What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-10 compared with 2020-08-06 · 418 added, 426 removed, 539 unchanged (61% of the section changed)

2 unchanged sentences

and Subsidiaries

Condensed Consolidated

Balance Sheets

Condensed Consolidated Balance Sheets

(In thousands except share and par value

June 30, 2020

December 31, 2019

September 30,

Current Assets

21 unchanged sentences

Common Stock, $0.001 par value;

200,000,000 shares authorized, 18,646,152 and 16,808,758 issued and 18,643,824 and

16,806,430 outstanding

200,000,000 shares authorized, 19,845,283 and 16,808,758 issued and 19,842,955 and 16,806,430 outstanding

Additional paid-in capital

9 unchanged sentences

and Subsidiaries

Condensed Consolidated

Statements of Operations

Condensed Consolidated Statements of

(In thousands, except share and per share

For the three months ended June,

For the six months ended June 30,

For the three months

ended September 30,

For the nine months

ended September 30,

Operating Costs and Expenses:

13 unchanged sentences

Net Loss Per Share - Basic and Dilutive

Weighted average number of shares outstanding during the

period - Basic and Dilutive

Weighted average number of shares outstanding during the period - Basic and Dilutive

See accompanying notes to unaudited condensed

consolidated financial statements.

Synthetic Biologics, Inc.

Synthetic Biologics,

and Subsidiaries

2 unchanged sentences

(In thousands, except share and par value

Stock $0.001 Par Value

Stockholders'

Equity (Deficit)

Balance at December 31, 2019

2 unchanged sentences

Issuance of SYN Biomics Stock

Conversion of Series B Preferred Stock to Common

($0.03 per share)

of Series B Preferred Stock to Common ($0.03 per share)

Non-controlling interest

7 unchanged sentences

Balance at June 30, 2020

Stock $0.001 Par Value

Stockholders'

Balance at December 31, 2018

Stock-based compensation

4 unchanged sentences

Non-controlling interest

Balance at September 30,

Stockholders'

Equity (Deficit)

Balance at December 31, 2018

Stock-based compensation

Series A Preferred Stock Dividends ($0.01 per share)

Issuance of SYN Biomics Stock

of Series B Preferred Stock to Common ($0.03 per share)

Non-controlling interest

Balance at March 31, 2019

6 unchanged sentences

Balance at June 30, 2019

Stock-based compensation

Series A Preferred Stock Dividends ($0.01 per share)

Issuance of SYN Biomics Stock

Conversion of Series B Preferred Stock to Common

($0.03 per share)

Non-controlling interest

Balance at September 30,

See accompanying notes to unaudited condensed

2 unchanged sentences

and Subsidiaries

Condensed Consolidated

Statements of Cash Flows

Condensed Consolidated Statements of

(In thousands)

For the Six Months Ended June 30,

For the nine months

ended September 30,

Cash Flows From Operating Activities:

10 unchanged sentences

Net Cash Used In Operating Activities

Net Cash From Investing Activities

Cash Flows From Investing Activities

Purchase of property and equipment

Net Cash Used In Investing Activities

Net Cash From Financing Activities

6 unchanged sentences

In-kind dividends paid in preferred stock

Right or use asset from operating lease

Right of use asset from operating lease

See accompanying notes to unaudited condensed

2 unchanged sentences

and Subsidiaries

Notes to Condensed

Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Organization, Nature of Operations and Basis of Presentation

1 unchanged sentence

Synthetic Biologics, Inc.

(the “Company”

or “Synthetic Biologics”) is a diversified clinical-stage company leveraging the microbiome to develop therapeutics

designed to prevent and treat gastrointestinal (GI) diseases in areas of high unmet need.

The Company’s lead 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-010 which is intended to reduce the impact of methane-producing

organisms in the gut microbiome to treat an underlying cause of irritable bowel syndrome with constipation (IBS-C).

is also advancing SYN-020, an oral formulation of the enzyme intestinal alkaline phosphatase (IAP) to treat both local GI

and systemic diseases.

(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:

(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 cGMP conditions and intended to treat both local GI and systemic diseases.

The Company was also developing SYN-010

to reduce the impact of methane-producing organisms in the gut microbiome to treat an underlying cause of irritable bowel syndrome

with constipation (IBS-C).

On September 30, 2020, Cedars Sinai Medical Center’s (CSMC) (the Company’s SYN-010 clinical

development partner) informed the Company that it agreed to discontinue the ongoing Phase 2b investigator-sponsored clinical study

of SYN-010 IBS-C patients.

Based on the results of a planned interim futility analysis, it was concluded that although SYN-010

was well tolerated, it was unlikely to meet its primary endpoint by the time enrollment is completed.

Basis of Presentation

12 unchanged sentences

and notes thereto included in the Company’s 2019 Form 10-K.

The interim results for the three and six months ended June 30,

The interim results for the three and nine months ended September

30, 2020 are not necessarily indicative of results for the full year.

10 unchanged sentences

and Developments

On January 30, 2020, the World Health

Organization (WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the

COVID-19 outbreak) and the risks to the international community as the virus spreads globally beyond its point of origin.

2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

In August 2020, the FASB issued Accounting

Standards Update 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

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 EPS 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 our consolidated financial

On January 30, 2020, the World Health Organization

(WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the COVID-19 outbreak

or “COVID-19”) and the risks to the international community as the virus spreads globally beyond its point of origin.

In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

On March 27, 2020, the Coronavirus Aid,

6 unchanged sentences

enacted Tax Cuts and Jobs Act.

The Company has assessed the impact of the CARES Act and based upon our initial assessment, we do

not believe that it will have a significant effect on our financial position, results of operations or cash flows.

The Company has assessed the impact of the CARES Act and, based upon our initial assessment, we

do not believe that it will have a significant effect on our financial position, results of operations or cash flows.

continues to evaluate its impact as new information becomes available.

3 unchanged sentences

Impairment of Long-Lived Assets

Long-lived assets include property,

equipment and right-of-use assets.

In accordance with Accounting Standards Codification (“ASC”) 360 - Property,

Plant and Equipment (“ASC 360”), management reviews the Company’s recorded 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 fair value and the carrying value of the

The Company identified COVID-19 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 six months ended June 30, 2020.

Long-lived assets include property, equipment

and right-of-use assets.

In accordance with Accounting Standards Codification (“ASC”) 360 - Property, Plant and

Equipment (“ASC 360”), management reviews the Company’s recorded 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.

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 fair value and the carrying value of the asset.

During the quarter ending March 31, 2020

the Company identified COVID-19 as a triggering event and performed a qualitative assessment of the fair value of its long-lived

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, 2020.

