UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 |
For the transition period from ____________ to ____________
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☒ | Smaller Reporting Company | |||
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As of November 3, 2021, the registrant had
SYNTHETIC BIOLOGICS, INC.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In particular, statements contained in this Quarterly Report on Form 10-Q, including but not limited to, statements regarding the timing of our clinical trials, the development and commercialization of our pipeline products, the sufficiency of our cash, our ability to finance our operations and business initiatives and obtain funding for such activities and the timing of any such financing, our future results of operations and financial position, business strategy and plan prospects, or costs and objectives of management for future research, development or operations, are forward-looking statements. These forward-looking statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “seeks,” “goals,” “estimates,” “predicts,” “potential” and “continue” or similar words. Readers are cautioned that these forward-looking statements are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below, under Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, and those identified under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 4, 2021. Therefore, actual results may differ materially and adversely from those expressed, projected or implied in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
NOTE REGARDING COMPANY REFERENCES
Throughout this Quarterly Report on Form 10-Q, “Synthetic Biologics,” the “Company,” “we,” “us” and “our” refer to Synthetic Biologics, Inc.
NOTE REGARDING TRADEMARKS
All trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.
SYNTHETIC BIOLOGICS, INC.
FORM 10-Q
TABLE OF CONTENTS
2
PART I–FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Synthetic Biologics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands except share and par value amounts)
| September 30, 2021 |
| December 31, 2020 | |||
Assets |
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Current Assets |
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Cash and cash equivalents | $ | | $ | | ||
Prepaid expenses and other current assets |
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Total Current Assets |
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Property and equipment, net |
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Right of use asset |
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Deposits and other assets |
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Total Assets | $ | | $ | | ||
Liabilities and Stockholders' Equity (Deficit) |
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Current Liabilities: |
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Accounts payable | $ | | $ | | ||
Accrued expenses |
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Accrued employee benefits |
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Operating lease liability |
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Total Current Liabilities |
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Lease liability - long term |
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Total Liabilities |
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Commitments and Contingencies |
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Series A Preferred Stock, $ |
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Stockholders' Equity (Deficit): |
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Series B Preferred Stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Synthetic Biologics, Inc. and Subsidiaries Equity (Deficit) |
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Non-controlling interest |
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Total Stockholders' Equity (Deficit) |
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Total Liabilities and Stockholders' Equity (Deficit) | $ | | $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
3
Synthetic Biologics, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
| For the three months ended September 30, |
| For the nine months ended September 30, | |||||||||
2021 | 2020 | 2021 | 2020 | |||||||||
Operating Costs and Expenses: |
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General and administrative | $ | |
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Research and development |
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Total Operating Costs and Expenses |
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Loss from Operations |
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Other Income: | ||||||||||||
Interest income |
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Total Other Income |
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Net Loss |
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Net Loss Attributable to Non-controlling Interest |
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Net Loss Attributable to Synthetic Biologics, Inc. and Subsidiaries | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Series A Preferred Stock Dividends | | ( | ( | ( | ||||||||
Effect of Series A Preferred Stock price adjustment | | | ( | | ||||||||
Series B Preferred Stock Dividends |
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Net Loss Attributable to Common Stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
- Basic and Dilutive | $ | ( | $ | ( | $ | ( | $ | ( | ||||
of outstanding during the period - Basic and Dilutive |
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See accompanying notes to unaudited condensed consolidated financial statements.
