Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
(Amendment No. 1)
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[X]
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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For the fiscal year ended December 31, 2017
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or
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission file No. 001-37853
AZURRX BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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46-4993860
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. employer identification number)
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760 Parkside Avenue
Downstate Biotechnology Incubator, Suite 304
Brooklyn, New York 11226
(Address of principal executive offices)
(646) 699-7855
(Issuer’s telephone number)
Securities registered pursuant
to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common stock, par value $0.0001 per share
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Nasdaq Capital Market
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Securities registered under Section 12(g) of the Exchange Act:
None
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ]
No [X]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes [
] No [X]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [X] No
[ ]
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X]
No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated filer
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Smaller reporting company
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[X]
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(Do not check if a smaller reporting company)
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Emerging growth company
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[X]
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. [
]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No
[X]
The aggregate market value of common stock held by non-affiliates
of the registrant, based on the closing price of a share of the
registrant’s common stock on June 30, 2017, which is the last
business day of the registrant’s most recently completed
second fiscal quarter, as reported by the Nasdaq Capital Market on
such date, was approximately $27,581,562.
There were 12,602,395 shares of the registrant’s common stock
outstanding as of April 25, 2018.
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
AzurRx BioPharma, Inc. (the
“Company”) is filing this Amendment No. 1 to Annual
Report on Form 10-K/A (the “Amendment”) to amend its Annual Report on Form 10-K
for the fiscal year ended December 31, 2017, as filed by the
Company with the Securities and Exchange Commission (the
“SEC”) on March 16, 2018 (the
“10-K”). The principal purpose of this Amendment
is to include in Part III the information that was to be
incorporated by reference from the proxy statement for the
Company’s 2018 annual meeting of stockholders. This Amendment
hereby amends the cover page, Part III, Items 10 through 14, and
Part IV, Item 15 of the 10-K. In addition, as required by Rule
12b-15 under the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”), new certifications
by the Company’s principal executive officer and principal
financial officer are filed as exhibits to this
Amendment.
No
attempt has been made in this Amendment to modify or update the
other disclosures presented in the 10-K. This Amendment does not
reflect events occurring after the filing of the original report
(i.e., those events occurring after March 16, 2018) or modify or
update those disclosures that may be affected by subsequent events.
Accordingly, this Amendment should be read in conjunction with the
10-K and the Company’s other filings with the
SEC.
Table of Contents
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Page
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PART III
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2
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7
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14
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16
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17
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PART IV
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19
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21
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Amendment and the 10-K (together, the
“Annual
Report”) contain
forward-looking statements that involve substantial risks and
uncertainties. All statements contained in the Annual Report other
than statements of historical facts, including statements regarding
our strategy, future operations, future financial position, future
revenue, projected costs, prospects, plans, objectives of
management and expected market growth, are forward-looking
statements. These statements involve known and unknown risks,
uncertainties and other important factors that may cause our actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements.
The
words “anticipate,” “believe,”
“estimate,” “expect,” “intend,”
“may,” “plan,” “predict,”
“project,” “target,”
“potential,” “will,” “would,”
“could,” “should,” “continue,”
and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain
these identifying words. These forward-looking statements include,
among other things, statements about:
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the availability of capital to satisfy our working capital
requirements;
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the accuracy of our estimates regarding expenses, future revenues
and capital requirements;
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our plans to develop and commercialize our principal product
candidates, consisting of MS1819 and
AZX1103;
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our ability to initiate and complete our clinical trials and to
advance our principal product candidates into additional clinical
trials, including pivotal clinical trials, and successfully
complete such clinical trials;
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regulatory developments in the U.S. and foreign
countries;
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the performance of our third-party contract manufacturer(s),
contract research organization(s) and other third-party
non-clinical and clinical development collaborators and regulatory
service providers;
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our ability to obtain and maintain intellectual property protection
for our core assets;
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the size of the potential markets for our product candidates and
our ability to serve those markets;
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the rate and degree of market acceptance of our product candidates
for any indication once approved;
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the success of competing products and product candidates in
development by others that are or become available for the
indications that we are pursuing;
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the loss of key scientific, clinical and nonclinical development,
and/or management personnel, internally or from one of our
third-party collaborators; and
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other risks and uncertainties, including those listed under Part I,
Item 1A. Risk Factors of the 10-K.
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These forward-looking statements are only
predictions and we may not actually achieve the plans, intentions
or expectations disclosed in our forward-looking statements, so you
should not place undue reliance on our forward-looking statements.
Actual results or events could differ materially from the plans,
intentions and expectations disclosed in the forward-looking
statements we make. We have based these forward-looking statements
largely on our current expectations and projections about future
events and trends that we believe may affect our business,
financial condition and operating results. We have included
important factors in the cautionary statements included in 10-K
particularly in Part I, Item 1A, titled
“Risk
Factors” that could cause
actual future results or events to differ materially from the
forward-looking statements that we make. Our forward-looking
statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures or investments
we may make.
You
should read the Annual Report and the documents that we have filed
as exhibits to the Annual Report with the understanding that our
actual future results may be materially different from what we
expect. We do not assume any obligation to update any
forward-looking statements whether as a result of new information,
future events or otherwise, except as required by applicable
law.
In this Amendment, unless the context otherwise requires,
references to the “Company,” “AzurRx,”
“we,” “us” and “our” refer to
AzurRx BioPharma, Inc.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The
following sets forth certain information regarding each of our
directors and executive officers:
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Name
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Age
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Position
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Johan M. (Thijs) Spoor
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46
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President, Chief Executive Officer and Director
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Maged Shenouda
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53
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Chief Financial Officer and Director
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Daniel Dupret
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61
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Chief Scientific Officer
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Edward J. Borkowski (1)(2)
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58
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Chairman of the Board of Directors
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Alastair Riddell (1)(2)
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68
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Director
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Charles Casamento (2)
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72
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Director
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Vern L. Schramm, Ph.D.
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76
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Director
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_____________
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(1)
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Member of the Compensation Committee and Nominating and Corporate
Governance Committee.
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(2)
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Member of the Audit Committee
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The
following is a summary of our executive officers’ and
directors’ business experience.
Johan M.
(Thijs) Spoor has been our Chief
Executive Officer since January 2016, and our President since April
2015. From September 2010 until December 2015, he was the Chief
Executive Officer of FluoroPharma Medical, Inc. (OTCQB: FPMI),
during which time he served as Chairman of the Board from June 2012
until December 2015. 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. He holds a Pharmacy
degree from the University of Toronto as well as an MBA from
Columbia University.
We
believe that Mr. Spoor’s background in pharmacy, finance and
accounting, as a healthcare research analyst, and his experience at
both large and small healthcare companies provides him with a broad
familiarity of the range of issues confronting the Company, which
qualifies him to serve as a member of our Board of
Directors.
Maged
Shenouda joined our Board
of Directors in October 2015 and was appointed to serve as our
Chief Financial Officer in September 2017. Mr. Shenouda, a
financial professional in the biotechnology industry, was the head
of business development at Retrophin, 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 later at Stifel
Nicolaus from June 2010 until November 2011. He currently serves on
the board of directors of Relmada Therapeutics, Inc. (OTCQB: RLMD).
Mr. Shenouda received an MBA from Rutgers Graduate School
of Management and BS in Pharmacy from St. John's College
of Pharmacy. He is a Registered Pharmacist in New Jersey and
California.
We
believe that Mr. Shenouda’s extensive knowledge of our
industry, his role in the governance of publicly held companies,
and his directorships in other life science companies qualify him
to serve as a member of our Board of Directors.