Going Concern

2 unchanged sentences

The Company continues to incur losses and,

as of June 30, 2020, the Company had an accumulated deficit of approximately $242.3 million.

Since inception, the Company has financed

its activities principally from the proceeds from the issuance of equity securities.

The Company’s ability to continue

as a going concern is dependent upon the Company’s ability to raise additional debt and equity capital.

There can be no assurance

that such capital will be available in sufficient amounts or on terms acceptable to the Company.

These factors raise substantial

doubt about the Company’s ability to continue as a going concern.

The accompanying consolidated financial statements do not

include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be

necessary should the Company be unable to continue as a going concern.

The Company does not have sufficient capital to fund its operations

for the next twelve months following the issuance date of its Quarterly Report on Form 10-Q.

In order to address its capital needs,

including its planned clinical trials, the Company is actively pursuing additional equity or debt financing in the form of either

a private placement or a public offering.

The Company has been in ongoing discussions with strategic institutional investors and

investment banks with respect to such possible offerings.

Such additional financing opportunities might not be available to the

Company when and if needed, on acceptable terms or at all.

If the Company is unable to obtain additional financing in sufficient

amounts or on acceptable terms under such circumstances, the Company’s operating results and prospects will be adversely

as of September 30, 2020, the Company had an accumulated deficit of approximately $245 million.

Since inception, the Company has

financed its activities primarily from the proceeds from the issuance of equity securities.

The Company does not have sufficient capital

to fund its operations for the next twelve months following the issuance date of its Quarterly Report on Form 10-Q.

The Company’s

ability to continue as a going concern, address its capital needs, and execute the required clinical trials, is therefore dependent

upon the Company’s ability to obtain capital through the issuance of debt and/or additional equity offerings.

is actively pursuing additional equity or debt financing in the form of either a private placement or a public offering and the

Company continues ongoing discussions with strategic institutional investors and investment banks with respect to such possible

Included in these options is utilizing the “at-the-market”

Issuance Sales Agreement (the “FBR Sales

Agreement”) that the Company entered into with B.

Riley Securities (formerly FBR Capital Markets & Co.) in August 2016.

Nonetheless, there can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to the

Company when and if needed or that the Company will meet the requirements for use of the FBR Sales Agreement.

If the Company is unable to obtain additional

financing in sufficient amounts or on acceptable terms under such circumstances, the Company’s operating results and prospects

will be adversely affected.

These factors individually and collectively, including the Company’s dependence on its ability

to raise additional capital to fund its operations for the next twelve months following the issuance date of these financial statements

raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying consolidated financial

statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities

that may be necessary should the Company be unable to continue as a going concern.

In January 2020, the World Health Organization

declared a global pandemic for the novel strain of coronavirus, COVID-19.

Since then, the COVID-19 coronavirus has spread to multiple

countries, including throughout the United States.

As the COVID-19 coronavirus continues to spread around the globe, the Company

has experienced disruptions that impact our business and clinical trials, including temporarily halting the enrollment of new patients

in its SYN-010 Phase 2b clinical study and the postponement of clinical site initiation for its SYN-004 Phase 1b/2a clinical study.

While the Company is experiencing limited financial impacts at this time, given the global economic slowdown, the overall disruption

of global healthcare systems and the other risks and uncertainties associated with the pandemic, the Company’s business,

financial condition, results of operations and growth prospects could be materially adversely affected.

With the recent and rapidly

evolving impact of COVID-19 on patient recruitment in clinical trials and considering patient safety and trial integrity, initiation

of the Company’s Phase 1b/2a clinical study of SYN-004 to be conducted by Washington University in Allogeneic HCT Recipients

has been postponed until Q1 2021, subject to COVID-19 global pandemic.

Enrollment of new patients in the Company’s Phase

2b clinical study of SYN-010 was temporarily halted during the first and second quarter of 2020 due to the COVID-19 pandemic and

has since recommenced.

However, the ability to continue to recruit new patients into this clinical trial remains at the discretion

of CSMC and contingent upon the COVID-19 global pandemic.

At June 30, 2020, the Company had cash

and cash equivalents of approximately $8.1 million.

As a result of the global COVID-19 pandemic, management has been able to extend

its cash runway since its clinical development partners (Cedars-Sinai Medical Center (CSMC) and Washington University) continued

to limit non-essential activities during the second quarter, which included the halting of enrollment in the ongoing Phase 2b

clinical trial of SYN-010 and postponement of the planned Phase 1b/2a clinical trial of SYN-004 (ribaxamase).

The Company anticipates

its current cash will allow it to cover overhead costs, manufacturing costs for clinical supply, commercial scale up costs and

limited research efforts, including completing its funding requirements for its ongoing Phase 2b investigator-sponsored clinical

study of SYN-010 and its planned Phase 1b/2a clinical study of SYN-004 in allogeneic HCT recipients.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Going Concern – (continued)

Since then, COVID-19 has spread to the United States

and countries worldwide.

As COVID-19 continues to spread around the globe, the Company has experienced disruptions that impact

our business and clinical trials, including the temporary halt of the enrollment of new patients in its SYN-010 Phase 2b clinical

study during the quarter ended June 30, 2020_and the postponement of clinical site initiation for its SYN-004 Phase 1b/2a clinical

While the Company has experienced limited financial impact at this time, given the global economic slowdown, the overall

disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, the Company’s

business, financial condition, results of operations and growth prospects could be materially adversely affected, including its

ability to raise capital.

To maximize patient participation and safeguard the trial’s integrity and patient safety, initiation

of the Company’s Phase 1b/2a clinical study of SYN-004 to be conducted by Washington University in Allogeneic HCT Recipients

is deferred until Q1 2021, pandemic conditions permitting.

At September 30, 2020, the Company had

cash and cash equivalents of approximately $6.0 million.

Management has been able to extend its cash runway since its clinical

development partners CSMC and Washington University continued to limit non-essential activities during the third quarter, which

included the SYN-010 Phase 2b clinical study and SYN-004 Phase 1b/2a clinical study.

The Company anticipates its current cash will

allow it to cover overhead costs, manufacturing costs for clinical supply, commercial scale up costs and limited research efforts,

including funding requirements to initiate its planned Phase 1b/2a clinical study of SYN-004 in allogeneic HCT recipients and Phase

1-enabling assay development and manufacturing of drug supply in support of the planned Phase 1 single ascending dose (SAD) study

of SYN-020 intestinal alkaline phosphatase (IAP).

