this offering. Based on an assumed public offering price of $7.00 per share, if you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of approximately $5.81 per share in the net tangible book value of the common stock. See the section entitled “Dilution” in this prospectus for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.
 
 
We are eligible to be treated as an “emerging growth company,” as defined in the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
 
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (2) reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements and (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, as an emerging growth company, we are only required to provide two years of audited financial statements and two years of selected financial data in this prospectus. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700.0 million as of any March 31 before that time or if we have total annual gross revenue of $1.0 billion or more during any fiscal year before that time, after which, in each case, we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, we would cease to be an emerging growth company immediately.
 
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
 
If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our shares or if our results of operations do not meet their expectations, our share price and trading volume could decline.
 
The trading market for our shares will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our share price could decline.

 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
Some of the information in this prospectus contains forward-looking statements within the meaning of the federal securities laws. These statements include, among others, the following:
 
 
the results of research and development activities;
 
 
uncertainties relating to preclinical and clinical testing, financing and strategic agreements and relationships;
 
 
the early stage of products under development;
 
 
our need for substantial additional funds;
 
 
government regulation;
 
 
patent and intellectual property matters;
 
 
dependence on third party manufacturers;
 
 
competition; and
 
 
foreign currency fluctuations.
 
These statements may be found under “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.”  Forward-looking statements typically are identified by the use of terms such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms, although some forward-looking statements are expressed differently. You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to the factors referenced above.
 
You should also consider carefully the statements under “Risk Factors” and other sections of this prospectus, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements.  We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations or any changes in events, conditions or circumstances on which any such statement is based, except as required by law.
 
 
USE OF PROCEEDS
 
We estimate that we will receive net proceeds from this offering of approximately $12,850,000, based on an assumed initial public offering price of $7.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares, we estimate that we will receive an additional $2,092,500 million in net proceeds.
 
A $1.00 increase (decrease) in the assumed initial public offering price of $7.00 would increase (decrease) the net proceeds to us from this offering by $1,992,525.
 
We currently intend to use the net proceeds from this offering as follows:
 
 
 
 
approximately $7,500,000 to continue clinical development and testing of MS1819;
 
approximately $1,500,000 to advance our preclinical AZX1101 program;
 
approximately $356,000 to repay convertible debt not converted in the IPO; and
 
the balance, if any, for working capital and other general corporate purposes.
 
We believe that the proceeds allocated to the MS1819 program will be sufficient to enable us to conduct the necessary drug product formulation work, validation and stabilization testing and conduct the program.  We expect that the proceeds allocated to AZX1101 will enable us to fund the additional preclinical studies and prepare the safety and toxicology data necessary to file an IND with the FDA; however, we will need to seek additional financing in order to pursue any clinical program.
 
The foregoing represents our best estimate of the allocation of the net proceeds of the offering during the next 12 to 18 months.  This estimate is based on certain assumptions, including that no events occur which would cause us to abandon any particular efforts, that our research, development and testing activities will occur as projected, and that we do not enter into collaborations to fund a project separately.  The amounts actually expended for each purpose may vary significantly in the event any of these assumptions prove inaccurate.  We reserve the right to change our use of proceeds as unanticipated events may cause us to redirect our priorities and reallocate the proceeds accordingly. Pending specific utilization of the net proceeds as described above, we intend to invest the net proceeds of the offering in short-term investment grade and U.S. government securities.
 
DIVIDEND POLICY
 
We have never paid cash dividends on any of our capital stock and currently intend to retain our future earnings, if any, to fund the development and growth of our business.
 
 
CAPITALIZATION
 
The following table sets forth our capitalization as of March 31, 2016:
 
 
On an actual basis;
 
 
the conversion of our outstanding shares of preferred stock into 878,171 shares of common stock that decreases Preferred stock by $1,764,000, increases Common stock by $88, and increases Additional paid-in capital by $1,763,912; (ii) the conversion of $135,000 of convertible promissory notes into OID convertible notes that increases Notes payable by that amount; (iii) the proceeds of $1,859,000 in additional OID convertible debt that increases Notes payable by that amount; and (iv) the issuance of 2,642,160 shares of common stock immediately prior to the closing of this offering upon the mandatory conversion portion of OID convertible notes (based on the assumed initial public offering price of $7.00 per share, the midpoint of the price range set forth on the cover page of this prospectus that decreases Notes payable by $9,791,501, increases Common stock by $264, increases Additional paid-in capital by $10,577,454 and increases Accumulated deficit by $786,217; and   
 
 
the receipt by us of the estimated net proceeds from this offering, based on an assumed initial public offering price of $7.00 per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us of $2,150,00 that increases Common stock by $214 and increases Additional paid-in capital by $12,849,786, (ii) the grant of 107,143 warrants with a five-year life to the underwriters at 120% of the IPO price with an estimated value of $562,501 that has no effect on Total stockholders’ (deficit) equity; and (iii) retiring in cash $356,573 of OID convertible debt and accrued interest not mandatorily converted at time of the IPO which decreases Notes payable by $329,499 and increases Accumulated deficit by $27,074.
 
You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere in this prospectus.
 
   
March 31, 2016 (unaudited)
 
   
Actual
   
Pro Forma
   
Pro forma As Adjusted
 
                     
Notes payable (inclusive of current portion)
 
$
7,460,503
  $   329,499   $   -  
Stockholders’ deficit:
                   
Preferred stock, $.0001 par value, 1,000,000 shares authorized; 36 shares issued and outstanding; 0; and 0
   
1,764,000
      -       -  
Common stock, $.0001 par value, 9,000,000 shares authorized; 5,150,757 shares issued and outstanding; 8,671,088 shares issued and outstanding, proforma; 10,825,633 shares issued and outstanding, as adjusted (1)
   
515
      867       1,081  
Additional paid-in capital
   
4,254,151
   
16,595,517
   
29,445,303
 
Accumulated deficit
   
(10,286,705
)
 
(11,072,922
)  
(11,099,996
Other comprehensive income
   
(1,151,468
    (1,151,468 )     (1,151,468 )
Total stockholders’ (deficit) equity
   
(5,419,507
)
 
4,371,994
   
17,194,920
 
               
Total capitalization
 
2,040,996
  $
4,704,493
  $
17,194,920
 
 
(1) The number of shares to be outstanding immediately after this offering is based on 6,028,928 shares outstanding on July 27,  2016 , which excludes:
 
 
1,092,800 shares of common stock issuable upon the exercise of outstanding options and warrants at a weighted average exercise price of $5.75 per share; and,
 
1,081,395  shares reserved for issuance under our equity incentive plans.
 
 
DILUTION
 
“Net tangible book value” is total assets minus the sum of liabilities and intangible assets. “Net tangible book value per share” is net tangible book value divided by the total number of shares outstanding on March 31, 2016.  After giving pro forma effect to (i) the conversion of our outstanding shares of preferred stock into 878,171 shares of common stock, and (ii) the issuance of 2,642,160 shares of common stock immediately prior to the closing of this offering upon the conversion of OID convertible notes (based on the midpoint of the price range set forth on the cover page of this prospectus), our pro forma net tangible book value on March 31, 2016 was approximately ($49,524), or ($0.01) per share.
After giving effect to our issuance and sale of 2,142,857 shares of common stock in this offering at an assumed initial public offering price of $7.00 per share, the mid-point of the estimated price range shown on the cover of this prospectus, after deducting the estimated underwriting discounts and offering expenses payable by us, the pro forma as adjusted net tangible book value as of March 31, 2016 would have been approximately $13 million, or $1.18 per share. This represents an immediate increase in pro forma net tangible book value of $1.19 per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of $5.81 per share to investors purchasing shares of common stock in this offering at the assumed public offering price.
 
The following table illustrates this dilution:
 
Assumed public offering price per share
 
$
7.00
 
Pro forma net tangible book value per share as of March 31, 2016
   
(0.01
)
Increase in pro forma net tangible book value per share attributable to the offering
   
1.18
 
Pro forma as adjusted net tangible book value per share as of March 31, 2016 after the offering
   
1.19
 
Dilution per share to new investors in the offering
 
$
5.81
 
 
A $1.00 increase (decrease) in the assumed initial public offering price of $7.00 per share would increase (decrease) the pro forma net tangible book value by approximately $2 million, the pro forma net tangible book value per share after this offering by $0.18 per share and the dilution in pro forma net tangible book value per share to investors in this offering by $0.18 per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and offering expenses payable by us.  If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value will increase to $1.50 per share, representing an immediate increase to existing stockholders of $1.50 per share and an immediate dilution of $5.50 per share to new investors. If any shares are issued in connection with outstanding options, you will experience further dilution.
 
The following table presents, on a pro forma basis as of March 31, 2016, the differences between the existing stockholders and the new investors purchasing our common stock in this offering with respect to the number of shares purchased from us, the total consideration paid or to be paid to us, which includes net proceeds received from the issuance of common stock, and the average price per share paid or to be paid to us at the public offering price of $7.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses:
 
 
Shares Purchased
   
Total Consideration
   
Average
Price Per
Share
 
 
Number
  
Percent
   
Amount
 
  
Percent
   
Existing stockholders
 8,671,088
  
 
  80
 
$
15,847,502
  
  
 
    51
 
$
1.83
  
New investors
 2,142,857
  
 
  20
 
$
15,000,000
  
  
 
    49
 
$
7.00
  
Total
10,813,945
   
 100
%
 
$
30,847,502
     
  100
%
       
 
Assuming the underwriters’ option to purchase additional shares is exercised in full, sales in this offering will reduce the percentage of shares held by existing stockholders to 78% and will increase the number of shares held by our new investors to 2,464,286 shares, or 22%, assuming no purchases of our common stock by existing stockholders in this offering.
 
 
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
 
The following table presents our selected historical financial data for the periods presented and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statement and notes thereto included elsewhere in this prospectus.  The statements of operations data for the fiscal years ended December 31, 2014 and 2015 and the statements of financial condition data as of December 31, 2014 and 2015 are derived from our audited financial statements included elsewhere in this prospectus.  The statements of operations data for the three months ended March 31, 2015 and 2016 and the statements of financial condition data as of March 31, 2016 is derived from our unaudited financial statements included elsewhere in this prospectus.
 
   
January 30, 2014 (Date of Inception) through December 31, 2014
   
Year Ending December 31, 2015
   
Three Months Ended March 31,
 
           
2015
   
2016
 
               
(unaudited)
   
(unaudited)
 
Statements of Operations Data:
                       
Operating expenses
  $ 2,329,106     $ 4,728,808     $ 1,072,416     $ 1,347,216  
Loss from operations
  $ (2,329,106 )   $ (4,728,808 )   $ (1,072,416 )   $ (1,347,216 )
Total other expense
  $ (36,042 )   $ (1,201,428 )   $ (118,891 )   $ (644,104 )
Net loss
  $ (2,365,148 )   $ (5,930,236 )   $ (1,191,307 )   $ (1,991,320 )
Net loss per share, basic and diluted
  $ (0.67 )   $ (1.63 )   $ (0.33 )   $ (0.42 )
 
   
As of December 31,
As of March 31,
 
      2014  
2015
   
2016
 
         
(unaudited)
 
Balance Sheet Data:
                 
Cash
 
$
94,836
   
$
581,668
   
$
169,036
 
Total assets
 
$
6,575,753
   
$
6,685,682
   
$
6,308,821
 
Total current liabilities
 
$
2,430,855
   
$
8,815,512
   
$
10,228,328
 
Total liabilities
 
$
3,930,855
   
$
10,315,512
   
$
11,728,328
 
Total stockholders’ equity (deficit)
 
$
2,644,898
   
$
(3,629,830
 
$
(5,419,507
)
 
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements and the related notes thereto and other financial information appearing elsewhere in this prospectus.
 
Critical Accounting Policies and Estimates

This Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. In our consolidated financial statements, estimates are used for, but not limited to, valuation of financial instruments and intangible assets, fair value of long-lived assets, deferred taxes and valuation allowance, and the depreciable lives of long-lived assets.

On an ongoing basis, we evaluate these estimates and assumptions, including those described below. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Due to the estimation processes involved, the following summarized accounting policies and their application are considered to be critical to understanding our business operations, financial condition and operating results.

Intangible Assets
 
Our definite-lived intangible assets have a carrying value of approximately $2,513,000, $2,584,000, and $3,638,000 as of March 31, 2016, December 31, 2015 and 2014, respectively. These assets include in-process research and development and license agreements. These intangible assets were recorded at historical cost and are stated net of accumulated amortization.
 
The in process research and development and licenses are amortized over their remaining estimated useful lives, ranging from five to 12 years, based on the straight-line method. The estimated useful lives directly impact the amount of amortization expense recorded for these assets on a quarterly and annual basis.
 
In addition, we test for impairment of definite-lived intangible assets when events or circumstances indicate that the carrying value of the assets may not be recoverable. Judgment is used in determining when these events and circumstances arise. If we determine that the carrying value of the assets may not be recoverable, judgment and estimates are used to assess the fair value of the assets and to determine the amount of any impairment loss. No events or circumstances arose in the three months ended March 31, 2016 and the years ended December 31, 2015 and 2014 that would indicate that the carrying value of any of our definite-lived intangible assets may not be recoverable.

Goodwill

Goodwill relates to the acquisition of ProteaBio Europe during 2014 and represents the excess of the total purchase consideration over the fair value of acquired assets and assumed liabilities, using the purchase method of accounting. Goodwill is not amortized, but is subject to periodic review for impairment. As a result, the amount of goodwill is directly impacted by the estimates of the fair values of the assets acquired and liabilities assumed.

 
In addition, goodwill will be reviewed annually, and whenever events or changes in circumstances indicate that the carrying amount of the goodwill might not be recoverable. Judgment is used in determining when these events and circumstances arise. We perform our review of goodwill on our one reporting unit. If we determine that the carrying value of the assets may not be recoverable, judgment and estimates are used to assess the fair value of the assets and to determine the amount of any impairment loss.
 
The carrying value of goodwill at March 31, 2016, December 31, 2015 and 2014 was approximately $1,908,000, $1,833,000, and $2,042,000, respectively.  If actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could be material.
 
Income Taxes

We use the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

We use a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. We have not identified any uncertain income tax positions that could have a material impact to the consolidated financial statements. We are subject to taxation in various U.S. and foreign jurisdictions and remain subject to examination by taxing jurisdictions for the calendar year 2013 and all subsequent periods due to the availability of net operating loss carryforwards. To the extent we prevail in matters for which a liability has been established, or are required to pay amounts in excess of our established liability, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement generally would require use of our cash and may result in an increase in our effective income tax rate in the period of resolution. A favorable tax settlement may reduce our effective income tax rate and would be recognized in the period of resolution.

Our effective income tax rate  may be affected by changes in tax law, our level of earnings, and the results of tax audits.

Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may be exposed to losses or gains that could be material.
 
Jumpstart Our Business Startups Act of 2012
 
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
 
General
 
To date, we have not generated any revenues from operations and at March 31, 2016, we had an accumulated deficit of approximately $10,287,000, primarily as a result of research and development (“R&D”) expenses and general and administrative (“G&A”) expenses. While we may in the future generate revenue from a variety of sources, including license fees, research and development payments in connection with strategic partnerships and/or government grants, our product candidates are at an early stage of development and may never be successfully developed or commercialized. Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future and there can be no assurance that we will ever generate significant revenues or net income.
 
 
R&D Expenses
 
Conducting R&D is central to our business. R&D expenses consist primarily of:
 
 
employee-related expenses, which include salaries and benefits, and rent expense;
 
 
license fees and annual payments related to in-licensed products and intellectual property;
 
 
expenses incurred under agreements with clinical research organizations, investigative sites and consultants that conduct or provide other services relating to our clinical trials and a substantial portion of our preclinical activities;
 
 
the cost of acquiring clinical trial materials from third party manufacturers; and
 
 
costs associated with non-clinical activities, patent filings and regulatory filings.
 
We expect to continue to incur substantial expenses related to our R&D activities for the foreseeable future as we continue product development. Since product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials, we expect that our R&D expenses will increase in the future. In addition, if our product development efforts are successful, we expect to incur substantial costs to prepare for potential commercialization of any late-stage product candidates and, in the event one or more of these product candidates receive regulatory approval, to fund the launch of the product.
 
G&A Expenses
 
G&A expenses consist principally of personnel-related costs, professional fees for legal, consulting and audit services, rent and other general operating expenses not otherwise included in R&D. We anticipate G&A expenses will increase in future periods, reflecting continued and increasing costs associated with:
 
 
support of our expanded R&D activities;
 
 
an expanding infrastructure and increased professional fees and other costs associated with the compliance with the Exchange Act, the Sarbanes-Oxley Act and stock exchange regulatory requirements and compliance; and
 
 
business development and financing activities.
 
Liquidity and Capital Resources, March 31, 2016 and 2015
 
We have experienced net losses and negative cash flows from operations since our inception. As of March 31, 2016, we had sustained cumulative losses attributable to common stockholders of approximately $10,287,000.  At March 31, 2016, we had cash and marketable securities of approximately $213,000.
 
We have funded our operations to date primarily through the issuance of debt and convertible debt securities.  During the years ended December 31, 2015 and 2014 and the three months ended March 31, 2016, we funded our working capital requirements with the proceeds of short-term 8% promissory notes (the “Advance Notes”) and original issuance discount convertible notes (the “OID Notes”).
 
Through March 31, 2016, we had received aggregate gross proceeds of $896,000 from the issuance of Advance Notes, $761,000 of which had been repaid, leaving a principal balance of $135,000 outstanding. Payment of $33,790 of accrued interest on the $761,000 principal amount of Advance Notes repaid was made through the issuance of an aggregate of 5,242 shares of common stock.
 

Through March 31, 2016, we had received aggregate gross proceeds of $7,303,529 from the issuance of $7,961,445 principal amount of OID Notes.  The principal amount of the OID Notes, together with accrued interest, will convert into equity immediately prior to the consummation of this offering.
 
We expect to incur substantial expenditures in the foreseeable future for the development of our product candidates. We will require additional financing to develop, prepare regulatory filings and obtain regulatory approvals, fund operating losses, and, if deemed appropriate, establish manufacturing, sales and marketing capabilities. We believe that our current cash and marketable securities are sufficient to fund operations until September 2016 without giving consideration to the proceeds of this offering based on our current business plan. 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 and our ability to pursue our business strategies. We will seek funds through additional equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. If adequate funds are not available to us, we will be required to delay, curtail or eliminate one or more of our research and development programs.
 
Cash Flows for the Three Months Ended March 31, 2016 and 2015
           
Net cash used in operating activities for the three months ended March 31, 2016 was $636,546, which primarily reflected our net loss of $1,991,320 plus non-cash depreciation and amortization expense of $182,842, non-cash accreted interest on OID convertible debt and debt discount - warrants of $710,988, and an increase in accounts payable and accrued expenses of $511,274 due to our cash position, offset by an increase in prepaid expenses of $36,353 consisting primarily of finance and legal costs associated with the filing of the S-1. Net cash used in operating activities for the three months ended March 31, 2015 was $1,025,900, which primarily reflected our net loss of $1,191,307 plus non-cash depreciation and amortization expense of $186,229, non-cash accreted interest on OID convertible debt and debt discount - warrants of $133,478, offset by a decrease in accounts payable and accrued expenses of $135,283.
 
Net cash used in investing activities for the three months ended March 31, 2016 was $936 which consisted of the purchase of property and equipment. Net cash used in investing activities for the three months ended March 31, 2015 was $11,033, which consisted of the purchase of property and equipment.
 
Net cash provided by financing activities for the three months ended March 31, 2016 was $225,000, which consisted of the gross proceeds in connection with the issuance of OID convertible debt. Net cash provided by financing activities for the three months ended March 31, 2015 was $1,160,000, which consisted of the issuance of promissory notes of $270,000 and the gross proceeds in connection with the issuance of OID convertible debt of $1,140,000 offset by the repayment of promissory notes of $250,000.
 
 
Consolidated Results of Operations for the Three Months Ended March 31, 2016 and 2015
 
R&D expenses were $685,575 and $308,834, respectively, for the three months ended March 31, 2016 and 2015, an increase of $376,741. The increase in R&D is primarily due to costs associated with manufacturing additional batches of MS1819. We expect R&D expenses to increase in future periods as our product candidates continue through clinical trials and we seek strategic collaborations.
 
G&A expenses were $661,641 and $763,582, respectively, for the three months ended March 31, 2016 and 2015, a decrease of $101,941. The decrease was due primarily to a decrease in consulting fees. We expect G&A expenses to increase going forward as we proceed to advance our product candidates through the development and regulatory process.
 
Interest expense was $713,680 and $144,746, respectively, for the three months ended March 31, 2016 and 2015, an increase of $568,934. The increase was due to the higher level of outstanding OID convertible debt. Fair value adjustment of our warrants was $69,576 and $25,855, respectively, for the three months ended March 31, 2016 and 2015, an increase of $43,721. This increase was due to the higher level of warrant liability as a result of the higher level of outstanding OID convertible debt.
 
Net loss was $1,991,320 and $1,191,307 for the three months ended March 31, 2016 and 2015, respectively. The higher net loss for the three months ended March 31, 2016 versus the same period in 2015 is due to the higher expenses noted above.
 
Liquidity and Capital Resources, December 31, 2015 and 2014
 
We have experienced net losses and negative cash flows from operations since our inception. We have cumulative losses attributable to common stockholders of approximately $8,295,000 and $2,365,000, respectively, as of December 31, 2015 and 2014. We have financed our operations through issuances of equity and the proceeds of debt instruments. From the date of inception through December 31, 2014, we received gross proceeds of $859,490 from the sale of our common stock to private investors. From the date of inception through December 31, 2015, we received gross proceeds of $896,000 from the issuance of promissory notes. During this same period, we also repaid $761,000 of these promissory notes. From the date of inception through December 31, 2015, we received cash proceeds of $5,995,000 plus Marketable Securities from a noteholder with a fair value of $150,000 at date of issuance for total proceeds of $6,145,000 from the issuance of original issue discounted convertible debt.
 
At December 31, 2015 and 2014, we had cash and marketable securities of approximately $639,000 and $220,000, respectively. We have funded our operations to date primarily through the issuance of debt and convertible debt securities. During the years ended December 31, 2015 and 2014, we funded our working capital requirements with the proceeds of Advance Notes and OID Notes.
 
We expect to incur substantial expenditures in the foreseeable future for the development of our product candidates. We will require additional financing to develop, prepare regulatory filings and obtain regulatory approvals, fund operating losses, and, if deemed appropriate, establish manufacturing, sales and marketing capabilities. We believe that our current cash and marketable securities are sufficient to fund operations until September 2016 without giving consideration to the proceeds of this offering based on our current business plan. 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 and our ability to pursue our business strategies. We will seek funds through additional equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. If adequate funds are not available to us, we will be required to delay, curtail or eliminate one or more of our research and development programs.
 
 
Cash Flows for the Year Ended December 31, 2015 and the Period January 30, 2014 (Date of Inception) through December 31, 2014
 
Net cash used in operating activities for the year ended December 31, 2015 was $4,510,778, which primarily reflected our net loss of $5,930,236, plus non-cash expenses of $733,599 for depreciation and amortization, non-cash accreted interest expense due to the OID convertible debt and debt discount - warrants of $1,561,677, non-cash warrant expense of $218,337, and an increase of accounts payable and accrued expenses of $251,608 due to our limited cash position, offset by a non-cash fair value gain on warrant liability of $386,103, an increase in other receivables of $638,092 due to a higher French R & D tax credit in 2015 versus 2014 and an increase in prepaid expenses of $340,524 consisting primarily of finance and legal costs associated with the filing of the S-1. Net cash used in operating activities from January 30, 2014 (Date of Inception) through December 31, 2014 was $1,005,993 , which primarily reflected our net loss of $2, 365,148 , offset by a non-cash fair value gain on the warrant liability of $1,368, non-cash expenses of $ 429,935 for depreciation and amortization, non-cash accreted interest expense due to the OID convertible debt and debt discount - warrants of $59,029, and a decrease of working capital of $871,559 due primarily to a decrease in accounts receivable of $356,252 as cash was collected from our European subsidiary’s prior billings, an increase of accounts payable and accrued expenses of $563,089 due to our limited cash position, offset by an increase in other receivables of $50,595. 

Net cash used in investing activities for the year ended December 31, 2015 was $24,380 consisting of purchases of property and equipment. Net cash used in investing activities from January 30, 2014 (Date of Inception) through December 31, 2014 was $751,955 consisting of $191,003 in purchases of property and equipment and $560,952 of the cash portion of the purchase of Protea Europe SAS.
 
Net cash provided by financing activities for the year ended December 31, 2015 was $5,021,353 consisting of gross proceeds of $5,395,000 in connection with the issuance of OID convertible debt, repayments of OID convertible debt of $117,947, gross proceeds from the issuance of promissory notes of $445,000, and the repayments of promissory notes of $701,000.

Net cash provided by financing activities from January 30, 2014 (Date of Inception) through December 31, 2014 was $1,850,491 consisting of gross proceeds of $859,491 for the sale of our common stock, gross proceeds of $600,000 in connection with the issuance of OID convertible debt, issuance of promissory notes of $451,000 offset by the repayments of promissory notes of $60,000.
 
Consolidated Results of Operations for the Year Ended December 31, 2015 and the Period January 30, 2014 (Date of Inception) through December 31, 2014 (“ 2014 ”)
 
R&D expenses were $1,398,056 and $670,491, respectively, for the year ended December 31, 2015 and 2014, an increase of $727,565. The increase in R&D is primarily due to costs associated with manufacturing additional batches of MS1819 as well as increased R&D activities in France. We expect R&D expenses to increase in future periods as our product candidates continue through clinical trials and we seek strategic collaborations.
 
G&A expenses were $3,330,752 and $1,658,615, respectively, for the year ended December 31, 2015 and 2014, an increase of $1,672,137. The increase is primarily due to increased G&A expenses in the U.S. such as an increase in legal/investment banking/other professional consulting of $720,555, payroll expenses of $43,307, travel of $121,565, and warrant expense of $218,337 as well as an increase in amortization of $253,297. We expect G&A expenses to increase going forward as we proceed to advance our product candidates through the development and regulatory process.
 
Interest expense was $1,587,533 and $68,149, respectively, for the year ended December 31, 2015 and 2014, an increase of $1,519,384. The increase was due to the higher level of outstanding OID convertible debt. Fair value adjustment of our warrants was $386,103 and $1,368, respectively, for the year ended December 31, 2015 and 2014, an increase of $384,735. This increase was due to the valuation of the warrants liability at the end of each respective period as well as a higher level of warrant liability a result of the higher level of outstanding OID convertible debt.

Other income was $0 and $30,739, respectively, for the year ended December 31, 2015 and 2014. The other income in 2014 was primarily from Mayoly, our lipase development partner.  
 
Net loss for the year ended December 31, 2015 was $5,930,236 compared to a net loss of $2,365,148 for 2014 as a result of the above.
 
Off-Balance Sheet Arrangements
 
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.


DESCRIPTION OF THE BUSINESS
 
Overview
 
We are engaged in the research and development of non-systemic biologics for the treatment of patients with gastrointestinal disorders. Non-systemic biologics are non-absorbable drugs that act locally without reaching the systemic circulation, i.e. the intestinal lumen, skin or mucosa.  Our current product pipeline consists of two therapeutic proteins under development:
 
 
MS1819 - an autologous yeast recombinant lipase for exocrine pancreatic insufficiency (EPI) associated with chronic pancreatitis (CP) and cystic fibrosis (CF).
 
 
AZX1101- a recombinant β -lactamase combination of bacterial origin for the prevention of hospital-acquired infections by resistant bacterial strains induced by parenteral administration of β-lactam antibiotics, as well as prevention of antibiotic-associated diarrhea (AAD).
 
Our initial product, MS1819, is intended to treat patients suffering from EPI who are currently treated with porcine pancreatic extracts, or PPEs, which have been on the market since 1938. The PPE market is well established and growing with estimated sales of $ 880 million in the U.S. in 2015 (based on a 20% discount to IMS Health’s 2015 prescription data) and has been growing for the past five years at a compound annual growth rate of 22% according to IMS Health 2009-2014 data. In spite of their long-term use, however, PPEs suffer from poor stability, formulation problems, possible transmission of conventional and non-conventional infectious agents due to their animal origins, possible adverse events at high doses in patients with CF and limited effectiveness. We believe that MS1819, if successfully developed and approved for commercialization, can address these shortcomings associated with PPEs.
 
Phase 1 testing of MS1819 was completed in March 2011 and we expect to initiate a Phase II clinical trial during the middle of 2016.  See “Product Programs-MS1819-Clinical Program” below. Our second non-systemic biologic product under preclinical development, AZX1101, is designed to protect the gut microbiome (gastrointestinal (GI) microflora) from the effects of certain commonly used intravenous (IV) antibiotics for the prevention of C. difficile infection (CDI) and antibiotic-associated diarrhea (AAD).  CDIs are a leading type of hospital acquired infection (HAI) and are frequently associated with IV antibiotic treatment. Designed to be given orally and co-administered with a broad range of IV beta-lactam antibiotics (e.g., penicillins, cephalosporins and aminogycosides), AZX1101 is intended to protect the gut while the IV antibiotics fight the primary infection. AZX1101 is believed to have the potential to protect the gut from a broad spectrum of IV beta-lactam antibiotics. Beta-lactam antibiotics are a mainstay in hospital infection management and include the commonly used penicillin and cephalosporin classes of antibiotics. AZX1101’s target market is significant and represented by annual U.S. hospitals purchases of approximately 118 million doses of IV beta-lactam antibiotics which are administered to approximately 14 million patients. Currently there are no approved treatments designed to protect the gut microbiome from the damaging effects of IV antibiotics. This worldwide market could represent a multi-billion-dollar opportunity for us. We intend to use a portion of the proceeds of this offering to fund the additional preclinical studies needed to file an Investigational New Drug Application, or IND, with the FDA.
 
Corporate History
 
On May 21, 2014, we entered into a stock purchase agreement (the “SPA”) with Protea Biosciences Group, Inc. (“Protea Group”) and its wholly-owned subsidiary, Protea Biosciences, Inc. (“Protea Sub” and, together with Protea Group, “Protea”) to acquire 100% of the outstanding capital stock of AzurRx BioPharma   SAS (formerly ProteaBio Europe SAS), a wholly-owned subsidiary of Protea Sub. On June 13, 2014, we completed the acquisition in exchange for the payment of $300,000 and the issuance of shares of our Series A convertible preferred stock (the “Series A Preferred”) convertible into 33% of our outstanding common stock. Under the SPA, we are obligated to make certain milestone and royalty payments to Protea.  See “Agreements and Collaborations” below.

 
Product Programs
 
We are currently engaged in research and development of two potential product candidates, MS1819 and AZX1101.
 
MS1819
 
MS1819 is the active pharmaceutical ingredient, or API, derived from Yarrowia lipolytica , an aerobic yeast naturally found in various foods such as cheese and olive oil that is widely used as a biocatalyst in several industrial processes.  MS1819 is an acid-resistant secreted lipase naturally produced by Yarrowia lipolytica, known as LIP2, that we are developing through recombinant DNA technology for the treatment of exocrine pancreatic insufficiency, or EPI, associated with chronic pancreatitis (CP) and cystic fibrosis (CF).  We obtained the exclusive right to commercialize MS1819 in the U.S. and Canada, South America (excluding Brazil), Asia (excluding China and Japan), Australia, New Zealand and Israel pursuant to a sublicense from Laboratoires Mayoly Spindler SAS, or Mayoly, under a joint development agreement that also grants us joint commercialization rights for Brazil, Italy, China and Japan.  See “Agreements and Collaborations.”
 
Background
 
The pancreas is both an endocrine gland that produces several important hormones, including insulin, glucagon, and pancreatic polypeptide, as well as a digestive organ that secretes pancreatic juice containing digestive enzymes that assist the absorption of nutrients and digestion in the small intestine.
 
The targeted indication of MS1819 is the compensation of EPI, which is observed when the exocrine functions of the pancreas are below 10% of normal. The symptomatology of EPI is essentially due to pancreatic lipase deficiency, an enzyme that hydrolyses triglycerides into monoglycerides and free fatty acids. The pancreatic lipase enzymatic activity is hardly compensated by extrapancreatic mechanisms, because gastric lipase has nearly no lipolytic activity in the pH range of the intestine. On the other hand, when they are impaired, the pancreatic amylase and proteases (enzymes that break up starches and protein, respectively) activities can be, at least in part, compensated by the salivary amylase, the intestinal glycosidase, the gastric pepsin, and the intestinal peptidases, all of which are components of the gastric juice secreted by the stomach walls. In summary, lipid maldigestion due to lipase deficiency is responsible for weight loss, steatorrhea featured by greasy diarrhea, and fat-soluble vitamin deficiencies (i.e. A, D, E and K vitamins). In addition, EPI caused by chronic pancreatic disorders is also frequently associated with endocrine pancreatic insufficiency, resulting in diabetes mellitus sometimes called type IIIc.
 
CP, the most common cause of EPI, is a long-standing inflammation of the pancreas that alters its normal structure and functions. In the United States, its prevalence rate is of 42 cases per 100,000 inhabitants, resulting in approximately 132,000 cases. Approximately 60% of patients affected with CP display EPI, resulting in approximately 80,000 patients requiring substitution therapy in the U.S. In Western societies, CP is caused by chronic alcoholic consumption in approximately 55-80% of cases. Other relatively frequent etiologies include the genetic form of the disease that is inherited as an autosomal dominant condition with variable penetrance, pancreatic trauma and idiopathic causes. CP is frequently associated with episodes of acute inflammation in a previously injured pancreas, or as chronic damage with persistent pain, diabetes mellitus due to endocrine pancreatic insufficiency, or malabsorption caused by EPI. In addition to EPI symptoms, weight loss due to malabsorption and/or reduction in food intake due to pain related to food intake, are frequent.
 