Daniel
Dupret has served as President
of AzurRx SAS since its formation in 2007, and as our Chief
Scientific Officer since the acquisition of AzurRx SAS in June
2014. Previously, Dr. Dupret founded Proteus SA in 1998 and served
as its President and Chief Executive Officer from 1998 to 2007. He
founded Appligene SA in 1985 and served as its Chief Scientific
Officer, then President and Chief Executive Officer 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
Borkowski joined our Board of
Directors in May 2015, and is currently serving as Chairman of the
Board. Mr. Borkowski is a healthcare executive who currently serves
as Executive Vice President of MiMedx Group, Inc.
(NASDAQ: MDGX). In addition, Mr. Borkowski currently serves
as a director for Co-Diagnostics, Inc. (NASDAQ: CODX), a position
he has held since May 2017. Mr. Borkowski previously served as the
Chief Financial Officer of Aceto Corproation (NASDAQ: ACET)
from February 2018 to April 2018, and held several executive level
positions with for Concordia
International, an international specialty pharmaceutical company,
from May 2015 to February
2018. Mr.
Borkowski has also served as Chief Financial Officer of Amerigen
Pharmaceuticals, a generic pharmaceutical company with a focus on
oral, controlled release products and as the Chief
Financial Officer and Executive Vice President of Mylan N.V. In
addition, Mr. Borkowski previously held the position of Chief
Financial Officer with Convatec, a global medical device company
focused on wound care and ostomy, and Carefusion, a global medical
device company for which he helped lead its spin-out from Cardinal
Health into an independent public company. Mr. Borkowski also held
senior financial positions at Pharmacia and American Home Products
(Wyeth). He started his career with Arthur Andersen & Co. after
graduating from Rutgers University with an MBA in accounting. Mr.
Borkowski also graduated from Allegheny College with a degree in
Economics and Political Science. Mr. Borkowski is currently a
Trustee and an executive committee member of Allegheny
College.
We
believe Mr. Borkowski’s extensive healthcare and financial
experience, together with his experience with public companies,
provide the Company and management with valuable experience as the
Company executes its business plan.
Dr.
Alastair Riddell joined
our Board of Directors in September 2015. Since June 2016, Dr.
Riddell has served as Chairman of Nemesis Biosciences Ltd and
Chairman of Feedback plc (LON: FDBK). Since January 2016 he has
also served as Chairman the South West Academic Health Science
network in the UK. Since December 2015 he has served as Non
Executive Director of Cristal Therapeutics in The Netherlands. From
September 2012 to February 2016, he served as the Chairman of
Definigen Ltd. and has served as the Chairman Silence Therapeutics
Ltd. from November 2013 to September 2015 and Procure Therapeutics
from October 2009 to November 2012. From 2007 to 2009,
he served as the Chief Executive Officer of Stem Cell Sciences plc.
and from 2005 to 2007, he served as the Chief Executive Officer of
Paradigm Therapeutics Ltd. From 1998 to 2005, Dr. Riddell served as
the Chief Executive Officer of Pharmagene plc. Dr. Ridell
began his
career as a doctor in a variety of hospital specialties and in
general practice. Dr. Riddell holds both Bachelor of Science and a
Bachelor of Medical Sciences degrees, and was recently awarded a
Doctorate of Science, Honoris Causa by Aston University.
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.
Charles J. Casamento joined our Board
of Directors in March 2017. Since 2007, Mr. Casamento has been
executive director and principal of The Sage Group, a health care
advisory group. He was president and CEO of Osteologix, a startup
company which he eventually took public, from October 2004 until
April 2007. Mr. Casamento was the founder of Questcor
Pharmaceuticals where he was president, CEO and chairman from 1999
through 2004. At Questcor he acquired Acthar, a product whose sales
eventually exceeded $1.0 billion. Mr. Casamento also served as
President, CEO and Chairman of RiboGene Inc. until 1999 when
RiboGene was merged another company to form Questcor. He was also
co-founder, president and CEO of Indevus (formerly Interneuron
Pharmaceuticals), has held senior management positions at Genzyme
Corporation, where he was Senior Vice President, American Hospital
Supply, where he was Vice President of Business Development for the
Critical Care division, Johnson & Johnson, Hoffmann-LaRoche and
Sandoz. He currently sits on the Boards of Directors of
International Stem Cell Corporation (OTCQB: ISCO), Relmada
Therapeutics (OTCQB: RLMD) and Eton Pharmaceuticals, and was
previously a director and vice-chairman of the Catholic Medical
Missions Board a large not for profit international organization.
Mr. Casamento holds a bachelor's degree in Pharmacy from Fordham
University and an M.B.A. from Iona College.
We
believe that Mr. Casamento’s expertise and knowledge of the
financial community combined with his experience in the healthcare
sector qualify him to serve as a member of our Board.
Dr. Vern
Lee Schramm joined our
Board of Directors in October 2017. Dr. Schramm has served
as Professor of the Albert Einstein College of Medicine
since 1987 and Chairman of the Department of Biochemistry from 1987
to 2015, and has been awarded the Ruth Merns Endowed Chair in
Biochemistry. His fields of interest include enzymatic transition
state analysis, transition state inhibitor design, biological
targets for inhibitor design, and mechanisms of
N-ribosyltransferases. Dr. Schramm was elected to the National
Academy of Sciences in 2007, and served as the Associate Editor for
the Journal of the American
Chemical Society from 2003
to 2012. A frequent lecturer and presenter in topics related to
chemical biology, Dr. Schramm has been a consultant and advisor to
Pico Pharmaceuticals, Metabolon Inc., Sirtris Pharmaceuticals, and
BioCryst Pharmaceuticals. Dr. Schramm obtained his BS in
Bacteriology with an emphasis in chemistry from South Dakota State
College, a Master’s Degree in Nutrition with an emphasis in
biochemistry from Harvard University, a Ph.D. in Mechanism of
Enzyme Action from the Australian National University and
postdoctoral training at NASA Ames Research Center, Biological
Sciences, with a NSF-NRC fellowship.
We
believe that Dr. Schramm’s substantial experience in
biochemistry and knowledge of the chemistry related to non-systemic
biologics will assist the Board in developing its product
candidates.
Board of Directors
Director Independence
Our
Board of Directors has reviewed the independence of our directors
based on the listing standards of the Nasdaq Stock Market. Based on
this review, the Board of Directors determined that Messrs.
Borkowski and Casamento, and Drs. Riddell and Schramm, are
independent as defined in Rule 5605(a)(2) of the Nasdaq Stock
Market 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.
Board Committees
Our
Board of Directors has established the following standing
committees: Audit Committee, Compensation Committee, and Nominating
and Corporate Governance Committee. Our Board of Directors has
adopted written charters for each of these committees. Copies of
the charters are 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:
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appointing, compensating, retaining, evaluating, terminating, and
overseeing our independent registered public accounting
firm;
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discussing with our independent registered public accounting firm
the independence of its members from its management;
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reviewing with our independent registered public accounting firm
the scope and results of their audit;
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approving all audit and permissible non-audit services to be
performed by our independent registered public accounting
firm;
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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 Securities and Exchange Commission
(“ SEC”);
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reviewing and monitoring our accounting principles, accounting
policies, financial and accounting controls, and compliance with
legal and regulatory requirements;
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coordinating the oversight by our Board of Directors of our code of
business conduct and our disclosure controls and
procedures;
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establishing procedures for the confidential and/or anonymous
submission of concerns regarding accounting, internal controls or
auditing matters; and
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reviewing and approving related-person transactions.
