FIRST WAVE BIOPHARMA, INC.
10-Ks and 10-Qs
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed by the
Registrant [X]
Filed by a Party
other than the Registrant [ ]
Check the
appropriate box:
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[
]
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Preliminary Proxy
Statement
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[
]
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Confidential, for
Use of the SEC Only (as permitted by
Rule 14a-6(e)(2))
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[X]
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Definitive Proxy
Statement
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[
]
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Definitive
Additional Materials
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[
]
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Soliciting Material
Pursuant to 14a-12
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AZURRX
BIOPHARMA, INC.
(Name of Registrant
as Specified in Its Charter)
_________________________________
(Name of Person(s)
Filing Proxy Statement, if other than the Registrant)
Payment of Filing
Fee (Check the appropriate box):
[X]
No fee required.
[
] Fee computed on table below per
Exchange Act Rules 14a-6(i)(4) and 0-11.
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1.
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Title of each class
of securities to which transaction applies:
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2.
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Aggregate number of
securities to which transaction applies:
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3.
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Per unit price or
other underlying value of transaction computed pursuant to Exchange
Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4.
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Proposed maximum
aggregate value of transaction:
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5.
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Total fee
paid:
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[
] Fee paid previously with
preliminary materials.
[
] Check box if any part of the fee is
offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
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1.
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Amount Previously
Paid:
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2.
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Form, Schedule or
Registration Statement No.:
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3.
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Filing
Party:
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4.
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Date
Filed:
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AzurRx
BioPharma, Inc.
760
Parkside Avenue
Downstate
Biotechnology Incubator, Suite 304
Brooklyn,
New York 11226
(646)
699-7855
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Dear Fellow
Stockholder,
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November
7,
2019
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On behalf of the
Board of Directors and management of AzurRx BioPharma, Inc., (the
“
Company
”,
“
we
”,
“
us
” and
“
our
”), a
Delaware corporation, you are invited to attend the Company’s
2019 Annual Meeting of Stockholders (the “
Annual Meeting
”) to be held
on
December 19
, 2019 at 9:00 A.M., Eastern Time and at any
adjournment or postponement thereof,
at the offices of
Lowenstein Sandler LLP
located
at
One Lowenstein Drive, Roseland, New Jersey,
07068.
Details of the
business to be conducted at the Annual Meeting are described in
this Proxy Statement. We have also made available a copy of our
Annual Report on Form 10-K for the year ended December 31, 2018
(the “
Annual
Report
”) with this Proxy Statement. We encourage you
to read our Annual Report. It includes our audited financial
statements and provides information about our business and
services.
Your
vote is important.
Regardless of whether
you plan to attend the Annual Meeting in
person,
please
read the accompanying Proxy Statement and then vote by internet,
telephone or e-mail as promptly as possible.
Returning your proxy
will help us assure that a quorum will be present at the Annual
Meeting and avoid the additional expense of duplicate proxy
solicitations. Any stockholder attending the Annual Meeting may
vote in person, even if he or she has returned a proxy. Please
refer to the “Voting” section contained within this
Proxy Statement for instructions on submitting your vote. Voting
promptly will save us additional expense in soliciting proxies and
will ensure that your shares are represented at the Annual
Meeting.
Our Board of Directors has unanimously approved the proposals set
forth in the Proxy Statement and recommends that you vote in favor
of each such proposal. We look forward to seeing you at the Annual
Meeting.
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Sincerely,
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/s/ Edward J.
Borkowski
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EDWARD J.
BORKOWSKI
Chair of the Board
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NOTICE
OF THE AZURRX BIOPHARMA, INC. ANNUAL MEETING OF
STOCKHOLDERS
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Date and Time
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December
19, 2019 at 9:00 A.M., Eastern Time.
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Place
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The
offices of Lowenstein Sandler LLP
located at
One Lowenstein
Drive, Roseland, New Jersey, 07068.
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Items of Business
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1.
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Election
of six director nominees named in this Proxy Statement, each for a
term of one year expiring at the Company’s 2020 annual
meeting of stockholders or until their respective successors are
duly elected and qualified;
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2.
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Approval to amend the Company’s Amended and
Restated Certificate of Incorporation (“
Charter
”) to increase the number of authorized
shares of the Company’s common stock, par value $0.0001 per
share (“
Common
Stock
”), by 50,000,000
shares to 150,000,000 shares;
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3.
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Approval to amend the Company’s Charter to
authorize the Board to effect a reverse stock split of both our
issued and outstanding and authorized shares of the Company’s
Common Stock, at a specific ratio, ranging from one-for-two (1:2)
to one-for-five (1:5), at any time prior to
the one year
anniversary date of the Annual Meeting,
with the exact ratio to be determined
by the Board of Directors
(the
“
Reverse
Split
”);
and
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4.
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Ratification of Mazars USA LLP
,
as our independent registered public
accounting firm for the fiscal year ending December 31,
2019.
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Adjournments and Postponements
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Any
action on the items of business described above may be considered
at the Annual Meeting at the time and on the date specified above
or at any time and date to which the Annual Meeting may be properly
adjourned or postponed.
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Record Date
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October
24, 2019. Only holders of record of our Common Stock as of the
Record Date are entitled to notice of and to vote at the Annual
Meeting.
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Meeting Admission
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You
are invited to attend the Annual Meeting if you are a stockholder
of record or a beneficial owner of shares of the Company’s
Common Stock as of the Record Date.
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Availability of Proxy Materials
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The Company’s proxy
materials and the Annual Report for the year ended December 31,
2018 are also available on the internet at:
www.colonialstock.com/azurrx2019
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Voting
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If your shares are
held in the name of a bank, broker or other fiduciary, please
follow the instructions on the proxy card.
Whether or not you expect to attend in person,
we urge you to vote your shares as promptly as possible by
following the proxy card instructions attached to this Proxy
Statement that you received in the mail so that your shares may be
represented and voted at the Annual Meeting.
Your vote is very
important
.
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BY
ORDER OF THE BOARD OF DIRECTORS,
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/s/ James
Sapirstein
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Brooklyn, New
York
November
7, 2019
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JAMES
SAPIRSTEIN
President and Chief Executive Officer
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760
Parkside Avenue
Downstate
Biotechnology Incubator, Suite 304
Brooklyn,
New York 11226
(646)
699-7855
PROXY
STATEMENT
The enclosed proxy
is solicited on behalf of the Board of Directors (the
“
Board
”) of the
Company, for use at the upcoming 2019 Annual Meeting to be held on
December 19, 2019 at 9:00 A.M. Eastern Time, and at any adjournment
or postponement thereof, at the offices of Lowenstein Sandler LLP
located at
One Lowenstein
Drive, Roseland, New Jersey, 07068.
This Proxy
Statement, the enclosed proxy card and a copy of our Annual Report
are first being mailed on or about November 12, 2019 to
stockholders entitled to vote as of October 24, 2019 (the
“
Record Date
”).
These proxy materials contain instructions on how to access this
Proxy Statement and our Annual Report online at:
www.colonialstock.com/azurrx2019
,
and how to submit your vote via the internet, telephone and/or
e-mail.
Voting
The specific
proposals to be considered and acted upon at our Annual Meeting are
each described in this Proxy Statement. Only holders of our
Common Stock as of the close of business on
the
Record Date are entitled to notice of
and to vote at the Annual Meeting. As of October 24, 2019, there
were
26,155,111
shares of
Common Stock
issued and
outstanding. Each holder of Common Stock is entitled to one vote
for each share held as of the Record Date.
Quorum
In order for any
business to be conducted at the Annual Meeting, holders of more
than 50% of the shares entitled to vote must be represented at the
Annual Meeting, either in person or by properly executed proxy. If
a quorum is not present at the scheduled time of the Annual
Meeting, the stockholders who are present, whether in person or by
proxy, may adjourn the Annual Meeting until a quorum is present.
The time and place of the adjourned Annual Meeting will be
announced at the time the adjournment is taken, and no other notice
will be given. An adjournment will have no effect on the business
that may be conducted at the Annual Meeting.
Required
Vote for Approval
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No.
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Proposal
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1.
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Election of Directors.
The six director nominees who receive
the greatest number of votes cast at the Annual Meeting by shares
present, either in person or by proxy, and entitled to vote will be
elected.
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2.
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Approval to Amend our Charter
to Increase Authorized Common Stock.
To approve an amendment to our Amended and
Restated Certificate of Incorporation (“
Charter
”) to increase the number of authorized
shares of Common Stock by 50,000,000
shares to 150,000,000 shares
. The
number of votes cast “FOR” must exceed the number of
votes cast “AGAINST” this Proposal.
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3.
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Approval to Amend Our Charter
to Effect a Reverse Stock Split.
To approve an amendment to our Charter to
authorize the Board to effect a reverse stock split of both our
issued and outstanding and authorized shares of Common Stock, at a
specific ratio, ranging from one-for-two (1:2) to one-for-five
(1:5), any time prior to
the one-year anniversary date of
the Annual Meeting,
with
the exact ratio to be determined by the Board of Directors
(the “
Reverse
Split
”). The number of
votes cast “FOR” must exceed the number of votes cast
“AGAINST” this Proposal.
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4.
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Ratification of Appointment of
Auditors.
To ratify the
appointment of Mazars USA LLP, as our independent auditors for the
fiscal year ending December 31, 2019. The number of votes cast
“FOR” must exceed the number of votes cast
“AGAINST” this Proposal.
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-1-
Abstentions
and Broker Non-Votes
All
votes will be tabulated by the inspector of election appointed for
the Annual Meeting, who will separately tabulate affirmative and
negative votes, abstentions and broker non-votes. An abstention is
the voluntary act of not voting by a stockholder who is present at
an Annual Meeting and entitled to vote. A broker
“non-vote” occurs when a broker nominee holding shares
for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary power for that
particular item and has not received instructions from the
beneficial owner. If you hold your shares in “street
name” through a broker or other nominee, your broker or
nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. If you
do not give your broker or nominee specific instructions regarding
such matters, your proxy will be deemed a “broker
non-vote.”
Under
Delaware law, abstentions and broker non-votes are not counted as
votes cast on an item and therefore will not affect the outcome of
any proposal presented in this Proxy Statement, although they are
counted for purposes of determining whether there is a quorum
present at the Annual Meeting.
Voting
and Revocation of Proxies
If your proxy is
properly returned to the Company, the shares represented thereby
will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If you return your proxy without
specifying how the shares represented thereby are to be voted, the
proxy will be voted (i)
FOR
the election of the
six director nominees named in this Proxy Statement;
(ii)
FOR
the
amendment to our Charter to increase the number of authorized
shares of Common Stock by 50,000,000 shares to 150,000,000 shares;
(iii)
FOR
the
amendment to our Charter authorizing the Board to effect a Reverse
Split at any time prior to the one year anniversary date of the
Annual Meeting; (iv)
FOR
ratification of the
appointment of Mazars as our independent auditors for the current
fiscal year; and (v) at the discretion of the proxy holders, on any
other matter that may properly come before the Annual Meeting or
any adjournment or postponement thereof.
You may revoke or
change your proxy at any time before the Annual Meeting by filing,
with our Corporate Secretary at 760 Parkside Avenue, Downstate
Biotechnology Incubator, Suite 304, Brooklyn, New York 11226, a
notice of revocation or another signed proxy with a later date. You
may also revoke your proxy by attending the Annual Meeting and
voting in person. Attendance at the Annual Meeting alone will
not revoke your proxy. If you are a stockholder whose shares
are not registered in your own name, you will need additional
documentation from your broker or record holder to vote personally
at the Annual Meeting.
No Appraisal Rights
The stockholders of the Company have no dissenter’s or
appraisal rights in connection with any of the proposals described
herein.
Solicitation
We will bear the
entire cost of solicitation, including the preparation, assembly,
printing and mailing of this Proxy Statement and the Annual Report,
as well as the preparation and posting of this Proxy Statement, the
Annual Report and any additional solicitation materials furnished
to the stockholders. Copies of any solicitation materials will be
furnished to brokerage houses, fiduciaries and custodians holding
shares in their names that are beneficially owned by others so that
they may forward this solicitation material to such beneficial
owners. In addition, we may reimburse such persons for their costs
in forwarding the solicitation materials to such beneficial owners.
The original solicitation of proxies may be supplemented by a
solicitation by telephone, e-mail or other means by our directors,
officers or employees. No additional compensation will be paid to
these individuals for any such services. Except as described above,
we do not presently intend to solicit proxies other than by e-mail,
telephone and mail.
-2-
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PROPOSAL NO.
1
:
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ELECTION OF DIRECTORS
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General
The Company’s
Amended and Restated Bylaws (“
Bylaws
”) provide that the Board
shall consist of one or more members, and that upon any change in
the number of directors, any newly created directorships or
eliminated directorships will be apportioned by the remaining
members of the Board or by stockholders.
Our Board currently
consists of six directors. Each of the director nominees identified
below has confirmed that he is able and willing to serve as a
director if elected. If any of the director nominees become unable
or unwilling to serve, your proxy will be voted for the election of
a substitute director nominee recommended by the current
Board.
Upon recommendation
of the Corporate Governance and Nominating Committee, the Board has
nominated Edward J. Borkowski, Charles J. Casamento, Alastair
Riddell, Vern L. Schramm, James Sapirstein and Johan M. (Thijs)
Spoor for election at the Annual Meeting, each to serve for a
one-year term until the conclusion of the 2020 annual meeting of
stockholders or until their successor is duly elected and
qualified.
As
previously disclosed by the Company in its Current Reports on Form
8-K filed October 11, 2019 and November 1, 2019, former director
Maged Shenouda resigned from his position as a director effective
October 8, 2019 and as Chief Financial Officer effective on
November 30, 2019. Effective October 11, 2019, Mr. Spoor resigned
from his position as the Company’s President and Chief
Executive Officer but continues to serve as a director on the
Board. Simultaneously, the Board appointed Mr. Sapirstein as
President and Chief Executive Officer of the Company in addition to
appointing him as a director to the Board to fill the vacancy
created by Mr. Shenouda’s resignation as a director effective
October 8, 2019. The Board wishes to formally thank Mr. Shenouda
for his dedication and service on the
Board.
Please see
“Directors” below for more information, including the
background and business experience of each director nominee taken
into consideration by the Corporate Governance and Nominating
Committee.
Required
Vote and Recommendation
The election of
directors requires the affirmative vote of a plurality of the
voting shares present in person or represented by proxy and
entitled to vote at the Annual Meeting. The six director nominees
receiving the highest number of affirmative votes will be elected.
Unless otherwise instructed or unless authority to vote is
withheld, shares represented by executed proxies will be voted
“FOR” the election of the aforementioned director
nominees.
OUR BOARD RECOMMENDS A VOTE “
FOR
” THE ELECTION OF
MESSRS. BORKOWSKI,
CASAMENTO, SAPIRSTEIN AND SPOOR, AND DRS. RIDDELL AND SCHRAMM UNDER
PROPOSAL ONE.