CF, another frequent etiology of EPI, is a severe genetic disease associated with chronic morbidity and life-span decrease of most affected individuals. In most Caucasian populations, CF prevalence is of 7-8 cases per 100,000 inhabitants, but less common in other populations, resulting in approximately 30,000 affected individuals in the U.S. CF is inherited as monogenic autosomal recessive disease due to the defect at a single gene locus that encodes the Cystic Fibrosis Transmembrane Regulator protein (CFTR), a regulated chloride channel. Mutation of both alleles of this chloride channel gene results in the production of thick mucus, which causes a multisystem disease of the upper and lower respiratory tracts, digestive system, and the reproductive tract. The progressive destruction of the pancreas results in EPI that is responsible for malnutrition and contributes to significant morbidity and mortality. About 80-90% of patients with CF develop EPI, resulting in approximately 25,000-27,000 patients in the U.S. that require substitution therapy.

 
EPI can be also observed following pancreatic and gastric surgeries due to insufficient enzyme production or asynchronism between the entry of food into the small intestine and pancreatic juice with bile secretion, respectively. Other uncommon etiologies of EPI include intestinal disorders (e.g. severe celiac disease, small bowel resection, enteral artificial nutrition), pancreatic diseases (e.g. pancreatic trauma, severe acute pancreatitis with pancreatic necrosis, and pancreatic cancer), and other uncommon etiologies (e.g. Zollinger-Ellison syndrome, Shwachman-Diamond syndrome). Idiopathic EPI has been also reported in the elderly.
 
Current treatments for EPI stemming from CP and CF rely on porcine pancreatic extracts, or PPEs, which have been on the market since 1938.  The PPE market is well established and growing with estimated sales in the U.S. of $880 million in 2015 and has been growing for the past 5 years at a compound annual growth rate of 22%.  In spite of their long-term use, however, PPEs suffer from poor stability, formulation problems, possible transmission of conventional and non-conventional infectious agents due to their animal origins, possible adverse events at high doses in patients with CF and limited effectiveness.
 
We believe that MS1819 recombinant lipase is currently the only non-animal source product known to be in development for the treatment of CP and has the potential to address the shortcomings of PPEs.
 
History of the Program
 
In 1998, Mayoly, a European pharmaceutical company focusing primarily on gastroenterology disorders, launched a program for the discovery and characterization of novel lipases of non-animal origin that could be used in replacement therapy for EPI. The program was conducted in collaboration with INRA TRANSFERT, a subsidiary of the French academic laboratory, National Institute for Agricultural Research, or INRA. In 2000, Mayoly and INRA discovered that the yeast Yarrowia lipolytica secreted a lipase which was named LIP2.  During the ensuing years, Mayoly investigated the in vitro enzymatic activities of LIP2 in collaboration with the Laboratory of Enzymology at Interfaces and Physiology of Lipolysis, or EIPL, a French public-funded research laboratory at the French National Scientific Research Centre laboratory, or CNR, which focuses on the physiology and molecular aspects of lipid digestion.
 
Pre-clinical Program
 
The efficacy of MS1819 has been investigated in normal minipigs, which are generally considered as a relevant model for digestive drug development when considering their physiological similarities with  humans and their omnivore diet. Experimental pancreatitis was induced by pancreatic duct ligation, resulting in severe EPI with baseline coefficient of fat absorption, or CFA, around 60% post-ligature.  CFA is a measurement obtained by quantifying the amount of fat ingested orally over a defined time period and subtracting the amount eliminated in the stool to ascertain the amount of fat absorbed by the body.  Pigs were treated with either MS1819 or enteric-coated PPE, both administered as a single-daily dose.
 
At doses ranging from 10.5 to 211mg, MS1819 increases the CFA by +25 to +29% in comparison to baseline (p<0.05 at all doses), whereas the 2.5 mg dose had milder activity. Similar efficacy was observed in pigs receiving 100,000 U lipase of enteric-coated porcine pancreatic extract. These findings demonstrate the in vivo activity of MS1819 in a relevant in vivo model at a level similar to the PPEs at dosage of 10.5mg or greater. The results of a clinical trial are statistically significant if they are unlikely to have occurred by chance. Statistical significance of the trial results are typically based on widely used, conventional statistical methods that establishes the p-value of the results. A p-value of 0.05 or less is required to demonstrate statistical significance. As such, these CFA levels are considered to be statistically significant.
 
To date, two non-clinical toxicology studies have been conducted. Both show that MS1819 lipase is clinically well tolerated at levels up to 1000mg/kg in rats and 250 mg/kg in minipigs up to 13 weeks. MS1819 is therefore considered non-toxic in both rodent and non-rodent species up to a maximum feasible dose (MFD) of 1000 mg/kg/day in the rats over six months of administration.
 
Clinical Program
 
We believe that there are two principal therapeutic indications for EPI compensation by MS1819: (1) adult patients with CP or post-pancreatectomy and (2) children or young adults affected by cystic fibrosis. Because of their radically different pathophysiology, we intend to separately investigate each of these indications and have determined, based on market size and expected dose requirements, to pursue the indication for adults first.


During 2010 and 2011, a phase I/IIa clinical trial of MS1819 was conducted in conjunction with Mayoly in a single center in France. The study was an exploratory study mainly designed to investigate the safety of MS1819-FD (freeze-dried) and was a randomized, double blind, placebo controlled, parallel clinical trial in 12 patients affected with CP or pancreatectomy and severe EPI.  This study was not designed, nor did it aim, to demonstrate statistically significant changes of CFA or steatorrhea under MS1819-FD. The primary endpoint of the study was defined as the relative change in steatorrhea (an established surrogate biomarker of EPI correction) in comparison to baseline. The study found that MS1819 was well tolerated with no serious adverse events. Only two adverse events were observed: constipation (2 patients out of 8 with MS1819) and hypoglycemia (2 patients out of 8 with MS1819, and 1 patient out of 4 with placebo).  A non-statistically significant difference of the primary endpoint, possibly due to the small group size, was found between the two groups both in intention-to-treat , a group that included three patients who received the in-patient facility study diet but did not fulfill the protocol’s inclusion criteria, and per-protocol analysis.
 
We are currently in the final stages of developing a protocol for a phase II multi-center dose escalation study in CP and pancreatectomy. This clinical trial is being designed to ascertain the active dose of MS1819 and to compare its efficacy with or in combination with PPEs and is expected to enroll approximately 15 patients.  We have allocated a substantial portion of the proceeds of this offering to conduct the necessary formulation work and validation and stabilization testing on the MS1819 capsules that will be used in the Phase II study, as well as to sponsor and conduct the trial.  We have identified a principal investigator and have identified CRO and clinical sites for the study. We expect to file an IND for the study as a result of interactions with the FDA. We expect to submit a U.S. IND by the third quarter of 2016. The U.S. trial is expected to be a placebo-crossover study in 30-60 patients with chronic pancreatitis. In parallel with the IND preparation, we expect to mitigate the dose escalation work in Australia and New Zealand.
 
AZX1101
 
AZX1101 is a recombinant-lactamase combination of bacterial origin under development for the prevention of hospital-acquired infections by resistant bacterial strains induced by parenteral administration of β-lactam antibiotics (known as nosocomial infections), as well as the prevention of antibiotic-associated diarrhea , or AAD.  Nosocomial infections are a major health concern contributing to increased morbidity, mortality and cost. The Centers for Disease Control, or CDC has estimated that roughly 1.7 million hospital-associated infections (i.e. ~5% of the number of hospitalized patients), cause or contribute to 99,000 deaths each year in the U.S., with the annual cost ranging from $4.5 - $11 billion.
 
Our AZX1101 product candidate is at an early stage of preclinical development and will consist of a c ombination of two β-lactamases having complementary activity spectrum. We have selected two proteins from the screening of 22 candidate enzymes that show biochemical characteristics fitting with the application. The production processes of these two candid ate proteins have been optimized and will be administrated to minipigs in order to evaluate efficacy. We intend to use a portion of the proceeds of this offering to conduct the first animal study and primary toxicology assessment of AZX1101 during the third quarter of 2016.  The offering proceeds will not be sufficient to fund this program past these initial steps and, accordingly, even if the findings warrant further study, we will need to seek additional financing in order to pursue the AZX1101 program, which may not be available on acceptable terms, if at all.
 
Agreements and Collaborations
 
Stock Purchase Agreement
 
On May 21, 2014, we entered into the SPA with Protea to acquire 100% of the outstanding capital stock of ProteaBio Europe (the “Acquisition”). On June 13, 2014, we completed the acquisition in exchange for the payment to Protea of $600,000 and the issuance of shares of our Series A convertible preferred stock (the “Series A Preferred”) convertible into 33% of our outstanding common stock. Pursuant to the SPA, Protea Sub assigned (i) to Protea Europe all of its rights, assets, know-how and intellectual property rights in connection with program PR1101 and those granted under that certain Joint Research and Development Agreement, by and among Protea Sub, Protea Europe and Mayoly, dated March 22, 2010 and (ii) to us all amounts, together with any right of reimbursement, due to Protea Sub in connection with outstanding shareholder loans.

 
Pursuant to the SPA, we are obligated to pay certain other contingent consideration upon the satisfaction of certain events, including (a) a one-time milestone payment of $2,000,000 due within (10) days of receipt of the first approval by the FDA of an NDA or BLA for a Business Product (as such term is defined in the SPA); (b) royalty payments equal to 2.5% of net sales of Business Product up to $100,000,000 and 1.5% of net sales of Business Product in excess of $100,000,000 and (c) ten percent (10%) of the Transaction Value (as defined in the SPA) received in connection with a sale or transfer of the pharmaceutical development business of Protea Europe.
 
Under the terms of the SPA, Protea has the right to designate one member of our board of directors, which right terminates upon the completion of this offering. Protea has exercised this right and Mr. Maged Shenouda sits on our Board.
 
Mayoly Agreement
 
Effective March 22, 2010, Protea and AzurRx SAS entered into a joint research and development agreement (the “2010 Agreement”) with Mayoly pursuant to which Mayoly sublicensed certain of its exclusive rights to a genetically engineered yeast strain cell line on which our MS1819 is based that derive from a Usage and Cross-Licensing Agreement dated February 2, 2006 (the “INRA Agreement”) between Mayoly and  INRA, in charge of patent management acting for and on behalf of the National Centre of Scientific Research (“CNRS”) and INRA.
 
Effective January 1, 2014, Protea entered into an amended and restated joint research and development agreement with Mayoly (the “Mayoly Agreement”) pursuant to which Protea acquired the exclusive right to Mayoly patents and technology, with the right to sublicense, to develop, manufacture and commercialize human pharmaceuticals based on the MS1819 lipase within the following territories: U.S. and Canada, South America (excluding Brazil), Asia (excluding China and Japan), Australia, New Zealand and Israel.  The Mayoly Agreement further provides Mayoly the exclusive right to Protea's patents and technology, with the right to sublicense, to develop, manufacture and commercialize human pharmaceuticals based on the MS1819 lipase within the following territories: Mexico, Europe (excluding Italy, Portugal and Spain) and any other country not granted to us alone, or jointly with Mayoly.  Rights to the following territories are held jointly with Mayoly: Brazil, Italy, Portugal, Spain, China and Japan.  In addition, the Mayoly Agreement requires Protea to pay 70% of all development costs and requires each of the parties to use reasonable efforts to:
 
 
devote sufficient personnel and facilities required for the performance of its assigned tasks;
 
 
make available appropriately qualified personnel to supervise, analyze and report on the results obtained in the furtherance of the development program; and
 
 
deploy such scientific, technical, financial and other resources as is necessary to conduct the development program.
 
Pursuant to the Mayoly Agreement, if Protea obtains marketing authorization in the U.S. during the development program, Protea is obligated to make a one-time milestone payment and pay Mayoly royalties on net product sales in the low single digits. If Protea does not obtain marketing authorization in the U.S. during the development program, but obtains such authorization thereafter, then Mayoly has the option to either request a license from Protea and pay 30% of our development costs, less the shared costs incurred by Mayoly and a royalty on net sales in the mid-teens, or Protea will pay Mayoly royalties on net product sales in the low single digits. If Mayoly receives EU marketing authorization after the development program concludes, then Protea may license the product from Mayoly for 70% of Mayoly’s development costs, less the shared costs incurred by Protea and a royalty on net sales in the mid-teens. The agreement further provides that no royalties are payable by either party until all expenses incurred in connection with the development program since 2009 have been recovered. The Mayoly Agreement further grants Protea the right to cure any breach by Mayoly of its obligations under the INRA agreement. See “INRA Agreement” below.  Unless earlier terminated in accordance with its terms, the Mayoly Agreement will expire, on a country by country basis, on the latest of (i) the expiration of any patent covered by the license, (ii) the duration of the legal protection of any intellectual property licensed under the agreement or (iii) the expiration of any applicable data exclusivity period. The latest expiration date of the current series of issued patents covered by the Mayoly Agreement is September 2028. See “Intellectual Property.” Either party may terminate the agreement upon a material breach by the other party that remains uncured after 90 days’ notice without prejudicing the rights of the terminating party. If the development program or license is terminated due to a material breach that is not cured, then the non-breaching party is free to develop, manufacture and commercialize the product, or grant a license to a third party to carry out such activities in the breaching parties territories or the joint territories. Further, the non-breaching party’s net product sales will be subject to low single digit royalties. Finally, either party may terminate due to insolvency of the other party. In connection with the Acquisition, Protea, with the consent of INRA and CNRS, assigned all of i ts rights, title and interest in and to the Mayoly Agreement to AzurRx S AS.
 
 
INRA Agreement
 
In February 2006, INRA, acting on behalf of CNRS and Institut National de la Recherche Agronomique, entered into a Usage and Cross-licensing Agreement with Mayoly to specify their respective rights to the use of (1) French patent application no. FR9810900 (INRA CNRS patent application), (2) international patent application no. WO2000FR0001148 (Mayoly patent application) and (3) the technology and know-how associated with both patent applications.
 
The agreement covers extensions of both patent applications. Specifically, the INRA CNRS patent application encompasses application no. FR9810900 as well as PCT/FR99/02079 with national phase entry in the U.S. (no. 09/786,048, now US patent 6,582,951), Canada (no. 2,341,776) and Europe (no. 99.940.267.0, now EP 1 108 043 B1). The Mayoly patent application encompasses WO2000FR0001148 with the national phase entered in Europe (now EP 1 276 874 B1).
 
The agreement provides Mayoly with the world-wide use in human therapy, nutraceuticals, and cosmetology and provides INRA with world-wide (a) use of lipase as an enzymatic catalyst throughout this field, including the production of pharmaceuticals, and (b) treatment of the environment, food production processes, cleaning processes and other fields, excluding human therapies, neutraceuticals and cosmetology.  The agreement provides for shared use in the production of lipase in the veterinary field (livestock and pets).  As consideration for the agreement, Mayoly will pay INRA an annual lump sum of €5,000 until marketing.  Upon marketing, Mayoly will pay INRA a lump sum of €100,000 and royalties on net sales of the product.  Unless earlier terminated in accordance with its terms, the agreement with INRA expires upon the expiration of the patents in each country in which the license has been granted. The parties may terminate the agreement in the event the other party breaches its obligations therein, which termination shall become effective three months following written notice thereof to the breaching party.  The breaching party shall have the right to cure such breach or default during such three month period.
 
Intellectual Property
 
Our goal is to obtain, maintain and enforce patent protection for our product candidates, formulations, processes, methods and any other proprietary technologies, preserve our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the United States and in other countries. Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property protection possible for our current product candidates and any future product candidates, proprietary information and proprietary technology through a combination of contractual arrangements and patents, both in the United States and abroad. However, patent protection may not afford us with complete protection against competitors who seek to circumvent our patents.
 
We also depend upon the skills, knowledge, experience and know-how of our management and research and development personnel, as well as that of our advisors, consultants and other contractors. To help protect our proprietary know-how, which is not patentable, and for inventions for which patents may be difficult to enforce, we currently rely and will in the future rely on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all of our employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.
 
MS1819
 
The MS1819 program is protected by the following series of issued patents that we have licensed under the Mayoly Agreement covering the method for transformation of Yarrowia lipolytica ,   the sequence of the LIP2 enzyme and its production process:
 
 
PCT/FR99/02079 patent family (including the patents EP1108043 B1, and US6582951) “Method for non-homologous transformation of Yarrowia lipolytica ”, concerns the integration of a gene of interest into the genome of a Yarrowia strain devoid of zeta sequences, by transforming said strain using a vector bearing zeta sequences. This modified strain is used for the current production process.  This patent has been issued in the U.S., Canada, and validated in several European countries, including Austria, Belgium, Switzerland, Cyprus, Germany, Denmark, Spain, Finland, Great Britain, Greece, Ireland, France, Italy, Lithuania, Luxembourg, Netherlands, Portugal and Sweden. This patent expires September 1, 2019.


 
PCT/FR2000/001148 patent family (including the patent EP1276874 B1) “Cloning and expressing an acid-resistant extracellular lipase of Yarrowia lipolytica ” describes the coding sequences of acid-resistant extracellular lipases, in particular Candida ernobii or Yarrowia lipolytica yeasts and the production of said lipases in their recombinant form. This patent has been validated in several European countries, including Italy, France and Great Britain. This patent expires April 28, 2020; and
 
 
PCT/FR2006/001352 patent family (including the patent EP2035556 and patent US8,334,130 and US8,834,867) “Method for producing lipase, transformed Yarrowia lipolytica cell capable of producing said lipase and their uses” describes a method for producing Yarrowia lipolytica acid-resistant recombinant lipase utilizing a culture medium without any products of animal origin or non-characterized mixtures such as tryptone, peptone or lactoserum, in addition to its uses. The European patents expire June 15, 2026, US patent 8,334,130 expires September 11, 2028, and US patent 8,834,867 expires September 15, 2026.
 
AZX1101
 
To date, we own one patent application covering different compositions which has been filed in France.   This application was filed internationally (PCT) on October 13, 2015 as PCT/FR2015/052756 claiming priority to French patent application 1459935 dated October 16, 2014.  This application was published as WO/2016/059341 titled “Hybrid Proteinaceous Molecule Capable Of Inhibiting At Least One Antibiotic And Pharmaceutical Composition Containing It.”    At present all PCT contracting states are designated.  The term of patent protection available is typically 20 years from the filing date of the earliest international (PCT) application.  Patents are territorial rights, meaning that the rights conferred are only applicable in the country or region in which a patent has been filed and granted, in accordance with the law of that country or region.  Patent enforcement is only possible after a patent is granted and before the expiration of the patent term. Any patent issuing from PCT/FR2015/052756 will expire on October 13, 2035, unless the patent term is extended pursuant to specific laws of the granting country. We expect to file additional patent applications covering the production process and formulation of AZX1101 following completion of this offering.
 
Manufacturing
 
MS1819 API is obtained by fermentation in bioreactors using the engineered Yarrowia lipolytica strain. MS1819 is currently manufactured at a contract facility located in Capua Italy owned by DSM. The proprietary yeast cell line from which the API is derived is kept at a storage facility maintained by Charles River.  Because the manufacturing process is fairly straightforward, we believe there are multiple alternative contract manufacturers capable of producing the product we need for clinical trials.
 
AZX1101 API production is still under development in-house.  To date, the manufacturing process appears fairly straightforward with multiple options leading us to believe that there are multiple alternative contract manufacturers capable of producing the products we will need for clinical trials.
 
Competition
 
The pharmaceutical and biotechnology industries are characterized by rapidly evolving technology and intense competition. Many companies of all sizes, including major pharmaceutical companies and specialized biotechnology companies, are engaged in the development and commercialization of therapeutic agents designed for the treatment of the same diseases and disorders that we target. Many of our competitors have substantially greater financial and other resources, larger research and development staff and more experience in the regulatory approval process. Moreover, potential competitors have or may have patents or other rights that conflict with patents covering our technologies.
 
With respect to MS1819, we will compete with PPEs, a well-established market that is currently dominated by a few large pharmaceutical companies, including Abvie, Johnson & Johnson and Actavis plc. There are currently six PPE products that have been approved by the FDA for sale in the U.S. We believe our ability to compete in this market, if we are successful in developing and obtaining regulatory approval to market MS1819, will depend on our ability (or that of a corporate partner) to convince patients, their physicians, healthcare payors and the medical community of the benefits of using a non-animal based product to treat EPI, as well as by addressing other shortcomings associated with PPEs.
 
With respect to AZX1101, we are aware of only one beta-lactamase under active development by a US specialty pharmaceutical company for the treatment of c. difficile although the compounds being developed appear to have very limited efficacy to only specific classes of antibiotics rather than the large classes of antibiotics expected to be covered by our compound.

 
Government Regulation and Product Approval
 
Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of products such as those we are developing.  To date, our research and development efforts have been conducted in France. We expect to continue to perform substantially all of our basic research activities in France in order to leverage our human capital expertise as well as to avail ourselves of tax credits awarded by the French government to research companies. We expect to conduct early stage development work in both France and the U.S. and late stage development work, including the MS1819 Phase II study and subsequent Phase 3 trial in the U.S. as North America is our principal target market for any products that we may successfully develop.
 
FDA Approval Process
 
In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act, or the FDC Act,  the Public Health Services Act or the PHS Act, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending new drug applications, or NDAs, refusal to approve pending biologic license applications, or BLAs ,  warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.
 
Pharmaceutical product development in the U.S. typically involves preclinical laboratory and animal tests, the submission to the FDA of either a notice of claimed investigational exemption or an investigational new drug application, or IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.
 
Preclinical tests include laboratory evaluation of product chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including good laboratory practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.
 
Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with good clinical practice, or GCP, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors; as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.
 
The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose other sanctions if it believes that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The study protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board, or IRB, for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.


Clinical trials to support NDAs or BLAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses, and, if possible, early evidence on effectiveness. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, dosage tolerance, and optimum dosage, and to identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug.
 
After completion of the required clinical testing, an NDA is prepared and submitted to the FDA for small molecule drugs, or a BLA is prepared and submitted for biologics. Section 351 of the PHS Act defines a biological product as a “virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or analogous product, … applicable to the prevention, treatment, or cure of a disease or condition of human beings.” FDA regulations and policies have established that biological products include blood-derived products, vaccines, in vivo diagnostic allergenic products, immunoglobulin products, products containing cells or microorganisms, and most protein products (including cytokines and enzymes).  Biological products subject to the PHS Act also meet the definition of drugs under FDC Act and therefore are regulated under provisions of both statutes. FDA approval of the NDA or BLA is required before marketing of the product may begin in the U.S. The NDA or BLA must include the results of all preclinical, clinical, and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting an NDA or a BLA is substantial.
 
Once the submission is accepted for filing, the FDA begins an in-depth review. Priority review can be applied to drugs that the FDA determines offer major advances in treatment, or provide a treatment where no adequate therapy exists. The FDA may refer applications for novel drug products, or drug products which present difficult questions of safety or efficacy, to an advisory committee — typically a panel that includes clinicians and other experts — for review, evaluation, and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an NDA or BLA, the FDA will typically inspect one, or more, clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. FDA will not approve the product unless compliance with current good manufacturing practices, or GMP — a quality system regulating manufacturing — is satisfactory and the NDA or BLA contains data that provide substantial evidence that the drug is safe and effective in the indication studied. The issuance of a biologics license is a determination that the product, the manufacturing process, and the manufacturing facilities meet applicable requirements to ensure the continued safety, purity and potency of the biologic product.
 
After the FDA evaluates the NDA or BLA and the manufacturing facilities, it issues either an approval letter (with the US license number, in the case of a biologic license) or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA or BLA, the FDA will issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA or BLA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover, product approval may require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.
 
The Hatch-Waxman Act
 
In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent whose claims cover the applicant’s product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug application, or ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically equivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, pre-clinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug, and can often be substituted by pharmacists under prescriptions written for the original listed drug.

 
The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book. Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification. If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired. The ANDA application also will not be approved until any non-patent exclusivity listed in the Orange Book for the referenced product has expired. Federal law provides a period of five years following approval of a drug containing no previously approved active ingredients during which ANDAs for generic versions of those drugs cannot be submitted, unless the submission contains a Paragraph IV challenge to a listed patent — in which case the submission may be made four years following the original product approval. Federal law provides for a period of three years of exclusivity during which the FDA cannot grant effective approval of an ANDA based on the approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage form, route of administration or combination, or for a new use; the approval of which was required to be supported by new clinical trials conducted by, or for, the applicant.
 
The BPCIA
 
The Biologics Price Competition and Innovation Act (BPCIA) was enacted as part of the Affordable Care Act on March 23, 2010. The BPCIA creates an abbreviated licensure pathway for biological products shown to be biosimilar to, or interchangeable with, an FDA-licensed biological reference product. The objectives of the BPCIA are conceptually similar to those of the Hatch-Waxman Act, which established abbreviated pathways for the approval of small molecule drug products under the FDC Act. The implementation of an abbreviated licensure pathway for biological products can present challenges given the scientific and technical complexities that may be associated with the larger and typically more complex structure of biological products, as well as the processes by which such products are manufactured. Most biological products are produced in a living system such as a microorganism, or plant or animal cells, whereas small molecule drugs are typically manufactured through chemical synthesis.

A “biosimilar” product is a follow-on version of another biological product for which marketing approval is sought or has been obtained based on a demonstration that it is “biosimilar” to the original reference product. Section 351(k) of the PHS Act, added by the BPCIA , sets forth the requirements for an application for a proposed biosimilar product and an application or a supplement for a proposed interchangeable product. Section 351(i) defines biosimilarity to mean “that the biological product is highly similar to the reference product notwithstanding minor differences in clinically inactive components” and that “there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product”. A 351(k) application must contain, among other things, information demonstrating that the biological product is biosimilar to a reference product based upon data derived from analytical studies, animal studies, and a clinical study or studies, unless the FDA determines, in its discretion, that certain studies are unnecessary. To meet the additional standard of “interchangeability,” an applicant must provide sufficient information to demonstrate biosimilarity, and also to demonstrate that the biological product can be expected to produce the same clinical result as the reference product in any given patient and, if the biological product is administered more than once to an individual, the risk in terms of safety or diminished efficacy of alternating or switching between the use of the biological product and the reference product is not greater than the risk of using the reference product without such alternation or switch. Biosimilar drugs are not generic drugs, which are shown to be the same as the reference product.  However, biosimilar products that are also determined to be interchangeable may be substituted for the reference product without the intervention of the prescribing healthcare provider.
 
In many cases, biosimilars may be brought to market without conducting the full suite of clinical trials typically required of originators. The law establishes a period of 12 years of data exclusivity for reference products in order to preserve incentives for future innovation and outlines statutory criteria for science-based biosimilar approval standards that take into account patient safety considerations. Under this framework, data exclusivity protects the data in the innovator's regulatory application by prohibiting others, for a period of 12 years, from gaining FDA approval based in part on reliance on or reference to the innovator's data in their application to the FDA. Moreover, a biosimilar applicant cannot file their application until 4 years after the reference biological product was first licensed.  The law does not change the duration of patents granted on biologic products, but does provide procedures for resolving patent disputes based on a biosimilar application .
 
The FDA maintains lists biological products, including any biosimilar and interchangeable biological products licensed by the FDA under the PHS Act in a book titled “Lists of Licensed Biological Products with Reference Product Exclusivity and Biosimilarity or Interchangeability Evaluations” (the “Purple Book”). The Purple Book includes the date a biological product was licensed under 351(a) of the PHS Act and whether the FDA evaluated the biological product for reference product exclusivity. If the FDA has determined that a biological product is protected by a period of reference product exclusivity, the list will identify the date of first licensure and the date that reference product exclusivity (including any attached pediatric exclusivity) will expire. The list will not identify periods of orphan exclusivity and their expiration dates for biological products as those dates are available at the searchable database for Orphan Designated and/or Approved Products. The Purple Book also identifies whether a biological product licensed under section 351(k) of the PHS Act has been determined by the FDA to be biosimilar to or interchangeable with a reference biological product. Biosimilar and interchangeable biological products licensed under section 351(k) of the PHS Act are listed under the reference product to which biosimilarity or interchangeability was demonstrated.
 
Advertising and Promotion
 
Once an NDA or BLA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet.
 
Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or BLA or supplement to same, before the change can be implemented. An NDA or BLA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA and BLA supplements as it does in reviewing NDAs and BLAs.
 
Adverse Event Reporting and GMP Compliance
 
Adverse event reporting and submission of periodic reports is required following FDA approval of an NDA or BLA. The FDA also may require post-marketing testing, known as Phase 4 testing, risk minimization action plans, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality-control, drug manufacture, packaging, and labeling procedures must continue to conform to current good manufacturing practices, or cGMPs, after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.


Pediatric Information
 
Under the Pediatric Research Equity Act, or PREA, NDAs, BLAs or supplements to same must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted.
 
The Best Pharmaceuticals for Children Act, or BPCA, provides NDA and BLA holders a six-month extension of any exclusivity — patent or non-patent — for a drug if certain conditions are met. Conditions for exclusivity include the FDA’s determination that information relating to the use of a new drug in the pediatric population may produce health benefits in that population, the FDA making a written request for pediatric studies, and the applicant agreeing to perform, and reporting on, the requested studies within the statutory timeframe. Applications under the BPCA are treated as priority applications, with all of the benefits that designation confers.
 
Physician Drug Samples
 
As part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs to physicians. The Prescription Drug Marketing Act, or the PDMA, imposes requirements and limitations upon the provision of drug samples to physicians, as well as prohibits states from licensing distributors of prescription drugs unless the state licensing program meets certain federal guidelines that include minimum standards for storage, handling, and record keeping. In addition, the PDMA sets forth civil and criminal penalties for violations.
 
Anti-Kickback, False Claims Laws & The Prescription Drug Marketing Act
 
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes. The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce; or in return for; purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other. Violations of the anti-kickback statute are punishable by imprisonment, criminal fines, civil monetary penalties, and exclusion from participation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases, or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.
 
Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
 
 
Foreign Regulatory Issues
 
Sales of pharmaceutical products outside the United States are subject to foreign regulatory requirements that vary widely from country to country. Whether or not FDA approval has been obtained, approval of a product by a comparable regulatory authority of a foreign country must generally be obtained prior to the commencement of marketing in that country. Although the time required to obtain such approval may be longer or shorter than that required for FDA approval, the requirements for FDA approval are among the most detailed in the world and FDA approval generally takes longer than foreign regulatory approvals.
 
Employees
 
As of July 28, 2016, we had twelve full-time employees, of whom nine were employed by AzurRx SAS and located in France and three were employed by us and located in our office in Brooklyn, New York.
 
Properties
 
Our executive offices are located in approximately 687 square feet of office space at 760 Parkside Avenue, Downstate Biotechnology Incubator, Suite 217, Brooklyn, NY 11226 that we occupy under a lease expiring on December 31, 2016 with the option for multiple year renewals .  The operations of AzurRx SAS are conducted at approximately 4,520 square feet of office space located at 290 chemin de Saint Dionisy, Jardin des Entreprises, 30980 Langlade, France, that we occupy under a 9-year lease expiring in December 24, 2020 .
 
Legal Proceedings
 
As of the date hereof, we know of no material, existing or pending legal proceedings against us, nor are we the plaintiff in any material proceedings or pending litigation.  There are no proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.  From time to time, we may be subject to various claims, legal actions and regulatory proceedings arising in the ordinary course of business.
 
Emerging Growth Company Status
 
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. Accordingly, we have included detailed compensation information for only our three most highly compensated executive officers and have not included a compensation discussion and analysis (CD&A) of our executive compensation programs in this prospectus. In addition, for so long as we are an “emerging growth company,” we will not be required to:
 
 
engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes–Oxley Act of 2002 (the “Sarbanes–Oxley Act”);
 
 
comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (the “PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);


 
submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “say-on-golden parachutes;” or
 
 
disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparison of the chief executive officer’s compensation to median employee compensation.
 
In addition, the JOBS Act provides that an “emerging growth company” can use the extended transition period for complying with new or revised accounting standards.
 
We will remain an “emerging growth company” until the earliest to occur of:
 
 
our reporting $1 billion or more in annual gross revenues;
 
 
our issuance, in a three year period, of more than $1 billion in non-convertible debt;
 
 
the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million on the last business day of our second fiscal quarter; and
 
 
June 30, 2021


 
DIRECTORS AND EXECUTIVE OFFICERS
 
The following table sets forth certain information about our executive officers, key employees and directors as of the date of this Registration Statement.
 
Name
Age
Position
Johan M. (Thijs) Spoor
 44
President, Chief Executive Officer and Director
Daniel Dupret
 60
Chief Scientific Officer
Edward J. Borkowski (1)
 58
Chairman of the Board of Directors
Alastair Riddell (1)
 67
Director
Maged Shenouda (1)       52 Director
_____________
 
(1)
Member of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee
 
Johan M. (Thijs) Spoor is our Chief Executive Officer since January 2016, President since April 2015, and Chairman from June 2014 to September 2015.  From September 2010 until December 2015, he was the chief executive officer of FluoroPharma Medical, Inc. (OTC.QB: FPMI). He has served as chairman of the board of such company from June 2012 until December 2015, and still serves as a member of its board of directors. From December 2008 until February 2010, he worked at Oliver Wyman as a consultant to pharmaceutical and medical device companies. Mr. Spoor was an equity research analyst at J.P. Morgan from July 2007 through October 2008 and at Credit Suisse from November 2005 through July 2007, covering the biotechnology and medical device industries.  Mr. Spoor also sits on the board of directors of MetaStat, Inc. (MTST).  He holds a Pharmacy degree from the University of Toronto as well as an M.B.A. from Columbia University.  We believe that Mr. Spoor’s background in pharmacy, finance and accounting and as a healthcare research analyst, as well as his experience at both large and small healthcare companies, provides him with a broad familiarity of the range of issues confronting our company, which makes him a qualified member of our board .

 
Daniel Dupret has served as President of AzurRx SAS since its formation in 2007 and as Chief Scientific Officer of our company since the Acquisition. Previously, Dr. Dupret founded Proteus SA in 1998 and served as its President and CEO from 1998 to 2007. He founded Appligene SA in 1985 and served as its CSO, then President and CEO until 1998. From 1982 to 1985, he served as Project leader at Transgene SA. In parallel to his biotechnology career, Daniel Dupret served as an advisor for the French government and the European commission in connection with grant commission and funding of early-stage biotechnology companies. From 2003 to 2007, he served as President of the Board of the University of Nîmes.
 
