What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-16 compared with 2021-03-04 · 516 added, 1391 removed, 298 unchanged (86% of the section changed)

Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (BDO USA, LLP;

Potomac, Maryland;

PCAOB ID# 243 )

Consolidated Balance Sheets

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Notes to Consolidated Financial Statements

Report of Independent Registered Public

Accounting Firm

and Board of Directors

Biologics, Inc.

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Synthetic Biologics, Inc.

(the “Company”) as of December

31, 2020 and 2019, the related consolidated statements of operations, stockholders’

deficit, and cash flows for the years

then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion,

the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December

31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended , in conformity with accounting

principles generally accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an

opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered

with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with

respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits

to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether

due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over

financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting

but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Synthetic Biologics, Inc.

Rockville, Maryland

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Synthetic Biologics, Inc.

(the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the

accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

consolidated financial statements.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements

that was communicated or required to be communicated to the audit committee and that:

(i) relates to accounts or disclosures that

are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements,

taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical

audit matter or on the accounts or disclosures to which it relates.

described in Note 1 to the consolidated financial statements, the Company has a significant accumulated deficit and, with the

exception of the three months ended June 30, 2010 and the three months ended December 31, 2017, the Company has experienced significant

losses and incurred negative cash flows since inception.

The Company expects to continue incurring losses for the foreseeable

Further, the Company has spent, and expects to continue to spend, a substantial amount of funds in connection with implementing

its business strategy, including planned product development efforts, clinical trials and research and discovery efforts.

Company is dependent on its ability to raise additional funding from the capital markets in order to continue to fund its operations.

identified management’s evaluation of the Company’s liquidity as a critical audit matter due to the significant judgments

and assumptions used by management in (i) preparing its forecast of cash expenditures to support the Company’s drug development

and clinical trials, and (ii) providing complete and accurate disclosures related to the Company’s liquidity.

Auditing these

judgments and assumptions involved especially challenging auditor judgment due to the nature and extent of audit effort required

to address these matters.

primary procedures we performed to address this critical audit matter included:

the completeness and accuracy of underlying data used in the forecasted cash expenditures

by (i) inspecting contractual arrangements with third-party clinical research organizations

and suppliers, and (ii) considering current and past expenditures in evaluating the forecasted

fixed and variable costs.

the reasonableness of management’s key assumptions in forecasting cash expenditures

by (i) performing a retrospective review of historical forecasts, (ii) comparing information

related to the Company’s ongoing and anticipated clinical trials and drug development

pipeline to management’s assumptions, and (iii) assessing the impact of proceeds

received from equity financing activities subsequent to year-end on the Company’s

planned expenditures.

the adequacy of management’s disclosure in the consolidated financial statements

regarding the Company’s liquidity by comparing to other audit evidence obtained

to determine whether such information is consistent with or contradictory to the Company’s

liquidity disclosure.

We have served

as the Company's auditor since 2012.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(i) relates to accounts or disclosures that are material to the consolidated financial statements, and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of Liquidity

As described in Note 1 to the consolidated financial statements, the Company has a significant accumulated deficit and has experienced significant losses and incurred negative cash flows since inception.

The Company expects to continue incurring losses for the foreseeable future.

Further, the Company has spent, and expects to continue to spend, a substantial amount of funds in connection with implementing its business strategy, including planned product development efforts, clinical trials and research and discovery efforts.

The Company is dependent on its ability to raise additional funding from the capital markets in order to continue to fund its operations.

We identified management’s evaluation of the Company’s liquidity as a critical audit matter due to the significant judgments and assumptions used by management in (i) preparing its forecast of cash expenditures to support the Company’s drug development and clinical trials, including anticipated expenditures related to the acquisition of VCN BioSciences, S.L (“VCN”) subsequent to year end as described in Note 9, and (ii) providing complete and accurate disclosures related to the Company’s liquidity.

Auditing these judgments and assumptions involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

● Testing the completeness and accuracy of underlying data used in the forecasted cash expenditures by (i) inspecting contractual arrangements with third-party clinical research organizations and suppliers, and (ii) considering current and past expenditures in evaluating the forecasted fixed and variable costs.

● Assessing the reasonableness of management’s key assumptions in forecasting cash expenditures by (i) performing a retrospective review of historical forecasts, (ii) comparing information related to the Company’s ongoing and anticipated clinical trials and drug development pipeline to management’s assumptions, and (iii) assessing the anticipated cash flows required to fund the payment of the cash portion of the transaction price for the acquisition of VCN and the forecasted expenditures that will be required to fund the development of VCN’s various drug candidates.

● Evaluating the adequacy of management’s disclosure in the consolidated financial statements regarding the Company’s liquidity by comparing to other audit evidence obtained to determine whether such information is consistent with or contradictory to the Company’s liquidity disclosure.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2012.

Potomac, Maryland

March 16, 2022

Synthetic Biologics, Inc.

1 unchanged sentence

Consolidated Balance Sheets

(In thousands except share and par value

(In thousands except share and par value amounts)

Current Assets

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Deposits and other assets

Liabilities and Stockholders' Deficit

Liabilities and Stockholders’ Equity (Deficit)

Current Liabilities:

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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;

120,000 issued and outstanding

Stockholders' Deficit:

Series B convertible preferred stock, $0.0001 par value;

10,000,000 shares authorized, 3,973 issued and outstanding at December 31, 2020 and 7,638 issued and outstanding at December 31, 2019

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

Stockholders’ Equity (Deficit):

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

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

Common stock, $ 0.001 par value;

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Total Synthetic Biologics, Inc.

and Subsidiaries (Deficit) Equity

and Subsidiaries Equity (Deficit)

Non-controlling interest

Total Stockholders' Deficit

Total Liabilities and Stockholders' Deficit

See accompanying notes to consolidated financial

Total Stockholders’ Equity (Deficit)

Total Liabilities and Stockholders’ Equity

See accompanying notes to consolidated financial statements

Synthetic Biologics, Inc.

1 unchanged sentence

Consolidated Statements of Operations

(In thousands, except share and per share

(In thousands, except share and per share amounts)

For the year ended

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Series B Preferred Stock Dividends

Effect of Series A Preferred Stock price adjustment

Effect of Warrant exercise price adjustment

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Weighted average number of shares outstanding during the period - basic and dilutive

See accompanying notes to consolidated

financial statements

See accompanying notes to consolidated financial statements

Synthetic Biologics, Inc.

and Subsidiaries

Consolidated Statements

of Stockholders Deficit

(In thousands, except share and par value

Consolidated Statements of Stockholders (Deficit) Equity

(In thousands, except share and par value amounts)

Series B Preferred

Non-Controlling

Stockholders’

(Deficit) Equity

Balance at December 31, 2019

Stock-based compensation

Stock issued under “at-the-market” offering

Series A Preferred Stock Dividends

Issuance of SYN Biomics Stock

Conversion of Series B Preferred Stock to

Non-controlling interest

Effect of Warrant exercise price adjustment

Conversion of Series B Preferred Stock to Common

Balance at December 31, 2020

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Series A Preferred Stock Dividends

Issuance of SYN Biomics Stock

Effect of Warrant exercise price adjustment

Conversion of Series B Preferred Stock to

Non-controlling interest

Warrants Exercised

Effect of Series A Preferred Stock price adjustment

Conversion of Series A Preferred Stock to Common

Conversion of Series B Preferred Stock to Common

Reversal of noncontrolling interest due to return of Syn Biomics shares

Balance at December 31,2021

See accompanying notes to consolidated financial

See accompanying notes to consolidated financial statements

Synthetic Biologics, Inc.

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Cash Flows From Financing Activities:

Proceeds from "at-the-market"

stock issuance

Proceeds from “at-the-market” stock issuance

Proceeds from issuance of common stock for warrant exercises

Net Cash Provided By Financing Activities

Net decrease in cash

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

1 unchanged sentence

NONCASH FINANCING ACTIVITIES:

Conversion of Series A Preferred Stock

Effect of Series A Preferred Stock price adjustment

Return of SYN Biomics Stock

Conversion of Series B Preferred Stock

Deemed dividends for accretion of Series B Preferred Stock discount

Effect of Warrant exercise price adjustment

In-kind dividends in preferred stock

Right of use assets from operating lease

See accompanying notes to consolidated financial

In-kind dividends in preferred stock

Effect of Warrant exercise price adjustment

See accompanying notes to consolidated financial statements

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Organization and Nature of Operations

and Basis of Presentation

Organization and Nature of Operations and Basis of Presentation

Description of Business

Synthetic Biologics, Inc.

(the “Company”

or “Synthetic Biologics”) is a diversified clinical-stage company developing therapeutics designed to prevent and treat

gastrointestinal (GI) diseases in areas of high unmet need.

The Company’s lead clinical development candidates are:

(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.

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.

Corporate Structure and Basis of

As of December 31, 2020, the Company

had eight subsidiaries, Pipex Therapeutics, Inc.

(“Pipex Therapeutics”), Effective Pharmaceuticals, Inc.

(“EPI”), Solovax, Inc.

(“Solovax”), CD4 Biosciences, Inc.

(“CD4”), Epitope Pharmaceuticals, Inc.

(“Epitope”), Healthmine, Inc.

(“Healthmine”), Putney Drug Corp.

(“Putney”) and Synthetic

Biomics, Inc.

(“SYN Biomics”).

Pipex Therapeutics, EPI, Healthmine and Putney are wholly owned, and Solovax, CD4,

Epitope and SYN Biomics are majority-owned.

For financial reporting purposes, the outstanding

common stock of the Company is that of Synthetic Biologics, Inc.

All statements of operations, (deficit) equity and cash flows

for each of the entities are presented as consolidated.

All subsidiaries were formed under the laws of the State of Delaware on

January 8, 2001, except for EPI, which was incorporated in Delaware on December 12, 2000, Epitope which was incorporated

in Delaware in January of 2002, Putney which was incorporated in Delaware in November of 2006, Healthmine which was incorporated

in Delaware in December of 2007 and SYN Biomics which was incorporated in Nevada in December of 2013.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Organization and Nature of Operations

and Basis of Presentation –

As of December 31, 2020, the

Company has a significant accumulated deficit, and with the exception of the three months ended June 30, 2010 and the

three months ended December 31, 2017, the Company has experienced significant losses and incurred negative cash flows

since inception.

The Company expects to continue incurring losses for the foreseeable future, with the recognition of revenue

being contingent on successful phase 3 clinical trials and requisite approvals by the FDA.

Historically, the Company has

financed its operations primarily through public and private sales of its common stock and a private placement of its

preferred stock, and it expects to continue to seek to obtain required capital in a similar manner.

The Company has spent,

and expects to continue to spend, a substantial amount of funds in connection with implementing its business strategy,

including planned product development efforts, clinical trials and research and discovery efforts.