The Company does not anticipate any additional

expense related to the Phase 1b/2a SYN-004 (ribaxamase) clinical trial until the trial is cleared for commencement by Washington

Commencement of planned future Phase 3 clinical trials of SYN-004 and SYN-010 are subject to the Company’s successful

pursuit of opportunities that will allow it to establish the clinical infrastructure and financial resources necessary to successfully

initiate and complete its plan.

The Company will be required to obtain additional funding in order to continue the development

of its current product candidates beyond its Phase 2b investigator-sponsored clinical study of SYN-010 and its planned Phase 1b/2a

clinical study of SYN-004 in allogeneic HCT recipients within the anticipated time periods, if at all, and to continue to fund operations

at the current cash expenditure levels.

Currently, the Company does not have commitments from any third parties to provide it with

If the Company fails to obtain additional funding for its clinical trials, whether through the sale of securities or a

partner or collaborator, and otherwise when needed, it will not be able to fully execute its business plan as planned and will

be forced to cease certain development activities until funding is received and its business will suffer, which would have a material

adverse effect on its financial position, results of operations and cash flows.

Potential sources of financing include strategic

relationships, public or private sales of equity (including through the “at-the-market” Issuance Sales Agreement (the

“FBR Sales Agreement”) that the Company entered into with FBR Capital Markets & Co.

in August 2016) or debt and

other sources.

The Company cannot assure that it will meet the requirements for use of the FBR Sales Agreement or that additional

funding will be available on favorable terms, or at all.

Current cash is expected to cover overhead costs, manufacturing costs

for clinical supply, commercial scale up costs and limited research efforts.

University (expected Q1 2021).

Commencement of the FDA-agreed Phase 3 clinical trial of SYN-004 for the prevention of C.

infection in the future is subject to the Company’s successful pursuit of opportunities that will allow it to establish the

clinical infrastructure and financial resources necessary to successfully initiate and complete its plan.

The Company will be required

to obtain additional funding in order to continue the development of its current product candidates beyond its planned Phase 1b/2a

clinical study of SYN-004 in allogeneic HCT recipients, its planned Phase 1 SAD study of SYN-020 IAP in healthy volunteers, and

to continue to fund operations at the current cash expenditure levels.

Currently, the Company does not have commitments from any

third parties to provide it with capital.

If the Company fails to obtain additional funding for its clinical trials, it will not

be able to fully execute its business plan as planned and will be forced to cease certain development activities until funding

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial

Going Concern –

Further, on September 30, 2020, the Company

and CSMC agreed to discontinue the ongoing Phase 2b investigator -sponsored clinical study of SYN-010 following the results

of a planned interim futility analysis.

Although it was concluded that SYN-010 was well tolerated, it was also concluded that SYN-010

is unlikely to meet its primary endpoint by the time enrollment is completed.

The Company anticipates additional reductions in

clinical development expense during the remainder of 2020 as a result of the discontinuation of this clinical program.

The actual amount of funds the Company will need to operate

7 unchanged sentences

its ability to maintain current research and development licensing arrangements and to establish new research and development and licensing arrangements;

its ability to achieve our milestones under licensing arrangements;

the costs associated with manufacturing-related services to produce material for use in our clinical trials;

its ability to achieve milestones under licensing arrangements;

the costs associated with manufacturing-related services to produce material for use in clinical trials;

the costs involved in prosecuting and enforcing patent claims and other intellectual property rights;

13 unchanged sentences

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Fair Value of Financial Instruments

8 unchanged sentences

Level 2 inputs:

Inputs, other than quoted prices, included in Level 1 that are observable either directly or indirectly;

Inputs, other than quoted prices, that are observable either directly or indirectly;

Level 3 inputs:

8 unchanged sentences

Cash and cash equivalents include money

market accounts of $114,000 as of June 30, 2020 and $98,000 as of December 31, 2019 that are measured using Level 1 inputs.

The Company uses Monte Carlo simulations

to estimate the fair value of its stock warrants.

In using this model, the fair value is determined by applying Level 3 inputs

for which there is little or no observable market data, requiring the Company to develop its own assumptions.

The assumptions used

in calculating the estimated fair value of the warrants represent the Company’s best estimates;

however, these estimates

involve inherent uncertainties and the application of management judgment.

As a result, if factors change and different assumptions

are used, the warrant liability and the change in estimated fair value could be materially different.

In 2020 and 2019, the Monte Carlo simulations were not used as the value of the warrants were deemed to

be minimal based on the historical fair value of the warrants and the Company’s current stock price.

market accounts of $114,000 as of September 30, 2020 and $98,000 as of December 31, 2019 that are measured using Level 1 inputs.

Selected Balance Sheet Information

1 unchanged sentence

(in thousands)

September 30,

Prepaid clinical research organizations

Prepaid consulting, subscriptions and other expenses

Prepaid insurances

Prepaid manufacturing expenses

Prepaid consulting, subscriptions and other expenses

Prepaid conferences, travel

Prepaid conferences, travel and other expenses

Other receivables

Amounts prepaid to clinical research organizations

(CROs) are classified as current assets.

The Company makes payments to the CROs based on agreed upon terms that include payments

in advance of study services.

Amounts prepaid to clinical research organizations (CROs) were

classified as current assets.

The Company makes payments to the CROs based on agreed upon terms that include payments in advance

of study services.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Selected Balance Sheet Information

1 unchanged sentence

Property and equipment, net (in thousands)

September 30,

Computers and office equipment

2 unchanged sentences

Accrued expenses (in thousands)

September 30,

Accrued clinical consulting services

3 unchanged sentences

Accrued employee benefits (in thousands)

Accrued severance expense

September 30,

Accrued bonus expense

2 unchanged sentences

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

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

3 unchanged sentences

price of stock options under the 2007 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.

number of shares of stock with respect to which stock options and stock appreciation rights may be granted to any one employee

2 unchanged sentences

over various periods from the date of grant, and generally expire ten years after the grant date.

As of June 30, 2020, there were

7,052 options issued and outstanding under the 2007 Stock Plan.

As of September 30, 2020, there

were 7,052 options issued and outstanding under the 2007 Stock Plan.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Stock-Based Compensation – (continued)

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

2 unchanged sentences

On October 22, 2013, the stockholders approved and adopted an amendment to

the Company’s 2010 Stock Plan to increase the number of shares of the Company’s Common Stock reserved for issuance

under the Plan from 85,714 to 171,429.

On May 15, 2015, the stockholders approved

and adopted an amendment to the Company’s 2010 Stock Plan to increase the number of shares of the Company’s Common

Stock reserved for issuance under the Plan from 171,429 to 228,572.

On August 25, 2016, the stockholders approved and adopted an

amendment to the 2010 Stock Plan to increase the number of shares of the Company’s Common Stock reserved for issuance under

the 2010 Stock Plan from 228,572 to 400,000.