Edward J. Borkowski   joined our board of directors in May 2015 and was appointed Chairman of our board of directors in September 2015. In May 2015, Mr. Borkowski joined the board of Concordia Healthcare. In February 2016, he joined Concordia as its Executive Vice President and continues to serve on its board of directors. Between September 2013 and February 2016, Mr Borkowski was the Chief Financial Officer of Amerigen Pharmaceuticals, an early stage, private, generic pharmaceutical company. From May 2012 to June 2013, Mr. Borkowski served as the Chief Financial Officer of ConvaTec Inc., a private global medical products and technologies company. From January 2011 to May 2012, Mr. Borkowski served as a consultant and advisor to several investment and private equity firms relating to investing in the medical technology and generic pharmaceutical industry. From May 2009 to December 2010, Mr. Borkowski served as the Chief Financial Officer of CareFusion Corporation, a global healthcare company focused on pharmaceutical dispensing equipment, infusion pumps, ventilators and surgical instruments. From 2002 through 2009, Mr. Borkowski was the Chief Financial Officer of Mylan Labs, one of the largest generic and specialty pharmaceutical companies in the world. Mr. Borkowski received his M.B.A. from Rutgers University and his B.S. from Allegheny College. He is also a Certified Public Accountant and a member of the AICPA and NYSSCPA. We believe that Mr. Borkowski’s industry specific extensive management experience provides him with a broad and deep understanding of our business and our competitors’ efforts, which makes him a qualified member of our board .
 
Alastair Riddell joined our board of directors in September 2015. Since September 2012, Dr. Riddell has served as the Chairman of Definigen Ltd. and has served as the Chairman of both Silence Therapeutics Ltd. since November 2013 and Procure Therapeutics from October 2009 to November 2012.  From 2007 to 2009, he served as the Chief Executive Officer of Stem Cell Sciences, Inc. and from 2005 to 2007, he served as the Chief Executive Officer of Paradigm Therapeutics. From 1998 to 2005, Dr. Riddell served as the Chief Executive Officer of Pharmagene Laboratories Ltd. We believe that Dr. Riddell’s background as a medical doctor with experience in a variety of hospital specialties coupled with his experience in the life sciences industry, directing all phases of clinical trials, before moving to sales, marketing and general management, makes him a qualified member of our board.
 
Maged Shenouda joined our board of directors in October 2015.  Mr. Shenouda, a financial professional in the biotechnology industry, was the head of Business Development at Retrofin, Inc. from January 2014 until November 2014. From January 2012 until September 2013, he served as Head of East Coast Operations for the Blueprint Life Science Group.  Prior thereto, Mr. Shenouda was a financial analyst, first at UBS from January 2004 until March 2010 and Stifel Nicolaus from June 2010 until November 2011.  He currently serves on the board of directors of Protea and was appointed to our board as Protea’s designee pursuant to the terms of the SPA.
 
 
CORPORATE GOVERNANCE
 
Director Independence
 
The board of directors has reviewed the independence of our directors based on the listing standards of the NASDAQ. Based on this review, the board of directors determined that each of Messrs. Borkowski, Shenouda and Riddell are independent within the meaning of the NASDAQ rules. In making this determination, our board of directors considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board of directors deemed relevant in determining their independence. As required under applicable NASDAQ rules, we anticipate that our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present .
 
Board Committees
 
Our board of directors has established the following three standing committees: audit committee; compensation committee; and nominating and governance committee, or nominating committee. Our board of directors has adopted written charters for each of these committees. Upon completion of this offering, copies of the charters will be available on our website. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.
 
Audit Committee
 
The audit committee is responsible for, among other matters:
 
 
appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm;
 
 
discussing with our independent registered public accounting firm the independence of its members from its management;
 
 
reviewing with our independent registered public accounting firm the scope and results of their audit;
 
 
approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
 
 
overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC;
 
 
reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements;
 
 
coordinating the oversight by our board of directors of our code of business conduct and our disclosure controls and procedures
 
 
establishing procedures for the confidential and/or anonymous submission of concerns regarding accounting, internal controls or auditing matters; and
 
 
reviewing and approving related-person transactions.

 
Our audit committee consists of Messrs. Borkowski, Shenouda and Riddell, with Mr. Borkowski serving as the chairman. The NASDAQ rules require us to have one independent audit committee member upon the listing of our common stock, a majority of independent directors within 90 days of the date of this prospectus and all independent audit committee members within one year of the date of this prospectus. Our board of directors has affirmatively determined that Messrs. Borkowski and Riddell meet the definition of “independent director” for purposes of serving on an audit committee under Rule 10A-3 and NASDAQ rules. Our board of directors has determined that Mr. Borkowski qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.
 
Compensation Committee
 
The compensation committee is responsible for, among other matters:
 
 
reviewing key employee compensation goals, policies, plans and programs;
 
 
reviewing and approving the compensation of our directors and executive officers;
 
 
reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and
 
 
appointing and overseeing any compensation consultants or advisors.
 
Our compensation committee consists of Messrs. Borkowski, Shenouda and Riddell, with Dr. Riddell serving as the chairman.
 
Nominating Committee
 
The purpose of the nominating committee is to assist the board in identifying qualified individuals to become board members, in determining the composition of the board and in monitoring the process to assess board effectiveness.  Our nominating committee consists of Messrs. Borkowski, Shenouda and Riddell, with Mr. Borkowski serving as the chairman.
 
Board Leadership Structure
 
Currently, our principal executive officer is Johan M. (Thijs) Spoor and our chairman of the board is Edward J. Borkowski.
 
 
Risk Oversight
 
Our board of directors will oversee a company-wide approach to risk management. Our board of directors will determine the appropriate risk level for us generally, assess the specific risks faced by us and review the steps taken by management to manage those risks. While our board of directors will have ultimate oversight responsibility for the risk management process, its committees will oversee risk in certain specified areas.
 
Specifically, our compensation committee will be responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our audit committee will oversee management of enterprise risks and financial risks, as well as potential conflicts of interests. Our board of directors will be responsible for overseeing the management of risks associated with the independence of our board of directors.
 
Code of Business Conduct and Ethics
 
Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers and employees. Upon completion of this offering, a copy of this code will be available on our website. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions.

 
EXECUTIVE COMPENSATION
 
Summary Compensation Table
 
The following table provides information regarding the compensation paid during the years ended December 31, 2015 and 2014 to our principal executive officer, principal financial officer and certain of our other executive officers, who are collectively referred to as “named executive officers” elsewhere in this prospectus.
 
Name and Principal Position
Year  
Salary
   
Bonus
   
Equity
Awards
   
All Other
Compensation
   
Total
 
Johan M. (Thijs) Spoor, President and Chief Operating Officer
2015   $ 478,400       -0-       -0-       -0-     $ 478,400  
  2014   $ 139,100       -0-       -0-       -0-     $ 139,100  
Daniel Dupret, Chief Scientific Officer 2015   $ 161,162       -0-       -0-       -0-     $ 161,162  
 
2014   $ 192,988       -0-       -0-       -0-     $ 192,988  
 
Potential Payments Upon Termination or Change in Control
 
If we terminate Mr. Spoor’s employment other than for cause, we will pay him twelve (12) months of his base salary as severance. In the event of termination by us without cause or by Mr. Spoor for good reason in connection with a change of control, the Company will pay him eighteen (18) months of his base salary as severance.

If we terminate Dr. Dupret’s employment other than for cause, the Company will pay him twelve (12) months of his base salary as severance.
 
Overview of Our Fiscal 2015 Executive Compensation
 
Elements of Compensation
 
Our executive compensation program consisted of the following components of compensation in 2014:
 
Base Salary . Each named executive officer receives a base salary for the expertise, skills, knowledge and experience he offers to our management team. Base salaries are periodically adjusted to reflect:
 
 
The nature, responsibilities, and duties of the officer’s position;
 
 
The officer’s expertise, demonstrated leadership ability, and prior performance;
 
 
The officer’s salary history and total compensation, including annual cash incentive awards and annual equity incentive awards; and
 
 
The competitiveness of the officer’s base salary.
 
Each named executive officer’s base salary for fiscal 2014 is listed in the 2014 Summary Compensation Table.
 
 
Employment Agreement
 
Effective as of January 1, 2016, we entered into an employment agreement with Mr. Spoor to serve as our president and chief executive officer for a term of three years. The employment agreement with Mr. Spoor provides for a base annual salary of $350,000, increasing to $425,000 upon completion of this offering and listing of our common stock on The NASDAQ Stock Market or NYSE MKT, and subject an annual milestone bonus, at the sole discretion of the board of directors based on his attainment of certain financial, clinical development, and/or business milestones to be established annually by our board of directors or compensation committee.  The employment agreement is terminable by either party at any time. In the event of termination by us without cause or by Mr. Spoor for good reason not in connection with a change of control, as those terms are defined in the agreement, he is entitled to twelve (12) months’ severance payable over such period. In the event of termination by us without cause or by Mr. Spoor for good reason in connection with a change of control, as those terms are defined in the agreement, he will receive his eighteen (18) months’ severance.
 
Subject to any required consents from third parties, on or as promptly as practicable following the effective date, Mr. Spoor shall be issued 100,000 shares of restricted stock that vest as follows: (i) 50,000 upon the first commercial sale in the United States of MS1819, and (ii) 50,000 upon our total market capitalization exceeding $1 billion dollars for 20 consecutive trading days, in each case subject to the earlier determination of a majority of the Board.
 
In addition, subject to any required consents from third parties, on or as promptly as practicable following the effective date, Mr. Spoor shall also be granted ten-year options to be governed by the terms of the 2014 Incentive Plan to purchase 380,000 shares of common stock, which options will vest as follows: (i) 100,000 upon consummation of this offering, (ii) 50,000 upon initiation of a Phase II clinical trial in the United States for MS1819, (iii) 50,000 completion of a Phase II clinical trial in the United States for MS1819, (iv) 100,000 upon initiation of a Phase III clinical trial in the United States for MS1819, (v) 50,000 upon initiation of a Phase I clinical trial in the United States for any product other than MS1819, and (vi) 30,000 upon the determination of a majority of our board. The employment agreement contains standard confidential and proprietary information, and one-year non-competition and non-solicitation provisions.
 
On June 8, 2016, the Board clarified Mr. Spoor’s agreement as follows: the 380,000 options described have neither been granted nor priced, the options will be granted at a future date to be determined by the Board, and the options will be priced at that future date when they are granted.
 
Outstanding Equity Incentive Awards At Fiscal Year-End
 
There were no outstanding equity awards held by our named executive officers as of December 31, 2015 and 2014.
 

Warrant Exercises and Stock Vested
 
No officers or directors exercised warrants and no stock vested during the years ended December 31, 2015 and 2014.
 
Non-Executive Director Compensation
 
Edward  Borkowski was paid $90,000 in 2015 as a financial consultant. In July 2016, we issued 45,000 shares of restricted stock to Mr. Borkowski and 30,000 shares of restricted stock to each of Messrs. Shenouda and Riddell. The shares of restricted stock vest as follows: (i) 50% upon the first commercial sale in the United States of MS1819, and (ii) 50% upon our total market capitalization exceeding $1 billion dollars for 20 consecutive trading days, in each case subject to the earlier determination of a majority of the Board .
 
Compensation Committee Interlocks and Insider Participation
 
None of our officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more officers serving as a member of our board of directors.
 
Amended and Restated 2014 Omnibus Equity Incentive Plan
 
Our board of directors and stockholders have adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan (the “2014 Plan”). The 2014 Plan is a comprehensive incentive compensation plan under which we can grant equity-based and other incentive awards to our officers, employees, directors, consultants and advisers. The purpose of the 2014 Plan is to help us attract, motivate and retain such persons with awards under the 2014 Plan and thereby enhance shareholder value.
 
Administration . The 2014 Plan is administered by the board, and upon consummation of this offering will be administered by the compensation committee of the board, which shall consist of three members of the board, each of whom is a “non-employee director” within the meaning of Rule 16b-3 promulgated under the Exchange Act and an “outside director” within the meaning of Code Section 162(m). Among other things, the compensation committee has complete discretion, subject to the express limits of the 2014 Plan, to determine the directors, employees and nonemployee consultants to be granted an award, the type of award to be granted the terms and conditions of the award, the form of payment to be made and/or the number of shares of common stock subject to each award, the exercise price of each option and base price of each stock appreciation right (“SAR”), the term of each award, the vesting schedule for an award, whether to accelerate vesting, the value of the common stock underlying the award, and the required withholding, if any. The compensation committee may amend, modify or terminate any outstanding award, provided that the participant’s consent to such action is required if the action would impair the participant’s rights or entitlements with respect to that award. The compensation committee is also authorized to construe the award agreements, and may prescribe rules relating to the 2014 Plan. Notwithstanding the foregoing, the compensation committee does not have any authority to grant or modify an award under the 2014 Plan with terms or conditions that would cause the grant, vesting or exercise thereof to be considered nonqualified “deferred compensation” subject to Code Section 409A.

 
Grant of Awards; Shares Available for Awards . The 2014 Plan provides for the grant of stock options, SARs, performance share awards, performance unit awards, distribution equivalent right awards, restricted stock awards, restricted stock unit awards and unrestricted stock awards to non-employee directors, officers, employees and nonemployee consultants of AzurRx or its affiliates. The aggregate number of shares of common stock that may be issued under the 2014 Plan shall not exceed ten percent (10%) of the issued and outstanding shares of common stock on an as converted basis (the “As Converted Shares”) on a rolling basis. For calculation purposes, the As Converted Shares shall include all shares of common stock and all shares of common stock issuable upon the conversion of outstanding preferred stock and other convertible securities, but shall not include any shares of common stock issuable upon the exercise of options, warrants and other convertible securities issued pursuant to the 2014 Plan. The number of authorized shares of common stock reserved for issuance under the Plan shall automatically be increased concurrently with our issuance of fully paid and non-assessable shares of As Converted Shares.  Shares shall be deemed to have been issued under the 2014 Plan solely to the extent actually issued and delivered pursuant to an award. If any award expires, is cancelled, or terminates unexercised or is forfeited, the number of shares subject thereto is again available for grant under the 2014 Plan.
 
The number of shares of common stock for which awards may be granted under the 2014 Plan to a participant who is an employee in any calendar year is limited to 300,000 shares. Future new hires and additional non-employee directors and/or consultants would be eligible to participate in the 2014 Plan as well. The number of stock options and/or shares of restricted stock to be granted to executives and directors cannot be determined at this time as the grant of stock options and/or shares of restricted stock is dependent upon various factors such as hiring requirements and job performance.
 
Stock Options . The 2014 Plan provides for either “incentive stock options” (“ISOs”), which are intended to meet the requirements for special federal income tax treatment under the Code, or “nonqualified stock options” (“NQSOs”). Stock options may be granted on such terms and conditions as the compensation committee may determine; provided, however, that the per share exercise price under a stock option may not be less than the fair market value of a share of common stock on the date of grant and the term of the stock option may not exceed 10 years (110% of such value and five years in the case of an ISO granted to an employee who owns (or is deemed to own) more than 10% of the total combined voting power of all classes of capital stock of our Company or a parent or subsidiary of our Company). ISOs may only be granted to employees. In addition, the aggregate fair market value of common stock covered by one or more ISOs (determined at the time of grant), which are exercisable for the first time by an employee during any calendar year may not exceed $100,000. Any excess is treated as a NQSO.
 
Stock Appreciation Rights . A SAR entitles the participant, upon exercise, to receive an amount, in cash or stock or a combination thereof, equal to the increase in the fair market value of the underlying common stock between the date of grant and the date of exercise. SARs may be granted in tandem with, or independently of, stock options granted under the 2014 Plan. A SAR granted in tandem with a stock option (i) is exercisable only at such times, and to the extent, that the related stock option is exercisable in accordance with the procedure for exercise of the related stock option; (ii) terminates upon termination or exercise of the related stock option (likewise, the common stock option granted in tandem with a SAR terminates upon exercise of the SAR); (iii) is transferable only with the related stock option; and (iv) if the related stock option is an ISO, may be exercised only when the value of the stock subject to the stock option exceeds the exercise price of the stock option. A SAR that is not granted in tandem with a stock option is exercisable at such times as the compensation committee may specify.
 
Performance Shares and Performance Unit Awards . Performance share and performance unit awards entitle the participant to receive cash or shares of common stock upon the attainment of specified performance goals. In the case of performance units, the right to acquire the units is denominated in cash values.

 
Distribution Equivalent Right Awards . A distribution equivalent right award entitles the participant to receive bookkeeping credits, cash payments and/or common stock distributions equal in amount to the distributions that would have been made to the participant had the participant held a specified number of shares of common stock during the period the participant held the distribution equivalent right. A distribution equivalent right may be awarded as a component of another award under the 2014 Plan, where, if so awarded, such distribution equivalent right will expire or be forfeited by the participant under the same conditions as under such other award.
 
Restricted Stock Awards and Restricted Stock Unit Awards . A restricted stock award is a grant or sale of common stock to the participant, subject to our right to repurchase all or part of the shares at their purchase price (or to require forfeiture of such shares if issued to the participant at no cost) in the event that conditions specified by the compensation committee in the award are not satisfied prior to the end of the time period during which the shares subject to the award may be repurchased by or forfeited to us. Our restricted stock unit entitles the participant to receive a cash payment equal to the fair market value of a share of common stock for each restricted stock unit subject to such restricted stock unit award, if the participant satisfies the applicable vesting requirement.
 
Unrestricted Stock Awards . An unrestricted stock award is a grant or sale of shares of our common stock to the participant that is not subject to transfer, forfeiture or other restrictions, in consideration for past services rendered to AzurRx or an affiliate or for other valid consideration.
 
Change-in-Control Provisions . In connection with the grant of an award, the compensation committee may provide that, in the event of a change in control, such award will become fully vested and immediately exercisable.
 
Amendment and Termination . The compensation committee may adopt, amend and rescind rules relating to the administration of the 2014 Plan, and amend, suspend or terminate the 2014 Plan, but no such amendment or termination will be made that materially and adversely impairs the rights of any participant with respect to any award received thereby under the 2014 Plan without the participant’s consent, other than amendments that are necessary to permit the granting of awards in compliance with applicable laws. We have attempted to structure the 2014 Plan so that remuneration attributable to stock options and other awards will not be subject to the deduction limitation contained in Code Section 162(m).
 
 
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
 
We were party to an agreement with JIST Consulting (“JIST”), a company controlled by Johan M. Spoor, our CEO, President and member of our board of directors, to provide Mr. Spoor’s services as a consultant for business strategy, financial modeling, and fundraising. During the years ended December 31, 2015 and 2014, we incurred $478,400 and $139,100, respectively, of expenses to JIST. As of March 31, 2016, we had $508,300 in accounts payable to JIST. Mr. Spoor received no other compensation from us other than reimbursement of related travel expenses.
 
We were party to an agreement with Rigby-Hutton Management Services (“RHMS”) to provide our former President, Christine Rigby-Hutton. During the years ended December 31, 2015 and 2014, we incurred $27,750 and $99,142, respectively, of expenses to RHMS. As of March 31, 2016, we had $38,453 in accounts payable to RHMS. Ms. Rigby-Hutton resigned effective April 20, 2015.
 
On May 21, 2014, we entered into the SPA with Protea in connection with the Acquisition.  Pursuant to the SPA, we issued to Protea 100 shares of our Series A Preferred convertible into 33% of our outstanding common stock. See the section entitled “Description of the Business, Agreements” above.
 
On August 31, 2014, January 31, 2015, February 28, 2015 and May 31, 2015, we issued promissory notes to Matthew Balk and his affiliates in the aggregate principal amount of $236,000. These notes have been repaid in full as to $50,000 on November 11, 2014, $111,000 on April 3, 2015, and $75,000 on August 7, 2015.  Mr. Balk holds voting and dispositive power over the shares held by Pelican Partners LLC, which owns 40%, 47%, and 64%, respectively, of the outstanding common stock of the Company as of March 31, 2016 and December 31, 2015 and 2014.
 
In July 2014, we issued promissory notes to Johan M. (Thijs) Spoor, our president, chief operating officer and chairman of the board, in the aggregate principal amount of $10,000. These notes were repaid in full as to $5,000 on October 17, 2014 and $5,000 on November 10, 2014.
 
From October 1, 2015 through December 31, 2015, the Company used the services of Edward Borkowski, a member of the Board of Directors and the Company’s audit committee chair, as a financial consultant. Expense recorded in general and administrative expense in the accompanying statements of operations related to Mr. Borkowski for the year ended December 31, 2015 was $90,000. As of March 31, 2016, we had $90,000 in accounts payable to Mr. Borkowski. Mr. Borkowski received no other compensation from the Company other than reimbursement of related travel expenses. On October 14, 2014 and March 12, 2015, the Company issued original issue discounted convertible notes to Edward Borkowski, a director and the Company’s audit committee chair, in the aggregate principal amount of $300,000. The notes will automatically convert into shares of the Company’s common stock upon the consummation of this offering at a conversion price equal to the principal amount divided by the lesser of $6.45 per share or the per share price of the Company’s common stock in this offering, multiplied by 80%. Mr. Borkowski has signed an exchange agreement related to these notes as detailed in Note 10 to our financial statements below.
 
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth certain information regarding the beneficial ownership of our common stock as of July 28, 2016, and as adjusted to reflect the sale of common stock being offered in this offering by:
 
 
each person, or group of affiliated persons, known to us to own beneficially more than 5% of our common stock;
 
 
each of our current directors;
 
 
each of our named executive officers; and
 
 
all of our current directors and executive officers as a group.
 
The information in the following table has been presented in accordance with the rules of the SEC.  Under such rules, beneficial ownership of a class of capital stock includes any shares of such class as to which a person, directly or indirectly, has or shares voting power or investment power and also any shares as to which a person has the right to acquire such voting or investment power within 60 days through the exercise of any stock option, warrant or other right.  If two or more persons share voting power or investment power with respect to specific securities, each such person is deemed to be the beneficial owner of such securities.  Except as we otherwise indicate below and under applicable community property laws, we believe that the beneficial owners of the common stock listed below, based on information they have furnished to us, have sole voting and investment power with respect to the shares shown.  Except as otherwise indicated, each stockholder named in the table is assumed to have sole voting and investment power with respect to the number of shares listed opposite the stockholder’s name.
 
The calculations of beneficial ownership in this table are based on 6,028,928 shares of common stock outstanding at July 28, 2016.
 
Name and Address of Beneficial Owner (1)
 
Shares Beneficially
Owned
   
Percentage Total
Voting Power Prior to Offering
 
Percentage Total
Voting Power
After This Offering
 
Daniel Dupret
   
0
     
*
    *  
Johan M. (Thijs) Spoor (2)
   
339,885
     
6
%
  3
Alastair Riddell
   
10,000
     
*
    *  
Edward J. Borkowski (3)
   
280,486
     
5
  3 %
Maged Shenouda     20,000       *    *  
Pelican Partners LLC (4)      1,803,146        30 % 17 %
Richard Melnick (5)
     911,962        15 % 8 %
Jason Adelman (6)
     560,243        9 % 5 %
Burke Ross (7)     1,804,866       25 16  %
ADEC Private Equity Investment, LLC (8)
    1,304,866       18 % 11 %
EBR Ventures, LLC (9)     500,000       8 % 5 %
All directors and executive officers as a group (5 persons)    
650,371
     
11
% 6 %
___________________________
 
* Less than 1%.
 
(1) Unless otherwise indicated, the address of such individual is c/o AzurRx BioPharma, Inc., 760 Parkside Avenue, Downstate Biotechnology Incubator, Suite 217, Brooklyn, NY 11226.
 
(2) Includes 300,000 shares issuable pursuant to options granted by third parties at an exercise price of $1.00 per share and 39,851 shares held in a trust for the benefit of Mr. Spoor’s minor children.
 
(3) Includes 103,126 shares issuable upon conversion of OID notes and 27,360 shares issuable upon the exercise of warrants.
 
(4) The address of such individual is P.O. Box 2422, Westport, CT 06880.
 
(5) The address of such individual is 28 Gothic Ave., Crested Butte, CO 81224.

(6) The address of such individual is 30 E. 72 nd St., 5th Floor, New York, NY 10021. 
 
(7) Includes 1,031,268 shares issuable upon conversion of OID notes and 273,598 shares issuable upon the exercise of warrants held by ADEC Private Equity Investment, LLC and 500,000 shares of common stock held by EBR Ventures, LLC.
 
(8) Includes 1,031,268 shares issuable upon conversion of OID notes and 273,598 shares issuable upon the exercise of warrants. Burke Ross has voting and dispositive power over the shares held by such entity. The address of such entity is c/o SCS Financial, 919 Third Ave., 30th Floor, New York, NY 10022.  
 
(9) Burke Ross has voting and dispositive power over the shares held by such entity.  The address of such entity is 172 South Ocean Blvd., Palm Beach, FL 33480.
 
DESCRIPTION OF SECURITIES
 
General
 
Our amended and  restated certificate of incorporation authorizes the issuance of up to 100,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share.
 
Common Stock
 
As of July 28, 2016, there were 6,028,928 shares of common stock outstanding and 1,092,800 shares of common stock subject to outstanding warrants. An additional 2,642,160 shares of common stock will be issued immediately prior to the closing of this offering upon the conversion of outstanding convertible notes. Each holder of common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of the stockholders, including the election of directors. Our certificate of incorporation and bylaws do not provide for cumulative voting rights.
 
Subject to preferences that may be applicable to any then outstanding preferred stock, the holders of our outstanding shares of common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds. In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.
 
Holders of our common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that are outstanding or that we may designate and issue in the future.
 
Preferred Stock
 
Our board of directors is empowered, without stockholder approval, to issue shares of preferred stock with dividend, liquidation, redemption, voting or other rights which could adversely affect the voting power or other rights of the holders of common stock. In addition, the preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of us. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.
 
Convertible Notes
 
Commencing on October 10, 2014, through a series of transactions, we issued original issue 15% discounted convertible notes to various investors. On March 31, 2016, the holders of all but $300,000 in principal signed exchange agreements rolling the principal amount into new original issue 8% discounted convertible notes due on November 4, 2016, modifying the conversion price to $4.65 per share. The aggregate gross proceeds received in connection with these notes as of July 28, 2016 was $9,042,529. The notes will automatically convert into shares of our common stock upon the consummation of this offering equal to the quotient obtained by dividing the principal amount, multiplied by 1.25, by the lesser of (a) $4.65 or (b) the price per share or price per unit issued in the IPO (2,642,160 shares).
 
Options
 
We currently do not have any outstanding options to purchase shares of our common stock or other securities.
 
Warrants
 
In connection with our private placement of our original issue discounted convertible notes, we issued five-year warrants (the “Warrants”) to purchase an aggregate of 950,360 shares of our common stock at exercise prices ranging from $5.58 to $7.37 per share. In addition, we issued warrants to purchase an aggregate of 142,440 shares of our common stock to placement agents in connection with this private placement.
 
Transfer Agent
 
The transfer agent for our common stock is Transhare Corporation, 4626 South Broadway, Englewood, Colorado 80113, Tel: (303) 662-1112.
 
Listing
 
We have applied to have our common stock listed on The NASDAQ Capital Market under the symbol “AZRX.”
 
Holders
 
As of July 28, 2016, there were 6,028,928 shares of common stock outstanding, which were held by approximately 46 stockholders of record.
 
Registration Rights
 
Pursuant to the SPA with Protea, we granted registration rights to Protea to include the shares of common stock issuable upon conversion of the Series A Preferred in registration statements that we may file for ourselves or other stockholders in the future.  We also agreed with the holders of our outstanding  OID notes and warrants issued in connection therewith that we file a registration statement providing for the resale of the shares of common stock underlying such notes and warrants no later than sixty (60) days following the effective date of this offering (subject to any underwriter lock-ups).  In addition, we granted certain registration rights in connection with the issuance of the warrants issued to our placement agent in connection with a previous private placement.  We will pay all of the expenses associated with each of such registrations.
 
Delaware Anti-Takeover Law
 
We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers upon consummation of this offering. This statute prevents certain Delaware corporations, under certain circumstances, from engaging in a “business combination” with:
 
 
a stockholder who owns 15% or more of our outstanding voting stock (otherwise known as an “interested stockholder”);
 
 
an affiliate of an interested stockholder; or
 
 
an associate of an interested stockholder, for three years following the date that the stockholder became an interested stockholder.
 
A “business combination” includes a merger or sale of more than 10% of our assets. However, the above provisions of Section 203 do not apply if:
 
 
our board of directors approves the transaction that made the stockholder an “interested stockholder,” prior to the date of the transaction;
 
 
after the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of common stock; or
 
 
on or subsequent to the date of the transaction, the business combination is approved by our board of directors and authorized at a meeting of our stockholders, and not by written consent, by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder.

 
SHARES ELIGIBLE FOR FUTURE SALE
 
Prior to this offering, no public market for our common stock existed, and a liquid trading market for our common stock may not develop or be sustained after this offering. Future sales of substantial amounts of our common stock in the public market could adversely affect prevailing market prices of our common stock from time to time and could impair our future ability to raise equity capital in the future. Furthermore, because only a limited number of shares of our common stock will be available for sale shortly after this offering due to certain contractual and legal restrictions on resale described below, sales of substantial amounts of our common stock in the public market after such restrictions lapse, or the anticipation of such sales, could adversely affect the prevailing market price of our common stock and our ability to raise equity capital in the future.
 
Based upon the number of shares outstanding as of July 28, 2016, upon the closing of this offering, we will have outstanding an aggregate of 10,813,645 shares of common stock, assuming no exercise of the underwriters’ over-allotment option and no exercise of outstanding options, after giving effect to the conversion of (i) all outstanding shares of our preferred stock into 878,171 shares of common stock and (ii) the issuance of 2,642,160 shares of common stock upon the conversion of outstanding convertible notes immediately prior to the closing of this offering. All of the shares sold in this offering by us will be freely tradable without restrictions or further registration under the Securities Act, unless held by our affiliates, as that term is defined under Rule 144 under the Securities Act, or subject to lock-up agreements. The remaining shares of common stock outstanding upon the closing of this offering are restricted securities as defined in Rule 144. Restricted securities may be sold in the U.S. public market only if registered or if they qualify for an exemption from registration, including by reason of Rule 144 or Rule 701 under the Securities Act, which rules are summarized below. These remaining shares will generally become available for sale in the public market as follows:
 
 
no shares will be eligible for sale in the public market on the date of this prospectus; and
 
 
approximately 10,813,945 shares will be eligible for sale in the public market upon expiration of lock-up agreements 181 days after the date of this prospectus, subject in certain circumstances to the volume, manner of sale and other limitations of Rule 144 and Rule 701.
 
As of July 28, 2016, of the 1,092,800 shares of common stock issuable upon exercise of outstanding options and warrants, approximately 1,092,800 shares will be vested and eligible for sale 181 days after the date of this prospectus.
 
We may issue shares of common stock from time to time as consideration for future acquisitions, investments or other corporate purposes. In the event that any such acquisition, investment or other transaction is significant, the number of shares of common stock that we may issue may in turn be significant. We may also grant registration rights covering those shares of common stock issued in connection with any such acquisition and investment.
 
In addition, the shares of common stock reserved for future issuance under our 2014 Plan will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements, a registration statement under the Securities Act or an exemption from registration, including Rule 144 and Rule 701.

 
Rule 144
 
In general, persons who have beneficially owned restricted shares of our common stock for at least six months, and any affiliate of the company who owns either restricted or unrestricted shares of our common stock, are entitled to sell their securities without registration with the SEC under an exemption from registration provided by Rule 144 under the Securities Act.
 
In general, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that (1) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale, (2) we have been subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and (3) we are current in our Exchange Act reporting at the time of sale.
 
Persons who have beneficially owned restricted shares of our common stock for at least six months, but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:
 
 
1% of the number of shares of our common stock then outstanding, which will equal approximately 108,139 shares immediately after the closing of this offering based on the number of common shares outstanding as of July 28, 2016.
 
the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
 
Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.
 
Rule 701
 
In general, under Rule 701, a person who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been one of our affiliates during the immediately preceding 90 days may sell these shares in reliance upon Rule 144, but without being required to comply with the notice, manner of sale, public information requirements or volume limitation provisions of Rule 144. Rule 701 also permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling such shares pursuant to Rule 701. As of  July 28, 2016, no shares of our outstanding common stock had been issued in reliance on Rule 701 as a result of exercises of stock options and issuance of restricted stock. However, substantially all Rule 701 shares are subject to lock-up agreements as described below and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.
 
Form S-8 Registration Statements
 
Following this offering, we intend to file with the SEC a registration statement on Form S-8 under the Securities Act to register the offer and sale of shares of our common stock that are issuable pursuant to our 2014 Plan. Shares covered by this registration statement will then be eligible for sale in the public markets, subject to vesting restrictions, any applicable lock-up agreements described below and Rule 144 limitations applicable to affiliates.

 
Lock-Up Arrangements
 
We, all of our directors and executive officers have agreed with the underwriters that, for a period of 180 days following the date of this prospectus, subject to certain exceptions, we and they will not, directly or indirectly, offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale, or otherwise dispose of or hedge any of our shares of common stock, any options, or any securities convertible into, or exchangeable for or that represent the right to receive shares of our common stock.  These agreements are described in the section of this prospectus titled “Underwriting.”
 
Registration Rights
 
Pursuant to the SPA with Protea, we granted registration rights to Protea to include the shares of common stock issuable upon conversion of the Series A Preferred in registration statements that we may file for ourselves or other stockholders in the future. We also agreed with the holders of our outstanding OID notes and warrants issued in connection therewith that we file a registration statement providing for the resale of the shares of common stock underlying such notes and warrants no later than sixty (60) days following the effective date of this offering (subject to any underwriter lock-ups). In addition, we granted certain registration rights in connection with the issuance of the warrants issued to our placement agent in connection with a previous private placement. We will pay all of the expenses associated with each of such registrations.  See the section titled “Description of Capital Stock—Registration Rights” for additional information .
 
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
 
Our Restated Certificate of Incorporation and Amended and Restated Bylaws, subject to the provisions of Delaware Law, contain provisions which allow the corporation to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he reasonably believed was in the best interest of the corporation. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.