Cash and cash equivalents totaled approximately

$6.2 million as of December 31, 2020, which includes the net proceeds of approximately $3.4 million from sales of its Common Stock

in “at-the-market”

(ATM) equity offerings during 2020.

Subsequent to year end through March 3, 2021, the Company received

cash proceeds of approximately $8.0 million through the exercise of a portion of the October 2018 warrants and approximately $63.8

million from sales of its Common Stock in “at-the-market”

(ATM) equity offerings, see Note 10.

With these additional

sources of liquidity , the Company believes it will be able to fund

its operations through the next twelve months from the issuance date of these financial statements.

Management believes its plan,

which includes the further development of SYN-020 and additional testing of SYN-004 (ribaxamase), will allow the Company to meet

its financial obligations, further advance key products, and maintain the Company’s planned operations for at least one year

from the issuance date of these consolidated financial statements.

If necessary, the Company may attempt to utilize the ATM or

seek to raise additional capital on the open market, neither of which is guaranteed.

Use of the ATM is limited by certain restrictions

and management’s plan does not rely on additional capital from either of these sources.

If the Company is not able to obtain

additional capital (which is not assured at this time), our long-term business plan may not be accomplished and we may be forced

to cease certain development activities.

More specifically, the completion of any later stage clinical trial will require significant

financing or a significant partnership.

(the “Company” or “Synthetic Biologics”) is a diversified clinical-stage company operating in one segment currently 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.

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 (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.

Corporate Structure and Basis of Presentation

As of December 31, 2021, the Company had eight subsidiaries, Pipex Therapeutics, Inc.

(“Pipex Therapeutics”), Effective Pharmaceuticals, Inc.

(“EPI”), Solovax, Inc.

(“Solovax”), CD4 Biosciences, Inc.

(“CD4”), Epitope Pharmaceuticals, Inc.

(“Epitope”), Healthmine, Inc.

(“Healthmine”), Putney Drug Corp.

(“Putney”) and Synthetic Biomics, Inc.

(“SYN Biomics”).

Pipex Therapeutics, EPI, Healthmine and Putney are wholly owned, and Solovax, CD4, Epitope and SYN Biomics are majority-owned.

For financial reporting purposes, the outstanding common stock of the Company is that of Synthetic Biologics, Inc.

All statements of operations, (deficit) equity and cash flows for each of the entities are presented as consolidated.

All subsidiaries were formed under the laws of the State of Delaware on January 8, 2001, except for EPI, which was incorporated in Delaware on December 12, 2000, Epitope which was incorporated in Delaware in January 2002, Putney which was incorporated in Delaware in November 2006, Healthmine which was incorporated in Delaware in December 2007 and SYN Biomics which was incorporated in Nevada in December 2013.

As of December 31, 2021, the Company has a significant accumulated deficit, and with the exception of the three months ended June 30, 2010 and the three months ended December 31, 2017, the Company has experienced significant losses and incurred negative cash flows since inception.

The Company expects to continue incurring losses for the foreseeable future, with the recognition of revenue being contingent on successful phase 3 clinical trials and requisite approvals by the FDA or foreign equivalents.

Historically, the Company has financed its operations primarily through public and private sales of its common stock and a private placement of its preferred stock, and it expects to continue to seek to obtain required capital in a similar manner.

The Company has spent, and expects to continue to spend, a substantial amount of funds in connection with implementing its business strategy, including planned product development efforts, clinical trials and research and discovery efforts.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Summary of Significant Accounting

Organization and Nature of Operations and Basis of Presentation – (continued)

Cash and cash equivalents totaled approximately $ 67.3 million as of December 31, 2021, which includes the net proceeds of approximately $ 66 million from sales of its Common Stock in “at-the-market” (ATM) equity offerings during 2021 and cash proceeds of approximately $ 8.0 million through the exercise of a portion of the October 2018 warrants.

With these additional sources of liquidity , the Company believes it will be able to fund its operations through the next twelve months from the issuance date of these financial statements.

Management believes its plan, which includes the further development of SYN-020, additional testing of SYN-004 (ribaxamase) and the advancement of VCN-01 will allow the Company to meet its financial obligations, further advance key products, and maintain the Company’s planned operations for at least one year from the issuance date of these consolidated financial statements.

If necessary, the Company may attempt to utilize the ATM or seek to raise additional capital on the open market, neither of which is guaranteed.

Use of the ATM is limited by certain restrictions and management’s plan does not rely on additional capital from either of these sources.

If the Company is not able to obtain additional capital (which is not assured at this time), our long-term business plan may not be accomplished and we may be forced to cease certain development activities.

More specifically, the completion of any later stage clinical trial will require significant financing or a significant partnership.

Summary of Significant Accounting Policies

Principles of Consolidation

All intercompany transactions and accounts

have been eliminated in consolidation.

Immaterial Revision

In 2020, the Company completed an Internal Revenue Code Section

382 analysis of its historical net operating loss carry-forward amount.

As a result, the prior year net operating loss carry-forward

was determined to be limited.

See Note 8 for further details.

All intercompany transactions and accounts have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial

statements in conformity with accounting principles generally accepted in the United States of America requires management to make

estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

estimates and assumptions impact, among others, the following:

the estimated useful lives for property and equipment, fair value

of warrants, preferred stock and stock options granted for services or compensation, respectively, and the valuation allowance

for deferred tax assets due to continuing and expected future operating losses.

Making estimates requires management to

exercise significant judgment.

It is at least reasonably possible that the estimate of the effect of a condition, situation or

set of consolidated financial statements, which management considered in formulating its estimate could change in the near term

due to one or more future confirming events.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Such estimates and assumptions impact, among others, the following:

the estimated useful lives for property and equipment, fair value of warrants, preferred stock and stock options granted for services or compensation, respectively, and the valuation allowance for deferred tax assets due to continuing and expected future operating losses.

Making estimates requires management to exercise significant judgment.

It is at least reasonably possible that the estimate of the effect of a condition, situation or set of consolidated financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events.

Accordingly, actual results could differ from those estimates.

Non-controlling Interest

The Company’s non-controlling interest

represents the minority stockholder’s ownership interest related to the Company’s subsidiary, SYN Biomics.

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

the minority stockholder for an investigator-sponsored Phase 2 clinical study of SYN-010.

Prior to this agreement and IRB approval

in December 2018, the Company’s equity interest in SYN Biomics was 88.5% and the non-controlling stockholder’s

interest was 11.5%.

In consideration of the support, the Company issued additional shares of stock to the minority stockholder.

The Company’s equity interest in SYN Biomics is now 83.0% and the non-controlling stockholder’s interest is 17.0%.

The Company’s non-controlling interest represents the minority stockholder’s ownership interest related to the Company’s subsidiary, SYN Biomics.

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 the minority stockholder for an investigator-sponsored Phase 2 clinical study of SYN-010.

Prior to this agreement and IRB approval in December 2018, the Company’s equity interest in SYN Biomics was 88.5 % and the non-controlling stockholder’s interest was 11.5 %.

In consideration of the support, the Company issued additional shares of stock to the minority stockholder, resulting in the Company’s equity interest in SYN Biomics being 83.0 % and the non-controlling stockholder’s interest is 17.0 %.

During 2021, the minority stockholder returned its shares of SYN Bionics to the Company for no consideration.

The Company's interest in SYN Biomics is now 100%.

This is reflected in the Consolidated Statements of Equity (Deficit).

Risks and Uncertainties

The Company’s operations could be

subject to significant risks and uncertainties including financial, operational and regulatory risks and the potential risk of

business failure.

These conditions may not only limit the Company’s access to capital, but also make it difficult for its

customers, its vendors and its ability to accurately forecast and plan future business activities.

The Company’s operations could be subject to significant risks and uncertainties including financial, operational and regulatory risks and the potential risk of business failure.

These conditions may not only limit the Company’s access to capital, but also make it difficult for its customers, its vendors and its ability to accurately forecast and plan future business activities.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Summary of Significant Accounting

Policies –

Summary of Significant Accounting Policies – (continued)

Cash and Cash Equivalents

Cash and cash equivalents include cash

and highly liquid short-term investments with original maturities of three months or less.

Cash and cash equivalents include cash and highly liquid short-term investments with original maturities of three months or less.

Property and Equipment

Property and equipment is recorded at cost

and depreciated or amortized using the straight-line method over the estimated useful life of the asset or the underlying lease

term for leasehold improvements, whichever is shorter.

The estimated useful life by asset description is noted in the following

Property and equipment is recorded at cost and depreciated or amortized using the straight-line method over the estimated useful life of the asset or the underlying lease term for leasehold improvements, whichever is shorter.

The estimated useful life by asset description is noted in the following table.

Asset Description

3 unchanged sentences

Lesser of estimated useful life or lease term

Depreciation and amortization expense was

approximately $201,000 and $240,000 for the years ended December 31, 2020 and 2019, respectively.

When assets are disposed

of, the cost and accumulated depreciation are removed from the accounts with any gain or loss reported in the consolidated statement

of operations.

Depreciation and amortization expense was approximately $ 87,000 and $ 201,000 for the years ended December 31, 2021 and 2020, respectively.

When assets are disposed of, the cost and accumulated depreciation are removed from the accounts with any gain or loss reported in the consolidated statement of operations.

Repairs and maintenance are charged to expense as incurred.

The Company reviews property and equipment

for impairment to determine if assets are impaired due to obsolescence.

As a result of this review, there was no impairment recognized

for the years ended December 31, 2020 and 2019.

The Company reviews property and equipment for impairment to determine if assets are impaired due to obsolescence.

As a result of this review, there was no impairment recognized for the years ended December 31, 2021 and 2020.

Long-Lived Assets

The Company reviews its long-lived assets

for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If such an event or change in circumstances occurs and potential impairment is indicated because the carrying values exceed the

estimated future undiscounted cash flows of the asset, the Company will measure the impairment loss as the amount by which the

carrying value of the asset exceeds its fair value.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If such an event or change in circumstances occurs and potential impairment is indicated because the carrying values exceed the estimated future undiscounted cash flows of the asset, the Company will measure the impairment loss as the amount by which the carrying value of the asset exceeds its fair value.

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 year ended December 31, 2020 excludes net loss attributable to non-controlling

interest of $0.1 million and includes the accretion of Series B preferred discount of $1.4 million on converted shares and

Series A preferred stock accrued dividends of $0.3 million.

Net loss attributable to common stockholders for the year ended

December 31, 2019 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 on converted shares and Series A preferred stock accrued dividends of $0.2

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

from the computations of net loss per common share for the years ended December 31, 2020 and 2019 were 678,258 and 664,798,

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 and for the years ended December 31, 2020 and 2019 were 3,454,783

and 6,641,736, 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 for the year ended December 31, 2020 were 3,997,418 and 18,000,713, respectively, and for the

year ended December 31, 2019 were 2,502,012 and 18,714,999, respectively, because their effect is anti-dilutive.