4
Synthetic Biologics, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders Equity (Deficit)
(In thousands, except share and par value amounts)
Common Stock $0.001 Par Value | Series B Preferred | Accumulated | Non-Controlling | Total Stockholders’ | ||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| APIC |
| Deficit |
| Interest |
| Deficit | |||||||
Balance at December 31, 2020 |
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Stock-based compensation |
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Stock issued under "at-the-market" offering |
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Warrants Exercised |
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Series A Preferred Stock Dividends |
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Effect of Series A Preferred Stock price adjustment |
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Conversion of Series A Preferred Stock to Common |
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Conversion of Series B Preferred Stock to Common | | | ( | ( | | ( | | | ||||||||||||||
Net loss | | | | | | ( | | ( | ||||||||||||||
Non-controlling interest | | | | | | | ( | ( | ||||||||||||||
Balance at March 31, 2021 | | $ | |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||||
Stock-based compensation | | | | | | | | | ||||||||||||||
Net loss | | | | | | ( | | ( | ||||||||||||||
Balance at June 30, 2021 | | $ | |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||||
Stock-based compensation | | | | | | | | | ||||||||||||||
Net loss | | | | | | ( | | ( | ||||||||||||||
Balance at September 30, 2021 | | $ | | | $ | | $ | | $ | ( | $ | ( | $ | |
Common Stock $0.001 Par Value | Series B Preferred | Accumulated | Non-Controlling | Total Stockholders’ | ||||||||||||||||||
Shares |
| Amount | Shares |
| Amount | APIC | Equity | Interest | Deficit | |||||||||||||
Balance at December 31, 2019 | | $ | | | $ | | $ | | $ | ( | $ | ( | $ | ( | ||||||||
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Stock-based compensation | | | | | | | | | ||||||||||||||
Series A Preferred Stock Dividends ($ | | | | | | ( | | ( | ||||||||||||||
Issuance of SYN Biomics Stock | | | | | | | | | ||||||||||||||
Conversion of Series B Preferred Stock to Common ($ | | | ( | ( | | ( | | | ||||||||||||||
Net loss | | | | | | ( | | ( | ||||||||||||||
Non-controlling interest | | | | | | | ( | ( | ||||||||||||||
Balance at March 31, 2020 | |
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Stock-based compensation | | | | | | | | | ||||||||||||||
Series A Preferred Stock Dividends ($ | | | | | | ( | | ( | ||||||||||||||
Issuance of SYN Biomics Stock | | | | | | | | | ||||||||||||||
Conversion of Series B Preferred Stock to Common ($ | | | ( | ( | | ( | | | ||||||||||||||
Net loss | | | | | | ( | | ( | ||||||||||||||
Non-controlling interest | | | | | | | ( | ( | ||||||||||||||
Balance at June 30, 2020 |
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| $ | ( |
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Stock-based compensation | | | | | | | | | ||||||||||||||
Series A Preferred Stock Dividends ($ | | | | | | ( | | ( | ||||||||||||||
Issuance of SYN Biomics Stock | | | | | | | | | ||||||||||||||
Conversion of Series B Preferred Stock to Common ($ | | | ( | ( | | ( | | | ||||||||||||||
Net loss | | | | | | ( | | ( | ||||||||||||||
Non-controlling interest | | | | | | | ( | ( | ||||||||||||||
Balance at September 30, 2020 |
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See accompanying notes to unaudited condensed consolidated financial statements.
5
Synthetic Biologics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
For the Nine Months Ended September 30, | ||||||
| 2021 |
| 2020 | |||
Cash Flows from Operating Activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Subsidiary stock issued to vendor | |
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Depreciation |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Right of use asset |
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Accounts payable |
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Accrued expenses |
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Accrued employee benefits |
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Operating lease liability |
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Net Cash Used in Operating Activities |
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Cash Flows from Investing Activities |
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Purchase of property and equipment | ( | ( | ||||
Net Cash Used in Investing Activities | ( | ( | ||||
Cash Flows from Financing Activities |
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Proceeds from "at the market" stock issuance |
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Proceeds from issuance of common stock for warrant exercises | | | ||||
Net Cash Provided by Financing Activities | | | ||||
Net increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents at the beginning of the period |
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Cash and cash equivalents at the end of the period | $ | | $ | | ||
Noncash Financing Activities: |
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Effect of Series A Preferred Stock price adjustment | $ | | $ | | ||
Right of use asset from operating lease | $ | | $ | |||
Conversion of Series B Preferred Stock | $ | | $ | | ||
Deemed dividends for accretion of Series B Preferred Stock discount | $ | | $ | | ||
In-kind dividends paid in preferred stock | $ | | $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
6
Synthetic Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization, Nature of Operations and Basis of Presentation
Description of Business
Synthetic Biologics, Inc. (the “Company” or “Synthetic Biologics”) is a diversified clinical-stage company developing therapeutics designed to prevent and treat gastrointestinal (GI) diseases in areas of high unmet need. The Company’s lead clinical development candidates are: (1) SYN-004 (ribaxamase) which is designed to degrade certain commonly used intravenous (IV) beta-lactam antibiotics within the gastrointestinal (GI) tract to prevent (a) microbiome damage, (b) Clostridioides difficile infection (CDI), (c) overgrowth of pathogenic organisms, (d) the emergence of antimicrobial resistance (AMR) and (e) acute graft-versus-host-disease (aGVHD) in allogeneic hematopoietic cell transplant (HCT) recipients, and (2) SYN-020, a recombinant oral formulation of the enzyme intestinal alkaline phosphatase (IAP) produced under Current Good Manufacturing Practice (cGMP) conditions and intended to treat both local GI and systemic diseases.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, comprised of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position and cash flows. The operating results for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2020 Form 10-K.
The condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the amounts of assets and liabilities at the reporting date and the amounts of revenue and expenses in the periods presented. The Company believes that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual results may differ from the original estimates, requiring adjustments to these balances in future periods.
Recent Accounting Pronouncements and Developments
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2023 and interim periods within those annual periods and early adoption is permitted in annual reporting periods ending after December 15, 2020. The Company is currently assessing the impact of ASU 2020-06 on its consolidated financial statements.
7
Synthetic Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
1. Organization, Nature of Operations and Basis of Presentation – (continued)
Impairment of Long-Lived Assets
Long-lived assets include property, equipment and right-of-use assets. In accordance with ASC 360, Property, Plant and Equipment (“ASC 360”), management reviews the Company’s long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as whether there is reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset. During the three months ended March 31, 2020, the Company identified a new strain of coronavirus originating in Wuhan, China (the “COVID-19” outbreak) as a triggering event and performed a qualitative assessment of the fair value of its long-lived assets. The results from this analysis determined that it is still more likely than not that the fair value of its long-lived assets remain higher than the carrying value of these assets. As a result,
2. Fair Value of Financial Instruments
Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement, defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are rated on a three-tier hierarchy as follows:
● | Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active markets; |
● | Level 2 inputs: Inputs, other than quoted prices, included in Level 1 that are observable either directly or indirectly; and |
● | Level 3 inputs: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. |
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.
The carrying amounts of the Company’s short-term financial instruments, including cash and cash equivalents, other current assets, accounts payable and accrued liabilities approximate fair value due to the relatively short period to maturity for these instruments.
8
Synthetic Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
3. Selected Balance Sheet Information
Prepaid expenses and other current assets (in thousands)
September 30, | December 31, | |||||
| 2021 |
| 2020 | |||
Prepaid clinical research organizations | $ | | $ | | ||
Prepaid consulting, subscriptions and other expenses | | | ||||
Prepaid insurances | | | ||||
Stock sales receivable |
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Prepaid manufacturing expenses |
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Total | $ | | $ | |
Prepaid clinical research organizations (“CROs”) expense is classified as a current asset. The Company makes payments to the CROs based on agreed upon terms that include payments in advance of study services.
Property and equipment, net (in thousands)
| September 30, | December 31, | ||||
2021 |
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Computers and office equipment | $ | | $ | | ||
Leasehold improvements |
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Software |
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Less: accumulated depreciation and amortization |
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Total | $ | | $ | |
Accrued expenses (in thousands)
| September 30, | December 31, | ||||
2021 |
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Accrued clinical consulting services | $ | | $ | | ||
Accrued vendor payments |
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Total | $ | | $ | |
Accrued employee benefits (in thousands)
| September 30, | December 31, | ||||
2021 |
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Accrued bonus expense | $ | | $ | | ||
Accrued vacation expense |
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Total | $ | | $ | |
9
Synthetic Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
4. Stock-Based Compensation
Stock Incentive Plans
On March 20, 2007, the Company’s Board of Directors approved the 2007 Stock Incentive Plan (the “2007 Stock Plan”) for the issuance of up to
On November 2, 2010, the Board of Directors and stockholders adopted the 2010 Stock Incentive Plan (“2010 Stock Plan”) for the issuance of up to