On September 7, 2017, the stockholders approved and adopted an amendment to the 2010

Stock Plan to increase the number of shares of the Company’s Common Stock reserved for issuance under the 2010 Stock Plan

from 400,000 to 500,000.

On September 24, 2018, the stockholders approved and adopted an amendment to the 2010 Stock Plan to increase

the number of shares of the Company’s Common Stock reserved for issuance under the 2010 Stock Plan from 500,000 to 1,000,000.

On September 5, 2019, the stockholders approved and adopted an amendment to the 2010 Stock Plan to increase the number of shares

of the Common Stock reserved for issuance under the 2010 Stock Plan from 1,000,000 to 4,000,000.

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 June 30, 2020, there

were 2,465,310 options issued and outstanding under the 2010 Stock Plan.

On May 15, 2015, the stockholders approved and adopted an amendment to the Company’s

2010 Stock Plan to increase the number of shares of the Company’s Common Stock reserved for issuance under the Plan from

171,429 to 228,572.

On August 25, 2016, the stockholders approved and adopted an amendment to the 2010 Stock Plan to increase the

number of shares of the Company’s Common Stock reserved for issuance under the 2010 Stock Plan from 228,572 to 400,000.

September 7, 2017, the stockholders approved and adopted an amendment to the 2010 Stock Plan to increase the number of shares of

the Company’s Common Stock reserved for issuance under the 2010 Stock Plan from 400,000 to 500,000.

On September 24, 2018,

the stockholders approved and adopted an amendment to the 2010 Stock Plan to increase the number of shares of the Company’s

Common Stock reserved for issuance under the 2010 Stock Plan from 500,000 to 1,000,000.

On September 5, 2019, the stockholders

approved and adopted an amendment to the 2010 Stock Plan to increase the number of shares of the Common Stock reserved for issuance

under the 2010 Stock Plan from 1,000,000 to 4,000,000.

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, 2020, there were 2,453,273 options issued and outstanding

under the 2010 Stock Plan.

On September 17, 2020, the stockholders

approved and adopted the 2020 Stock Incentive Plan (“2020 Stock Plan”) for the issuance of up to 4,000,000 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.

As of September 30, 2020, there were no options issued and outstanding under the 2020 Stock

In the event of an employee’s termination,

8 unchanged sentences

option pricing model.

There were no options granted during the three and six months ended June 30, 2020 and 2019.

The assumptions

used for the awards during the year ended December 31, 2019 were as follows:

Exercise price

Expected dividends

Expected volatility

Risk free interest rate

Expected life of option

dividends —

The Company has never declared or paid dividends on its Common Stock and has no plans to do so in the

foreseeable future.

Expected volatility —Volatility

is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected

to fluctuate (expected volatility) during a period.

Risk-free interest

rate —The assumed risk free rate used is a zero coupon U.S.

Treasury security with a maturity that approximates the expected

term of the option.

Expected life of the option —The

period of time that the options granted are expected to remain unexercised.

Options granted during 2019 have a maximum term of

The Company estimates the expected life of the option based on the weighted average life between the dates that options

become fully vested and the maximum life of options granted.

There were no options granted during the three and nine months ended September 30, 2020 and 2019.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Stock-Based Compensation – (continued)

3 unchanged sentences

immediate vesting;

half vesting immediately and remaining over three years;

in full on the six-month anniversary of grant date;

in full on one-year anniversary of grant date;

1 unchanged sentence

annually over three years;

one-third immediate vesting and remaining annually over two years;

one half immediate vesting and remaining over nine months;

one quarter immediate vesting and remaining over three years;

one quarter immediate vesting and remaining over 33 months;

one-third immediate vesting and remaining annually over two

monthly over three years.

1 unchanged sentence

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Stock-Based Compensation – (continued)

A summary of stock option activity for

the six months ended June 30, 2020 and the year ended December 31, 2019 is as follows:

the nine months ended September 30, 2020 and the year ended December 31, 2019 is as follows:

Balance - December 31, 2018

1 unchanged sentence

Balance –

June 30, 2020 - outstanding

September 30, 2020 - outstanding

Balance –

June 30, 2020 - exercisable

September 30, 2020 - exercisable

Grant date fair value of options granted –

six months ended June 30, 2020

nine months ended September 30, 2020

Weighted average grant date fair value –

six months ended June 30, 2020

nine months ended September 30, 2020

Grant date fair value of options granted –

3 unchanged sentences

Stock-based compensation expense included

in general and administrative expenses relating to stock options issued to employees for the three and six months ended June 30,

2020 was $40,000 and $79,000, respectively, and $50,000 and $106,000 for the three and six months ended June 30, 2019, respectively.

Stock-based compensation expense included in research and development expenses relating to stock options issued to employees for

the three and six months ended June 30, 2020 was $15,000 and $31,000, respectively, and $32,000 and $110,000 for the three and

six months ended June 30, 2019, respectively.

Stock-based compensation expense included in general and administrative

expenses relating to stock options issued to consultants for the three and six months ended June 30, 2020 was $27,000 and $53,000,

respectively, and $9,000 and $19,000 for the three and six months ended June 30, 2019, respectively.

Stock-based compensation

expense included in research and development expenses relating to stock options issued to consultants for the three and six months

ended June 30, 2020 was $4,000 and $6,000, respectively, and $1,000 for the three and six months ended June 30, 2019.

in general and administrative expenses relating to stock options issued to employees for the three and nine months ended September

30, 2020 was $41,000 and $120,000, respectively, and $59,000 and $165,000 for the three and nine months ended September 30, 2019,

respectively.

Stock-based compensation expense included in research and development expenses relating to stock options issued to

employees for the three and nine months ended September 30, 2020 was $14,000 and $45,000, respectively, and $22,000 and $52,000

for the three and nine months ended September 30, 2019, respectively.

Stock-based compensation expense included

in general and administrative expenses relating to stock options issued to consultants for the three and nine months ended September

30, 2020 was $26,000 and $79,000, respectively, and $9,000 and $28,000 for the three and nine months ended September 30, 2019,

respectively.

Stock-based compensation expense included in research and development expenses relating to stock options issued

to consultants for the three and nine months ended September 30, 2020 was $1,000 and $7,000, respectively, and $1,000 for the three

and nine months ended September 30, 2019.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Stock-Based Compensation – (continued)

As of June 30, 2020, total unrecognized

stock-based compensation expense related to stock options was $498,000, which is expected to be expensed through July 2022.

As of September 30, 2020, total unrecognized

stock-based compensation expense related to stock options was $406,000, which is expected to be expensed through August 2022.

