UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-12584

SYNTHETIC BIOLOGICS, INC.

(Exact name of Registrant as Specified in Its Charter)

Nevada	13-3808303
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

9605 Medical Center Drive, Suite 270
Rockville, MD	20850
(Address of Principal Executive Offices)	(Zip Code)

(301) 417-4364

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SYN	NYSE American

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☐

Non-accelerated Filer	☒	Smaller Reporting Company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No ⌧

As of November 3, 2021, the registrant had 132,042,538 shares of common stock, $0.001 par value per share, outstanding.

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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.

Table of Contents

SYNTHETIC BIOLOGICS, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page
	PART I. FINANCIAL INFORMATION	3

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2021 and 2020	4
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Nine Months ended September 30, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2021 and 2020	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

	PART II. OTHER INFORMATION	35

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40

SIGNATURES		41

Table of Contents

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

Current Assets
Cash and cash equivalents	$	72,135	$	6,227
Prepaid expenses and other current assets		1,422		1,707
Total Current Assets		73,557		7,934

Property and equipment, net		115		174

Right of use asset		1,426		279

Deposits and other assets		23		23

Total Assets	$	75,121	$	8,410

Liabilities and Stockholders' Equity (Deficit)

Current Liabilities:
Accounts payable	$	1,255	$	886
Accrued expenses		1,009		925
Accrued employee benefits		721		868
Operating lease liability		175		287
Total Current Liabilities		3,160		2,966

Lease liability - long term		1,401		186

Total Liabilities		4,561		3,152
Commitments and Contingencies
Series A Preferred Stock, $0.001 par value; 10,000,000 shares authorized; 0 and 120,000 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		-		12,798
Stockholders' Equity (Deficit):
Series B Preferred Stock, $1,000 par value; 10,000,000 shares authorized, 0 issued and outstanding and 3,973 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		-		2,477
Common stock, $0.001 par value; 200,000,000 shares authorized, 132,044,866 issued and 132,042,538 outstanding at September 30, 2021 and 29,252,253 issued and 29,249,925 outstanding at December 31, 2020		132		29
Additional paid-in capital		339,223		240,821
Accumulated deficit		(266,021)		(248,094)
Total Synthetic Biologics, Inc. and Subsidiaries Equity (Deficit)		73,334		(4,767)
Non-controlling interest		(2,774)		(2,773)
Total Stockholders' Equity (Deficit)		70,560		(7,540)

Total Liabilities and Stockholders' Equity (Deficit)	$	75,121	$	8,410

See accompanying notes to unaudited condensed consolidated financial statements.

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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:
General and administrative	$	1,303	$	1,197	$	3,988	$	3,876
Research and development		1,972		914		5,021		4,152
Total Operating Costs and Expenses		3,275		2,111		9,009		8,028

Loss from Operations		(3,275)		(2,111)		(9,009)		(8,028)

Other Income:
Interest income		2		-		4		44
Total Other Income		2		-		4		44

Net Loss		(3,273)		(2,111)		(9,005)		(7,984)

Net Loss Attributable to Non-controlling Interest		-		(8)		(1)		(50)

Net Loss Attributable to Synthetic Biologics, Inc. and Subsidiaries	$	(3,273)	$	(2,103)	$	(9,004)	$	(7,934)
Series A Preferred Stock Dividends		-		(64)		(24)		(189)
Effect of Series A Preferred Stock price adjustment		-		-		(7,402)		-
Series B Preferred Stock Dividends		-		(519)		(1,496)		(1,315)

Net Loss Attributable to Common Stockholders	$	(3,273)	$	(2,686)	$	(17,926)	$	(9,438)

Net Loss Per Share - Basic and Dilutive	$	(0.02)	$	(0.14)	$	(0.15)	$	(0.52)

Weighted average number of shares outstanding during the period - Basic and Dilutive		132,042,538		19,398,339		118,448,633		18,302,585

See accompanying notes to unaudited condensed consolidated financial statements.

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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	29,249,925	$	29	3,973	$	2,477	$	240,821	$	(248,094)	$	(2,773)	$	(7,540)

Stock-based compensation	-		-	-		-		101		-		-		101
Stock issued under "at-the-market" offering	78,685,315		79	-		-		65,881		-		-		65,960
Warrants Exercised	11,655,747		12	-		-		8,030		-		-		8,042
Series A Preferred Stock Dividends	-		-	-		-		-		(24)		-		(24)
Effect of Series A Preferred Stock price adjustment	-		-	-		-		7,402		(7,402)		-		-
Conversion of Series A Preferred Stock to Common	8,996,768		9	-		-		12,813		-		-		12,822
Conversion of Series B Preferred Stock to Common	3,454,783		3	(3,973)		(2,477)		3,971		(1,497)		-		-
Net loss	-		-	-		-		-		(2,536)		-		(2,536)
Non-controlling interest	-		-	-		-		-		-		(1)		(1)

Balance at March 31, 2021	132,042,538	$	132	-	$	-	$	339,019	$	(259,553)	$	(2,774)	$	76,824

Stock-based compensation	-		-	-		-		102		-		-		102
Net loss	-		-	-		-		-		(3,195)		-		(3,195)

Balance at June 30, 2021	132,042,538	$	132	-	$	-	$	339,121	$	(262,748)	$	(2,774)	$	73,731

Stock-based compensation	-		-	-		-		102		-		-		102
Net loss	-		-	-		-		-		(3,273)		-		(3,273)

Balance at September 30, 2021	132,042,538	$	132	-	$	-	$	339,223	$	(266,021)	$	(2,774)	$	70,560


