What changed in this filing

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Item 1. Financial Statements

2021-05-05 compared with 2020-11-10 · 634 added, 731 removed, 226 unchanged (86% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

(In thousands except share and par value

September 30,

(In thousands except share and par value amounts)

March 31, 2021

December 31, 2020

Current Assets

10 unchanged sentences

Accrued employee benefits

Lease liability

Operating lease liability

Total Current Liabilities

1 unchanged sentence

Total Liabilities

Commitments and Contingencies

Series A convertible preferred stock, $0.001 par value;

10,000,000 shares authorized;

120,000 issued and outstanding

Stockholders' Deficit:

0 and 120,000 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Stockholders' Equity (Deficit):

Series B convertible preferred stock, $1,000 par value;

10,000,000 shares authorized, 4,146 issued and outstanding and 7,638 issued and outstanding

10,000,000 shares authorized, 0 issued and outstanding and 3,973 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Common stock, $0.001 par value;

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

200,000,000 shares authorized, 132,044,866 issued and 132,042,538 outstanding at March 31, 2021 and 29,252,253 issued and 29,249,925 outstanding at December 31, 2020

Additional paid-in capital

1 unchanged sentence

Total Synthetic Biologics, Inc.

and Subsidiaries Deficit

and Subsidiaries Equity (Deficit)

Non-controlling interest

Total Stockholders' Deficit

Total Liabilities and Stockholders' Deficit

See accompanying notes to unaudited condensed

consolidated financial statements.

Total Stockholders' Equity (Deficit)

Total Liabilities and Stockholders' Equity (Deficit)

See accompanying notes to unaudited condensed consolidated

financial statements.

Synthetic Biologics, Inc.

and Subsidiaries

Condensed Consolidated Statements of

(In thousands, except share and per share

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

For the three months

ended September 30,

For the nine months

ended September 30,

ended March 31,

Operating Costs and Expenses:

10 unchanged sentences

Series A Preferred Stock Dividends

Effect of Series A Preferred Stock price adjustment

Series B Preferred Stock Dividends

2 unchanged sentences

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

See accompanying notes to unaudited condensed

consolidated financial statements.

Synthetic Biologics,

See accompanying notes to unaudited condensed consolidated

financial statements.

Synthetic Biologics, Inc.

and Subsidiaries

Condensed Consolidated

Statements of Stockholders Equity (Deficit)

(In thousands, except share and par value

Stockholders'

Condensed Consolidated Statements of Stockholders

Equity (Deficit )

(In thousands, except share and par value amounts)

Stock $0.001 Par Value

Non-Controlling

Stockholders'

Balance at December 31, 2020

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, 2020

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 June 30, 2020

Stock-based compensation

Series A Preferred Stock Dividends ($0.01 per share)

Issuance of SYN Biomics Stock

Stock issued under "at-the-market" offering

Warrants Exercised

Series A Preferred Stock Dividends

Effect of Series A Preferred Stock price adjustment

Conversion of Series A Preferred Stock to Common

Conversion of Series B Preferred Stock to Common

($0.03 per share)

Non-controlling interest

Balance at September 30,

Balance at March 31, 2021

Stock $0.001 Par Value

Non-Controlling

Stockholders'

Equity (Deficit)

Balance at December 31, 2019

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

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 June 30, 2019

Stock-based compensation

Series A Preferred Stock Dividends ($0.01 per share)

Series A Preferred Stock Dividends

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

consolidated financial statements.

Balance at March 31, 2020

See accompanying notes to unaudited condensed consolidated

financial statements.

Synthetic Biologics, Inc.

and Subsidiaries

Condensed Consolidated Statements of

Condensed Consolidated Statements of Cash Flows

(In thousands)

For the nine months

ended September 30,

For the Three Months Ended March 31,

Cash Flows From Operating Activities:

13 unchanged sentences

Net Cash Used in Investing Activities

Net Cash From Financing Activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Cash Flows from Financing Activities

Proceeds from "at the market" stock issuance

Proceeds from issuance of common stock for warrant exercises

Net Cash Provided by Financing Activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of this period

Cash and cash equivalents at the end of

Noncash Financing Activities:

Effect of Series A Preferred Stock price adjustment

Conversion of Series B Preferred Stock

1 unchanged sentence

In-kind dividends paid in preferred stock

Right of use asset from operating lease

See accompanying notes to unaudited condensed

consolidated financial statements.

See accompanying notes to unaudited condensed consolidated

financial statements.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial

Notes to Condensed Consolidated Financial Statements

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 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.

(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.

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

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements

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

The interim results for the three and nine months ended September

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

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 interim results for the three months ended March 31, 2021 are not necessarily indicative of results for the full year.

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 FASB issued Accounting

Standards Update 2020-06 Debt –

Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging –

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

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,

Relief and Economic Security Act (CARES Act) was enacted.

The CARES Act is an emergency economic stimulus package that includes

spending and tax breaks to strengthen the United States’ economy and fund a nationwide effort to curtail the effect of COVID-19.

While the CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions

include removal of certain limitations on utilization of net operating losses, increasing the loss carryback period for certain

losses to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously

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.

continues to evaluate its impact as new information becomes available.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

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.