-3-
DIRECTOR
COMPENSATION
The following
section sets forth certain information regarding the nominees for
election as directors of the Company. There are no family
relationships between any of the directors and the Company’s
Named Executive Officers.
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Director Nominee, Title
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Age
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Edward
J. Borkowski – Chair and Independent Director
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60
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Charles
J. Casamento – Independent Director
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74
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Alastair
Riddell, MSc.,MDChB.,DSc. – Independent Director
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70
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Vern
L. Schramm, Ph.D. – Independent Director
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77
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James
Sapirstein – President, Chief Executive Officer and
Non-Independent Director
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58
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Johan
M. (Thijs) Spoor – Non-Independent Director
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47
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Edward J. Borkowski
was appointed to
the Board in May 2015, and currently serves as its Chair. Mr.
Borkowski is a healthcare executive who currently serves as
Executive Vice President of
MiMedx Group, Inc.
(NASDAQ: MDGX). Mr. Borkowski also currently serves as a director
for Co-Diagnostics, Inc. (NASDAQ: CODX), since May 2017. Previously
he served as the Chief Financial Officer
of Aceto Corporation (NASDAQ: ACET) from
February 2018 to April 2018, and has held several executive
positions with for
Concordia
International, an international specialty pharmaceutical company,
between
May
2015
to
February 2018
. Mr. Borkowski has
also served as Chief Financial Officer of Amerigen Pharmaceuticals,
a generic pharmaceutical company with a focus on oral, controlled
release products
and as the Chief
Financial Officer and Executive Vice President of Mylan N.V. In
addition, Mr. Borkowski previously held the position of Chief
Financial Officer with Convatec, a global medical device company
focused on wound care and ostomy, and Carefusion, a global medical
device company for which he helped lead its spin-out from Cardinal
Health into an independent public company. Mr. Borkowski has also
served in senior financial positions at Pharmacia and American Home
Products (Wyeth). He started his career with Arthur Andersen &
Co. after receiving his MBA in accounting from Rutgers University
subsequent to having earned his degree in Economics and Political
Science from Allegheny College. Mr. Borkowski is currently a
Trustee and a member of the Executive Committee of Allegheny
College.
Mr.
Borkowski’s extensive healthcare and financial expertise,
together with his public company experience provides the Board and
management with valuable insight in the growth of the
Company’s business plan.
Charles J. Casamento
was appointed to
the Board in March 2017. Since 2007, Mr. Casamento has been
executive director and principal of The Sage Group, a health care
advisory group. Prior to that, Mr. Casamento was president and
Chief Executive Officer of Osteologix, a startup company which he
oversaw going public, from October 2004 until April 2007. Mr.
Casamento was the founder of Questcor Pharmaceuticals where he was
President, Chief Executive Officer and Chair from 1999 through
2004. During his time at Questcor, the company acquired Acthar, a
product with sales that would eventually exceed $1.0 billion. Mr.
Casamento also served as President, Chief Executive Officer and
Chair of RiboGene Inc. until 1999 when RiboGene was merged another
company to form Questcor. He was also the Co-Founder, President and
Chief Executive Officer of Indevus (formerly Interneuron
Pharmaceuticals) and has held senior management positions at
Genzyme Corporation, where he was Senior Vice President, American
Hospital Supply, where he was Vice President of Business
Development for the Critical Care division, Johnson & Johnson,
Hoffmann-LaRoche and Sandoz. He currently serves on the Boards of
Directors of Relmada Therapeutics (OTCQB: RLMD) and Eton
Pharmaceuticals, and was previously a Director and Vice Chair of
the Catholic Medical Missions Board, a large not for profit
international organization. Mr. Casamento holds a bachelor's degree
in Pharmacy from Fordham University and an MBA from Iona
College.
Mr.
Casamento’s expertise and knowledge of the financial
community combined with his experience in the healthcare sector
makes him a valued member of the Board
Dr.
Alastair Riddell
was
appointed to the Board in September 2015. Since June 2016, Dr.
Riddell has served as Chair of Nemesis Biosciences Ltd and Chair of
Feedback plc (LON: FDBK). He has also served as Chair of the South
West Academic Health Science network in the UK since January 2016.
Since his appointment in December 2015, Dr. Riddell he has served
as Non-Executive Director of Cristal Therapeutics in The
Netherlands. From September 2012 to February 2016, he served as
Chair of Definigen Ltd., and from November 2013 to September 2015
as Chair of Silence Therapeutics Ltd., and from October 2009 to
November 2012 as Chair of Procure Therapeutics. Between
2007 to 2009, Dr. Riddell served as the Chief Executive Officer of
Stem Cell Sciences plc. and between 2005 to 2007, served at
Paradigm Therapeutics Ltd. as the Chief Executive Officer. Between
1998 to 2005, Dr. Riddell also served as the Chief Executive
Officer of Pharmagene plc. Dr. Ridell
began his career as a
doctor in general practice in a variety of hospital specialties and
holds both a Bachelor of Science and a Bachelor of Medical Sciences
degrees. He was recently awarded a Doctorate of Science, Honoris
Causa by Aston University.
Dr.
Riddell’s medical background coupled with his expertise in
the life sciences industry, directing all phases of clinical
trials, before moving to sales, marketing and general management,
makes him a well-qualified member of the Board.
-4-
Dr. Vern L.
Schramm
was appointed to
the Board in October 2017. Dr. Schramm has served as Professor of
the Albert Einstein College of Medicine since 1987 and Chair of the
Department of Biochemistry from 1987 to 2015, and was awarded the
Ruth Merns Endowed Chair in Biochemistry. His fields of
interest include enzymatic transition state analysis, transition
state inhibitor design, biological targets for inhibitor design,
and mechanisms of N-ribosyltransferases. Dr. Schramm was elected to
the National Academy of Sciences in 2007, and served as the
Associate Editor for the
Journal of the American
Chemical Society
between
2003 to 2012. A frequent lecturer and presenter in topics related
to chemical biology, Dr. Schramm has been a consultant and advisor
to Pico Pharmaceuticals, Metabolon Inc., Sirtris Pharmaceuticals,
and BioCryst Pharmaceuticals. Dr. Schramm obtained his BS in
Bacteriology with an emphasis in chemistry from South Dakota State
College and holds a Master’s Degree in Nutrition with an
emphasis in biochemistry from Harvard University, a Ph.D. in
Mechanism of Enzyme Action from the Australian National University
and completed his postdoctoral training at NASA Ames Research
Center, Biological Sciences, with an NSF-NRC
fellowship.
Dr.
Schramm’s substantial experience in biochemistry and
expertise in the chemistry related to non-systemic biologics makes
him a respected member of the Board and an asset to the Company
specifically in the development of its product
candidates.
James
Sapirstein
was appointed to the
Board on October 8, 2019 and as the Company’s President and
Chief Executive Officer effective that same day. Prior to joining
the Company, Mr. Sapirstein served as Chief Executive Officer and
as a director of ContraVir Pharmaceuticals, Inc. (now known as
Hepion Pharmaceuticals, Inc.) from March 2014 to October 2018.
Previously, Mr. Sapirstein was the Chief Executive Officer of
Alliqua Therapeutics from October 2012 to February 2014. He founded
and served as Chief Executive Officer of Tobira Therapeutics from
October 2006 to April 2011 and served as Executive Vice President,
Metabolic and Endocrinology for Serono Laboratories from June 2002
to May 2005. Mr. Sapirstein’s earlier career included a
number of senior level positions in the area of marketing and
commercialization, including as Global Marketing Lead for Viread
(tenofovir) while at Gilead Sciences and as Director of
International Marketing of the Infectious Disease Division at
Bristol Myers Squibb. Mr. Sapirstein is currently the Chair
Emeritus of BioNJ, the New Jersey affiliate of the Biotechnology
Innovation Organization, and also serves on the Emerging Companies
and Health Section Boards of the Biotechnology Innovation
Organization. Mr. Sapirstein received his bachelor’s degree
in pharmacy from Rutgers University and holds an MBA degree in
management from Fairleigh Dickinson University.
Mr.
Sapirstein’s nearly 36 years of pharmaceutical industry
experience which spans areas such as drug development and
commercialization, including participation in 23 product launches,
six of which were global launches led by him makes him a valuable
asset to the Board and in his oversight and execution of the
Company’s business plan.
Johan M. (Thijs) Spoor
was appointed to
the Board on May 14, 2014. He was the former Chief Executive
Officer of the Company since January 2016 and President since April
2015 until his resignation as President and Chief Executive Officer
effective October 8, 2019 but continues to serve as a director on
the Company’s Board. From September 2010 until December 2015,
he was the Chief Executive Officer of FluoroPharma Medical, Inc.
(OTCQB: FPMI), during which time he also served as Chair of the
Board from June 2012 to December 2015. From December 2008 to
February 2010, Mr. Spoor worked at Oliver Wyman as a consultant to
pharmaceutical and medical device companies. Prior to that, Mr.
Spoor was an equity research analyst at J.P. Morgan from July 2007
to October 2008 and at Credit Suisse from November 2005 to July
2007, covering the biotechnology and medical device industries. He
holds a Pharmacy degree from the University of Toronto as well as
an MBA from Columbia University.
Mr.
Spoor’s background in the pharmaceutical industry combined
with his historical knowledge of the daily operations of the
Company provides him with a broad familiarity of the range of
issues confronting the Company makes him a qualified member of the
Board.
-5-
Non-Executive Director Compensation
Currently,
each of the Company’s non-executive directors receive (i) an
annual retainer of $35,000 for their service on the Board which is
payable in either cash or shares of Common Stock in quarterly
installments, at the Company’s discretion; and (ii) an annual
grant of 30,000 shares of Common Stock. During the year ended
December 31, 2018, the Company elected to pay the annual retainer
to non-executive directors in cash.
The following table provides information regarding
compensation paid to non-employee directors for the year ended
December 31, 2018. Messrs. Sapirstein, Shenouda and Spoor did not
receive compensation for their service on the Board as employee
directors for the year ended December 31, 2018. Information
regarding executive compensation paid to Messrs. Sapirstein,
Shenouda and Spoor during 2018 is reflected in the Summary
Compensation table under “Executive
Compensation
”
of this
Proxy Statement.
|
Name
|
Fees Earned or Paid in Cash
|
Stock Awards
(1)
|
Option Awards
(2)
|
All Other Compensation
|
Total
|
|
Edward
J. Borkowski
|
$
35,000
|
$
76,575
|
-
|
-
|
$
111,575
|
|
Charles
J. Casamento
|
$
35,000
|
$
76,575
|
-
|
-
|
$
111,575
|
|
Alastair
Riddell
|
$
35,000
|
$
76,575
|
-
|
-
|
$
111,575
|
|
Vern
L. Schramm
|
$
35,000
|
$
76,575
|
-
|
-
|
$
111,575
|
|
(1)
|
Represents the aggregate grant date fair value of shares of the
Company’s Common Stock issued to each of our non-employee
directors in 2018 as partial payment of fees payable for each
director’s service on the Board in 2018, calculated in
accordance with ASC Topic 718.
|
|
|
|
|
(2)
|
Represents the aggregate grant date fair value of stock options
issued to each of our non-employee directors in 2018, calculated in
accordance with ASC Topic 718. As of December 31, 2018, Mr.
Borkowski held a total of 30,000 outstanding stock options, and Dr.
Riddell held a total of 30,000 outstanding stock
options.
|
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.
-6-
CORPORATE GOVERNANCE AND BOARD MATTERS
Board
Leadership Structure
Currently,
Messrs. Borkowski and Sapirstein serve as Chair of the Board, and
as President and Chief Executive Officer, respectively. Our
Board has determined that it is in the best interests of the Board
and the Company to maintain separate roles for the both the Chair
of the Board and the Chief Executive Officer. The Board believes
that this structure increases its independence from management and,
in turn, encourages the appropriate level of oversight by
management. Although the Board believes the Company is currently
best served by separation between the role of Chair of the Board
and Chief Executive Officer, the Board reviews and considers the
continued appropriateness of this structure on an annual
basis.
Director
Independence
The Board has determined that all of its members,
other than Messrs. Sapirstein and Spoor, the Company’s
President and Chief Executive Officer and former President and
Chief Executive Officer, respectively, are
“independent” within the meaning of Rule 5605(a)(2)
under the rules of the Nasdaq Stock Market
(“
NASDAQ
”), and the Securities and Exchange
Commission (“
SEC
”) rules regarding
independence.
Director Nomination Process
The Corporate Governance and Nominating Committee
identifies director nominees by first considering those current
members of the Board who are willing to continue service. Current
members of the Board with skills and experience that are relevant
to our business and are willing to continue their service as a
director are considered for re-election, balancing the value of
continuity of service by existing members of the Board with that of
obtaining a new perspective. Nominees for director are selected by
a majority of the members of the Board. Although the Company does
not have a formal diversity policy, in considering the suitability
of director nominees, the Corporate Governance and Nominating
Committee considers such factors as it deems appropriate to develop
a Board and its committees that are diverse in nature and comprised
of experienced and seasoned advisors. Factors considered by the
Corporate Governance and Nominating Committee include sound
judgment, knowledge, skill, diversity, integrity, experience with
businesses and other organizations of comparable size, including
experience in the biopharma industry, clinical studies, U.S. Food
and Drug Administration
(“
FDA
”) compliance, intellectual property,
business, finance, administration or public service, the relevance
of a candidate’s experience to our needs and experience of
other Board members, experience with accounting rules and
practices, the desire to balance the considerable benefit of
continuity with the periodic injection of the fresh perspective
provided by new members, and the extent to which a director
candidate would be a desirable addition to the Board and its
committees.
The
Board may consider suggestions for persons to be nominated for
director that are submitted by stockholders. The Corporate
Governance and Nominating Committee will evaluate stockholder
suggestions for director nominees in the same manner as it
evaluates suggestions for director nominees made by management,
then-current directors or other appropriate sources.
The
Role of the Board in Risk Oversight
Our
Board oversees a company-wide approach to risk management,
determines the appropriate risk level for the Company in general,
assesses the specific risks faced by the Company and reviews steps
taken by management to manage those risks. Although our Board has
ultimate oversight responsibility for the risk management process,
specific areas of risk are overseen by designation of such duties
and responsibilities to certain committees of the
Board.
Specifically,
the Board has designated certain fiduciary duties to its
Compensation Committee, which is responsible for overseeing the
management of risks relating to our executive compensation plans
and arrangements, and the incentives created by the compensation
awards it administers. The Board has also designated specific
fiduciary duties to its Audit Committee, which is responsible for
overseeing the management of enterprise risks and financial risks,
as well as potential conflicts of interests. The Board is
responsible for overseeing the management of risks associated with
the independence of the Board.
Code
of Business Conduct and Ethics
The Board adopted a code of business conduct and
ethics (the “
Code
”) that applies to our directors, officers
and employees. A copy of this Code is available on our website
at
www.azurrx.com/investors
.