Basic net loss per share is computed by dividing net loss attributable to common shareholders 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 year ended December 31, 2021 includes the effect of the Series A preferred stock price adjustment of $ 7.4 million, the accretion of the Series B preferred discount of $ 1.5 million on converted shares and Series A preferred stock accrued dividends of $ 0.1 million.

Net loss attributable to common stockholders for the year ended December 31, 2020 excludes net loss attributable to non-controlling interest of $ 0.1 million and includes the accretion of Series B preferred discount of $ 1.4 million on converted shares, the effect of warrant exercise adjustment of $ 1.0 million and Series A preferred stock accrued dividends of $ 0.3 million.

The number of shares of common stock underlying Series A Preferred shares convertible to common stock that were excluded from the computation of the net loss per common share for the year ended December 31, 2020 was 678,258 .

The number of shares of common stock underlying Series B Preferred shares convertible to common stock that was excluded from the computation of net loss per common share and for the year ended December 31, 2020 was 3,454,783 .

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 year ended December 31, 2021 were 6,255,275 and 6,344,966 , respectively, and for the year ended December 31, 2020 were 3,997,418 and 18,000,713 , respectively, because their effect is anti-dilutive.

Synthetic Biologics, Inc.

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Notes to Consolidated Financial Statements

Summary of Significant Accounting

Policies –

Summary of Significant Accounting Policies – (continued)

Research and Development Costs

The Company expenses research and development

costs associated with developmental products not yet approved by the FDA to research and development expense as incurred.

and development costs consist primarily of license fees (including upfront payments), milestone payments, manufacturing costs,

salaries, stock-based compensation and related employee costs, fees paid to consultants and outside service providers for laboratory

development, legal expenses resulting from intellectual property prosecution and other expenses relating to the design, development,

testing and enhancement of our product candidates.

Research and development expenses include external contract research organization

(“CRO”) services.

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

of study services.

The Company reviews and accrues CRO expenses based on services performed and relies on estimates of those costs

applicable to the stage of completion of a study as provided by the CRO.

Accrued CRO costs are subject to revisions as such studies

progress to completion.

At December 31, 2020 and 2019, the Company has accrued CRO expenses of “$0.7 million and $0.7

million”, that are included in accrued expenses.

The Company has prepaid CRO costs at December 31, 2020 and 2019 of

$470,000 and $48,000, respectively.

The Company expenses research and development costs associated with developmental products not yet approved by the FDA to research and development expense as incurred.

Research and development costs consist primarily of license fees (including upfront payments), milestone payments, manufacturing costs, salaries, stock-based compensation and related employee costs, fees paid to consultants and outside service providers for laboratory development, legal expenses resulting from intellectual property prosecution and other expenses relating to the design, development, testing and enhancement of our product candidates.

Research and development expenses include external contract research organization (“CRO”) services.

The Company makes payments to the CROs based on agreed upon terms and may include payments in advance of study services.

The Company reviews and accrues CRO expenses based on services performed and relies on estimates of those costs applicable to the stage of completion of a study as provided by the CRO.

Accrued CRO costs are subject to revisions as such studies progress to completion.

At December 31, 2021 and 2020, the Company has accrued CRO expenses of $ 0.7 million, that are included in accrued expenses.

The Company has prepaid CRO costs at December 31, 2021 and 2020 of $ 0.5 million that are included in prepaid expenses.

Fair Value of Financial Instruments

Accounting Standards Codification (“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.

Fair value measurements are classified on a three-tier hierarchy

Accounting Standards Codification (“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.

Fair value measurements are classified on a three-tier hierarchy as follows:

● Level 1 inputs:

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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, 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 and $98,000 as of December 31, 2020 and 2019, respectively, that are measured using Level 1 inputs.

The Company uses Monte Carlo simulations

to estimate the fair value of the warrants.

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

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

The assumptions used in calculating

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

however, these estimates involve inherent

uncertainties and the application of management judgment.

As a result, if factors change and different assumptions are used, the

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

In 2020 and 2019, the Monte Carlo simulations

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

Company’s current stock price.

Stock-Based Payment Arrangements

Generally, all forms of stock-based payments,

including stock option grants, warrants, restricted stock grants and stock appreciation rights are measured at their fair value

on the awards’

grant date typically using the Black-Scholes option pricing model, based on the estimated number of awards

that are ultimately expected to vest.

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, 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 $ 193,000 and $ 114,000 as of December 31, 2021 and 2020, respectively, that are measured using Level 1 inputs.

The Company uses Monte Carlo simulations to estimate the fair value of the warrants.

In using this model, the fair value is determined by applying Level 3 inputs for which there is little or no observable market data, requiring the Company to develop its own assumptions.

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

however, these estimates involve inherent uncertainties and the application of management judgment.

As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different.

In 2021 and 2020, the Monte Carlo simulations were not used as the value of the warrants was deemed to be minimal based on the historical fair value of the warrants and the Company’s current stock price.

Synthetic Biologics, Inc.

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Notes to Consolidated Financial Statements

Summary of Significant Accounting

Policies –

Stock based compensation awards issued

to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the

stock-based payment, whichever is more readily determinable.

resulting from stock-based payments is recorded in research and development expense or general and administrative expense in the

Consolidated Statements of Operations, depending on the nature of the services provided.

Summary of Significant Accounting Policies – (continued)

Stock-Based Payment Arrangements

Generally, all forms of stock-based payments, including stock option grants, warrants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date typically using the Black-Scholes option pricing model, based on the estimated number of awards that are ultimately expected to vest.

Stock-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the stock-based payment, whichever is more readily determinable.

The expense resulting from stock-based payments is recorded in research and development expense or general and administrative expense in the Consolidated Statements of Operations, depending on the nature of the services provided.

Derivative Instruments

The warrants issued in conjunction

with the public offering of the Company’s securities in November 2016 include a provision that if the Company were

to enter into a certain transaction, as defined in the warrant agreement, the warrants would be purchased from the holder for

The warrants issued in conjunction with the public offering of the Company’s securities in November 2016 include a provision that if the Company were to enter into a certain transaction, as defined in the warrant agreement, the warrants would be purchased from the holder for cash.

The provisions of these warrants preclude equity accounting treatment under ASC 815, Derivatives and Hedging.

Accordingly, the Company is required to record the warrants as liabilities at their fair value upon issuance and re-measure

the fair value at each period end with the change in fair value recorded in the Consolidated Statement of Operations.

the warrants are exercised or cancelled, they are reclassified to equity.

The Company uses Monte Carlo simulations to

estimate the fair value of the warrants.

Accordingly, the Company is required to record the warrants as liabilities at their fair value upon issuance and re-measure the fair value at each period end with the change in fair value recorded in the Consolidated Statement of Operations.

When the warrants are exercised or cancelled, they are reclassified to equity.

The Company uses Monte Carlo simulations to estimate the fair value of the warrants.

In November 2020, all liability-classified warrants expired.

In 2019, the Monte

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

the warrants and the Company’s current stock price.

The Company recognizes deferred tax assets

and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities,

using enacted tax rates in effect in the years the differences are expected to reverse.

Deferred income tax benefit (expense) results

from the change in net deferred tax assets or deferred tax liabilities.

A valuation allowance is recorded when it is more likely

than not that some or all deferred tax assets will not be realized.

Management assesses the need to accrue

or disclose uncertain tax positions for proposed potential adjustments from various federal and state authorities who regularly

audit the Company in the normal course of business.

In making these assessments, management must often analyze complex tax laws

of multiple jurisdictions.

In 2019, the Monte Carlo simulations were not used as the value of the warrants was deemed to be minimal based on the historical fair value of the warrants and the Company’s current stock price.

The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse.

Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities.

A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.

Management assesses the need to accrue or disclose uncertain tax positions for proposed potential adjustments from various federal and state authorities who regularly audit the Company in the normal course of business.

In making these assessments, management must often analyze complex tax laws of multiple jurisdictions.

The Company records the related interest expense and penalties, if any, as tax expense in the tax provision.

At December 31, 2021 and 2020, the Company did not record any liabilities for uncertain tax positions.

Recent Accounting Pronouncements

and Developments

In August 2020, the 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 .

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 its consolidated financial statements.

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, the Company does not believe that it will have a significant effect on our financial position, results of operations

or cash flows.

The Company continues to evaluate its impact as new information becomes available.

Recent Accounting Pronouncements and Developments

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

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

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

The ASU will be effective for annual reporting periods after December 15, 2023 and interim periods within those annual periods and early adoption is permitted in annual reporting periods ending after December 15, 2020.

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

In October 2021, the FASB issued Accounting Standards Update 2021-08 that address the accounting for Contract Assets and Liabilities from Contracts with Customers in a business combination (“ASU 2021-08”), with an effective date for SYN of January 1,2 2024 (earlier adoption permitted).

ASU 2021-08 provides that existing contract assets and liabilities (including deferred costs to obtain and deferred revenue) are measured in a business combination under the measurement and recognition requirements of ASC 606.

ASU 2021-08 should generally “result in an acquirer recognizing and measuring the acquired contract assets and liabilities consistent with how they were recognized and measured in the acquiree’s financial statements.” The Company is currently assessing the impact of ASU 2021-08 on its consolidated financial statements.

Synthetic Biologics, Inc.

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PREPAID EXPENSES AND OTHER CURRENT ASSETS (in thousands):

Prepaid insurances

Prepaid insurance

Prepaid clinical research organizations

Stock sales receivable

Prepaid consulting, subscriptions and other expenses

Stock sales receivable

Prepaid manufacturing expenses

Prepaid conferences and travel

Prepaid CRO expense is classified as a

current asset.

Prepaid CRO 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.

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ACCRUED EXPENSES (in thousands)

Accrued clinical consulting services

Accrued vendor payments

Accrued clinical consulting services

Accrued manufacturing costs

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Selected Balance Sheet Information –

ACCRUED EMPLOYEE BENEFITS (in thousands)

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Accrued vacation expense

Stock-Based Compensation and Warrants

Stock Incentive Plan

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 was 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.

Options become exercisable

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

As of December 31, 2020,

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.

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

to the Company’s 2010 Incentive 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;

on May 15, 2015, increased the number of shares from 171,429 to 228,572;

August 25, 2016, increased the number of shares from 228,572 to 400,000;

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.

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 period from the

date of grant, and expire between five and ten years after the grant date.

As of December 31, 2020, 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 December 31, 2020, there were 1,540,000 options issued and outstanding

under the 2010 Stock Plan.

Synthetic Biologics, Inc.

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Notes to Consolidated Financial Statements

Stock-Based Compensation and Warrants –

In the event of an employee’s termination,

the Company will cease to recognize compensation expense for that employee.