Company is currently assessing the impact of ASU 2020-06 on its consolidated financial statements.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial

Organization, Nature of Operations and

Basis of Presentation – (continued)

Impairment of Long-Lived Assets

1 unchanged sentence

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

The accompanying consolidated financial

statements have been prepared assuming the Company will continue as a going concern.

The Company continues to incur losses and,

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, 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

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

is subject to many factors, some of which are beyond its control.

These factors include the following:

the progress of its research activities;

the number and scope of its research programs;

the ability to recruit patients for clinical studies in a timely manner;

the progress of its preclinical and clinical development activities;

the progress of the development efforts of parties with whom the Company has entered into research and development agreements and amount of funding received from partners and collaborators;

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

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;

the costs and timing of regulatory approvals;

the ability to commence or complete clinical trials due to the ongoing impact of the COVID-19 global pandemic.

The Company has based its estimates of

funding requirements on assumptions that may prove to be wrong.

The Company may need to obtain additional funds sooner or in greater

amounts than it currently anticipates.

If the Company raises funds by selling

additional shares of Common Stock or other securities convertible into Common Stock, the ownership interest of the existing stockholders

will be diluted.

If the Company is not able to obtain financing when needed, it may be unable to carry out its business plan.

a result, the Company may have to significantly limit its operations and its business, financial condition and results of operations

would be materially harmed.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial

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.

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 months ended March 31, 2021 and 2020.

Fair Value of Financial Instruments

ASC 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.

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:

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Level 2 inputs:

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

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

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.

Cash and cash equivalents include money

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.

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.

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.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial

Selected Balance Sheet Information

Prepaid expenses and other current assets

(in thousands)

September 30,

Prepaid expenses and other current assets (in

Prepaid clinical research organizations

Prepaid consulting, subscriptions and other expenses

Prepaid insurances

Prepaid consulting, subscriptions and other expenses

Stock sales receivable

Prepaid manufacturing expenses

Prepaid conferences, travel and other expenses

Other receivables

Amounts prepaid to clinical research organizations (CROs) were

classified as current assets.

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.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial

Selected Balance Sheet Information

– (continued)

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)

September 30,

Accrued bonus expense

Accrued vacation expense

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial

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.

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.

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

of the Company or a subsidiary during any one-year period under the 2007 plan shall not exceed 7,143.

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 March 31, 2021, there were 5,145 options issued and outstanding under the 2007 Stock

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.

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 Company’s common stock reserved for issuance under the Plan from 85,714 to 171,429;

2015, increased the number of shares from 171,429 to 228,572;

on August 25, 2016, increased the number of shares from 228,572 to

on September 7, 2017, increased the number of shares from 400,000 to 500,000;

on September 24, 2018 increased the number

of shares from 500,000 to 1,000,000;

and on September 5, 2019, increased the number of shares from 1,000,000 to 4,000,000.

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 generally expire ten years after the grant date.

As of September 30, 2020, there

over various periods from the date of grant and expire between five and ten years after the grant date.

As of March 31, 2021, there

were 2,452,273 options issued and outstanding under the 2010 Stock Plan.

Synthetic Biologics, Inc.

and Subsidiaries

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

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.

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.

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

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 March 31, 2021, there were 1,540,000 options issued and outstanding under the 2010 Stock Plan.

In the event of an employee’s termination,

1 unchanged sentence

Stock forfeitures are recognized as incurred.

is no deferred compensation recorded upon initial grant date.

Instead, the fair value of the stock-based payment is recognized

as compensation expense over the stated vesting period.

deferred compensation recorded upon initial grant date.

Instead, the fair value of the stock-based payment is recognized over the stated

vesting period.

The Company has applied fair value accounting

for all stock-based payment awards since inception.

The fair value of each option is estimated on the date of grant using the Black-Scholes

option pricing model.

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

The fair value of each option granted is estimated on the date of grant using the

Black-Scholes option pricing model.

There were no options granted during the three months ended March 31, 2021 and 2020.

Synthetic Biologics, Inc.

2 unchanged sentences

Stock-Based Compensation – (continued)

The Company records stock-based compensation

based upon the stated vesting provisions in the related agreements.

The vesting provisions for these agreements have various terms

Expected 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.

The expected volatility assumption is derived from the historical volatility of the Company’s

common stock over a period approximately equal to the expected term.

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 the year have a maximum term of seven

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

fully vested and the maximum life of options granted.

The Company records stock-based compensation based

upon the stated vesting provisions in the related agreements.

The vesting provisions for these agreements have various terms as follows:

immediate vesting,

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

in full on one-year anniversary of grant date;

in full on the one-year anniversary date of the grant date,

half vesting immediately and the remaining over three years,

quarterly over three years,

annually over three years,

one-third immediate vesting and remaining annually over two

one-third immediate vesting and the remaining annually over two years,

one-half immediate vesting and the remaining over nine months,

one-quarter immediate vesting and the remaining over three years,

one-quarter immediate vesting and the remaining over 33 months,

monthly over one year, and

monthly over three years.