	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	16,806,430	$	17	7,638	$	4,761	$	232,580	$	(235,537)	$	(2,878)	$	(1,057)

Stock-based compensation	-		-	-		-		83		-		-		83
Series A Preferred Stock Dividends ($0.01 per share)	-		-	-		-		-		(62)		-		(62)
Issuance of SYN Biomics Stock	-		-	-		-		-		-		26		26
Conversion of Series B Preferred Stock to Common ($0.03 per share)	933,045		1	(1,073)		(669)		1,072		(404)		-		-
Net loss	-		-	-		-		-		(2,964)		-		(2,964)
Non-controlling interest	-		-	-		-		-		-		(26)		(26)

Balance at March 31, 2020	17,739,475	$	18	6,565	$	4,092	$	233,735	$	(238,967)	$	(2,878)	$	(4,000)

Stock-based compensation	-		-	-		-		86		-		-		86
Series A Preferred Stock Dividends ($0.01 per share)	-		-	-		-		-		(63)		-		(63)
Issuance of SYN Biomics Stock	-		-	-		-		-		-		10		10
Conversion of Series B Preferred Stock to Common ($0.03 per share)	904,349		1	(1,040)		(648)		1,039		(392)		-		-
Net loss	-		-	-		-		-		(2,867)		-		(2,867)
Non-controlling interest	-		-	-		-		-		-		(16)		(16)
Balance at June 30, 2020	18,643,824	$	19	5,525	$	3,444	$	234,860	$	(242,289)	$	(2,884)	$	(6,850)

Stock-based compensation	-		-	-		-		82		-		-		82
Series A Preferred Stock Dividends ($0.01 per share)	-		-	-		-		-		(64)		-		(64)
Issuance of SYN Biomics Stock	-		-	-		-		-		-		142		142
Conversion of Series B Preferred Stock to Common ($0.03 per share)	1,199,131		1	(1,379)		(860)		1,378		(519)		-		-
Net loss	-		-	-		-		-		(2,103)		-		(2,103)
Non-controlling interest	-		-	-		-		-		-		(16)		(8)

Balance at September 30, 2020	19,842,955	$	20	4,146	$	2,584	$	236,320	$	(244,975)	$	(2,750)	$	(8,801)

See accompanying notes to unaudited condensed consolidated financial statements.

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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:
Net loss	$	(9,005)	$	(7,984)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		305		251
Subsidiary stock issued to vendor		-		178
Depreciation		74		169
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		285		724
Right of use asset		123		103
Accounts payable		368		(1,324)
Accrued expenses		85		(788)
Accrued employee benefits		(147)		(182)
Operating lease liability		(168)		(183)
Net Cash Used in Operating Activities		(8,080)		(9,036)

Cash Flows from Investing Activities
Purchase of property and equipment		(14)		(4)
Net Cash Used in Investing Activities		(14)		(4)

Cash Flows from Financing Activities
Proceeds from "at the market" stock issuance		65,960		-
Proceeds from issuance of common stock for warrant exercises		8,042		-
Net Cash Provided by Financing Activities		74,002		-

Net increase (decrease) in cash and cash equivalents		65,908		(9,040)

Cash and cash equivalents at the beginning of the period		6,227		15,045

Cash and cash equivalents at the end of the period	$	72,135	$	6,005

Noncash Financing Activities:
Effect of Series A Preferred Stock price adjustment	$	7,402	$	-
Right of use asset from operating lease	$	1,270	$	-
Conversion of Series B Preferred Stock	$	2,477	$	2,177
Deemed dividends for accretion of Series B Preferred Stock discount	$	1,496	$	1,315
In-kind dividends paid in preferred stock	$	24	$	189

See accompanying notes to unaudited condensed consolidated financial statements.

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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.

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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, no impairment charges were recorded during the three and nine months ended September 30, 2021 and 2020.

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.

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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	$	1,182	$	470
Prepaid consulting, subscriptions and other expenses		157		90
Prepaid insurances		83		639
Stock sales receivable		-		469
Prepaid manufacturing expenses		-		39

Total	$	1,422	$	1,707

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		2020
Computers and office equipment	$	827	$	813
Leasehold improvements		94		439
Software		11		11
		932		1,263
Less: accumulated depreciation and amortization		(817)		(1,089)

Total	$	115	$	174

Accrued expenses (in thousands)


	September 30,		December 31,
	2021		2020
Accrued clinical consulting services	$	756	$	700
Accrued vendor payments		253		225

Total	$	1,009	$	925

Accrued employee benefits (in thousands)


	September 30,		December 31,
	2021		2020
Accrued bonus expense	$	543	$	724
Accrued vacation expense		178		144

Total	$	721	$	868

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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 71,429 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. This plan was approved by the stockholders on November 2, 2007. The exercise price of stock options under the 2007 Stock Plan was determined by the compensation committee of the Board of Directors and could be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted. The total number of shares of stock with respect to which stock options and stock appreciation rights may be granted to any one employee of the Company or a subsidiary during any one-year period under the 2007 stock plan shall not exceed 7,143. Options become exercisable over various periods from the date of grant and generally expire ten years after the grant date. As of September 30, 2021, there were 5,145 options issued and outstanding under the 2007 Stock Plan.

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 85,714 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. From time to time the number of shares authorized for options was increased such that 4,000,000 million were authorized as of September 30, 2021. The exercise price of stock options under the 2010 Stock Plan is determined by the compensation committee of the Board of Directors and may be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted. Options become exercisable over various periods from the date of grant and expire between five and ten years after the grant date. As of September 30, 2021, the