UNDERWRITING
 
WallachBeth Capital, LLC and Network 1 Securities, Inc. are acting as the co-book-running managers of the offering, and we have entered into an underwriting agreement, dated July 13, 2016, with them as underwriters.  Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters and the underwriters have agreed to purchase from us, at the public offering price per share less the underwriting discounts set forth on the cover page of this prospectus.
 
The underwriters are committed to purchase all the shares of common stock offered by us other than those covered by the option to purchase additional shares described below, if they purchase any shares.  The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement.  Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.
 
We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments the underwriters may be required to make in respect thereof.
 
The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement.  The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
 
Over-allotment Option
 
We have granted the underwriters an over-allotment option.  This option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwriters to purchase a maximum of 321,429 additional shares (15% of the shares sold in this offering) from us to cover over-allotments, if any.  If the underwriters exercise all or part of this option, it will purchase shares covered by the option at the public offering price per share that appears on the cover page of this prospectus, less the underwriting discount.  If this option is exercised in full, the total offering price to the public will be $17,250,000 and the total net proceeds, before expenses, to us will be $16,042,500.
 
Discount
 
The following table shows the public offering price, underwriting discount and proceeds, before expenses, to us.  The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.
 
   
Per Share
   
Total Without Over-Allotment Option
   
Total With Over-Allotment Option
 
Public offering price
 
$
  7.00
   
$
  15,000,000
   
$
17,250,000
 
Underwriting discount (7%)
 
$
  0.49
   
$
  1,050,000
   
$
  1,207,500
 
Proceeds, before expenses, to us
 
$
  6.51
   
$
13,950,000
   
$
16,042,500
 
 
The underwriters propose to offer the shares offered by us to the public at the public offering price per share set forth on the cover of this prospectus.  In addition, the underwriters may offer some of the shares to other securities dealers at such price less a concession of $[_____] per share.  If all of the shares offered by us are not sold at the public offering price per share, the underwriters may change the offering price per share and other selling terms by means of a supplement to this prospectus.


We will pay the out-of-pocket accountable expenses of the underwriters in connection with this offering.  The underwriting agreement, however, provides that in the event the offering is terminated, any advance expense deposits paid to the underwriters will be returned to the extent that offering expenses are not actually incurred in accordance with FINRA Rule 5110(f)(2)(C).
 
We have agreed to pay the underwriters’ non-accountable expenses allowance equal to 1% of the public offering price of the shares (excluding shares that we may sell to the underwriters to cover over-allotments).  We have also agreed to pay the underwriters’ expenses relating to the offering, including (a) all filing fees incurred in clearing this offering with FINRA; (b) up to $5,000 of fees, expenses and disbursements relating to background checks of our officers and directors; (c) all fees, expenses and disbursements relating to the registration, qualification or exemption of securities offered under the securities laws of foreign jurisdictions designated by the underwriters; (d) stock transfer and/or stamp taxes, if any, payable upon the transfer of shares of our common stock to the underwriters; (e) $21,775 for the underwriters’ use of Ipreo’s book-building, prospectus tracking and compliance software for this offering; (f) up to $20,000 of the underwriters’ actual accountable road show expenses for the offering; and (g) up to $100,000   for the fees of the underwriters’ counsel.
 
We estimate that the total expenses of the offering payable by us, excluding underwriting discounts and commissions, will be approximately $750,000.
 
Discretionary Accounts
 
The underwriters do not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.
 
Lock-Up Agreements
 
Pursuant to certain “lock-up” agreements, we, our executive officers and directors have agreed, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic risk of ownership of, directly or indirectly, engage in any short selling of any common stock or securities convertible into or exchangeable or exercisable for any common stock, whether currently owned or subsequently acquired, without the prior written consent of the underwriters, for a period of 180 days from the date of effectiveness of the offering.
   
The lock-up period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the restricted period, we issue an earnings release or announce material news or a material event; or (2) prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the date of the earnings release, unless the underwriters waive this extension in writing; provided, however, that this lock-up period extension shall not apply to the extent that FINRA has amended or repealed NASD Rule 2711(f)(4), or has otherwise provided written interpretive guidance regarding such rule, in each case, so as to eliminate the prohibition of any broker, dealer, or member of a national securities association from publishing or distributing any research report, with respect to the securities of an emerging growth company (as defined in the JOBS Act) prior to or after the expiration of any agreement between the broker, dealer, or member of a national securities association and the emerging growth company or its stockholders that restricts or prohibits the sale of securities held by the emerging growth company or its stockholders after the initial public offering date.


Underwriter Warrants
 
We have agreed to issue to the underwriters warrants to purchase up to a total of 107,143 shares of common stock.  The warrants are exercisable at $8.40 per share (120% of the public offering price) commencing on a date which is one year from the effective date of the offering under this prospectus supplement and expiring on a date which is no more than five (5) years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G).  The warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA.  The underwriters (or their permitted assignees under the Rule) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from effectiveness.  In addition, the warrants provide for registration rights upon request, in certain cases.  We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders.  The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation.  However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.
 
Electronic Offer, Sale and Distribution of Shares
 
A prospectus in electronic format may be made available on the websites maintained by the underwriters, if any, participating in this offering and the underwriters participating in this offering may distribute prospectuses electronically.  The underwriters may agree to allocate a number of shares for sale to its online brokerage account holders.  Internet distributions will be allocated by the underwriters that will make internet distributions on the same basis as other allocations.  Other than the prospectus in electronic format, the information on these websites is not part of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or the underwriters in their capacity as underwriters, and should not be relied upon by investors.
 
Stabilization
 
In connection with this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate-covering transactions, penalty bids and purchases to cover positions created by short sales.
 
 
Stabilizing transactions permit bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the shares while the offering is in progress.
 
 
Over-allotment transactions involve sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase.  This creates a syndicate short position which may be either a covered short position or a naked short position.  In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option.  In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option.  The underwriters may close out any short position by exercising their over-allotment option and/or purchasing shares in the open market.
 
 
 
Syndicate covering transactions involve purchases of shares in the open market after the distribution has been completed in order to cover syndicate short positions.  In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the over- allotment option.  If the underwriters sell more shares than could be covered by exercise of the over-allotment option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market.  A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering.
 
 
Penalty bids permits the underwriters to reclaim a selling concession from a syndicate member when the shares originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.
 
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our shares of common stock or preventing or retarding a decline in the market price of our shares of common stock.  As a result, the price of our common stock or warrants in the open market may be higher than it would otherwise be in the absence of these transactions.  Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock.  These transactions may be effected on The NASDAQ Capital Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
 
Passive Market Making
 
In connection with this offering, the underwriters may engage in passive market making transactions in our common stock on The NASDAQ Capital Market in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the shares and extending through the completion of the distribution.  A passive market maker must display its bid at a price not in excess of the highest independent bid of that security.  However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.
 
Other Relationships
 
The underwriters and their respective affiliates may, in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which they have received, and may in the future receive, customary fees.  However, except as disclosed in this prospectus, we have no present arrangements with the underwriters for any further services.
 
Offer Restrictions Outside the United States
 
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required.  The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction.  Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus.  This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

LEGAL MATTERS
 
The validity of the shares of our common stock offered hereby has been passed upon for us by Loeb & Loeb LLP, New York, NY.  Cozen O’Connor, New York, NY, is acting as counsel to the underwriters.

EXPERTS
 
WeiserMazars LLP, an independent registered public accounting firm, has audited the financial statements of AzurRx BioPharma, Inc. as of December 31, 2015 and 2014 and for the year ended December 31, 2015 and the period from January 30, 2014 (date of inception) through December 31, 2014 and the statements of operations and comprehensive loss and cash flows for the period from January 1, 2014 through May 31, 2014 for Protea Europe SAS (predecessor) included in this prospectus and registration statement as set forth in its reports, which are included in this prospectus and registration statement.  The report for AzurRx BioPharma, Inc. includes an explanatory paragraph about the existence of substantial doubt concerning its ability to continue as a going concern.  Such financial statements have been so included in reliance on the reports of WeiserMazars, LLP, upon the authority of said firm as experts in accounting and auditing.
 
WHERE YOU CAN FIND MORE INFORMATION
 
We have filed with the SEC a registration statement on Form S-1, which includes amendments and exhibits, under the Securities Act and the rules and regulations under the Securities Act for the registration of common stock being offered by this prospectus.  This prospectus, which constitutes a part of the registration statement, does not contain all the information that is in the registration statement and its exhibits and schedules.  Certain portions of the registration statement have been omitted as allowed by the rules and regulations of the SEC.  Statements in this prospectus that summarize documents are not necessarily complete, and in each case you should refer to the copy of the document filed as an exhibit to the registration statement.  You may read and copy the registration statement, including exhibits and schedules filed with it, and reports or other information we may file with the SEC at the public reference facilities of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549.  You may call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms.  In addition, the registration statement and other public filings can be obtained from the SEC’s internet site at www.sec.gov.
 
Upon completion of this offering, we will become subject to information and periodic reporting requirements of the Exchange Act and we will file annual, quarterly and current reports, proxy statements, and other information with the SEC.

 
AzurRx BioPharma, Inc.
 
Index to Consolidated Financial Statements
 
 
Page
   
F-2
   
F-4
   
F-5
   
F-6
   
F-7
   
F-8
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of AzurRx BioPharma, Inc.
 
We have audited the accompanying consolidated balance sheets of AzurRx BioPharma, Inc. (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the year ended December 31, 2015 and for the period January 30, 2014 (date of inception) through December 31, 2014. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2015 and 2014, and the consolidated results of their operations and their consolidated cash flows for the year ended December 31, 2015 and for the period January 30, 2014 (date of inception) through December 31, 2014, in conformity with U.S. generally accepted accounting principles.
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred significant operating losses and negative cash flows from operations since inception. The Company also had a working capital deficiency of $6,748,152 and an accumulated deficit of $8,295,384 at December 31, 2015. The Company is dependent on obtaining necessary funding from outside sources, including obtaining additional funding from the sale of securities in order to continue their operations. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.
 
As described in Note 1, the consolidated balance sheet as of December 31, 2014 and the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity, and cash flows for the period January 30, 2014 (date of inception) through December 31, 2014 have been restated to correct a misstatement.
 
/s/ WeiserMazars LLP
Edison, New Jersey
 
June 15, 2016
 
 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of AzurRx BioPharma, Inc.
 
We have audited the accompanying statements of operations and comprehensive loss and cash flows of Protea Europe SAS (the “Company”) (Predecessor to AzurRx BioPharma SAS) for the period from January 1, 2014 through May 31, 2014.  These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the financial statements of the Company referred to above present fairly, in all material respects, the results of its operations and its cash flows for the period from January 1, 2014 through May 31, 2014, in conformity with U.S. generally accepted accounting principles.
   
/s/ WeiserMazars LLP
Edison, New Jersey
June 15, 2016
 
AZURRX BIOPHARMA, INC.
                 
Consolidated Balance Sheets
                 
   
12/31/14
(Restated)
   
12/31/15
   
03/31/16 
(Unaudited)
 
ASSETS
                 
                   
Current Assets:
                 
Cash
  $ 94,836     $ 581,668     $ 169,036  
Marketable securities
    125,070       56,850       44,343  
Other receivables
    428,752       1,074,858       1,084,043  
Prepaid expenses
    14,796       353,984       390,715  
Total Current Assets
    663,454       2,067,360       1,688,137  
                         
Property, equipment, and leasehold improvements, net
    211,725       176,319       172,958  
                         
Other Assets:
                       
 In process research & development, net
    422,104       345,678       351,337  
 License agreements, net
    3,215,701       2,238,105       2,161,986  
 Goodwill
    2,042,454       1,832,579       1,908,195  
 Deposits
    20,315       25,641       26,208  
Total Other Assets
    5,700,574       4,442,003       4,447,726  
Total Assets
  $ 6,575,753     $ 6,685,682     $ 6,308,821  
                         
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 
                         
Current Liabilities:
                       
Accounts payable and accrued expenses
  $ 1,003,544     $ 781,985     $ 1,325,697  
Accounts payable and accrued expenses - related party
    219,530       636,753       636,753  
Convertible promissory notes
    391,000       135,000       135,000  
Convertible debt
    661,285       6,442,372       7,325,503  
Warrant liability
    146,376       818,216       801,497  
Interest payable
    9,120       1,186       3,878  
Total Current Liabilities
    2,430,855       8,815,512       10,228,328  
                         
Contingent consideration
    1,500,000       1,500,000       1,500,000  
Total Liabilities
    3,930,855       10,315,512       11,728,328  
                         
Stockholders' Equity (Deficit):
                       
Convertible preferred stock - Par value $0.0001 per share; 1,000,000 shares authorized; 36 shares outstanding as of March 31, 2016; 71 shares outstanding as of December 31, 2015; 100 shares outstanding as of December 31, 2014; liquidation preference approximates par value at March 31, 2016, December 31, 2015 and 2014
    4,900,000       3,479,000       1,764,000  
Common stock - Par value $0.0001 per share; 9,000,000 shares authorized; 5,150,757 shares outstanding as of March 31, 2016; 4,296,979 shares outstanding as of December 31, 2015; 3,584,321 shares outstanding as of December 31, 2014
    358       430       515  
Additional paid in capital
    859,133       2,532,188       4,254,151  
Accumulated deficit
    (2,365,148 )     (8,295,384 )     (10,286,705 )
Accumulated other comprehensive (loss) income
    (749,445 )     (1,346,064 )     (1,151,468 )
Total Stockholders' Equity (Deficit)
    2,644,898       (3,629,830 )     (5,419,507 )
Total Liabilities and Stockholders' Equity (Deficit)
  $ 6,575,753     $ 6,685,682     $ 6,308,821  
                         
See accompanying notes to consolidated financial statements
                 
 
 
See accompanying notes to consolidated financial statements
 
 
F-4

 
 
AZURRX BIOPHARMA, INC.
Consolidated Statements of Operations and Comprehensive Loss
 
 
 
01/01/14
through 05/31/14 Protea Europe SAS (Predecessor)
 
01/30/14
(Date of
Inception)
through
12/31/14 (1) Consolidated
(Restated)
   
Year Ended 12/31/15 Consolidated
   
3 Months Ended 03/31/16 Consolidated 
(Unaudited)
   
3 Months Ended 03/31/15 Consolidated 
(Unaudited)
 
                             
Research and development expenses
$ 380,132     $ 670,491     $ 1,398,056     $ 685,575     $ 308,834  
General & administrative expenses
  207,074       1,658,615       3,330,752       661,641       763,582  
                                       
Loss from operations
  (587,206 )     (2,329,106 )     (4,728,808 )     (1,347,216 )     (1,072,416 )
                                       
Other:
                                     
   Interest expense
  -       (68,149 )     (1,587,533 )     (713,680 )     (144,746 )
   Fair value adjustment, warrants
  -       1,368       386,105       69,576       25,855  
   Other income
  -       30,739       -       -       -  
Total other
  -       (36,042 )     (1,201,428 )     (644,104 )     (118,891 )
                                       
Loss before income taxes
  (587,206 )     (2,365,148 )     (5,930,236 )     (1,991,320 )     (1,191,307 )
                                       
Income taxes
  -       -       -       -       -  
                                       
Net loss
$ (587,206 )   $ (2,365,148 )   $ (5,930,236 )   $ (1,991,320 )   $ (1,191,307 )
                                       
Other comprehensive income (loss):
                                     
  Foreign currency translation adjustment
$ 2,179     $ (749,445 )   $ (596,619 )   $ 194,596     $ (675,857 )
Total comprehensive loss
$ (585,027 )   $ (3,114,593 )   $ (6,526,855 )   $ (1,796,724 )   $ (1,867,164 )
                                       
Basic and diluted weighted average shares outstanding
  4,000   (2)    3,540,196       3,627,133       4,725,879       3,584,321  
                                       
Loss per share - basic and diluted
$ (146.80 )   $ (0.67 )   $ (1.63 )   $ (0.42 )   $ (0.33 )
                                       
(1) - Includes Protea Europe SAS from date of acquisition, see Note 2
           
(2) - All shares owned by former parent
           
 
See accompanying notes to consolidated financial statements
 
 
F-5

 
 
AZURRX BIOPHARMA, INC.
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
 
   
Convertible
Preferred Stock
   
Common Stock
   
Additional
Paid In
   
Accumulated
   
Accumulated
Other
Comprehensive
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
(Loss) Income
   
Total
 
Balance, January 30, 2014 (Date of Inception), AzurRx
    -     $ -       -     $ -     $ -     $ -     $ -     $ -  
Common stock issued
                    3,584,321       358       859,133                       859,491  
Acquisition of Protea Europe SAS
    100       4,900,000                                               4,900,000  
Foreign currency translation adjustment
                                                    (749,445 )     (749,445 )
Net loss
                                            (2,365,148 )             (2,365,148 )
Balance, December 31, 2014 (Restated)
    100       4,900,000       3,584,321       358       859,133       (2,365,148 )     (749,445 )     2,644,898  
                                                                 
Common stock issued
                    5,242       1       33,789                       33,790  
Preferred stock converted into common stock
    (29 )     (1,421,000 )     707,416       71       1,420,929                       -  
Warrants issued to investment bankers
                                    218,337                       218,337  
Foreign currency translation adjustment
                                                    (596,619 )     (596,619 )
Net loss
                                            (5,930,236 )             (5,930,236 )
Balance, December 31, 2015
    71     $ 3,479,000       4,296,979     $ 430     $ 2,532,188     $ (8,295,384 )   $ (1,346,064 )   $ (3,629,830 )
                                                                 
(unaudited)
                                                               
Preferred stock converted into common stock
    (35 )     (1,715,000 )     853,778       85       1,714,915                       -  
Warrants issued to investment bankers
                                    7,048                       7,048  
Foreign currency translation adjustment
                                                    194,596       194,596  
Net loss
                                            (1,991,320 )             (1,991,320 )
Balance, March 31, 2016
    36     $ 1,764,000       5,150,757     $ 515     $ 4,254,151     $ (10,286,705 )   $ (1,151,468 )   $ (5,419,507 )
 
See accompanying notes to consolidated financial statements
 
 
F-6

 
 
AZURRX BIOPHARMA, INC.
                             
Consolidated Statements of Cash Flows
                             
                               
   
01/01/14 through 05/31/14 Protea Europe SAS (Predecessor)
   
01/30/14 (Date of Inception) through 12/31/14 (1) Consolidated
(Restated)
   
Year Ended 12/31/15 Consolidated
   
3 Months Ended 03/31/16 Consolidated 
(Unaudited)
   
3 Months Ended 03/31/15 Consolidated 
(Unaudited)
 
Cash flows from operating activities:
                             
Net loss
  $ (587,206 )   $ (2,365,148 )   $ (5,930,236 )   $ (1,991,320 )   $ (1,191,307 )
Adjustments to reconcile net loss to net cash used in operating activities:
                                       
Depreciation
    4,153       11,113       41,784       10,845       10,902  
Amortization
    -       418,822       691,815       171,997       175,327  
Fair value adjustment, warrants
    -       (1,368 )     (386,103 )     (69,576 )     (25,855 )
Warrant expense
    -       -       218,337       7,048       -  
Interest expense settled with issuances of common stock
    -       -       33,790       -       -  
Accreted interest on convertible debt
    -       27,893       749,262       348,610       63,167  
Accreted interest on debt discount - warrants
    -       31,136       812,415       362,378       70,311  
Changes in assets and liabilities, net of effects of acquisition:
                                       
Accounts receivable
    -       356,252       -       -       -  
Other receivables
    6,204       (50,595 )     (638,092 )     45,859       (5,092 )
Prepaid expenses
    (10,696 )     (1,307 )     (340,524 )     (36,353 )     662  
Deposits
    -       (5,000 )     (6,900 )     -       -  
Accounts payable and accrued expenses
    31,839       563,089       251,608       511,274       (135,283 )
Interest payable
    -       9,120       (7,934 )     2,692       11,268  
Due to related party
    549,307       -       -       -       -  
Net cash used in operating activities
    (6,399 )     (1,005,993 )     (4,510,778 )     (636,546 )     (1,025,900 )
                                         
Cash flows from investing activities:
                                       
Purchase of property and equipment
    -       (191,003 )     (24,380 )     (936 )     (11,033 )
Acquisition of Protea Europe SAS, net of cash acquired
    -       (560,952 )     -       -       -  
Net cash used in investing activities
    -       (751,955 )     (24,380 )     (936 )     (11,033 )
                                         
Cash flows from financing activities:
                                       
Issuances of common stock
    -       859,491       -       -       -  
Issuances of convertible promissory notes
    -       451,000       445,000       -       270,000  
Repayments of convertible promissory notes
    -       (60,000 )     (701,000 )     -       (250,000 )
Issuances of convertible debt
    -       600,000       5,395,000       225,000       1,140,000  
Repayments of convertible debt
    -       -       (117,647 )     -       -  
Net cash provided by financing activities
    -       1,850,491       5,021,353       225,000       1,160,000  
                                         
Effect of exchange rate changes on cash
    (2,788 )     2,293       637       (150 )     (9,702 )
                                         
(Decrease) increase in cash
    (6,399 )     92,543       486,195       (412,482 )     123,067  
 
                                       
Cash, beginning balance
    48,235       -       94,836       581,668       94,836  
                                         
Cash, ending balance
  $ 39,048     $ 94,836     $ 581,668     $ 169,036     $ 208,201  
 
                                       
Supplemental disclosures of cash flow information:
                                       
Cash paid for interest
  $ -     $ -     $ -     $ -     $ -  
                                         
Cash paid for income taxes
  $ -     $ -     $ -     $ -     $ -  
                                         
Non-cash investing and financing activities:
                                       
Shares issued for purchase of Protea Europe SAS
  $ -     $ 4,900,000     $ -     $ -     $ -  
                                         
Contingent consideration related to purchase of Protea Europe SAS acquisition
  $ -     $ 1,500,000     $ -     $ -     $ -  
                                         
Receipt of marketable securities in exchange for issuance of convertible debt to investor
  $ -     $ 150,000     $ -     $ -     $ -  
                                         
Issuance of 5,242 shares of common stock as payment of interest on convertible promissory notes
  $ -     $ -     $ 33,790     $ -     $ -  
                                         
Conversion of preferred shares into common shares by Protea
  $ -     $ -     $ 1,421,000     $ 1,715,000     $ -  
 
(1) - Includes Protea Europe SAS from date of acquisition, see Note 2
 
See accompanying notes to consolidated financial statements
 
 
F-7

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

Note 1 - The Company, Basis of Presentation, and Significant Accounting Policies

The Company

AzurRx Biopharma, Inc. (“AzurRx”, the “Company”, or “Parent”) was incorporated on January 30, 2014 in the State of Delaware. In June 2014, the Company acquired 100% of the issued and outstanding capital stock of AzurRx BioPharma SAS (formerly ProteaBio Europe SAS), a company incorporated in October 2008 under the laws of France that had been a wholly-owned subsidiary of Protea Biosciences, Inc., or Protea Sub, in turn a wholly-owned subsidiary of Protea Biosciences Group, Inc., a publicly-traded company.

AzurRx, through its AzurRx Europe SAS subsidiary, is engaged in the research and development of non-systemic biologics for the treatment of patients with gastrointestinal disorders. Non-systemic biologics are non-absorbable drugs that act locally without reaching the systemic circulation, i.e. the intestinal lumen, skin or mucosa. The Company’s current product pipeline consists of two therapeutic proteins under development:

·
MS1819 - a recombinant (synthetic) lipase, an enzyme derived from a specialized yeast, which breaks apart fats. Lipases are required to treat patients whose pancreases don’t work anymore in a condition known as exocrine pancreatic insufficiency (EPI) which usually arises from chronic pancreatitis (CP) or cystic fibrosis (CF).

·
AZ1101- a recombinant (synthetic) enzyme which is being developed to prevent hospital-acquired infec tions which come from resistant bacterial strains caused by parenteral (intra-venous) administration of β-lactam antibiotics, as well as prevention of antibiotic-associated diarrhea (AAD).

Basis of Presentation and Principles of Consolidation
 
The financial statements for the period January 1, 2014 through May 31, 2014 include only the accounts of Protea Europe SAS (“Predecessor”). There were no material transactions between June 1, 2014 and June 13, 2014 on the accounts of the Predecessor so the Company assumed May 31, 2014 as the acquisition date for financial statement presentation purposes. For the period January 30, 2014 (date of inception) through May 31, 2014, general & administrative expenses and net loss for the U.S. parent company were $176,456. The financial statements for the periods January 30, 2014 (date of inception) through December 31, 2014; January 1 through December 31, 2015; and January 1, 2016 through March 31, 2016 and 2015 include the accounts of AzurRx and its wholly-owned subsidiary, AzurRx Europe SAS (collectively, the “Company”). Intercompany transactions and balances have been eliminated upon consolidation.
 
At December 31, 2014 and the year then ended, the Company has recorded a prior period adjustment relating to their property, equipment and leasehold improvements, intangible assets, and goodwill in regards to its consolidation of its French acquired subsidiary. The impact of these adjustments are as follows:

Financial Statement Item
 
As Previously Reported
   
As Adjusted
   
Change
 
                   
Consolidated Balance Sheet
                 
Property, equipment, and leasehold improvements, net
  $ 222,662     $ 211,725     $ 10,937  
Total Other assets
  $ 6,391,503     $ 5,700,574     $ 690,929  
Total Assets
  $ 7,277,619     $ 6,575,753     $ 701,866  
Accumulated deficit
  $ (2,406,922 )   $ (2,365,148 )   $ (41,774 )
Accumulated other comprehensive loss
  $ (5,805 )   $ (749,445 )   $ 743,640  
Total Stockholders’ Equity (Deficit)
  $ 3,346,764     $ 2,644,898     $ 701,866  
                         
Consolidated Statement of Operations and Comprehensive Loss
                 
Loss from operations
  $ (2,370,880 )   $ (2,329,106 )   $ (41,774 )
Net loss
  $ (2,406,922 )   $ (2,365,148 )   $ (41,774 )
Foreign currency translation adjustment
  $ (9,343 )   $ (749,445 )   $ 740,102  
Total comprehensive loss
  $ (2,416,265 )   $ (3,114,593 )   $ 698,328  
Loss per share - basic and diluted
  $ (0.68 )   $ (0.67 )   $ (0.01 )
                         
Consolidated Statement of Cash Flows
                       
Net loss
  $ (2,406,922 )   $ (2,365,148 )   $ (41,774 )
Amortization
  $ 460,596     $ 418,822     $ 41,774  
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception, had a working capital deficiency at March 31, 2016 and December 31, 2015 of approximately $8,540,000 and $6,748,000, respectively, and had an accumulated deficit at March 31, 2016 and December 31, 2015 of approximately $10,287,000 and $8,295,000, respectively. The Company is dependent on obtaining necessary funding from outside sources, including obtaining additional funding from the sale of securities in order to continue their operations. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 
F-8

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

Note 2 - Significant Accounting Policies

Use of Estimates
The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, and include certain estimates and assumptions which affect the reported amounts of assets and liabilities at the date of the financial statements (including goodwill, intangible assets and contingent consideration), and the reported amounts of revenues and expenses during the reporting period, including contingencies. Accordingly, actual results may differ from those estimates.

Concentration of Risks
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and available for sale marketable securities. The Company primarily maintains its cash balances with financial institutions in federally-insured accounts. The Company may from time to time have cash in banks in excess of FDIC insurance limits. The Company has not experienced any losses to date resulting from this practice. The Company’s investments in Marketable Securities are comprised of a single investment in a publicly traded stock received as payment from an investor for his $150,000 investment in the Company's Original Issue Convertible Debt. The investor has agreed to make up any shortfall from sales of these securities while any gain is for the account of the Company. As of March 31, 2016, the market value of these Marketable Securities are $44,343 and an associated Other Receivable of $105,657 was recorded. As of December 31, 2015, the market value of these Marketable Securities are $56,850 and an associated Other Receivable of $93,150 was recorded. As of December 31, 2014, the market value of these Marketable Securities are $125,070 and an associated Other Receivable of $24,930 was recorded. See Note 3 below.

Property, Equipment, and Leasehold Improvements
Property, equipment and leasehold improvements are carried on the cost basis and depreciated over the estimated useful lives of the related assets using the straight-line method. For financial statement purposes, depreciation expense is provided using the straight-line method over the estimated useful lives of the assets as follows:
 
  Laboratory Equipment  5 years
  Computer Equipment  5 years
  Office Equipment  7-8 years
  Leasehold Improvements  Term of lease or estimated useful life of the assets; whichever is shorter
 
Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized.

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.

Intangible assets subject to amortization consist of in process research and development and license agreements 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:

In Process Research & Development      12 years
License Agreements                                   5 years

Research and Development
Research and development costs are charged to operations when incurred and are included in operating expenses. Research and development costs consist principally of compensation of employees and consultants that perform the Company’s research activities, the fees paid to maintain the Company’s licenses, and the payments to third parties for clinical trial and additional product development and testing.

 
F-9

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

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.

At March 31, 2016, December 31, 2015 and 2014, the Company had Level 2 instruments consisting of marketable securities of common stock in a thinly-traded public company received as payment from an investor for $150,000 of the Company’s Original Issue Discounted Convertible Note, see Notes 3 and 10 below.

At March 31, 2016, December 31, 2015 and 2014, the Company had Level 3 instruments consisting of the Company’s common stock warrant liability related to the Company’s convertible debt, see Note 10 and contingent consideration in connection with the Protea Europe SAS acquisition, see Note 6.
 
The carrying amounts of the Company’s financial instruments, including accounts payable, and accrued liabilities, approximate fair value due to their short maturities.

 
F-10

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

The following tables summarize the Company’s financial instruments measured at fair value on a recurring basis:

   
Fair Value Measurements at Reporting Date Using
 
   
Total
   
Level 1
   
Level 2
   
Level 3
 
As of March 31, 2016 (Unaudited):
                       
Marketable Securities
  $ 44,343     $ -     $ 44,343     $ -  
Warrant Liability
  $ 801,497     $ -     $ -     $ 801,497  
Contingent Consideration
  $ 1,500,000     $ -     $ -     $ 1,500,000  
                                 
As of December 31, 2015:
                               
Marketable Securities
  $ 56,850     $ -     $ 56,850     $ -  
Warrant Liability
  $ 818,216     $ -     $ -     $ 818,216  
Contingent Consideration
  $ 1,500,000     $ -     $ -     $ 1,500,000  
                                 
As of December 31, 2014:
                               
Marketable Securities
  $ 125,070     $ -     $ 125,070     $ -  
Warrant Liability
  $ 146,376     $ -     $ -     $ 146,376  
Contingent Consideration
  $ 1,500,000     $ -     $ -     $ 1,500,000  
   
The following table provides a reconciliation of the fair value of liabilities using Level 3 significant unobservable inputs:

   
Warrant
   
Contingent
 
   
Liability
   
Consideration
 
Date of Inception (January 30, 2014)
  $ -     $ -  
Protea Europe SAS acquisition
    -       1,500,000  
Issuance of warrants
    147,744       -  
Change in fair value
    (1,368 )     -  
Balance at December 31, 2014
    146,376       1,500,000  
Issuance of warrants
    1,057,943       -  
Change in fair value
    (386,105 )     -  
Balance at December 31, 2015
    818,214       1,500,000  
Issuance of warrants
    52,859       -  
Change in fair value
    (69,576 )     -  
Balance at March 31, 2016
  $ 801,497     $ 1,500,000  
 
The warrant liability above relates to the Company’s original issued discounted convertible notes, see Note 10 below.
 
The fair values of the outstanding warrants were measured by the Company using a Binomial Option Pricing model. Inputs used to determine estimated fair value of the warrant liabilities at March 31, 2016, December 31, 2015 and 2014 include the estimated fair value of the underlying stock at the valuation date ($1.77, $2.16 and $3.09, respectively), the estimated term in years of the warrants (5.49, 4.90 and 5.34, respectively), risk-free interest rates (1.28%, 1.72% and 1.69%, respectively), expected dividends (zero) and the expected volatility (117.5%, 98% and 93%, respectively) of the underlying stock. The significant unobservable inputs used in the fair value measurement of the warrant liabilities are the fair value of the underlying stock at the valuation date and the estimated term of the warrants. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement.
 
The contingent consideration was valued by the Company using a series of Black-Scholes Option Pricing Models (“BSM”). Significant unobservable inputs used in the calculations included projected net sales over a 9-year period discounted by the Company’s weighted average cost of capital of 33.7%, the contractual hurdle amount of $100 million that replaces the strike price input in the traditional BSM, an asset volatility of 90% that replaces the equity volatility in the traditional BSM, risk-free rates ranging from 1.5% to 2.7%, and an option-adjusted spread of 0.5% that is applied to these payments to account for the payer’s risk and arrive at a present value of the expected payment.  As the next sales forecast becomes less uncertain, liability may lower in value.  If the volatility increases, then the liability value may increase.

 
F-11

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)
 
The fair value of the Company's other receivables, convertible debt, and loans payable are as follows:
 
         
Fair Value Measured at Reporting Date Using
       
   
Carrying Amount
   
Level 1
   
Level 2
   
Level 3
   
Fair Value
 
As of March 31, 2016 (Unaudited).:
                         
Other Receivables
  $ 1,084,043     $ -     $ -     $ 1,084,043     $ 1,084,043  
Convertible Debt
  $ 7,325,503                     $ 7,325,503     $ 7,325,503  
Convertible Promissory Notes
  $ 135,000     $ -     $ -     $ 135,000     $ 135,000  
                                         
As of December 31, 2015:
                                       
Other Receivables
  $ 1,074,858     $ -     $ -     $ 1,074,858     $ 1,074,858  
Convertible Debt
  $ 6,442,372                     $ 6,442,372     $ 6,442,372  
Convertible Promissory Notes
  $ 135,000     $ -     $ -     $ 135,000     $ 135,000  
                                         
As of December 31, 2014:
                                       
Other Receivables
  $ 428,752     $ -     $ -     $ 428,752     $ 428,752  
Convertible Debt
  $ 661,285     $ -     $ -     $ 661,285     $ 661,285  
Convertible Promissory Notes
  $ 391,000     $ -     $ -     $ 391,000     $ 391,000  
 
The fair value of Other Receivables approximates carrying value as these consist primarily of French R & D tax credits that are normally received within 9 months of year end.

