1. Organization and Nature of Operations and Basis of Presentation

Description of Business

Synthetic Biologics, Inc. (the “Company” or “Synthetic Biologics”) is a clinical-stage biotechnology company developing pathogen-specific therapies for serious infections and diseases, with a focus on protecting the microbiome. The Company is developing an oral biologic to protect the gut microbiome (gastrointestinal (GI) microflora) from intravenous (IV) antibiotics for the prevention of C. difficile infection, an oral statin treatment to reduce the impact of methane producing organisms on irritable bowel syndrome with constipation (IBS-C) and a monoclonal antibody combination for the treatment of Pertussis. In addition, the Company is developing a Phase 2 oral estriol drug for the treatment of relapsing-remitting multiple sclerosis (MS) and cognitive dysfunction in MS.


Therapeutic Area	Product Candidate	Status
Relapsing-remitting MS	Trimesta (oral estriol)	The lead principal investigator presented additional Phase 2 clinical outcome data, including more detailed results on improvements in cognitive and disability measures at the ACTRIMS-ECTRIMS Joint Meeting in September 2014; Partnership discussions ongoing; MRI data review underway
Cognitive dysfunction in MS	Trimesta (oral estriol)	Patient enrollment underway in Phase 2 clinical trial
C. difficile infection prevention	SYN-004 (oral enzyme)	Intend to initiate Phase 2a SYN-004 clinical trial during 1^st quarter 2015 and Phase 2b proof-of- concept SYN-004 clinical trial during 2^nd half 2015
Irritable bowel syndrome with constipation (IBS-C)	SYN-010 (oral compound)	Intend to initiate Phase 2 clinical trials during 2^nd quarter of 2015; Collaboration with Cedars-Sinai Medical Center
Pertussis	SYN-005 (monoclonal antibodies)	Positive preclinical research findings reported in 2014; Seeking non-dilutive funding to support clinical development of SYN-005; Collaborations with Intrexon and The University of Texas at Austin
Acinetobacter infection	SYN-001 (monoclonal antibody)	Discovery stage; Collaboration with Intrexon

Basis of Presentation and Corporate Structure

As of December 31, 2014, 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. (“Synthetic Biomics”). Pipex Therapeutics, EPI, Healthmine and Putney are wholly owned, and Solovax, CD4, Epitope and Synthetic 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, 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 Synthetic Biomics which was incorporated in Nevada in December of 2013.

On March 8, 2012, the Company sold all of its interest in Adeona Clinical Laboratory, LLC (the “Lab”) to Hartlab, LLC, an entity controlled by the Lab’s former owner, in consideration for (i) the immediate assignment of the Lab’s outstanding accounts receivable up through the date of closing, plus (ii) $700,000 payable pursuant to the terms of a two-year non-recourse promissory note secured by all the assets of the Lab. Accordingly, this business has been presented in the consolidated financial statements as discontinued operations. During September 2013, the note receivable and associated interest receivable were deemed uncollectible. Accordingly, the Company recorded bad debt expense of $763,000. This transaction is described in more detail in Note 3 — Discontinued Operations of Adeona Clinical Laboratory and Note Receivable.