The FASB’s guidance for stock-based

2 unchanged sentences

to stock compensation costs for such options.

The Company did not record any excess tax benefits during the three and six months

ended June 30, 2020 and 2019.

The Company did not record any excess tax benefits during the three and nine months

ended September 30, 2020 and 2019.

Stock Warrants

46 unchanged sentences

at their estimated fair value on the issuance date of $15.7 million and changes in estimated fair value are being recorded as non-cash

income or expense in the Company’s Condensed Consolidated Statements of Operations at each subsequent period.

2020 and June 30, 2019, the fair value of the warrant liability was $100.

The warrants were valued on the date of grant.

and 2019, the Monte Carlo simulations were not used as the value of the warrants were deemed to be minimal based on the historical

fair value of the warrants and the Company’s current stock price.

income or expense in the Company’s Condensed Consolidated Statements of Operations at each subsequent period.

30, 2020 and September 30, 2019, the fair value of the warrant liability was nominal.

In 2020 and 2019, the Monte Carlo simulations

were not used as the value of the warrants were deemed to be minimal based on the historical fair value of the warrants and the

Company’s current stock price.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Stock Warrants – (continued)

2 unchanged sentences

in a registered direct offering.

Each unit consisted of one share of the Company’s Common Stock and a warrant to purchase

0.50 shares of Common Stock.

2 unchanged sentences

The warrants vested immediately and expired on October 10, 2019.

The warrants issued in conjunction with the registered direct

offering in October 2014 included a provision that if the Company were to enter into a certain transaction, as defined in the agreement,

the warrants would be purchased from the holder at a premium.

Accordingly, the Company recorded the warrants as a liability at

their estimated fair value on the issuance date, which was $7.4 million, and changes in estimated fair value are being recorded

as non-cash income or expense in the Company’s Consolidated Statements of Operations at each subsequent period.

2020 and 2019, the fair value of the warrant liability was zero.

The warrants were valued on the date of grant using the Black-Scholes

option pricing model which approximates the value derived using Monte Carlo simulations.

In 2020 and 2019, the Monte Carlo simulations

were not used as the value of the warrants were deemed to be minimal based on the historical fair value of the warrants and the

Company’s current stock price.

A summary of all warrant activity for the

Company for the six months ended June 30, 2020 and the year ended December 31, 2019 is as follows:

Company for the nine months ended September 30, 2020 and the year ended December 31, 2019 is as follows:

Balance at December 31, 2018

Balance at December 31, 2019

Balance at June 30, 2020

Balance at September 30, 2020

On December 26, 2017, the Company entered

2 unchanged sentences

was paid an upfront payment, was paid a monthly fee, and on January 24, 2018 was issued a warrant exercisable for 714 shares of

the Company’s Common Stock on the date of issuance.

The warrant is equity classified and the fair value of the warrant approximated

3 unchanged sentences

A summary of all outstanding and exercisable

warrants as of June 30, 2020 is as follows:

warrants as of September 30, 2020 is as follows:

Exercise Price

3 unchanged sentences

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Net Loss per Share

Basic net loss per share is computed

by dividing net loss by the weighted average number of common shares outstanding.

Diluted net loss per share is computed by

dividing net loss by the weighted average number of common shares outstanding including the effect of common share

Diluted net loss per share assumes the issuance of potential dilutive common shares outstanding for the period

and adjusts for any changes in income and the repurchase of common shares that would have occurred from the assumed issuance,

unless such effect is anti-dilutive.

Net loss attributable to common stockholders for the three and six months ended June 30,

2020 excludes net loss attributable to non-controlling interest of $0.1 million and includes the accretion of Series B

preferred discount of $0.4 million and $0.8 million, respectively, on converted shares and Series A preferred stock accrued

dividends of $0.1 million.

Net loss attributable to common stockholders for the three and six months ended June 30, 2019

excludes net loss attributable to non-controlling interest of $0.1 million and includes the accretion of Series B preferred

discount of $0.1 million and $0.5 million, respectively, on converted shares and $0.1 million of Series A accrued dividends.

The number of shares of common stock underlying Series B Preferred shares convertible to common stock that were excluded from

the computations of net loss per common share for the three and six months ended June 30, 2020 and 2019 were 4,804,348 and

Basic net loss per share is computed by

dividing net loss by the weighted average number of common shares outstanding.

Diluted net loss per share is computed by dividing

net loss by the weighted average number of common shares outstanding including the effect of common share equivalents.

net loss per share assumes the issuance of potential dilutive common shares outstanding for the period and adjusts for any changes

in income and the repurchase of common shares that would have occurred from the assumed issuance, unless such effect is anti-dilutive.

Net loss attributable to common stockholders for the three and nine months ended September 30, 2020 excludes net loss attributable

to non-controlling interest of $0.1 million and includes the accretion of Series B preferred discount of $0.5 million and $1.3

million, respectively, on converted shares and Series A preferred stock accrued dividends of $0.1 million and $0.2 million, respectively.

Net loss attributable to common stockholders for the three and nine months ended September 30, 2019 excludes net loss attributable

to non-controlling interest of $0.1 million and includes the accretion of Series B preferred discount of $0.1 million and $0.6

million, respectively, on converted shares and Series A preferred stock accrued dividends of $0.1 million and $0.2 million, respectively.

The number of shares of common stock underlying Series B Preferred shares convertible to common stock that were excluded from the

computations of net loss per common share for the three and nine months ended September 30, 2020 and 2019 were 3,605,217 and 6,641,739,

respectively.

The number of options and warrants for the purchase of common stock that were excluded from the

computations of net loss per common share and for the three and six months ended June 30, 2020 were 2,472,362 and 18,714,999,

respectively, and for the six months ended June 30, 2019 were 843,119 and 18,915,851, respectively, because their effect is

anti-dilutive.

The number of options and warrants for the purchase of common stock that were excluded from the computations of net

loss per common share and for the three and nine months ended September 30, 2020 were 2,460,325 and 18,714,999, respectively, and

for the three and nine months ended September 30, 2019 were 803,577 and 18,915,851, respectively, because their effect is anti-dilutive.

Non-controlling Interest

The Company’s non-controlling interest

is accounted for under ASC 810, Consolidation (“ASC 810”), and represents the minority shareholder’s ownership

interest related to the Company’s subsidiary, Synthetic Biomics, Inc.

(“SYN Biomics”).

The Company’s non-controlling interest

is accounted for under ASC 810, Consolidation (“ASC 810”), and represents the minority shareholder’s ownership

interest related to the Company’s subsidiary, Synthetic Biomics, Inc.

(“SYN Biomics”).