Stock-Based Compensation and Warrants

Stock Incentive Plan

On March 20, 2007, the Company’s Board of Directors approved the 2007 Stock Incentive Plan (the “2007 Stock Plan”) for the issuance of up to 71,429 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries.

This plan was approved by the stockholders on November 2, 2007.

The exercise price of stock options under the 2007 Stock Plan was determined by the compensation committee of the Board of Directors and may 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 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 December 31, 2021, there were 5,145 options issued and outstanding under the 2007 Stock Plan.

There are no shares available to be issued under this 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 December 31, 2021, there were 2,450,130 options issued and outstanding under the 2010 Stock Plan.

There are no shares available to be issued under this 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 December 31, 2021, there were 3,800,000 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.

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

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 or warrant granted is estimated on the date of

grant using the Black-Scholes option pricing model.

The assumptions used for the years ended December 31, 2020 and 2019 are

There is no 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 or warrant granted is estimated on the date of grant using the Black-Scholes option pricing model.

The assumptions used for the years ended December 31, 2021 and 2020 are as follows:

Year ended December 31,

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Expected life of option (years)

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.

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.

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 years.

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.

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.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Stock-Based Compensation and Warrants

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

Stock-Based Compensation and Warrants – (continued)

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 years.

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,

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● monthly over three years.

During the years ended December 31,

2020 and 2019, the Company granted 1,540,000 and 1,725,000 options to employees and directors having an approximate fair value

of $0.4 million and $0.5 million based upon the Black-Scholes option pricing model, respectively.

Stock-based compensation expense included

in general and administrative expenses and research and development expenses relating to stock options issued to employees for

the years ended December 31, 2020 and 2019 was $213,000 and $295,000, 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 years ended December 31, 2020 and 2019 were $137,000 and $45,000, respectively.

A summary of stock option activity for

the years ended December 31, 2020 and 2019 is as follows:

During the years ended December 31, 2021 and 2020, the Company granted 2,260,000 and 1,540,000 options to employees and directors having an approximate fair value of $ 0.5 million and $ 0.4 million based upon the Black-Scholes option pricing model, respectively.

Stock-based compensation expense included in general and administrative expenses and research and development expenses relating to stock options issued to employees for the years ended December 31, 2021 and 2020 was $ 204,000 and $ 213,000 , 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 years ended December 31, 2021 and 2020 was $ 212,000 and $ 137,000 , respectively.

Synthetic Biologics, Inc.

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Notes to Consolidated Financial Statements

Stock-Based Compensation and Warrants –

Average Exercise

Stock-Based Compensation and Warrants – (continued)

A summary of stock option activity for the years ended December 31, 2021 and 2020 is as follows:

Weighted Average

Average Exercise

Contractual Life

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Weighted average grant date fair value - December 31, 2020

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Stock-Based Compensation and Warrants –

The options outstanding and exercisable

at December 31, 2020 are as follows:

The options outstanding and exercisable at December 31, 2021 are as follows:

Options Outstanding

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Exercise Price

41.00 –

71.00 –

As of December 31, 2020, total unrecognized

stock-based compensation expense related to stock options was $686,000, 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.

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.

0.00 – $ 40.00

41.00 – $ 70.00

71.00 – $ 102.00

As of December 31, 2021, total unrecognized stock-based compensation expense related to stock options was $ 771,000 , which is expected to be expensed through February 2024.

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 in 2021 or 2020.

Cash received

from option exercises under the Company’s stock-based compensation plans for the years ended December 31, 2020 and 2019

Also, during the years ended December 31, 2020 and 2019, the Company did not issue any shares of common stock in connection with the exercise

of stock options.

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

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 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”

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.

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 ($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 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.

During January and February

2021, 11,655,747 warrants were exercised for cash proceeds of $8.0 million, see note 10.

Cash received from option exercises under the Company’s stock-based compensation plans for the years ended December 31, 2021 and 2020 was zero .

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Stock-Based Compensation and Warrants –

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 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.

Stock-Based Compensation and Warrants – (continued)

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 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 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 $ 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.

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.

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 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.

During the year ended December 31, 2021, 11,655,747 warrants were exercised for cash proceeds of $ 8.0 million.

There were no warrants exercised during the year ended December 31, 2020.

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 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 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

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

warrants are 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 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

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

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

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Stock-Based Compensation and Warrants

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, have an exercise price

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

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

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.

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 and expired November 16, 2020.

The Series B warrants expired December 31, 2017 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 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 were 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.

1 unchanged sentence

Notes to Consolidated Financial Statements

Stock-Based Compensation and Warrants –

A summary of all warrant activity for the Company for the years

ended December 31, 2020 and 2019 is as follows:

Stock-Based Compensation and Warrants – (continued)

A summary of all warrant activity for the Company for the years ended December 31, 2021 and 2020 is as follows:

Weighted Average

2 unchanged sentences

Balance at December 31,2020

( 11,655,747 )

Balance at December 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, is 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

warrants as of December 31, 2020 is as follows:

Exercise Price

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, is 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 warrants as of December 31, 2021 is as follows:

Weighted Average

Exercise Price

Contractual Life

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Stockholders’

Stockholders’ Equity

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

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

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

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.

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 of $880,000, which reduces the income available

to common stockholders.

During the years ended December 31, 2020 and 2019, 3,665 and 1,523, respectively, shares were converted

resulting in the recognition of deemed dividends of $1.4 million and $525,000, respectively, for the amortization of the Series

B Preferred Stock discount upon conversion.

This is recorded as a deemed dividend in accumulated deficit.

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.

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.

and Subsidiaries

Notes to Consolidated Financial Statements

Stockholders’

Equity –

The Company may not effect, and 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

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.

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).

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.

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.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Stockholders’

Equity –

Stockholders’ Equity – (continued)

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.

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 $ 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.

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.

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 years ended December 31, 2021 and 2020, 3,973 and 3,665 shares, respectively, were converted resulting in the recognition of deemed dividends of $ 1.5 million and $ 1.4 million, 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 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 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 Reverse Stock Split, subject to certain customary anti-dilution adjustments On January 27, 2021, the Company filed a Certificate

of 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 that adjusted the conversion price from $18.90 per share to $1.50 per share

and removed the redemption upon change of control see Note 10.

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, 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.

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 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 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, as described 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.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Stockholders’

Equity –

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.

Stockholders’ Equity – (continued)

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 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.

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 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).

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 years ended December 31, 2021 and 2020, the Company accrued dividends of $ 24,000 and $ 254,000 , respectively.

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.

The Amendment to the Certificate of Designation for the Series A Convertible Preferred Stock (the “Certificate of Amendment”) that was filed 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 thereof.

The holder of the Series A Preferred Stock converted all of its shares of Series A Preferred Stock and there are no remaining shares of the Series A Convertible Preferred stock outstanding.

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 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 year ended December 31, 2021.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Stockholders’

Equity –

Stockholders’ Equity – (continued)

Riley Securities Sales Agreement

On August 5, 2016, the Company entered

On August 5, 2016, the Company entered into the B.

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 Common Stock from time to time through B.

Riley Securities), which enables the Company to offer and sell shares of the common stock from time to time through B.

Riley Securities, Inc.

as the Company’s

as the Company’s sales agent.

Sales of common stock under the B.

Riley Securities 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 Securities 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 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

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.

For the year ended December 31, 2020, the Company sold through the B.

Riley Securities Sales Agreement an aggregate

of 9.3 million shares of Common Stock and received net proceeds of approximately $ 3.4 million.

The Company did not sell any shares

of common stock during 2019 through the B.

Riley Securities Sales Agreement.

Subsequent to year end through March 3, 2021, the

Company sold approximately 76.3 million shares of the Company’s common stock and received net proceeds of approximately $63.8

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Riley Securities Sales Agreement an aggregate of 9.3 million shares of common stock and received net proceeds of approximately $ 3.4 million.

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”).

During the year ended December 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.

Non-controlling Interest

On September 5, 2018, the Company

entered into an agreement (the ‘Stock Purchase 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 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.

On September 5, 2018, the Company entered into an agreement (the ‘Stock Purchase 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 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 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”)

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 50,000 shares of common stock of the Company;

and (ii) transferred to CSMC an additional 2,420,000

shares of common stock of its subsidiary SYN Biomics, Inc.

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

such issuance CSMC owns an aggregate of 7,480,000 shares of common stock of SYN Biomics, representing 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 are based overall on the fair value of the shares ($285,000) as determined at the

date of IRB approval.

During the years ended December 31, 2020 and 2019, research and development expense recorded related

to this transaction approxima ted $225,000 and $198,000 ,

respectively.

The Stock Purchase 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 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 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 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 August 29, 2015, the Company, SYN

Biomics and Mark Pimentel, M.D.

entered into an amendment to the Pimentel Stock Purchase Agreement dated December 3, 2013,

which accelerated the date upon which Dr.

Pimentel could exchange his shares of common stock in SYN Biomics for shares of

the Company’s common stock.

On August 29, 2015, Dr.

Pimentel notified the Company of his intent to exchange all

of the shares of common stock in SYN Biomics, 8.5%, owned by him for 38,572 shares of the Company’s common stock in accordance

with the terms of the Stock Purchase Agreement, as amended.

On August 31, 2015, the Company issued 38,572 shares of the Company’s

common stock to Dr.

Pimentel in exchange for all of the shares of common stock of SYN Biomics held by Dr.

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.

During the years ended

December 31, 2020 and 2019, the Company did not owe and did not pay CSMC for milestone payments related this license agreement.

and (ii) transferred to CSMC an additional 2,420,000 shares of common stock of its subsidiary SYN Biomics, Inc.

(“SYN Biomics”) owned by the Company, such that after such issuance CSMC owned an aggregate of 7,480,000 shares of common stock of SYN Biomics, representing 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 are based overall on the fair value of the shares ($ 285,000 ) as determined at the date of IRB approval.

During the years ended December 31, 2021 and 2020, research and development expense recorded related to this transaction approximated $ 1,000 and $ 225,000 , respectively.

The Stock Purchase 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 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 Medically Associated Science and Technology Program (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.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Non-controlling Interest –

The Company’s

non-controlling interest is accounted for under ASC 810, Consolidation (“ASC 810”) and represents the minority

stockholder’s ownership interest related to the Company’s subsidiary, 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.

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 December 31, 2020,

the accumulated net loss attributable to the non-controlling interest was $2.8 million.

As of December 31, 2019, the accumulated

net loss attributable to the non-controlling interest was $2.9 million and includes $77,000 of prior year losses attributable to

minority stockholders including the reversal of Dr.

Pimentel’s 2015 losses of $505,000 associated with the exchange

of his shares of common stock in SYN Biomics for shares of the Company’s common stock.

Collaborative and Employment Agreements and Commitments

Non-controlling Interest – (continued)

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 to 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.

During 2021, CSMC returned its shares of SYN Biomics to the Company.

