See accompanying notes to unaudited condensed
consolidated financial statements.
See accompanying notes to unaudited condensed
consolidated financial statements.
See accompanying notes to unaudited condensed
consolidated financial statements.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
1. Organization, Nature of Operations and Basis of Presentation
Description of Business
Synthetic Biologics, Inc. (the “Company” or “Synthetic Biologics”) is a clinical-stage
company focused on developing therapeutics designed to preserve the microbiome to protect and restore the health of patients. The
Company’s lead candidates are: (1) SYN-004 (ribaxamase) which is designed to degrade certain commonly used intravenous (IV)
beta-lactam antibiotics within the gastrointestinal (GI) tract to prevent (a) microbiome damage, (b)
Clostridioides difficile
infection (CDI), (c) overgrowth of pathogenic organisms, (d) the emergence of antimicrobial resistance (AMR) and (e) acute graft-versus-host-disease
(aGVHD) in allogeneic hematopoietic cell transplant (HCT) recipients, and (2) SYN-010 which is intended to reduce the impact
of methane-producing organisms in the gut microbiome to treat an underlying cause of irritable bowel syndrome with constipation
(IBS-C). The Company is also advancing SYN-020, an oral formulation of the enzyme intestinal alkaline phosphatase (IAP) to
treat both local GI and systemic diseases.
Basis of Presentation
The accompanying condensed consolidated
financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”)
for interim financial information. Accordingly, they do not include all of the information and notes required by Accounting Principles
Generally Accepted in the United States of America (“U.S. GAAP”) for complete financial statements. The accompanying
condensed consolidated financial statements include all adjustments, comprised of normal recurring adjustments, considered necessary
by management to fairly state the Company’s results of operations, financial position and cash flows. The operating results
for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the
full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements
and notes thereto included in the Company’s 2018 Form 10-K. The interim results for the three and six months ended June 30,
2019 are not necessarily indicative of results for the full year.
The condensed consolidated financial statements
are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the amounts
of assets and liabilities at the reporting date and the amounts of revenue and expenses in the periods presented. The Company believes
that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent
uncertainties in making estimates, actual results may differ from the original estimates, requiring adjustments to these balances
in future periods.
Liquidity
As of June 30, 2019, the Company has a
significant accumulated deficit and with the exception of the three months ended September 30, 2010 and 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 $20.1 million as of early August 2019, which includes
the net proceeds of approximately $16.7 million from the sale of securities in October 2018 (the Offering) and net proceeds of
approximately $12.2 million from sales of its Common Stock in “at-the-market” (ATM) equity offerings during 2018. With
the cash available in early August 2019, the Company believes these resources will be sufficient to fund its operations through
at least the end of the third quarter of 2020. Management believes its plan, which includes the further development of SYN-020
and additional testing of SYN-004 (ribaxamase) and SYN-010, 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, while not sacrificing the strategic direction of the Company. 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), the Company’s long term business plan may not be accomplished
and the Company may be forced to cease certain development activities. More specifically, the completion of a Phase 3 clinical
trial will require significant financing or a significant partnership.
Reverse Stock Split
On August 10, 2018, the Company
effected a one for thirty-five reverse stock split (the “Reverse Stock Split”) of its authorized, issued and
outstanding common stock. Unless otherwise noted, all references to share amounts in these financial statements reflect the
Reverse Stock Split.
Every thirty-five shares of issued and
outstanding Common Stock were automatically combined into one issued and outstanding share of Common Stock, without any change
in the par value per share of Common Stock.
All share and per share amounts in the financial
statements have been retroactively adjusted for all periods presented to give effect to the reverse split, including reclassifying
an amount equal to the reduction in par value to additional paid-in capital.
The Reverse Stock Split affected all issued
and outstanding shares of Common Stock, as well as Common Stock underlying stock options, warrants and convertible instruments
outstanding immediately prior to the effectiveness of the Reverse Stock Split. The Reverse Stock Split reduced the total number
of shares of Common Stock outstanding from approximately 128.5 million to approximately 3.7 million.