In accordance with ASC

810, the Company reports its non-controlling interest in subsidiaries as a separate component of equity in the Consolidated Balance

Sheets and reports both net loss attributable to the non-controlling interest and net loss attributable to the Company’s

common stockholders on the face of the Consolidated Statements of Operations.

On September 5, 2018, the Company entered into an

agreement with CSMC for an investigator-sponsored Phase 2b clinical study of SYN-010 to be co-funded by the Company and CSMC (the

The Study will provide further evaluation of the efficacy and safety of SYN-010, the Company’s modified-release

reformulation of lovastatin lactone, which is exclusively licensed to the Company by CSMC.

SYN-010 is designed to reduce methane

production by certain microorganisms ( M.

smithii ) in the gut to treat an underlying cause of irritable bowel syndrome with

constipation (IBS-C).

After the 2018 transaction with CSMC, the Company’s equity interest in SYN Biomics is 83% and the non-controlling

stockholder’s interest is 17%.

As of June 30, 2020, the accumulated net loss attributable to the non-controlling interest

is $2.9 million.

In consideration of the support provided by CSMC for the Study,

the Company will pay $441,000 to support the Study and the Company entered into a Stock Purchase Agreement with CSMC pursuant to

which the Company, upon the approval of the Study protocol by the Institutional Review Board (IRB):

(i) issued to CSMC fifty thousand

(50,000) shares of common stock of the Company;

and (ii) transferred to CSMC an additional two million four hundred twenty thousand

(2,420,000) shares of common stock of its subsidiary SYN Biomics, Inc.

(“Synbiomics”) owned by the Company, such that

after such issuance CSMC owns an aggregate of seven million four hundred eighty thousand (7,480,000) shares of common stock of

SYN Biomics, representing seventeen percent (17%) of the issued and outstanding shares of SYN Biomics’

agreement with Cedars-Sinai Medical Center (CSMC) for an investigator-sponsored Phase 2b clinical study of SYN-010 to be co-funded

by the Company and CSMC (the “Study”).

The Study was to provide further evaluation of the efficacy and safety of SYN-010,

the Company’s modified-release reformulation of lovastatin lactone, which is exclusively licensed to the Company by CSMC.

SYN-010 was designed to reduce methane production by certain microorganisms ( M.

smithii ) in the gut to treat an underlying

cause of irritable bowel syndrome with constipation (IBS-C).

After the 2018 transaction with CSMC, the Company’s equity interest

in SYN Biomics was 83% and the non-controlling stockholder’s interest is 17%.

As of September 30, 2020, the accumulated net

loss attributable to the non-controlling interest is $2.8 million.

In consideration of the support provided

by CSMC for the Study, the Company agreed to pay $441,000 to support the Study and the Company entered into a Stock Purchase Agreement

with CSMC pursuant to which the Company, upon the approval of the Study protocol by the Institutional Review Board (IRB):

to CSMC fifty thousand (50,000) shares of common stock of the Company;

and (ii) transferred to CSMC an additional two million four

hundred twenty thousand (2,420,000) shares of common stock of its subsidiary SYN Biomics, Inc.

(“Synbiomics”) owned

by the Company, such that after such issuance CSMC owns an aggregate of seven million four hundred eighty thousand (7,480,000)

shares of common stock of SYN Biomics, representing seventeen percent (17%) of the issued and outstanding shares of SYN Biomics’

common stock.

services rendered are recorded to research and development expense in proportion with the progress of the study and based overall

on the fair value of the shares ($285,000) as determined at the date of IRB approval.

During the three and six months ended June

30, 2020, research and development expense recorded related to this transaction approximated $25,000 and $92,000, respectively.

During the three and six months ended June 30, 2019, research and development expense recorded related to this transaction approximated

The services rendered are recorded to research and development expense in proportion with the progress of the

study and based overall on the fair value of the shares ($285,000) as determined at the date of IRB approval.

During the three

and nine months ended September 30, 2020, research and development expense recorded related to this transaction approximated $134,000

and $225,000, respectively.

The Agreement also provides CSMC with a

right, commencing on the six month anniversary of issuance of the stock under certain circumstances in the event that the shares

of stock of SYN Biomics are not then freely tradeable, and subject to NYSE American, LLC approval, to exchange its SYN Biomics

shares for unregistered shares of the Company’s common stock, with the rate of exchange based upon the relative contribution

of the valuation of SYN Biomics to the public market valuation of the Company at the time of each exchange.

The Stock Purchase

Agreement also provides for tag-along rights in the event of the sale by the Company of its shares of SYN Biomics.

During the three and nine months ended September 30, 2019, research and development expense recorded

related to this transaction approximated $108,000 and $318,000, respectively.

30, 2020, CSMC MAST formally agreed to discontinue the ongoing Phase 2b investigator-sponsored clinical study of SYN-010 following

the results of a planned interim futility analysis.

Although it was concluded that SYN-010 was well tolerated, it was also concluded

that SYN-010 is unlikely to meet its primary endpoint by the time enrollment is completed.

As a result, the Company anticipates

additional reductions in clinical development expense during the remainder of 2020 resulting from the discontinuation of this clinical

The Agreement also provides CSMC with

a right, commencing on the six month anniversary of issuance of the stock under certain circumstances in the event that the

shares of stock of SYN Biomics are not then freely tradeable, and subject to NYSE American, LLC approval, to exchange its SYN

Biomics shares for unregistered shares of the Company’s common stock, with the rate of exchange based upon the relative

contribution of the valuation of SYN Biomics to the public market valuation of the Company at the time of each exchange.

Stock Purchase Agreement also provides for tag-along rights in the event of the sale by the Company of its shares of SYN

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Common and Preferred Stock

25 unchanged sentences

The exercise price of the Warrants is subject to adjustment in the event of certain dilutive issuances.

During the three and six months ended

June 30, 2020, 1,040 and 2,113 Series B shares, respectively, have been converted into common stock resulting in the

recognition of $392,000 and $796,000, respectively, of unamortized discount from the conversion.

During the three and six

months ended June 30, 2019, 302 and 1,338 Series B shares, respectively, have been converted into common stock resulting in

the recognition of $117,000 and $515,000, respectively, of unamortized discount from the conversion.

As of June 30, 2020,

10,198 shares have been converted resulting in the recognition of $3.8 million of unamortized discount.

This is recorded as a

deemed dividend in accumulated deficit.

During the three and nine months ended

September 30, 2020, 1,379 and 3,492 Series B shares, respectively, have been converted into common stock resulting in the recognition

of $519,000 and $1,315,000, respectively, of unamortized discount from the conversion.