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Stock-Based Compensation– (continued)

A summary of stock option activity for

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

A summary of stock option activity for the three

months ended March 31, 2021 and the year ended December 31, 2020 is as follows:

Weighted Average

Contractual Life

Balance - December 31, 2019

Balance - December 31, 2020

Balance –

September 30, 2020 - outstanding

Balance –

September 30, 2020 - exercisable

Balance - March 31, 2021 - outstanding

Balance - March 31, 2021 - exercisable

Grant date fair value of options granted –

nine months ended September 30, 2020

three months ended March 31, 2021

Weighted average grant date fair value –

nine months ended September 30, 2020

three months ended March 31, 2021

Grant date fair value of options granted –

2 unchanged sentences

year ended December 31, 2020

Stock-based compensation expense included

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.

Stock-based compensation expense included in general

and administrative expenses and research and development expenses relating to stock options issued to employees for the three months ended

March 31, 2021 and 2020 was $49,000 and $55,000, respectively.

Stock-based compensation expense included in general and administrative

expenses and research and development expenses relating to stock options issued to consultants for the three months ended March 31, 2021

and 2020 were $52,000 and $28,000, respectively.

As of March 31, 2021, total unrecognized stock-based

compensation expense related to stock options was $585,000, which is expected to be expensed through February 2023.

The FASB’s guidance for stock-based payments

requires cash flows from excess tax benefits to be classified as a part of cash flows from operating activities.

Excess tax benefits are

realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation

costs for such options.

The Company did not record any excess tax benefits during the three months ended March 31, 2021 and 2020.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial

Stock-Based Compensation – (continued)

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

payments requires cash flows from excess tax benefits to be classified as a part of cash flows from operating activities.

tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable

to stock compensation costs for such options.

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

ended September 30, 2020 and 2019.

Stock Warrants

On October 15, 2018, the Company closed

its underwritten public offering pursuant to which it received gross proceeds of approximately $18.6 million before deducting underwriting

On October 15, 2018, the Company closed its

underwritten public offering pursuant to which it received gross proceeds of approximately $18.6 million before deducting underwriting

discounts, commissions and other offering expenses payable by the Company and sold an aggregate of (i) 2,520,000 Class A Units

(the “Class A Units”), with each Class A Unit consisting of one share of Common Stock, and one five-year warrant to

purchase one share of Common Stock at an exercise price of $1.38 per share (each a “Warrant” and collectively, the

“Warrants”), with each Class A Unit to be offered to the public at a public offering price of $1.15, and (ii) 15,723

Class B Units (the “Class B Units”, and together with the Class A Units, the “Units”), with each Class

B Unit offered to the public at a public offering price of $1,000 per Class B Unit and consisting of one share of the Company’s

Series B Convertible Preferred Stock (the “Series B Preferred Stock”), with a stated value of $1,000 and convertible

into shares of Common Stock at the stated value divided by a conversion price of $1.15 per share, with all shares of Series B Preferred

Stock convertible into an aggregate of 13,672,173 shares of Common Stock, and issued with an aggregate of 13,672,173 Warrants.

In addition, pursuant to the underwriting agreement that the Company had entered into with A.G.P./Alliance Global Partners (the

“Underwriters”), as representative of the underwriters, the Company granted the Underwriters a 45 day option (the “Over-allotment

Option”) to purchase up to an additional 2,428,825 shares of Common Stock and/or additional Warrants to purchase an additional

(the “Class A Units”), with each Class A Unit consisting of one share of the Common Stock, and one five-year warrant

to purchase one share of Common Stock at an initial exercise price of $1.38 per share, which subsequently was reduced to $0.69 per share

(each a “Warrant” and collectively, the “Warrants”), with each Class A Unit to be offered to the public at

a public offering price of $1.15, and (ii) 15,723 Class B Units (the “Class B Units”, and together with the

Class A Units, the “Units”), with each Class B Unit offered to the public at a public offering price of $1,000 per

Class B Unit and consisting of one share of the Company’s Series B Convertible Preferred Stock (the “Series B

Preferred Stock”), with a stated value of $1,000 and convertible into shares of Common Stock at the stated value divided by a conversion

price of $1.15 per share, with all shares of Series B Preferred Stock convertible into an aggregate of 13,672,173 shares of Common

Stock, and issued with an aggregate of 13,672,173 Warrants.

On November 16, 2020, the exercise price of the Warrants was reduced

from $1.38 per Warrant per full share of the Company’s common stock, $0.001 par value per share (the “Common Stock”),

to $0.69 per Warrant per full share of Common Stock in accordance with the anti-dilution terms of the Warrant.

The reduction was the result

of the issuance of shares of Common Stock by the Company through its “at the market offering” facility.

The effect of the

change in the exercise price of the warrants as a result of the triggering of the down round protection clause in the Warrants was recorded

as a deemed dividend of $880,000, which reduces the income available to common stockholders.

In addition, pursuant to the underwriting

agreement that the Company had entered into with A.G.P./Alliance Global Partners (the “Underwriters”), as representative of

the underwriters, the Company granted the Underwriters a 45 day option (the “Over-allotment Option”) to purchase up to an

additional 2,428,825 shares of Common Stock and/or additional Warrants to purchase an additional 2,428,825 shares of Common Stock.