Recent Accounting Pronouncements
and Developments
In February
2016, the FASB issued guidance for accounting for leases. The guidance requires lessees to recognize assets and liabilities
related to long-term leases on the balance sheet and expands disclosure requirements regarding leasing arrangements. The
guidance is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The guidance
must be adopted on a modified retrospective transition approach and provides for certain practical expedients. We adopted
this guidance effective January 1, 2019 using the modified retrospective transition approach wherein we applied the guidance
to each lease that had commenced as of January 1, 2019 (the beginning of effective date) with a cumulative effect adjustment
as of that date. The prior comparative period was not adjusted under this method and we have provided the required
disclosures under Accounting
Standards
Codification (
ASC) 840 for the comparative period to which ASC 840 is applied. We have also elected to adopt the
following package of practical expedients:
|
·
|
we did not reassess if any expired or existing contracts are or contain leases.
|
|
·
|
we did not reassess the initial direct costs for existing leases.
|
|
·
|
we did not reassess the classification of any expired or existing leases.
|
Additionally, we made ongoing accounting policy elections whereby
we (i) do not recognize right of use (“ROU”) assets or lease liabilities for short-term leases (those with original
terms of 12-months or less) and (ii) combine lease and non-lease elements of our operating leases. The determination of whether
an arrangement contains a lease and the classification of a lease, if applicable, is made at lease commencement.
Upon adoption
of the new guidance on January 1, 2019, we recorded a ROU asset of approximately $537,000 (net of taxes and existing deferred rent
liability) and recognized a lease liability of approximately $939,000.
2. Fair Value of Financial Instruments
Fair Value of Financial Instruments
ASC 820,
Fair Value Measurement
,
defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing
an asset or liability. Fair value measurements are rated on a three-tier hierarchy as follows:
|
·
|
Level 1 inputs:
Quoted prices (unadjusted) for identical assets or liabilities in active markets;
|
|
·
|
Level 2 inputs:
Inputs, other than quoted prices, included in Level 1 that are observable either directly or indirectly; and
|
|
·
|
Level 3 inputs:
Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
In many cases, a valuation technique used
to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant
input determines the placement of the entire fair value measurement in the hierarchy.
The carrying amounts of the Company’s
short-term financial instruments, including cash and cash equivalents, other current assets, accounts payable and accrued liabilities
approximate fair value due to the relatively short period to maturity for these instruments.
Cash and cash equivalents include money
market accounts of $98,000 as of June 30, 2019 and December 31, 2018 that are measured using Level 1 inputs.
The Company uses Monte Carlo simulations
to estimate the fair value of its stock warrants. In using this model, the fair value is determined by applying Level 3 inputs
for which there is little or no observable market data, requiring the Company to develop its own assumptions. The assumptions
used in calculating the estimated fair value of the warrants represent the Company’s best estimates; however, these estimates
involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions
are used, the warrant liability and the change in estimated fair value could be materially different.
3. Selected Balance Sheet Information
Prepaid expenses and other current assets
(in thousands)
|
|
June 30,
2019
|
|
|
December 31,
2018
|
|
Prepaid manufacturing expenses
|
|
$
|
1,001
|
|
|
$
|
-
|
|
Prepaid insurance
|
|
|
197
|
|
|
|
419
|
|
Prepaid consulting, subscriptions and other expenses
|
|
|
96
|
|
|
|
132
|
|
Other receivable
|
|
|
4
|
|
|
|
-
|
|
Prepaid conferences, travel
|
|
|
-
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,298
|
|
|
$
|
593
|
|
Property and equipment, net (in thousands)
|
|
June 30,
2019
|
|
|
December 31,
2018
|
|
Computers and office equipment
|
|
$
|
852
|
|
|
$
|
852
|
|
Leasehold improvements
|
|
|
439
|
|
|
|
439
|
|
Software
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,302
|
|
|
|
1,302
|
|
Less: accumulated depreciation and amortization
|
|
|
(817
|
)
|
|
|
(695
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
485
|
|
|
$
|
607
|
|
Accrued expenses (in thousands)
|
|
June 30,
2019
|
|
|
December 31,
2018
|
|
Accrued clinical consulting services
|
|
$
|
726
|
|
|
$
|
674
|
|
Accrued manufacturing costs
|
|
|
670
|
|
|
|
83
|
|
Accrued vendor payments
|
|
|
140
|
|
|
|
150
|
|
Other accrued expenses
|
|
|
8
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,544
|
|
|
$
|
919
|
|
Accrued employee benefits (in thousands)
|
|
June 30,
2019
|
|
|
December 31,
2018
|
|
Accrued bonus expense
|
|
$
|
405
|
|
|
$
|
907
|
|
Accrued vacation expense
|
|
|
106
|
|
|
|
118
|
|
Accrued severance
|
|
|
-
|
|
|
|
307
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
511
|
|
|
$
|
1,332
|
|
4. Stock-Based Compensation
Stock Incentive Plans
On March 20, 2007, the Company’s
Board of Directors approved the 2007 Stock Incentive Plan (the “2007 Stock Plan”) for the issuance of up to 71,429
shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend
equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors
and consultants of the Company and its subsidiaries. This plan was approved by the stockholders on November 2, 2007. The exercise
price of stock options under the 2007 Stock Plan is determined by the compensation committee of the Board of Directors and may