Our
Audit Committee currently consists of Messrs. Borkowski and
Casamento, and Dr. Riddell, with Mr. Borkowski serving as the
Chairman. The rules of the Nasdaq Stock Market require our Audit
Committee to consist entirely of at least three directors, all of
whom must be deemed to be independent directors under the rules of
the Nasdaq stock market. Our Board has affirmatively determined
that Messrs. Borkowski and Casamento, and Dr. Riddell, each meet
the definition of “independent director” for purposes
of serving on an Audit Committee under the Nasdaq Stock Market
Rules. Our Board of Directors has determined that Messrs. Borkowski
and Casamento each qualify as an “audit committee financial
expert,” as such term is defined in Item 407(d)(5) of
Regulation S-K.
Compensation Committee
The
Compensation Committee is responsible for, among other
matters:
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reviewing key employee compensation goals, policies, plans and
programs;
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reviewing and approving the compensation of our directors and
executive officers;
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reviewing and approving employment agreements and other similar
arrangements between us and our executive officers;
and
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appointing and overseeing any compensation consultants or
advisors.
Our
Compensation Committee consists of Mr. Borkowski and Dr. Riddell,
with Dr. Riddell serving as the Chairman. The rules of the NASDAQ
stock market require our Compensation Committee to consist entirely
of independent directors. Our Board has affirmatively determined
that Mr. Borkowski and Dr. Riddell meet the definition of
“independent director” for purposes of serving on a
Compensation Committee under the rules of the NASDAQ Stock
Market.
Nominating and Corporate Governance Committee
The
purpose of the Nominating and Corporate Governance Committee is to
assist the Board in identifying qualified individuals to become
members of the Board, determining the composition of the Board, and
monitoring the activities of the Board to assess overall
effectiveness. In addition, the Nominating and Corporate
Governance Committee will be responsible for developing and
recommending to our Board corporate governance guidelines
applicable to the Company and advising our Board on corporate
governance matters. Our Nominating and Corporate Governance
Committee consists of Mr. Borkowski and Dr. Riddell, with Mr.
Borkowski serving as the Chairman.
Board Attendance at Board of Directors, Committee and Stockholder
Meetings
Our Board met six times and acted by unanimous
written consent four times during the fiscal year ended December
31, 2017. Our Audit Committee met eight times and our Compensation Committee met
one time, and our Compensation Committee requested
action by the entire Board of Directors one time during the same period. Our Nominating
and Corporate Governance Committee met one time during the fiscal year ended December 31,
2017. Each of our directors serving during fiscal 2017
attended at least 75% of the meetings of the Board of Directors and
the committees of the Board upon which such director served that
were held during the term of his service.
We
do not have a formal policy regarding attendance by members of the
Board of Directors at our annual meeting of stockholders, but
directors are encouraged to attend.
Board Leadership Structure
Currently,
our principal executive officer is Johan M. (Thijs) Spoor and our
Chairman of the Board is Edward J. Borkowski. Our Board
of Directors has determined that it is in the best interests of the
Board and the Company to maintain separate the roles for the Chief
Executive Officer and Chairman of the Board. The Board believes
this structure increases the Board’s independence from
management and, in turn, leads to better monitoring and oversight
of management. Although the Board believes the Company is currently
best served by separating the role of Chairman of the Board and
Chief Executive Officer, the Board of Directors will
review and consider the continued appropriateness of this structure
on an annual basis.
Risk Oversight
Our
Board of Directors oversees a company-wide approach to
risk management, determines the appropriate risk level for us
generally, assesses the specific risks faced by us and reviews the
steps taken by management to manage those risks. Although our Board
of Directors has ultimate oversight responsibility for the risk
management process, its committees oversee risk in certain
specified areas.
Specifically,
our Compensation Committee is responsible for overseeing the
management of risks relating to our executive compensation plans
and arrangements, and the incentives created by the compensation
awards it administers. Our Audit Committee oversees 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.
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. A copy of
this code is 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.
Section 16(a) Beneficial Ownership Reporting
Compliances
Section 16(a) of the Securities Exchange Act of
1934, as amended (the “Exchange
Act”) requires our
officers, directors, and persons who beneficially own more than 10%
of our common stock to file reports of ownership and changes in
ownership with the SEC. Officers, directors, and
greater-than-ten-percent shareholders are also required by the SEC
to furnish us with copies of all Section 16(a) forms that they
file.
Based solely upon a review of these forms that
were furnished to us, we believe that all reports required to be
filed by these individuals and persons under Section 16(a) were
filed during the year ended December 31, 2017 and that such filings
were timely, except for the
inadvertent failure by one of our 10% stockholders to timely file a
Form 4 following the completion of certain transactions on June 5,
2017.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The
following table provides information regarding the compensation
paid during the years ended December 31, 2017 and 2016 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 Annual Report.
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Name and Principal Position
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Year
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Salary
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Bonus
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Equity
Awards
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All Other
Compensation
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Total
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Johan M. (Thijs) Spoor
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2017
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$454,167
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$170,000
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$386,900
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(1)
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$-
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$1,011,067
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President
and Chief Executive Officer
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2016
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$336,458
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$-
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$210,000
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$-
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$546,458
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Maged Shenouda
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2017
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$91,667
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$-
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$336,500
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(1)
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$-
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$428,167
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Chief Financial Officer (2)
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|
|
|
|
|
|
|
|
|
Daniel Dupret
|
2017
|
$208,673
|
$-
|
$213,000
|
(1)
|
$-
|
$421,6733
|
|
Chief
Scientific Officer
|
2016
|
$204,215
|
$-
|
$-
|
|
$-
|
$204,215
|
|
(1)
|
Represents the grant date fair value of stock options issued during
the year ended December 31, 2017, calculated in accordance with ASC
Topic 718. The assumptions used in the calculation of these amounts
are included in Note 13 of the notes to the consolidated financial
statements contained in the Company’s Annual Report on Form
10-K for the year ended December 31, 2017, filed with the
Securities and Exchange Commission on March 16, 2018.
The stock options issued to Mr. Spoor in 2017 are fully vested. The
stock options issued to Messrs. Shenouda and Dupret are currently
unvested and are scheduled to vest upon achievement of certain
performance criteria. The Company is unable to determine the
probability of achieving the performance criteria associated with
the stock options and instead has reported the grant date fair
value of the stock options assuming the maximum award amount is
achieved.
|
|
(2)
|
No compensation is reported for Mr. Shenouda in 2016 as he was
appointed to serve as the Company’s Chief Financial Officer
on September 26, 2017, he did not receive any compensation in 2016
for an executive role.
For compensation paid to Mr. Shenouda in 2017 prior to his
appointment as the Company’s Chief Financial Officer, see the
section titled “Non-Employee Director
Compensation”
below.
|
Overview of Our Fiscal 2017 and 2016 Executive
Compensation
Elements of Compensation
Our
executive compensation program consisted of the following
components of compensation in 2017 and 2016:
Base Salary. Each named executive officer receives a base
salary commensurate with their respective expertise, skills,
knowledge and experience offered 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 2017 and
2016 is listed under the heading “Salary” in the
Summary Compensation Table above.
Employment Agreements and Potential Payments upon Termination or
Change of Control
Johan M. (Thijs) Spoor
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, which annual salary
was increased to $425,000 upon completion of our initial public
offering and listing of our common stock on the Nasdaq Stock Market
in October 2016. In addition to his salary, Mr. Spoor is eligible
to receive an annual milestone bonus, awarded at the sole
discretion of the Board based on his attainment of certain
financial, clinical development, and/or business milestones
established annually by our Board 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 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 eighteen
months’ worth of his base salary in a lump sum as
severance.