Underwriters partially exercised the Over-allotment Option by electing to purchase from the Company additional Warrants to purchase 1,807,826

shares of Common Stock.

The Underwriters partially exercised the Over-allotment Option by electing to purchase from the

Company additional Warrants to purchase 1,807,826 shares of Common Stock.

The Warrants are immediately exercisable

at a price of $1.38 per share of Common Stock (which is 120% of the public offering price of the Class A Units) and expire on October

If, at the time of exercise, there is no effective registration statement registering, or no current prospectus available

for, the issuance of the shares of Common Stock to the holder, then the Warrants may only be exercised through a cashless exercise.

The Warrants are immediately exercisable at a

price of $1.38 ($0.69 effective November 16, 2020) per share of Common Stock (which was 120% of the public offering price of the

Class A Units) and expire on October 15, 2023.

If, at the time of exercise, there is no effective registration statement registering,

or no current prospectus available for, the issuance of the shares of Common Stock to the holder, then the Warrants may only be exercised

through a cashless exercise.

No fractional shares of Common Stock will be issued in connection with the exercise of a Warrant.

In lieu of fractional shares,

the holder will receive an amount in cash equal to the fractional amount multiplied by the fair market value of any such fractional

of fractional shares, the holder will receive an amount in cash equal to the fractional amount multiplied by the fair market value of

any such fractional shares.

The Company has concluded that the Warrants are required to be equity classified.

The Warrants were valued on the date

of grant using Monte Carlo simulations.

The Warrants were valued

on the date of grant using Monte Carlo simulations.

During the three months ended March 31, 2021, 11,655,747 warrants were exercised for

cash proceeds of $8.0 million.

On November 18, 2016, the Company completed

a public offering of 714,286 shares of Common Stock in combination with accompanying warrants to purchase an aggregate of 1,428,571

shares of Common Stock.

The stock and warrants were sold in combination, with two warrants for each share of Common Stock sold,

a Series A warrant and a Series B warrant, each representing the right to purchase one share of Common Stock.

The purchase price

for each share of common stock and accompanying warrants was $35.00.

The shares of Common Stock were immediately separable from

the warrants and were issued separately.

The initial per share exercise price of the Series A warrants is $50.05 and the per share

exercise price of the Series B warrants is $60.20, each subject to adjustment as specified in the warrant agreements.

A and Series B warrants may be exercised at any time on or after the date of issuance.

The Series A warrants are exercisable until

the four-year anniversary of the issuance date.

The Series B warrants expired on December 31, 2017 and none were exercised prior

to expiration.

The warrants include 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 for cash.

Accordingly, the Company recorded the warrants as a liability

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.

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.

a public offering of 714,286 shares of common stock in combination with accompanying warrants to purchase an aggregate of 1,428,571 shares

of the common stock.

The stock and warrants were sold in combination, with two warrants for each share of common stock sold, a Series A

warrant and a Series B warrant, each representing the right to purchase one share of common stock.

The purchase price for each share

of common stock and accompanying warrants was $35.00.

The shares of common stock were immediately separable from the warrants and were

issued separately.

The initial per share exercise price of the Series A warrants was $50.05 and the per share exercise price of the

Series B warrants was $60.20, each subject to adjustment as specified in the warrant agreements.

The Series A and Series B

warrants could be exercised at any time on or after the date of issuance.

The Series A warrants were exercisable until the four-year

anniversary of the issuance date.

The Series B warrants expired December 31, 2017 and none were exercised prior to expiration.

The Series A warrants expired November 18, 2020 and none were exercised prior to expiration.

The warrants 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

Accordingly, the Company recorded the warrants as a liability at their estimated fair value on the issuance date of $15.7 million

and changes in estimated fair value will be recorded as non-cash income or expense in the Company’s Statement of Operations at each

subsequent period.

At December 31, 2019, the fair value of the warrant liability was $100.

The warrants were valued on the date of

grant and on each remeasurement period.

Synthetic Biologics, Inc.

2 unchanged sentences

Stock Warrants – (continued)

On October 10, 2014, the Company raised

net proceeds of $19.1 million through the sale of 14,059,616 units at a price of $1.47 per unit to certain institutional investors

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.

The warrants, exercisable for an aggregate of 200,852 shares of Common Stock, had an exercise price

of $61.25 per share and a life of five years.

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

A summary of all warrant activity for the

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

A summary of all warrant activity for the Company

for the quarter ended March 31, 2021 and the year ended December 31, 2020 is as follows:

Exercise Price

Balance at December 31, 2019

Balance at December 31, 2020

Balance at September 30, 2020

Balance at March 31, 2021

On December 26, 2017, the Company entered

into a consulting agreement for advisory services for a period of six months.

As compensation for such services, the consultant

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

$9,000 on the date of grant and was measured using the Black-Scholes option pricing model.

This entire expense was recorded in

the quarter ended March 31, 2018.

A summary of all outstanding and exercisable

warrants as of September 30, 2020 is as follows:

As compensation for such services, the consultant 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 issue.