be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted. 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 June 30, 2019, there were
11,737 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 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, the stockholders approved and adopted an amendment to the Company’s 2010
Stock Plan to increase the number of shares of the Company’s common stock reserved for issuance under the Plan from 171,429
to 228,572. On August 25, 2016, the stockholders approved and adopted an amendment to the 2010 Stock Plan to increase the number
of shares of the Company’s common stock reserved for issuance under the 2010 Stock Plan from 228,572 to 400,000. On September
7, 2017, the stockholders approved and adopted an amendment to the 2010 Stock Plan to increase the number of shares of the Company’s
common stock reserved for issuance under the 2010 Stock Plan from 400,000 to 500,000. On September 24, 2018, the stockholders approved
and adopted an amendment to the 2010 Stock Plan to increase the number of shares of the Company’s common stock reserved for
issuance under the 2010 Stock Plan from 500,000 to 1,000,000. The exercise price of stock options under the 2010 Stock Plan is
determined by the compensation committee of the Board of Directors and may be equal to or greater than the fair market value of
the Company’s common stock on the date the option is granted. Options become exercisable over various periods from the date
of grant, and expire between five and ten years after the grant date. As of June 30, 2019, there were 831,382 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. There is no deferred compensation recorded upon initial
grant date. Instead, the fair value of the stock-based payment is recognized as compensation expense over the stated vesting period.
The Company has applied fair value accounting
for all stock-based payment awards since inception. The fair value of each option is estimated on the date of grant using the Black-Scholes
option pricing model. There were no options granted during the three and six months ended June 30, 2019 and 2018. The assumptions
used for the awards during the year ended December 31, 2018 are as follows:
Exercise price
|
|
$
|
0.69
|
|
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
86
|
%
|
Risk-free interest rate
|
|
|
2.75
|
%
|
Expected life of option
|
|
|
4 years
|
|
Expected dividends
—
The Company has never declared or paid dividends on its common stock and has no plans to do so in the foreseeable future.
Expected volatility
—Volatility
is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected
to fluctuate (expected volatility) during a period.
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 2018
have a maximum term of seven years. The Company estimates the expected life of the option based on the weighted average life between
the dates that options become fully vested and the maximum life of options granted.
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;
|
|
·
|
half vesting immediately and remaining over three years;
|
|
·
|
in full on one-year anniversary date of grant date;
|
|
·
|
quarterly over three years;
|
|
·
|
annually over three years;
|
|
·
|
one-third immediate vesting and remaining annually over two years;
|
|
·
|
one-half immediate vesting and remaining over nine months;
|
|
·
|
one quarter immediate vesting and remaining over three years;
|
|
·
|
one quarter immediate vesting and remaining over 33 months; and
|
|
·
|
monthly over three years.
|
A summary of stock option activity for
the six months ended June 30, 2019 and the year ended December 31, 2018 is as follows:
|
|
Options
|
|
|
Weighted
Average Exercise
Price
|
|
|
Weighted Average
Remaining
Contractual Life
(in years)
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2017
|
|
|
359,076
|
|
|
$
|
53.93
|
|
|
|
4.60
|
|
|
$
|
1,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
671,500
|
|
|
$
|
0.69
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(78,667
|
)
|
|
$
|
67.02
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(12,927
|
)
|
|
$
|
23.72
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2018
|
|
|
938,982
|
|
|
$
|
15.18
|
|
|
|
6.19
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(52,419
|
)
|
|
$
|
68.96
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(43,444
|
)
|
|
$
|
8.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - June 30, 2019 - outstanding
|
|
|
843,119
|
|
|
$
|
12.19
|
|
|
|
5.85
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - June 30, 2019 - exercisable
|
|
|
289,660
|
|
|
$
|
32.81
|
|
|
|
4.80
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant date fair value of options granted - June 30, 2019
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average grant date fair value - June 30, 2019
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant date fair value of options granted - December 31, 2018
|
|
|
|
|
|
$
|
301,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average grant date fair value - December 31, 2018
|
|
|
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense included
in operating expenses related to stock options issued to employees and consultants for the three months ended June 30, 2019 and
2018 was $91,000 and $557,000 respectively, and $155,000 and $1.2 million for the six month ended June 30, 2019 and 2018, respectively.
As of June 30, 2019, total unrecognized
stock-based compensation expense related to stock options was $422,000, which is expected to be expensed through March 2021.
The FASB’s guidance for stock-based
payments requires cash flows from excess tax benefits to be classified as a part of cash flows from operating activities. Excess
tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable
to stock compensation costs for such options. The Company did not record any excess tax benefits during the three and six months
ended June 30, 2019 and 2018.