The fair value of Convertible Debt and Loans Payable approximates carrying value due to the terms of such instruments and applicable interest rates.

Stock-based Compensation
The Company’s board of directors and stockholders have adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan which took effect on May 12, 2014. Although the Company did not grant any stock options under the Plan during the three months ended March 31, 2016 and the years ended December 31, 2015 and 2014, the Company will account for its stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation ("ASC 718"). ASC 718 requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the statements of operations based on their grant date fair values. For stock options granted to employees and to members of the board of directors for their services on the board of directors, the Company estimates the grant date fair value of each option award 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. For awards subject to service-based vesting conditions, the Company recognizes stock-based compensation expense, net of estimated forfeitures, equal to the grant date fair value of stock options on a straight-line basis over the requisite service period.

Income Taxes
Income taxes are recorded in accordance with ASC 740, Accounting for Income Taxes ("ASC 740"), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of March 31, 2016, December 31, 2015 and 2014, the Company does not have any significant uncertain tax positions. All tax years are still open for audit.

 
F-12

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

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 March 31, 2016.

Foreign Currency Translation
For foreign subsidiaries with operations denominated in a foreign currency, assets and liabilities are translated to U.S. dollars, which is the functional currency, at year-end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the year. Gains and losses from translation adjustments are accumulated in a separate component of shareholders’ equity (deficit).

Collaboration Agreements
As more fully discussed in Note 14, the Company has joint research collaboration agreements with Laboratoires Mayoly Spindler SAS and INRA TRANSFERT. Any payments due from our collaboration partners is recorded as a reduction in research and development expenses.

Subsequent Events
The Company considered events or transactions occurring after the balance sheet date but prior to the date the consolidated financial statements are available to be issued for potential recognition or disclosure in its consolidated financial statements.

 Note 3 - Marketable Securities

At March 31, 2016, December 31, 2015 and 2014, the Company had $44,343, $56,850 and $125,070, respectively, of common stock in a public company. These available for sale securities are recorded at fair value and were received as payment from an investor for $150,000 of the Company’s Original Issue Discounted Convertible Notes. The investor has agreed to make up any shortfall between the value of the Marketable Securities when converted to cash and the face amount of his Convertible Note.

The Marketable Securities fair value was based on Level 2 inputs.

   Note 4 - Other Receivables
 
Other Receivables consisted of the following:
 
   
March 31,
             
 
 
2016
   
December 31,
   
December 31,
 
   
(Unaudited)
   
2015
   
2014
 
Research & development tax credits
  $ 950,482     $ 912,818     $ 380,247  
Investor subscription
    105,657       93,150       24,930  
Other
    27,904       68,880       23,575  
 
  $ 1,084,043     $ 1,074,848     $ 428,752  
 
The research & development tax credits are refundable tax credits for research conducted in France. The Investor subscription is related to an investor’s agreement to make up any shortfall between the Marketable Securities given for his Convertible Debt, see Note 3. The make-whole provision is a deemed “put” measured at fair value due to its relationship in connection with the Marketable Securities. The Company follows the guidance in ASC 815-25-35-6 and records the change in fair values of both the Marketable Securities and the “put” in earnings. Due to the correlation of these instruments, the change in fair values completely offset and net to zero. Other is primarily amounts due from collaboration partner Mayoly, see Note 14.
 
 
F-13

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

    Note 5 - Property, Equipment, and Leasehold Improvements

Property, equipment and leasehold improvements consisted of the following:
   
March 31,
             
   
2016
   
December 31,
   
December 31,
 
   
(Unaudited)
   
2015
   
2014
 
Laboratory Equipment
  $ 154,709     $ 148,578     $ 155,703  
Computer Equipment
    17,986       16,733       11,105  
Office Equipment
    29,906       29,057       22,048  
Leasehold Improvements
    29,163       28,008       31,215  
      231,764       222,376       220,071  
Less accumulated depreciation
    (58,806 )     (46,057 )     (8,346 )
                         
    $ 172,958     $ 176,319     $ 211,725  
 
Depreciation expense for the three months ended March 31, 2016 and 2015 was $10,845 and $10,902, respectively. Depreciation expense for the years ended December 31, 2015 and 2014 was $41,784 and $11,113, respectively. Depreciation expense is included in General and Administrative (“G & A”) expenses.

   Note 6 - Acquisition
 
On March 19, 2014, AzurRx entered into a Memo of Understanding with Protea Biosciences Group, Inc. (“Protea Group”) and its wholly-owned subsidiary, Protea Biosciences, Inc. (“Protea Sub” and, together with Protea Group, “Protea”) to acquire 100% of the outstanding capital stock of AzurRx BioPharma SAS (formerly ProteaBio Europe SAS), a wholly-owned subsidiary of Protea Sub, a company engaged in the research and development of non-systemic biologics for the treatment of patients with gastrointestinal disorders in exchange for a non-refundable deposit of $300,000. On May 21, 2014, the Company entered into a stock purchase agreement (the “SPA”) with Protea for this acquisition. On June 13, 2014, the Company completed the acquisition in exchange for a payment of $300,000 and the issuance of shares of its Series A convertible preferred stock (the “Series A Preferred”). Pursuant to the SPA, the Company is obligated to pay Protea certain other Contingent Consideration in U.S. dollars upon the satisfaction of certain events, including (a) a one-time milestone payment of $2,000,000 due within (10) days of receipt of the first approval by the Food and Drug Administration (“FDA”) of a New Drug Application (“NDA”) or Biologic License Application (“BLA”) for a Business Product (as such term is defined in the SPA); (b) royalty payments equal to 2.5% of net sales of Business Product up to $100,000,000 and 1.5% of net sales of Business Product in excess of $100,000,000 and (c) ten percent (10%) of the Transaction Value (as defined in the SPA) received in connection with a sale or transfer of the pharmaceutical development business of Protea Europe. The total consideration was $7,000,000, which consisted of $600,000 cash, the fair value of the 100 shares of Class A Preferred stock issued to Protea, and the fair value of the Contingent Consideration described above.

The estimated useful lives of the intangible assets acquired are described in Note 2, “Significant Accounting Policies, Goodwill and Intangible Assets”.

Goodwill related to this acquisition is 100% deductible for U.S. federal income tax purposes.

Acquisition costs in connection with this acquisition were approximately $118,000 and are included in operating expenses.

The acquisition was accounted for as a business combination and, accordingly, the purchase price was allocated to the identified tangible and intangible assets acquired less the liabilities assumed, based on fair value.

 
F-14

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

The purchase price was determined as following:
 
Purchase price:
     
Fair value of Class A preferred stock issued to seller
  $ 4,900,000  
Cash
    600,000  
Fair value of the contingent consideration
    1,500,000  
Total purchase price
  $ 7,000,000  
 
The Class A Preferred Stock was valued using the Option Pricing Method. Significant unobservable inputs used in this calculation included the Company’s total equity value at June 13, 2014 of $34.8 million, the exercise price of $0.01 for the first breakpoint, for each closed form option model an expected term of four years, volatility of 90%, and an interpolated risk-free rate of 1.32%.

See Note 2, Fair Value Measurements above for the explanation of the valuation method and significant inputs used to value the Contingent Consideration.

The following table summarizes the allocation of the purchase price to the estimated fair value of the assets acquired and the liabilities assumed as of the date of the acquisition:
 
Net assets acquired were allocated as follows:
       
      Cash
  $ 39,045  
      Accounts receivable
    291,740  
      Other receivable
    424,384  
      Prepaid expenses and other current assets
    15,202  
      Property and equipment
    45,381  
      Other long-term assets
    17,157  
      In process research and development
    495,829  
      License agreements
    4,045,064  
      Goodwill
    2,290,892  
      Accounts payable and accrued expenses
    (664,694 )
         
            Total purchase price
  $ 7,000,000  

 
F-15

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

The following is the proforma income statement as if both companies had been consolidated for the full applicable periods presented (unaudited):

   
Year Ended
 
   
12/31/14
 
Research and development expenses
  $ 1,050,623  
General & administrative expenses
    1,865,689  
         
Loss from operations
    (2,916,312 )
         
Interest expense
    (68,149 )
Fair value adjustment, warrants
    1,368  
Other income
    30,739  
Total other
    (36,042 )
         
Loss before income taxes
    (2,952,354 )
         
Income taxes
    -  
         
Net loss
  $ (2,952,354 )
         
Basic and diluted weighted average shares outstanding
    3,540,196  
         
Loss per share - basic and diluted
  $ (0.83 )
 
Note 7 - Intangible Assets and Goodwill
 
Intangible assets are as follows:
   
March 31,
             
   
2016
   
December 31,
   
December 31,
 
   
(Unaudited)
   
2015
   
2014
 
In Process Research & Development
  $ 413,000     $ 396,634     $ 442,058  
Less accumulated amortization
    (61,663 )     (50,956 )     (19,954 )
                         
    $ 351,337     $ 345,678     $ 422,104  
                         
License Agreements
  $ 3,369,329     $ 3,235,814     $ 3,606,394  
Less accumulated amortization
    (1,207,343 )     (997,709 )     (390,693 )
                         
    $ 2,161,986     $ 2,238,105     $ 3,215,701  
 
Amortization expense for the three months ended March 31, 2016 and 2015 was $171,997 and $175,327, respectively. Amortization expense for the years ended December 31, 2015 and 2014 was $691,815 and $418,822, respectively. Amortization expense is included in G & A expenses.
 
As of March 31, 2016, amortization expense is expected to be $708,282 per year for the next three years and two months and $34,417 per year for the next year and 10 months after that.
 
Goodwill is as follows:
 
   
Goodwill
 
Date of Inception (January 30, 2014)
  $ -  
Protea Europe SAS acquisition
    2,290,892  
Foreign currency translation
    (248,438 )
Balance at December 31, 2014
    2,042,454  
Foreign currency translation
    (209,875 )
Balance at December 31, 2015
    1,832,579  
Foreign currency translation
    75,616  
Balance at March 31, 2016 (unaudited)
  $ 1,908,195  
 
F-16

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

Note 8 - Accounts Payable
 
Accounts payable and accrued expenses consisted of the following:

   
March 31,
             
 
 
2016
   
December 31,
   
December 31,
 
   
(Unaudited)
   
2015
   
2014
 
Trade payables
  $ 916,563     $ 409,407     $ 825,574  
Accrued expenses
    139,721       174,210       4,197  
Accrued payroll
    269,413       198,368       173,773  
 
  $ 1,325,697     $ 781,985     $ 1,003,544  
 
Note 9 - Convertible Promissory Notes
 
Commencing on July 22, 2014 and through April 3, 2015, the Company, through a series of transactions with various investors, raised $896,000 through the sale of its convertible promissory notes with various maturity dates that can be extended by the Company. The maturity dates ranged from August 31, 2014 through May 31, 2015. All maturity dates have been extended by the Company. Through December 31, 2015, the Company entered into transactions in which noteholders were voluntarily repaid $761,000 and shares were issued to such noteholders in lieu of interest payments. As of December 31, 2014, the Company raised $451,000 through the sale of these convertible promissory notes and repaid $60,000 of these notes. The notes bear interest at 8% per annum and are convertible into Common Stock of the Company at $6.45 per share at the investors’ discretion as long as the notes are outstanding. As of March 31, 2016, December 31, 2015 and 2014, the Company had $135,000, $135,000 and $391,000, respectively, of these notes outstanding.
 
Interest expense for the three months ended March 31, 2016 and 2015 incurred in connection with the promissory notes was $2,693 and $11,268, respectively. Interest expense for the years ended December 31, 2015 and 2014 incurred in connection with the promissory notes was $25,856 and $9,120, respectively. On August 7, 2015, 5,242 shares of the Company’s common stock were issued in payment of $33,790 of accrued interest payable on these notes. Interest payable at March, 31, 2016, December 31, 2015 and 2014 in connection with these notes was $3,878, $1,186 and $9,120, respectively.

Note 10 - Original Issue Discounted Convertible Notes

Commencing on October 10, 2014, the Company, through a series of transactions, issued original issue discounted convertible notes to several investors at 85% of the principal amount of the notes. The notes do not otherwise bear interest. The notes are convertible into shares of the Company’s common stock at the principal amount divided by the lesser of $6.45 per share or the per share price of the Common Stock representing the pre-money valuation immediately prior to any shares sold in the Company’s initial public offering (“IPO”), multiplied by 80% (the “Convertible Shares”). Additionally, separate warrants to purchase shares of the Company’s common stock equal to 50% of the number of Convertible Shares at the lesser of $7.37 per share or at a 20% discount to the pre-money IPO valuation of the Company were issued in conjunction with these notes. The warrants are exercisable for five years beginning six months after the issue date. If the pre-money IPO valuation of the Company is less than $43,750,000, then the number of Warrant Shares (herein defined as the underlying common stock shares) will be recalculated as follows: New Number of Warrant Shares = Existing Warrant Shares * [43,750,000/(IPO valuation*80%)]. The Company did not recognize any amounts associated with the beneficial conversion feature at the dates of issuances of such notes due to the unsatisfied condition associated with the pre-money valuation. If, and when, the pre-money valuation is determined, the Company may be required to recognize the value of the beneficial conversion feature, if any, in earnings.

 
F-17

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

The notes had nine-month terms with principal and interest due starting July 10, 2015. The holders of the notes may demand payment in cash before the maturity date within thirty (30) trading days of the Company’s initial public offering.   If, on the maturity date, the principal amount of any note remains unpaid, the Company shall pay to the note holder a one-time default penalty of 5% of the total amount unpaid on the maturity date. The Company, however, shall still be required to repay the note holder the principal balance and interest on the principal balance, which shall accrue at the default interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. As of December 31, 2015, $2,105,882 in principal amount of these notes are in default due to being past their maturity dates.

On March 31, 2016, the holders of all but $300,000 in principal signed exchange agreements nullifying the default provisions and rolling the principal amount into new original issue discounted convertible notes at 92% of the principal amount of the notes due on November 4, 2016, modifying the conversion price to $4.65 per share, and modifying the strike price of the warrants down to the lesser of (i) $5.58 or (ii) a 15% premium to the price per share or unit issued in the IPO or in connection with a public listing. As a result of these exchange agreements, as of December 31, 2015, the Company has not recorded any of the default provisions for all but $300,000 in principal of these notes. The aggregate gross proceeds received in connection with these notes through March 31, 2016, December 31, 2015 and 2014 was $7,303,529, $6,145,000 and $750,000, respectively.  Through June 13, 2016 , gross proceeds of $700,000 were received from the issuance of additional original issue discounted convertible notes.
 
The Company accounted for the warrant feature of the notes based upon the fair value of the warrants on the date of issuance. The effect of the warrant modifications is reflected in the fair value adjustment at March 31, 2016 noted below. The Company recorded a warrant liability related to the warrants at March 31, 2016, December 31, 2015 and December 31, 2014 of $1,251,066, $1,205,687, and $147,744, respectively. The warrant liability was adjusted to the fair value at March 31, 2016 of $801 , 497 by recording a fair value adjustment of $69 , 576 at March 31, 2016. The warrant liability was adjusted to the fair value at December 31, 2015 of $818,216 by recording a fair value adjustment of $386,105 at December 31, 2015 and the warrant liability was adjusted to the fair value at December 31, 2014 of $146,376 by recording a fair value adjustment of $1,368 at December 31, 2014.
 
For the three month periods ended March 31, 2016 and 2015, the Company recorded $710,988 and $133,479, respectively, of interest expense related to the original issue discount and warrant features of these notes. For the three months ended March 31, 2016 and 2015, $348,610 and $63,167, respectively, of these amounts were accreted interest expense related to the original issue discount feature of the notes that also increased the outstanding balance of the convertible debt by the same amount. For the three months ended March 31, 2016 and 2015, $362,378 and $70,311, respectively, of these amounts were amortization of the debt discount related to the warrant features of the convertible debt.
 
For the years ended December 31, 2015 and 2014, the Company recorded $1,561,677 and $59,029, respectively, of interest expense related to the original issue discount and warrant features of these notes. For the years ended December 31, 2015 and 2014, $749,262 and $27,893, respectively, of these amounts were accreted interest expense related to the original issue discount feature of the notes that also increased the outstanding balance of the convertible debt by the same amount. For the years ended December 31, 2015 and 2014, $812,415 and $31,136, respectively, of these amounts were amortization of the debt discount related to the warrant features of the convertible debt.
 
 
F-18

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

Convertible Debt consisted of:
   
March 31,
             
   
2016
   
December 31,
   
December 31,
 
   
(Unaudited)
   
2015
   
2014
 
Convertible Debt
  $ 7,303,529     $ 6,145,000     $ 750,000  
Accreted Interest
    74,589       659,508       27,893  
Debt Discount - Warrants
    (52,615 )     (362,136 )     (116,608 )
                         
    $ 7,325,503     $ 6,442,372     $ 661,285  
 
Note 11 - Equity
 
The Company has authorized 9,000,000 shares of its common stock, $0.0001 par value and 1,000,000 shares of preferred stock, $0.0001 par value.

Common Stock
At March 31, 2016, December 31, 2015 and 2014, the Company had issued and outstanding 5,150,757, 4,296,979 and 3,584,321, respectively, shares of its common stock.
 
Voting
Each holder of common stock has one vote for each share held.

Stock Option Plan
The Company’s board of directors 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. The 2014 Plan permits the Company to award stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance stock awards, performance unit awards, unrestricted stock awards, distribution equivalent rights to the Company’s officers, employees, directors, consultants and advisers. The maximum number of shares of common stock that may be issued pursuant to awards under the 2014 Plan is ten percent (10%) of the issued and outstanding shares of the Company’s common stock on an “as converted” basis on a rolling basis. The “as converted” shares include all shares of the Company’s common stock and all shares of the Company’s common stock issuable upon the conversion of outstanding preferred stock and other convertible securities, but do not include any shares of common stock issuable upon the exercise of options and other convertible securities issued pursuant to the Plan. During the three months ended March 31, 2016 and the years ended December 31, 2015 and 2014, the Company did not grant any stock options under the Plan.

Series A Convertible Preferred Stock
Pursuant to the SPA with the Protea Group, on June 13, 2014, the Company issued 100 shares of Series A Convertible Preferred Stock (“Series A”).

The terms of the Series A are described below:

Voting
The Series A preferred stock holders are entitled to vote, together with the holders of common stock as one class, on all matters to which holders of common stock shall be entitled to vote, in the same manner and with the same effect as the common stock holders with the same number of votes per share that equals the number of shares of common stock into which the Series A preferred stock is convertible at the time of such vote.

Dividends
The holders of the Series A Preferred shall be entitled to receive dividends, when, as, and if declared by the Board, ratably with any declaration or payment of any dividend on common stock. To date there have been no dividends declared or paid by the Board of Directors.

 
F-19

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)

Liquidation
The holders of the Series A shall be entitled to receive, before and in preference to, any distribution of any assets of the Company to the holders of common stock, an amount equal to $0.0001 per share, plus any declared but unpaid dividends. The liquidation preference as of March 31, 2016, December 31, 2015 and 2014 approximates par value.

Conversion
The Series A is convertible into 33% of the issued and outstanding shares of common stock on a fully diluted basis, assuming the conversion, exercise, or exchange for shares of common stock of all convertible securities issued and outstanding immediately prior to such conversion, including the Series A Preferred stock, all outstanding warrants and options, and all outstanding convertible debt, notes, debentures, or any other securities which are convertible, exercisable, or exchangeable for shares of common stock. The Series A Convertible Preferred Stock is subject to mandatory conversion upon the occurrence of certain triggering events including a public offering coupled with an equity-linked financing with an offering price that values the Company prior to consummation of such financing at not less than $12,000,000 and the aggregate gross proceeds to the Company (before deduction of underwriting discounts and registration expenses) are not less than $6,000,000. The Company did not recognize any amounts associated with the beneficial conversion feature at the date of issuance of such convertible preferred shares due to the unsatisfied condition associated with the pre-money valuation. If, and when, the pre-money valuation is determined, the Company may be required to recognize the value of the beneficial conversion feature, if any, in earnings.

During the three months ended March 31, 2016, Protea Group converted 35 shares of Series A Convertible Preferred Stock into 853,778 shares of commons stock. During the year ended December 31, 2015, Protea Group converted 29 shares of Series A Convertible Preferred Stock into 707,416 shares of commons stock. During the year ended December 31, 2014, no shares were converted. In April 2016, Protea Group converted the balance of 36 shares of Series A Convertible Preferred Stock into 878,171 shares of common stock.

Note 12 - Warrants

Stock warrant transactions for the period from January 30, 2014 (date of inception) through March 31, 2016 were as follows:
 
         
Exercise
   
Weighted
 
         
Price Per
   
Average
 
   
Warrants
   
Share
   
Exercise Price
 
                   
Warrants issued and exercisable at January 30, 2014
    -       -       -  
                         
Granted during the year
    68,400     $ 7.37     $ 7.37  
Expired during the year
    -       -       -  
Exercised during the year
    -       -       -  
Warrants issued and exercisable at December 31, 2014
    68,400     $ 7.37     $ 7.37  
                         
Granted during the year
    594,074     $ 7.37     $ 7.37  
Expired during the year
    -       -       -  
Exercised during the year
    -       -       -  
Warrants issued and exercisable at December 31, 2015
    662,474     $ 7.37     $ 7.37  
                         
Granted during the year
    44,705     $ 5.58     $ 5.58  
Expired during the year
    -       -       -  
Exercised during the year
    -       -       -  
Warrants issued and exercisable at March 31, 2016 (unaudited)
    707,179     $ 5.58 - $7.37     $ 5.84  

 
F-20

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)
 
           
Weighted Average
       
     
Number of Shares
   
Remaining Contract
   
Weighted Average
 
Exercise Price
   
Under Warrants
   
Life in Years
   
Exercise Price
 
$ 5.58       605,127       4.72     $ 5.58  
$ 7.37       102,052       4.70     $ 7.37  
                             
Total warrants
      707,179       4.72     $ 5.84  
 
Per the terms of exchange agreements executed on March 31, 2016 with certain holders of the Company’s Original Issue Discounted Convertible Notes, the associated warrants had their exercise price adjusted to $5.58 per share with no other adjustments made to the warrants, see Note 10 above.
 
During the three months ended March 31, 2016, 5,259 immediately vesting warrants were issued to investment bankers in association with the placement of original issue discounted convertible notes with a value of $7,048, using the same valuation used to value the warrants issued in connection with the original issue discounted convertible notes, see Note 10 above. This amount was included in G & A expenses.
 
During the year ended December 31, 2015, 102,052 immediately vesting warrants were issued to investment bankers in association with the placement of original issue discounted convertible notes with a value of $218,337, using the same valuation used to value the warrants issued in connection with the original issue discounted convertible notes, see Note 10 above. This amount was included in G & A expenses.
 
During the year ended December 31, 2014, no such warrants were issued.

Through June 13, 2016 , 122,721 warrants were issued to investors and 11,688 warrants were issued to placement agents in connection with the issuance of $700,000 of additional original issue discounted convertible notes.
 
Note 13 - Interest Expense

During the three months ended March 31, 2016 and 2015, the Company incurred $713,680 and $144,746, respectively, of interest expense. During the three months ended March 31, 2016 and 2015, $710,988 and $133,479, respectively, of this amount was in connection with the Convertible Notes issued by the Company in the form of accretion of original issue debt discount and amortization of the debt discount related to the warrants. During the three months ended March 31, 2016 and 2015, the Company also incurred $2,693 and $11,268, respectively, of interest expense in connection with the promissory notes issued by the Company.

During the years ended December 31, 2015 and 2014, the Company incurred $1,587,533 and $68,149, respectively, of interest expense. During the years ended December 31, 2015 and 2014, $1,561,677 and $59,029, respectively, of this amount was in connection with the Convertible Notes issued by the Company in the form of accretion of original issue debt discount and amortization of the debt discount related to the warrants. During the years ended December 31, 2015 and 2014, the Company also incurred $25,856 and $9,120, respectively, of interest expense in connection with the promissory notes issued by the Company.

Note 14 - Agreements
 
Mayoly Agreement
On March 22, 2010, the Predecessor entered into a joint research and development agreement (the “2010 Agreement”) with Laboratoires Mayoly Spindler SAS (“Mayoly”) with no consideration exchanged, pursuant to which Mayoly sublicensed certain of its exclusive rights to a genetically engineered yeast strain cell line on which MS1819 is based that derive from a Usage and Cross-Licensing Agreement dated February 2, 2006 (the “INRA Agreement”) between Mayoly and  INRA TRANSFERT, a subsidiary of the National Institute for Agricultural Research (“INRA”) in charge of patent management acting for and on behalf of the National Centre of Scientific Research (“CNRS”) and INRA.

Effective January 1, 2014, the Predecessor entered into an amended and restated joint research and development agreement with Mayoly (the “Mayoly Agreement”) with no consideration exchanged, pursuant to which the Predecessor acquired the exclusive right, with the right to sublicense, to commercialize human pharmaceuticals based on the MS1819 lipase within the following territories: U.S. and Canada, South America (excluding Brazil), Asia (excluding China and Japan), Australia, New Zealand and Israel.  Rights to the following territories are held jointly with Mayoly: Brazil, Italy, Portugal, Spain, China and Japan.  The Mayoly Agreement requires the Predecessor to pay 70% of all development costs and requires each of the parties to use reasonable efforts to:

 
F-21

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)
 
· 
devote sufficient personnel and facilities required for the performance of its assigned tasks;
· 
make available appropriately qualified personnel to supervise, analyze and report on the results obtained in the furtherance of the development program; and
· 
deploy such scientific, technical, financial and other resources as is necessary to conduct the development program.

The Agreement grants the Predecessor the right to cure any breach by Mayoly of its obligations under the INRA agreement. In connection with the Acquisition, the Predecessor, with the consent of INRA and CNRS, assigned all of it rights, title and interest in and to the 2014 Agreement to the AzurRx Europe SAS.

The Agreement includes a €1,000,000 payment due to Mayoly upon the U.S. FDA approval of MS1819.

INRA Agreement
In February 2006, Mayoly and INRA TRANSFERT, on behalf of INRA and CNRS, entered into a Usage and Cross-Licensing Agreement granting Mayoly exclusive worldwide rights to exploit Yarrowia lipolytica and other lipase proteins based on their patents for use in humans. The INRA Agreement provides for the payment by Mayoly of royalties on net sales, subject to Mayoly’s right to terminate such obligation upon the payment of a lump sum specified in the agreement.

Employment Agreement
On January 3, 2016, the Company entered into an employment agreement with its President and Chief Executive Officer, Johan Spoor. The employment agreement provides for a term expiring January 2, 2019. The Company may terminate Mr. Spoor’s employment at any time and for any reason, or for no reason. Mr. Spoor may terminate his employment at any time and for any reason, or for no reason.   During the term and for a period of twelve (12) months thereafter, Mr. Spoor shall not engage in competition with the Company either directly or indirectly, in any manner or capacity.
 
The Company will pay Mr. Spoor a base salary of $350,000 per year, which shall  automatically  increase  to  $425,000 upon (i) consummation of the Company’s initial public offering which results in the listing of the Company’s common stock on The NASDAQ Stock Market or NYSE MKT, or (ii) consummation of a merger or consolidation of the Company with or into any other corporation or corporations, or a sale of all or  substantially all of the assets of the Company, or the effectuation by the Company of a transaction or series of related transactions in which more than 50% of the voting shares of the Company is disposed of or conveyed, and in each such case the Company becomes  a  public  reporting  company which  results  in  the  listing  of  the  Company’s shares (or shares of the Company’s parent company) on The NASDAQ Stock Market or NYSE MKT (the “Public Event”). At the sole discretion of the Board or the Compensation Committee of the Board, following each calendar year of employment, Mr. Spoor shall be eligible to receive an additional cash bonus based on his attainment of certain financial, clinical development, and/or business milestones to be established annually by the Board or the Compensation Committee.
 
In addition, Mr. Spoor shall be issued 100,000 shares of common stock, which vest as follows: (i) 50,000 Restricted Shares upon the first commercial sale in the United States of MS1819, and (ii) 50,000 Restricted Shares upon the total market capitalization of the Company exceeding $1 billion dollars for 20 consecutive trading days, in each case subject to the earlier determination of a majority of the Board.  In the event of a Change of Control (defined), all of the Restricted Shares shall vest in full.  The estimated fair value at the date of grant was $216,000.  Mr. Spoor shall also be issued 380,000 10-year stock options pursuant to the Company’s Amended and Restated Stock Option Plan, which options shall vest as follows so long as the Executive is serving as Chief Executive Officer or President at such  time: (i) 100,000 of such stock options shall vest upon consummation of the Public Event, (ii)  50,000 of such stock options shall vest upon the Company initiating a Phase II clinical trial in the United States for MS1819 (i.e., upon the first individual enrolled in the trial),  (iii)  50,000 of such stock options shall  vest upon the Company completing a Phase II clinical trial in the United States for MS1819, (iv) 100,000 of such stock options shall vest upon the Company initiating a Phase III clinical trial in the United States for MS1819, (v) 50,000 of such stock options shall vest upon the Company initiating a Phase  I clinical trial in  the United States for any product other than MS1819, and (vi) 30,000 of such stock options shall vest upon the determination of a majority of the Board.
 
On June 8, 2016, the Board clarified Mr. Spoor’s agreement as follows: the 380,000 options described have neither been granted nor priced since certain key provisions , particularly the underlying strike price, have not been determined.  The options will be granted at a future date to be determined by the Board, and the options will be priced at that future date when they are granted.
 
 
F-22

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)
 
If the Company terminates Mr. Spoor’s employment other than for cause, or he terminates for good reason, as both terms are defined in the agreement, the Company will pay him twelve (12) months of his base salary as severance. If the Company terminates Mr. Spoor’s employment other than for cause, or he terminates for good reason, in connection with a Change of Control, the Company will pay him eighteen (18) months of his base salary in lump sum as severance. Upon termination of Mr. Spoor’s employment, the Company may impose a restrictive covenant on him for up to twelve (12) months, provided that the Company must continue his severance payments to continue the covenant beyond nine (9) months.
 
Note 15 - Income Taxes
 
The Company is subject to taxation at the federal level in both the United States and France and at the state level in the United States. At March 31, 2016, December 31, 2015 and 2014, the Company had gross deferred tax assets of approximately $2,901,000, $2,412,000 and $645,000, respectively. As the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax asset, a valuation allowance of approximately $2,901,000, $2,412,000 and $645,000, respectively, has been established at March 31, 2016, December 31, 2015 and 2014.

The significant components of the Company’s net deferred tax assets (liabilities) consisted of:

   
March 31,
             
   
2016
   
December 31,
   
December 31,
 
   
(Unaudited)
   
2015
   
2014
 
Gross deferred tax assets:
                 
   Net operating loss carry-forwards
  $ 2,901,000     $ 2,412,000     $ 645,000  
   Deferred tax asset valuation allowance
    (2,901,000 )     (2,412,000 )     (645,000 )
Net deferred tax asset
  $ -     $ -     $ -  
 
Income taxes computed using the federal statutory income tax rate differs from the Company’s effective tax rate primarily due to the following:

   
March 31,
             
   
2016
   
December 31,
   
December 31,
 
   
(Unaudited)
   
2015
   
2014
 
Income taxes benefit (expense) at statutory rate
    34 %     34 %     34 %
State income tax, net of federal benefit
    11 %     11 %     11 %
Change in valuation allowance
    (45 %)     (45 %)     (45 %)
      0 %     0 %     0 %
 
At March 31, 2016, the Company has gross net operating loss carry-forwards for U.S. federal and state income tax purposes of approximately $6,405,000 and $6,402,000, respectively, which expire in the year 2036. The net increase in the valuation allowance for the three months ended March 31, 2016 was approximately $489,000.
 
At December 31, 2015, the Company has gross net operating loss carry-forwards for U.S. federal and state income tax purposes of approximately $5,325,000 and $5,322,000, respectively, which expire in the year 2035. The net increase in the valuation allowance for the year ended December 31, 2015 was approximately $1,767,000.
 
At December 31, 2014, the Company has gross net operating loss carry-forwards for U.S. federal and state income tax purposes of approximately $1,425,000 and $1,422,000, respectively, which expire in the year 2034. The net increase in the valuation allowance for the year ended December 31, 2014 was approximately $645,000.
 
The Company acquired a French subsidiary during 2014. The operations of the subsidiary are not taxed in the United States and this is not considered in the tax provision. At December 31, 2015 and 2014, the Company has approximately $5,052,000 and $2,722,000, respectively, in net operating losses which it can carryforward indefinitely to offset against future French income.
 
 
F-23

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)
 
ASC 740 prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At March 31, 2016, December 31, 2015 and 2014, the Company had taken no uncertain tax positions that would require disclosure under ASC 740.

Note 16 - Net Loss per Common Share

Basic net loss per share is computed by dividing net loss available to common shareholders 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.

For the three months ended March 31, 2016, diluted net loss per share did not include the effect of 707,179 shares of common stock issuable upon the exercise of outstanding warrants; 1,194,364 shares of common stock issuable upon the conversion of promissory notes and convertible debt; and 878,171 shares of common stock issuable upon the conversion of the Series A preferred stock, as their effect would be anti-dilutive.

For the three months ended March 31, 2015, diluted net loss per share did not include the effect of 172,367 shares of common stock issuable upon the exercise of outstanding warrants; 408,454 shares of common stock issuable upon the conversion of promissory notes and convertible debt; and 2,439,365 shares of common stock issuable upon the conversion of the Series A preferred stock, as their effect would be anti-dilutive.

For the year ended December 31, 2015, diluted net loss per share did not include the effect of 662,474 shares of common stock issuable upon the exercise of outstanding warrants; 1,141,769   shares of common stock issuable upon the conversion of promissory notes and convertible debt; and 1,731,949 shares of common stock issuable upon the conversion of the Series A preferred stock, as their effect would be anti-dilutive.

For the period of inception (January 30, 2014) through December 31, 2014, diluted net loss per share did not include the effect of 68,400 shares of common stock issuable upon the exercise of outstanding warrants, 197,419   shares of common stock issuable upon the conversion of promissory notes and convertible debt, and 1,896,620 shares of common stock issuable upon the conversion of the Series A preferred stock, as their effect would be anti-dilutive.