The warrant is equity classified and the fair value of the warrant approximated $9,000 and was measured

using the Black-Scholes option pricing model.

A summary of all outstanding and exercisable common

stock warrants as of March 31, 2021 is as follows:

Exercise Price

5 unchanged sentences

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 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 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.

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.

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 months ended March 31, 2021 excludes net loss attributable to non-controlling interest of $0.1 million and

includes the accretion of the Series B preferred discount of $1.5 million as a result of converted shares and Series A preferred stock

accrued dividends of $0.1 million and the deemed dividend of $7.4 million resulting from the effect of the Series A preferred stock price

adjustment during the first quarter of 2021.

Net loss attributable to common stockholders for the three months ended March 31, 2020 excludes

net loss attributable to non-controlling interest of $0.1 million, includes the accretion of Series B preferred discount of $0.4 million

on converted shares and $0.1 million of Series A accrued dividends.

There were no 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 months ended March

31, 2021 since all remaining Series B preferred stock were converted to common stock.

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

months ended March 31, 2020 were 5,708,696.

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 months ended March 31, 2021 were 3,997,418 and 6,344,966, respectively

and for the three months ended March 31, 2020 were 2,502,012 and 18,714,999, 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.

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 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’

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 “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 was

exclusively licensed to the Company by CSMC.

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

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 March 31, 2021

and 2020, the accumulated net loss attributable to the non-controlling interest is $2.8 million and $2.9 million, respectively.

In consideration of the support provided by CSMC

for the Study, the Company paid $328,000 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’

common stock.

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.

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

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 months ended March 31, 2020, research and development expense recorded related

to this transaction approxima ted $67,000.

There was no expense recorded related to this transaction

during the three months ended March 31, 2021.

The Agreement also provided 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.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial

Non-controlling Interest – (continued)

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 was unlikely to meet its primary endpoint by the

time enrollment is completed.

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

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.

Common and Preferred Stock

Series B Preferred Stock

On October 15, 2018, the Company closed

its underwritten public offering pursuant to which it received gross proceeds of approximately $18.6 million before deducting underwriting

On October 15, 2018, the Company closed its

underwritten public offering pursuant to which it received gross proceeds of approximately $18.6 million before deducting underwriting

discounts, commissions and other offering expenses payable by the Company and sold an aggregate of (i) 2,520,000 Class A Units,

with each Class A Unit offered to the public at a public offering price of $1.15, and (ii) 15,723 Class B Units, with each Class

B Unit offered to the public at a public offering price of $1,000 per Class B Unit and consisting of one share of the Company’s

Series B Preferred Stock, with a stated value of $1,000 and convertible into shares of Common Stock at the stated value divided

by a conversion price of $1.15 per share, with all shares of Series B Preferred Stock convertible into an aggregate of 13,672,173

shares of Common Stock, and issued with an aggregate of 13,672,173 October 2018 Warrants.

Since the above units are equity instruments,

the proceeds were allocated on a relative fair value basis which created the Series B Preferred Stock discount.

In addition, pursuant to the Underwriting

Agreement that the Company entered into with the Underwriters on October 10, 2018, the Company granted the Underwriters a 45 day

option (the “Over-allotment Option”) to purchase up to an additional 2,428,825 shares of Common Stock and/or additional

warrants to purchase an additional 2,428,825 shares of Common Stock.

with each Class A Unit offered to the public at a public offering price of $1.15, and (ii) 15,723 Class B Units, with each

Class B Unit offered to the public at a public offering price of $1,000 per Class B Unit and consisting of one share of the

Company’s Series B Preferred Stock, with a stated value of $1,000 and convertible into shares of Common Stock at the stated

value divided by a conversion price of $1.15 per share, with all shares of Series B Preferred Stock convertible into an aggregate

of 13,672,173 shares of Common Stock, and issued with an aggregate of 13,672,173 October 2018 Warrants.

Since the above units are

equity instruments, the proceeds were allocated on a relative fair value basis which created the Series B Preferred Stock discount.

In addition, pursuant to the Underwriting Agreement

that the Company entered into with the Underwriters on October 10, 2018, the Company granted the Underwriters a 45 day option (the

“Over-allotment Option”) to purchase up to an additional 2,428,825 shares of Common Stock and/or additional warrants to purchase

an additional 2,428,825 shares of Common Stock.

Each Warrant is exercisable for one share of common stock.

The Underwriters partially exercised the Over-allotment Option by electing to purchase from the Company additional Warrants to

purchase 1,807,826 shares of Common Stock.

The Underwriters partially

exercised the Over-allotment Option by electing to purchase from the Company additional Warrants to purchase 1,807,826 shares of Common

The Units were offered by the Company pursuant

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by the SEC on October 10, 2018.

The conversion price of the Series B

Preferred Stock and exercise price of the October 2018 Warrants are subject to appropriate adjustment in the event of recapitalization

events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Common

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

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 conversion price of the Series B Preferred

Stock and exercise price of the October 2018 Warrants is subject to appropriate adjustment in the event of recapitalization events, stock

dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Common Stock.