Per his employment agreement, Mr. Spoor was
granted 100,000 shares of restricted common stock on February 3,
2017, which shares will only vest as follows: (i) 50,000 upon the
first commercial sale in the United States of MS1819, and (ii)
50,000 upon our total market capitalization exceeding $1.0 billion
for 20 consecutive trading days, in each case subject to the
earlier determination of a majority of the Board. In addition, Mr.
Spoor is entitled to receive stock options issuable under the terms
of the Amended and Restated 2014 Omnibus Equity Incentive Plan (the
“2014 Plan”) to purchase 380,000 shares of common
stock at a price per share equal to the closing price of the
Company’s common stock on the trading day immediately prior
to the date of issuance.
On
June 8, 2016, the Board of Directors reviewed and modified Mr.
Spoor’s agreement as follows: the 380,000 stock options
described in the agreement had neither been granted nor priced
since certain key provisions, particularly the underlying exercise
price, had not been determined. The Board determined that the
options will be granted at a future date, at the discretion of the
Board, and priced at that future date when they are granted. In the
first quarter of 2017, the Board elected to issued 100,000 stock
options to Mr. Spoor with an exercise price of $4.48 per share. On
September 29, 2017, Mr. Spoor was granted 100,000 shares of
restricted common stock subject to vesting conditions as follows:
(i) 75% upon FDA acceptance of a U.S. IND application for MS1819,
and (ii) 25% upon the Company completing a Phase IIa clinical trial
for MS1819, in satisfaction of the Company’s obligation to
issue the additional 280,000 options to Mr. Spoor described above,
with an estimated fair value at the grant date of $425,000 to be
expensed when the Company determines that achievement of the
milestones are probable.
In
addition to the stock awards Mr. Spoor received in 2017, the Board
approved a 2016 annual incentive bonus equal to 40% of Mr.
Spoor’s current base salary pursuant to his employment
agreement in the amount of $170,000.
Maged Shenouda
Pursuant
to the employment agreement entered into by the Company and Mr.
Shenouda on September 26, 2017, Mr. Shenouda currently serves as
the Company’s Executive Vice-President of Corporate
Development and Chief Financial Officer for a term of three years,
during which time he receives a base salary of $275,000, which
amount may be increased by the Company at any time during the term
of the agreement. In addition to the base salary, Mr. Shenouda is
eligible to receive an annual milestone cash bonus based on the
achievement of certain financial, clinical development, and/or
business milestones, which milestones will be established annually
by the Company’s Board or the Compensation Committee. Upon
execution of Mr. Shenouda’s employment agreement, Mr.
Shenouda became entitled to receive options to purchase 100,000
shares of the Company’s common stock pursuant to the
Company’s 2014 Plan, which options will vest as follows so
long as Mr. Shenouda is serving as either Executive
Vice-President of Corporate Development or as Chief Financial
Officer: (i) 75% upon acceptance of a US IND for MS1819, and (ii)
25% upon the completion of a Phase IIa clinical trial for MS1819.
These stock options are exercisable for $4.39 per share and will
expire on September 25, 2027.
The
Company may terminate Mr. Shenouda’s employment agreement at
any time, with or without Cause, as such term is defined in the
agreement. If the Company terminates the agreement without Cause,
or if the agreement is terminated due to a Change of Control, as
such term is defined in the agreement, Mr. Shenouda will be
entitled to (i) all salary owed through the date of termination;
(ii) any unpaid annual milestone bonus; (iii) severance in the
form of continuation of his salary for the greater of a period of
12 months following the termination date or the remaining term of
the employment agreement; (iv) payment of premiums to cover COBRA
for a period of 12 months following the termination date; (v) a
prorated annual bonus equal to the target annual milestone bonus,
if any, for the year of termination multiplied by the formula set
forth in the agreement; and (vi) immediate accelerated vesting of
any unvested options or other unvested awards.
Daniel Dupret
If
we terminate Dr. Dupret’s employment other than for cause, we
will pay him twelve months of his base salary as
severance.
Outstanding Equity Incentive Awards At Fiscal Year-End
The
following table sets forth information regarding unexercised
options, stock that has not vested and equity incentive awards held
by each of the Named Executive Officers outstanding as of
December 31, 2017:
|
|
|
Option Awards
|
Stock Awards
|
||||||
|
Name
|
Grant Date
|
Number of securities underlying unexercised options (#)
exercisable
|
Equity incentive plan awards: Number of underlying unexercised
unearned options (#)
|
Option exercise price
($)
|
Option
expiration date
|
Number of shares or units of stock that have not vested
(#)
|
Market value of shares or units of stock that have not vested
($)
|
Equity incentive plan awards: Number of Unearned shares, units or
other rights that have not vested (#)
|
Equity
incentive plan awards: Market or Payout value of unearned shares,
units or other rights that have not vested
($)
|
|
Johan
(Thijs) Spoor
|
1/4/2016(1)
|
100,000
|
-
|
$1.00
|
1/4/2021
|
-
|
-
|
-
|
$-
|
|
|
2/3/2017
|
100,000
|
-
|
$4.48
|
2/3/2027
|
-
|
-
|
-
|
$-
|
|
|
2/3/2017(2)
|
-
|
-
|
$-
|
|
-
|
-
|
100,000
|
$364,000
|
|
|
9/29/2017(3)
|
-
|
-
|
$-
|
|
100,000
|
$364,000
|
-
|
$-
|
|
|
|
|
|
|
|
|
|
|
|
|
Maged
Shenouda
|
9/26/2017(4)
|
-
|
100,000(4)
|
$4.39
|
9/24/2027
|
-
|
-
|
-
|
$-
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
Dupret
|
8/24/2017(5)
|
-
|
100,000(5)
|
$3.60
|
8/23/2022
|
-
|
-
|
-
|
$-
|
(1)
Represents
options to purchase shares of the Company’s common stock
issued to Mr. Spoor by a third party, prior to the Company’s
initial public offering in October 2016.
(2)
Represents
the restricted stock award issued to Mr. Spoor on February 3, 2017
under the terms of his employment agreement, which shares will only
vest as follows: (i) 50,000 upon the first commercial sale in the
United States of MS1819, and (ii) 50,000 upon our total market
capitalization exceeding $1.0 billion for 20 consecutive trading
days.
The
value reported for this award was calculated using the closing
price of the Company’s common stock on December 29, 2017, as
reported by the Nasdaq Capital Market, assuming achievement if the
maximum award amount.
(3)
Represents
the restricted stock award issued to Mr. Spoor on September 29,
2017, which award was issued in satisfaction of the Company’s
obligation to issue an additional 280,000 options under Mr.
Spoor’s employment agreement and is subject to the following
vesting conditions: (i) 75% upon FDA acceptance of a U.S. IND
application for MS1819, and (ii) 25% upon the Company completing a
Phase IIa clinical trial for MS1819.
The
value reported for this award was calculated using the closing
price of the Company’s common stock on December 29, 2017, as
reported by the Nasdaq Capital Market, assuming achievement if the
maximum award amount.
(4)
Represents
stock options issued to Mr. Shenouda on September 26, 2017, which
options are subject to the following vesting schedule so long as
Mr. Shenouda is serving as either Executive Vice-President of
Corporate Development or as Chief Financial Officer of the Company:
(i) 75% upon FDA acceptance of a U.S. IND application for MS1819,
and (ii) 25% upon the Company completing a Phase IIa clinical trial
for MS1819.
(5)
Represents
stock options issued to Mr. Dupret on August 24, 2017, which
options are subject to the following vesting schedule so long as
Mr. Dupret is serving as the Company’s Chief Scientific
Officer: (i) 75% upon FDA acceptance of a U.S. IND application for
MS1819, and (ii) 25% upon the Company completing a Phase IIa
clinical trial for MS1819.