Note 17 - Related Party Transactions

During the years ended December 31, 2015 and 2014, the Company employed the services of JIST Consulting (“JIST”), a company controlled by Johan M. Spoor, the Company’s President and a Director, as a consultant for business strategy, financial modeling, and fundraising. Expense recorded in general and administrative expense in the accompanying statements of operations related to JIST for the years ended December 31, 2015 and 2014 was $478,400 and $139,100, respectively. Included in accounts payable at March 31, 2016, December 31, 2015 and is $508,300, $508,300, and $139,100, respectively, for JIST relating to Mr. Spoor’s services. Mr. Spoor received no other compensation from the Company other than reimbursement of related travel expenses.

During the years ended December 31, 2015 and 2014, the Company's President, Christine Rigby-Hutton, was employed through Rigby-Hutton Management Services (“RHMS”). Expense recorded in general and administrative expense in the accompanying statements of operations related to RHMS for the years ended December 31, 2015 and 2014 was $27,750 and $99,142, respectively. Included in accounts payable at March 31, 2016, December 31, 2015 and 2014 is $38,453, $38,453 and $80,430, respectively, for RHMS for Ms. Rigby-Hutton’s services. Ms. Rigby-Hutton received no other compensation from the Company other than reimbursement of related travel expenses. Ms. Rigby-Hutton resigned from the Company effective April 20, 2015.

 
F-24

 
Notes to Consolidated Financial Statements, AzurRx Biopharma Inc., March 31, 2016, December 31, 2015 and 2014 (Information pertaining to the three month periods ended March 31, 2016 and 2015 are unaudited)
 
From October 1, 2015 through December 31, 2015, the Company used the services of Edward Borkowski, a member of the Board of Directors and the Company’s audit committee chair, as a financial consultant. Expense recorded in general and administrative expense in the accompanying statements of operations related to Mr. Borkowski for the year ended December 31, 2015 was $90,000. Included in accounts payable at March 31, 2016 and December 31, 2015 is $90,000 for Mr. Borkowski’s services. Mr. Borkowski received no other compensation from the Company other than reimbursement of related travel expenses. On October 14, 2014 and March 12, 2015, the Company issued original issue discounted convertible notes to Edward Borkowski, a director and the Company’s audit committee chair, in the aggregate principal amount of $300,000. The notes will automatically convert into shares of the Company’s common stock upon the consummation of this offering at a conversion price equal to the principal amount divided by the lesser of $6.45 per share or the per share price of the Company’s common stock in this offering, multiplied by 80%. Mr. Borkowski has signed an exchange agreement related to these notes as detailed in Note 10 above.
 
On August 31, 2014, January 31, 2015, February 28, 2015 and May 31, 2015, the Company issued promissory notes to Matthew Balk and his affiliates in the aggregate principal amount of $236,000. These notes have been repaid in full as to $50,000 on November 11, 2014, $111,000 on April 3, 2015, and $75,000 on August 7, 2015.  Mr. Balk holds voting and dispositive power over the shares held by Pelican Partners LLC, which owns 40%, 47%, and 64%, respectively, of the outstanding common stock of the Company as of March 31, 2016 and December 31, 2015 and 2014.
 
In July 2014, the Company issued promissory notes to Johan M. (Thijs) Spoor, the Company’s President, Chief Operating Officer and Chairman of the Board, in the aggregate principal amount of $10,000. These notes were repaid in full as to $5,000 on October 17, 2014 and $5,000 on November 10, 2014.
 

 

 
AZURRX BIOPHARMA , INC.
 
 

 
  2,142,857   Shares
 
Common Stock
 
 
 

 
 
 
 
 
 
 

 
PROSPECTUS
 
 
 
 
 
 
WallachBeth Capital, LLC                              Network 1 Financial Securities, Inc.

Through and including        , 2016 (the 25 th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to a dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or membership.
 

PART II
 
INFORMATION NOT REQUIRED IN PROSPECTUS
 
Item 13. Other Expenses of Issuance and Distribution
 
The following table sets forth the various expenses, all of which will be borne by the registrant, in connection with the sale and distribution of the securities being registered, other than the underwriting discounts and commissions. All amounts shown are estimates except for the SEC registration fee and the FINRA filing fee.
 
SEC registration fee
  $ 1,510.50  
FINRA fees
  $ 3,950.00  
Printing and engraving expenses
  $ 5,000.00  
Accounting fees and expenses
  $ 425,000.00  
Legal fees and expenses
  $
300,000.00
 
Miscellaneous
  $ 14,579.50  
Total
  $ 750,000.00  
 
Item 14. Indemnification of Directors and Officers.
 
Amended and Restated Bylaws
 
Pursuant to our bylaws, our directors and officers will be indemnified to the fullest extent allowed under the laws of the State of Delaware for their actions in their capacity as our directors and officers.
 
We must indemnify any person made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (“Proceeding”) by reason of the fact that he is or was a director, against judgments, penalties, fines, settlements and reasonable expenses (including attorney’s fees) (“Expenses”) actually and reasonably incurred by him in connection with such Proceeding if: (a) he conducted himself in good faith, and: (i) in the case of conduct in his own official capacity with us, he reasonably believed his conduct to be in our best interests, or (ii) in all other cases, he reasonably believes his conduct to be at least not opposed to our best interests; and (b) in the case of any criminal Proceeding, he had no reasonable cause to believe his conduct was unlawful.
 
We must indemnify any person made a party to any Proceeding by or in the right of us, by reason of the fact that he is or was a director, against reasonable expenses actually incurred by him in connection with such proceeding if he conducted himself in good faith, and: (a) in the case of conduct in his official capacity with us, he reasonably believed his conduct to be in our best interests; or (b) in all other cases, he reasonably believed his conduct to be at least not opposed to our best interests; provided that no such indemnification may be made in respect of any proceeding in which such person shall have been adjudged to be liable to us.
 
No indemnification will be made by unless authorized in the specific case after a determination that indemnification of the director is permissible in the circumstances because he has met the applicable standard of conduct.
 
Reasonable expenses incurred by a director who is party to a proceeding may be paid or reimbursed by us in advance of the final disposition of such Proceeding in certain cases.
 
We have the power to purchase and maintain insurance on behalf of any person who is or was our director, officer, employee, or agent or is or was serving at our request as an officer, employee or agent of another corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not we would have the power to indemnify him against such liability under the provisions of the amended and restated bylaws.


Delaware Law
 
We are incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, parties 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 such corporation), by reason of the fact that such person was an officer, director, employee or agent of such corporation, or is or was serving at the request of such person as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include 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, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses which such officer or director has actually and reasonably incurred. Our amended and restated certificate of incorporation and amended and restated bylaws provide for the indemnification of our directors and officers to the fullest extent permitted under the Delaware General Corporation Law.
 
Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:
 
 
transaction from which the director derives an improper personal benefit;
 
 
act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
 
 
unlawful payment of dividends or redemption of shares; or
 
 
breach of a director’s duty of loyalty to the corporation or its stockholders.
 
Our amended and restated certificate of incorporation and amended and restated bylaws include such a provision. Expenses incurred by any officer or director in defending any such action, suit or proceeding in advance of its final disposition shall be paid by us upon delivery to us of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by us.
 
Section 174 of the Delaware General Corporation Law provides, among other things, that a director who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption may be held liable for such actions. A director who was either absent when the unlawful actions were approved, or dissented at the time, may avoid liability by causing his or her dissent to such actions to be entered in the books containing minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.


Indemnification Agreements
 
As permitted by the Delaware General Corporation Law, we have entered, and intend to continue to enter, into separate indemnification agreements with each of our directors and executive officers, that require us to indemnify such persons against any and all expenses (including attorneys’ fees), witness fees, damages, judgments, fines, settlements and other amounts incurred (including expenses of a derivative action) in connection with any action, suit or proceeding, whether actual or threatened, to which any such person may be made a party by reason of the fact that such person is or was a director, an officer or an employee of us or any of our affiliated enterprises, provided that such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.
 
At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or preceding that may result in a claim for indemnification.
 
We have an insurance policy covering its officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act or otherwise.
 
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or controlling persons, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
 
Item 15. Recent Sales of Unregistered Securities.
 
The information below lists all of the securities sold by us during the past three years which were not registered under the Securities Act:
 
Between January 30, 2014 and September 2015, we sold 100 shares of Series A Convertible Preferred Stock and 3,584,321 shares of common stock.
 
Commencing on July 22, 2014, the Company, through a series of transactions with various investors, raised $896,000 through the issuance and sale of its promissory notes.
 
Commencing on October 10, 2014, the Company, through a series of transactions with various investors, raised $9,162,526 through the issuance and sale of its original issue discounted convertible notes and warrants to purchase an aggregate of 2,128,683 shares of common stock.
 
In July 2016, the Company issued  an aggregate of 105,000 shares of restricted stock to the Company’s non-executive members of its board of directors.
 
These securities were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder, in reliance on the recipient’s status as an “accredited investor” as defined in Rule 501(a) of Regulation D, except for the restricted stock grants which were issued pursuant to Rule 701 or Rule 506.
 
 
Item 16. Exhibits and Financial Statement Schedules.
 
     (a) The following exhibits are filed as part of this Registration Statement:
 
  1.1  
Form of Underwriting Agreement
       
  3.1  
Amended and Restated Certificate of Incorporation of the Registrant**
       
  3.2  
Amended and Restated Bylaws of the Registrant**
       
  4.1  
Form of Common Stock Certificate
       
  4.2  
Form of Investor Warrant**
       
  4.3  
Form of Underwriter Warrant
       
  5.1  
Opinion of Loeb & Loeb LLP regarding legality
       
  10.1  
Stock Purchase Agreement dated May 21, 2014 between the Registrant, Protea Biosciences Group, Inc. and its wholly-owned subsidiary, Protea Biosciences, Inc.**
       
  10.2  
Amended and Restated Joint Research and Development Agreement dated January 1, 2014 between the Registrant and Mayoly+**
       
  10.3  
Amended and Restated AzurRx BioPharma, Inc. 2014 Omnibus Equity Incentive Plan**
       
  10.4  
Employment Agreement between the Registrant and Mr. Spoor**
       
  14.1  
Code of Ethics of AzurRx BioPharma, Inc. Applicable To Directors, Officers And Employees**
       
  21.1  
Subsidiaries of the Registrant**
       
  23.1  
Consent of WeiserMazars LLP, independent registered public accounting firm
       
  23.2  
Consent of Loeb & Loeb LLP (included in Exhibit 5.1)
       
  24.1  
Power of Attorney (included on signature page)**
 
**   Previously filed.
 
+   Confidential treatment has been granted with respect to portions of this exhibit.
 
 
Item 17. Undertakings.
 
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
 
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
 
The undersigned registrant hereby undertakes that:
 
     (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
 
     (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 
SIGNATURES
 
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Brooklyn, New York, on July 29, 2016.
 
 
 
AZURRX BIOPHARMA, INC.
 
 
By:   /s/ Johan M. (Thijs) Spoor
         Name: Johan M. (Thijs) Spoor
         Title: President  and Chief Executive Officer
 
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities held on the dates indicated.

Signature
 
Title
 
Date
         
/s/ Johan M. (Thijs) Spoor    
 
President, Chief Executive Officer and Director
 
July 29, 2016
Johan M. (Thijs) Spoor
 
(principal executive officer and principal financial and accounting officer)
   
         
*                                                
 
Chairman of the Board of Directors
 
July 29, 2016
Edward J. Borkowski
       
         
*                                                
 
Director
 
July 29, 2016
Alastair Riddell
       
         
  *                                               
 
Director
 
July 29, 2016
Maged Shenouda
       
 
 
 
* /s/ Johan M. (Thijs) Spoor
Attorney-in-fact
 
 
 
Exhibit 1.1
 
UNDERWRITING AGREEMENT
 
among
 
AZURRX BIOPHARMA, INC.
 
and
 
WALLACHBETH Capital, LLC and NETWORK 1 FINANCIAL SECURITIES, INC.,
 
as Representatives of the Several Underwriters
 
 
 

 
 
AZURRX BIOPHARMA, INC.
 
UNDERWRITING AGREEMENT
 
New York, New York
[●], 2016
WallachBeth Capital, LLC
Network 1 Financial Securities, Inc.
As Representatives of the several Underwriters named on Schedule 1 attached hereto

c/o WallachBeth Capital, LLC
100 Wall Street, Suite 6600
New York, NY 10006
 
c/o Network 1 Financial Securities, Inc.
2 Bridge Avenue, Suite 241
Red Bank, NJ 07701
 
Ladies and Gentlemen:
 
The undersigned, AzurRx BioPharma, Inc., a corporation formed under the laws of the State of Delaware (collectively with its subsidiaries and affiliates, including, without limitation, all entities disclosed or described in the Registration Statement (as hereinafter defined) and set forth on Schedule 4 attached hereto, as being subsidiaries or affiliates of AzurRx BioPharma, Inc., the “Company”), hereby confirms its agreement (this “Agreement”) with the Underwriters named in Schedule I hereto (the “Representatives” and such other underwriters being collectively called the “Underwriters” or, individually, an “Underwriter”) as follows:
 
1.            Purchase and Sale of Shares .
 
1.1            Firm Shares .
 
1.1.1            Nature and Purchase of Firm Shares .
 
(i)           On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the several Underwriters, an aggregate of [●] shares (“Firm Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”).
 
(ii)           The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Shares set forth opposite their respective names on Schedule 1 attached hereto and made a part hereof at a purchase price of $[●] per share ([93]% of the per Firm Share offering price). The Firm Shares are to be offered initially to the public at the offering price set forth on the cover page of the Prospectus (as defined in Section 2.1.1 hereof).
 
1.1.2            Shares Payment and Delivery .
 
(i)           Delivery and payment for the Firm Shares shall be made at 10:00 a.m., Eastern time, on the third (3 rd ) Business Day following the effective date (the “Effective Date”) of the Registration Statement (as defined in Section 2.1.1 below) (or the fourth (4th) Business Day following the Effective Date if the Registration Statement is declared effective after 4:01 p.m., Eastern time) or at such earlier time as shall be agreed upon by the Representatives and the Company, at the offices of Cozen O’Connor, 277 Park Avenue, New York NY 10172 (“Representative Counsel”), or at such other place (or remotely by facsimile or other electronic transmission) as shall be agreed upon by the Representatives and the Company. The hour and date of delivery and payment for the Firm Shares is called the “Closing Date.”
 
(ii)           Payment for the Firm Shares shall be made on the Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company upon delivery of the certificates (in form and substance satisfactory to the Underwriters) representing the Firm Shares (or through the facilities of the Depository Trust Company (“DTC”)) for the account of the Underwriters. The Firm Shares shall be registered in such name or names and in such authorized denominations as the Representatives may request in writing at least two (2) full Business Days prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Shares except upon tender of payment by the Representatives for all of the Firm Shares. The term “Business Day” means any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions are authorized or obligated by law to close in New York, New York.
 
 
 

 
 
1.2            Over-allotment Option .
 
1.2.1            Option Shares . For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares, the Company hereby grants to the Underwriters an option to purchase up to [●] additional shares of Common Stock, representing fifteen percent (15%) of the Firm Shares sold in the offering, from the Company (the “Over-allotment Option”). Such [●] additional shares of Common Stock, the net proceeds of which will be deposited with the Company’s account, are hereinafter referred to as “Option Shares.” The purchase price to be paid per Option Share shall be equal to the price per Firm Share set forth in Section 1.1.1 hereof. The Firm Shares and the Option Shares are hereinafter referred to together as the “Public Securities.” The offering and sale of the Public Securities is hereinafter referred to as the “Offering.”
 
1.2.2            Exercise of Option . The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representatives as to all (at any time) or any part (from time to time) of the Option Shares within 45 days after the Effective Date. The Underwriters shall not be under any obligation to purchase any Option Shares prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of oral notice to the Company from the Representatives, which must be confirmed in writing by overnight mail or facsimile or other electronic transmission setting forth the number of Option Shares to be purchased and the date and time for delivery of and payment for the Option Shares (the “Option Closing Date”), which shall not be later than five (5) full Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representatives, at the offices of Representative Counsel or at such other place (including remotely by facsimile or other electronic transmission) as shall be agreed upon by the Company and the Representatives. If such delivery and payment for the Option Shares does not occur on the Closing Date, the Option Closing Date will be as set forth in the notice. Upon exercise of the Over-allotment Option with respect to all or any portion of the Option Shares, subject to the terms and conditions set forth herein, (i) the Company shall become obligated to sell to the Underwriters the number of Option Shares specified in such notice and (ii) each of the Underwriters, acting severally and not jointly, shall purchase that portion of the total number of Option Shares then being purchased as set forth in Schedule 1 opposite the name of such Underwriter.
 
 
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1.2.3            Payment and Delivery . Payment for the Option Shares shall be made on the Option Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company upon delivery to you of certificates (in form and substance satisfactory to the Underwriters) representing the Option Shares (or through the facilities of DTC) for the account of the Underwriters. The Option Shares shall be registered in such name or names and in such authorized denominations as the Representatives may request in writing at least two (2) full Business Days prior to the Option Closing Date. The Company shall not be obligated to sell or deliver the Option Shares except upon tender of payment by the Representatives for applicable Option Shares.
 
1.3            Representatives’ Warrants .
 
1.3.1            Purchase Warrants . The Company hereby agrees to issue and sell to the Representatives (and/or their designees) on the Closing Date option (“Representatives’ Warrants”) for the purchase of an aggregate of [●] shares of Common Stock, representing 5% of the Firm Shares (excluding the Option Shares), for an aggregate purchase price of $100.00. The Representatives’ Warrant agreement, in the form attached hereto as Exhibit A (the “Representatives’ Warrant Agreement”), shall be exercisable, in whole or in part, commencing on a date which is one (1) year after the Effective Date and expiring on the five-year anniversary of the Effective Date at an initial exercise price per share of Common Stock of $[●], which is equal to 120% of the initial public offering price of the Firm Shares. The Representatives’ Warrant Agreement and the shares of Common Stock issuable upon exercise thereof are hereinafter referred to together as the “Representatives’ Securities.” The Representatives understand and agree that there are significant restrictions pursuant to FINRA Rule 5110 against transferring the Representatives’ Warrant Agreement and the underlying shares of Common Stock during the one hundred eighty (180) days after the Effective Date and by its acceptance thereof shall agree that it will not sell, transfer, assign, pledge or hypothecate the Representatives’ Warrant Agreement, or any portion thereof, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities for a period of one hundred eighty (180) days following the Effective Date to anyone other than (i) an Underwriter or a selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the Representatives or of any such Underwriter or selected dealer; and only if any such transferee agrees to the foregoing lock-up restrictions.
 
 
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1.3.2            Delivery . Delivery of the Representatives’ Warrant Agreement shall be made on the Closing Date and shall be issued in the name or names and in such authorized denominations as the Representatives may request in writing.
 
2.            Representations and Warranties of the Company . The Company represents and warrants to the Underwriters as of the Applicable Time (as defined below), as of the Closing Date and as of the Option Closing Date, if any with respect to AzurRx BioPharma, Inc., and solely in reliance upon certificates of officers of the entities listed on Schedule 4, with respect to such entities as follows:
 
2.1            Filing of Registration Statement .
 
2.1.1            Pursuant to the Securities Act . The Company has filed with the U.S. Securities and Exchange Commission (the “Commission”) a registration statement, and an amendment or amendments thereto, on Form S-1 (File No. 333-212511), including any related prospectus or prospectuses, for the registration of the Public Securities and the Representatives’ Securities under the Securities Act of 1933, as amended (the “Securities Act”), which registration statement and amendment or amendments have been prepared by the Company in all material respects in conformity with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act (the “Securities Act Regulations”) and will contain all material statements that are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement became effective (including the Preliminary Prospectus included in the registration statement, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Securities Act Regulations (the “Rule 430A Information”)), is referred to herein as the “Registration Statement.” If the Company files any registration statement pursuant to Rule 462(b) of the Securities Act Regulations, then after such filing, the term “Registration Statement” shall include such registration statement filed pursuant to Rule 462(b). The Registration Statement has been declared effective by the Commission on the date hereof.
 
Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “Preliminary Prospectus.” The Preliminary Prospectus, subject to completion, dated [●], 2016, that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the “Pricing Prospectus.” The final prospectus in the form first furnished to the Underwriters for use in the Offering is hereinafter called the “Prospectus.” Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer to the latest Preliminary Prospectus included in the Registration Statement.
 
 “Applicable Time” means [TIME] [a.m./p.m.], Eastern time, on the date of this Agreement.
 
 
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“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Securities Act Regulations (“Rule 433”), including without limitation any “free writing prospectus” (as defined in Rule 405 of the Securities Act Regulations) relating to the Public Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Public Securities or of the Offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).
 
“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “ bona fide electronic road show,” as defined in Rule 433 (the “Bona Fide Electronic Road Show”)), as evidenced by its being specified in Schedule 2-B hereto.
 
“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.
 
“Pricing Disclosure Package” means any Issuer General Use Free Writing Prospectus issued at or prior to the Applicable Time, the Pricing Prospectus and the information included on Schedule 2-A hereto, all considered together.
 
2.1.2            Pursuant to the Exchange Act . The Company has filed with the Commission a Form 8-A (File Number 000-[●]) providing for the registration pursuant to Section 12(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the shares of Common Stock. The registration of the shares of Common Stock under the Exchange Act has been declared effective by the Commission on or prior to the date hereof. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the shares of Common Stock under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration.
 
2.2            Stock Exchange Listing . The shares of Common Stock have been approved for listing on the NASDAQ Capital Market (the “Exchange”) subject only to official notice of issuance, and the Company has taken no action designed to, or likely to have the effect of, delisting the shares of Common Stock from the Exchange, nor has the Company received any notification that the Exchange is contemplating terminating such listing except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
 
2.3            No Stop Orders, etc . Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has instituted or, to the Company’s knowledge, threatened to institute, any proceedings with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information.
 
2.4            Disclosures in Registration Statement .
 
 
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2.4.1            Compliance with Securities Act and 10b-5 Representation .
 
(i)           Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus, including the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto, and the Prospectus, at the time each was filed with the Commission, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus delivered to the Underwriters for use in connection with this Offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
 
(ii)           Neither the Registration Statement nor any amendment thereto, at its effective time, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
 
(iii)           The Pricing Disclosure Package, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Limited Use Free Writing Prospectus does not conflict in any material respect with the information contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, and each such Issuer Limited Use Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Representatives expressly for use in the Registration Statement, the Pricing Prospectus or the Prospectus or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter consists solely of the disclosure contained in the “Underwriting” section of the Prospectus (the “Underwriters’ Information”).
 
(iv)           Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Date or at any Option Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to the Underwriters’ Information.
 
 
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2.4.2            Disclosure of Agreements . The agreements and documents described in the Registration Statement, the Pricing Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration Statement, the Pricing Disclosure Package and the Prospectus, or (ii) is material to the Company’s business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, none of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder except for such defaults that would not reasonably be expected to result in a Material Adverse Change (as defined in Section 2.5.1 below). To the best of the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses (each, a “Governmental Entity”), including, without limitation, those relating to environmental laws and regulations, except for such violations that would not reasonably be expected to result in a Material Adverse Change.
 
2.4.3            Prior Securities Transactions . No securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Preliminary Prospectus.
 
2.4.4            Regulations . The disclosures in the Registration Statement, the Pricing Disclosure Package and the Prospectus concerning the effects of federal, state, local and all foreign regulation on the Offering and the Company’s business as currently contemplated are correct in all material respects and no other such regulations are required to be disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus which are not so disclosed.
 
2.5            Changes After Dates in Registration Statement .
 
2.5.1            No Material Adverse Change . Since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except as otherwise specifically stated therein: (i) there has been no material adverse change in the financial position or results of operations of the Company, nor to the Company’s knowledge, any change or development that, singularly or in the aggregate, would involve a material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company (a “Material Adverse Change”); and (ii) there have been no material transactions entered into by the Company not in the ordinary course of business, other than as contemplated pursuant to this Agreement.
 
 
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2.5.2            Recent Securities Transactions, etc . Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, and except as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not: (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.
 
2.6            Independent Accountants . To the knowledge of the Company, WeiserMazars, LLP (the “Auditor”), whose report is filed with the Commission as part of the Registration Statement, the Pricing Disclosure Package and the Prospectus, is an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Auditor has not, during the periods covered by the financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.
 
2.7            Financial Statements, etc . The financial statements, including the notes thereto and supporting schedules, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, fairly in all material respects present the financial position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by GAAP); and any supporting schedules included in the Registration Statement present fairly in all material respects the information required to be stated therein. Except as included therein, no historical or pro forma financial statements are required to be included in the Registration Statement, the Pricing Disclosure Package or the Prospectus under the Securities Act or the Securities Act Regulations. The pro forma and pro forma as adjusted financial information and the related notes, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus have been properly compiled and prepared in accordance with the applicable requirements of the Securities Act and the Securities Act Regulations and present fairly in all material respects the information shown therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. All disclosures contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. Each of the Registration Statement, the Pricing Disclosure Package and the Prospectus discloses all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (a) neither the Company nor any of its direct and indirect subsidiaries, including each entity disclosed or described in the Registration Statement, the Pricing Disclosure Package and the Prospectus as being a subsidiary of the Company (each, a “Subsidiary” and, collectively, the “Subsidiaries”), has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions other than in the ordinary course of business, (b) the Company has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock, (c) there has not been any change in the capital stock of the Company or any of its Subsidiaries, or, other than in the course of business, any grants under any stock compensation plan, and (d) there has not been any material adverse change in the Company’s long-term or short-term debt.
 
 
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2.8            Authorized Capital; Options, etc . The Company had, at the date or dates indicated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company will have on the Closing Date the adjusted stock capitalization set forth therein. Except as set forth in, or contemplated by, the Registration Statement, the Pricing Disclosure Package and the Prospectus, on the Effective Date, as of the Applicable Time and on the Closing Date and any Option Closing Date, there will be no stock options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued shares of Common Stock of the Company or any security convertible or exercisable into shares of Common Stock of the Company, or any contracts or commitments to issue or sell shares of Common Stock or any such options, warrants, rights or convertible securities.
 
2.9            Valid Issuance of Securities, etc .
 
2.9.1            Outstanding Securities . All issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized shares of Common Stock conform in all material respects to all statements relating thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The offers and sales of the outstanding shares of Common Stock were at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky” laws or, based in part on the representations and warranties of the purchasers of such Shares, exempt from such registration requirements.
 
 
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2.9.2            Securities Sold Pursuant to this Agreement . The Public Securities and Representatives’ Securities have been duly authorized for issuance and sale and, when issued and paid for, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Public Securities and Representatives’ Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Public Securities and Representatives’ Securities has been duly and validly taken. The Public Securities and Representatives’ Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. All corporate action required to be taken for the authorization, issuance and sale of the Representatives’ Warrant Agreement has been duly and validly taken; the shares of Common Stock issuable upon exercise of the Representatives’ Warrant have been duly authorized and reserved for issuance by all necessary corporate action on the part of the Company and when paid for and issued in accordance with the Representatives’ Warrant and the Representatives’ Warrant Agreement, such shares of Common Stock will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; and such shares of Common Stock are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company.
 
2.10            Registration Rights of Third Parties . Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, no holders of any securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Securities Act or to include any such securities in a registration statement to be filed by the Company.
 
2.11            Validity and Binding Effect of Agreements . This Agreement and the Representatives’ Warrant Agreement have been duly and validly authorized by the Company, and, when executed and delivered, will constitute, the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
 
2.12            No Conflicts, etc . The execution, delivery and performance by the Company of this Agreement, the Representatives’ Warrant Agreement and all ancillary documents, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a material breach of, or conflict in any material respect with any of the terms and provisions of, or constitute a material default under, or result in the creation, modification, termination or imposition of any material lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any agreement or instrument to which the Company is a party; (ii) result in any violation of the provisions of the Company’s Certificate of Incorporation (as the same may be amended or restated from time to time, the “Charter”) or the by-laws of the Company; or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Entity as of the date hereof; except in the cases of clause (iii) above, for such breaches, conflicts or defaults that would not reasonably be expected to result in a Material Adverse Change.
 
 
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2.13            No Defaults; Violations . No material default exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the properties or assets of the Company is subject. The Company is not in violation of any term or provision of its Charter or by-laws.  The Company is not in violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any Governmental Entity, except for such violations that would not reasonably be expected to result in a Material Adverse Change.
 
2.14            Corporate Power; Licenses; Consents .
 
2.14.1            Conduct of Business . Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has all requisite corporate power and authority, and has all necessary authorizations, approvals, orders, licenses, certificates and permits (“Permits”) of and from any Governmental Entity that it needs as of the date hereof to conduct its business purpose as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except for such Permits, the absence of which would not reasonably be expected to have a Material Adverse Change.
 
2.14.2            Transactions Contemplated Herein . The Company has all corporate power and authority to enter into this Agreement and to carry out the provisions and conditions hereof, and all consents, authorizations, approvals and orders required in connection therewith have been obtained. No consent, authorization or order of, and no filing with, any court, government agency or other body is required for the valid issuance, sale and delivery of the Public Securities and the consummation of the transactions and agreements contemplated by this Agreement and the Representatives’ Warrant Agreement and as contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, except with respect to applicable federal and state securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
 
2.15            D&O Questionnaires . To the Company’s knowledge, all information contained in the questionnaires (the “Questionnaires”) completed by each of the Company’s directors and officers immediately prior to the Offering (the “Insiders”) as supplemented by all information concerning the Company’s directors, officers and principal shareholders as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, as well as in the Lock-Up Agreement (as defined in Section 2.24 below), provided to the Underwriters, is true and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed in the Questionnaires to become materially inaccurate or incorrect in any material respect.
 
 
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2.16            Litigation; Governmental Proceedings . There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s knowledge, any executive officer or director which has not been disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus or in connection with the Company’s listing application for the listing of the Public Securities on the Exchange, which individually or in the aggregate, if determined adversely to the Company would reasonably be expected to have a Material Adverse Change.
 
2.17            Good Standing . The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of the State of Delaware as of the date hereof, and is duly qualified to do business and is in good standing in each other jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify, singularly or in the aggregate, would not have or reasonably be expected to result in a Material Adverse Change.
 
2.18            Insurance . The Company carries or is entitled to the benefits of insurance, with reputable insurers, in such amounts and covering such risks which the Company believes are adequate, and all such insurance is in full force and effect. The Company has no reason to believe that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not reasonably be expected to result in a Material Adverse Change.
 
2.19            Transactions Affecting Disclosure to FINRA .
 
2.19.1            Finder’s Fees . Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by the Company or any Insider with respect to the sale of the Public Securities hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its shareholders that may affect the Underwriters’ compensation, as determined by FINRA.
 
2.19.2            Payments Within Twelve (12) Months . Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) in connection with the Offering to: (i) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the twelve (12) months prior to the Effective Date, other than the payment to the Underwriters as provided hereunder.
 
 
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2.19.3            Use of Proceeds . None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.
 
2.19.4            FINRA Affiliation . There is no (i) officer or director of the Company, (ii) beneficial owner of 5% or more of any class of the Company’s securities or (iii) beneficial owner of the Company’s unregistered equity securities which were acquired during the 180-day period immediately preceding the filing of the Registration Statement that is an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
 
2.19.5            Information . All information provided by the Company in its FINRA questionnaire to Representative Counsel specifically for use by Representative Counsel in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all material respects.
 
2.20            Foreign Corrupt Practices Act . None of the Company and its Subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its Subsidiaries or any other person acting on behalf of the Company and its Subsidiaries, has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any Governmental Entity or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have caused a Material Adverse Change or (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.
 
2.21            Compliance with OFAC . None of the Company and its Subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its Subsidiaries or any other person acting on behalf of the Company and its Subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), and the Company will not knowingly, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
 
2.22            Money Laundering Laws . The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.
 
 
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2.23            Officers’ Certificate . Any certificate signed by any duly authorized officer of the Company and delivered to you or to Representative Counsel shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.
 
2.24            Lock-Up Agreements . Schedule 3 hereto contains a complete and accurate list of the Company’s officers and directors (collectively, the “Lock-Up Parties”). The Company has caused each of the Lock-Up Parties to deliver to the Representatives an executed Lock-Up Agreement, in the form attached hereto as Exhibit B (the “Lock-Up Agreement”), prior to the execution of this Agreement.
 
2.25            Subsidiaries . All direct and indirect Subsidiaries of the Company are duly organized and in good standing under the laws of the place of organization or incorporation, and each Subsidiary is in good standing in each jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify would not have a Material Adverse Change. The Company’s ownership and control of each Subsidiary is as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
 
2.26            Related Party Transactions . There are no business relationships or related party transactions involving the Company or any other person required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus that have not been described as required.
 
2.27            Board of Directors . The Board of Directors of the Company is comprised of the persons set forth under the heading of the Pricing Prospectus and the Prospectus captioned “Management.” The qualifications of the persons serving as board members and the overall composition of the board comply with the Exchange Act, the Exchange Act Regulations, the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder (the “Sarbanes-Oxley Act”) applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors of the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board of Directors qualify as “independent,” as defined under the listing rules of the Exchange.
 
2.28            Sarbanes-Oxley Compliance .
 
2.28.1            Disclosure Controls . The Company has developed and currently maintains disclosure controls and procedures that comply in all material respects with Rule 13a-15 or 15d-15 under the Exchange Act Regulations, and such controls and procedures are effective to ensure that all material information concerning the Company will be made known on a timely basis to the individuals responsible for the preparation of the Company’s Exchange Act filings and other public disclosure documents.
 
 
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2.28.2            Compliance . The Company is, or at the Applicable Time and on the Closing Date will be, in material compliance with the provisions of the Sarbanes-Oxley Act applicable to it, and has implemented or will implement such programs and taken reasonable steps to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all of the material provisions of the Sarbanes-Oxley Act.
 
2.29            Accounting Controls . The Company and its Subsidiaries maintain systems of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply in all material respects with the requirements of the Exchange Act and have been designed by, or under the supervision of, their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company is not aware of any material weaknesses in its internal controls. The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are known to the Company’s management and that have adversely affected or are reasonably likely to adversely affect the Company’ ability to record, process, summarize and report financial information; and (ii) any fraud known to the Company’s management, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
 
2.30            No Investment Company Status . The Company is not and, after giving effect to the Offering and the application of the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be, required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.
 