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

On November 16, 2020, the exercise price of

the Warrants was reduced from $1.38 per Warrant per full share of common stock to $0.69 per Warrant per full share of common stock.

The reduction was the result of the issuance of shares of Common Stock by the Company through its “at the market

offering”

The effect of the change in the exercise price of the warrants as a result of the triggering of the down

round protection clause in the Warrants was recorded as a deemed dividend in accumulated deficit of $880,000, which reduces the

income available to common stockholders for the year ended December 31, 2020.

The October 2018 Warrants are immediately

exercisable at a price of $1.38 per share of common stock (which is 120% of the public offering price of the Class A Units) and

will expire on October 15, 2023.

If, at the time of exercise, there is no effective registration statement registering, or no current

prospectus available for, the issuance of the shares of common stock to the holder, then the October 2018 warrants may only be

exercised through a cashless exercise.

No fractional shares of common stock will be issued in connection with the exercise of any

October 2018 warrants.

In lieu of fractional shares, the holder will receive an amount in cash equal to the fractional amount multiplied

by the fair market value of any such fractional shares.

The Company may not effect, and the holder

will not be entitled to, exercise any Warrants or conversion of the Series B Preferred Stock, which, upon giving effect to such

exercise, would cause (i) the aggregate number of shares of Common Stock beneficially owned by the holder (together with its affiliates)

to exceed 4.99% (or, at the election of the holder, 9.99%) of the number of shares of Common Stock outstanding immediately after

giving effect to the exercise, or (ii) the combined voting power of the Company’s securities beneficially owned by the holder

(together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99%) of the combined voting power of all of

the Company’s securities then outstanding immediately after giving effect to the exercise or conversion, as such percentage

ownership is determined in accordance with the terms of the October 2018 Warrants or Series B Preferred Stock.

However, any holder

may increase or decrease such percentage to any other percentage not in excess of 9.99% upon at least 61 days’ prior notice

from the holder to the Company.

The holders of the Series B Preferred will participate, on an as-if-converted-to-common stock basis,

in any dividends to the holders of common stock.

Upon a defined Fundamental Transaction, the holders of the Series B Preferred

Stock are entitled to the same consideration as are holders of Common Stock.

The Series B Preferred Stock ranks junior to existing

Series A Preferred Stock but on parity with common stock.

Liquidation preference is equal to an amount pari passu with the common

stock on an as converted basis (i.e., there is no preference to common stock).

exercisable at a price of $1.38 ($0.69 effective November 16, 2020) per share of common stock (which was 120% of the public offering

price of the Class A Units) and will expire on October 15, 2023.

If, at the time of exercise, there is no effective registration

statement registering, or no current prospectus available for, the issuance of the shares of common stock to the holder, then the October 2018

warrants may only be exercised through a cashless exercise.

No fractional shares of common stock will be issued in connection with the

exercise of any October 2018 warrants.

In lieu of fractional shares, the holder will receive an amount in cash equal to the fractional

amount multiplied by the fair market value of any such fractional shares.

Synthetic Biologics, Inc.

2 unchanged sentences

Common and Preferred Stock – (continued)

Since the effective conversion price of

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”

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.

During the three months ended March 31, 2021 and 2020, 3,973 and 1,073, respectively,

shares were converted resulting in the recognition of a deemed dividends of $1.5 million and $404,000, respectively, for the amortization

of the Series B Preferred Stock discount upon conversion.

Series A Preferred Stock

On September 11, 2017, the Company entered

into a share purchase agreement (the “Purchase Agreement”) with an investor (the “Investor”), pursuant

to which the Company offered and sold in a private placement 120,000 shares of its Series A Convertible Preferred Stock, par value

$0.001 per share (the “Series A Preferred Stock”) for an aggregate purchase price of $12 million, or $100 per share.

The Series A Preferred Stock ranks senior

to the shares of the Company’s common stock, and any other class or series of stock issued by the Company with respect to

dividend rights, redemption rights and rights on the distribution of assets upon any voluntary or involuntary liquidation, dissolution

or winding up of the affairs of the Company.

Holders of Series A Preferred Stock are entitled to a cumulative dividend at the rate

of 2.0% per annum, payable quarterly in arrears, as set forth in the Certificate of Designation of Series A Preferred Stock.

On September 11, 2017, the Company entered into

a share purchase agreement (the “Purchase Agreement”) with an investor (the “Investor”), pursuant to which the

Company offered and sold in a private placement 120,000 shares of its Series A Convertible Preferred Stock, par value $0.001 per share

(the “Series A Preferred Stock”) for an aggregate purchase price of $12 million, or $100 per share.

The Series A Preferred Stock ranks senior to the

shares of the Company’s common stock, and any other class or series of stock issued by the Company with respect to dividend rights,

redemption rights and rights to the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the

affairs of the Company.

Holders of Series A Preferred Stock are entitled to a cumulative dividend at the rate of 2.0% per annum,

payable quarterly in arrears, as set forth in the Certificate of Designation of Series A Preferred Stock classifying the Series A Preferred

The Series A Preferred Stock is convertible at the option of the holders at any time into shares of common stock at an initial

conversion price of $18.90 per share, subject to certain customary anti-dilution adjustments.