Non-Executive Director Compensation
Each
of our non-executive directors are compensated at a rate of $35,000
per year, payable in cash or shares of common stock, for service on
the Board of Directors and the various Board committees, and
receives an annual grant of 30,000 shares of our common stock. In
addition, each non-executive director serving as a director at the
time of the Company’s initial public offering was granted a
one-time IPO-related payment of $30,000, which was accrued at
December 31, 2017.
The following table sets forth certain information
relating to the compensation for each of our directors, who is not
also an executive officer of the Company, for the year ended
December 31, 2017. Compensation for executive officers who are also
serving as directors is available in section titled
“Summary Compensation
Table” below.
|
Name
|
Fees Earned or Paid in Cash
|
Stock Awards(1)
|
Option Awards(2)
|
All Other Compensation
|
Total
|
|
Edward
J. Borkowski
|
$35,000
|
$120,000
|
$74,156
|
$-
|
$229,156
|
|
Maged Shenouda (3)
|
$115,000
|
$90,000
|
$74,156
|
$-
|
$279,156
|
|
Alastair
Riddell
|
$35,000
|
$120,000
|
$74,156
|
$-
|
$229,156
|
|
Charles J. Casamento (4)
|
$30,000
|
$100,000
|
$-
|
$-
|
$130,000
|
|
Vern Schramm (5)
|
$8,750
|
$30,000
|
$-
|
$-
|
$38,750
|
(1)
Represent the aggregate grant date fair value of shares of the
Company’s common stock issued to each of our non-employee
directors in 2017 as partial payment of fees payable for each
director’s service on the Board in 2017, calculated in
accordance with ASC Topic 718.
(2)
Represent the aggregate grant date fair value of stock options
issued to each of our non-employee directors in 2017, calculated in
accordance with ASC Topic 718.
As of December 31, 2017, Mr. Borkowsi held a total of 30,000
outstanding stock options, Mr. Shenouda held a total of 130,000
outstanding stock options (including 100,000 options issued
pursuant to his employment agreement) and Dr. Riddell held a total
of 30,000 outstanding stock options.
(3)
This table reflects compensation earned by
Mr. Shenouda as a non-employee director of the Company from January
1, 2017 to September 26, 2017. On September 26, 2017 Mr. Shenouda
was appointed to serve as the Company’s Chief Financial
Officer. For a summary of the compensation Mr. Shenouda received as
an executive, see the “ Summary Compensation
Table”
above.
In addition to the compensation Mr. Shenouda received as a
non-employee director and as Chief Financial Officer of the
Company, Mr. Shenouda received a total of $90,000 in 2017 for
services rendered to the Company as a financial
consultant.
(4)
Mr. Casamento began serving on our Board of Directors on March 3,
2017.
(5)
Mr. Schramm began serving on our Board of Directors on October 10,
2017.
Compensation Committee Interlocks and Insider
Participation
None
of our executive officers currently serves, or has served during
the last three years, on the compensation committee of any other
entity that has one or more officers serving as a member of our
Board of Directors.
Although
Mr. Shenouda was a member of the Company’s Compensation
Committee prior to his appointment as Chief Financial Officer, he
resigned from the Compensation Committee when he was appointed
Chief Financial Officer of the Company in October of 2017 in order
to comply with Compensation Committee independence
requirements.
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table provides information as of December 31, 2017
regarding equity compensation plans approved by our security
holders and equity compensation plans that have not been approved
by our security holders:
|
Plan category
|
Number of securities to be issued upon exercise of outstanding
options, warrants and rights
|
Weighted-average exercise price of outstanding options,
warrants and rights
|
Number of securities remaining available for future issuance under
equity compensation plans (excluding securities reflected in column
(a))
|
|
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation plans approved by security holders
|
545,000
|
$4.05
|
963,553
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
|
|
|
|
|
|
Total
|
545,000
|
$4.05
|
963,553
|
Amended and Restated 2014 Omnibus Equity Incentive
Plan
Our
Board of Directors and stockholders have adopted and approved the
2014 Plan, which is a comprehensive incentive compensation plan
under which we can grant equity-based and other incentive awards to
our officers, employees, directors, consultants and advisers. The
purpose of the 2014 Plan is to help us attract, motivate and retain
such persons with awards under the 2014 Plan and thereby enhance
stockholder value.
Administration.
The 2014 Plan is administered by the Compensation Committee of the
Board of Directors, which consists of two 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 Section 162(m)
of the Internal Revenue Code (the “Code”). Among other things, the Compensation
Committee has complete discretion, subject to the express limits of
the 2014 Plan, to determine the directors, employees and
nonemployee consultants to be granted an award, the type of award
to be granted the terms and conditions of the award, the form of
payment to be made and/or the number of shares of common stock
subject to each award, the exercise price of each option and base
price of each stock appreciation right (“SAR”), the term of each award, the vesting
schedule for an award, whether to accelerate vesting, the value of
the common stock underlying the award, and the required
withholding, if any. The Compensation Committee may amend, modify
or terminate any outstanding award, provided that the
participant’s consent to such action is required if the
action would impair the participant’s rights or entitlements
with respect to that award. The Compensation Committee is also
authorized to construe the award agreements, and may prescribe
rules relating to the 2014 Plan. Notwithstanding the foregoing, the
Compensation Committee does not have any authority to grant or
modify an award under the 2014 Plan with terms or conditions that
would cause the grant, vesting or exercise thereof to be considered
nonqualified “deferred compensation” subject to Code
Section 409A.
Grant of Awards; Shares
Available for Awards. The 2014
Plan provides for the grant of stock options, SARs, performance
share awards, performance unit awards, distribution equivalent
right awards, restricted stock awards, restricted stock unit awards
and unrestricted stock awards to non-employee directors, officers,
employees and nonemployee consultants of the Company or its
affiliates. The aggregate number of shares of common stock that may
be issued under the 2014 Plan shall not exceed 10% of the issued
and outstanding shares of common stock on an as converted basis
(the “As Converted
Shares”), on a rolling
basis. For calculation purposes, the As Converted Shares shall
include all shares of common stock and all shares of common stock
issuable upon the conversion of outstanding preferred stock and
other convertible securities, but shall not include any shares of
common stock issuable upon the exercise of options, warrants and
other convertible securities issued pursuant to the 2014 Plan. The
number of authorized shares of common stock reserved for issuance
under the 2014 Plan shall automatically be increased concurrently
with our issuance of fully paid and non-assessable shares of As
Converted Shares. Shares shall be deemed to have been
issued under the 2014 Plan solely to the extent actually issued and
delivered pursuant to an award. If any award expires, is cancelled,
or terminates unexercised or is forfeited, the number of shares
subject thereto is again available for grant under the 2014
Plan.
The
number of shares of common stock for which awards may be granted
under the 2014 Plan to a participant who is an employee in any
calendar year is limited to 300,000 shares. Future new hires and
additional non-employee directors and/or consultants would be
eligible to participate in the 2014 Plan as well. The number of
stock options and/or shares of restricted stock to be granted to
executives and directors cannot be determined at this time as the
grant of stock options and/or shares of restricted stock is
dependent upon various factors such as hiring requirements and job
performance.
Stock
Options. The 2014 Plan provides
for either “incentive stock options”
(“ISOs”), which are intended to meet the
requirements for special federal income tax treatment under the
Code, or “nonqualified stock options”
(“NQSOs”). Stock options may be granted on such
terms and conditions as the Compensation Committee may
determine; provided,
however, that the per share
exercise price under a stock option may not be less than the fair
market value of a share of common stock on the date of grant and
the term of the stock option may not exceed 10 years (110% of such
value and five years in the case of an ISO granted to an employee
who owns (or is deemed to own) more than 10% of the total combined
voting power of all classes of the Company's capital stock or a
parent or subsidiary of the Company). ISOs may only be granted to
employees. In addition, the aggregate fair market value of common
stock covered by one or more ISOs (determined at the time of
grant), which are exercisable for the first time by an employee
during any calendar year may not exceed $100,000. Any excess is
treated as a NQSO.
