What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-03 compared with 2021-08-05 · 108 added, 118 removed, 396 unchanged (36% of the section changed)

4 unchanged sentences

(In thousands except share and par value amounts)

June 30, 2021

September 30, 2021

December 31, 2020

6 unchanged sentences

Deposits and other assets

Liabilities and Stockholders' Deficit

Liabilities and Stockholders' Equity (Deficit)

Current Liabilities:

7 unchanged sentences

Commitments and Contingencies

Series A convertible preferred stock, $ 0.001 par value;

Series A Preferred Stock, $ 0.001 par value;

10,000,000 shares authorized;

0 and 120,000 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

0 and 120,000 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Stockholders' Equity (Deficit):

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

10,000,000 shares authorized, 0 issued and outstanding and 3,973 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Series B Preferred Stock, $ 1,000 par value;

10,000,000 shares authorized, 0 issued and outstanding and 3,973 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Common stock, $ 0.001 par value;

200,000,000 shares authorized, 132,044,866 issued and 132,042,538 outstanding at June 30, 2021 and 29,252,253 issued and 29,249,925 outstanding at December 31, 2020

200,000,000 shares authorized, 132,044,866 issued and 132,042,538 outstanding at September 30, 2021 and 29,252,253 issued and 29,249,925 outstanding at December 31, 2020

Additional paid-in capital

10 unchanged sentences

(In thousands, except share and per share amounts)

For the three months ended June 30,

For the six months ended June 30,

For the three months ended September 30,

For the nine months ended September 30,

Operating Costs and Expenses:

36 unchanged sentences

Balance at June 30, 2021

Stock-based compensation

Balance at September 30, 2021

Common Stock $0.001 Par Value

15 unchanged sentences

Balance at June 30, 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 September 30, 2020

See accompanying notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash Flows from Operating Activities:

19 unchanged sentences

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 this period

Cash and cash equivalents at the beginning of the period

Cash and cash equivalents at the end of the period

Noncash Financing Activities:

27 unchanged sentences

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (subtopic 815-40) :

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

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).

This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics.

10 unchanged sentences

If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset.

During the three months ended March 31, 2020, the Company identified COVID-19 as a triggering event and performed a qualitative assessment of the fair value of its long-lived assets.

During the three months ended March 31, 2020, the Company identified a new strain of coronavirus originating in Wuhan, China (the “COVID-19” outbreak) as a triggering event and performed a qualitative assessment of the fair value of its long-lived assets.

The results from this analysis determined that it is still more likely than not that the fair value of its long-lived assets remain higher than the carrying value of these assets.

As a result, no impairment charges were recorded during the three and six months ended June 30, 2021 and 2020.

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

Fair Value of Financial Instruments

16 unchanged sentences

Prepaid expenses and other current assets (in thousands)

September 30,

Prepaid clinical research organizations

Prepaid insurances

Prepaid consulting, subscriptions and other expenses

Prepaid insurances

Stock sales receivable

3 unchanged sentences

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

Accrued vendor payments

Other accrued expenses

Accrued employee benefits (in thousands)

September 30,

Accrued bonus expense

10 unchanged sentences

Options become exercisable over various periods from the date of grant and generally expire ten years after the grant date.

As of June 30, 2021, there were 5,145 options issued and outstanding under the 2007 Stock Plan.

As of September 30, 2021, there were 5,145 options issued and outstanding under the 2007 Stock Plan.

On November 2, 2010, the Board of Directors and stockholders adopted the 2010 Stock Incentive Plan (“2010 Stock Plan”) for the issuance of up to 85,714 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries.

From time to time the number of shares authorized for options was increased such that 4,000,000 million were authorized as of September 30, 2021.

The exercise price of stock options under the 2010 Stock Plan is determined by the compensation committee of the Board of Directors and may be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted.

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

As of June 30, 2021, there were 2,452,273 options issued and outstanding under the 2010 Stock Plan.

As of September 30, 2021, there were 2,452,273 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 June 30, 2021, there were 1,540,000 options issued and outstanding under the 2010 Stock Plan.

As of September 30, 2021, there were 1,540,000 options issued and outstanding under the 2010 Stock Plan.

In the event of an employee’s termination, the Company will cease to recognize compensation expense for that employee’s options.

2 unchanged sentences

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 at grant date.

The Company has applied fair value accounting for all stock-based payment awards at the grant date.

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 and six months ended June 30, 2021 and 2020.

Stock-Based Compensation – (continued)

There were no options granted during the three and nine months ended September 30, 2021 and 2020.

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.

6 unchanged sentences

Notes to Condensed Consolidated Financial Statements

Stock-Based Compensation – (continued)

Expected life of the option —The period of time that the options granted are expected to remain unexercised.