We intend to disclose on our website any amendments to and waivers
of the Code that apply to our principal executive officer,
principal financial officer, principal accounting officer,
controller, or persons performing similar
functions.
-7-
Stockholder
Communications
If you wish to
communicate with the Board, you may send your communication in
writing to AzurRx BioPharma, Inc., Attention: Corporate Secretary
– 760 Parkside Avenue, Downstate Biotechnology Incubator,
Suite 304, Brooklyn, New York 11226.
You must include
your name and address in the written communication and indicate
whether you are a stockholder of the Company. The Corporate
Secretary will review any communication received from a
stockholder, and all material and appropriate communications from
stockholders will be forwarded to the appropriate director or
directors or committee of the Board based on the subject
matter.
Meetings
of the Board
Each
of the Company’s directors who served during 2018 attended or
participated in no less than 75% or more of the aggregate of
(i) the total number of meetings of the Board; and
(ii) the total number of meetings held by all committees of
the Board on which such director served as a member during the year
ended 2018. Although directors are not required to attend the
Company’s annual meeting of stockholders, they are encouraged
to attend.
The following table represents the current
composition of each committee of the Board and meetings held as
well as actions taken by unanimous written consent
(“
UWC
”) in lieu of holding a meeting, during the
fiscal year ended December 31, 2018:
|
|
|
Committees
|
||
|
Director
|
Board
|
Audit
|
Compensation
|
Corporate
Governance and Nominating
|
|
Edward J.
Borkowski
|
C
|
CC
|
X
|
CC
|
|
Charles J.
Casamento
|
X
|
X
|
X
|
X
|
|
Alastair
Riddell
|
X
|
X
|
CC
|
X
|
|
Vern L.
Schramm
|
X
|
|
|
|
|
James
Sapirstein
|
X
|
|
|
|
|
Johan M. (Thijs)
Spoor
|
X
|
|
|
|
|
Meetings
Held During 2018
|
3
|
4
|
1
|
-
|
|
Actions
Taken by UWC During 2018
|
4
|
-
|
1
|
-
|
|
C
– Chair of the Board
CC
– Committee Chair
X
– Member
|
|
|
|
|
-8-
Board
Committees
The standing committees of the Board consist of
the Audit Committee, Compensation Committee, and Corporate
Governance and Nominating Committee.
Our Board has adopted
written charters for each of these committees, copies of which are
available on our website at
www.azurrx.com/investors
.
Our Board may establish other committees as it deems necessary or
appropriate from time to time.
|
Audit Committee
|
The duties and
responsibilities of the Audit Committee include but are not limited
to:
●
appointing,
compensating, retaining, evaluating, terminating, and overseeing
our independent registered public accounting firm;
●
discussing with the
Company’s independent registered public accounting firm the
independence of its members from its management;
●
reviewing with the
Company’s independent registered public accounting firm the
scope and results of their audit;
●
approving all audit
and permissible non-audit services to be performed by the
Company’s independent registered public accounting
firm;
●
overseeing the
financial reporting process and discussing with management and the
Company’s independent registered public accounting firm the
interim and annual financial statements that are filed with the
SEC;
●
reviewing and
monitoring our accounting principles, accounting policies,
financial and accounting controls, and compliance with legal and
regulatory requirements;
●
coordinating
oversight of the Code and the Company’s disclosure controls
and procedures on behalf of the Board;
●
establishing
procedures for the confidential and/or anonymous submission of
concerns regarding accounting, internal controls or auditing
matters; and
●
reviewing and
approving related-person transactions.
|
|
The rules of NASDAQ
require our Audit Committee to consist of at least three directors,
all of whom must be deemed to be independent directors under NASDAQ
rules. The Board has affirmatively determined that Messrs.
Borkowski and Casamento, and Dr. Riddell, each meet the definition
of “independent director” for purposes of serving on an
Audit Committee under NASDAQ rules. Additionally, the Board has
determined that Messrs. Borkowski and Casamento each qualify as an
“audit committee financial expert,” as such term is
defined in Item 407(d)(5) of Regulation
S-K.
|
|
|
Compensation Committee
|
The duties and
responsibilities of the Compensation Committee include but are not
limited to:
●
reviewing key
employee compensation goals, policies, plans and
programs;
●
reviewing and
approving the compensation of our directors and executive
officers;
●
reviewing and
approving employment agreements and other similar arrangements
between the Company and its executive officers; and
●
appointing and
overseeing any compensation consultants or advisors to the
Company.
|
|
The
rules of NASDAQ require our Compensation Committee to consist
entirely of independent directors. The Board has affirmatively
determined that Mr. Borkowski and Dr. Riddell meet the definition
of “independent director” for purposes of serving on
the Compensation Committee under NASDAQ rules.
|
|
|
Corporate Governance and Nominating Committee
|
The duties and
responsibilities of the Corporate Governance and Nominating
Committee include but are not limited to:
●
assisting the Board
in identifying qualified individuals to become members of the
Board;
●
determining the
composition of the Board and monitoring the activities of the Board
to assess overall effectiveness; and
●
developing and
recommending to our Board corporate governance guidelines
applicable to the Company and advising our Board on corporate
governance matters.
|
|
|
|
-9-
EXECUTIVE
COMPENSATION
The following table
sets forth information regarding the Company’s current
executive officers as appointed by the Board, each to serve in such
position until their respective successors have been duly appointed
and qualified or until their earlier death, resignation or removal
from office.
|
Executive Officer
|
Age
|
Title
|
|
James
Sapirstein
|
58
|
President,
Chief Executive Officer and Director
|
|
Maged
Shenouda
|
55
|
Chief
Financial Officer
|
|
James
E. Pennington
|
76
|
Chief
Medical Officer
|
The Company’s
executive officers are appointed by and serve at the discretion of
the Board, subject to the terms of any employment agreements they
may have with the Company. The following is a brief description of
the qualifications and business experience of each of the
Company’s current executive officers.
James Sapirstein.
Please see Mr. Sapirstein’s biography under the
“Directors” section of this Proxy
Statement.
Maged
Shenouda
was appointed as
Chief Financial Officer of the Company in September 2017 after
serving as a director on the Board since his appointment in October
2015. Effective October 8, 2019, Mr. Shenouda resigned as a
director but continues to serve as the Company’s Chief
Financial Officer until November 30, 2019, at which time Mr.
Shenouda’s employment with the Company as Chief Financial
Officer will terminate. Mr. Shenouda’s financial experience
in the biotechnology industry includes Head of Business Development
at Retrophin, Inc. from January 2014 to November 2014. From January
2012 to September 2013, he served as Head of East Coast Operations
for the Blueprint Life Science Group. Prior to that, he was a
financial analyst at UBS from January 2004 to March 2010 and later
at Stifel Nicolaus from June 2010 to November 2011. He currently
serves on the Board of Directors of Relmada Therapeutics, Inc.
(OTCQB: RLMD). Mr. Shenouda received an MBA from Rutgers Graduate
School of Management and a BS in Pharmacy from St. John's
College of Pharmacy and is a Registered Pharmacist in New Jersey
and California.
Dr. James E.
Pennington
was appointed as Chief Medical Officer of the
Company in May 2018.
Prior to joining
the Company, Dr. Pennington served as Senior Clinical Fellow from
2010 to 2018 and as Executive Vice President and Chief Medical
Officer from 2007 to 2010 at Anthera Pharmaceuticals, Inc. (NASDAQ:
ANTH). From 2004 to 2007, Dr. Pennington served as Executive Vice
President and Chief Medical Officer at CoTherix, Inc., and has held
various executive positions at a number of pharmaceutical
companies, including InterMune Inc., Shaman Pharmaceuticals and
Bayer Corporation. He has served on several editorial boards, and
has authored numerous original research publications and reviews.
Dr. Pennington is currently a Clinical Professor of Medicine with
the University of California San Francisco, where he has taught
since 1986. Prior to that, he was a professor at Harvard Medical
School. Dr. Pennington received a Bachelor of Arts from the
University of Oregon and a Doctor of Medicine from the University
of Oregon School of Medicine, and is Board Certified in internal
medicine and infectious diseases.
Summary
Compensation
The table set forth
below reflects certain information regarding the
compensation paid or accrued during the years
ended December 31, 2018 and 2017 to our Chief Executive Officer and
our executive officers, other than our Chief Executive Officer, who
were serving as an executive officer as of December 31, 2018, and
whose annual compensation exceeded $100,000 during such year
(collectively the “
Named Executive
Officers
”).
-10-
As
previously reported on the Company’s Current Report on Form
8-K filed on March 28, 2019, Dr. Dupret retired and resigned from
his position as President of AzurRx SAS, a wholly owned French
subsidiary of the Company effective July 1, 2019. Due to the
resignation of Mr. Spoor as President and Chief Executive Officer
effective October 8, 2019, Mr. Sapirstein was appointed as
President and Chief Executive Officer of the Company effective that
same day. Compensation paid to Dr. Dupret and Mr. Spoor during the
years ended December 31, 2018 and 2017 is reflected in the table
below.
|
Current Named Executive Officers
|
Year
|
Salary
|
Bonus
|
Equity
Awards
|
All Other
Compensation
|
Total
|
||
|
James
Sapirstein
(1)
|
2018
|
-
|
-
|
-
|
-
|
-
|
||
|
President and Chief Executive Officer
|
2017
|
-
|
-
|
-
|
-
|
-
|
||
|
Maged Shenouda
(2)
|
2018
|
$296,666
|
$82,500
|
$207,300
(3)
|
-
|
$586,466
|
||
|
Chief Financial Officer
|
2017
|
$91,667
|
-
|
$336,500
(4)
|
-
|
$428,167
|
||
|
James E.
Pennington
(3)
|
2018
|
$148,718
|
-
|
$155,475
|
-
|
$304,193
|
||
|
Chief Medical Officer
|
2017
|
-
|
-
|
-
|
-
|
-
|
||
|
Former
Named Executive Officers
|
|
|
|
|
|
|
||
|
Johan
M. (Thijs) Spoor
|
2018
|
$425,000
|
$212,500
|
$608,000
(3)
|
-
|
$1,245,500
|
||
|
Former President and Chief Executive Officer
|
2017
|
$454,167
|
$170,000
|
$386,900
(4)
|
-
|
$1,011,067
|
||
|
Daniel
Dupret
|
2018
|
$234,999
|
-
|
$169,980
(3)
|
-
|
$404,979
|
||
|
Former Chief Scientific Officer
|
2017
|
$208,673
|
-
|
$213,000
(4)
|
-
|
$421,673
|
||
|
(1)
|
Mr. Sapirstein received no compensation during this period or prior
to his appointments as the Company’s President and Chief
Executive Officer effective October 8, 2019.
|
|
(2)
|
Mr.
Shenouda received no compensation prior to his appointment as the
Company’s Chief Financial Officer effective September 26,
2017. Effective November 30, 2019, Mr. Shenouda’s
employment with the Company as Chief Financial Officer will
terminate.
|
|
(3)
|
Dr. Pennington received no compensation prior to his appointment as
the Company’s Chief Medical Officer effective May 30,
2018.
|
|
(4)
|
Represents the grant date fair value of restricted stock and stock
options issued during the year ended December 31, 2018, calculated
in accordance with ASC Topic 718. The assumptions used in the
calculation of these amounts are included in Note 13 of the notes
to the consolidated financial statements contained in the
Company’s Annual Report, filed with the SEC on April 1,
2019.
The restricted stock and stock options issued to Mr. Shenouda and
Dr. Dupret in 2018 are fully vested. $278,665 of the shares of
restricted stock issued to Mr. Spoor in 2018 is currently unvested
and is scheduled to vest either over time or upon achievement of
certain performance criteria. The Company is unable to determine
the probability of achieving the performance criteria associated
with the stock options and instead has reported the grant date fair
value of the stock options assuming the maximum award amount is
achieved.
|
|
(5)
|
Represents the grant date fair value of stock options issued during
the year ended December 31, 2017, calculated in accordance with ASC
Topic 718. The assumptions used in the calculation of these amounts
are included in Note 13 of the notes to the consolidated financial
statements contained in the Company’s Annual Report on Form
10-K for the year ended December 31, 2017, filed with the SEC on
March 16, 2018.
The stock options issued to Mr. Spoor in 2017 are fully vested. The
stock options issued to Mr. Shenouda and Dr. Dupret are currently
unvested and are scheduled to vest upon achievement of certain
performance criteria. The Company is unable to determine the
probability of achieving the performance criteria associated with
the stock options and instead has reported the grant date fair
value of the stock options assuming the maximum award amount is
achieved.
|
-11-
Employment Arrangements and Potential Payments upon Termination or
Change of Control
Sapirstein Employment
Agreement.
Effective October 8,
2019, the Company entered into an employment agreement with Mr.
Sapirstein to serve as its President and Chief Executive Officer
for a term of three years, subject to further renewal upon
agreement of the parties. The employment agreement with Mr.
Sapirstein provides for a base salary of $450,000 per year. In
addition to the base salary, Mr. Sapirstein is eligible to receive
(i) a bonus of up to 40% of his base salary on an annual basis,
based on certain milestones that are yet to be determined; (ii) 1%
of net fees received by the Company upon entering into license
agreements with any third-party with respect to any product current
in development or upon the sale of all or substantially all assets
of the Company; (iii) a grant of 200,000 restricted shares of the
Company’s Common Stock which are subject to vest as follows
(a) 100,000 upon the first commercial sale of MS1819 in the United
States, and (b) 100,000 upon the total market capitalization of the
Company exceeding $1.0 billion for 20 consecutive trading days;
(iv) a grant of 300,000 10-year stock options to purchase shares of
the Company’s Common Stock which are subject to vest as
follows (a) 50,000 upon the Company initiating its next Phase II
clinical trial in the United States for MS1819, (b) 50,000 upon the
Company completing its next or subsequent Phase II clinical trial
in the United States for MS1819, (c) 100,000 upon the Company
initiating a Phase III clinical trial in the United States for
MS1819, and (d) 100,000 upon the Company initiating a Phase I
clinical trial in the United States for any product other than
MS1819. Mr. Sapirstein is entitled to receive 20 days of paid
vacation, participate in full employee health benefits and receive
reimbursement for all reasonable expenses incurred in connection
with his services to the Company.
In
the event that Mr. Sapirstein’s employment is terminated by
the Company for Cause, as defined in his employment agreement, or
by Mr. Sapirstein voluntarily, then will not be entitled to receive
any payments beyond amounts already earned, and any unvested equity
awards will terminate. In the event that Mr. Sapirstein’s
employment is terminated as a result of an Involuntary Termination
Other than for Cause, as defined in the Agreement, Mr. Sapirstein
will be entitled to receive the following compensation: (i)
severance in the form of continuation of his salary (at the Base
Salary rate in effect at the time of termination, but prior to any
reduction triggering Good Reason) for a period of 12 months
following the termination date; (ii) payment of Executive’s
premiums to cover COBRA for a period of 12 months following the
termination date; and (iii) a prorated annual bonus.