2.31            No Labor Disputes . No labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the knowledge of the Company, is imminent.
 
2.32            Intellectual Property Rights . The Company and each of its Subsidiaries owns or possesses or has valid rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and similar rights (“Intellectual Property Rights”) necessary for the conduct of the business of the Company and its Subsidiaries as currently carried on and as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. To the knowledge of the Company, no action or use by the Company or any of its Subsidiaries necessary for the conduct of its business as currently carried on and as described in the Registration Statement and the Prospectus will involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property Rights of others. Neither the Company nor any of its Subsidiaries has received any notice alleging any such infringement, fee or conflict with asserted Intellectual Property Rights of others. Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change (A) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any of the Intellectual Property Rights owned by the Company; (B) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the rights of the Company in or to any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim, that would, individually or in the aggregate, together with any other claims referred to in this Section 2.32, reasonably be expected to result in a Material Adverse Change; (C) the Intellectual Property Rights owned by the Company and, to the knowledge of the Company, the Intellectual Property Rights licensed to the Company have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or in part, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims referred to in this Section 2.32, reasonably be expected to result in a Material Adverse Change; (D) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company infringes, misappropriates or otherwise violates any Intellectual Property Rights or other proprietary rights of others, the Company has not received any written notice of such claim and the Company is unaware of any other facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims referred to in this Section 2.32, reasonably be expected to result in a Material Adverse Change; and (E) to the Company’s knowledge, no employee of the Company is in or has ever been in violation in any material respect of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company, or actions undertaken by the employee while employed with the Company and could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change. To the Company’s knowledge, all material technical information developed by and belonging to the Company which has not been patented has been kept confidential. The Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus and are not described therein. The Registration Statement, the Pricing Disclosure Package and the Prospectus contain in all material respects the same description of the matters set forth in the preceding sentence. None of the technology employed by the Company has been obtained or is knowingly being used by the Company in material violation of any contractual obligation binding on the Company or, to the Company’s knowledge, any of its officers, directors or employees, or otherwise in material violation of the rights of any persons.
 
 
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2.33            Taxes . Each of the Company and its Subsidiaries has filed all material returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. Each of the Company and its Subsidiaries has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company or such respective Subsidiary. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. Except as disclosed in writing to the Underwriters, (i) no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company or its Subsidiaries, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company or its Subsidiaries. The term “taxes” means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes.
 
2.34            ERISA Compliance . The Company and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company or its “ERISA Affiliates” (as defined below) are in compliance in all material respects with ERISA. “ERISA Affiliate” means, with respect to the Company, any member of any group of organizations described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “Code”) of which the Company is a member.  No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.
 
2.35            Compliance with Laws . The Company: (A) is and at all times has been in compliance with all statutes, rules, or regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product manufactured or distributed by the Company (“Applicable Laws”), except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change; (B) has not received any warning letter, untitled letter or other correspondence or notice from any other Governmental Entity alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“Authorizations”); (C) possesses all material Authorizations and such material Authorizations are valid and in full force and effect and are not in material violation of any term of any such Authorizations; (D) has not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Governmental Entity or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such Governmental Entity or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding that if brought would result in a Material Adverse Change; (E) has not received notice that any Governmental Entity has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such Governmental Entity is considering such action; (F) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications and records, as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, and records, were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission); and (G) has not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or replacement, safety alert, post-sale warning, or other notice or action relating to the alleged lack of safety or any alleged product defect or violation and, to the Company’s knowledge, no third party has initiated, conducted or intends to initiate any such notice or action.
 
 
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2.36            Clinical Data and Regulatory Compliance . The Company’s clinical and non-clinical studies (collectively, “studies”) that are described in, or the results of which are referred to in, the Registration Statement, the Time of Sale Prospectus or the Prospectus were and, if still pending, are being conducted in all material respects in accordance with the study protocols submitted to the U.S. Food and Drug Administration (“FDA”) and/or with applicable FDA regulations; each description of the results of such studies is accurate and complete in all material respects and fairly presents the data derived from such studies, and the Company and its Subsidiaries have no knowledge of any other studies the results of which are inconsistent with, or otherwise call into question, the results described or referred to in the Registration Statement, the Time of Sale Prospectuses or the Prospectus; the Company and its Subsidiaries have made all such filings and obtained all such approvals as may be required by the FDA or from any other U.S. or foreign government or drug regulatory agency (collectively, the “Regulatory Agencies”) or any health care facility Institutional Review Board (“IRB”); neither the Company nor any of its Subsidiaries has received any notice of, or correspondence from, any Regulatory Agency or IRB requiring the termination or suspension of any clinical trials that are described or referred to in the Registration Statement, the Preliminary Prospectus or the Prospectus; and the Company and its Subsidiaries have each operated and currently are in compliance in all material respects with all applicable rules and regulations of the Regulatory Agencies.
 
2.37            Compliance with Health Care Laws . The Company and its Subsidiaries are in compliance with applicable Health Care Laws, except for any noncompliance that would not reasonably be expected to have a Material Adverse Change. For purposes of this Agreement, “Health Care Laws” means: (i) the Federal Food, Drug, and Cosmetic Act and the regulations promulgated thereunder; (ii) the Standards for Privacy of Individually Identifiable Health Information (the “Privacy Rule”), the Security Standards, and the Standards for Electronic Transactions and Code Sets promulgated under HIPAA, the Health Information Technology for Economic and Clinical Health Act (42 U.S.C. Section 17921 et seq.), and the regulations promulgated thereunder and any state or non-U.S. counterpart thereof or other law or regulation the purpose of which is to protect the privacy of individuals or prescribers; (iii) licensure, quality, safety and accreditation requirements under applicable federal, state, local or foreign laws or regulatory bodies; and (iv) all other local, state, federal, national, supranational and foreign laws, relating to the regulation of the Company or its Subsidiaries. Neither the Company nor its Subsidiaries have received written notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any court or arbitrator or Governmental Entity or third party alleging that any product operation or activity is in material violation of any Health Care Laws nor, to the Company’s knowledge, is any such claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action threatened. The Company and its Subsidiaries have filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Health Care Laws, and all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were timely, complete, accurate and not misleading on the date filed in all material respects (or were corrected or supplemented by a subsequent submission). Neither the Company nor its Subsidiaries are a party to any corporate integrity agreements, monitoring agreements, consent decrees, settlement orders, or similar agreements with or imposed by any Governmental Entity. Additionally, neither the Company, its Subsidiaries nor, to the Company’s knowledge, any of their respective employees, officers or directors has been excluded, suspended or debarred from participation in any U.S. federal health care program or human clinical research or, to the knowledge of the Company, is subject to a governmental inquiry, investigation, proceeding, or other similar action that could reasonably be expected to result in debarment, suspension, or exclusion.
 
 
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2.38            Ineligible Issuer . At the time of filing the Registration Statement and any post-effective amendment thereto, at the time of effectiveness of the Registration Statement and any amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations) of the Public Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.
 
2.39            Real Property . Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company and its Subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company and its Subsidiaries taken as a whole, in each case free and clear of all liens, encumbrances, security interests, claims and defects that do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or its Subsidiaries; and all of the leases and subleases material to the business of the Company and its Subsidiaries, considered as one enterprise, and under which the Company or any of its Subsidiaries holds properties described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, are in full force and effect, and neither the Company nor any Subsidiary has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such Subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.
 
 
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2.40            Contracts Affecting Capital . There are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405 of the Securities Act Regulations) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s or its Subsidiaries’ liquidity or the availability of or requirements for their capital resources required to be described or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus which have not been described or incorporated by reference as required.
 
2.41            Loans to Directors or Officers . There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company or its Subsidiaries to or for the benefit of any of the officers or directors of the Company, its Subsidiaries or any of their respective family members, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
 
2.42            Smaller Reporting Company . As of the time of filing of the Registration Statement, the Company was a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act Regulations.
 
2.43            Industry Data . The statistical and market-related data included in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate or represent the Company’s good faith estimates that are made on the basis of data derived from such sources.
 
2.44            Emerging Growth Company . From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly in or through any Person authorized to act on its behalf in any Testing-the Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “Emerging Growth Company”). “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act.
 
2.45            Testing-the-Waters Communications . The Company has not (i) alone engaged in any Testing-the-Waters Communications, other than Testing-the-Waters Communications with the written consent of the Representatives and with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company confirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule 2-C hereto. “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.
 
 
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3.            Covenants of the Company . The Company covenants and agrees as follows:
 
3.1            Amendments to Registration Statement . The Company shall deliver to the Representatives, prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representatives shall reasonably object in writing.
 
3.2            Federal Securities Laws .
 
3.2.1            Compliance . The Company, subject to Section 3.2.2, shall comply in all material respects with the requirements of Rule 430A of the Securities Act Regulations, and will notify the Representatives promptly, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed; (ii) of the receipt of any comments from the Commission; (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information; (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Public Securities and Representatives’ Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Securities Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the Offering of the Public Securities and Representatives’ Securities. The Company shall effect all filings required under Rule 424(b) of the Securities Act Regulations, in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and shall take such steps as it deems reasonably necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company shall use its commercially reasonable efforts to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.
 
3.2.2            Continued Compliance . The Company shall comply in all material respects with the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations so as to permit the completion of the distribution of the Public Securities as contemplated in this Agreement and in the Registration Statement, the Pricing Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“Rule 172”), would be) required by the Securities Act to be delivered in connection with sales of the Public Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) amend or supplement the Pricing Disclosure Package or the Prospectus in order that the Pricing Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser; or (iii) amend the Registration Statement or amend or supplement the Pricing Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the Securities Act or the Securities Act Regulations, the Company will promptly (A) give the Representatives notice of such event; (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Pricing Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representatives with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representatives or Representative Counsel shall reasonably object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representatives notice of any filings made pursuant to the Exchange Act or the Exchange Act Regulations within 48 hours prior to the Applicable Time. The Company shall give the Representatives notice of its intention to make any such filing from the Applicable Time until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof and will furnish the Representatives with copies of the related document(s) a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representatives or counsel for the Underwriters shall reasonably object.
 
 
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3.2.3            Exchange Act Registration . For a period of three (3) years after the date of this Agreement, the Company shall use its commercially reasonable efforts to maintain the registration of the shares of Common Stock under the Exchange Act. The Company shall not deregister the shares of Common Stock under the Exchange Act without the prior written consent of the Representatives.
 
3.2.4            Free Writing Prospectuses . The Company agrees that, unless it obtains the prior written consent of the Representatives, it shall not make any offer relating to the Public Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representatives shall be deemed to have consented to each Issuer General Use Free Writing Prospectus hereto and any “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by the Representatives. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Underwriters as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Underwriters and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
 
 
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3.2.5            Testing-the-Waters Communications . If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company shall promptly notify the Representatives and shall promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
 
3.3            Delivery to the Underwriters of Registration Statements . The Company has delivered or made available or shall deliver or make available to the Representatives and Representative Counsel, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and will also deliver to the Underwriters, upon request and without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
 
3.4            Delivery to the Underwriters of Prospectuses . The Company has delivered or made available or will deliver or make available to each Underwriter, without charge, as many copies of each Preliminary Prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
 
3.5            Effectiveness and Events Requiring Notice to the Representatives . The Company shall use its commercially reasonable efforts to cause the Registration Statement to remain effective with a current prospectus for at least nine (9) months after the Applicable Time, and shall notify the Representatives promptly and confirm the notice in writing: (i) of the effectiveness of the Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Public Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (iv) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for any additional information from the Commission; and (vi) of the happening of any event during the period described in this Section 3.5 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the Pricing Disclosure Package or the Prospectus untrue or that requires the making of any changes in (a) the Registration Statement in order to make the statements therein not misleading, or (b) in the Pricing Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company shall use its commercially reasonable efforts to obtain promptly the lifting of such order.
 
 
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3.6            Review of Financial Statements . For a period of three (3) years after the date of this Agreement, the Company, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company’s financial statements for each of the three fiscal quarters immediately preceding the announcement of any quarterly financial information.
 
3.7            Listing . The Company shall use its commercially reasonable efforts to maintain the listing of the shares of Common Stock (including the Public Securities) on the Exchange for at least three (3) years from the date of this Agreement.
 
3.8            Financial Public Relations Firm . As of the Effective Date, the Company shall have retained a financial public relations firm reasonably acceptable to the Representatives and the Company, which shall initially be [PUBLIC RELATIONS FIRM], which firm shall be experienced in assisting issuers in initial public offerings of securities and in their relations with their security holders, and shall retain such firm or another firm reasonably acceptable to the Representatives for a period of not less than two (2) years after the Effective Date.
 
3.9            Reports to the Representatives .
 
3.9.1            Periodic Reports, etc . For a period of three (3) years after the date of this Agreement, the Company shall furnish or make available to the Representatives copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish to the Representatives: (i) a copy of each periodic report the Company shall be required to file with the Commission under the Exchange Act and the Exchange Act Regulations; (ii) a copy of every press release and every news item and article with respect to the Company or its affairs which was released by the Company; (iii) a copy of each Form 8-K filed by the Company; (iv) five copies of each registration statement filed by the Company under the Securities Act; and (v) such additional documents and information with respect to the Company and the affairs of any future subsidiaries of the Company as the Representatives may from time to time reasonably request; provided the Representatives shall sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representatives and Representative Counsel in connection with the Representatives’ receipt of such information. Documents filed with the Commission pursuant to its EDGAR system shall be deemed to have been delivered to the Representatives pursuant to this Section 3.9.1.
 
 
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3.9.2            Transfer Agent; Transfer Sheets . For a period of one (1) year after the date of this Agreement, the Company shall retain a transfer agent and registrar acceptable to the Representatives (the “Transfer Agent”) and shall furnish to the Representatives at the Company’s sole cost and expense such transfer sheets of the Company’s securities as the Representatives may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and DTC. Transhare Corporation is acceptable to the Representatives to act as Transfer Agent for the shares of Common Stock.
 
3.9.3            Trading Reports . For a period of three (3) years after the date of this Agreement and so long the Public Securities are listed on the Exchange, the Company shall provide to the Representatives, at the Company’s expense, such reports published by the Exchange relating to price trading of the Public Securities, as the Representatives shall reasonably request.
 
3.10            Payment of Expenses
 
3.10.1            General Expenses Related to the Offering . The Company hereby agrees to pay on each of the Closing Date and the Option Closing Date, if any, to the extent not paid at the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the shares of Common Stock to be sold in the Offering (including the Over-allotment Shares) with the Commission; (b) all Public Filing System filing fees associated with the review of the Offering by FINRA; (c) all fees and expenses relating to the listing of such Public Securities on the Exchange and such other stock exchanges as the Company and the Representatives together determine; (d) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors in an amount not to exceed $5,000 in the aggregate; (e) all fees, expenses and disbursements, if any, relating to the registration or qualification of the Public Securities under the “blue sky” securities laws of such states and other jurisdictions as the Representatives may reasonably designate if the Offering is commenced on the Over-the-Counter Bulletin Board, and the reasonable fees upon the commencement of “blue sky” work by such counsel of up to $10,000; (f) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Public Securities under the securities laws of such foreign jurisdictions as the Representatives may reasonably designate; (g) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement, any Blue Sky Surveys and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representatives may reasonably deem necessary; (h) the costs and expenses of a public relations firm; (i) the costs of preparing, printing and delivering certificates representing the Public Securities; (j) fees and expenses of the transfer agent for the shares of Common Stock; (k) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (l) to the extent approved by the Company in writing, the costs associated with post-Closing advertising the Offering in the national editions of the Wall Street Journal and New York Times; (m) the costs associated with one set of bound volumes of the public offering materials as well as commemorative mementos and lucite tombstones, each of which the Company or its designee shall provide within a reasonable time after the Closing Date in such quantities as the Representatives may reasonably request up to $5,000; (n) the fees and expenses of the Company’s accountants; (o) the fees and expenses of the Company’s legal counsel and other agents and representatives; (p) the $25,000 cost associated with the Underwriter’s use of Ipreo’s book-building, prospectus tracking and compliance software for the Offering; (q) fees and expenses of the Representative Counsel not to exceed $100,000; and (r) up to $21,775 of the Underwriter’s actual accountable “road show” expenses for the Offering. The Representatives may deduct from the net proceeds of the Offering payable to the Company on the Closing Date, or the Option Closing Date, if any, the expenses set forth herein to be paid by the Company to the Underwriters, other than amounts already advanced to the Representatives as of the date of this Underwriting Agreement.
 
 
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3.10.2            Non-accountable Expense s. The Company further agrees that, in addition to the expenses payable pursuant to Section 3.10.1, on the Closing Date it shall pay to the Representatives, by deduction from the net proceeds of the Offering contemplated herein, a non-accountable expense allowance equal to one percent (1%) of the gross proceeds received by the Company from the sale of the Firm Shares (excluding the Option Shares), less the Advance (as such term is defined in Section 8.3 hereof), provided, however, that in the event that the Offering is terminated, the Company agrees to reimburse the Underwriters pursuant to Section 8.3 hereof.
 
3.11            Application of Net Proceeds . The Company shall apply the net proceeds from the Offering received by it in a manner consistent with the application thereof described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
 
3.12            Delivery of Earnings Statements to Security Holders . The Company shall make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth (15 th ) full calendar month following the date of this Agreement, an earnings statement (which need not be certified by independent registered public accounting firm unless required by the Securities Act or the Securities Act Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at least twelve (12) consecutive months beginning after the date of this Agreement.
 
3.13            Stabilization . Neither the Company nor, to its knowledge, any of its employees, directors or shareholders (without the consent of the Representatives) has taken or shall take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.
 
3.14            Internal Controls . The Company shall maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
 
 
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3.15            Accountants . As of the date of this Agreement, the Company has retained an independent registered public accounting firm reasonably acceptable to the Representatives, and the Company shall continue to retain a nationally recognized independent registered public accounting firm for a period of at least three (3) years after the date of this Agreement. The Representatives acknowledge that the Auditor is acceptable to the Representatives.
 
3.16            FINRA . The Company shall advise the Representatives (who shall make an appropriate filing with FINRA) if it is or becomes aware that (i) any officer or director of the Company, (ii) any beneficial owner of 5% or more of any class of the Company’s securities or (iii) any beneficial owner of the Company’s unregistered equity securities which were acquired during the 180 days immediately preceding the filing of the Registration Statement is or becomes an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
 
3.17            No Fiduciary Duties . The Company acknowledges and agrees that the Underwriters’ responsibility to the Company is solely contractual in nature and that none of the Underwriters or their affiliates or any selling agent shall be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement.
 
3.18            Company Lock-Up Agreements .
 
3.18.1            Restriction on Sales of Capital Stock . The Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representatives, it will not, for a period of 180 days after the date of this Agreement (the “Lock-Up Period”), (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) file or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clause (i), (ii) or (iii) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise.
 
The restrictions contained in this Section 3.18.1 shall not apply to (i) the shares of Common Stock to be sold hereunder, (ii) the issuance by the Company of shares of Common Stock upon the exercise of a stock option or warrant or the conversion of a security outstanding on the date hereof, of which the Representatives has been advised in writing or (iii) the issuance by the Company of stock options or shares of capital stock of the Company under any equity compensation plan of the Company.
 
 
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Notwithstanding the foregoing, if (i) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs, or (ii) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results or becomes aware that material news or a material event will occur during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by this Section 3.18.1 shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of such material news or material event, as applicable, unless the Representatives waive, in writing, such extension; provided, however, that this extension of the Lock-Up Period shall not apply to the extent that FINRA has amended or repealed NASD Rule 2711(f)(4), or has otherwise provided written interpretive guidance regarding such rule, in each case, so as to eliminate the prohibition of any broker, dealer, or member of a national securities association from publishing or distributing any research report, with respect to the securities of an Emerging Growth Company prior to or after the expiration of any agreement between the broker, dealer, or member of a national securities association and the Emerging Growth Company or its shareholders that restricts or prohibits the sale of securities held by the Emerging Growth Company or its shareholders after the initial public offering date.
 
3.18.2            Restriction on Continuous Offerings . Notwithstanding the restrictions contained in Section 3.18.1, the Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representatives, it will not, for a period of 12 months after the date of this Agreement, directly or indirectly in any “at-the-market” or continuous equity transaction, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company.
 
3.19            Release of D&O Lock-up Period . If the Representatives, in their sole discretion, agrees to release or waive the restrictions set forth in the Lock-Up Agreements described in Section 2.24 hereof for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three (3) Business Days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit C hereto through a major news service at least two (2) Business Days before the effective date of the release or waiver.
 
3.20            Blue Sky Qualifications . The Company shall use its commercially reasonable efforts, in cooperation with the Underwriters, if necessary, to qualify the Public Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representatives may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Public Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
 
3.21            Reporting Requirements . The Company, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, will use its commercially reasonable efforts to file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and Exchange Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Public Securities as may be required under Rule 463 under the Securities Act Regulations.
 
 
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3.22            Emerging Growth Company Status . The Company shall promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Public Securities within the meaning of the Securities Act and (ii) fifteen (15) days following the completion of the Lock-Up Period.
 
4.            Conditions of Underwriters’ Obligations . The obligations of the Underwriters to purchase and pay for the Public Securities, as provided herein, shall be subject to (i) the continuing accuracy of the representations and warranties of the Company as of the date hereof and as of each of the Closing Date and the Option Closing Date, if any; (ii) the accuracy of the statements of officers of the Company made pursuant to the provisions hereof; (iii) the performance by the Company of its obligations hereunder; and (iv) the following conditions:
 
4.1            Regulatory Matters .
 
4.1.1            Effectiveness of Registration Statement; Rule 430A Information . The Registration Statement has become effective not later than 5:00 p.m., Eastern time, on the date of this Agreement or such later date and time as shall be consented to in writing by you, and, at each of the Closing Date and any Option Closing Date, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Securities Act, no order preventing or suspending the use of any Preliminary Prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated by the Commission. The Company has complied with each request (if any) from the Commission for additional information. The Prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) (without reliance on Rule 424(b)(8)) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.
 
4.1.2            FINRA Clearance . On or before the date of this Agreement, the Representatives shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.
 
4.1.3            Exchange Stock Market Clearance . On the Closing Date, the Company’s shares of Common Stock, including the Firm Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance. On the first Option Closing Date (if any), the Company’s shares of Common Stock, including the Option Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance.
 
4.2            Company Counsel Matters .
 
4.2.1            Closing Date Opinion of Counsel . On the Closing Date, the Representatives shall have received the favorable opinion of Loeb & Loeb, LLP, counsel to the Company, dated the Closing Date and addressed to the Representatives, substantially in the form of Exhibit D attached hereto.
 
 
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4.2.2            Option Closing Date Opinions of Counsel . On the Option Closing Date, if any, the Representatives shall have received the favorable opinions of each counsel listed in Section 4.2.1, dated the Option Closing Date, addressed to the Representatives and in form and substance reasonably satisfactory to the Representatives, confirming as of the Option Closing Date, the statements made by such counsels in their respective opinions delivered on the Closing Date.
 
4.2.3            Reliance . In rendering such opinions, such counsel may rely: (i) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to the Representatives) of other counsel reasonably acceptable to the Representatives, familiar with the applicable laws; and (ii) as to matters of fact, to the extent they deem proper, on certificates or other written statements of officers of the Company and officers of departments of various jurisdictions having custody of documents respecting the corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to Representative Counsel if requested. The opinion of Loeb & Loeb, LLP and any opinion relied upon by Loeb & Loeb, LLP shall include a statement to the effect that it may be relied upon by Representative Counsel in its opinion delivered to the Underwriters.
 
4.3            Comfort Letters .
 
4.3.1            Cold Comfort Letter . At the time this Agreement is executed you shall have received a cold comfort letter containing statements and information of the type customarily included in accountants’ comfort letters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus, addressed to the Representatives and in form and substance satisfactory in all respects to you and to the Auditor, dated as of the date of this Agreement.
 
4.3.2            Bring-down Comfort Letter . At each of the Closing Date and the Option Closing Date, if any, the Representatives shall have received from the Auditor a letter, dated as of the Closing Date or the Option Closing Date, as applicable, to the effect that the Auditor reaffirms the statements made in the letter furnished pursuant to Section 4.3.1, except that the specified date referred to shall be a date not more than three (3) business days prior to the Closing Date or the Option Closing Date, as applicable.
 
4.4            Officers’ Certificates .
 
4.4.1            Officers’ Certificate . The Company shall have furnished to the Representatives a certificate, dated the Closing Date and any Option Closing Date (if such date is other than the Closing Date), of its Chief Executive Officer, its President and its Chief Financial Officer stating that (i) such officers have carefully examined the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date) did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Pricing Disclosure Package, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), any Issuer Free Writing Prospectus as of its date and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading, (ii) since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus, (iii) to the best of their knowledge, as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the representations and warranties of the Company in this Agreement are true and correct and the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date (or any Option Closing Date if such date is other than the Closing Date), and (iv) there has not been, subsequent to the date of the most recent audited financial statements included or incorporated by reference in the Pricing Disclosure Package, any material adverse change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a material adverse change or a prospective material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company, except as set forth in the Prospectus.
 
 
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4.4.2            Secretary’s Certificate . At each of the Closing Date and the Option Closing Date, if any, the Representatives shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date or the Option Date, as the case may be, respectively, certifying: (i) that each of the Charter and Bylaws is true and complete, has not been modified and is in full force and effect; (ii) that the resolutions of the Company’s Board of Directors relating to the Offering are in full force and effect and have not been modified; (iii) as to the accuracy and completeness of all correspondence between the Company or its counsel and the Commission; and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.
 
4.5            No Material Changes . Prior to and on each of the Closing Date and each Option Closing Date, if any: (i) there shall have been no material adverse change or development involving a prospective material adverse change in the condition or prospects or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (ii) no action, suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Insider before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations, prospects or financial condition or income of the Company, except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (iii) no stop order shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; and (iv) the Registration Statement, the Pricing Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations and shall conform in all material respects to the requirements of the Securities Act and the Securities Act Regulations, and neither the Registration Statement, the Pricing Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
 
 
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4.6            Delivery of Agreements .
 
4.6.1            Lock-Up Agreements . On or before the date of this Agreement, the Company shall have delivered to the Representatives executed copies of the Lock-Up Agreements from each of the persons listed in Schedule 3 hereto.
 
4.6.2            Representatives’ Warrant Agreement . On the Closing Date, the Company shall have delivered to the Representatives executed copies of the Representatives’ Warrant Agreement.
 
4.7            Additional Documents . At the Closing Date and at each Option Closing Date (if any) Representative Counsel shall have been furnished with such documents and opinions as they may reasonably require for the purpose of enabling Representative Counsel to deliver an opinion to the Underwriters, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Public Securities and the Representatives’ Securities as herein contemplated shall be satisfactory in form and substance to the Representatives and Representative Counsel.
 
5.            Indemnification .
 
5.1            Indemnification of the Underwriters .
 
5.1.1            General . Subject to the conditions set forth below, the Company agrees to indemnify and hold harmless each Underwriter, its affiliates and each of its and their respective directors, officers, members, employees, representatives and agents and each person, if any, who controls any such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively the “Underwriter Indemnified Parties,” and each an “Underwriter Indemnified Party”), against any and all loss, liability, claim, damage and expense whatsoever (including but not limited to any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter Indemnified Parties and any third party, or otherwise) to which they or any of them may become subject under the Securities Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Registration Statement, the Pricing Disclosure Package, the Preliminary Prospectus, the Prospectus, or in any Issuer Free Writing Prospectus or in any Written Testing-the-Waters Communication (as from time to time each may be amended and supplemented); (ii) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering, including any “road show” or investor presentations made to investors by the Company (whether in person or electronically); or (iii) any application or other document or written communication (in this Section 5, collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Public Securities and Representatives’ Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, the Exchange or any other national securities exchange; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon, and in conformity with, the Underwriters’ Information. With respect to any untrue statement or omission or alleged untrue statement or omission made in the Pricing Disclosure Package, the indemnity agreement contained in this Section 5.1.1 shall not inure to the benefit of any Underwriter Indemnified Party to the extent that any loss, liability, claim, damage or expense of such Underwriter Indemnified Party results from the fact that a copy of the Prospectus was not given or sent to the person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Public Securities to such person as required by the Securities Act and the Securities Act Regulations, and if the untrue statement or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of non-compliance by the Company with its obligations under Section 3.3 hereof.
 
 
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5.1.2            Procedure . If any action is brought against an Underwriter Indemnified Party in respect of which indemnity may be sought against the Company pursuant to Section 5.1.1, such Underwriter Indemnified Party shall promptly notify the Company in writing of the institution of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of such Underwriter Indemnified Party) and payment of actual expenses. Such Underwriter Indemnified Party shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter Indemnified Party unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company in connection with the defense of such action, or (ii) the Company shall not have employed counsel to have charge of the defense of such action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Company (in which case the Company shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events the reasonable fees and expenses of not more than one additional firm of attorneys selected by the Underwriter Indemnified Party (in addition to local counsel) shall be borne by the Company. Notwithstanding anything to the contrary contained herein, if any Underwriter Indemnified Party shall assume the defense of such action as provided above, the Company shall have the right to approve the terms of any settlement of such action, which approval shall not be unreasonably withheld.
 
5.2            Indemnification of the Company . Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the several Underwriters, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, the Underwriters’ Information. In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5.1.2. The Company agrees promptly to notify the Representatives of the commencement of any litigation or proceedings against the Company or any of its officers, directors or any person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, in connection with the issuance and sale of the Public Securities or in connection with the Registration Statement, the Pricing Disclosure Package, the Prospectus, or any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication.
 
 
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5.3            Contribution .
 
5.3.1            Contribution Rights . If the indemnification provided for in this Section 5 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 5.1 or 5.2 in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other, from the Offering of the Public Securities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, with respect to such Offering shall be deemed to be in the same proportion as the total net proceeds from the Offering of the Public Securities purchased under this Agreement (before deducting expenses) received by the Company, as set forth in the table on the cover page of the Prospectus, on the one hand, and the total underwriting discounts and commissions received by the Underwriters with respect to the shares of the Common Stock purchased under this Agreement, as set forth in the table on the cover page of the Prospectus, on the other hand. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 5.3.1 were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 5.3.1 shall be deemed to include, for purposes of this Section 5.3.1, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5.3.1 in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the Offering of the Public Securities exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
 
 
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5.3.2            Contribution Procedure . Within fifteen (15) days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (“contributing party”), notify the contributing party of the commencement thereof, but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid 15 days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section 5.3.2 are intended to supersede, to the extent permitted by law, any right to contribution under the Securities Act, the Exchange Act or otherwise available. Each Underwriter’s obligations to contribute pursuant to this Section 5.3 are several and not joint.
 
6.            Default by an Underwriter .
 
6.1            Default Not Exceeding 10% of Firm Shares or Option Shares . If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Shares or the Option Shares, if the Over-allotment Option is exercised hereunder, and if the number of the Firm Shares or Option Shares with respect to which such default relates does not exceed in the aggregate 10% of the number of Firm Shares or Option Shares that all Underwriters have agreed to purchase hereunder, then such Firm Shares or Option Shares to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments hereunder.
 
 
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6.2            Default Exceeding 10% of Firm Shares or Option Shares . In the event that the default addressed in Section 6.1 relates to more than 10% of the Firm Shares or Option Shares, the Representatives may in their discretion arrange for themselves or for another party or parties to purchase such Firm Shares or Option Shares to which such default relates on the terms contained herein. If, within one (1) Business Day after such default relating to more than 10% of the Firm Shares or Option Shares, the Representatives do not arrange for the purchase of such Firm Shares or Option Shares, then the Company shall be entitled to a further period of one (1) Business Day within which to procure another party or parties reasonably satisfactory to the Representatives to purchase said Firm Shares or Option Shares on such terms. In the event that neither the Representatives nor the Company arrange for the purchase of the Firm Shares or Option Shares to which a default relates as provided in this Section 6, this Agreement will automatically be terminated by the Representatives or the Company without liability on the part of the Company (except as provided in Sections 3.9 and 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); provided, however, that if such default occurs with respect to the Option Shares, this Agreement will not terminate as to the Firm Shares; and provided, further, that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other Underwriters and to the Company for damages occasioned by its default hereunder.
 
6.3            Postponement of Closing Date . In the event that the Firm Shares or Option Shares to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, the Representatives or the Company shall have the right to postpone the Closing Date or Option Closing Date for a reasonable period, but not in any event exceeding five (5) Business Days, in order to effect whatever changes may thereby be made necessary in the Registration Statement, the Pricing Disclosure Package or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus that in the opinion of counsel for the Underwriter may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such shares of Common Stock.
 
7.            Additional Covenants .
 
7.1            Board Composition and Board Designations . The Company shall ensure that: (i) the qualifications of the persons serving as members of the Board of Directors and the overall composition of the Board comply with the Sarbanes-Oxley Act, with the Exchange Act and with the listing rules of the Exchange or any other national securities exchange, as the case may be, in the event the Company seeks to have its Public Securities listed on another exchange or quoted on an automated quotation system, and (ii) if applicable, at least one member of the Audit Committee of the Board of Directors qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange.
 
7.2            Prohibition on Press Releases and Public Announcements . The Company shall not issue press releases or engage in any other publicity, without the Representatives’ prior written consent (which consent shall not be unreasonably withheld), for a period ending at 5:00 p.m., Eastern time, on the first (1 st ) Business Day following the forty-fifth (45 th ) day after the Closing Date, other than normal and customary releases issued in the ordinary course of the Company’s business.
 
8.            Effective Date of this Agreement and Termination Thereof .
 
 
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8.1            Effective Date . This Agreement shall become effective when both the Company and the Representatives have executed the same and delivered counterparts of such signatures to the other party.
 
8.2            Termination . The Representatives shall have the right to terminate this Agreement at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in your reasonable opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the New York Stock Exchange or the Nasdaq Stock Market LLC shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction; or (iii) if the United States shall have become involved in a new war or an increase in major hostilities; or (iv) if a banking moratorium has been declared by a New York State or federal authority; or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets; or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in your reasonable opinion, make it inadvisable to proceed with the delivery of the Firm Shares or Option Shares; or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder; or (viii) if the Representatives shall have become aware after the date hereof of such a material adverse change in the conditions or prospects of the Company, or such adverse material change in general market conditions as in the Representatives’ reasonable judgment would make it impracticable to proceed with the offering, sale and/or delivery of the Public Securities or to enforce contracts made by the Underwriters for the sale of the Public Securities.
 
