AZRX AzurRx BioPharma Inc

On July 29, 2022, First Wave BioPharma, Inc., a Delaware corporation (“the Company”), entered into a binding term sheet (the “Term Sheet”) with Fortis Advisors LLC, the hired representative (in such capacity, the “Representative”) of the former stockholders of First Wave Bio, Inc. (“FWB”), which is intended to settle the previously disclosed complaint filed by the Representative against the Company in the Court of Chancery in the State of Delaware (the “FWB Action”) and to restructure the Company’s obligations to the former FWB shareholders.

Under the Term Sheet, the Company agreed to pay the former stockholders of FWB $1.5 million in cash on the date of the Term Sheet (the “Upfront Payment”). The Company also agreed to pay the former stockholders of FWB an additional $1.0 million in cash no later than September 29, 2022 (the “Second Payment”) and to pay the former stockholders of FWB an additional $2.0 million on the earlier of November 30, 2022 and the completion by the Company of one or more qualifying equity offerings (collectively with the Upfront Payment and the Second Payment, the “Payments”).

Under the Term Sheet, the former stockholders of FWB are entitled to receive future cash payments conditioned on the achievement of certain development milestones for adrulipase and to a percentage of any consideration received by the Company in the event of a license or sale of adrulipase, subject to a cap. The former stockholders of FWB are also entitled receive a percentage of the consideration received by the Company in the event of a license or sale of niclosamide and will retain their existing milestone payment rights with respect to niclosamide. In the event that the consideration received by the Company in connection with the sale or license of adrulipase or niclosamide consists of securities or other non-cash consideration, the Representative will have the right to elect either to receive payment for the former stockholders of FWB in such form of consideration or to cause the licensee or acquirer to assume the obligations described in this paragraph.

In the event of a “Company Sale” (as defined in the Term Sheet), the former stockholders of FWB are entitled to receive a pro rata share of the total consideration received by the Company or its stockholders up to $4.0 million (plus any unpaid Payments whether or not then due) based on a formula set forth in the Term Sheet. Additionally, in the event of a “Company Sale”, if any of the milestone payments described in the preceding paragraph have not yet occurred or been paid, the obligations of the Company to make such payments upon the subsequent occurrence of such milestone events will survive the “Company Sale” and will be assumed by any successor, acquirer or surviving company in such “Company Sale”. In certain circumstances, the former stockholders of FWB have the right to treat a “Company Sale” as a sale of ardulipase or niclosamide, as applicable, and to treat the Company Sale as a sale of the related asset and the former stockholders of FWB are to receive the consideration with respect thereto described in the preceding paragraph.

In the Term Sheet, the Representative has agreed to stay the FWB Action for a period of 90 days and to eliminate the Company’s obligation to pay a portion of any offering proceeds to the former stockholders of FWB. In addition, the Company’s obligation to use commercially reasonable efforts to develop niclosamide will be deferred for a period of 24 months from the date of the Term Sheet. Effective upon the payment of the Second Payment, the Representative has agreed to dismiss the FWB Action with prejudice and to extinguish the approximately $12.5 million of fixed payment obligations currently owed to the former FWB shareholders.

In the Term Sheet the Company and the Representative have also agreed to enter into a formal settlement agreement embodying the terms described above and containing mutual releases and other customary terms that will become effective upon the payment of the Second Payment. In addition, certain related parties of Fortis will agree to vote their shares of Company common stock for a reverse stock split intended to enable the Company to comply with Nasdaq’s minimum $1.00 bid price requirement.

The foregoing description of the Term Sheet is a summary only, does not purport to be complete and is qualified in its entirely by reference to the full text of the Term Sheet filed herewith as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.