Shenouda Employment
Agreement.
Effective September
26, 2017, the Company entered into an employment agreement with Mr.
Shenouda to serve as its Executive Vice-President of Corporate
Development and Chief Financial Officer for a term of three years,
during which time he receives a base salary of $275,000, which
amount may be increased by the Company at any time during the term
of the agreement. In addition to the base salary, Mr. Shenouda is
eligible to receive an annual milestone cash bonus based on the
achievement of certain financial, clinical development, and/or
business milestones, which milestones will be established annually
by the Company’s Board or the Compensation Committee. Upon
execution of Mr. Shenouda’s employment agreement, Mr.
Shenouda became entitled to receive options to purchase 100,000
shares of the Company’s Common Stock pursuant to the
Company’s 2014 Plan, which options will vest as follows so
long as Mr. Shenouda is serving as either Executive
Vice-President of Corporate Development or as Chief Financial
Officer: (i) 75% upon acceptance of a US IND for MS1819, and (ii)
25% upon the completion of a Phase II clinical trial for MS1819.
These stock options are exercisable for $4.39 per share and will
expire on September 25, 2027.
The
Company may terminate Mr. Shenouda’s employment agreement at
any time, with or without Cause, as such term is defined in the
agreement. If the Company terminates the agreement without Cause,
or if the agreement is terminated due to a Change of Control, as
such term is defined in the agreement, Mr. Shenouda will be
entitled to (i) all salary owed through the date of termination;
(ii) any unpaid annual milestone bonus; (iii) severance in the
form of continuation of his salary for the greater of a period of
12 months following the termination date or the remaining term of
the employment agreement; (iv) payment of premiums to cover COBRA
for a period of 12 months following the termination date; (v) a
prorated annual bonus equal to the target annual milestone bonus,
if any, for the year of termination multiplied by the formula set
forth in the agreement; and (vi) immediate accelerated vesting of
any unvested options or other unvested awards.
In
connection with Mr. Shenouda’s resignation as the
Company’s Chief Financial Officer effective November 30,
2019, he will receive no additional or severance
compensation.
Pennington Employment
Agreement.
Effective May 28,
2018, the Company entered into an employment agreement with Mr.
Pennington to serve as its Chief Medical Officer. The employment
agreement with Dr. Pennington provides for a base annual salary of
$250,000. In addition to his salary, Dr. Pennington is eligible to
receive an annual milestone bonus, awarded at the sole discretion
of the Board based on his attainment of certain financial, clinical
development, and/or business milestones established annually by the
Board or Compensation Committee. The employment agreement is
terminable by either party at any time. In the event of termination
by the Company other than for cause, Dr. Pennington is entitled to
three months’ severance payable over such period. In the
event of termination by the Company other than for cause in
connection with a Change of Control, Dr. Pennington will receive
six months’ severance payable over such
period.
-12-
On
June 28, 2018, Mr. Pennington was granted stock options to purchase
75,000 shares of the Company’s Common Stock, issuable
pursuant to the 2014 Plan, subject to vesting conditions as
follows: (i) 50% upon U.S. acceptance of an IND for MS1819-SD, and
(ii) 50% upon the first CF patient doses with MS1819-SD anywhere in
the world. These options had an estimated fair value at the grant
date of $155,475 to be expensed when the above milestones are
probable. 37,500 of these options vested and $77,738 was expensed
in 2018 due to the FDA acceptance of the Company’s IND
application for MS1819-SD in 2018.
Spoor Employment
Agreement.
Effective January 1,
2016, the Company entered into an employment agreement with Mr.
Spoor to serve as President and Chief Executive Officer for a term
of three years. The employment agreement with Mr. Spoor provided
for a base annual salary of $350,000, which annual salary was
increased to $425,000 upon completion of the Company’s
initial public offering and listing of its Common Stock on NASDAQ
in October 2016. In addition to his salary, Mr. Spoor was eligible
to receive an annual milestone bonus, awarded at the sole
discretion of the Board based on his attainment of certain
financial, clinical development, and/or business milestones
established annually by the Board or Compensation
Committee. The employment agreement was terminable by either
party at any time. In the event of termination by the Company
without Cause or by Mr. Spoor for Good Reason not in connection
with a Change of Control, as those terms were defined in the
agreement, he was entitled to 12 months’ severance payable
over such period. In the event of termination by the Company
without Cause or by Mr. Spoor for Good Reason in connection with a
Change of Control, as those terms were defined in the agreement, he
would have received eighteen months’ worth of his base salary
in a lump sum as severance.
Per his employment agreement, Mr. Spoor was
granted 100,000 shares of restricted Common Stock on February 3,
2017, which shares were subject to vesting as follows: (i) 50,000
upon the first commercial sale in the United States of MS1819, and
(ii) 50,000 upon our total market capitalization exceeding $1.0
billion for 20 consecutive trading days, in each case subject to
the earlier determination of a majority of the Board. In addition,
Mr. Spoor was entitled to receive stock options issuable under the
terms of the Amended and Restated 2014 Omnibus Equity Incentive
Plan (the “
2014
Plan
”) to purchase 380,000 shares of Common
Stock at a price per share equal to the closing price of the
Company’s Common Stock on the trading day immediately prior
to the date of issuance.
On
June 8, 2016, the Board reviewed and modified Mr. Spoor’s
agreement as follows: the 380,000 stock options described in the
agreement had neither been granted nor priced since certain key
provisions, particularly the underlying exercise price, had not
been determined. The Board determined that the options will be
granted at a future date, at the discretion of the Board, and
priced at that future date when they are granted. In the first
quarter of 2017, the Board elected to issue 100,000 stock options
to Mr. Spoor with an exercise price of $4.48 per share. On
September 29, 2017, Mr. Spoor was granted 100,000 shares of
restricted Common Stock subject to vesting conditions as follows:
(i) 75% upon FDA acceptance of a U.S. IND application for MS1819,
and (ii) 25% upon the Company completing a Phase IIa clinical trial
for MS1819, in satisfaction of the Company’s obligation to
issue the additional 280,000 options to Mr. Spoor described above,
with an estimated fair value at the grant date of $425,000 to be
expensed when the Company determines that achievement of the
milestones are probable.
In
connection with Mr. Spoor’s resignation as the
Company’s President and Chief Executive Officer effective
October 8, 2019, he received no additional or severance
compensation.
-13-
Outstanding
Equity Incentive Awards at Fiscal Year-End
The
following table sets forth information regarding unexercised
options, stock that has not vested and equity incentive awards held
by each of the Named Executive Officers outstanding as of
December 31, 2018 and 2017:
|
|
|
Option Awards
|
Stock Awards
|
|
|||||||
|
Name
|
Grant Date
|
Number
of securities underlying unexercised options (#)
exercisable
|
Equity incentive plan awards: Number of underlying unexercised
unearned options (#)
|
Option
exercise price
($)
|
Option
expiration
date
|
Number of shares or units of stock that have not vested
(#)
|
Market value of shares or units of stock that have not vested
($)
|
Equity incentive plan awards: Number of Unearned shares, units or
other rights that have not vested (#)
|
Equity incentive plan awards: Market or Payout value of unearned
shares, units or other rights that have not vested ($)
|
|
|
|
James
Sapirstein
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
Maged
Shenouda
|
7/12/2016
|
-
|
-
|
-
|
-
|
-
|
-
|
30,000
|
$112,500
|
|
|
|
|
2/3/2017
|
30,000
|
-
|
$4.48
|
2/2/2027
|
-
|
-
|
-
|
-
|
|
|
|
|
9/26/2017
(1)
|
100,000
|
-
|
$4.39
|
9/24/2027
|
-
|
-
|
-
|
-
|
|
|
|
|
6/28/2018
|
100,000
|
|
$3.04
|
6/27/2023
|
-
|
-
|
-
|
-
|
|
|
|
James E.
Pennington
|
6/28/2018
|
37,500
|
37,500
|
$3.04
|
6/27/2023
|
-
|
-
|
-
|
-
|
|
|
|
Former
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
Johan
(Thijs) Spoor
|
1/4/2016
(2)
|
100,000
|
-
|
$1.00
|
1/4/2021
|
-
|
-
|
-
|
-
|
|
|
|
|
2/3/2017
|
100,000
|
-
|
$4.48
|
2/3/2027
|
-
|
-
|
-
|
-
|
|
|
|
|
2/3/2017
(3)
|
-
|
-
|
-
|
-
|
-
|
-
|
100,000
|
$364,000
|
|
|
|
|
9/29/2017
(4)
|
-
|
-
|
-
|
-
|
100,000
|
$425,000
|
-
|
-
|
|
|
|
|
6/28/2018
|
-
|
-
|
-
|
-
|
108,334
|
$329,336
|
91,666
|
$278,665
|
|
|
|
Daniel
Dupret
|
8/24/2017
(5)
|
100,000
|
-
|
$3.60
|
8/23/2022
|
-
|
-
|
-
|
-
|
|
|
|
|
|
||||||||||
|
(1)
|
Represents stock options issued to Mr. Shenouda on
September 26, 2017, which options were subject to the following
vesting schedule so long as Mr. Shenouda is serving as either
Executive Vice-President of Corporate Development or as Chief
Financial Officer of the Company: (i) 75% upon FDA acceptance of a
U.S. IND application for MS1819, and (ii) 25% upon the Company
completing a Phase IIa clinical trial for MS1819
.
|
||||||||||
|
(2)
|
Represents
options to purchase shares of the Company’s Common Stock
issued to Mr. Spoor by a third party, prior to the Company’s
initial public offering in October 2016.
|
||||||||||
|
(3)
|
Represents the restricted stock award issued to
Mr. Spoor on February 3, 2017 under the terms of his employment
agreement, which shares will only vest as follows: (i) 50,000 upon
the first commercial sale in the United States of MS1819, and (ii)
50,000 upon our total market capitalization exceeding $1.0 billion
for 20 consecutive trading days. The value reported for this award
was calculated using the closing price of the Company’s
Common Stock on February 3, 2017
, as reported by NASDAQ, assuming achievement if
the maximum award amount.
|
||||||||||
|
(4)
|
Represents the restricted stock award issued to
Mr. Spoor on February 3, 2017 under the terms of his employment
agreement, which shares will only vest as follows: (i) 50,000 upon
the first commercial sale in the United States of MS1819, and (ii)
50,000 upon our total market capitalization exceeding $1.0 billion
for 20 consecutive trading days. The value reported for this award
was calculated using the closing price of the Company’s
Common Stock on September 29, 2017
, as reported by NASDAQ, assuming achievement if
the maximum award amount.
|
||||||||||
|
(5)
|
Represents
stock options issued to Dr. Dupret on August 24, 2017, which
options were subject to the following vesting schedule so long as
Dr. Dupret is serving as the Company’s Chief Scientific
Officer: (i) 75% upon FDA acceptance of a U.S. IND application for
MS1819, and (ii) 25% upon the Company completing a Phase IIa
clinical trial for MS1819.
|
||||||||||
-14-
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table provides information as of December 31, 2018
regarding equity compensation plans approved by our security
holders and equity compensation plans that have not been approved
by our security holders:
|
Plan category
|
Number of securities to be issued upon exercise of outstanding
options, warrants and rights
|
Weighted-average exercise price of outstanding options,
warrants and rights
|
Number of securities remaining available for future issuance under
equity compensation plans
(1)
|
|
Equity
compensation plans approved by security holders
|
994,000
|
$
3.58
|
471,764
|
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
|
Total
|
994,000
|
$
3.58
|
471,764
|
|
(1)
|
Excludes
securities reflected in first column, “Number of securities
to be issues upon exercise of outstanding options, warrants and
rights”.
|
|||||
Amended
and Restated 2014 Omnibus Equity Incentive Plan
The
Board and stockholders have adopted and approved the 2014 Plan,
which is a comprehensive incentive compensation plan under which we
can grant equity-based and other incentive awards to our officers,
employees, directors, consultants and advisers. The purpose of the
2014 Plan is to help us attract, motivate and retain such persons
with awards under the 2014 Plan and thereby enhance stockholder
value.
Administration
.
The 2014 Plan is administered by the Compensation Committee of the
Board, which consists of three members of the Board, each of whom
is a “non-employee director” within the meaning of Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the “
Exchange
Act
”), an “outside
director” within the meaning of Section 162(m) of the
Internal Revenue Code (the “
Code
”). Among other things, the Compensation
Committee has complete discretion, subject to the express limits of
the 2014 Plan, to determine the directors, employees and
nonemployee consultants to be granted an award, the type of award
to be granted the terms and conditions of the award, the form of
payment to be made and/or the number of shares of Common Stock
subject to each award, the exercise price of each option and base
price of each stock appreciation right (“
SAR
”), the term of each award, the vesting
schedule for an award, whether to accelerate vesting, the value of
the Common Stock underlying the award, and the required
withholding, if any. The Compensation Committee may amend, modify
or terminate any outstanding award, provided that the
participant’s consent to such action is required if the
action would impair the participant’s rights or entitlements
with respect to that award. The Compensation Committee is also
authorized to construe the award agreements, and may prescribe
rules relating to the 2014 Plan. Notwithstanding the foregoing, the
Compensation Committee does not have any authority to grant or
modify an award under the 2014 Plan with terms or conditions that
would cause the grant, vesting or exercise thereof to be considered
nonqualified “deferred compensation” subject to Code
Section 409A.
Grant of Awards; Shares
Available for Awards
. The 2014
Plan provides for the grant of stock options, SARs, performance
share awards, performance unit awards, distribution equivalent
right awards, restricted stock awards, restricted stock unit awards
and unrestricted stock awards to non-employee directors, officers,
employees and nonemployee consultants of the Company or its
affiliates. The aggregate number of shares of Common Stock that may
be issued under the 2014 Plan shall not exceed 10% of the issued
and outstanding shares of Common Stock on an as converted basis
(the “
As Converted
Shares
”), on a rolling
basis. For calculation purposes, the As Converted Shares shall
include all shares of Common Stock and all shares of Common Stock
issuable upon the conversion of outstanding preferred stock and
other convertible securities, but shall not include any shares of
Common Stock issuable upon the exercise of options, warrants and
other convertible securities issued pursuant to the 2014 Plan. The
number of authorized shares of Common Stock reserved for issuance
under the 2014 Plan shall automatically be increased concurrently
with our issuance of fully paid and non-assessable shares of As
Converted Shares. Shares shall be deemed to have been
issued under the 2014 Plan solely to the extent actually issued and
delivered pursuant to an award. If any award expires, is cancelled,
or terminates unexercised or is forfeited, the number of shares
subject thereto is again available for grant under the 2014
Plan.
The
number of shares of Common Stock for which awards may be granted
under the 2014 Plan to a participant who is an employee in any
calendar year is limited to 300,000 shares. Future new hires and
additional non-employee directors and/or consultants would be
eligible to participate in the 2014 Plan as well. The number of
stock options and/or shares of restricted stock to be granted to
executives and directors cannot be determined at this time as the
grant of stock options and/or shares of restricted stock is
dependent upon various factors such as hiring requirements and job
performance.