Any conversion of Series A Preferred Stock

may be settled by the Company in shares of common stock only.

conversion price of $0.54 per share which was increased to $18.90 after taking into account the 2018 reverse stock split, subject to certain

customary anti-dilution adjustments and was decreased to $1.50 on January 27, 2021, see below.

Any conversion of Series A Preferred Stock may

be settled by the Company in shares of common stock only.

The holder’s ability to convert the

Series A Preferred Stock into common stock is subject to (i) a 19.99% blocker provision to comply with NYSE American Listing

Rules, (ii) if so elected by the Investor, a 4.99% blocker provision that will prohibit beneficial ownership of more than 4.99%

of the outstanding shares of the Company’s common stock or voting power at any time, and (iii) applicable regulatory

restrictions.

In the event of any liquidation, dissolution or

winding-up of the Company, holders of the Series A Preferred Stock are entitled to a preference on liquidation equal to the greater of

(i) an amount per share equal to the stated value plus any accrued and unpaid dividends on such share of Series A Preferred Stock (the

“Accreted Value”), and (ii) the amount such holders would receive in such liquidation if they converted their shares of Series

A Preferred Stock (based on the Accreted Value and without regard to any conversion limitation) into shares of the common stock immediately

prior to any such liquidation, dissolution or winding-up (the greater of (i) and (ii), is referred to as the “Liquidation Value”).

Except as otherwise required by law, the

holders of Series A Preferred Stock have no voting rights, other than customary protections against adverse amendments and issuance

of pari passu or senior preferred stock.

Upon certain change of control events involving the Company, prior to the

filing of the amendment to the Certificate of Designation for the Series A Preferred Stock described below, the Company will be

required to repurchase all of the Series A Preferred Stock at a redemption price equal to the greater of (i) the Accreted Value and

(ii) the amount that would be payable upon a change of control (as defined in the Certificate of Designation) in respect of common

stock issuable upon conversion of such share of Series A Preferred Stock if all outstanding shares of Series A Preferred Stock were

converted into common stock immediately prior to the change of control.

On or at any time after (i) the VWAP (as

1 unchanged sentence

to adjustment in the case of stock split, stock dividends or the like the Company has the right, after providing notice not less

than 6 months prior to the redemption date, to redeem, in whole or in part, on a pro rata basis from all holders thereof based

on the number of shares of Series A Preferred Stock then held, the outstanding Series A Preferred Stock, for cash, at a redemption

than 6 months prior to the redemption date, to redeem, in whole or in part, on a pro rata basis from all holders thereof based on

the number of shares of Series A Preferred Stock then held, the outstanding Series A Preferred Stock, for cash, at a redemption

price per share of Series A Preferred Stock of $7,875.00, subject to appropriate adjustment in the event of any stock dividend,

stock split, combination or other similar recapitalization with respect to the Series A Convertible Preferred Stock, or (ii) the

five year anniversary of the issuance date, the Company has the right to redeem, in whole or in part, on a pro rata basis from

all holders thereof based on the number of shares of Series A Convertible Preferred Stock then held, the outstanding Series A Preferred

Stock, for cash, at a redemption price per share equal to the Liquidation Value (as defined in the Certificate of Designations).

The Series A Preferred Stock is classified

as temporary equity due to the shares being redeemable based on contingent events outside of the Company’s control.

the effective conversion price of the Series A 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 A 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.

the year ended December 31, 2017, the Company recorded a discount of $6.9 million.

Because the Series A Preferred Stock is not

currently redeemable, the discount arising from issuance costs was allocated to temporary equity and will not be accreted until

such time that redemption becomes probable.

The stated dividend rate of 2% per annum is cumulative and the Company accrues the

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

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.

stock split, combination or other similar recapitalization with respect to the Series A Convertible Preferred Stock or (ii) the five

year anniversary of the issue date, the Company shall have the right to redeem, in whole or in part, on a pro rata basis from all

holders thereof

Synthetic Biologics, Inc.

2 unchanged sentences

Common and Preferred Stock – (continued)

Riley FBR Sales Agreement

On August 5, 2016, the Company entered

based on the number of shares of Series A Convertible

Preferred Stock then held, the outstanding Series A Preferred Stock, for cash, at a redemption price per share equal to the Liquidation

The Series A Preferred Stock is classified

as temporary equity due to the shares being redeemable based on contingent events outside of the Company’s control.

Since the effective

conversion price of the Series A 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 A 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,

2017, the Company recorded a discount of $6.9 million.

Because the Series A Preferred Stock is not currently redeemable, the discount

arising from issuance costs was allocated to temporary equity and will not be accreted until such time that redemption becomes probable.

The stated dividend rate of 2% per annum is cumulative and the Company accrues the dividend on a quarterly basis (in effect accreting

the dividend regardless of declaration because the dividend is cumulative).

During the three months ended March 31, 2021 and 2020,

the Company accrued dividends of $24,000 and $62,000, 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.

On January 27, 2021, the Company filed an amendment

to the Certificate of Designation for the Series A Preferred Stock to (i) lower the stated Conversion Price through September 30, 2021

and (ii) remove their change in control put, as an inducement for the holder to fully convert its Series A Preferred Stock.

