BSTG Biostage Inc (QB)

On April 4, 2018, Biostage, Inc. (the “Company”) received a notification from KPMG LLP (“KPMG”), which is currently serving as the Company’s independent auditors, stating that KPMG will not be standing for reelection and was resigning, effective upon the completion of their review procedures of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. The decision to change accountants was not recommended by the audit committee of the board of directors.

During the two fiscal years ended December 31, 2017, and the subsequent interim period through April 4, 2018 there were no (1) disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of KPMG, would have caused it to make reference to the subject matter of the disagreements in connection with its reports, or (2) "reportable events" as such term is defined in Item 304(a)(1)(v) of Regulation S-K.

KPMG’s audit reports on the Company’s consolidated financial statements for the fiscal years ended December 31, 2017 or 2016 did not contain an adverse opinion or a disclaimer of opinion, nor was any such report qualified or modified as to uncertainty, audit scope or accounting principles except as follows:

KPMG’s audit reports on the consolidated financial statements of Biostage, Inc. and subsidiaries as of and for the years ended December 31, 2017 and 2016, contained a separate paragraph stating that “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 suffered recurring losses from operations and will require additional financing to fund future operations which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.”

The Company has provided KPMG with a copy of the disclosure set forth in this Item 4.01 and has requested that KPMG furnish the Company with a letter addressed to the SEC stating whether or not it agrees with the statements made herein, each as required by applicable SEC rules. A copy of KPMG's letter, dated April 6, 2018, confirming KPMG's agreement with these statements, is attached as Exhibit 16.1 to this Current Report on Form 8-K.

While the Company has not engaged a new independent accounting firm, it has begun a search process to identify KPMG’s successor. The Company will disclose its engagement of a new independent accounting firm once the process has been completed as required by SEC rules.