8.3            Expenses . Notwithstanding anything to the contrary in this Agreement, except in the case of a default by the Underwriters, pursuant to Section 6.2 above, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Underwriters their actual and accountable out-of-pocket expenses related to the transactions contemplated herein then due and payable (including the fees and disbursements of Representative Counsel) up to $75,000, inclusive of any advance for non-accountable expenses previously paid by the Company to the Representatives (the “Advance”) and upon demand the Company shall pay the full amount thereof to the Representatives on behalf of the Underwriters; provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement. Notwithstanding the foregoing, any advance received by the Representatives will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(f)(2)(C).
 
8.4            Indemnification . Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Section 5 shall remain in full force and effect and shall not be in any way affected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof.
 
 
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8.5            Representations, Warranties, Agreements to Survive . All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company or (ii) delivery of and payment for the Public Securities.
 
9.            Miscellaneous .
 
9.1            Notices . All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed (registered or certified mail, return receipt requested), personally delivered or sent by facsimile transmission and confirmed and shall be deemed given when so delivered or faxed and confirmed or if mailed, two (2) days after such mailing.
 
If to the Representatives:
 
WallachBeth Capital, LLC
100 Wall Street, Suite 6600
New York, NY 10006
Attn:
Fax No.:  [●]
 
and
 
Network 1 Financial Securities, Inc.
2 Bridge Avenue, Suite 241
Red Bank, NJ 07701
Attn:
Fax No.:  [●]
 
with a copy (which shall not constitute notice) to:
 
Cozen O’Connor
200 S. Biscayne Boulevard, Suite 4410
Miami, Florida 33131
Attn:  Martin T. Schrier, Esq. and Christopher J. Bellini, Esq.
Fax No.: (612) 260-9091
 
If to the Company:
 
AzurRx BioPharma, Inc.
760 Parkside Avenue
Downstate Biotechnology Incubator
Suite 217
Brooklyn, NY 11226
Attention:  Johan M. (Thijs) Spoor, President
Fax No: [●]
 
 
37

 
 
with a copy (which shall not constitute notice) to:
 
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
Attention:  Fran Stoller, Esq. and David Levine , Esq.
Fax No:  (212) 937-3943
 
9.2            Headings . The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.
 
9.3            Amendment . This Agreement may only be amended by a written instrument executed by each of the parties hereto.
 
9.4            Entire Agreement . This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. Notwithstanding anything to the contrary set forth herein, it is understood and agreed by the parties hereto that all other terms and conditions of that certain engagement letter among the Company, WallachBeth Capital, LLC and Network 1 Financial Securities, Inc., dated July 11, 2016, shall remain in full force and effect.
 
9.5            Binding Effect . This Agreement shall inure solely to the benefit of and shall be binding upon the Representatives, the Underwriters, the Company and the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors, legal representatives, heirs and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from any of the Underwriters.
 
9.6            Governing Law; Consent to Jurisdiction; Trial by Jury . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
 
 
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9.7            Execution in Counterparts . This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Delivery of a signed counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and sufficient delivery thereof.
 
9.8            Waiver, etc . The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

[Signature Page Follows]
 
 
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If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.

Very truly yours,

AZURRX BIOPHARMA, INC.

By:                                                                 
Name:
Title:

Confirmed as of the date first written above mentioned,
on behalf of itself and as Representatives of the several
Underwriters named on Schedule 1 hereto:

 
WALLACHBETH CAPITAL, LLC
 
By:  ____________________________ 
Name:
Title:
 
NETWORK 1 FINANCIAL SECURITIES, INC.
 
By:  ____________________________       
Name:
Title:
 

 
 

 

 
[SIGNATURE PAGE]
AZURRX BIOPHARMA, INC. – UNDERWRITING AGREEMENT

 
 

 
 
SCHEDULE 1
 

Underwriter
Total Number of
Firm Shares to be
Purchased
 
Number of Additional
Shares to be Purchased
if the Over-Allotment
Option is Fully
Exercised
WallachBeth Capital, LLC
     
Network 1 Financial Securities, Inc.
     
       
TOTAL
     
       

 
 

 
 
SCHEDULE 2-A
 
Pricing Information
Number of Firm Shares: [●]
 
Number of Option Shares: [●]
 
Public Offering Price per Share: $[●]
 
Underwriting Discount per Share: $[●]
 
Underwriting Non-accountable expense allowance per Share: $[●]
 
Proceeds to Company per Share (before expenses): $[●]
 
 
SCHEDULE 2-B
 
Issuer General Use Free Writing Prospectuses
[None.]
 
 
SCHEDULE 2-C
 
Written Testing-the-Waters Communications
None.
 
 
 

 
 
SCHEDULE 3
 
List of Lock-Up Parties

Johan M. (Thijs) Spoor
 
Daniel Dupret
 
Edward J. Borkowski
 
Alastair Riddell
 
Maged Shenouda
 
 
 

 
 
SCHEDULE 4
 
Subsidiaries and Affiliates

AzurRx BioPharma SAS
 
 
 

 
 
EXHIBIT A
 
Form of Representatives’ Warrant Agreement
 
 
 
 

 
 
EXHIBIT B
 
Form of Lock-Up Agreement
[●], 2016
WallachBeth Capital, LLC
Network 1 Financial Securities, Inc.
As Representatives of the several Underwriters named on Schedule 1 attached hereto

c/o WallachBeth Capital, LLC
100 Wall Street, Suite 6600
New York, NY 10006
 
c/o Network 1 Financial Securities, Inc.
2 Bridge Avenue, Suite 241
Red Bank, NJ 07701
 
Ladies and Gentlemen:
 
 
The undersigned understands that you, as representatives (the “ Representatives ”), propose to enter into an Underwriting Agreement (the “ Underwriting Agreement ”) with AzurRx BioPharma, Inc., a Delaware corporation (the “ Company ”), providing for the public offering (the “ Public Offering ”) of shares of common stock, par value $0.0001 per share, of the Company (the “ Shares ”).
 
To induce the Representatives to continue its efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of the Representatives, the undersigned will not, during the period commencing on the date hereof and ending 180 days after the date of the final prospectus (the “ Prospectus ”) relating to the Public Offering (the “ Lock-Up Period ”), (1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any Shares or any securities convertible into or exercisable or exchangeable for Shares, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “ Lock-Up Securities ”); (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Lock-Up Securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to the registration of any Lock-Up Securities; or (4) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to any Lock-Up Securities. Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Representatives in connection with (a) transactions relating to Lock-Up Securities acquired in open market transactions after the completion of the Public Offering; provided that no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), shall be required or shall be voluntarily made in connection with subsequent sales of Lock-Up Securities acquired in such open market transactions; (b) transfers of Lock-Up Securities as a bona fide gift, by will or intestacy or to a family member or trust for the benefit of a family member (for purposes of this lock-up agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (c) transfers of Lock-Up Securities to a charity or educational institution; (d) if the undersigned, directly or indirectly, controls a corporation, partnership, limited liability company or other business entity, any transfers of Lock-Up Securities to any shareholder, partner or member of, or owner of similar equity interests in, the undersigned, as the case may be, (e) if required by the terms of a qualified domestic relations order; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c) or (d), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to the Representatives a lock-up agreement substantially in the form of this lock-up agreement and (iii) no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s Lock-Up Securities except in compliance with this lock-up agreement.
 
 
 

 
 
If (i) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs, or (ii) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results or becomes aware that material news or a material event will occur during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by this lock-up agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of such material news or material event, as applicable, unless the Representatives waive, in writing, such extension; provided, however, that this extension of the Lock-Up Period shall not apply to the extent that FINRA has amended or repealed NASD Rule 2711(f)(4), or has otherwise provided written interpretive guidance regarding such rule, in each case, so as to eliminate the prohibition of any broker, dealer, or member of a national securities association from publishing or distributing any research report, with respect to the securities of an Emerging Growth Company prior to or after the expiration of any agreement between the broker, dealer, or member of a national securities association and the Emerging Growth Company or its shareholders that restricts or prohibits the sale of securities held by the Emerging Growth Company or its shareholders after the initial public offering date.
 
The undersigned agrees that, prior to engaging in any transaction or taking any other action that is subject to the terms of this lock-up agreement during the period from the date hereof to and including the 34th day following the expiration of the initial Lock-Up Period, the undersigned will give notice thereof to the Company and will not consummate any such transaction or take any such action unless it has received written confirmation from the Company that the Lock-Up Period (as may have been extended pursuant to the previous paragraph) has expired.
 
The Representatives agree that, at least three (3) business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Lock-Up Securities, the Representatives will notify the Company of the impending release or waiver; and the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two (2) business days before the effective date of the release or waiver. Any release or waiver granted by the Representatives hereunder to any such officer or director shall only be effective two (2) business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer of Lock-Up Securities not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this lock-up agreement to the extent and for the duration that such terms remain in effect at the time of such transfer.
 
 
 

 
 
No provision in this agreement shall be deemed to restrict or prohibit the exercise, exchange or conversion by the undersigned of any securities exercisable or exchangeable for or convertible into Shares, as applicable; provided that the undersigned does not transfer the Shares acquired on such exercise, exchange or conversion during the Lock-Up Period, unless otherwise permitted pursuant to the terms of this lock-up agreement. In addition, no provision herein shall be deemed to restrict or prohibit the entry into or modification of a so-called “10b5-1” plan at any time (other than the entry into or modification of such a plan in such a manner as to cause the sale of any Lock-Up Securities within the Lock-Up Period).
 
The undersigned understands that the Company and the Representatives are relying upon this lock-up agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
 
The undersigned understands that, if the Underwriting Agreement is not executed by September 30, 2016, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Shares to be sold thereunder, then this lock-up agreement shall be void and of no further force or effect.
 
Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Representatives.
 
 
Very truly yours,
 
 
 
 
(Name - Please Print)
 
 
 
 
(Signature)
 
 
 
 
(Name of Signatory, in the case of entities - Please Print)
 
 
 
 
(Title of Signatory, in the case of entities - Please Print)
 
 
 
 
Address:                                                                           
 
   
   
   
   
 
 
 

 
 
 
EXHIBIT C
 
Form of Press Release
 
[COMPANY]
 
[Date]
 
[COMPANY] (the “Company”) announced today that WallachBeth Capital, LLC and Network 1 Financial Securities, Inc., acting as representatives for the underwriters in the Company’s recent public offering of _______ shares of the Company’s common stock, is [waiving] [releasing] a lock-up restriction with respect to _________ shares of the Company’s common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on _________, 20___, and the shares may be sold on or after such date.
 
This press release is not an offer or sale of the securities in the United States or in any other jurisdiction where such offer or sale is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act of 1933, as amended .

 
 

 
 
EXHIBIT D
 
Form of Opinion of Counsel
 

 
 
 
 
 
 

Exhibit 4.1
 
 
 
 

 
 
Exhibit 4.3
 

 
THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT OR CAUSE IT TO BE THE SUBJECT OF ANY HEDGING, SHORT SALE, DERIVATIVE, PUT, OR CALL TRANSACTION THAT WOULD RESULT IN THE EFFECTIVE ECONOMIC DISPOSITION OF THE PURCHASE WARRANT BY ANY PERSON FOR A PERIOD OF ONE (1) YEAR FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE OTHER THAN (I) [__________] OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF [__________] OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER AND IN ACCORDANCE WITH FINRA RULE 5110(G)(2).
 
THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO [                                                                                                                                          ] [ DATE THAT IS ONE (1) YEAR FROM THE EFFECTIVE DATE OF THE OFFERING ]. VOID AFTER 5:00 P.M., EASTERN TIME, [   ] [ DATE THAT IS FIVE (5) YEARS FROM THE EFFECTIVE DATE OF THE OFFERING ].
 
COMMON STOCK PURCHASE WARRANT
 
For the Purchase of [          ] Shares of Common Stock
 
of
 
AZURRX BIOPHARMA, INC.
 
1.            Purchase Warrant . THIS CERTIFIES THAT, in consideration of funds duly paid by or on behalf of [__________] (“ Holder ”), as registered owner of this Purchase Warrant, to AzurRx BioPharma, Inc., a Delaware corporation (the “Company”), Holder is entitled, at any time or from time to time from [] [ DATE THAT IS ONE (1) YEAR FROM THE EFFECTIVE DATE OF THE OFFERING ] (the “ Commencement Date ”), and at or before 5:00 p.m., Eastern time, [] [ DATE THAT IS FIVE (5) YEARS FROM THE EFFECTIVE DATE OF THE OFFERING ] (the “ Expiration Date ”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to [] shares of common stock of the Company, par value $0.0001 per share (the “Shares”), subject to adjustment as provided in Section 5 hereof. If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase Warrant may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate this Purchase Warrant. This Purchase Warrant is initially exercisable at $[] per Share [ 120% of the price of the Shares sold in the Offering ]; provided , however , that upon the occurrence of any of the events specified in Section 5 hereof, the rights granted by this Purchase Warrant, including the exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as therein specified. The term “ Exercise Price ” shall mean the initial exercise price or the adjusted exercise price, depending on the context.
 
 
 

 
 
1.            Exercise .
 
1.1            Exercise Form . In order to exercise this Purchase Warrant, the exercise form attached hereto must be duly executed and completed and delivered to the Company, together with this Purchase Warrant and payment of the Exercise Price for the Shares being purchased payable in cash by wire transfer of immediately available funds to an account designated by the Company or by certified check or official bank check. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Warrant shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.
 
1.2            Cashless Exercise . If at any time after the Commencement Date there is no effective registration statement registering, or no current prospectus available for, the resale of the Shares by the Holder, then in lieu of exercising this Purchase Warrant by payment of cash or check payable to the order of the Company pursuant to Section 1.1 above, Holder may elect to receive the number of Shares equal to the value of this Purchase Warrant (or the portion thereof being exercised), by surrender of this Purchase Warrant to the Company, together with the exercise form attached hereto, in which event the Company shall issue to Holder, Shares in accordance with the following formula:

Y(A-B)
X   =           A
 
Where,

X = The number of Shares to be issued to Holder;
Y = The number of Shares for which the Purchase Warrant is being exercised;
A = The fair market value of one Share; and
B = The Exercise Price.
 
For purposes of this Section 1.2, the fair market value of a Share is defined as follows:
 
(i)           if the Company’s common stock is traded on a securities exchange, the fair market value shall be deemed to be the closing price on such exchange on the trading day immediately prior to the date the exercise form is submitted to the Company in connection with the exercise of the Purchase Warrant; or
 
(ii)           if the Company’s common stock is actively traded over-the-counter, the fair market value shall be deemed to be the closing bid price on the trading day immediately prior to the date the exercise form is submitted to the Company in connection with the exercise of the Purchase Warrant; or
 
(iii)           if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors.
 
1.3            Legend . Each certificate for the securities purchased under this Purchase Warrant shall bear a legend as follows unless such securities have been registered under the Securities Act of 1933, as amended (the “ Act ”):
 
 
2

 
 
“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “ Act ”), or applicable state law. Neither the securities nor any interest therein may be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Securities Act, or pursuant to an exemption from registration under the Securities Act and applicable state law which, in the opinion of counsel to the Company, is available.”
 
1.4            No Obligation to Net Cash Settle . Notwithstanding anything to the contrary contained in this Purchase Warrant, in no event will the Company be required to net cash settle the exercise of the Purchase Warrant. The holder of the Purchase Warrant will not be entitled to exercise the Purchase Option unless it exercises such Purchase Warrant pursuant to the cashless exercise right or a registration statement is effective, or an exemption from the registration requirements is available at such time and, if the Holder is not able to exercise the Purchase Warrant, the Purchase Warrant will expire worthless.
 
2.            Transfer .
 
2.1            General Restrictions . The registered Holder of this Purchase Warrant agrees by his, her or its acceptance hereof, that such Holder will not: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant for a period of one (1) year following the Effective Date to anyone other than: (i) [__________] (“[ Underwriter] ”) or another underwriter or a selected dealer participating in the Offering, or (ii) a bona fide officer or partner of [Underwriter] or of any such underwriter or selected dealer, in each case in accordance with FINRA Conduct Rule 5110(g)(1), or (b) cause this Purchase Warrant or the securities issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Purchase Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(g)(2). On and after one (1) year after the Effective Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly executed and completed, together with the Purchase Warrant and payment of all transfer taxes, if any, payable in connection therewith. The Company shall within five (5) Business Days transfer this Purchase Warrant on the books of the Company and shall execute and deliver a new Purchase Warrant or Purchase Warrants of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.
 
2.2            Restrictions Imposed by the Securities Act . The securities evidenced by this Purchase Warrant shall not be transferred unless and until: (i) the Company has received the opinion of counsel for the Holder that the securities may be transferred pursuant to an exemption from registration under the Securities Act and applicable state securities laws, the availability of which is established to the reasonable satisfaction of the Company (the Company hereby agreeing that the opinion of Cozen O’Connor shall be deemed satisfactory evidence of the availability of an exemption), or (ii) a registration statement or a post-effective amendment to the Registration Statement relating to the offer and sale of such securities has been filed by the Company and declared effective by the U.S. Securities and Exchange Commission (the “Commission”) and compliance with applicable state securities law has been established.
 
3.            Registration Rights .
 
 
3

 
 
3.1            Demand Registration .
 
3.1.1            Grant of Right . The Company, upon written demand (a “ Demand Notice ”) of the Holder(s) of at least 51% of the Purchase Warrants and/or the underlying Shares (“ Majority Holders ”), agrees to register, on one occasion, all or any portion of the Shares underlying the Purchase Warrants (collectively, the “ Registrable Securities ”). On such occasion, the Company will file a registration statement with the Commission covering the Registrable Securities within sixty (60) days after receipt of a Demand Notice and use its commercially reasonable efforts to have the registration statement declared effective promptly thereafter, subject to compliance with review by the Commission; provided , however , that the Company shall not be required to comply with a Demand Notice if the Company has filed a registration statement with respect to which the Holder is entitled to piggyback registration rights pursuant to Section 3.2 hereof and either: (i) the Holder has elected to participate in the offering covered by such registration statement or (ii) if such registration statement relates to an underwritten primary offering of securities of the Company, until the offering covered by such registration statement has been withdrawn or until thirty (30) days after such offering is consummated. The demand for registration may be made at any time during a period of four (4) years beginning on the Commencement Date. The Company covenants and agrees to give written notice of its receipt of any Demand Notice by any Holder(s) to all other registered Holders of the Purchase Warrants and/or the Registrable Securities within ten (10) business days after the date of the receipt of any such Demand Notice.
 
3.1.2            Terms . The Company shall bear all fees and expenses attendant to the registration of the Registrable Securities pursuant to Section 3.1.1, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. The Company agrees to use its commercially reasonable efforts to qualify or register the Registrable Securities in such States as are reasonably requested by the Holder(s); provided , however , that in no event shall the Company be required to register the Registrable Securities in a State in which such registration would cause: (i) the Company to be obligated to register or become licensed to do business in such State or submit to general service of process in such State, or (ii) the principal shareholders of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration statement filed pursuant to the demand right granted under Section 3.1.1 to remain effective for a period of at least twelve (12) consecutive months after the date that the Holders of the Registrable Securities covered by such registration statement are first given the opportunity to sell all of such securities. The Holders shall only use the prospectuses provided by the Company to sell the shares covered by such registration statement, and will immediately cease to use any prospectus furnished by the Company if the Company advises the Holder that such prospectus may no longer be used due to a material misstatement or omission. Notwithstanding the provisions of this Section 3.1.2, the Holder shall be entitled to a demand registration under this Section 3.1.2 on only one (1) occasion and such demand registration right shall terminate on the fifth anniversary of the effectiveness of the registration statement in accordance with FINRA Rule 5110(f)(2)(G)(iv).
 
3.2           “ Piggy-Back” Registration .
 
 
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3.2.1            Grant of Right . In addition to the demand right of registration described in Section 3.1 hereof, the Holder shall have the right, for a period of no more than seven (7) years from the Commencement Date in accordance with FINRA Rule 5110(f)(2)(G)(v), to include the Registrable Securities as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or any equivalent form); provided , however , that if, solely in connection with any primary underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of shares of common stock which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by such Holders; provided , however , that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities.
 
3.2.2            Terms . The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 3.2.1 hereof, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company until such time as all of the Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement. Except as otherwise provided in this Purchase Warrant, there shall be no limit on the number of times the Holder may request registration under this Section 3.2.2; provided , however , that such registration rights shall terminate upon the earlier of (i) the exercise and completion of the demand registration right pursuant to Section 3.1 for all of the Registrable Securities, and (ii) on the sixth anniversary of the Commencement Date.
 
3.3            General Terms .
 
3.3.1            Indemnification . The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 5.1 of the Underwriting Agreement between the Underwriters and the Company, dated as of [], 2016. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company and its affiliates, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5.2 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.
 
 
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3.3.2            Exercise of Purchase Warrants . Nothing contained in this Purchase Warrant shall be construed as requiring the Holder(s) to exercise their Purchase Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.
 
3.3.3            Documents Delivered to Holders . The Company shall furnish to each Holder participating in any underwritten offerings and to each underwriter of any such offering, a signed counterpart, addressed to such Holder and underwriter, of: (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and an opinion dated the date of the closing under any underwriting agreement related thereto), and (ii) a “cold comfort” letter dated the effective date of such registration statement (and a letter dated the date of the closing under the underwriting agreement) signed by the independent registered public accounting firm which has issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the underwritten offering requesting the correspondence and memoranda described below and to the managing underwriter copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request.
 
3.3.4            Underwriting Agreement . In the event the Company shall enter into an underwriting agreement with any managing underwriter(s), if any, selected by the Company with respect to the Registrable Securities that are being registered pursuant to this Section 3, which managing underwriter shall be reasonably satisfactory to the Majority Holders. Such agreement shall be reasonably satisfactory in form and substance to the Company and such managing underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders, their Shares and their intended methods of distribution.
 
 
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3.3.5            Documents to be Delivered by Holder(s) . Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.
 
3.3.6            Damages . Should the registration or the effectiveness thereof required by Sections 3.1 and 3.2 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holder(s) shall, in addition to any other legal or other relief available to the Holder(s), be entitled to seek specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.
 
4.            New Purchase Warrants to be Issued .
 
4.1            Partial Exercise or Transfer . Subject to the restrictions in Section 2 hereof, this Purchase Warrant may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Warrant for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax if exercised pursuant to Section 1.1 hereto, the Company shall cause to be delivered to the Holder without charge a new Purchase Warrant of like tenor to this Purchase Warrant in the name of the Holder evidencing the right of the Holder to purchase the number of Shares purchasable hereunder as to which this Purchase Warrant has not been exercised or assigned.
 
4.2            Lost Certificate . Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Warrant and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Warrant of like tenor and date. Any such new Purchase Warrant executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.
 
5.            Adjustments .
 
5.1            Adjustments to Exercise Price and Number of Securities . The Exercise Price and the number of Shares underlying the Purchase Warrant shall be subject to adjustment from time to time as hereinafter set forth:
 
 
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5.1.1            Share Dividends; Split Ups . If, after the date hereof, and subject to the provisions of Section 5.3 below, the number of outstanding Shares is increased by a stock dividend payable in Shares or by a split up of Shares or other similar event, then, on the effective day thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding Shares, and the Exercise Price shall be proportionately decreased.
 
5.1.2            Aggregation of Shares . If, after the date hereof, and subject to the provisions of Section 5.3 below, the number of outstanding Shares is decreased by a consolidation, combination or reclassification of Shares or other similar event, then, on the effective date thereof, the number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding Shares, and the Exercise Price shall be proportionately increased.
 
5.1.3            Replacement of Securities upon Reorganization, etc . In case of any reclassification or reorganization of the outstanding Shares other than a change covered by Section 5.1.1 or 5.1.2 hereof or that solely affects the par value of such Shares, or in the case of any share reconstruction or amalgamation or consolidation of the Company with or into another corporation or other entity (other than a consolidation or share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding Shares), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Warrant shall have the right thereafter (until the expiration of the right of exercise of this Purchase Warrant) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of the number of Shares of the Company obtainable upon exercise of this Purchase Warrant immediately prior to such event; and if any reclassification also results in a change in Shares covered by Section 5.1.1 or 5.1.2, then such adjustment shall be made pursuant to Sections 5.1.1, 5.1.2 and this Section 5.1.3. The provisions of this Section 5.1.3 shall similarly apply to successive reclassifications, reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.
 
5.1.4            Changes in Form of Purchase Warrant . This form of Purchase Warrant need not be changed because of any change pursuant to this Section 5.1, and Purchase Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in [the Purchase Warrants initially issued pursuant to this Agreement]. The acceptance by any Holder of the issuance of new Purchase Warrants reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the Commencement Date or the computation thereof.
 
5.2            Substitute Purchase Warrant . In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company with or into, another corporation or other entity (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification or change of the outstanding Shares), the corporation or other entity formed by such consolidation or share reconstruction or amalgamation shall execute and deliver to the Holder a supplemental Purchase Warrant providing that the holder of each Purchase Warrant then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Warrant) to receive, upon exercise of such Purchase Warrant, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or share reconstruction or amalgamation, by a holder of the number of Shares of the Company for which such Purchase Warrant might have been exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale or transfer. Such supplemental Purchase Warrant shall provide for adjustments which shall be identical to the adjustments provided for in this Section 5. The above provision of this Section shall similarly apply to successive consolidations or share reconstructions or amalgamations.
 
 
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5.3            Elimination of Fractional Interests . The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Purchase Warrant, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may be, to the nearest whole number of Shares or other securities, properties or rights.
 
6.            Reservation and Listing . The Company shall at all times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of the Purchase Warrants, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Warrants and payment of the Exercise Price therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any shareholder. The Company further covenants and agrees that upon exercise of the Purchase Warrants and payment of the exercise price therefor, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any shareholder. As long as the Purchase Warrants shall be outstanding, the Company shall use its commercially reasonable efforts to cause all Shares issuable upon exercise of the Purchase Warrants to be listed (subject to official notice of issuance) on all national securities exchanges (or, if applicable, on the OTC Bulletin Board or any successor trading market) on which the Shares issued to the public in the Offering may then be listed and/or quoted.
 
7.            Certain Notice Requirements .
 
7.1            Holder’s Right to Receive Notice . Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive notice as a shareholder for the election of directors or any other matter, or as having any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of the Purchase Warrants and their exercise, any of the events described in Section 7.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other shareholders of the Company at the same time and in the same manner that such notice is given to the shareholders.
 
 
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7.2            Events Requiring Notice . The Company shall be required to give the notice described in this Section 7 upon one or more of the following events: (i) if the Company shall take a record of the holders of its Shares for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, (ii) the Company shall offer to all the holders of its Shares any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation) or a sale of all or substantially all of its property, assets and business shall be proposed.
 
7.3            Notice of Change in Exercise Price . The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 5 hereof, send notice to the Holders of such event and change (“ Price Notice ”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s Chief Financial Officer.
 
7.4            Transmittal of Notices . All notices, requests, consents and other communications under this Purchase Warrant shall be in writing and shall be deemed to have been duly made when hand delivered, or mailed by express mail or private courier service: (i) if to the registered Holder of the Purchase Warrant, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to following address or to such other address as the Company may designate by notice to the Holders:

If to the Holder:

____________
 
____________
 
____________
 
Attn: [●]
Fax No.: [●]
 
with a copy (which shall not constitute notice) to:
 
Cozen O’Connor
200 S. Biscayne Boulevard, Suite 4410
Miami, Florida 33131
Attn: Christopher J. Bellini, Esq. and Martin Schrier, Esq.
Fax No.: (612) 260-9091
 
If to the Company:
 
 
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AzurRx BioPharma, Inc.
760 Parkside Avenue
Downstate Biotechnology Incubator
Suite 217
Brooklyn, NY 11226
Attention:  Johan M. (Thijs) Spoor, President
Fax No: [●]
 
with a copy (which shall not constitute notice) to:
 
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
Attention: Fran Stoller, Esq. and David Levine, Esq.
Fax No: (212) 898-1184
 
8.            Miscellaneous .
 
8.1            Amendments . The Company and [Underwriter] may from time to time supplement or amend this Purchase Warrant without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company and [Underwriter] may deem necessary or desirable and that the Company and [Underwriter] deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of and be signed by the party against whom enforcement of the modification or amendment is sought.
 
8.2            Headings . The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Warrant.
 
8.3            Entire Agreement . This Purchase Warrant (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Warrant) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.
 
8.4            Binding Effect . This Purchase Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted assignees, respective successors, legal representative and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Warrant or any provisions herein contained.
 
8.5            Governing Law; Submission to Jurisdiction; Trial by Jury . This Purchase Warrant shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Warrant shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 7 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and the Holder hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
 
 
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8.6            Waiver, etc . The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
 
8.7            Execution in Counterparts . This Purchase Warrant may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Such counterparts may be delivered by facsimile transmission or other electronic transmission.
 
8.8            Exchange Agreement . As a condition of the Holder’s receipt and acceptance of this Purchase Warrant, Holder agrees that, at any time prior to the complete exercise of this Purchase Warrant by Holder, if the Company and [Underwriter] enter into an agreement (“ Exchange Agreement ”) pursuant to which they agree that all outstanding Purchase Warrants will be exchanged for securities or cash or a combination of both, then Holder shall agree to such exchange and become a party to the Exchange Agreement.

[ Signature Page Follows ]
 
 
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IN WITNESS WHEREOF, the Company has caused this Purchase Warrant to be signed by its duly authorized officer as of the ______ day of ________________, 2016.

 
  AZURRX BIOPHARMA, INC.
   
 
By:                                                 
         Name:
         Title:
 
 
       
 
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[ Form to be used to exercise Purchase Warrant ]
 
Date: _______________, 20___
 
 
The undersigned hereby elects irrevocably to exercise the Purchase Warrant for                                                                                                                                   shares of common stock, par value $0.0001 per share (the “ Shares ”), of AzurRx BioPharma, Inc., a Delaware corporation (the “ Company ”), and hereby makes payment of $     (at the rate of $     per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.
 
or
 
The undersigned hereby elects irrevocably to convert its right to purchase ___ Shares of the Company under the Purchase Warrant for ______ Shares, as determined in accordance with the following formula:
 
                Y(A-B)
  X   =        A

Where,

X = The number of Shares to be issued to Holder;
Y = The number of Shares for which the Purchase Warrant is being exercised;
A = The fair market value of one Share which is equal to $_____; and
B = The Exercise Price which is equal to $______ per share
 
 
The undersigned agrees and acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with respect to the calculation shall be resolved by the Company in its sole discretion.
 
Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been converted.

 
Signature
 
Signature Guaranteed                                                                                      
 
 
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INSTRUCTIONS FOR REGISTRATION OF SECURITIES
 
Name:

(Print in Block Letters)
 
Address:                                                                            
 
                                                                                           
 
                                                                                           


 
NOTICE: The signature to this form must correspond with the name as written upon the face of the Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.
 
 
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[ Form to be used to assign Purchase Warrant ]
 
ASSIGNMENT
 
 
(To be executed by the registered Holder to effect a transfer of the within Purchase Warrant):
 
FOR VALUE RECEIVED, __________________ does hereby sell, assign and transfer unto the right to purchase shares of common stock, par value $0.0001 per share, of AzurRx BioPharma, Inc., a Delaware corporation (the “ Company ”), evidenced by the Purchase Warrant and does hereby authorize the Company to transfer such right on the books of the Company.
 
Dated: __________, 20__
 
Signature
 
Signature Guaranteed                                                                                                 
 
NOTICE: The signature to this form must correspond with the name as written upon the face of the within Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.
 
 
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Exhibit 5.1
 
July 28, 2016

AzurRx BioPharma, Inc.
760 Parkside Avenue
Downstate Biotechnology Incubator, Suite 217
Brooklyn, New York 11226
 
 
Ladies and Gentlemen:
 
Reference is made to the Registration Statement on Form S-1 File No. 333-212511 (the “Registration Statement”) filed with the Securities and Exchange Commission by AzurRx BioPharma, Inc., a Delaware corporation (the “Company”), under the Securities Act of 1933, as amended (the “Act”), covering an underwritten public offering of 2,142,857 shares (the “Shares”) of the Company’s common stock, par value $.0001 per share (the “Common Stock”).
 
We have examined such documents and considered such legal matters as we have deemed necessary and relevant as the basis for the opinion set forth below. With respect to such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as reproduced or certified copies, and the authenticity of the originals of those latter documents. As to questions of fact material to this opinion, we have, to the extent deemed appropriate, relied upon certain representations of certain officers of the Company.
 
Based upon the foregoing, we are of the opinion that the Shares, when issued and sold in accordance with and in the manner described in the Registration Statement, will be duly authorized, validly issued, fully paid and non-assessable.
 
We hereby consent to the use of this opinion as an exhibit to the Registration Statement, to the use of our name as your counsel and to all references made to us in the Registration Statement and in the Prospectus forming a part thereof. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act, or the rules and regulations promulgated thereunder.
 
 
   
Very truly yours,

/s/ Loeb & Loeb LLP
Loeb & Loeb LLP
 
Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
We hereby consent to the use in the Prospectus constituting part of the Registration Statement on the Amendment No. 1 to Form S-1 (No. 333-212511) of our report dated June 15, 2016, related to the financial statements of Protea Europe SAS (“Predecessor”) for the period January 1, 2014 through May 31, 2014; and our report dated June 15, 2016, related to the consolidated financial statements of AzurRx BioPharma, Inc. as of December 31, 2015 and 2014 and for the year ended December 31, 2015 and the period January 30, 2014 (date of inception) through December 31, 2014 which appear in such Prospectus. The report for AzurRx BioPharma, Inc. includes an explanatory paragraph about the existence of substantial doubt concerning its ability to continue as a going concern. We also consent to the reference to our Firm under the caption “Experts” in such Prospectus.


/s/ WeiserMazars LLP
New York, New York
July 28, 2016