The Company’s interest in SYN Biomics is now 100 %.

This is reflected in the Consolidated Statements of Equity (Deficit).

The Company’s non-controlling interest is accounted for under ASC 810, Consolidation and represents the minority stockholder’s ownership interest related to the Company’s subsidiary, 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 in the face of the Consolidated Statements of Operations.

As of December 31, 2020, the accumulated net loss attributable to the non-controlling interest was $ 2.8 million and includes $ 73,000 of prior year losses attributable to minority stockholders including the reversal of Dr.

Pimentel’s 2015 losses of $ 505,000 associated with the exchange of his shares of common stock in SYN Biomics for shares of the Company’s common stock.

During 2021, the minority stockholder returned its shares of SYN Biomics to the Company for no consideration.

The Company’s interest in SYN Biomics is now 100 %.

License, Collaborative and Employment Agreements and Commitments

License and Collaborative Agreements

As described below, the Company has entered

into several license and collaborative agreements for the right to use research, technology and patents.

Some of these license

and collaborative agreements may contain milestones.

The specific timing of such milestones cannot be predicted and are dependent

on future developments as well as regulatory actions which cannot be predicted with certainty (including actions which may never

Further, under the terms of certain licensing agreements, the Company may have the obligation to pay certain milestones

contingent upon the achievement of specific levels of sales.

Due to the long-range nature of such commercial milestone amounts,

they are neither probable at this time nor predictable and consequently are not included in this disclosure.

Washington University School of Medicine

As described below, the Company has entered into several license and collaborative agreements for the right to use research, technology and patents.

Some of these license and collaborative agreements may contain milestones.

The specific timing of such milestones cannot be predicted and is dependent on future developments as well as regulatory actions which cannot be predicted with certainty (including actions which may never occur).

Further, under the terms of certain licensing agreements, the Company may have the obligation to pay certain milestones contingent upon the achievement of specific levels of sales.

Due to the long-range nature of such commercial milestone amounts, they are neither probable at this time nor predictable and consequently are not included in this disclosure.

Washington University School of Medicine in St.

Louis Clinical Trial Agreement

In August 7, 2019, the Company entered

into a clinical trial agreement (“CTA”) with Washington University School of Medicine in St.

Louis (“Washington

University”) to conduct a Phase 1b/2a single-center, randomized, double-blinded, placebo-controlled clinical trial designed

to evaluate the safety, tolerability and pharmacokinetics of oral SYN-004 (ribaxamase) in up to 36 adult allogeneic hematopoietic

cell transplant (HCT) recipients (the “Study”).

Under the terms of the CTA, the Company will serve as the sponsor of

the Study and supply SYN-004 (ribaxamase), as well as compensate Washington University for all research services to be provided

in connection with the Study which is estimated to cost approximately $3,200,000.

The CTA continues in effect until completion

of all obligations under the CTA.

Either party may terminate the CTA prior to completion of its obligations (i) if authorization

of the study is withdrawn by the FDA;

(ii) if the emergence of any adverse reaction or side effect with SYN-004 (ribaxamase)

administered in the Study is of such magnitude or incidence in the opinion of either party to support termination;

or (iii) upon

a breach of the terms of the CTA if the breaching party fails to cure the breach within 30 days after receipt of notice.

has the right to terminate the CTA (i) effective immediately if Washington University fails to perform the study in accordance

with the terms of the protocol, the CTA or applicable laws or regulations or if Washington University or the principal investigator

become debarred or (ii) upon 14 days written notice and Washington University has the right to terminate the CTA upon 14 days

notice if the principal investigator becomes unable to perform or complete the Study and the parties have not, prior to the expiration

of such fourteen (14) day period, agreed to an alternative principal investigator.

Cedars-Sinai Medical Center (“CSMC”)

On December 5, 2013, the Company,

through its newly formed, majority owned subsidiary, SYN Biomics, entered into a worldwide exclusive License Agreement with CSMC

for the development of new treatment approaches to target non-bacterial intestinal microorganism life forms known as archaea that

are associated with intestinal methane production and chronic diseases such as irritable bowel syndrome (IBS), obesity and type

As part of the terms of the License Agreement the Company issued 9,569 unregistered shares of the Company’s common

stock to CSMC, paid $150,000 for the initial license fee and $220,000 for patent reimbursement fees.

The License Agreement also

provides that, commencing on the second anniversary of the License Agreement, SYN Biomics will pay an annual maintenance fee, which

payment shall be creditable against annual royalty payments owed under the License Agreement.

In addition to royalty payments which

are a percentage of net sales of licensed and technology products, SYN Biomics is obligated to pay CSMC a percentage of any non-royalty

sublicense revenues, as well as additional consideration upon the achievement of milestones (the first two of which are payable

in cash or unregistered shares of Company stock at the Company’s option).

On December 5, 2013, the Company also entered

into an option agreement with CSMC, which expired unexercised on December 31, 2014.

In August 7, 2019, the Company entered into a clinical trial agreement (“CTA”) with Washington University School of Medicine in St.

Louis (“Washington University”) to conduct a Phase 1b/2a single-center, randomized, double-blinded, placebo-controlled clinical trial designed to evaluate the safety, tolerability and pharmacokinetics of oral SYN-004 (ribaxamase) in up to 36 adult allogeneic hematopoietic cell transplant (HCT) recipients (the “Study”).

Under the terms of the CTA, the Company will serve as the sponsor of the Study and supply SYN-004 (ribaxamase), as well as compensate Washington University for all research services to be provided in connection with the Study which is estimated to cost approximately $ 3,200,000 .

The CTA continues in effect until completion of all obligations under the CTA.

Either party may terminate the CTA prior to completion of its obligations (i) if authorization of the study is withdrawn by the FDA;

(ii) if the emergence of any adverse reaction or side effect with SYN-004 (ribaxamase) administered in the Study is of such magnitude or incidence in the opinion of either party to support termination;

or (iii) upon a breach of the terms of the CTA if the breaching party fails to cure the breach within 30 days after receipt of notice.

The Company has the right to terminate the CTA (i) effective immediately if Washington University fails to perform the study in accordance with the terms of the protocol, the CTA or applicable laws or regulations or if Washington University or the principal investigator become debarred or (ii) upon 14 days written notice and Washington University has the right to terminate the CTA upon 14 days notice if the principal investigator becomes unable to perform or complete the Study and the parties have not, prior to the expiration of such fourteen (14) day period, agreed to an alternative principal investigator.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

License, Collaborative and Employment

Agreements and Commitments –

License, Collaborative and Employment Agreements and Commitments – (continued)

Cedars-Sinai Medical Center (“CSMC”) Agreement

On December 5, 2013, the Company, through its newly formed, majority owned subsidiary, SYN Biomics, entered into a worldwide exclusive License Agreement with CSMC for the development of new treatment approaches to target non-bacterial intestinal microorganism life forms known as archaea that are associated with intestinal methane production and chronic diseases such as irritable bowel syndrome (IBS), obesity and type 2 diabetes.

As part of the terms of the License Agreement, the Company issued 9,569 unregistered shares of the Company’s common stock to CSMC, paid $ 150,000 for the initial license fee and $ 220,000 for patent reimbursement fees.

The License Agreement also provides that, commencing on the second anniversary of the License Agreement, SYN Biomics will pay an annual maintenance fee, which payment shall be creditable against annual royalty payments owed under the License Agreement.

In addition to royalty payments which are a percentage of net sales of license and technology products, SYN Biomics is obligated to pay CSMC a percentage of any non-royalty sublicense revenues, as well as additional consideration upon the achievement of milestones (the first two of which are payable in cash or unregistered shares of Company stock at the Company’s option).

The License Agreement provided for termination:

(i) automatically if SYN Biomics enters into a liquidating bankruptcy or other specified bankruptcy event or if the performance

of any term, covenant, condition or provision of the License Agreement will jeopardize the licensure of CSMC, its participation

in certain reimbursement programs, its full accreditation by the Joint Commission of Accreditation of Healthcare Organizations

or any similar state organizations, its tax exempt status or is deemed illegal;

(ii) upon 30 days notice from CSMC if SYN

Biomics fails to make a payment or use commercially reasonable efforts to exploit the patent rights;

(iii) upon 60 days notice

from CSMC if SYN Biomics fails to cure any breach or default of any material obligations under the License Agreement;

90 days notice from SYN Biomics if CSMC fails to cure any breach or default of any material obligations under the License Agreement.

(i) automatically if SYN Biomics enters into a liquidating bankruptcy or other specified bankruptcy event or if the performance of any term, covenant, condition or provision of the License Agreement will jeopardize the licensure of CSMC, its participation in certain reimbursement programs, its full accreditation by the Joint Commission of Accreditation of Healthcare Organizations or any similar state organizations, its tax exempt status or is deemed illegal;

(ii) upon 30 days notice from CSMC if SYN Biomics fails to make a payment or use commercially reasonable efforts to exploit the patent rights;

(iii) upon 60 days notice from CSMC if SYN Biomics fails to cure any breach or default of any material obligations under the License Agreement;

or (iv) upon 90 days notice from SYN Biomics if CSMC fails to cure any breach or default of any material obligations under the License Agreement.

SYN Biomics also has the right to terminate the License Agreement without cause upon six months notice to CSMC;

however, upon such

termination, SYN Biomics is obligated to pay a termination fee with the amount of such fee reduced:

(i) if such termination

occurs after an Investigational New Drug submission to the FDA but prior to completion of a Phase 2 clinical trial, (ii) reduced

further if such termination occurs after completion of Phase 2 clinical trial but prior to completion of a Phase 3 clinical trial;

however, upon such termination, SYN Biomics is obligated to pay a termination fee with the amount of such fee reduced:

(i) if such termination occurs after an Investigational New Drug submission to the FDA but prior to completion of a Phase 2 clinical trial, (ii) reduced further if such termination occurs after completion of Phase 2 clinical trial but prior to completion of a Phase 3 clinical trial;

and (iii) reduced to zero if such termination occurs after completion of a Phase 3 clinical trial.

Prior to the execution of the CSMC License

Agreement, SYN Biomics issued shares of common stock of SYN Biomics to each of CSMC and Mark Pimentel, M.D.

(the primary inventor

of the intellectual property), representing 11.5% and 8.5%, respectively, of the outstanding shares of SYN Biomics (the “SYN

Biomics Shares”).

The Stock Purchase Agreements for the SYN Biomics shares provide for certain anti-dilution protection until

such time as an aggregate of $3.0 million in proceeds from equity financings are received by SYN Biomics as well as a right, under

certain circumstances in the event that the SYN Biomics shares are not then freely tradable, and subject to NYSE American approval,

as of the 18 and 36 month anniversary date of the effective date of the Stock Purchase Agreements, for each of CSMC and the Dr.

to exchange up to 50% of their 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 Agreements also provide for tag-along rights in the event of the sale by the Company

of its shares of SYN Biomics.