5. 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 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
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 per share of Common Stock (which is 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.
The assumptions used by the Company are
summarized in the following table:
|
|
Issuance
Date
|
|
Closing stock price
|
|
$
|
0.88
|
|
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
90
|
%
|
Risk free interest rate
|
|
|
3.01
|
%
|
Expected life of warrant (years)
|
|
|
5.00
|
|
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 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 may be exercised at any time on or after the date of issuance. The Series A warrants are exercisable
until the four-year anniversary of the issuance date. The Series B warrants expired December 31, 2017 and none were exercised prior
to expiration. The warrants include a provision that if the Company were to enter into a certain transaction, as defined in the
agreement, the warrants would be purchased from the holder for cash. Accordingly, the Company recorded the warrants as a liability
at their estimated fair value on the issuance date of $15.7 million and changes in estimated fair value are being recorded as non-cash
income or expense in the Company’s Condensed Consolidated Statements of Operations at each subsequent period. At June 30,
2019, the fair value of the warrant liability was $100. At June 30, 2018, the fair value of the warrant liability was $624,000,
which resulted in non-cash income of $714,000 and $3.0 million for the three and six months ended June 30, 2018, respectively. The
warrants were valued on the date of grant and on each remeasurement period using Monte Carlo simulations. A third party valuation
was not obtained for these warrants as of June 30, 2019 due to the nominal value of the warrants as of December 31, 2018 and the
Company’s continued low stock price.
The assumptions used by the Company are
summarized in the following table:
|
|
Series A
|
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
|
November 18,
2016
|
|
Closing stock price
|
|
$
|
0.56
|
|
|
$
|
17.85
|
|
|
$
|
31.15
|
|
Expected dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected volatility
|
|
|
92.5
|
%
|
|
|
80
|
%
|
|
|
85
|
%
|
Risk free interest rate
|
|
|
2.50
|
%
|
|
|
1.97
|
%
|
|
|
1.58
|
%
|
Expected life of warrant
|
|
|
1.9 years
|
|
|
|
2.9 years
|
|
|
|
4.0 years
|
|
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 expire on October 10, 2019.
The warrants issued in conjunction with
the registered direct offering in October 2014 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 at a premium. Accordingly, the Company recorded the
warrants as a liability at their estimated fair value on the issuance date, which was $7.4 million, and changes in estimated fair
value are being recorded as non-cash income or expense in the Company’s Consolidated Statements of Operations at each subsequent
period. At June 30, 2019, the fair value of the warrant liability was zero. At June 30, 2018, the fair value of the warrant liability
was $21,000, which resulted in non-cash income of $69,000 and $395,000 for the three and six months ended June 30, 2018, respectively.
The warrants were valued on the date of grant using the Black-Scholes valuation model which approximates the value derived using
Monte Carlo simulations. The warrants were not valued during 2019 due the current minimal value and stock price. The assumptions
used by the Company are summarized in the following table:
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
|
October 10,
2014
|
|
Closing stock price
|
|
$
|
0.56
|
|
|
$
|
17.85
|
|
|
$
|
61.25
|
|
Expected dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected volatility
|
|
|
110
|
%
|
|
|
80
|
%
|
|
|
95
|
%
|
Risk free interest rate
|
|
|
2.60
|
%
|
|
|
1.86
|
%
|
|
|
1.39
|
%
|
Expected life of warrant
|
|
|
.79 years
|
|
|
|
1.79 years
|
|
|
|
5.0 years
|
|
The following table summarizes the estimated
fair value of the warrant liability
(in thousands)
:
Balance at December 31, 2017
|
|
$
|
4,083
|
|
Change in fair value of warrant liability
|
|
|
(4,083
|
)
|
Balance at December 31, 2018
|
|
|
-
|
|
Change in fair value of warrant liability
|
|
|
-
|
|
Balance at June 30, 2019
|
|
$
|
-
|
|
A summary of all warrant activity for
the Company for the six months ended June 30, 2019 and the year ended December 31, 2018 is as follows:
|
|
Number of
Warrants
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
|
915,138
|
|
|
$
|
52.50
|
|
Granted
|
|
|
18,000,713
|
|
|
|
1.38
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Balance at December 31, 2018
|
|
|
18,915,851
|
|
|
|
3.85
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Balance at June 30, 2019
|
|
|
18,915,851
|
|
|
$
|
3.85
|
|
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 issuance. The warrant is equity classified and the fair value of the warrant approximated
$9,000 on the date of grant and was measured using the Black-Scholes option pricing model. This entire expense was recorded in
the quarter ended March 31, 2018.