The Amendment

to the Certificate of Designation for its Series A Convertible Preferred Stock (the “Certificate of Amendment”) with the Secretary

of State of the State of Nevada adjusted the conversion price from $18.90 per share to $1.50 per share and removed the redemption upon

change of control.

The Company received notice from the holder of the Series A Preferred Stock that it was increasing the Maximum Percentage

as defined in the “Certificate of Designation”

from 4.99% to 9.99%, such increase to be effective 61 days from the date hereof.

During the three months ended March 31, 2021, all outstanding shares of Series A Convertible Preferred Stock were converted to approximately

9.0 million shares of the Company’s common stock.

There are no remaining shares of the Series A Convertible Preferred stock outstanding

after these conversions.

During January and February 2021, the Company issued 8,996,768 shares of its common stock upon the conversion

effected on such date by the holder of 120,000 shares of its Series A Convertible Preferred Stock.

The fair value of the consideration

issued to the holder to induce conversion is accounted for as a deemed dividend and increased net loss available to common shareholders

for purposes of calculating loss per share.

The Company estimated fair value of the inducement consideration of $7.4 million and as a

result has recorded a corresponding deemed dividend of $7.4 million during the three months ended March 31, 2021.

Riley Securities Sales Agreement

On August 5, 2016, the Company entered into

Riley FBR Sales Agreement with FBR Capital Markets & Co.

(now known as 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.

as the Company’s sales agent.

Riley Securities), which enables the Company

to offer and sell shares of common stock from time to time through B.

Riley Securities, Inc.

as the Company’s sales agent.

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 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 the B.

Riley FBR Sales Agreement.

Riley Securities Sales Agreement are made in sales deemed to be “at-the-market”

offerings as defined in Rule 415 promulgated under the Securities Act.

Riley Securities, Inc.

is entitled to receive a commission

rate of up to 3.0% of gross sales in connection with the sale of the Common Stock sold on the Company’s behalf.

The Company did

not sell any shares of common stock during the three months ended March 31, 2020 through the Riley Securities Sales Agreement.

On February 9, 2021, the Company entered

into an amended and restated sales agreement with B.

Riley Securities, Inc.

Riley”) and A.G.P./Alliance Global Partners

(“AGP”) in order to include AGP as an additional sales agent for the Company’s “at the market offering”

program (the “Amended and Restated Sales Agreement”).

The Sales Agreement amended and restated the At Market Issuance Sales

Agreement, dated August 5, 2016, with B.

Riley Securities, Inc.

(formerly known as B.

Riley FBR, Inc.), as amended by amendment

1, dated May 7, 2018, to the At Market Issuance Sales Agreement.

During the three months ended March 31, 2021,

the Company sold through the At Market Issuance Sales Agreement and the Amended and Restated Sales Agreement approximately 78.7 million

shares of the Company’s common stock and received net proceeds of approximately $66.0 million.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial

Related Party Transactions

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 “Study”).

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

by CSMC for the Study, 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:

(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 Synthetic Biomics, Inc.

(“SYN Biomics”) 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.

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.

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 “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).

In consideration of the support provided by CSMC

for the Study, the Company entered into a Stock Purchase Agreement with CSMC pursuant to which the Company:

(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 Synthetic Biomics, Inc.

(“SYN Biomics”) 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.

The Agreement also provided 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.

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.

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 was unlikely to meet its primary endpoint by the

time enrollment is completed.

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

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.

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.

and foreign 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.

During the three months

ended March 31, 2021 and 2020, the Company did not owe and did not pay CSMC for milestone payments related to this license agreement.

Synthetic Biologics, Inc.

2 unchanged sentences

Commitments and Contingencies

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.

Because the Company currently has no outstanding debt, the incremental borrowing rate for each lease is primarily

based on publicly-available information for companies within the same industry and with similar credit profiles.

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, Leases (ASC 842).

All of the Company’s existing leases as

of March 31, 2021 are classified as operating leases.

As of March 31, 2021, 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 9.9%.

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.

Company currently has no outstanding debt, the incremental borrowing rate for each lease is primarily based on publicly available information

for companies within the same industry and with similar credit profiles.

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 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

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 months ended March 31, 2021 and 2020 approximated $51,000

and $50,000, respectively.

A maturity analysis of our operating leases

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

Future undiscounted cash flow for the years ending December 31:

During the same periods, operating cash flows used for operating leases approximated $79,000 and $77,000, respectively,

and 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.

A maturity analysis of our operating leases as

of March 31, 2021 is as follows (amounts in thousands of dollars) :

Future undiscounted cash flow for the years ending March 31:

Discount factor

2 unchanged sentences

Lease liability –

Risks and Uncertainties

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.

In March 2020, the WHO classified

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

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.

1 unchanged sentence

Notes to Condensed Consolidated Financial

Subsequent Events

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.

Commitments and Contingencies – (continued)

Risks and Uncertainties

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.

In March 2020, the

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

As COVID-19 continued to spread around the globe,

the Company experienced disruptions that impacted 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.

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.

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