18 unchanged sentences

Stock-Based Compensation – (continued)

A summary of stock option activity for the six months ended June 30, 2021 and the year ended December 31, 2020 is as follows:

A summary of stock option activity for the nine months ended September 30, 2021 is as follows:

Weighted Average

2 unchanged sentences

Balance - December 31, 2020

Balance - June 30, 2021 - outstanding

Balance - June 30, 2021 - exercisable

Grant date fair value of options granted – three months ended June 30, 2021

Weighted average grant date fair value – three months ended June 30, 2021

Balance - September 30, 2021 - outstanding

Balance - September 30, 2021 - exercisable

Grant date fair value of options granted – nine months ended September 30, 2021

Weighted average grant date fair value –nine months ended September 30, 2021

Grant date fair value of options granted – year ended December 31, 2020

Weighted average grant date fair value – 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 six months ended June 30, 2021 was $ 34,000 and $ 67,000 , respectively, and $ 40,000 and $ 79,000 for the three and six months ended June 30, 2020, respectively.

Stock-based compensation expense included in research and development expenses relating to stock options issued to employees for the three and six months ended June 30, 2021 was $ 16,000 and $ 31,000 ,respectively, and $ 15,000 and $ 31,000 for the three and six months ended June 30, 2020, respectively.

Stock-based compensation expense included in general and administrative expenses relating to stock options issued to consultants for the three and six months ended June 30, 2021 was $ 49,000 and $ 98,000 , respectively, and $ 27,000 and $ 53,000 for the three and six months ended June 30, 2020, respectively.

Stock-based compensation expense included in research and development expenses relating to stock options issued to consultants for the three and six months ended June 30, 2021 was $ 3,000 and $ 7,000 , respectively, and $ 4,000 and $ 6,000 for the three and six months ended June 30, 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, 2021 was $ 34,000 and $ 101,000 , respectively, and $ 41,000 and $ 120,000 for the three and nine months ended September 30, 2020, 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, 2021 was $ 16,000 and $ 47,000 , respectively, and $ 14,000 and $ 45,000 for the three and nine months ended September 30, 2020, 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, 2021 was $ 49,000 and $ 147,000 , respectively, and $ 26,000 and $ 79,000 for the three and nine months ended September 30, 2020, 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, 2021 was $ 3,000 and $ 10,000 , respectively, and $ 1,000 and $ 7,000 for the three and nine months ended September 30, 2020.

Synthetic Biologics, Inc.

2 unchanged sentences

Stock-Based Compensation – (continued)

As of June 30, 2021, total unrecognized stock-based compensation expense related to stock options was $ 483,000 , which is expected to be expensed through April 2023.

As of September 30, 2021, total unrecognized stock-based compensation expense related to stock options was $ 380,000 , which is expected to be expensed through May 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 and six months ended June 30, 2021 and 2020.

The Company did not record any excess tax benefits during the three and nine months ended September 30, 2021 and 2020.

Stock Warrants

2 unchanged sentences

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 during the year ended December 31, 2020, which reduces the income available to common stockholders.

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 $ 0.9 million during the year ended December 31, 2020, 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.

5 unchanged sentences

The Warrants were valued on the date of grant using Monte Carlo simulations.

During the six months ended June 30, 2021, 11,655,747 warrants were exercised for cash proceeds of $ 8.0 million.

There were no warrants exercised during the 3 months ended June 30, 2021.

During the nine months ended September 30, 2021, 11,655,747 warrants were exercised for cash proceeds of $ 8.0 million.

There were no warrants exercised during the three months ended September 30, 2021.

Synthetic Biologics, Inc.

15 unchanged sentences

The warrants were valued on the date of grant and on each remeasurement period.

A summary of all warrant activity for the Company for the six months ended June 30, 2021 and the year ended December 31, 2020 is as follows:

A summary of all warrant activity for the Company for the nine months ended September 30, 2021 is as follows:

Weighted Average

1 unchanged sentence

Balance at December 31, 2020

Balance at June 30, 2021

A summary of all outstanding and exercisable common stock warrants as of June 30, 2021 is as follows:

Balance at September 30, 2021

A summary of all outstanding and exercisable common stock warrants as of September 30, 2021 is as follows:

Weighted Average

2 unchanged sentences

Contractual Life

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Net Loss per Share

2 unchanged sentences

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

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

stockholders for the six months ended June 30, 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 and six months ended June 30, 2020 excludes net loss attributable to non-controlling interest of $ 0.1 million and includes the accretion of Series B preferred discount of $ 0.4 million and $ 0.8 million, respectively, on converted shares and Series A preferred stock accrued dividends of $ 0.1 million.