Stock Appreciation
Rights. A SAR entitles the
participant, upon exercise, to receive an amount, in cash or stock
or a combination thereof, equal to the increase in the fair market
value of the underlying common stock between the date of grant and
the date of exercise. SARs may be granted in tandem with, or
independently of, stock options granted under the 2014 Plan. A SAR
granted in tandem with a stock option (i) is exercisable only at
such times, and to the extent, that the related stock option is
exercisable in accordance with the procedure for exercise of the
related stock option; (ii) terminates upon termination or exercise
of the related stock option (likewise, the common stock option
granted in tandem with a SAR terminates upon exercise of the SAR);
(iii) is transferable only with the related stock option; and (iv)
if the related stock option is an ISO, may be exercised only when
the value of the stock subject to the stock option exceeds the
exercise price of the stock option. A SAR that is not granted in
tandem with a stock option is exercisable at such times as the
Compensation Committee may specify.
Performance Shares and
Performance Unit Awards.
Performance share and performance unit awards entitle the
participant to receive cash or shares of common stock upon the
attainment of specified performance goals. In the case of
performance units, the right to acquire the units is denominated in
cash values.
Distribution Equivalent Right
Awards. A distribution
equivalent right award entitles the participant to receive
bookkeeping credits, cash payments and/or common stock
distributions equal in amount to the distributions that would have
been made to the participant had the participant held a specified
number of shares of common stock during the period the participant
held the distribution equivalent right. A distribution equivalent
right may be awarded as a component of another award under the 2014
Plan, where, if so awarded, such distribution equivalent right will
expire or be forfeited by the participant under the same conditions
as under such other award.
Restricted Stock Awards and
Restricted Stock Unit Awards. A
restricted stock award is a grant or sale of common stock to the
participant, subject to our right to repurchase all or part of the
shares at their purchase price (or to require forfeiture of such
shares if issued to the participant at no cost) in the event that
conditions specified by the Compensation Committee in the award are
not satisfied prior to the end of the time period during which the
shares subject to the award may be repurchased by or forfeited to
us. Our restricted stock unit entitles the participant to receive a
cash payment equal to the fair market value of a share of common
stock for each restricted stock unit subject to such restricted
stock unit award, if the participant satisfies the applicable
vesting requirement.
Unrestricted Stock
Awards. An unrestricted stock
award is a grant or sale of shares of our common stock to the
participant that is not subject to transfer, forfeiture or other
restrictions, in consideration for past services rendered to the
Company or an affiliate or for other valid
consideration.
Change-in-Control
Provisions. In connection with
the grant of an award, the Compensation Committee may provide that,
in the event of a change in control, such award will become fully
vested and immediately exercisable.
Amendment and
Termination. The Compensation
Committee may adopt, amend and rescind rules relating to the
administration of the 2014 Plan, and amend, suspend or terminate
the 2014 Plan, but no such amendment or termination will be made
that materially and adversely impairs the rights of any participant
with respect to any award received thereby under the 2014 Plan
without the participant’s consent, other than amendments that
are necessary to permit the granting of awards in compliance with
applicable laws.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS
MATTERS
As
of April 25, 2018, we had one class of voting stock outstanding:
common stock. The following table sets forth information regarding
shares of common stock beneficially owned as of April 25, 2018
by:
|
|
(i)
|
Each of our officers and directors;
|
|
|
(ii)
|
All officer and directors as a group; and
|
|
|
(iii)
|
Each person known by us to beneficially own five percent or more of
the outstanding shares of our common stock. Percent ownership is
calculated based on 12,602,395 shares of common stock
outstanding at April 25, 2018.
|
Beneficial Ownership of Common Stock
|
Name and Address of Beneficial Owner (1)
|
Number of
Shares (2)
|
Percent Ownership of
Class (3)
|
|
Johan M. (Thijs) Spoor, President and Chief
Executive Officer (4)
|
539,885
|
4.2%
|
|
Daniel
Dupret, Chief Scientific Officer
|
–
|
*
|
|
Maged Shenouda, Chief Financial Officer and
Director (5)
|
94,167
|
*
|
|
Alastair Riddell,
Director (6)
|
99,167
|
*
|
|
Edward J. Borkowski,
Director (7)
|
409,653
|
3.2%
|
|
Charles
J. Casamento, Director
|
32,500
|
*
|
|
Vern
Lee Schramm, Ph.D., Director
|
15,000
|
*
|
|
All
directors and executive officers as a group (7
persons)
|
1,190,372
|
9.1%
|
|
|
|
|
|
5% Stockholders
|
|
|
|
Edmond Burke Ross, Jr. (8)(9)
|
2,401,010
|
18.0%
|
|
Pelican Partners LLC (10)
|
1,627,796
|
12.9%
|
|
ADEC Private Equity (11)
|
1,676,009
|
12.7%
|
|
EBR Ventures, LLC (9)(12)
|
675,000
|
5.3%
|
* Less than 1%.
(1)
Unless otherwise indicated, the address of such individual is c/o
AzurRx BioPharma, Inc., 760 Parkside Avenue, Downstate
Biotechnology Incubator, Suite 304, Brooklyn, NY
11226.
(2)
Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with
respect to securities. All entries exclude beneficial ownership of
shares issuable pursuant to warrants, options or other derivative
securities that have not vested or that are not otherwise
exercisable as of the date hereof or which will not become vested
or exercisable within 60 days of April 25, 2018.
(3)
Percentages are rounded to nearest percent. Percentages are based
on 12,602,395 shares of common stock outstanding. Warrants, options
or other derivative securities that are presently exercisable or
exercisable within 60 days are deemed to be beneficially owned by
the person holding the options for the purpose of computing the
percentage ownership of that person, but are not treated as
outstanding for the purpose of computing the percentage of any
other person.
(4)
Includes (i) 100,034 shares of common stock; (ii) 200,000
restricted shares of common stock; (iii) 100,000 shares of common
stock issuable upon exercise of options; (iv) 200,000 shares of
common stock that may be purchased pursuant to options granted by
third parties at an exercise price of $1.00 per share; and (v)
39,851 shares of common stock held in a trust for the benefit of
Mr. Spoor’s spouse and minor children. Mr. Spoor disclaims
beneficial ownership with respect to such shares of common stock
held in trust.
(5)
Includes (i) 42,500 shares of common stock; (ii) 30,000 restricted
shares of common stock; and (iii) 21,667 shares of common stock
issuable upon the exercise of stock options.
(6)
Includes (i) 47,500 shares of common stock; (ii) 30,000 restricted
shares of common stock; and (iii) 21,667 shares of common stock
issuable upon the exercise of stock options.
(7)
Includes (i) 290,626 shares of common stock; (ii) 45,000 restricted
shares of common stock; (iii) 28,474 shares of common stock
issuable upon the exercise of warrants; and (iv) 21,667 shares of
common stock issuable upon exercise of options.
(8)
Based upon information contained in a Schedule 13D filed by Burke
Edmund Ross, Jr. on June 13, 2017 and records maintained by the
Company. Includes a total of 1,659,840 shares of common stock and
warrants to purchase up to 644,741 shares of common stock. Of these
holdings, (i) 1,676,009 shares are held by ADEC Private Equity
Investment, LLC, which include 1,031,268 shares of common stock and
644,741 shares issuable upon exercise of warrants; (ii) 675,000
shares are held by EBR Ventures, LLC, which include 600,000 shares
of common stock and 75,000 shares issuable upon exercise of
warrants; and (iii) 50,001 shares held by CEDA Investments, LLC,
which include 28,572 shares of common stock and 21,429 shares
issuable upon exercise of warrants.