-15-
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.
-16-
Compensation Committee Interlocks and Insider
Participation
No
executive officers of the Company serve on the Compensation
Committee (or in a like capacity) for the Company or any other
entity.
Policy and Procedures Governing Related Party
Transactions
The
Board is committed to upholding the highest legal and ethical
conduct in fulfilling its responsibilities and recognizes that
related party transactions can present a heightened risk of
potential or actual conflicts of interest.
The
SEC rules define a related party transaction to include any
transaction, arrangement or relationship which: (i) we are a
participant; (ii) the amount involved exceeds $120,000; and (iii)
executive officer, director or director nominee, or any person who
is known to be the beneficial owner of more than 5% of our Common
Stock, or any person who is an immediate family member of an
executive officer, director or director nominee or beneficial owner
of more than 5% of our Common Stock had or will have a direct or
indirect material interest.
Although
we do not maintain a formal written procedure for the review and
approval of transactions with such related persons, it is our
policy for the disinterested members of our Board to review all
related party transactions on a case-by-case basis. To receive
approval, a related-party transaction must have a legitimate
business purpose for us and be on terms that are fair and
reasonable to us and our stockholders and as favorable to us and
our stockholders as would be available from non-related entities in
comparable transactions.
All
related party transactions must be disclosed in our applicable
filings with the SEC as required under SEC rules.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act, requires our officers, directors, and
persons who beneficially own more than 10% of our Common Stock to
file reports of ownership and changes in ownership with the SEC.
Officers, directors, and greater-than-ten-percent stockholders are
also required by the SEC to furnish us with copies of all Section
16(a) forms that they file.
Based solely upon a review of these forms that
were furnished to us, we believe that all reports required to be
filed by these individuals and persons under Section 16(a) were
filed during the year ended December 31, 2018 and that such filings
were timely,
except for the
following:
●
Mr. Borkowski, a
director, filed two late Form 4s reporting an aggregate of four
transactions;
●
Mr. Casamento, a
director, filed a late Form 4 reporting one
transaction;
●
Dr. Dupret, the
former Chief Scientific Officer, filed a late Form 4 reporting two
transactions;
●
Dr. Pennington, the
Chief Medical Officer, filed a late Form 4 reporting one
transaction;
●
Dr. Riddell, a
director, filed a late Form 4 reporting one
transaction;
●
Mr. Ross Jr., an
individual who owns in excess of 10% of our Common Stock, filed a
late Form 4 reporting five transactions; and
●
Dr. Schramm, a
director, filed a late Form 4 reporting one
transaction.
-17-
|
PROPOSAL NO.
2
:
|
AMENDMENT TO OUR CHARTER TO INCREASE THE NUMBER OF SHARES OF
AUTHORIZED COMMON STOCK
|
Overview
Our
Board of Directors is proposing to amend our Charter to increase
the number of shares of Common Stock authorized for issuance
thereunder by 50,000,000 shares of Common Stock from 100,000,000 to
150,000,000 shares. If approved by our stockholders, the amendment
will become effective upon the filing of a certificate of amendment
with the Delaware Secretary of State, which filing is expected to
occur promptly after stockholder approval of this
Proposal.
The form of amendment to our Charter relating to
this Proposal is attached to this Proxy Statement as
Appendix B
.
Purpose and Effect of the Amendment
As
of November 6, 2019, we had 68,038,162 shares of Common Stock that
remained authorized but not issued or reserved for certain
purposes. The principal purpose of the proposed amendment to the
Charter is to authorize additional shares of Common Stock that will
be available to raise additional capital through the sale of such
Common Stock, and securities convertible or exercisable for Common
Stock, and to incentivize employees through the issuance of stock
incentives under our 2014 Plan. In addition, the additional
authorized shares will be available in the event the Board of
Directors determines that it is necessary or appropriate to use
Common Stock to acquire another company or its assets, to establish
strategic relationships with corporate partners or for other
corporate purposes.
The
limited number of remaining available shares of Common Stock may
make it difficult for us to raise necessary capital and be
responsive to potential investors. We will require substantial
additional capital resources in order to conduct our operations,
complete our product development programs, complete our clinical
trials needed to market our products, and potentially commercialize
these products. If adequate funds are not available in the future,
we may be required to delay or terminate research and development
programs, curtail capital expenditures, and reduce business
development and other operating activities. Should the financing we
require to sustain our working capital needs be unavailable or
prohibitively expensive when we require it, the consequences could
have a material adverse effect on our business, operating results,
financial condition and prospects. Because of our funding
requirements, we will try to raise additional capital through
additional public or private financings, as well as collaborative
relationships, incurring debt and other available sources. The
availability of additional authorized shares of Common Stock is
particularly important in the event that the Board of Directors
needs to undertake any of the foregoing actions on an expedited
basis and thus to avoid the time and expense of seeking stockholder
approval in connection with the contemplated issuance of Common
Stock. If the amendment is approved by our stockholders, the Board
does not intend to solicit further stockholder approval prior to
any particular issuance of any additional shares of Common Stock,
except as may be required by the rules of NASDAQ or applicable
law.
The
increase in authorized Common Stock will not have any immediate
effect on the rights of existing stockholders. To the extent that
additional authorized shares are issued in the future, such
additional issuances may decrease the existing stockholders'
percentage equity ownership and, depending on the price at which
they are issued, could be dilutive to the existing stockholders.
Holders of Common Stock have no preemptive rights and the Board has
no plans to grant such rights with respect to any such
shares.
The
increase in the authorized number of shares of Common Stock and the
subsequent issuance of such shares could have the effect of
delaying or preventing a change in control of the Company without
further action by the stockholders. Shares of authorized and
unissued Common Stock could, within the limits imposed by
applicable law, be issued in one or more transactions that would
make a change in control of the Company more difficult, and
therefore less likely. Any such issuance of additional shares of
Common Stock could have the effect of diluting the earnings per
share and book value per share of outstanding shares of Common
Stock and such additional shares could be used to dilute the stock
ownership or voting rights of a person seeking to obtain control of
us.
The Board is not currently aware of any attempt to
take over or acquire the Company. While it may be deemed to have
potential anti-takeover effects, the proposed amendment to increase
the number of shares of Common Stock authorized for issuance under
the Charter is not prompted by any specific effort or takeover
threat currently perceived by management.
The
additional shares of Common Stock to be authorized pursuant to the
proposed amendment will be of the same class of Common Stock as is
currently authorized under the Charter. These additional shares
will be used to issue shares of our Common Stock in connection with
our existing stock option and award plans. In addition, we
anticipate raising additional capital through future issuances and
sales of shares of our Common Stock, or securities convertible or
exercisable for shares of our Common Stock, and we intend to use
the additional shares of Common Stock that will be available to
undertake any such issuances and sales. While we are currently
engaged in discussions with potential investors regarding
transactions involving the issuance of shares of our Common Stock,
the Company currently has sufficient authorized shares of Common
Stock necessary to consummate such transactions. Currently, we do
not have any specific plan, commitment, arrangement, understanding
or agreement, either oral or written, regarding the issuance of any
additional shares of Common Stock that may be authorized if this
Proposal to increase the number of authorized shares of Common
Stock is approved by stockholders.
Required Vote and Recommendation
In
accordance with our Charter and Delaware law, approval and
adoption of this Proposal requires the affirmative vote of at least
a majority of our issued and outstanding voting securities.
Abstentions and broker non-votes will have the same effect as a
vote “AGAINST” this Proposal.
Bifurcation of Proposal No. 2 and Proposal No. 3
While
this Proposal reflects the proposed amendment to our Charter to
increase the number of authorized shares of Common Stock by
50,000,000 shares from 100,000,000 to 150,000,000 shares, the
approval of this Proposal is not conditioned on the approval of
Proposal 3 to amend our Charter to authorize our Board to effect a
Reverse Split. To the extent that only one of either of these
Proposals is approved by stockholders, only the amendment to affect
the Proposal that was approved by stockholders will be filed with
the Secretary of State of the State of Delaware. To the extent that
both Proposal No. 2 and Proposal No. 3 are approved by
stockholders, the amendment to our Charter to (i) increase the
number of authorized shares of Common Stock will be promptly filed
following approval at the Annual Meeting, and (ii) effect the
Reverse Split, subject to implementation by the Board, as more
particularly set forth in Proposal No. 3 below.
OUR BOARD RECOMMENDS A VOTE “
FOR
” PROPOSAL TWO.
-18-
|
PROPOSAL NO.
3
:
|
AMENDMENT TO OUR CHARTER TO AUTHORIZE OUR BOARD TO EFFECT A REVERSE
STOCK SPLIT
|
Overview
The Board of the Company has determined that it is
advisable and in the best interests of the Company and its
stockholders, for the Company to amend its Charter (the
“
Charter
Amendment
”), to authorize
the Board to effect a reverse stock split of both our issued and
outstanding and authorized shares of our Common Stock at a specific
ratio, ranging from one-for-two (1:2) to one-for-five (1:5) (the
“
Approved Split
Ratios
”), to be
determined by the Board (the “
Reverse
Split
”).
A vote for this
Proposal will constitute approval of the Reverse Split that, once
authorized by the Board and affected by filing the Charter
Amendment with the Delaware Division of Corporations, will combine
between two and five shares of our Common Stock into one share of
Common Stock. If implemented, the Reverse Split will have the
effect of decreasing the number of shares of our Common Stock
issued and outstanding.
Accordingly, stockholders are asked to approve the
Charter Amendment set forth in
Appendix
C
to effect the Reverse
Split consistent with those terms set forth in this Proposal, and
to grant authorization to the Board to determine, in its sole
discretion, whether or not to implement the Reverse Split, as well
as its specific ratio within the range of the Approved Split
Ratios, and on or prior to the one-year anniversary date of the
Annual Meeting. The text of
Appendix
C
remains subject to modification to include such
changes as may be required by the Secretary of State of the State
of Delaware and as our Board deems necessary or advisable to
implement the Reverse Split.
If approved by the holders of our outstanding
voting securities, the Reverse Split would provide for the reverse
split of our authorized Common Stock at the same ratio as the
Approved Split Ratio approved by the Board prior to
the
one-year anniversary date of the Annual Meeting
. The Board reserves the right to elect to abandon
the Reverse Split if it determines, in its sole discretion,
that the Reverse Split is no longer in the best interests of the
Company and its stockholders.
Purpose and Rationale for the Reverse Split
Avoid Delisting from the
NASDAQ.
On November 1, 2019,
the Company received a letter from NASDAQ’s Listing
Qualifications Staff indicating that, based upon the closing bid
price of the Company's Common Stock for the last 30 consecutive
business days, the Company is not currently in compliance with the
requirement to maintain a minimum bid price of $1.00 per share for
continued listing on the NASDAQ, as set forth in NASDAQ Listing
Rule 5550(a)(2) (the "
Notice
").
To regain compliance, the closing bid price of the Company's Common
Stock must be at least $1.00 per share for ten consecutive business
days at some point during the period of 180 calendar days from the
date of the Notice, or until April 29, 2020. If the Company does
not regain compliance with the minimum bid price requirement by
April 29, 2020, NASDAQ may grant the Company a second period of 180
calendar days to regain compliance. To qualify for this additional
compliance period, the Company would be required to meet the
continued listing requirement for market value of publicly held
shares and all other initial listing standards for NASDAQ, other
than the minimum bid price requirement. In addition, the Company
would also be required to notify NASDAQ of its intent to cure the
minimum bid price deficiency. If the Company does not regain
compliance within the allotted compliance periods, including any
extensions that may be granted by NASDAQ, NASDAQ will provide
notice that the Company's Common Stock will be subject to
delisting. The Company would then be entitled to appeal that
determination to a NASDAQ hearings panel.
Failure
to approve the Reverse Split may potentially have serious, adverse
effects on the Company and its stockholders. Our Common Stock could
be delisted from the NASDAQ because shares of our Common Stock may
continue to trade below the requisite $1.00 per share price needed
to maintain our listing in accordance with NASDAQ Listing Rule
5550(a)(2). Our shares may then trade on the OTC Bulletin Board or
other small trading markets, such as the pink sheets. In that
event, the Company’s Common Stock could trade thinly as a
microcap or penny stock, adversely decrease to nominal levels of
trading and may be avoided by retail and institutional investors,
resulting in the impaired liquidity of our Common
Stock.
As
of the Record Date, our Common Stock closed at $0.67 per share on
NASDAQ. The Reverse Split, if effected, will have the immediate
effect of increasing the price of our Common Stock as reported on
NASDAQ, therefore reducing the risk that our Common Stock could be
delisted from NASDAQ.
Our
Board strongly believes that the Reverse Split is necessary to
maintain our listing on NASDAQ. Accordingly, the Board has approved
resolutions proposing the Charter Amendment to effect the Reverse
Split and directed that it be submitted to our stockholders for
approval at the Annual Meeting.
Management
and the Board has considered the potential harm to the Company and
its stockholders should NASDAQ delist our Common Stock from trading
on NASDAQ. Delisting could adversely affect the liquidity of our
Common Stock since alternatives, such as the OTC Bulletin Board and
the pink sheets, are generally considered to be less efficient
markets. An investor likely would find it less convenient to sell,
or to obtain accurate quotations in seeking to buy, our Common
Stock on an over-the-counter market. Many investors likely would
not buy or sell our Common Stock due to difficulty in accessing
over-the-counter markets, policies preventing them from trading in
securities not listed on a national exchange, or other
reasons.
-19-
Other
Effects.
The Board also
believes that the increased market price of our Common Stock
expected as a result of implementing the Reverse Split could
improve the marketability and liquidity of our Common Stock and
will encourage interest and trading in our Common Stock. The
Reverse Split, if effected, could allow a broader range of
institutions to invest in our Common Stock (namely, funds that are
prohibited from buying stock whose price is below a certain
threshold), potentially increasing the trading volume and liquidity
of the Company’s Common Stock. The Reverse Split could help
increase analyst and broker’s interest in Common Stock, as
their policies can discourage them from following or recommending
companies with low stock prices. Because of the trading volatility
often associated with low-priced stocks, many brokerage houses and
institutional investors have internal policies and practices that
either prohibit them from investing in low-priced stocks or tend to
discourage individual brokers from recommending low-priced stocks
to their customers. Some of those policies and practices may make
the processing of trades in low-priced stocks economically
unattractive to brokers. Additionally, because brokers’
commissions on low-priced stocks generally represent a higher
percentage of the stock price than commissions on higher-priced
stocks, a low average price per share of Common Stock can result in
individual stockholders paying transaction costs representing a
higher percentage of their total share value than would be the case
if the share price were higher.
Our
Board does not intend for this transaction to be the first step in
a series of plans or proposals effect a “going private
transaction” within the meaning of Rule 13e-3 of the Exchange
Act.
Risks of the Proposed Reverse Split
We cannot assure you that the proposed Reverse Split will increase
the price of our Common Stock and have the desired effect of
maintaining compliance with NASDAQ
.