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 and six months ended June 30, 2021 since all remaining Series B preferred stock were converted to common stock.

A total of 4,804,348 shares of common stock underlying Series B preferred shares convertible to common stock were excluded from the computations of net loss per common share for the three and six months ended June 30, 2020.

The number of options and warrants for the purchase of common stock were excluded from the computations of net loss per common share and for the three and six months ended June 30, 2021 were 3,997,418 and 6,344,966 , respectively, and for the six months ended June 30, 2020 were 2,472,362 and 18,714,999 , respectively, because their effect is anti-dilutive.

Net loss attributable to common stockholders for the nine months ended September 30, 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 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.

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 and nine months ended September 30, 2021 since all remaining Series B preferred stock were converted to common stock.

A total of 3,605,217 shares of common stock underlying Series B preferred shares convertible to common stock were excluded from the computations of net loss per common share for the three and nine months ended September 30, 2020.

The number of options and warrants for the purchase of common stock that were excluded from the computations of net loss per common share for the three and nine months ended September 30, 2021 were 3,997,418 and 6,344,966 , respectively, and for the nine months ended September 30, 2020 were 2,460,325 and 18,714,999 , respectively, because their effect is anti-dilutive.

Non-controlling Interest

7 unchanged sentences

After the 2018 transaction with CSMC, the Company’s equity interest in SYN Biomics is 83 % and the non-controlling stockholder’s interest is 17 %.

As of June 30, 2021 and 2020, the accumulated net loss attributable to the non-controlling interest is $ 2.8 million and $ 2.9 million, respectively.

As of September 30, 2021 and 2020, the accumulated net loss attributable to the non-controlling interest is $ 2.8 million and $ 2.8 million, respectively.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Non-controlling Interest – (continued)

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):

1 unchanged sentence

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.

(“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 services rendered are recorded to research and development expense in proportion with the progress of the study and based overall on the fair value of the shares ($ 285,000 ) as determined at the date of IRB approval.

During the three and six months ended June 30, 2020, research and development expense recorded related to this transaction approximated $ 25,000 and $ 92,000 , respectively.

There was no expense recorded related to this transaction during the three and six months ended June 30, 2021.

Non-controlling Interest – (continued)

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

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

valuation of the Company at the time of each exchange.

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.

There was no expense recorded related to this transaction during the three and nine months ended September 30, 2021.

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.

1 unchanged sentence

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.

On November 9, 2020, the Company and its subsidiary, SYN Biomics 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.

On September 30, 2020, CSMC informed the Company that it discontinued the ongoing Phase 2b investigator-sponsored clinical study of SYN-010 IBS-C patients.

Common and Preferred Stock

2 unchanged sentences

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.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Common and Preferred Stock – (continued)

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.

1 unchanged sentence

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 Units were offered by the Company pursuant to a registration statement on Form S-1 (File No.

333-227400), as amended, filed with the SEC, which was declared effective by the SEC on October 10, 2018.

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.

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

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Common and Preferred Stock – (continued)

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” 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 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 ($ 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.

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 $ 0.9 million, 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 $ 0.69 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.

3 unchanged sentences

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 six months ended June 30, 2021 and 2020, 3,973 and 2,113 shares, respectively, were converted resulting in the recognition of a deemed dividends of $ 1.5 million and $ 795,000 , respectively, for the amortization of the Series B Preferred Stock discount upon conversion.

There we no shares converted during the three months ended June 30, 2021.

During the three months ended June 30, 2020, 1,040 shares were converted resulting in the recognition of a deemed dividends of $ 392,000 for the amortization of the Series B Preferred Stock discount upon conversion.

During the nine months ended September 30, 2021 and 2020, 3,973 and 3,492 shares, respectively, were converted resulting in the recognition of deemed dividends of $ 1.5 million and $ 1.3 million, respectively, for the amortization of the Series B Preferred Stock discount upon conversion.

During the three months ended September 30, 2020, 1,379 shares were converted resulting in the recognition of a deemed dividend of $ 0.5 million for the amortization of the Series B Preferred Stock discount upon conversion.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Common and Preferred Stock – (continued)

Series A Preferred Stock

2 unchanged sentences

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 Stock.

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 $ 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 was 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 would 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 were 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 have received 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 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 defined in the Certificate of Designation) for at least 20 trading days in any 30 trading day period is greater than $ 70.00 , subject 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 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 issue date, the Company shall have 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.

Synthetic Biologics, Inc.

2 unchanged sentences

Common and Preferred Stock – (continued)

In the event of any liquidation, dissolution or winding-up of the Company, holders of the Series A Preferred Stock were 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 have received 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”).

On or at any time after (i) the VWAP (as defined in the Certificate of Designation) for at least 20 trading days in any 30 trading day period is greater than $ 70.00 , subject 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 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 issue date, the Company shall have 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.