Mr. Ross is the Manager of EBR Ventures, LLC, ADEC Private Equity
Investment, LLC and CEDA Investments, LLC, and has voting and
dispositive power over the shares of common stock held by such
entities. The address of Mr. Ross and such entities is c/o JDJ
Family Office Services, P.O. Box 962049, Boston, MA
02196.
(9)
Shares owned and percentages for Burke Edmond Ross, ADEC Private
Equity, and EBR Ventures, LLC are partially duplicative as Mr. Ross
holds voting and dispositive power over the shares held by ADEC
Private Equity and EBR Ventures, LLC.
(10)
Based upon information contained in a Schedule 13G filed by Matthew
Balk on August 28, 2017. The address of such entity is P.O. Box
2422, Westport, CT 06880. Matthew Balk is the managing member of
Pelican Partners LLC, and has voting and dispositive power over the
shares of common stock held by such entity.
(11)
Based upon information contained in a Schedule 13D filed by Burke
Edmund Ross, Jr. on June 13, 2017 and records maintained by the
Company. As indicated in Note 8 above, includes 644,741 shares of
common stock issuable upon the exercise of warrants. Mr. Ross has
voting and dispositive power over the shares held by such
entity.
(12)
Based upon information contained in a Schedule 13D filed by Burke
Edmund Ross, Jr. on June 13, 2017 and records maintained by the
Company. As indicated in Note 8 above, includes 75,000 shares of
common stock issuable upon the exercise of warrants. Mr. Ross has
voting and dispositive power over the shares held by such
entity.
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
During the year ended December 31, 2015, the
Company employed the services of JIST Consulting
(“JIST”), a company controlled by Johan (Thijs)
Spoor, the Company’s current Chief Executive Officer and
president, as a consultant for business strategy, financial
modeling, and fundraising. Included in accounts payable at December
31, 2017 and 2016 was $478,400 and $508,300, respectively, for JIST
relating to Mr. Spoor’s services. Mr. Spoor received no other
compensation from the Company other than as specified in his
employment agreement.
During the year ended December 31, 2015, the
Company’s President, Christine Rigby-Hutton, was employed
through Rigby-Hutton Management Services
(“RHMS”).
Ms. Rigby-Hutton resigned from the Company effective April 20,
2015. Included in accounts payable at both December 31, 2017 and
2016 was $38,453 for RHMS for Ms. Rigby-Hutton’s
services.
From
October 1, 2015 through December 31, 2015, the Company used the
services of Edward Borkowski as a financial consultant. Mr.
Borkowski is a member of the Board of Directors and the Chairman of
the Company’s Audit Committee. Included in accounts payable
at both December 31, 2017 and 2016 is $90,000 for Mr.
Borkowski’s services.
In
July 2016, the Company granted 45,000 shares of restricted common
stock to Mr. Borkowski and 30,000 shares of restricted common stock
to each of Mr. Shenouda and Dr. Riddell, members of the
Company’s Board of Directors. The shares of restricted common
stock will be issued as follows: (i) 50% upon the first commercial
sale in the United States of MS1819, and (ii) 50% upon our total
market capitalization exceeding $1.0 billion for 20 consecutive
trading days, in each case subject to the earlier determination of
a majority of the members of the Board of Directors.
Beginning
October 1, 2016 until his appointment as the Company’s Chief
Financial Officer on September 25, 2017, the Company utilized the
services of Maged Shenouda as a financial consultant. Mr. Shenouda
is also a member of the Board of Directors. Included in accounts
payable at both December 31, 2017 and 2016 is $90,000 for Mr.
Shenouda’s services.
Policy and Procedures Governing Related Party
Transactions
The
Board of Directors is committed to upholding the highest legal and
ethical conduct in fulfilling its responsibilities and recognizes
that related party transactions can present a heightened risk of
potential or actual conflicts of interest.
The
SEC rules define a related party transaction to include any
transaction, arrangement or relationship which: (i) we are a
participant; (ii) the amount involved exceeds $120,000; and (iii)
executive officer, director or director nominee, or any person who
is known to be the beneficial owner of more than 5% of our common
stock, or any person who is an immediate family member of an
executive officer, director or director nominee or beneficial owner
of more than 5% of our common stock had or will have a direct or
indirect material interest.
Although
we do not maintain a formal written procedure for the review and
approval of transactions with such related persons, it is our
policy for the disinterested members of our Board of Directors to
review all related party transactions on a case-by-case
basis. To receive approval, a related-party transaction must
have a legitimate business purpose for us and be on terms that are
fair and reasonable to us and our stockholders and as favorable to
us and our stockholders as would be available from non-related
entities in comparable transactions.
All
related party transactions must be disclosed in our applicable
filings with the SEC as required under SEC rules.
ITEM 14. PRINCIPAL ACCOUNTANT FEES
AND SERVICES
Set
forth below are fees billed or expected to be billed to us by
our independent registered public accounting firm Mazars USA LLP
for the years ended December 31, 2017 and 2016 for the professional
services performed for us.
Audit Fees
The
following table presents fees for professional services billed by
Mazars USA LLP for the fiscal years ended December 31, 2017 and
2016.
|
|
For the years ended
December 31,
|
|
|
|
2017
|
2016
|
|
Audit fees (1)
|
$139,329
|
$284,779
|
|
Audit-related fees (2)
|
33,240
|
181,437
|
|
Tax fees (3)
|
20,114
|
12,600
|
|
All other fees (4)
|
-
|
-
|
|
Total
|
$192,683
|
$478,816
|
(1)
Professional services rendered by the Mazars USA LLP for the audit
of our annual financial statements and review of financial
statements included in our Form 10-Q’s.
(2)
The aggregate fees billed for assurance and related services by
Mazars USA LLP that are reasonably related to the performance of
the audit or review of our financial statements and are not
reported under Note 1 above.
(3)
The aggregate fees billed for professional services rendered by
Mazars USA LLP for tax compliance, tax advice, and tax
planning.
(4)
The aggregate fees billed for products and services provided by
Mazars USA LLP other than the services reported in Notes 1 through
3 above.
Audit Committee Pre-Approval Policies and Procedures
The
Audit Committee has the sole authority for the appointment,
compensation and oversight of the work of our independent
accountants, who prepare or issue an audit report for
us.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
The Audit Committee has reviewed and discussed
with management and Mazars USA, our independent registered
public accounting firm, the audited consolidated financial
statements in the AzurRx BioPharma, Inc. Annual Report on
Form 10-K for the year ended December 31, 2017. The Audit Committee
has also discussed with Mazars USA those matters required to be
discussed by Public Company Accounting Oversight Board
(“PCAOB”) Auditing Standard No.
61.
Mazars
USA also provided the Audit Committee with the written
disclosures and the letter required by the applicable requirements
of the PCAOB regarding the independent auditor’s
communication with the Audit Committee concerning independence. The
Audit Committee has discussed with the registered public accounting
firm their independence from our Company.