If
the Reverse Split is implemented, our Board expects that it will
increase the market price of our Common Stock so that we are able
to regain and maintain compliance with the NASDAQ minimum bid price
requirement. However, the effect of the Reverse Split upon the
market price of our Common Stock cannot be predicted with any
certainty, and the history of similar stock splits for companies in
like circumstances is varied. It is possible that (i) the per
share price of our Common Stock after the Reverse Split will not
rise in proportion to the reduction in the number of shares of our
Common Stock outstanding resulting from the Reverse Split,
(ii) the market price per post-Reverse Split share may not
exceed or remain in excess of the $1.00 minimum bid price for a
sustained period of time, or (iii) the Reverse Split may not
result in a per share price that would attract brokers and
investors who do not trade in lower priced stocks. Even if the
Reverse Split is implemented, the market price of our Common Stock
may decrease due to factors unrelated to the Reverse Split. In any
case, the market price of our Common Stock will be based on other
factors which may be unrelated to the number of shares outstanding,
including our future performance. If the Reverse Split is
consummated and the trading price of our Common Stock declines, the
percentage decline as an absolute number and as a percentage of our
overall market capitalization may be greater than would occur in
the absence of the Reverse Split. Even if the market price per
post-Reverse Split share of our Common Stock remains in excess of
$1.00 per share, we may be delisted due to a failure to meet other
continued listing requirements, including NASDAQ requirements
related to the minimum number of shares that must be in the public
float and the minimum market value of the public
float.
A decline in the market price of our Common Stock after the Reverse
Split is implemented may result in a greater percentage decline
than would occur in the absence of a reverse stock
split.
If
the Reverse Split is implemented and the market price of our Common
Stock declines, the percentage decline may be greater than would
occur in the absence of a reverse stock split. The market price of
our Common Stock will, however, also be based upon our performance
and other factors, which are unrelated to the number of shares of
Common Stock outstanding.
The proposed Reverse Split may decrease the liquidity of
our Common Stock
.
The
liquidity of our Common Stock may be harmed by the proposed Reverse
Split given the reduced number of shares of Common Stock that would
be outstanding after the Reverse Split, particularly if the stock
price does not increase as a result of the Reverse
Split.
-20-
Determination
of the Ratio for the Reverse Stock Split
If this Proposal is
approved by stockholders and the Board determines that it is in the
best interests of the Company and its stockholders to move forward
with the Reverse Split, the Approved Split Ratio will be selected
by the Board, in its sole discretion. However, the Approved Split
Ratio will not be less than a ratio of one-for-two (1:2) or exceed
a ratio of one-for-five (1:5). In determining which Approved Split
Ratio to use, the Board will consider numerous factors, including
the historical and projected performance of our Common Stock,
prevailing market conditions and general economic trends, and will
place emphasis on the expected closing price of our Common Stock in
the period following the effectiveness of the Reverse Split. The
Board will also consider the impact of the Approved Split Ratios on
investor interest. The purpose of selecting a range is to give the
Board the flexibility to meet business needs as they arise, to take
advantage of favorable opportunities and to respond to a changing
corporate environment. Based on the number of shares of Common
Stock issued and outstanding as of the Record Date, after
completion of the Reverse Split, we will have approximately between
5,231,022 and 13,077,556 shares of Common Stock issued and
outstanding, depending on the Approved Split Ratio selected by the
Board of Directors.
Principal Effects of the Reverse Split
After
the effective date of the proposed Reverse Split, each stockholder
will own a reduced number of shares of Common Stock. Except for
adjustments that may result from the treatment of fractional shares
as described below, the proposed Reverse Split will affect all
stockholders uniformly. The proportionate voting rights and other
rights and preferences of the holders of our Common Stock will not
be affected by the proposed Reverse Split (other than as a result
of the payment of cash in lieu of fractional shares). For example,
a holder of 2% of the voting power of the outstanding shares of our
Common Stock immediately prior to a Reverse Split would continue to
hold 2% (assuming there is no impact as a result of the payment of
cash in lieu of issuing fractional shares and no other shares of
Common Stock issuable upon exercise or conversion of any other
derivative securities are issued) of the voting power of the
outstanding shares of our Common Stock immediately after such
Reverse Stock Split. The number of stockholders of record also
will not be affected by the proposed Reverse Split, except to the
extent that any stockholder holds only a fractional share interest
and receives cash for such interest after the Reverse
Split.
The following table contains
approximate
number of issued and outstanding shares of Common Stock, and the
estimated per share trading price following a 1:2 to 1:5 Reverse
Split
, without giving effect to any
adjustments for fractional shares of Common Stock or the issuance
of any derivative securities, as of the Record Date. In the event
Proposal No. 3 below is approved by stockholders, the number of
shares of Common Stock authorized, as well as the number of shares
of Common Stock authorized but unissued and unreserved will
decrease by the same ratio as the Approved Split
Ratio.
|
|
Current
|
After
a 1:2
Reverse
Split
|
After
a 1:3
Reverse
Split
|
After
a 1:4
Reverse
Split
|
After
a 1:5 Reverse Split
|
|
Common Stock
Authorized
|
100,000,000
|
50,000,000
|
33,333,333
|
25,000,000
|
20,000,000
|
|
Common Stock
Issued and Outstanding
|
26,155,111
|
13,077,556
|
8,718,370
|
6,538,778
|
5,231,022
|
|
Number of Shares
of Common Stock Reserved for Issuance
|
5,806,727
|
2,903,364
|
1,935,576
|
1,451,682
|
1,161,345
|
|
Number of Shares
of Common Stock Authorized but Unissued and Unreserved
|
68,038,162
|
34,019,080
|
22,679,387
|
17,009,540
|
13,607,633
|
|
Price per share,
based on the closing price of our Common Stock on October 24,
2019
|
$0.67
|
$1.34
|
$2.01
|
$2.68
|
$3.35
|
After
the effective date of the Reverse Split, our Common Stock would
have a new committee on uniform securities identification
procedures (CUSIP) number, a number used to identify our Common
Stock.
Our
Common Stock is currently registered under Section 12(b) of
the Exchange Act, and we are subject to the periodic reporting and
other requirements of the Exchange Act. The proposed Reverse Split
will not affect the registration of our Common Stock under the
Exchange Act. Our Common Stock would continue to be reported on
NASDAQ under the symbol “AZRX,” assuming that we are
able to regain compliance with the minimum bid price requirement,
although it is likely that NASDAQ would add the letter
“D” to the end of the trading symbol for a period of
twenty trading days after the effective date of the Reverse Split
to indicate that the Reverse Split had occurred.
-21-
Effect on Warrants
The Reverse Split will require that proportionate
adjustments be made to the conversion rate, the per share exercise
price and the number of shares issuable upon the exercise or
conversion of the following outstanding derivative securities
issued by the Company, in accordance with the Approved Split Ratio
(all figures are as of September 30, 2019 and are on a pre-Reverse
Split basis), including
warrants to purchase 3,388,378
shares of Common Stock.
The
adjustments to the warrants, as required by the Reverse Split and
in accordance with the Approved Split Ratio, would result in
approximately the same aggregate price being required to be paid
under such securities upon exercise, and approximately the same
value of shares of Common Stock being delivered upon such exercise
or conversion, immediately following the Reverse Split as was the
case immediately preceding the Reverse Split.
Effect on Stock Option Plans
As
of the Record Date, we had 1,877,500 shares of Common Stock
reserved for issuance pursuant to the exercise of outstanding
options issued under our 2014 Plan, as well as 530,849 shares of
Common Stock available for issuance under the 2014 Plan. Pursuant
to the terms of the 2014 Plan, the Board, or a designated committee
thereof, as applicable, will adjust the number of shares of Common
Stock underlying outstanding awards, the exercise price per share
of outstanding stock options and other terms of outstanding awards
issued pursuant to the 2014 Plan to equitably reflect the effects
of the Reverse Split. The number of shares subject to vesting under
restricted stock awards and the number of shares issuable as
contingent consideration as part of an acquisition by the Company
will be similarly adjusted, subject to our treatment of fractional
shares. Furthermore, the number of shares available for future
grant under the 2014 Plan will be similarly
adjusted.
Effective Date
The
proposed Reverse Split would become effective on the date of filing
of the Amendment with the office of the Secretary of State of the
State of Delaware. On the effective date, shares of Common Stock
issued and outstanding shares of Common Stock held in treasury, in
each case, immediately prior thereto will be combined and
converted, automatically and without any action on the part of our
stockholders, into new shares of Common Stock in accordance with
the Approved Split Ratio set forth in this Proposal. If the
proposed Charter Amendment is not approved by our stockholders, a
Reverse Split will not occur.
Treatment of Fractional Shares
No
fractional shares of Common Stock will be issued as a result of the
Reverse Split. Instead, in lieu of any fractional shares to which a
stockholder of record would otherwise be entitled as a result of
the Reverse Split, we will pay cash (without interest) equal to
such fraction multiplied by the average of the closing sales prices
of our Common Stock on the NASDAQ during regular trading hours for
the five consecutive trading days immediately preceding the
effective date of the Reverse Split (with such average closing
sales prices being adjusted to give effect to the Reverse Split).
After the Reverse Split, a stockholder otherwise entitled to a
fractional interest will not have any voting, dividend or other
rights with respect to such fractional interest except to receive
payment as described above.
Upon
stockholder approval of this Proposal, if the Board elects to
implement the proposed Reverse Split, stockholders owning
fractional shares will be paid out in cash for such fractional
shares. For example, assuming the Board elected to consummate a
Approved Split Ratio of 1:2, if a stockholder held three shares of
Common Stock immediately prior to the Reverse Split, then such
stockholder would be paid in cash for the one share of Common Stock
but will maintain ownership of the remaining two shares of Common
Stock.
-22-
Record and Beneficial Stockholders
If
the Reverse Split is authorized by our stockholders and our Board
elects to implement the Reverse Split, stockholders of record
holding some or all of their shares of Common Stock electronically
in book-entry form under the direct registration system for
securities will receive a transaction statement at their address of
record indicating the number of shares of Common Stock they hold
after the Reverse Split along with payment in lieu of any
fractional shares. Non-registered stockholders holding Common Stock
through a bank, broker or other nominee should note that such
banks, brokers or other nominees may have different procedures for
processing the consolidation and making payment for fractional
shares than those that would be put in place by us for registered
stockholders. If you hold your shares with such a bank, broker or
other nominee and if you have questions in this regard, you are
encouraged to contact your nominee.
If
the Reverse Split is authorized by the stockholders and our Board
elects to implement the Reverse Split, stockholders of record
holding some or all of their shares in certificate form will
receive a letter of transmittal, as soon as practicable after the
effective date of the Reverse Split. Our transfer agent will act as
“exchange agent” for the purpose of implementing the
exchange of stock certificates. Holders of pre-Reverse Split shares
will be asked to surrender to the exchange agent certificates
representing pre-Reverse Split shares in exchange for post-Reverse
Split shares and payment in lieu of fractional shares (if any) in
accordance with the procedures to be set forth in the letter of
transmittal. Until surrender, each certificate representing shares
before the Reverse Split would continue to be valid and would
represent the adjusted number of whole shares based on the approved
exchange ratio of the Reverse Split selected by the Board. No new
post-Reverse Split share certificates will be issued to a
stockholder until such stockholder has surrendered such
stockholder’s outstanding certificate(s) together with the
properly completed and executed letter of transmittal to the
exchange agent.
STOCKHOLDERS SHOULD NOT DESTROY ANY PRE-SPLIT STOCK CERTIFICATE AND
SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL THEY ARE REQUESTED TO DO
SO.
Accounting Consequences
The
par value per share of Common Stock would remain unchanged at
$0.0001 per share after the Reverse Split. As a result, on the
effective date of the Reverse Split, the stated capital on our
balance sheet attributable to the Common Stock will be reduced
proportionally, based on the Approved Split Ratio selected by the
Board, from its present amount, and the additional paid-in capital
account shall be credited with the amount by which the stated
capital is reduced. The per share Common Stock net income or loss
and net book value will be increased because there will be fewer
shares of Common Stock outstanding. The shares of Common Stock held
in treasury, if any, will also be reduced proportionately based on
the Approved Split Ratio selected by the Board. Retroactive
restatement will be given to all share numbers in the financial
statements, and accordingly all amounts including per share amounts
will be shown on a post-split basis. We do not anticipate that any
other accounting consequences would arise as a result of the
Reverse Split.
No Appraisal Rights
The
Company’s stockholders are not entitled to dissenters’
or appraisal rights under the Delaware General Corporation Law with
respect to this Proposal and we will not independently provide our
stockholders with any such right if the Reverse Split is
implemented.
-23-
Material Federal U.S. Income Tax Consequences of the Reverse Stock
Split
The following is a summary of the material U.S.
federal income tax consequences of a Reverse Split to our
stockholders. The summary is based on the Internal Revenue Code of
1986, as amended (the “
Code
”), applicable Treasury Regulations
promulgated thereunder, judicial authority and current
administrative rulings and practices as in effect on the date of
this Proxy Statement. Changes to the laws could alter the tax
consequences described below, possibly with retroactive effect. We
have not sought and will not seek an opinion of counsel or a ruling
from the Internal Revenue Service regarding the federal income tax
consequences of a Reverse Split. This discussion is for general
information only and does not discuss the tax consequences which
may apply to special classes of taxpayers
(e.g., non-resident aliens, broker/dealers or insurance
companies). The state and local tax consequences of a Reverse Split
may vary significantly as to each stockholder, depending upon the
jurisdiction in which such stockholder resides. Stockholders are
urged to consult their own tax advisors to determine the particular
consequences to them.
In
general, the federal income tax consequences of a Reverse Split
will vary among stockholders depending upon whether they receive
cash for fractional shares or solely a reduced number of shares of
Common Stock in exchange for their old shares of Common Stock. We
believe that because the Reverse Split is not part of a plan to
increase periodically a stockholder’s proportionate interest
in our assets or earnings and profits, the Reverse Split should
have the following federal income tax effects. A stockholder who
receives solely a reduced number of shares of Common Stock will not
recognize gain or loss. In the aggregate, such a
stockholder’s basis in the reduced number of shares of Common
Stock will equal the stockholder’s basis in its old shares of
Common Stock and such stockholder’s holding period in the
reduced number of shares will include the holding period in its old
shares exchanged. A stockholder who receives cash in lieu of a
fractional share as a result of the Reverse Split should generally
be treated as having received the payment as a distribution in
redemption of the fractional share, as provided in
Section 302(a) of the Code. Generally, if redemption of the
fractional shares of all stockholders reduces the percentage of the
total voting power held by a particular redeemed stockholder
(determined by including the voting power held by certain related
persons), the particular stockholder should recognize gain or loss
equal to the difference, if any, between the amount of cash
received and the stockholder’s basis in the fractional share.