The Series A Preferred Stock was classified as temporary equity due to the shares being redeemable based on contingent events outside of the Company’s control.

4 unchanged sentences

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 June 30, 2021, the Company did not record any Series A Preferred Stock dividends since all shares were converted to shares of common stock during the three months ended March 31, 2021.

During the six months ended June 30, 2021, the Company accrued dividends of $ 24,000 .

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

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Common and Preferred Stock – (continued)

During the three months ended September 30, 2021, the Company did not record any Series A Preferred Stock dividends since all shares were converted to shares of common stock during the three months ended March 31, 2021.

During the nine months ended September 30, 2021, the Company accrued dividends of $ 24,000 .

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

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 six months ended June 30, 2021.

The fair value of the consideration issued to the holder to induce conversion was accounted for as a deemed dividend and increased net loss available to common shareholders for purposes of calculating loss per share.

The Company estimated the fair value of the inducement consideration of $ 7.4 million and as a result recorded a corresponding deemed dividend of $ 7.4 million during the nine months ended September 30, 2021.

Riley Securities Sales Agreement

9 unchanged sentences

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 and six months ended June 30, 2020 through the Riley Securities Sales Agreement.

The Company did not sell any shares of common stock during the three and nine months ended September 30, 2020 through the Riley Securities Sales Agreement.

On February 9, 2021, the Company entered into an amended and restated sales agreement with B.

1 unchanged sentence

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 no.

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

During the six months ended June 30, 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.

The Company did not sell any shares of common stock during the three months ended June 30, 2021 through the Riley Securities Sales Agreement.

During the nine months ended September 30, 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.

The Company did not sell any shares of common stock during the three months ended September 30, 2021 through the Amended and Restated Sales Agreement.

Synthetic Biologics, Inc.

8 unchanged sentences

(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.

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 owned by the Company, such that after such issuance CSMC owned 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 Stock Purchase Agreement also provides for tag-along rights in the event of the sale by the Company of its shares of SYN Biomics.

The Stock Purchase Agreement also provided 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 was unlikely to meet its primary endpoint by the time enrollment was 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.

In December 2013, through SYN Biomics, 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.

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 six months ended June 30, 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 June 30, 2021 are classified as operating leases.

As of June 30, 2021, the Company has one operating lease for facilities with a remaining term expiring in 2027.

All of the Company’s existing leases as of September 30, 2021 are classified as operating leases.

As of September 30, 2021, the Company has one operating lease for facilities with a remaining term expiring in 2027.

During the quarter ended June 30, 2021, the Company renewed its facility lease by entering into a Second Lease Amendment which extends the lease term for 63 months beginning on September 1, 2022 and ending on December 31, 2027 at stated rental rates and including a 3 month rent abatement.

2 unchanged sentences

The Second Extension Term is offered at market rates and there is no economic incentive for the lessee, therefore the Company has determined that it is not part of the original lease term.

There is an option in this Second Amendment to Lease for the Company to borrow funds for tenant improvements subject to an 8.5 % interest rate, which is the discount rate used in this modification analysis.

Operating lease costs are presented as part of general and administrative expenses in the condensed consolidated statements of operations, and for the three and six months ended June 30, 2021 approximated $ 68,000 and $ 118,000 , respectively and for the three and six months ended June 30, 2020 approximated $ 50,000 and $ 101,000 , respectively.

For the three and six months ended June 30, 2021, operating cash flows used for operating leases approximated $ 80,000 and $ 160,000 , respectively, and for three and six months ended June 30, 2020 approximated $ 77,000 and $ 154,000 , respectively, and right of use assets exchanged for operating lease obligations was $ 1.3 million.

There is an option in this Second Amendment to Lease for the Company to borrow funds for tenant improvements subject to an 8.5 % interest rate.

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, 2021 approximated $ 77,000 and $ 195,000 , respectively, and for the three and nine months ended September 30, 2020 approximated $ 50,000 and $ 151,000 , respectively.

For the three and nine months ended September 30, 2021, operating cash flows used for operating leases approximated $ 80,000 and $ 240,000 , respectively, and for three and nine months ended September 30, 2020 approximated $ 77,000 and $ 231,000 , respectively, and the right of use assets exchanged for operating the lease obligation was $ 1.3 million.

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 June 30, 2021 is as follows (amounts in thousands of dollars) :

Future undiscounted cash flow for the years ending June 30:

A maturity analysis of our operating leases as of September 30, 2021 is as follows (amounts in thousands of dollars) :

Future undiscounted cash flow for the years ending September 30:

Discount factor

7 unchanged sentences

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.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of 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.

4 unchanged sentences

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