On August 29, 2015, the Company, SYN

Biomics and Mark Pimentel, M.D.

entered into an amendment to the Pimentel Stock Purchase Agreement, which accelerated the date

upon which Dr.

Pimentel can exchange his shares of common stock in SYN Biomics for shares of the Company’s common stock.

On August 29, 2015, Dr.

Pimentel notified the Company of his intent to exchange all of the shares of common stock in

SYN Biomics owned by him for 38,572 shares of the Company’s common stock in accordance with the terms of the Pimentel Stock

Purchase Agreement, as amended.

On August 31, 2015, the Company issued 38,572 shares of the Company’s common stock to

Pimentel in exchange for all of the shares of common stock of SYN Biomics held by Dr.

As of and during the years ended December 31,

2020 and 2019, the Company did not owe and did not pay CSMC for milestone payments related to this license agreement.

On September 5, 2018, the Company

entered into an agreement with CSMC for an investigator-sponsored Phase 2 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 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).

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment

Agreements and Commitments –

In consideration of the support provided

by CSMC for the Study, the Company paid $441,000 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:

(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 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 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 years

ended December 31, 2020 and 2019, research and development expense related to this transaction approxima ted

$ 225,000 and $198,000 , respectively.

The Agreement also provides CSMC with a

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

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

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

the valuation of Synbiomics 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 Synbiomics.

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.

On November 9, 2020, the Company and

its subsidiary, SYN 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.

rights previously licensed to the Company covering the use of SYN-010 will remain the property of CSMC.

On September 5, 2018, the Company entered into an agreement with CSMC for an investigator-sponsored Phase 2 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 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).

University of Texas Austin Agreement

On December 19, 2012, the Company

entered into a License Agreement with UT Austin for the exclusive license of the right to use, develop,

manufacture, market and commercialize certain research and patents related to pertussis antibodies.

The License Agreement provides

that UT Austin is entitled to payment of past patent expenses, an annual payment of $50,000 per year commencing on the effective

date through December 31, 2014, a $25,000 payment on December 31, 2015 and milestone payments of $50,000 upon commencement

of Phase 1 clinical trials, $100,000 upon commencement of Phase 3 clinical trials, $250,000 upon NDA submission in the U.S., $100,000

upon European Medicines Agency approval and $100,000 upon regulatory approval in an Asian country.

In addition, UT Austin

is entitled to a running royalty upon net sales.

On December 19, 2012, the Company entered into a License Agreement with University of Texas Austin (“UT”) Austin for the exclusive license of the right to use, develop, manufacture, market and commercialize certain research and patents related to pertussis antibodies.

The License Agreement provides that UT Austin is entitled to payment of past patent expenses, an annual payment of $ 50,000 per year commencing on the effective date through December 31, 2014, a $ 25,000 payment on December 31, 2015 and milestone payments of $ 50,000 upon commencement of Phase 1 clinical trials, $ 100,000 upon commencement of Phase 3 clinical trials, $ 250,000 upon NDA submission in the U.S., $ 100,000 upon European Medicines Agency approval and $ 100,000 upon regulatory approval in an Asian country.

In addition, UT Austin is entitled to a running royalty upon net sales.

The License Agreement terminates upon the expiration of the patent rights;

however that the License Agreement is subject to early termination by the Company in its discretion and by UT Austin for a

breach of the License Agreement by the Company.

In connection with the License Agreement,

the Company and UT Austin also entered into a Sponsored Research Agreement pursuant to which UT Austin will perform certain

research work related to pertussis.

The Sponsored Research Agreement may be renewed annually, in the sole discretion of the Company,

after the first year for two additional one year terms with a fixed fee for the first year of $303,287.

The Sponsored Research

Agreement was renewed for the second and third years for a fixed fee of $316,438 and $328,758 respectively, all payable in quarterly

installments.

The Sponsored Research Agreement expires January 17, 2023;

provided, however, the Sponsored Research Agreement

is subject to early termination upon the written agreement of the parties, a default in the material obligations under the Research

Agreement which remain uncured for 60 days after receipt of notice, automatically upon the Company’s bankruptcy or insolvency

and by the Company in its sole discretion at any time after the one year anniversary of the date of execution thereof upon no less

than 90 days’

provided, however that the License Agreement is subject to early termination by the Company in its discretion and by UT Austin for a breach of the License Agreement by the Company.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

License, Collaborative and Employment

Agreements and Commitments –

On October 22, 2015, the Company and

UT Austin amended the Sponsored Research Agreement to extend the termination date from the initial termination date of December 31,

2015 to January 15, 2017, on September 2, 2016 to extend the agreement until January 15, 2018, on August 22,

2017 to extend the agreement until January 17, 2019, on August 24, 2018 to extend the agreement until January 17,

2021 and again on August 8, 2020 until January 17, 2023.

All other terms and conditions of the Sponsored Research Agreement

remain unchanged.

No further or additional payments will be made to UT Austin as a result of this amendment.

Prev ABR LLC (“Prev”) Agreement

On November 28, 2012, the Company

entered into an agreement (“Prev Agreement”) to acquire the C.

diff program assets of Prev, including pre-Investigational

New Drug (IND) package, Phase 1 and Phase 2 clinical data, manufacturing process data and all issued and pending U.S.

and international

Upon execution and closing of the Prev Agreement, the Company paid Prev cash payments of $235,000 and issued 17,858 unregistered

shares of its common stock to Prev.

As set forth in the Prev Agreement, Prev may be entitled to receive additional consideration

upon the achievement of certain milestones including:

License, Collaborative and Employment Agreements and Commitments – (continued)

In connection with the License Agreement, the Company and UT Austin also entered into a Sponsored Research Agreement pursuant to which UT Austin will perform certain research work related to pertussis.

The Sponsored Research Agreement may be renewed annually, in the sole discretion of the Company, after the first year for two additional one year terms with a fixed fee for the first year of $ 303,287 .

The Sponsored Research Agreement was renewed for the second and third years for a fixed fee of $ 316,438 and $ 328,758 respectively, all payable in quarterly installments.

The Sponsored Research Agreement expires January 17, 2023;

provided, however, the Sponsored Research Agreement is subject to early termination upon the written agreement of the parties, a default in the material obligations under the Research Agreement which remain uncured for 60 days after receipt of notice, automatically upon the Company’s bankruptcy or insolvency and by the Company in its sole discretion at any time after the one year anniversary of the date of execution thereof upon no less than 90 days’ notice.

Prev ABR LLC (“Prev”) Agreement

On November 28, 2012, the Company entered into an agreement (“Prev Agreement”) to acquire the C.

diff program assets of Prev, including the pre-Investigational New Drug (IND) package, Phase 1 and Phase 2 clinical data, manufacturing process data and all issued and pending U.S.

and international patents.

Upon execution and closing of the Prev Agreement, the Company paid Prev cash payments of $ 235,000 and issued 17,858 unregistered shares of its common stock to Prev.

As set forth in the Prev Agreement, Prev may be entitled to receive additional consideration upon the achievement of certain milestones, including:

(i) commencement of an IND;

(ii) commencement of a Phase 1 clinical

(ii) commencement of a Phase 1 clinical trial;

(iii) commencement of a Phase 2 clinical trial;

(iv) commencement of a Phase 3 clinical trial;

a Biologic License Application (BLA) in the U.S.

(v) filing a Biologic License Application (BLA) in the U.S.

and for territories outside of the U.S.

(as defined in the Prev Agreement);

(vi) approval of a BLA in the U.S.

and (vi) approval of a BLA in the U.S.

and for territories outside the U.S.

With exception of the first milestone payment, the

remaining milestones are payable 50% in cash and 50% in our stock, however, at Prev’s option the entire milestone may be

payable in shares of the Company’s stock.

As of December 31, 2015, the first three milestones have been met, and at

Prev’s option, Prev elected to receive 18,724 shares of the Company’s common stock.

No milestones were achieved or

such payments were made during the years ended December 31, 2020 and 2019.

Intrexon Exclusive Channel Collaboration

On August 6, 2012, the Company entered

into an Exclusive Channel Collaboration (“Infectious Disease ECC”) with Intrexon that governs an “exclusive channel

collaboration”

arrangement in which the Company will use Intrexon’s technology relating to the identification, design

and production of human antibodies and DNA vectors for the development and commercialization of a series of monoclonal antibody

therapies for the treatment of certain serious infectious diseases.

Pursuant to the terms of the Second Stock Issuance Agreement

with Intrexon, which was approved by the Company’s stockholders on October 5, 2012, the Company issued 101,492 shares

of its common stock, $0.001 par value, which issuance is also deemed paid in consideration for the execution and delivery of the

Infectious Disease ECC, dated August 6, 2012, between the Company and Intrexon.

In connection with the transactions contemplated

by the Second Stock Issuance Agreement, and pursuant to the First Amendment to Registration Rights Agreement (the “First

Amendment to Registration Rights Agreement”) executed and delivered by the parties at the closing, which was declared effective

on May 5, 2013.

The Company filed a “resale”

registration statement registering the resale of the shares issued

under the Second Stock Issuance Agreement.

Subject to certain expense allocations

and other offsets provided in the Infectious Disease ECC, the Company will pay Intrexon royalties on annual net sales of the Synthetic

Products, calculated on a Synthetic Product-by-Synthetic Product basis.

The Company has likewise agreed to pay Intrexon a percentage

of quarterly revenue obtained from a sublicensor in the event of a sublicensing arrangement.

No such payments were made during

the years ended December 31, 2020 and 2019.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment

Agreements and Commitments –

The Company also agreed upon the filing

of an IND application with the FDA for a Synthetic Product, or alternatively the filing of the first equivalent regulatory filing

with a foreign regulatory agency (both as applicable, the “IND Milestone Event”), to pay Intrexon either (i) $2.0

million in cash, or (ii) that number of shares of common stock (the “IND Milestone Shares”) having a fair market

value equaling $2.0 million where such fair market value is determined using published market data of the share price for common

stock at the close of market on the business day immediately preceding the date of public announcement of attainment of the IND

Milestone Event.

Upon the first to occur of either first

commercial sale of a Synthetic Product in a country or the granting of the regulatory approval of that Synthetic Product (both

as applicable, the “Approval Milestone Event”), the Company agreed to pay to Intrexon either (i) $3.0 million

in cash, or (ii) that number of shares of common stock (the “Approval Milestone Shares”) having a fair market

value equaling $3.0 million where such fair market value is determined using published market data of the share price for common

stock at the close of market on the business day immediately preceding the date of public announcement of attainment of the Approval

Milestone Event.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment

Agreements and Commitments –

On August 10, 2015, the Company entered

into an Exclusive Channel Collaboration Agreement (the “PKU ECC”) with Intrexon that governs a “channel collaboration”

arrangement in which the Company was granted a worldwide exclusive license to use the patents and other intellectual property of

Intrexon in connection with the research, development, use, importing, manufacture, sale, and offer for sale of biotherapeutic

products for the treatment of PKU in humans by direct administration of a viral construct containing a gene to alter genetic expression

of phenyalanine hydroxylase and/or administration of genetically modified bacteria that express an effector directed to the metabolic

conversion of phenyalanine.