In the aggregate, such a stockholder’s basis in the reduced
number of shares of Common Stock will equal the stockholder’s
basis in its old shares of Common Stock decreased by the basis
allocated to the fractional share for which such stockholder is
entitled to receive cash, and the holding period of the reduced
number of shares received will include the holding period of the
old shares exchanged. If the redemption of the fractional shares of
all stockholders leaves the particular redeemed stockholder with no
reduction in the stockholder’s percentage of total voting
power (determined by including the voting power held by certain
related persons), it is likely that cash received in lieu of a
fractional share would be treated as a distribution under
Section 301 of the Code. Stockholders should consult their own
tax advisors regarding the tax consequences to them of a payment
for fractional shares.
We
will not recognize any gain or loss as a result of the proposed
Reverse Split.
THE
PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN
FEDERAL U.S. INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT AND DOES
NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL
POTENTIAL TAX EFFECTS RELEVANT THERETO. YOU SHOULD CONSULT YOUR OWN
TAX ADVISORS AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN
AND OTHER TAX CONSEQUENCES OF THE REVERSE SPLIT IN LIGHT OF YOUR
SPECIFIC CIRCUMSTANCES.
Required Vote and Recommendation
In
accordance with our Charter and Delaware law, approval and
adoption of this Proposal requires the affirmative vote of at least
a majority of our issued and outstanding voting securities.
Abstentions and broker non-votes will have the same effect as a
vote “AGAINST” this Proposal.
Bifurcation of Proposal No. 2 and Proposal No. 3
While
this Proposal reflects the proposed amendment to our Charter to
authorize our Board to effect a Reverse Split, the approval of this
Proposal is not conditioned on the approval of Proposal 2 to
increase the number of authorized shares by 50,000,000 shares to
150,000,000 shares. To the extent that only one of either of these
Proposals is approved by stockholders, only the amendment to affect
the Proposal that was approved by stockholders will be filed with
the Secretary of State of the State of Delaware. To the extent that
both Proposal No. 2 and Proposal No. 3 are approved by
stockholders, the amendment to our Charter to (i) increase the
number of authorized shares of Common Stock will be promptly filed
following approval at the Annual Meeting, and (ii) effect the
Reverse Split, subject to implementation by the Board, as more
particulary set forth in this Proposal.
OUR BOARD RECOMMENDS A VOTE “
FOR
” PROPOSAL THREE.
-24-
|
PROPOSAL NO.
4
:
|
RATIFICATION OF THE APPOINTMENT OF MAZARS TO SERVE TO SERVE AS OUR
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL
YEAR
|
General
Upon recommendation
of the Audit Committee, the Board appointed Mazars USA LLP
(“
Mazars
”), as
the Company’s independent registered public accounting firm
for the year ending December 31, 2019, and hereby recommends that
the stockholders ratify such appointment. The Board may terminate
the appointment of Mazars as the Company’s independent
registered public accounting firm without the approval of the
Company’s stockholders whenever the Board deems such
termination necessary or appropriate.
Representatives of
Mazars will be present at the Annual Meeting or available by
telephone and will have an opportunity to make a statement if they
so desire and to respond to any appropriate questions from
stockholders.
Audit Fees
The
following table represents fees for professional services billed by
Mazars for the fiscal years ended December 31, 2018 and 2017 in
relation to services rendered in connection with the audit of the
Company’s consolidated financial statements and for tax
services rendered with respect to tax-related compliance, advice
and planning.
|
|
For the years ended
December 31,
|
|
|
|
2018
|
2017
|
|
Audit fees
(1)
|
$
129,031
|
$
139,329
|
|
Audit-related fees
(2)
|
28,101
|
33,240
|
|
Tax fees
(3)
|
23,772
|
20,114
|
|
All other fees
(4)
|
-
|
-
|
|
Total
|
$
180,904
|
$
192,683
|
|
(1)
|
Professional services rendered by the Mazars for the audit of our
annual financial statements and review of financial statements
included in our Form 10-Q’s.
|
|
(2)
|
The aggregate fees billed for assurance and related services by
Mazars that are reasonably related to the performance of the audit
or review of our financial statements and are not reported under
footnote 1 above.
|
|
(3)
|
The aggregate fees billed for professional services rendered by
Mazars for tax compliance, tax advice, and tax
planning.
|
|
(4)
|
The aggregate fees billed for products and services provided by
Mazars other than the services reported in footnotes 1, 2 and 3
above.
|
Audit Committee Pre-Approval Policies and Procedures
The
Audit Committee has the sole authority for the appointment,
compensation and oversight of the work of our independent
accountants, who prepare or issue an audit report for
us.
Required
Vote and Recommendation
Ratification of the
selection of Mazars as the Company’s independent auditors for
the fiscal year ending December 31, 2019 requires the affirmative
vote of a majority of the shares present or represented by proxy
and entitled to vote at the Annual Meeting. Unless otherwise
instructed on the proxy or unless authority to vote is withheld,
shares represented by executed proxies will be voted
“FOR” the ratification of Mazars as the Company’s
independent auditors for the fiscal year ending December 31,
2019.
OUR BOARD RECOMMENDS A VOTE “
FOR
” PROPOSAL FOUR.
-25-
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee of the Board of
Directors shall not be deemed to be soliciting material or to be
incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent the Company specifically incorporates
this Report therein, and shall not otherwise be deemed filed under
such Acts.
Management is
responsible for the Company’s internal controls, financial
reporting process and compliance with applicable laws and
regulations. The independent registered public accounting firm is
responsible for performing an independent audit of the
Company’s consolidated financial statements in accordance
with generally accepted auditing standards and issuing a report
thereon, and annually attesting to management’s assessments
of the effectiveness of the Company’s internal control over
financial reporting. The members of the Audit Committee are
responsible for monitoring and overseeing these
processes.
The Audit Committee
has reviewed and discussed the Company’s audited consolidated
financial statements for the year ended December 31, 2018,
with management and Mazars USA LLP (“
Mazars
”), the Company’s
independent registered public accounting firm for 2018. The Audit
Committee also has discussed with Mazars the matters required to be
discussed by Statement of Auditing Standards No. 1301,
Communications with Audit Committees, as currently in effect.
Finally, the Audit Committee has received the written disclosures
and the letter from Mazars required by applicable requirements of
the Public Company Accounting Oversight Board regarding Mazars
communications with the Audit Committee concerning independence as
currently in effect and discussed with Mazars their independence.
Based upon the review and discussions described in this report, the
Audit Committee recommended to the Company’s Board of
Directors that the Company’s audited consolidated financial
statements be included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2018, for filing with the
Securities and Exchange Commission.
|
November
7, 2019
|
RESPECTFULLY SUBMITTED,
Edward J. Borkowski,
Chair
Alastair
Riddell
Charles
J. Casamento
|
-26-
BENEFICIAL
OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The
following table sets forth information regarding shares of the
Company’s Common Stock beneficially owned as of October 24,
2019 by:
●
each
of our officers and directors;
●
all
officers and directors as a group; and
●
each person known by us to beneficially own five
percent or more of the outstanding shares of the Company’s
Common Stock. Percentage of ownership is calculated based on
26,155,111
shares of Common
Stock outstanding as of the Record
Date.
Beneficial Ownership of Common Stock
|
Name and Address of Beneficial Owner
(1)
|
Number of Shares
(2)
|
Percent Ownership of Class
(3)
|
|
Edward J. Borkowski,
Director Nominee
(4)
|
482,600
|
1.8
%
|
|
Charles J. Casamento, Director
Nominee
(5)
|
94,000
|
*
|
|
Alastair Riddell, Director
Nominee
(6)
|
160,000
|
*
|
|
Vern L. Schramm, Director
Nominee
(7)
|
67,500
|
*
|
|
James Sapirstein,
Director Nominee, President and Chief Executive
Officer
|
-
|
*
|
|
Johan M. (Thijs) Spoor, Director Nominee, Former
President and Chief Executive Officer
(8)
|
703,486
|
1.6
%
|
|
Maged Shenouda, Chief Financial
Officer
(9)
|
322,500
|
1.2
%
|
|
James E. Pennington, Chief Medical
Officer
(10)
|
75,000
|
*
|
|
All directors and executive officers as a group (8
persons)
|
1,905,868
|
7.0
%
|
|
5% Stockholders
|
|
|
|
Edmund Burke Ross, Jr.
(11)
(12)
|
3,340,555
|
12.1
%
|
|
Pelican Partners LLC
(13)
|
1,525,509
|
5.8
%
|
|
ADEC Private Equity
(12)
(14)
|
2,476,009
|
9.0
%
|
* Less than 1%.
|
(1)
|
Unless otherwise indicated, the address of such individual is c/o
AzurRx BioPharma, Inc., 760 Parkside Avenue, Downstate
Biotechnology Incubator, Suite 304, Brooklyn, NY
11226.
|
|
(2)
|
Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with
respect to securities. All entries exclude beneficial ownership of
shares issuable pursuant to warrants, options or other derivative
securities that have not vested or that are not otherwise
exercisable as of the date hereof or which will not become vested
or exercisable within 60 days of the Record Date.
|
|
(3)
|
Percentages are rounded to nearest percent. Percentages are based
on 26,155,111 shares of Common Stock outstanding. Warrants, options
or other derivative securities that are presently exercisable or
exercisable within 60 days are deemed to be beneficially owned by
the person holding the options for the purpose of computing the
percentage ownership of that person, but are not treated as
outstanding for the purpose of computing the percentage of any
other person.
|
|
(4)
|
Includes (i) 371,626 shares of Common Stock; (ii) 45,000 restricted
shares of Common Stock; (iii) 28,474 shares of Common Stock
issuable upon the exercise of warrants; and (iv) 37,500 shares of
Common Stock issuable upon exercise of options.
|
|
(5)
|
Includes (i) 86,500 shares of Common Stock and (ii) 7,500 shares of
Common Stock issuable upon exercise of options.
|
|
(6)
|
Includes (i) 92,500 shares of Common Stock; (ii) 30,000 restricted
shares of Common Stock; and (iii) 37,500 shares of Common Stock
issuable upon the exercise of stock options.
|
|
(7)
|
Includes (i) 60,000 shares of Common Stock and (ii) 7,500 shares of
Common Stock issuable upon exercise of options.
|
|
(8)
|
Includes (i) 138,617 shares of
Common Stock
;
(ii) 325,000 restricted shares of
Common Stock
;
(iii) 100,000 shares of
Common Stock
issuable upon exercise
of options; (iv) 100,000 shares of
Common Stock
that may be purchased
pursuant to options granted by third parties at an exercise price
of $1.00 per share; and (v) 39,851 shares of
Common Stock
held in a trust for the
benefit of Mr. Spoor’s spouse and minor children. Mr. Spoor
disclaims beneficial ownership with respect to such shares
of
Common Stock
held in
trust.
|
-27-
|
(9)
|
Includes (i) 62,500 shares of Common Stock; (ii) 30,000 restricted
shares of Common Stock; and (iii) 230,000 shares of Common Stock
issuable upon the exercise of stock options.
|
|
(10)
|
Includes 75,000 shares of Common Stock issuable upon exercise of
options.
|
|
(11)
|
Based upon information contained in a Schedule 13D filed by Edmund
Burke Ross, Jr. on February 26, 2019 and records maintained by the
Company. Includes a total of 1,799,385 shares of Common Stock,
warrants to purchase up to 741,170 shares of Common Stock, and
800,000 shares of Common Stock issuable upon conversion of certain
Convertible Promissory Notes. Of these holdings, (i) 2,476,009
shares are held by ADEC Private Equity Investment, LLC, which
include 1,031,268 shares of Common Stock, 644,741 shares issuable
upon exercise of warrants, and 800,000 shares of Common Stock
issuable upon conversion of certain 10% Convertible Promissory
Notes; (ii) 794,545 shares are held by EBR Ventures, LLC, which
include 694,545 shares of Common Stock and 100,000 shares issuable
upon exercise of warrants; and (iii) 70,001 shares held by CEDA
Investments, LLC, which include 48,572 shares of Common Stock and
21,429 shares issuable upon exercise of warrants. Mr. Ross, Jr. is
the Manager of EBR Ventures, LLC, ADEC Private Equity Investment,
LLC and CEDA Investments, LLC, and has voting and dispositive power
over the shares of Common Stock held by such entities. The address
of Mr. Ross, Jr. and such entities are c/o JDJ Family Office
Services, P.O. Box 962049, Boston, MA 02196.
|
|
(12)
|
Shares owned and percentages for Edmund Burke Ross, Jr. and ADEC
Private Equity are partially duplicative, as Mr. Ross, Jr. holds
voting and dispositive power over the shares held by ADEC Private
Equity.
|
|
(13)
|
Based upon information contained in a Schedule 13G filed by Matthew
Balk on December 31, 2018. The address of such entity is P.O. Box
2422, Westport, CT 06880. Matthew Balk is the managing member of
Pelican Partners LLC, and has voting and dispositive power over the
shares of Common Stock held by such entity.
|
|
(14)
|
Based upon information contained in a Schedule 13D filed by Edmund
Burke Ross, Jr. on February 26, 2019 and records maintained by the
Company. As indicated in Note 8 above, includes 644,741 shares of
Common Stock issuable upon the exercise of warrants and 800,000
shares of Common Stock issuable upon conversion of certain
Convertible Promissory Notes. Mr. Ross, Jr. has voting and
dispositive power over the shares held by such entity.
|
Related Party Transactions
As of 2015, the Company has employed the services
of JIST Consulting (“
JIST
”), a company controlled by Johan (Thijs)
Spoor, the Company’s former Chief Executive Officer and
President, as a consultant for business strategy, financial
modeling, and fundraising. Included in accounts payable at both
December 31, 2018 and 2017 is $478,400 for JIST relating to Mr.
Spoor’s services. Mr. Spoor received no other compensation
from the Company other than as specified in his employment
agreement.
During the year ended December 31, 2015, the
Company's former President, Christine Rigby-Hutton, was employed
through Rigby-Hutton Management Services
(“
RHMS
”).
Ms. Rigby-Hutton resigned from the Company effective April 20,
2015. Included in accounts payable at both December 31, 2018 and
2017 is $38,453 for RHMS for Ms. Rigby-Hutton’s
services.
From
October 1, 2015 through December 31, 2015, the Company used the
services of Edward J. Borkowski, a member of the Company’s
Board and Audit Committee Chair, as a financial consultant.
Included in accounts payable at December 31, 2018 and 2017 is $0
and $90,000, respectively, for Mr. Borkowski’s
services.
Starting
on October 1, 2016 until his appointment as the Company’s
Chief Financial Officer on September 25, 2017, the Company used the
services of Maged Shenouda as a financial consultant. Expense
recorded in general and administration expense in the accompanying
statements of operations related to Mr. Shenouda for the year ended
December 31, 2017 was $80,000. Included in accounts payable at
December 31, 2018 and 2017 is $50,000 and $70,000, respectively,
for Mr. Shenouda’s services.
On
February 3, 2017, the Board granted 30,000 options each to Messrs.