Based
on its discussions with management and the registered public
accounting firm, and its review of the representations and
information provided by management and the registered public
accounting firm, including as set forth above, the Audit Committee
recommended to our Board of Directors that the audited financial
statements be included in our Annual Report on Form 10-K for the
year ended December 31, 2017.
|
Dated: March 16, 2018
|
Respectfully Submitted,
Edward J. Borkowski, Chairman
Alastair Riddell
Charles J. Casamento
|
The information contained above under the caption
“Report of the Audit Committee
of the Board of Directors” shall not be deemed to be soliciting
material or to be filed with the SEC, nor shall such information be
incorporated by reference into any future filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended, except to the extent that we specifically
incorporate it by reference into such filing.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULE.
|
(a)
|
The following financial statements, schedules and exhibits are
filed as part of this report:
|
|
|
(1)
|
Consolidated Financial Statements;
|
See
Index to Consolidated Financial Statements at page 40 of the
10-K.
|
|
(2)
|
Exhibits:
|
The
exhibits listed in the accompanying index to exhibits are filed as
part of, and incorporated by reference into, the 10-K.
|
(b)
|
See Item 15(a)(2) above.
|
Index
List of Exhibits.
The
following is a list of exhibits filed as a part of this Annual
Report on Form 10-K/A.
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
|
Form of Underwriting Agreement (Incorporated by reference from
Exhibit 1.1 filed with Amendment No 1. to Registration Statement on
Form S-1, filed July 29, 2016).
|
|
|
|
Amended and Restated Certificate of Incorporation of the Registrant
(Incorporated by reference from Exhibit 3.1 filed with Registration
Statement on Form S-1, filed July 13, 2016).
|
|
|
|
Amended and Restated Bylaws of the Registrant (Incorporated by
reference from Exhibit 3.2 filed with Registration Statement on
Form S-1, filed July 13, 2016).
|
|
|
|
Form of Common Stock Certificate (Incorporated by reference from
Exhibit 4.1 filed with Amendment No 1. to Registration Statement on
Form S-1, filed July 29, 2016).
|
|
|
|
Form of Investor Warrant (Incorporated by reference from Exhibit
4.2 filed with Registration Statement on Form S-1, filed July 13,
2016).
|
|
|
|
Form of Underwriter Warrant (Incorporated by reference from Exhibit
4.3 filed with Amendment No 1. to Registration Statement on Form
S-1, filed July 29, 2016).
|
|
|
|
Stock Purchase Agreement dated May 21, 2014 between the Registrant,
Protea Biosciences Group, Inc. and its wholly-owned subsidiary,
Protea Biosciences, Inc (Incorporated by reference from Exhibit
10.1 filed with Registration Statement on Form S-1, filed July 13,
2016).
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|
|
|
Amended and Restated Joint Research and Development Agreement dated
January 1, 2014 between the Registrant and Mayoly (Incorporated by
reference from Exhibit 10.2 filed with Registration Statement on
Form S-1, filed July 13, 2016).
|
|
|
|
Amended and Restated AzurRx BioPharma, Inc. 2014 Omnibus Equity
Incentive Plan (Incorporated by reference from Exhibit 10.3 filed
with Registration Statement on Form S-1, filed July 13,
2016).
|
|
|
|
Employment Agreement between the Registrant and Mr. Spoor
(Incorporated by reference from Exhibit 10.4 filed with
Registration Statement on Form S-1, filed July 13,
2016).
|
|
|
|
Securities Purchase Agreement dated April 11, 2017 between the
Registrant and Lincoln Park Capital Fund, LLC (Incorporated by
reference from Exhibit 10.1 filed with Current Report on Form 8-K,
filed April 12, 2017)
|
|
|
|
12% Senior Secured Original Issue Discount Convertible Debenture
between the Registrant and Lincoln Park Capital Fund, LLC
(Incorporated by reference from Exhibit 10.2 filed with Current
Report on Form 8-K, filed April 12, 2017)
|
|
|
|
Form of Series A Warrant dated April 11, 2017 between the
Registrant and Lincoln Park Capital Fund, LLC (Incorporated by
reference from Exhibit 10.3 filed with Current Report on Form 8-K,
filed April 12, 2017)
|
|
|
|
Registration Rights Agreement dated April 11, 2017 between the
Registrant and Lincoln Park Capital Fund, LLC (Incorporated by
reference from Exhibit 10.4 filed with Current Report on Form 8-K,
filed April 12, 2017)
|
|
|
|
Form of Securities Purchase Agreement dated June 5, 2017
(Incorporated by reference from Exhibit 10.1 filed with Current
Report on Form 8-K, filed June 9, 2017)
|
|
|
|
Form of Registration Rights Agreement dated June 5, 2017
(Incorporated by reference from Exhibit 10.2 filed with Current
Report on Form 8-K, filed April 12, 2017)
|
|
|
|
Form of Series A Warrant, dated June 5, 2017 (Incorporated by
reference from Exhibit 10.3 filed with Current Report on Form 8-K,
filed June 9, 2017)
|
|
|
|
Form of Series A-1 Warrant, dated June 5, 2017 (Incorporated by
reference from Exhibit 10.4 filed with Current Report on Form 8-K,
filed June 9, 2017)
|
|
|
|
Sublicense Agreement dated August 7, 2017 by and between the
Registrant and TransChem, Inc. (Incorporated by reference from
Exhibit 10.1 filed with Current Report on Form 8-K, filed August
11, 2017).
|
|
|
|
Employment Agreement between the Registrant and Mr. Shenouda
(Incorporated by reference from Exhibit 10.1 filed with Current
Report on Form 8-K, filed October 2, 2017).
|
|
|
|
Modification to 12% Senior Secured Original Issue Discount
Convertible Debenture, dated November 10, 2017 (Incorporated by
reference from Exhibit 10.1 filed with Quarterly Report on Form
10-Q, filed November 13, 2017).
|
|
|
|
Form of Exercise Letter (Incorporated by reference from Exhibit
10.1 filed with Current Report on Form 8-K, filed January 5,
2018).
|
|
|
|
Form of Partial Exercise Letter (Incorporated by reference from
Exhibit 10.2 filed with Current Report on Form 8-K, filed January
5, 2018).
|
|
|
|
Code of Ethics of AzurRx BioPharma, Inc. Applicable To Directors,
Officers And Employees (Incorporated by reference from Exhibit 14.1
filed with Registration Statement on Form S-1, filed July 13,
2016).
|
|
|
|
Subsidiaries of the Registrant (Incorporated by reference from
Exhibit 21.1 filed with Registration Statement on Form S-1, filed
July 13, 2016).
|
|
|
23*
|
|
Consent of Mazars USA LLP, dated March 16, 2018.
|
|
31.1*
|
|
Certification of CEO as Required by Rule
13a-14(a)/15d-14.
|
|
31.2*
|
|
Certification of CFO as Required by Rule
13a-14(a)/15d-14.
|
|
|
Certification of CEO as Required by Rule 13a-14(a)/15d-14, filed
herewith.
|
|
|
|
Certification of CFO as Required by Rule 13a-14(a)/15d-14, filed
herewith.
|
|
|
32.1*
|
|
Certification of CEO as Required by Rule 13a-14(a) and Rule
15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of
Title 18 of the United States Code, filed herewith.
|
|
32.2*
|
|
Certification of CFO as Required by Rule 13a-14(a) and Rule
15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of
Title 18 of the United States Code.
|
|
|
|
|
|
101.INS*
|
|
XBRL Instance Document
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
+ Confidential treatment has been granted with respect to portions
of this exhibit.
* Filed as an exhibit to the 10-K, filed with the SEC on March 16,
2018.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, there unto duly
authorized.
|
|
AZURRX BIOPHARMA, INC.
|
|
April 27, 2018
|
By: /s/
Johan M. (Thijs) Spoor
Name: Johan M. (Thijs)
Spoor
Title: President and
Chief Executive Officer
By: /s/ Maged
Shenouda
Name: Maged
Shenouda
Title: Chief Financial
Officer and Director
|
-21-