The license was exclusive to both parties within the Field.

On September 2, 2015, in accordance

with the terms of the Intrexon Stock Issuance Agreement that the Company entered into in connection with the PKU ECC, the Company

paid Intrexon a technology access fee by the issuance of 26,786 shares of common stock, having a value equal to $3.0 million as

of August 7, 2015.

Pursuant to the Second Amendment to Registration Rights Agreement, the Company filed a “resale”

registration statement to register the shares issued under the Intrexon Stock Issuance Agreement, which was declared effective

by the SEC on October 15, 2015.

On November 30, 2018, the Company

received written notice from Intrexon stating that Intrexon and the Company had terminated by mutual agreement the PKU Exclusive

Channel Collaboration Agreement.

As a result of the mutually agreed upon November 30, 2018 termination, each party retains

its own respective confidential information and intellectual property and all licenses between the parties granted under the ECC

are terminated.

The Company had also entered into the Exclusive Channel Collaboration Agreement, dated August 6, 2012 with

Intrexon that governs a “channel collaboration”

arrangement in which the Company intends to use Intrexon’s technology

relating to the identification, design and production of human antibodies and DNA vectors for the development and commercialization

of a series of monoclonal antibody therapies for the treatment of Pertussis, remains in effect.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment

Agreements and Commitments –

With exception of the first milestone payment, the remaining milestones are payable 50% in cash and 50% in our stock , however, at Prev’s option the entire milestone may be payable in shares of the Company’s stock.

As of December 31, 2015, the first three milestones have been met, and at Prev’s option, Prev elected to receive 18,724 shares of the Company’s common stock.

Currently, assets licensed under this agreement are used in the Company’s Phase 1b/2a Clinical Study in Allogeneic HCT Recipients.

No milestones were achieved or such payments were made during the years ended December 31, 2021 and 2020.

Employment Agreements

On December 6, 2018, the Company

entered into a three-year employment agreement with Steven A.

Shallcross, (the “Employment Agreement”), to serve as

the Chief Executive Officer and to continue to serve as the Chief Financial Officer of the Company.

The Employment Agreement has a stated term

of three years but may be terminated earlier pursuant to its terms.

Shallcross’

employment is terminated for

any reason, he or his estate as the case may be, will be entitled to receive the accrued base salary, vacation pay, expense reimbursement

and any other entitlements accrued by him to the extent not previously paid (the “Accrued Obligations”);

however, that if his employment is terminated (i) by the Company without Cause or by Mr.

Shallcross for Good Reason (as

each is defined in the Employment Agreement) then in addition to paying the Accrued Obligations, (a) the Company will continue

to pay his then current base salary and continue to provide benefits at least equal to those that were provided at the time of

termination for a period of twelve (12) months and (b) he shall have the right to exercise any vested equity awards until

the earlier of six (6) months after termination or the remaining term of the awards;

or (ii) by reason of his death or

Disability (as defined in the Employment Agreement), then in addition to paying the Accrued Obligations, Mr.

Shallcross would

have the right to exercise any vested options until the earlier of six (6) months after termination or the remaining term

of the awards.

On December 6, 2018, the Company entered into a three-year employment agreement with Steven A.

Shallcross, (the “Employment Agreement”), to serve as the Chief Executive Officer and to continue to serve as the Chief Financial Officer of the Company.

The Employment Agreement has a stated term of three years but may be terminated earlier pursuant to its terms.

Shallcross’ employment is terminated for any reason, he or his estate as the case may be, will be entitled to receive the accrued base salary, vacation pay, expense reimbursement and any other entitlements accrued by him to the extent not previously paid (the “Accrued Obligations”);

provided, however, that if his employment is terminated (i) by the Company without Cause or by Mr.

Shallcross for Good Reason (as each is defined in the Employment Agreement) then in addition to paying the Accrued Obligations, (a) the Company will continue to pay his then current base salary and continue to provide benefits at least equal to those that were provided at the time of termination for a period of twelve (12) months and (b) he shall have the right to exercise any vested equity awards until the earlier of six (6) months after termination or the remaining term of the awards;

or (ii) by reason of his death or Disability (as defined in the Employment Agreement), then in addition to paying the Accrued Obligations, Mr.

Shallcross would have the right to exercise any vested options until the earlier of six (6) months after termination or the remaining term of the awards.

In such event, if Mr.

Shallcross commenced employment with another employer and becomes eligible to receive

medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits to be provided by

the Company as described herein would terminate.

Synthetic Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment

Agreements and Commitments –

On December 30, 2020, the Board of

the Company awarded Steven A.

Shallcross (i) a cash bonus equal to 62% of his prior base salary and (ii) an option to

purchase 450,000 shares of the Company’s common stock.

Shallcross commenced employment with another employer and becomes eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits to be provided by the Company as described herein would terminate.

On December 30, 2020, the Board of Directors of the Company awarded Steven A.

Shallcross (i) a cash bonus equal to 62 % of his prior base salary and (ii) an option to purchase 450,000 shares of the Company’s common stock.

On December 23, 2020, the Board of the Company awarded Steven A.

Shallcross (i) a cash bonus equal to 62.5 % of his prior base salary and (ii) an option to purchase 450,000 shares of the Company’s common stock.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

License, Collaborative and Employment

Agreements and Commitments –

On December 23, 2021, the Board of Directors of the Company awarded Steven A.

Shallcross (i) a cash bonus equal to approximately 62.5 % of his current base salary, and (ii) an option to purchase 650,000 shares of the Company’s common stock.

License, Collaborative and Employment Agreements and Commitments – (continued)

Operating Lease

All of the Company’s existing leases

as of December 31, 2020 are classified as operating leases.

As of December 31, 2020, the Company has one material operating

lease for facilities with a remaining term expiring in 2022.

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

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

The discount rate used in the calculation of the lease

liability was 9.9%.

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.

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

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

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

lease costs are presented as part of general and administrative expenses in the consolidated statements of operations, and for

the years ended December 31, 2020 and 2019 approximated $209,000 and 201,000, respectively.

For the years ended December 31,

2020 and 2019, operating cash flows used for operating leases approximated $309,000 and $300,000, respectively.

A maturity analysis of our operating leases

as of December 31, 2020 is as follows (amounts in thousands of dollars) :

Future undiscounted cash flows:

The Company’s existing lease as of December 31, 2021 is classified as an operating lease.

As of December 31, 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.

The Second Amendment also has options for a Tenant Improvement Allowance and a Second Extension Term.

The Second Amendment also gives the Company the right to expand their space by giving notice to the landlord before December 31, 2021.

The Company did not give notice to expand the space during 2021.

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.

Operating lease costs are presented as part of general and administrative expenses in the condensed consolidated statements of operations, and for the years ended December 31, 2021 and 2020 approximated $ 280,000 and $ 209,000 , respectively.

For the years ended December 31, 2021 and 2020, operating cash flows used for operating leases approximated $ 321,000 and $ 309,000 , 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 December 31, 2021 is as follows (amounts in thousands of dollars) :

Future undiscounted cash flow for the years ending December 31,

Discount factor

Lease liability

Amount due within 12 months

Lease liability –

Lease liability - current

Lease liability - long term

Consulting Fees

In November 2017, the Company engaged

a regulatory consultant to assist in the Company’s efforts to prepare, file and obtain FDA approval for ribaxamase.

term of the engagement is on a monthly basis, provided that either party may terminate the agreement at any time by providing the

other party a six-month notice period.

The Company is obligated to pay the consultant a monthly retainer in addition to the success

fee payments of up to an aggregate of $4,500,000 for attainment of certain regulatory milestones.

The achievement of the milestones

is not probable at this time.

In November 2017, the Company engaged a regulatory consultant to assist in the Company’s efforts to prepare, file and obtain FDA approval for ribaxamase.

The term of the engagement is on a monthly basis, provided that either party may terminate the agreement at any time by providing the other party a six-month notice period.

The Company was obligated to pay the consultant a monthly retainer in addition to success fee payments of up to an aggregate of $ 4,500,000 for attainment of certain regulatory milestones.

The achievement of the milestones is not probable at this time.

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

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 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.

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.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

There was no income tax expense for the

years ended December 31, 2020 and 2019 due to the Company’s net losses.

The Company’s tax expense differs from

the “expected”

tax expense for the years ended December 31, 2020 and 2019.

For 2020, the “expected”

tax expense is computed by applying the Federal corporate statutory tax rate of 21% and a net, after Federal benefit state tax

rate of 6.45% (state blended rate was 27.45%) to loss before taxes.

For 2019, the “expected”

tax expense is computed

by applying the Federal corporate statutory tax rate of 21% and a net, after Federal benefit state tax rate of 4.74% (state blended

rate was 24.74.%) to loss before taxes.

License, Collaborative and Employment Agreements and Commitments – (continued)

As COVID-19 continued to spread around the globe, the Company experienced disruptions that impacted its business and clinical trials, including 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, especially in light of the new variants, 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.

There was no income tax expense for the years ended December 31, 2021 and 2020 due to the Company’s net losses.

The Company’s tax expense differs from the “expected” tax expense for the years ended December 31, 2021 and 2020.

For 2021, the “expected” tax expense is computed by applying the Federal corporate statutory tax rate of 21 % and a net, after Federal benefit state tax rate of 6.46 % (state blended rate was 8.18 %) to loss before taxes.

For 2020, the “expected” tax expense is computed by applying the Federal corporate statutory tax rate of 21 % and a net, after Federal benefit state tax rate of 6.45 % (state blended rate was 8.17 .%) to loss before taxes.

These results are as follows (in thousands):

Computed “expected”

tax-benefit –

Computed “expected”

tax-benefit –

Computed “expected” tax-benefit - Federal

Computed “expected” tax-benefit - State

Adjustment of “expected” tax-benefit to actual

Meals, entertainment and other

Non-deductible stock-based compensation

State Tax Rate Adjustment

Federal and state NOL Adjustment

Change in valuation allowance

The effects of temporary differences that

gave rise to significant portions of deferred tax assets at December 31, 2020 and 2019 are as follows ( in thousands ):

The effects of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2021 and 2020 are as follows ( in thousands ):

Deferred tax assets:

9 unchanged sentences

Total net deferred tax assets

At December 31, 2020, the Company has a

gross Federal net operating loss carry-forward of approximately $43.3 million available to offset future taxable income.

The Company’s

pre-2018 net operating losses expire on various dates through 2037.

In 2020, the Company completed an Internal Revenue Code Section

382 analysis of its historical net operating loss carry-forward amount.

As a result, the prior year net operating loss carry-forward

of $188.6 million was determined to be limited by $155.6 million.

The decrease in the prior year net operating loss carry-forward

is attributable to change of control ownership shifts which were determined for the years 2013 and 2018 which caused the reduction

in the value of the historical net operating loss carry-forward amounts.

Since the limitation affected the prior period, the Company

has determined that its 2019 tax footnote presentation was incorrect by overstating the gross net operating loss deferred tax asset

and corresponding valuation allowance.

However, there was no net impact to the net deferred tax asset and tax expense as the decrease

in the net operating loss carry-forward was offset completely by a corresponding adjustment to the Company’s overall valuation

For comparative purposes, the Company’s prior year tax footnote has been revised to reflect the adjustment to

the net operating losses and valuation allowance.

After the change noted above to the Company’s

net operating loss carry-forward amounts, at December 31, 2020 the Company has a net operating loss carry-forward of approximately

$43.3 million available to offset future taxable income.

The December 31, 2020 net operating loss carry-forward consists of $33.0

million of pre-2020 net operating loss carry-forward and $10.3 million of current year net operating loss carry-forward.

The Company’s

pre-2018 net operating losses expire on various dates through 2037 while the net operating loss carry-forward originating in the

2018 year and later carry-forward indefinitely and are subject to additional limitations based on taxable income.

The Coronavirus Aid, Relief, and Economic

Security Act (the “CARES Act”) was enacted in March 2020.

The CARES Act includes several U.S.

income tax provisions

related to, among other things, net operating loss carrybacks, alternative minimum tax credits, modifications to the net interest

deduction limitations, and technical amendments regarding the income tax depreciation of qualified improvement property placed

in service after December 31, 2017.

The CARES Act is not expected to have a material impact on the Company’s financial

In December 2019, the FASB issued ASU 2019-12,

“Income Taxes Topic 740-Simplifying the Accounting for Income Taxes”

(“ASU 2019-12”), which is intended

to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles

in Topic 740 and also clarifies and amends existing guidance to improve consistent application of Topic 740.

This guidance is effective

for fiscal years beginning after December 15, 2020, including interim periods therein, and early adoption is permitted.

the Company’s preliminary analysis, adoption of Topic 740 in 2021 is not expected to have a material effect on the Company’s

consolidated financial statements.

The valuation allowance at December 31,

2020 was approximately $17.3 million.

The net change in valuation allowance during the year ended December 31, 2020 was an increase

of approximately $3.9 million primarily due to increases in gross federal and state deferred tax assets in 2020 and state tax rate

change from the previous period.

In assessing the realizability of deferred tax assets, management considers whether it is more

likely than not that some portion or all of the deferred income tax assets will not be realized.

The ultimate realization of deferred

income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences

become deductible.

Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income,

and tax planning strategies in making this assessment.

Based on consideration of these items, management has determined that enough

uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation

allowance as of December 31, 2020.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

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 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.

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):

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

representing seventeen percent (17%) of the issued and outstanding shares of SynBiomics’

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 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.

In December 2013, through the Company’s

subsidiary, SYN 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.

During the year ended

December 31, 2016, the Company paid CSMC $350,000 for milestone payments related this license agreement.

There were no milestone

payments made during the years ended December 31, 2020 and 2019.

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.

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

Income Taxes – (continued)

At December 31, 2021, the Company has a gross Federal net operating loss carry-forward of approximately $ 58.3 million available to offset future taxable income.

The Company’s pre-2018 net operating losses expire on various dates through 2037 .

In addition, it was determined that the utilization of gross Federal net operating losses of approximately $ 198.8 million was limited by $ 155.6 million.

due to change of control ownership changes that occurred under Section 382 of the Internal Revenue Code.

State NOL’s are also limited by Section 382 of the Internal Revenue Code and were limited accordingly.

In 2020, the Company completed an Internal Revenue Code Section 382 analysis of its historical net operating loss carry-forward amount.

As a result, the prior year net operating loss carry-forward of $ 188.6 million was limited by $ 155.6 million.

The decrease in the prior year net operating loss is attributable to change of control ownership shifts which were determined for the years 2013 and 2018 which caused the reduction in the value of the historical net operating loss carry-forward amounts.

An updated section 382 analysis was performed in 2021 to identify if any additional ownership shifts occurred in the current year.

It was determined that an ownership shift occurred on January 20, 2021.

The result of the updated 2021 analysis produced an IRC 382 limit due to the 2021 ownership shift.

However, all previously limited net operating losses remain available for use in future periods.

The Company’s pre-2018 net operating losses expire on various dates through 2037 while the net operating loss carry-forward originating in the 2018 year and later carry-forward indefinitely and are subject to additional limitations based on taxable income.

In December 2019, the FASB issued ASU 20109-12, “Income Taxes Topic 740-Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application of Topic 740.

This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods therein, and early adoption is permitted.

The Company adopted ASU 2019-12 in the current period.

The valuation allowance at December 31, 2021 was approximately $ 21.5 million.

The net change in valuation allowance during the year ended December 31, 2021, was an increase of approximately $ 4.2 million primarily due to increases in gross federal and state deferred tax assets in 2021.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2021.

Subsequent Events

December 31, 2020 there were 17,999,999 October 2018 Warrants outstanding.

On November 16, 2020, the exercise price

of the October 2018 Warrants was reduced from $1.38 per October 2018 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 October 2018 Warrant.

The reduction was the result of the automatic price adjustment provision

of the October 2018 Warrant triggered by the issuance of shares of Common Stock by the Company through its “at the market

offering”

During January and February 2021, 11,655,747 October 2018 Warrants were exercised for cash proceeds of

$8.0 million.

On January 3, 2022, the Company entered into a three-year employment agreement with Steven A.

Shallcross (the “Employment Agreement”), who has served as the Company’s Chief Executive Officer since December 6, 2018 and as the Company’s Chief Financial Officer since June 1, 2015, to continue to serve as the Chief Executive Officer and Chief Financial Officer of the Company.

The Employment Agreement replaced the prior employment agreement with the Company that Mr.

Shallcross entered into on December 6, 2018, as amended December 5, 2019.

Pursuant to the Employment Agreement, Mr.

Shallcross is entitled to an annual base salary of $ 585,000 and an annual cash performance bonus of up to fifty percent ( 50 %) of his annual base salary as well as discretionary annual equity awards pursuant to the Company’s incentive plans.

The annual bonus will be based upon the assessment of the Board of Mr.

Shallcross’s performance.

The Employment Agreement also includes confidentiality obligations and inventions assignments by Mr.

Shallcross and non-solicitation and non-competition provisions.

Synthetic Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Subsequent Events –

On January 27, 2021, the Company filed

a Certificate of 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 that 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”

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

During January and February 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 a holder of

120,000 shares of its Series A Convertible Preferred Stock.

On February 9, 2021, the Company entered

into an amended and restated the 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.

FBR, Inc.), as amended by amendment no.

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

Subsequent to year end through March 3,

2021, the Company sold through the At Market Issuance Sales Agreement and the Amended and Restated Sales Agreement approximately

76.3 million shares of the Company’s common stock and received net proceeds of approximately $63.8 million.

On March 10, 2022, the Company completed the acquisition of all the outstanding shares of VCN (the “VCN Shares”) from the shareholders of VCN.

VCN is a private, clinical-stage biopharmaceutical company developing new oncolytic adenoviruses for the treatment of cancer.

VCN’s lead product candidate, VCN-01, is being studied in clinical trials for pancreatic cancer and retinoblastoma.

VCN-01 is designed to be administered systemically, intratumorally or intravitreally, either as a monotherapy or in combination with standard of care, to treat a wide variety of cancer indications.

VCN-01 is designed to replicate selectively and aggressively within tumor cells, and to degrade the tumor stroma barrier that serves as a significant physical and immunosuppressive barrier to cancer treatment, Degrading the tumor stroma has been shown to improve access to the tumor by the virus and additional therapies such as chemo- and immuno-therapies.

Importantly, degrading the stroma exposes tumor antigens, turning “cold” tumors “hot” and enabling a sustained anti-tumor immune response.

VCN has the rights to four exclusive patents for proprietary technologies, as well as technologies developed in collaboration with the Virotherapy Group of the Catalan Institute of Oncology (ICO-IDIBELL), with a number of additional patents pending.

As consideration for the purchase of the VCN Shares, the Comany paid $ 4,700,000 to Grifols Innovation and New Technologies Limited the owner of approximately 86 % of the equity of VCN, and issued to the remaining sellers and certain key employees and consultants of VCN the closing Shares, representing 19.99 % of the outstanding shares of the Company’s common stock on December 14, 2021, the date of the Purchase Agreement.

In addition to the consideration described above, under the terms of the Purchase Agreement, the Company assumed up to $ 2,400,000 of existing liabilities of VCN and has agreed to make cash payments to Grifols upon the achievement of certain clinical and commercialization milestones, as described below.

In connection with the Acquisition, prior to the closing the Company loaned VCN $ 425,000 to help finance the costs of certain of VCN’s research and development activities and, at the Closing, VCN and Grifols entered into a sublease agreement for the sublease by VCN of the laboratory and office space currently occupied by it as well as a transitional services agreement.

As a Purchase Agreement post-Closing covenant, Synthetic has agreed to commit to fund VCN’s research and development programs, including but not limited to VCN01 PDAC phase 2 trial, VCN01 RB pivotal trial and necessary G&A within a budgetary plan of approximately $ 27.8 million.

Milestone Payments

US$ 3 MM upon VCN-01 US IND Safe to Proceed pancreatic ductal adenocarcinoma (“PDAC”, or other first indication)

US$ 2.75 MM upon VCN-01 US IND Safe to Proceed – retinoblastoma (“RB”, or other second indication)

US$ 3.25 MM upon VCN-01 US first patient dosed– PDAC (or other first indication) after receipt of VCN-01 US IND Safe to Proceed for PDAC being informed

US$ 3.25 MM upon VCN-01 US first patient dosed – RB (or other second indication) after receipt of VCN-01 US IND Safe to Proceed for RB being informed

US$ 6 MM upon VCN-01 US Phase 2 trial meets the primary endpoint or if a Phase 2 trial is not conducted and only a Phase 3 trial is conducted then upon a Phase 3 being initiated – PDAC (or other first indication)

US$ 8 MM upon VCN-01 Pivotal Trial meeting the primary endpoint or upon BLA Submission – RB (or other second indication)

US$ 12 MM upon VCN-01 US Phase 3 trial meeting the primary endpoint or upon BLA Submission – PDAC (or other first indication)

US$ 16 MM upon VCN-01 BLA Approval – PDAC (or other first indication)

US$ 16 MM upon VCN-01 BLA Approval – RB (or other second indication)

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data