First Wave BioPharma Inc

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of First Wave BioPharma, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of First Wave BioPharma, Inc. (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred significant operating losses and negative cash flows from operations since inception. The Company also had an accumulated deficit of approximately $184.3 million at December 31, 2023. Subsequent to December 31, 2023, the Company has raised aggregate gross proceeds of approximately $4.0 million from a March 2024 Registered Direct Offering. The Company is dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute its development plans and continue operations. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform an audit of the Company’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment Assessment

Critical Audit Matter Description

As discussed in Note 2 to the consolidated financial statements, the Company’s goodwill arose as a result of the excess fair value over book value from prior business combinations. Goodwill is tested for impairment at least annually. The determination of the fair value requires management to make significant estimates and assumptions related to forecasts of future revenues and expenses and discount rates.

Considering the significant estimation, judgement, and subjectivity required by management in determining the future cash flows and current fair value of assets, our audit of the impairment assessment of goodwill required a high degree of auditor judgement and subjectivity.

How the Critical Matter Was Addressed in the Audit

Our audit procedures related to the intangible asset impairment included the following, among others:

Equity Classification and Valuation

Critical Audit Matter Description

As discussed in Notes 9, 10, and 11 to the consolidated financial statements, the Company issued convertible preferred stock, options, and warrants. The classification between debt and equity of these instruments requires management to make significant and complex judgements in evaluating the characteristics of these instruments including the redemption features, voting rights, collateral requirements, covenant provisions, creditor and liquidation rights, dividends, conversion rights, and exchange rights. The valuation of these new instruments requires management to make significant estimates and complex judgements in determining the fair value of and relative fair value allocation amongst the original instruments, conversion options, and beneficial conversion features. Considering the significant judgement and estimation required by management in determining the proper classification and valuation of these equity instruments, our audit of the new equity instruments required a high degree of auditor judgement and subjectivity.

How the Critical Matter Was Addressed in the Audit

Our audit procedures related to the equity structures included the following, among others:

/s/Mazars USA LLP

We have served as the Company’s auditor since 2015.

New York, New York

March 29, 2024