During the three and nine months ended September

30, 2019, 185 and 1,523 Series B shares, respectively, have been converted into common stock resulting in the recognition of $71,000

and $585,000, respectively, of unamortized discount from the conversion.

As of September 30, 2020, 11,577 shares have been converted

resulting in the recognition of $4.4 million of unamortized discount.

This is recorded as a deemed dividend in accumulated deficit.

The October 2018 Warrants are immediately

29 unchanged sentences

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Common and Preferred Stock – (continued)

Since the effective conversion price of

the Series B Preferred Stock is less than the fair value of the underlying common stock at the date of issuance, there is a beneficial

conversion feature (“BCF”) at the issuance date.

Because the Series B Preferred Stock has no stated maturity or redemption

date and is immediately convertible at the option of the holder, the discount created by the BCF is immediately charged to accumulated

deficit as a “deemed dividend” and impacts earnings per share.

During the year ended December 31, 2018, the Company

recorded a discount of $9.1 million and immediately amortized the discount to record the deemed dividend.

the Series B Preferred Stock was less than the fair value of the underlying common stock at the date of issuance, there was a

beneficial conversion feature (“BCF”) at the issuance date.

Because the Series B Preferred Stock had no stated maturity

or redemption date and was immediately convertible at the option of the holder, the discount created by the BCF is immediately

charged to accumulated deficit as a “deemed dividend”

and impacts earnings per share.

During the year ended December

31, 2018, the Company recorded a discount of $9.1 million and immediately amortized the discount to record the deemed dividend.

Series A Preferred Stock

36 unchanged sentences

dividend on a quarterly basis (in effect accreting the dividend regardless of declaration because the dividend is cumulative).

During the three and six months ended June 30, 2020, the Company accrued dividends of $63,000 and $125,000, respectively.

the three and six months ended June 30, 2019, the Company accrued dividends of $61,000 and $122,000, respectively.

Once the dividend

is declared, the Company will reclassify the declared amount from temporary equity to a dividends payable liability.

When the redemption

of the Series A Preferred Stock becomes probable, the temporary equity will be accreted to redemption value as a deemed dividend.

During the three and nine months ended September 30, 2020, the Company accrued dividends of $64,000 and $189,000, respectively.

During the three and nine months ended September 30, 2019, the Company accrued dividends of $63,000 and $185,000, respectively.

Once the dividend is declared, the Company will reclassify the declared amount from temporary equity to a dividends payable liability.

When the redemption of the Series A Preferred Stock becomes probable, the temporary equity will be accreted to redemption value

as a deemed dividend.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Common and Preferred Stock – (continued)

3 unchanged sentences

(now known as B.

Riley FBR, Inc.), which enables the Company

to offer and sell shares of the Company’s common stock with an aggregate sales price of up to $40.0 million from time to

time through B.

Riley Securities), which enables the

Company to offer and sell shares of the Company’s common stock with an aggregate sales price of up to $40.0 million from

time to time through B.

Riley FBR, Inc.

1 unchanged sentence

Sales of common stock under the B.

Riley FBR Sales Agreement

are made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities

Riley FBR Sales

Agreement are made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under

the Securities Act.

Riley FBR, Inc.

is entitled to receive a commission rate of up to 3.0% of gross sales in connection with the sale of the

Company’s common stock sold on the Company’s behalf.

The Company has not sold any shares during 2020 and 2019 through

is entitled to receive a commission rate of up to 3.0% of gross sales in connection with

the sale of the Company’s common stock sold on the Company’s behalf.

The Company has not sold any shares during 2020

and 2019 through the B.

Riley FBR Sales Agreement.

3 unchanged sentences

CSMC (the “Study”).

The Study will provide further evaluation of the efficacy and safety of SYN-010, the Company’s

modified-release reformulation of lovastatin lactone, which is exclusively licensed to the Company by CSMC.

SYN-010 is designed

to reduce methane production by certain microorganisms ( M.

smithii ) in the gut to treat an underlying cause of irritable

bowel syndrome with constipation (IBS-C).

The Study was intended to provide further evaluation of the efficacy and safety of SYN-010, the

Company’s modified-release reformulation of lovastatin lactone, which is exclusively licensed to the Company by CSMC.

was designed to reduce methane production by certain microorganisms ( M.

smithii ) in the gut to treat an underlying cause

of irritable bowel syndrome with constipation (IBS-C).

In consideration of the support provided

6 unchanged sentences

(“SYN Biomics”) owned by the Company, such that after such issuance

CSMC will own an aggregate of seven million four hundred eighty thousand (7,480,000) shares of common stock of SYN Biomics, representing

CSMC owns an aggregate of seven million four hundred eighty thousand (7,480,000) shares of common stock of SYN Biomics, representing

seventeen percent (17%) of the issued and outstanding shares of SYN Biomics’ common stock.

6 unchanged sentences

Agreement also provides for tag-along rights in the event of the sale by the Company of its shares of SYN Biomics.

In December 2013, through the Company’s subsidiary,

Synthetic Biomics, Inc., the Company entered into a worldwide exclusive license agreement with CSMC and acquired the rights

to develop products for therapeutic and prophylactic treatments of acute and chronic diseases, including the development of

SYN-010 to target IBS-C.

On September 30, 2020, CSMC MAST formally

agreed to discontinue the ongoing Phase 2b investigator-sponsored clinical study of SYN-010 following the results of a planned

interim futility analysis.

Although it was concluded that SYN-010 was well tolerated, SYN-010 is unlikely to meet its primary endpoint

by the time enrollment is completed.

The Company anticipates additional reductions in clinical development expense during the remainder

of 2020 and an acceleration of expense recognition of $141,000 as a result of the discontinuation of this clinical program.

In December 2013, through the Company’s

subsidiary, Synthetic Biomics, Inc., the Company entered into a worldwide exclusive license agreement with CSMC and acquired the

rights to develop products for therapeutic and prophylactic treatments of acute and chronic diseases, including the development

of SYN-010 to target IBS-C.

The Company licensed from CSMC a portfolio of intellectual property comprised of several U.S.

foreign patents and pending patent applications for various fields of use, including IBS-C, obesity and diabetes.

investigational team led by Mark Pimentel, M.D.

at CSMC discovered that these products may reduce the production of methane

gas by certain GI microorganisms.

During the three and six months ended June 30, 2020 and 2019, the Company did not owe and

did not pay CSMC for milestone payments related this license agreement.

patents and pending patent applications for various fields of use, including IBS-C, obesity and diabetes.

An investigational team

led by Mark Pimentel, M.D.

at CSMC discovered that these products may reduce the production of methane gas by certain GI microorganisms.