Borkowski and Shenouda, and Dr. Riddell, with a total value of
$348,210 of which $116,073 and $222,469, respectively, vested and
was charged to expense in the years ended December 31, 2018 and
2017.
During
the year ended December 31, 2018, the Company recorded cash Board
fees of $35,000 each for Mr. Borkowski, Dr. Riddell, Mr. Casamento
and Dr. Schramm. During the year ended December 31, 2017, the
Company recorded Board fees of $35,000 for Mr. Borkowski and Dr.
Riddell; $25,000 for Mr. Shenouda; $30,000 for Mr. Casamento; and
$8,750 for Dr. Schramm.
During
the year ended December 31, 2018, as part of Board compensation,
the Company issued 30,000 shares of restricted Common Stock each to
Mr. Borkowski, Dr. Riddell, Mr. Casamento and Dr. Vern Schramm with
a total value of $306,300 which was vested and charged to expense
in the year ended December 31, 2018. During the year ended December
31, 2017, as part of Board compensation, the Company issued 30,000
shares of restricted Common Stock each to Messrs. Borkowski and Dr.
Riddell; 22,500 shares of restricted Common Stock to Mr. Shenouda;
25,000 shares of restricted Common Stock to Mr. Casamento; and
7,500 shares to Dr. Schramm with a total value of $460,000 which
was vested and charged to expense in the year ended December 31,
2017.
-28-
On February 14,
2019, the Company entered into a Note Purchase Agreement
(“
NPA
”) with
ADEC Private Equity Investments, LLC (“
ADEC
”), a company affiliated with
Edmond Burke Ross, Jr., a large holder of the Company’s
securities, pursuant to which the Company issued to ADEC two Senior
Secured Convertible Notes (the “
Convertible Promissory Notes
”),
in the principal amount of $1.0 million per Convertible Promissory
Note. The Convertible Promissory Notes accrue interest at a rate of
10% per annum;
provided,
however
, that
in the event the
Company elects to repay the full balance due under the terms of
both Notes prior to December 31, 2019, then the interest rate will
be reduced to 6% per annum. The Convertible Promissory Notes shall
mature on the earlier to occur of (i) the tenth business day
following the receipt by the Company or AzurRx BioPharma SAS, a
wholly owned subsidiary of the Company (“
ABS
”), of certain tax credits that the Company
is expected to receive prior to July 2019 in the case of Note A
(the “
2019 Tax
Credit
”) and July 2020 in
the case of Note B (the “
2020 Tax
Credit
”), or (ii)
December 31, 2019 in the case of Note A and December 31, 2020 in
the Case of Note B (the “
Maturity
Dates
”).
As a condition to entering into the NPA, ABS and
ADEC also entered into a Pledge Agreement, pursuant to which ABS
agreed to pledge an interest in the 2019 and 2020 Tax Credits to
ADEC in order to guarantee payment of all amounts due under the
terms of the Notes.
Prior to their respective Maturity Dates, each of
the Convertible Promissory Notes is convertible, at ADEC’s
option, into shares of the Company’s Common Stock, at a
conversion price equal to the principal and accrued interest due
under the terms of the Convertible Promissory Notes divided by
$2.50 (“
Conversion
Shares
”);
provided,
however
, that pursuant to the
term of the Convertible Promissory Notes, ADEC may not convert all
or a portion of the Notes if such conversion would result in ADEC
and/or entities or persons affiliated with ADEC beneficially owning
in excess of 19.99% of the Company’s shares of Common Stock
issued and outstanding immediately after giving effect to the
issuance of the Conversion Shares.
As additional consideration for entering into the
NPA, pursuant to a Warrant Amendment Agreement, the Company agreed
to reduce the exercise price of certain warrants previously issued
by the Company to ADEC and its affiliates, totaling warrants to
purchase 1,009,565 shares, to $1.50 per share. The Warrant
Amendment Agreement does not alter any other terms of
such warrants.
-29-
ADDITIONAL
INFORMATION
Deadline
for Receipt of Stockholder Proposals for the 2020 Annual
Meeting
Pursuant to Rule 14a-8 under the Exchange Act,
stockholder proposals to be included in our next proxy statement
must be received by our Corporate Secretary by writing to
AzurRx BioPharma, Inc., Attention: Corporate Secretary – 760
Parkside Avenue, Downstate Biotechnology Incubator, Suite 304,
Brooklyn, NY 11226,
no later than 90
days nor more than 120 days prior to the first anniversary of the
preceding year’s annual meeting. Submitted proposals must
comply with applicable Delaware law, the rules and regulations
promulgated by the SEC and the procedures set forth in our
Bylaws.
We
reserve the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not
comply with these and all other applicable
requirements.
Householding
of Proxy Materials
The SEC has adopted
rules that permit companies and intermediaries (e.g., brokers) to
satisfy the delivery requirements for proxy statements and annual
reports with respect to two or more stockholders sharing the same
address by delivering a single proxy statement and annual report
addressed to those stockholders. This process, which is commonly
referred to as “householding,” potentially means extra
convenience for stockholders and cost savings for
companies.
A number of brokers
with account holders who are stockholders of the Company will be
“householding” the Company’s proxy materials. A
single set of the Company’s proxy materials will be delivered
to multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders.
Once you have received notice from your broker that they will be
“householding” communications to your address,
“householding” will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in “householding” and would
prefer to receive a separate set of the Company’s proxy
materials at no charge, please notify your broker or direct a
written request to AzurRx BioPharma, Inc., Attention: Corporate
Secretary – 760 Parkside Avenue, Downstate Biotechnology
Incubator, Suite 304, Brooklyn, NY 11226, or contact us at (646)
699-7855. The Company undertakes to deliver promptly, upon any such
verbal or written request, a separate copy of its proxy materials
to a stockholder at a shared address to which a single copy of
these documents was delivered. Stockholders who currently receive
multiple copies of the Company’s proxy materials at their
address and would like to request “householding” of
their communications should contact their broker, bank or other
nominee, or contact the Company at the above address or phone
number.
Other
Matters
At the date of this
Proxy Statement, the Company knows of no other matters, other than
those described above, that will be presented for consideration at
the Annual Meeting. If any other business should come before the
Annual Meeting, it is intended that the proxy holders will vote all
proxies using their best judgment in the interest of the Company
and the stockholders.
REGARDLESS
OF WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING IN
PERSON, PLEASE READ THE ACCOMPANYING PROXY STATEMENT AND THEN
VOTE BY INTERNET, TELEPHONE OR MAIL AS PROMPTLY AS POSSIBLE TO
ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING.
|
|
|
|
|
BY
ORDER OF THE BOARD OF DIRECTORS,
/s/ James
Sapirstein
|
|
Brooklyn, New
York
|
JAMES
SAPIRSTEIN
|
|
November 7
, 2019
|
President, Chief Executive Officer and Director
|
-30-
Appendix
A
AZURRX
BIOPHARMA, INC.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AZURRX BIOPHARMA, INC.
FOR
THE 2019 ANNUAL MEETING OF STOCKHOLDERS
The undersigned
revokes all previous proxies and constitutes and appoints James
Sapirstein and Edward J. Borkowski, and each of them, the true and
lawful agent and proxy with full power of substitution in each, to
represent and to vote on behalf of the undersigned all of the
shares of AzurRx BioPharma, Inc. (the “
Company
”) which the undersigned
is entitled to vote at the Company’s 2019 Annual Meeting of
Stockholders (the “
Annual
Meeting
”), to be held at the offices of Lowenstein
Sandler LLP
located at
One
Lowenstein Drive, Roseland, New Jersey, 07068 on December 19, 2019
at 9:00 A.M. Eastern Time, and at any adjournment(s) or
postponement(s) thereof, upon the following proposals, each of
which are more fully described in the Notice of Annual Meeting of
Stockholders and Proxy Statement for the Annual Meeting (receipt of
which is hereby acknowledged).
This
Proxy Statement when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction is
made, this proxy will be voted
FOR
each director nominee
identified in Proposal No. 1 and
FOR
Proposals No. 2, 3 and 4,
each of which have been proposed by our Board, and at the
discretion of the proxy holder upon other matters as may properly
come before the Annual Meeting.
(continued
and to be signed on reverse side)
|
PROPOSAL NO.
|
|
|
|
|
|
|
|
|
|
1.
ELECTION OF SIX DIRECTOR
NOMINEES, EACH FOR A TERM OF ONE YEAR.
|
|
|
|
|
|
|||
|
NOMINEES
:
|
|
|
FOR
|
|
WITHHELD
|
|
||
|
Edward
J. Borkowski, Chair
|
|
|
☐
|
|
☐
|
|
||
|
Charles
J. Casamento
|
|
|
☐
|
|
☐
|
|
||
|
Alastair
Riddell
|
|
|
☐
|
|
☐
|
|
||
|
Vern
L. Schramm
|
|
|
☐
|
|
☐
|
|
||
|
James
Sapirstein
|
|
|
☐
|
|
☐
|
|
||
|
Johan
M. (Thijs) Spoor
|
|
|
☐
|
|
☐
|
|
||
|
|
|
|
|
|
|
|
|
|
|
2. APPROVAL TO AMEND THE COMPANY’S CHARTER, TO INCREASE
THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK.
|
|
FOR
☐
|
|
AGAINST
☐
|
ABSTAIN
☐
|
|||
|
3.
APPROVAL TO AMEND THE
COMPANY’S CHARTER, TO AUTHORIZE THE BOARD TO EFFECT A REVERSE
STOCK SPLIT, AT THE BOARD’S DISCRETION, AT ANY TIME PRIOR TO
THE ONE YEAR ANNIVERSARY OF THE ANNUAL MEETING.
|
|
FOR
☐
|
|
AGAINST
☐
|
ABSTAIN
☐
|
|||
|
4.
RATIFICATION OF MAZARS USA LLP,
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2019.
|
|
FOR
☐
|
|
AGAINST
☐
|
ABSTAIN
☐
|
|||
☐
I PLAN
TO ATTEND THE ANNUAL MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE.
|
Signature
of Stockholder _______________________ Signature of Stockholder
_________________________
(if held
jointly)
|
|
Dated:
________________________________,
2019
|
Note: This proxy must be signed exactly as the name appears hereon.
When shares are held by joint tenants, both should sign. If the
signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If the signer is a
partnership, please sign in partnership name by authorized
person.
Appendix B
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AZURRX BIOPHARMA, INC.
AzurRx BioPharma, Inc. (the
“
Corporation
”), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
FIRST:
That a resolution was duly adopted on December __,
2019, by the Board of Directors of the Corporation pursuant to
Section 242 of the General Corporation Law of the State of Delaware
setting forth an amendment to the Certificate of Incorporation of
the Corporation and declaring said amendment to be
advisable. The stockholders of the Corporation duly
approved said proposed amendment at the 2019 annual meeting of
stockholders held on December 19, 2019, in accordance with Section
242 of the General Corporation Law of the State of
Delaware. The proposed amendment set forth as
follows:
Article
FOURTH
of the Amended and Restated Certificate of
Incorporation of the Corporation, as amended to date, be and hereby
is amended by deleting the following sentence in the first
paragraph of Article
FOURTH
:
The
total number of shares which the Corporation shall have authority
to issue is one hundred ten million (110,000,000) shares, of which
one hundred million (100,000,000) shares shall be common stock, par
value $0.0001 per share, and ten million (10,000,000) shares shall
be preferred stock, par value $.0.0001 per share.
The first reflected above under the first
paragraph of Article
FOURTH
will be replaced by the
following:
The
total number of shares which the Corporation shall have authority
to issue is one hundred sixty million (160,000,000) shares, of
which one hundred fifty million (150,000,000) shares shall be
common stock, par value $0.0001 per share, and ten million
(10,000,000) shares shall be preferred stock, par value $.0.0001
per share.
SECOND:
That said amendment will have an Effective Time of
5:00 P.M., Eastern Time, on the filing date of this Certificate of
Amendment to the Amended and Restated Certificate of
Incorporation
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President and Chief Executive Officer
this __ day of December, 2019.
|
|
|
|
|
JAMES
SAPIRSTEIN
|
|
|
President and Chief Executive Officer
|
Appendix
C
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AZURRX BIOPHARMA, INC.
AzurRx BioPharma, Inc. (the
“
Corporation
”), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
FIRST:
That a resolution was duly adopted on ____, ____
by the Board of Directors of the Corporation pursuant to Section
242 of the General Corporation Law of the State of Delaware setting
forth an amendment to the Certificate of Incorporation of the
Corporation and declaring said amendment to be
advisable. The stockholders of the Corporation duly
approved said proposed amendment at the 2019 annual meeting of
stockholders held on December 19, 2019, in accordance with Section
242 of the General Corporation Law of the State of
Delaware. The proposed amendment set forth as
follows:
Article
FOURTH
of the Amended and Restated Certificate of
Incorporation of the Corporation, as amended to date, be and hereby
is further amended by inserting the following immediately after the
first paragraph of Article FOURTH:
Upon effectiveness (“
Effective
Time
”) of this amendment
to the Amended and Restated Certificate of Incorporation of the
Corporation, a __ reverse stock split of the Corporation’s
Common Stock shall become effective, pursuant to which each __
share of Common Stock outstanding and held of record by each
stockholder of the Corporation (including treasury shares)
immediately prior to the Effective Time (“
Old Common
Stock”)
shall be
reclassified and split into __ shares of Common Stock automatically
and without any action by the holder thereof upon the Effective
Time and shall represent __ shares of Common Stock from and after
the Effective Time (“
New Common
Stock
”), with a
corresponding reduction in the number of authorized shares of our
Common Stock by a corresponding ratio.
No
fractional shares of Common Stock will be issued in connection with
the reverse stock split. Stockholders of record who otherwise would
be entitled to receive fractional shares, will be entitled to
receive cash (without interest) in lieu of fractional shares, equal
to such fraction multiplied by the average of the closing sales
prices of our Common Stock on the exchange the Corporation is
currently trading during regular trading hours for the five
consecutive trading days immediately preceding the effective date
of the Reverse Split (with such average closing sales prices being
adjusted to give effect to the Reverse Split).
Each
holder of record of a certificate or certificates for one or more
shares of the Old Common Stock shall be entitled to receive as soon
as practicable, upon surrender of such certificate, a certificate
or certificates representing the largest whole number of shares of
New Common Stock to which such holder shall be entitled pursuant to
the provisions of the immediately preceding paragraphs. Any
certificate for one or more shares of the Old Common Stock not so
surrendered shall be deemed to represent one share of the New
Common Stock for each five shares of the Old Common Stock
previously represented by such certificate.
SECOND:
That said amendment will have an Effective Time of
5:00 P.M., Eastern Time, on the filing date of this Certificate of
Amendment to the Amended and Restated Certificate of
Incorporation
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President and Chief Executive Officer
this __ day of
____, ____
.
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JAMES
SAPIRSTEIN
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President and Chief Executive Officer
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TABLE OF CONTENTS