Item 1.01. Entry into a Material Definitive Agreement.
On October
10, 2018, Synthetic Biologics, Inc., a Nevada corporation (the “Company”), entered into an underwriting
agreement (the “Underwriting Agreement”) with A.G.P./Alliance Global Partners, as representative of the
underwriters (the “Underwriters”), pursuant to which the Company agreed to issue and sell to the Underwriters in
a firm commitment underwritten public offering (the “Offering”) 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 Company’s common stock, par
value $0.001 per share (the “Common Stock”), and one five-year warrant to purchase one share of Common Stock at
an exercise price of $1.38 per share (each a “Warrant” and collectively, the “Warrants”), with
each Class A Unit to be offered to the public at a public offering price of $1.15, and (ii) 15,723 Class B Units (the
“Class B Units”, and together with the Class A Units, the “Units”), with each Class B Unit offered
to the public at a public offering price of $1,000 per Class B Unit and consisting of one share of the Company’s Series
B Convertible Preferred Stock (the “Series B Preferred Stock”), with a stated value of $1,000 and convertible
into shares of Common Stock at the stated value divided by a conversion price of $1.15 per share, with all shares of Series B
Preferred Stock convertible into an aggregate of 13,672,173 shares of Common Stock, and issued with an aggregate of
13,672,173 Warrants.
In addition, pursuant
to the Underwriting Agreement, 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 Offering, including the Warrants purchased in the partial
exercise of the over-allotment option, closed on October 15, 2018. The Units were not certificated and the shares of Common Stock,
Series B Preferred Stock and Warrants comprising the Units are immediately separable and were issued separately in the Offering.
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 Securities and Exchange Commission (the “Commission”), which was declared effective by the Commission on October
10, 2018 (the “Registration Statement”).
The conversion price
of the Series B Preferred Stock and exercise price of the 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 Company’s
Common Stock. The exercise price of Warrants is subject to adjustment in the event of certain dilutive issuances.
The Warrants are
immediately exercisable at a price of $1.38 per share of Common Stock (which is 120% of the public offering price of the
Class A Units) and 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
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 may not
effect, and holder will not be entitled to, exercise any Warrant 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 Warrants or Series B Preferred Stock. However, any
holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon at least 61 days’ prior
notice from the holder to us.
The net proceeds to
the Company from the Offering, after deducting the Underwriters’ fees and expenses and the Company’s estimated Offering
expenses, and excluding the proceeds, if any, from the exercise of the Warrants issued in the Offering, are expected to be approximately
$16.7 million. The Company anticipates using the net proceeds from the Offering to fund the Company’s and its subsidiaries’
preclinical and clinical programs, (including, but not limited to, providing approximately $5.0-$7.0 million in funding for manufacturing
scale-up activities to progress SYN-004 towards a potential Phase 3 clinical trial (broad indication) and/or initiate a Phase 1/2
clinical trial(s) in a specialty population, approximately $7.5 million in funding for preclinical development and related manufacturing
activities for the Company’s IND and Phase 1 clinical trial for the Company’s SYN-020 program and required milestone
payments) and for working capital and general corporate purposes, including, to acquire, license or invest in complementary businesses,
technologies, product candidates or other intellectual property.
The Underwriting Agreement
contains representations and warranties that the parties made to, and solely for the benefit of, the other in the context of all
of the terms and conditions of that agreement and in the context of the specific relationship between the parties. The provisions
of the Underwriting Agreement, including the representations and warranties contained therein, are not for the benefit of any party
other than the parties to such agreements and are not intended as documents for investors and the public to obtain factual information
about the current state of affairs of the parties to those documents and agreements. Rather, investors and the public should look
to other disclosures contained in the Company’s filings with the Securities and Exchange Commission.
The Company also entered
into a warrant agency agreement with its transfer agent, Corporate Stock Transfer, Inc., who will act as warrant agent for the
Company, setting forth the terms and conditions of the Warrants sold in the Offering (the “Warrant Agency Agreement”).
The foregoing summaries
of the terms of the Underwriting Agreement, the Warrant Agency Agreement and Warrants are subject to, and qualified in their entirety
by reference to, the Underwriting Agreement and the Warrant Agency Agreement (including the form of Warrant), which are filed as
Exhibits 1.1, and 4.1, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.