The assumptions used by the Company are summarized in the following table:
|
|
Issuance
Date
|
|
Closing stock price
|
|
$
|
18.55
|
|
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
85
|
%
|
Risk free interest rate
|
|
|
2.42
|
%
|
Expected life of warrant (years)
|
|
|
4.92
|
|
A summary of all outstanding and exercisable
warrants as of June 30, 2019 is as follows:
Exercise Price
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
Weighted Average
Remaining
Contractual Life
|
|
$
|
1.38
|
|
|
|
17,999,999
|
|
|
|
17,999,999
|
|
|
|
4.29 years
|
|
|
18.20
|
|
|
|
714
|
|
|
|
714
|
|
|
|
3.49 years
|
|
|
50.05
|
|
|
|
714,286
|
|
|
|
714,286
|
|
|
|
1.39 years
|
|
|
61.25
|
|
|
|
200,852
|
|
|
|
200,852
|
|
|
|
0.28 years
|
|
$
|
3.85
|
|
|
|
18,915,851
|
|
|
|
18,915,851
|
|
|
|
4.14 years
|
|
6. Net Loss per Share
Basic net loss per
share is computed by dividing net loss by the weighted average number of common shares outstanding. Included in net loss is the
Series A preferred dividend from preferred shares issuance of $61,000 and $122,000 for the three and six months ended June 30,
2019 and $61,000 and $120,000 for the three and six months ended June 30, 2018, respectively. Net loss for the three and
six months ended June 30, 2019 also includes the Series B deemed dividend of $117,000 and $515,000. The deemed dividend relates
to the discount provided to preferred stockholders upon conversion of their preferred stock to common shares and is subtracted
from net loss (see Note 8). 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 potentially
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. The number of options and warrants for the
purchase of common stock that were excluded from the computations of net loss per common share for the three and six months ended
June 30, 2019 were 843,119 and 18,915,851, respectively, and for the three and six months and ended June 30, 2018 were 12,168,515
and 32,054,809, respectively.
The following tables set forth the computation
of diluted net loss per weighted average number of shares outstanding attributable to Synthetic Biologics, Inc. and Subsidiaries
for the three and six months ended June 30, 2019 and 2018
(in thousands except share and per share amounts)
:
|
|
Three months ended June 30, 2019
|
|
|
Six months ended June 30, 2019
|
|
|
|
Net loss
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Share
Amount
|
|
|
Net Loss
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Share
Amount
|
|
Net loss - Basic
|
|
$
|
(3,709
|
)
|
|
|
16,465,314
|
|
|
$
|
(0.23
|
)
|
|
$
|
(7,680
|
)
|
|
|
16,063,283
|
|
|
$
|
(0.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive shares related to warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss - Dilutive
|
|
$
|
(3,709
|
)
|
|
|
16,465,314
|
|
|
$
|
(0.23
|
)
|
|
$
|
(7,680
|
)
|
|
|
16,063,283
|
|
|
$
|
(0.48
|
)
|
|
|
Three months ended June 30, 2018
|
|
|
Six months ended June 30, 2018
|
|
|
|
Net loss
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Share
Amount
|
|
|
Net Loss
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per Share
Amount
|
|
Net loss - Basic
|
|
$
|
(4,258
|
)
|
|
|
3,683,383
|
|
|
$
|
(1.16
|
)
|
|
$
|
(6,634
|
)
|
|
|
3,678,389
|
|
|
$
|
(1.80
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive shares related to warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss - Dilutive
|
|
$
|
(4,258
|
)
|
|
|
3,683,383
|
|
|
$
|
(1.16
|
)
|
|
$
|
(6,634
|
)
|
|
|
3,678,389
|
|
|
$
|
(1.80
|
)
|
7. Non-controlling Interest
The Company’s non-controlling interest
is accounted for under ASC 810,
Consolidation
, and represents the minority shareholder’s ownership interest related
to the Company’s subsidiary, Synthetic Biomics, Inc. (“SYN Biomics”). In accordance with ASC 810, the Company
reports its non-controlling interest in subsidiaries as a separate component of equity in the Consolidated Balance Sheets and reports
both net loss attributable to the non-controlling interest and net loss attributable to the Company’s common stockholders
on the face of the Consolidated Statements of Operations. On September 5, 2018, the Company entered into an agreement with Cedars-Sinai
Medical Center (CSMC) for an investigator-sponsored Phase 2b clinical study of SYN-010 to be co-funded by the Company and CSMC
(the “Study”). The Study 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 will pay $441,000 to support the Study and the Company entered into a Stock Purchase Agreement
with CSMC pursuant to which the Company, upon the approval of the Study protocol by the Institutional Review Board (IRB) : (i)
issued to CSMC 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. (“Synbiomics”)
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 2019, research and development expense
recorded related to this transaction approximated $119,000 and $174,000 for the three and six months ended June 30, 2019, respectively.
The Agreement also provides CSMC with a
right, commencing on the six month anniversary of issuance of the stock under certain circumstances in the event that the shares
of stock of SYN Biomics are not then freely tradeable, and subject to NYSE American, LLC approval, to exchange its SYN Biomics
shares for unregistered shares of the Company’s common stock, with the rate of exchange based upon the relative contribution
of the valuation of SYN Biomics to the public market valuation of the Company at the time of each exchange. The Stock Purchase
Agreement also provides for tag-along rights in the event of the sale by the Company of its shares of SYN Biomics.
8. Common and Preferred Stock
Series B Preferred Stock
On October 15, 2018, the Company closed
its underwritten public offering pursuant to which it received gross proceeds of approximately $18.6 million before deducting underwriting
discounts, commissions and other offering expenses payable by the Company and sold an aggregate of (i) 2,520,000 Class A Units
, with each Class A Unit offered to the public at a public offering price of $1.15, and (ii) 15,723 Class B Units, with each Class
B Unit offered to the public at a public offering price of $1,000 per Class B Unit and consisting of one share of the Company’s
Series B Preferred Stock, with a stated value of $1,000 and convertible into shares of Common Stock at the stated value divided
by a conversion price of $1.15 per share, with all shares of Series B Preferred Stock convertible into an aggregate of 13,672,173
shares of Common Stock, and issued with an aggregate of 13,672,173 October 2018 Warrants. Since the above units are equity instruments,
the proceeds were allocated on a relative fair value basis which created the Series B Preferred Stock discount.
In addition, pursuant to the Underwriting
Agreement that the Company entered into with the Underwriters on October 10, 2018, the Company granted the Underwriters a 45 day
option (the “Over-allotment Option”) to purchase up to an additional 2,428,825 shares of Common Stock and/or additional
warrants to purchase an additional 2,428,825 shares of Common Stock. Each Warrant is exercisable for one share of common stock.
The Underwriters partially exercised the Over-allotment Option by electing to purchase from the Company additional Warrants to
purchase 1,807,826 shares of Common Stock.
The 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. During the three
and six months ended June 30, 2019, 302 and 1,338 shares, respectively, have been converted resulting in the recognition of $117,000
and $515,000 of unamortized discount from the conversion, respectively. As of June 30, 2019, 7,900 shares have been converted resulting
in the recognition of $3.0 million of unamortized discount. This is recorded as a deemed dividend in accumulated deficit.
The October 2018 Warrants are immediately
exercisable at a price of $1.38 per share of common stock (which is 120% of the public offering price of the Class A Units) and
will expire on October 15, 2023. If, at the time of exercise, there is no effective registration statement registering, or no current
prospectus available for, the issuance of the shares of common stock to the holder, then the October 2018 Warrants may only be
exercised through a cashless exercise. No fractional shares of common stock will be issued in connection with the exercise of any
October 2018 Warrants. In lieu of fractional shares, the holder will receive an amount in cash equal to the fractional amount multiplied
by the fair market value of any such fractional shares.
The Company may not effect, and the holder
will not be entitled to, exercise any Warrants or conversion of the Series B Preferred Stock, which, upon giving effect to such
exercise, would cause (i) the aggregate number of shares of Common Stock beneficially owned by the holder (together with its affiliates)
to exceed 4.99% (or, at the election of the holder, 9.99%) of the number of shares of Common Stock outstanding immediately after
giving effect to the exercise, or (ii) the combined voting power of the Company’s securities beneficially owned by the holder
(together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99%) of the combined voting power of all of
the Company’s securities then outstanding immediately after giving effect to the exercise or conversion, as such percentage
ownership is determined in accordance with the terms of the October 2018 Warrants or Series B Preferred Stock. However, any holder
may increase or decrease such percentage to any other percentage not in excess of 9.99% upon at least 61 days’ prior notice
from the holder to the Company. The holders of the Series B Preferred will participate, on an as-if-converted-to-common stock basis,
in any dividends to the holders of common stock. Upon a defined Fundamental Transaction, the holders of the Series B Preferred
Stock are entitled to the same consideration as are holders of Common Stock. The Series B Preferred Stock ranks junior to existing
Series A preferred stock but on parity with common stock. Liquidation preference is equal to an amount pari passu with the common
stock on an as converted basis (i.e., there is no preference to common stock)
Since the effective conversion price of
the Series B Preferred Stock is less than the fair value of the underlying common stock at the date of issuance, there is a beneficial
conversion feature (“BCF”) at the issuance date. Because the Series B Preferred Stock has no stated maturity or redemption
date and is immediately convertible at the option of the holder, the discount created by the BCF is immediately charged to accumulated
deficit as a “deemed dividend” and impacts earnings per share. During the year ended December 31, 2018, the Company
recorded a discount of $9.1 million and immediately amortized the discount to record the deemed dividend.
Series A Preferred Stock
On September 11, 2017, the Company entered
into a share purchase agreement (the “Purchase Agreement”) with an investor (the “Investor”), pursuant
to which the Company offered and sold in a private placement 120,000 shares of its Series A Convertible Preferred Stock, par value
$0.001 per share (the “Series A Preferred Stock”) for an aggregate purchase price of $12 million, or $100 per share.
The Series A Preferred Stock ranks senior
to the shares of the Company’s common stock, and any other class or series of stock issued by the Company with respect to
dividend rights, redemption rights and rights on the distribution of assets upon any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Company. Holders of Series A Preferred Stock are entitled to a cumulative dividend at the rate
of 2.0% per annum, payable quarterly in arrears, as set forth in the Certificate of Designation of Series A Preferred Stock.
The Series A Preferred Stock is convertible at the option of the holders at any time into shares of common stock at an initial
conversion price of $18.90 per share, subject to certain customary anti-dilution adjustments.
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, subject to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization with respect to the Series A Convertible Preferred Stock, or (ii) the
five year anniversary of the issuance date, the Company has the right to redeem, in whole or in part, on a pro rata basis from
all holders thereof based on the number of shares of Series A Convertible Preferred Stock then held, the outstanding Series A Preferred
Stock, for cash, at a redemption price per share equal to the Liquidation Value (as defined in the Certificate of Designations).
The Series A Preferred Stock is classified
as temporary equity due to the shares being (i) redeemable based on contingent events outside of the Company’s control, and
(ii) convertible immediately and from time to time. Since the effective conversion price of the Series A Preferred Stock was 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 retained earnings as a “deemed dividend”
and impacts earnings per share. Because the Series A Preferred Stock is not currently redeemable, the discount arising from issuance
costs was allocated to temporary equity and will not be accreted until such time that redemption becomes probable. The stated dividend
rate of 2% per annum is cumulative and the Company accrues the dividend on a quarterly basis (in effect accreting the dividend
regardless of declaration because the dividend is cumulative). During the three and six months ended June 30, 2019, the Company
accrued dividends of $61,000 and $122,000, respectively. During the three and six months ended June 30, 2018, the Company accrued
dividends of $61,000 and $120,000, respectively. Once the dividend is declared, the Company will reclassify the declared amount
from temporary equity to a dividends payable liability. When the redemption of the Series A Preferred Stock becomes probable, the
temporary equity will be accreted to redemption value as a deemed dividend.
B. Riley FBR Sales Agreement
On August 5, 2016, the Company entered
into the B. Riley FBR Sales Agreement with FBR Capital Markets & Co. (now known as B. Riley FBR, Inc.), which enables the Company
to offer and sell shares of the Company’s common stock with an aggregate sales price of up to $40.0 million from time to
time through B. Riley FBR, Inc. as the Company’s sales agent. Sales of common stock under the B. Riley FBR Sales Agreement
are made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities
Act. B. Riley FBR, Inc. is entitled to receive a commission rate of up to 3.0% of gross sales in connection with the sale of the
Company’s common stock sold on the Company’s behalf. For the year ended December 31, 2018, the Company sold through
the B. Riley FBR Sales Agreement an aggregate of 3.5 million shares of the Company’s common stock, and received net proceeds
of approximately $12.2 million. For the three and six months ending June 30, 2018, the Company sold through the B. Riley FBR Sales
Agreement an aggregate of 0 and 1.7 million shares of the Company’s common stock, and received net proceeds of approximately
$400,000. The Company has not sold any shares during 2019 through the B. Riley FBR Sales Agreement.
9. 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 will provide further evaluation of the efficacy and safety of SYN-010, the Company’s
modified-release reformulation of lovastatin lactone, which is exclusively licensed to the Company by CSMC. SYN-010 is designed
to reduce methane production by certain microorganisms (
M. smithii
) in the gut to treat an underlying cause of irritable
bowel syndrome with constipation (IBS-C).
In consideration of the support provided
by CSMC for the Study, the Company entered into a Stock Purchase Agreement with CSMC pursuant to which the Company: (i) issued
to CSMC 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 Synthetic 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 seventeen percent (17%) of the issued and outstanding
shares of SYN Biomics’ common stock.
The Agreement also provides CSMC with a
right, commencing on the six month anniversary of issuance of the stock under certain circumstances in the event that the shares
of stock of SYN Biomics are not then freely tradeable, and subject to NYSE American, LLC approval, to exchange its SYN Biomics
shares for unregistered shares of the Company’s common stock, with the rate of exchange based upon the relative contribution
of the valuation of SYN Biomics to the public market valuation of the Company at the time of each exchange. The Stock Purchase
Agreement also provides for tag-along rights in the event of the sale by the Company of its shares of SYN Biomics. As of June 30,
2019, CSMC has not exercised its right to exchange its SYN Biomics shares for the Company’s common stock.
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. and foreign
patents and pending patent applications for various fields of use, including IBS-C, obesity and diabetes. An investigational team
led by Mark Pimentel, M.D. at CSMC discovered that these products may reduce the production of methane gas by certain GI microorganisms.
During the three and six months ended June 30, 2019 and 2018, the Company did not owe and did not pay CSMC for milestone payments
related this license agreement.
10. Commitments
and Contingencies
Leases
All of the Company’s existing leases
as of June 30, 2019 are classified as operating leases. As of June 30, 2019, 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. The rate is then
adjusted for the impact of collateralization, the lease term and other specific terms included in the Company’s lease arrangements.
The incremental borrowing rate is determined at lease commencement, or as of January 1, 2019, for operating leases in existence
upon adoption of ASC 842. The incremental borrowing rate is subsequently reassessed upon a modification to the lease arrangement.
ROU assets are subsequently assessed for impairment in accordance with the Company’s accounting policy for long-lived assets.
Operating lease costs are presented as part of the general and administrative expenses in the condensed consolidated statements
of operations, and for the three and six months ended June 30, 2019 approximated $50,000 and $101,000, respectively. During the
same period, operating cash flows used for operating leases approximated $75,000 and $149,000, respectively. During 2019 there
were no ROU assets exchanged for operating lease obligations. The initial non-cash addition of ROU assets due to adoption of ASC
842 was $538,000.
A maturity analysis of our operating leases
as of June 30, 2019 is as follows
(amounts in thousands of dollars)
:
Future undiscounted cash flows:
|
|
|
|
|
2019
|
|
$
|
151
|
|
2020
|
|
|
309
|
|
2021
|
|
|
321
|
|
2022
|
|
|
192
|
|
Total
|
|
$
|
973
|
|
|
|
|
|
|
Discount factor
|
|
$
|
(139
|
)
|
Lease liability
|
|
$
|
834
|
|
Amount due within 12 months
|
|
$
|
(233
|
)
|
Non-current lease liability
|
|
$
|
601
|
|
As of December 31, 2018, the Company’s
future minimum lease payments were as follows
(in thousands)
:
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Lease
|
|
$
|
300
|
|
|
$
|
309
|
|
|
$
|
321
|
|
|
$
|
192
|
|
|
$
|
1,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
300
|
|
|
$
|
309
|
|
|
$
|
321
|
|
|
$
|
192
|
|
|
$
|
1,122
|
|
11. Subsequent Events
In August 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), the Company’s first-in-class oral enzyme designed to protect the gut microbiome from disruption
caused by commonly used intravenous (IV) beta-lactam antibiotics, 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. Dr. Erik R. Dubberke,
Professor of Medicine and Clinical Director, Transplant Infectious Diseases at Washington University will serve as the principal
investigator of the trial in collaboration with his Washington University colleague Dr. Mark A. Schroeder, Associate Professor
of Medicine, Division of Oncology, Bone Marrow Transplantation and Leukemia.
The goal of the Study is to evaluate the
safety, tolerability and potential absorption into the systemic circulation (if any) of 150 mg oral SYN-004 administered to allogeneic
HCT recipients who receive an IV beta-lactam antibiotic to treat fever. Study participants will be enrolled into three sequential
cohorts administered a different study-assigned IV beta-lactam antibiotic. Eight participants in each cohort will receive SYN-004
and four will receive placebo. Safety and pharmacokinetic data for each cohort will be reviewed by an independent Data and Safety
Monitoring Committee, which will make a recommendation on whether to proceed to the next IV beta-lactam antibiotic. The Study will
also evaluate potential protective effects of SYN-004 on the gut microbiome as well as generate preliminary information on potential
therapeutic benefits and patient outcomes of SYN-004 in allogeneic HCT recipients. Enrollment is expected to begin during the fourth
quarter of 2019, contingent upon approval of the clinical study protocol by the Washington University School of Medicine’s
Institutional Review Board (IRB) and the U.S. Food & Drug Administration (FDA).
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 the Study Drug 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 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.