During the three and nine months ended September 30, 2020 and 2019, the Company did not owe and did not pay CSMC for milestone

payments related this license agreement.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Commitments and Contingencies

All of the Company’s existing leases

as of June 30, 2020 are classified as operating leases.

As of June 30, 2020, the Company has one material operating lease for facilities

with a remaining term expiring in 2022.

The existing lease has fair value renewal options, none of which are considered certain

of being exercised or included in the minimum lease term.

The discount rate used in the calculation of the lease liability was

All of the Company’s existing leases

as of September 30, 2020 are classified as operating leases.

As of September 30, 2020, the Company has one material operating lease

for facilities with a remaining term expiring in 2022.

The existing lease has fair value renewal options, none of which are considered

certain of being exercised or included in the minimum lease term.

The discount rate used in the calculation of the lease liability

The rates implicit within the Company's leases are generally not determinable, therefore, the Company's incremental borrowing

rate is used to determine the present value of lease payments.

The determination of the Company’s incremental borrowing rate

requires judgment.

2 unchanged sentences

The rate is then

adjusted for the impact of collateralization, the lease term and other specific terms included in the Company’s lease arrangements.

The incremental borrowing rate is determined at lease commencement, or as of January 1, 2019 for operating leases in existence

upon adoption of ASC 842.

The incremental borrowing rate is subsequently reassessed upon a modification to the lease arrangement.

ROU assets are subsequently assessed for impairment in accordance with the Company’s accounting policy for long-lived assets.

Operating lease costs are presented as part of general and administrative expenses in the condensed consolidated statement of operations,

and for the three and six months ended June 30, 2020 approximated $50,000 and $101,000, respectively, and for three and six months

ended June 30, 2019 approximated $50,000 and $101,000, respectively.

For the three and six months ended June 30, 2020, operating

cash flows used for operating leases approximated $77,000 and $154,000, respectively, and for three and six months ended June 30,

2019 approximated $75,000 and $149,000, respectively.

The right of use assets exchanged for operating lease obligations was $0.

The day one non-cash addition of right of use assets due to adoption of ASC 842 was $538,000.

upon adoption of ASC 842, Leases (ASC 842).

The incremental borrowing

rate is subsequently reassessed upon a modification to the lease arrangement.

ROU assets are subsequently assessed for impairment

in accordance with the Company’s accounting policy for long-lived assets.

Operating lease costs are presented as part of

general and administrative expenses in the condensed consolidated statements of operations, and for the three and nine months ended

September 30, 2020 approximated $50,000 and $151,000, respectively, and for three and nine months ended September 30, 2019 approximated

$50,000 and $151,000, respectively.

For the three and nine months ended September 30, 2020, operating cash flows used for operating

leases approximated $77,000 and $231,000, respectively, and for three and nine months ended September 30, 2019 approximated $75,000

and $224,000, respectively.

A maturity analysis of our operating leases

as of June 30, 2020 is as follows (amounts in thousands of dollars) :

as of September 30, 2020 is as follows (amounts in thousands of dollars) :

Future undiscounted cash flow for the years ending December 31:

9 unchanged sentences

the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

As the COVID-19 coronavirus continues to

spread around the globe, the Company experienced disruptions that impact its business and clinical trials, including halting the

enrollment of new patients in the ongoing Phase 2b investigator-sponsored clinical trial of SYN-010 and postponement of clinical

site initiation of the Phase 1b/2a clinical trial of SYN-004.

The extent to which the COVID-19 pandemic impacts the Company’s

business, the clinical development of SYN-010, SYN-004 (ribaxamase) and SYN-020, the business of the Company’s suppliers

and other commercial partners, the Company’s corporate development objectives and the value of and market for the Company’s

common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time,

such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements

in the United States, Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease.

The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated

with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations

and growth prospects.

In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and

results of operations, it may also have the effect of heightening many of the other risks and uncertainties which the Company faces.

As the COVID-19 continued to spread

around the globe, the Company experienced disruptions that impact its business and clinical trials, including halting the

postponement of clinical site initiation of the Phase 1b/2a clinical trial of SYN-004.

The extent to which the COVID-19

pandemic impacts the Company’s business, the clinical development of SYN-004 (ribaxamase) and SYN-020, the business of

the Company’s suppliers and other commercial partners, the Company’s corporate development objectives and the

value of and market for the Company’s common stock, will depend on future developments that are highly uncertain and

cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions,

quarantines, social distancing and business closure requirements in the United States, Europe and other countries, and the

effectiveness of actions taken globally to contain and treat the disease.

The global economic slowdown, the overall

disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a

material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of

operations, it may also have the effect of heightening many of the other risks and uncertainties which the Company faces.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Notes to Condensed Consolidated Financial

Subsequent Events

On June 30, 2020 the Company submitted

an Investigational New Drug (IND) application with the FDA for SYN-020, an oral formulation of recombinant intestinal alkaline

phosphatase (IAP).

On July 30, 2020 the Company announced that it received a study-may-proceed letter from the U.S.

Food and Drug

Administration (FDA) to conduct a Phase 1 single ascending dose study in healthy volunteers designed to evaluate SYN-020 for safety,

tolerability and pharmacokinetic parameters.

The Phase 1 clinical program is intended to support the clinical development of SYN-020

in multiple indications, including the treatment of radiation enteropathy secondary to pelvic cancer therapy.

On January 7, 2020 the Company held a

Type-C meeting with the FDA to discuss the clinical program requirements needed to evaluate safety, tolerability and potential

absorption into the systemic circulation (if any) of SYN-004 (ribaxamase) in adult allogeneic HCT recipients.

On July 30, 2020

the Company received written notification from the FDA informing it that they determined the Phase 1b/2a clinical program in adult

allogeneic HCT recipients is safe to proceed per the submitted clinical program protocol.

On November 9, 2020, the Company and its

subsidiary, Synthetic Biomics, Inc.

and CSMC mutually agreed to terminate the exclusive license agreement dated December 5, 2013

and all amendments thereto and the clinical trial agreement relating to SYN-010.

The determination to terminate the SYN-010 license

agreement was agreed following the completion of a planned interim futility analysis of the Phase 2b investigator-sponsored clinical

trial of SYN-010.

On September 30, 2020, CSMC (the Company’s SYN-010 clinical development partner) informed the Company that

it discontinued the ongoing Phase 2b investigator-sponsored clinical study of SYN-010 IBS-C patients.

Based on the results of a

planned interim futility analysis, it was concluded that although SYN-010 was well tolerated, it was unlikely to meet its primary

endpoint by the time enrollment is completed.

The patent rights previously licensed to the Company covering the use of SYN-010

will remain the property of CSMC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements