Synthetic Biologics(TOVX) - 2022 Q2 - Quarterly Report

Part I Financial Statements (Unaudited) The company reported a net loss of $5.0 million for Q2 2022, with cash decreasing to $52.3 million due to the VCN acquisition and operations, and a 1-for-10 reverse stock split effective July 25, 2022 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $52,266 | $67,325 | ($15,059) | | In-process research and development | $20,562 | $0 | +$20,562 | | Goodwill | $5,185 | $0 | +$5,185 | | Total Assets | $82,331 | $70,365 | +$11,966 | | Total Liabilities | $20,657 | $4,957 | +$15,700 | | Total Stockholders' Equity | $61,674 | $65,408 | ($3,734) | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | General and administrative | $1,500 | $1,265 | $3,155 | $2,685 | | Research and development | $3,485 | $1,932 | $6,082 | $3,049 | | Loss from Operations | ($4,985) | ($3,197) | ($9,237) | ($5,734) | | Net Loss Attributable to Common Stockholders | ($4,968) | ($3,195) | ($9,241) | ($14,654) | | Net Loss Per Share | ($0.31) | ($0.24) | ($0.62) | ($1.31) | Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | ($9,258) | ($5,924) | | Net Cash Used in Investing Activities | ($4,294) | ($14) | | Net Cash Provided (used in) by Financing Activities | ($1,376) | $74,002 | | Net (decrease) increase in cash | ($14,963) | $68,064 | - On March 10, 2022, the company acquired VCN Biosciences for total consideration of approximately $23.9 million, consisting of $4.7 million in cash, $6.6 million in common stock, and $12.2 million in fair value of contingent consideration[46][48] - A 1-for-10 reverse stock split was effective on July 25, 2022, reducing outstanding shares from 158.4 million to 15.8 million, with all share and per-share amounts in the financial statements retrospectively adjusted[29][30][31] - Subsequent to the quarter end, in July 2022, the company closed a private placement of Series C and D Preferred Stock for gross proceeds of approximately $3.0 million[142] Management's Discussion and Analysis of Financial Condition and Results of Operations The company is transitioning its strategic focus to oncology post-VCN acquisition, with R&D expenses increasing 80% and a net loss of $5.0 million for Q2 2022, while management believes its $52.3 million cash position is sufficient for the next twelve months - The company is shifting its strategic focus to oncology following the acquisition of VCN Biosciences and is exploring value creation options for its legacy GI assets, SYN-004 and SYN-020[147][148] Product Pipeline Status | Candidate | Target Indication | Status* | | :--- | :--- | :--- | | VCN-01 | Pancreatic Cancer (IV) | Protocol submitted for regulatory review | | | Retinoblastoma (IVit) | Developing Ph 2/3 Protocol (ODD US & EU) | | | HNSCC (IV) + CPI | Treatment Complete, in Follow-up Period | | SYN-004 | Prevention of aGVHD in allo-HCT | Cohort 1 Topline Data expected Q4'22 | | SYN-020 | Celiac, NAFLD/NASH, etc. | MAD Study Topline Data reported Q2'22 | | VCN-11 | Solid tumors (IV) | Preclinical studies ongoing | *Based on management's current beliefs and expectations Comparison of Operating Expenses (Three Months Ended June 30, in thousands) | Expense Category | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | General and administrative | $1,500 | $1,265 | 19% | | Research and development | $3,485 | $1,932 | 80% | Comparison of Operating Expenses (Six Months Ended June 30, in thousands) | Expense Category | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | General and administrative | $3,155 | $2,685 | 18% | | Research and development | $6,082 | $3,049 | 99% | - The company believes its cash and cash equivalents of $52.3 million as of June 30, 2022, are sufficient to fund operations through the next twelve months, including a commitment to fund VCN's R&D programs with approximately $27.8 million over the next three years[219][238] Quantitative and Qualitative Disclosures About Market Risk The company's market risk is limited to cash and cash equivalents held in low-risk money market instruments, with no significant impact expected from interest rate changes - The company's primary market risk is confined to its cash and cash equivalents, which consist mainly of money market instruments, and management does not expect significant effects from changes in market interest rates due to their short-term and low-risk nature[230] Controls and Procedures Management identified a material weakness in internal controls over financial reporting related to non-routine transactions, leading to the CEO's conclusion that disclosure controls were ineffective as of June 30, 2022 - A material weakness was identified in controls related to the accounting and disclosure for non-routine transactions, specifically concerning the review of reports and related income tax implications[233] - Due to the identified material weakness, the CEO concluded that disclosure controls and procedures were not effective as of June 30, 2022[232] - The company is integrating VCN's operations into its system of internal control but will exclude VCN from its assessment of internal control over financial reporting for the year ending December 31, 2022, as permitted by the SEC[234] Part II Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - As of the report date, the company is not involved in any legal proceedings that would materially and adversely affect its business or financial condition[236] Risk Factors The company faces significant risks including the need for additional capital, potential stockholder dilution due to limited authorized shares, and a previously disclosed material weakness in internal controls over financial reporting - The company will need to raise additional capital to fund its operations, including a commitment of approximately $27.8 million over three years for VCN's R&D programs, and failure to obtain funding could force delays or elimination of development programs[238] - A limited number of authorized and unissued shares of common stock (2.9 million available after accounting for outstanding convertible securities) may be insufficient for future equity financing or strategic transactions[240][243] - A material weakness in internal controls over financial reporting related to non-routine transactions was identified, and there is no assurance it will be effectively remediated or that others will not occur[245][246] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the quarter ended June 30, 2022, beyond previously disclosed SEC filings Defaults Upon Senior Securities This section is not applicable Mine Safety Disclosures This section is not applicable Other Information On August 9, 2022, the company amended its Securities Purchase Agreement for Series C and D preferred stock to limit voting rights, ensuring compliance with NYSE American rules - To comply with NYSE American rules, the company amended the SPA for its Series C and D preferred stock on August 9, 2022, to cap the number of votes the holder is entitled to cast[251] Exhibits This section provides an index of exhibits filed or furnished as part of the Quarterly Report on Form 10-Q