All intercompany transactions and accounts have been eliminated in consolidation.

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, research and development costs, business combinations, contingent consideration, fair value of long-lived assets, 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.

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).

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.

Cash and cash equivalents include cash and highly liquid short-term investments with original maturities of three months or less. All interest bearing and non-interest bearing accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $250 thousand. The majority of our cash balances are in excess of FDIC coverage. We consider this to be a normal business risk.

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.

Depreciation and amortization expense was approximately $85,000 and $87,000 for the years ended December 31, 2022 and 2021, 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, 2022 and 2021.

The Company accounts for acquisitions using the acquisition method of accounting, which requires that all identifiable assets acquired, and liabilities assumed be recorded at their estimated fair values. The excess of the fair value of purchase consideration over the fair values of identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from acquired patented technology. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

As a result of the acquisition of VCN (see Note 3), the Company recorded two intangible assets, in-process research and development (“IPR&D”) and goodwill. The IPR&D and goodwill are deemed to have indefinite lives and therefore not amortized.

IPR&D assets represent the fair value assigned to technologies that the Company acquired, which at the time of acquisition have not reached technological feasibility and have no alternative future use. IPR&D assets are considered to have indefinite-lives until the completion or abandonment of the associated research and development projects. If and when development is complete, which generally occurs upon regulatory approval and the ability to commercialize products associated with the IPR&D assets, these assets are then deemed to have definite lives and are amortized based on their estimated useful lives at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value.

During the period that the assets are considered indefinite-lived, they are tested for impairment on an annual basis on October 1, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that could indicate an impairment. The impairment test consists of a comparison of the estimated fair value of the IPR&D with its carrying amount. If the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess.

The Company tests the carrying amounts of goodwill for recoverability on an annual basis on October 1 or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company performs a one-step test in its evaluation of the carrying value of goodwill if qualitative factors determine it is necessary to complete a goodwill impairment test. In the evaluation, the fair value of the relevant reporting unit is determined and compared to its carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable, and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value, and a charge is reported in impairment of goodwill in the Company’s consolidated statements of operations. As of December 31, 2022, the Company has determined that it has one reporting unit.

Consideration paid in a business combination may include potential future payments that are contingent upon the acquired business achieving certain milestones in the future (“contingent consideration”). Contingent consideration liabilities are measured at their estimated fair value as of the date of acquisition, with subsequent changes in fair value recorded in the consolidated statements of operations. The Company estimates the fair value of the contingent consideration as of the acquisition date using the estimated future cash outflows based on the probability of meeting future milestones. The milestone payments will be made upon the achievement of clinical and commercialization milestones as well as single low digit royalty payments and payments upon receipt of sublicensing income. Subsequent to the date of acquisition, the Company reassesses the actual consideration earned and the probability-weighted future earn-out payments at each balance sheet date. Any adjustment to the contingent consideration liability will be recorded in the consolidated statements of operations. Contingent consideration liabilities expected to be settled within 12 months after the balance sheet date are presented in current liabilities, with the non-current portion recorded under long term liabilities in the consolidated balance sheets.

Long-lived assets include property, equipment and right-of-use assets. Management reviews the Company’s long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as whether there is reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset. No impairment charges were recorded during the year ended December 31, 2022 and 2021.

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, 2022 includes the effect of the Series C and D preferred stock price adjustment of $0.3 million. 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. The number of shares of common stock underlying Series C and D 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, 2022 was 2,459,016. 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, 2022 were 2,295,898 and 634,425, respectively, and for the year ended December 31, 2021 were 625,565 and 634,497, respectively, because their effect is anti-dilutive.

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, 2022 and 2021, we have accrued CRO expenses of $0.8 million and $0.7 million, respectively, that are included in accrued expenses. As of December 31, 2022, and 2021, we have prepaid CRO costs of $2.3 million and $0.5 million, respectively, that are included in prepaid expenses.

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:

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.

In connection with the Acquisition of VCN, the Company will be required pay up to $70.2 million in additional consideration upon the achievement of certain milestones, including regulatory filings completed noted in Note 3. In September 2022 the Company received approval from the FDA to proceed with the Phase 2 clinical trial of VCN-01 in PDAC. Due to this approval the company paid Grifols Innovation and New Technologies Limited (“Grifols”) $3.0 million in Q4 2022. The discounted cash flow method used to value this contingent consideration includes inputs of not readily observable market data, which are Level 3 inputs. As of the March 10, 2022 acquisition date, the contingent consideration had a fair value of $11.1 million. The fair value of the contingent consideration was $10.1 million as of December 31, 2022 and is reflected as current accrued contingent consideration of $3.0 million and non-current contingent consideration liability of $7.1 million in the consolidated balance sheet. During the year ended December 31, 2022 the Company recognized in operating expense a $2.1 million fair value adjustment increase to contingent consideration.

2. Summary of Significant Accounting Policies – (continued)

The fair value of financial instruments measured on a recurring basis is as follows (in thousands):


	As of March 10, 2022
Description	Total		Level 1	Level 2	Level 3
Liabilities:
Contingent consideration	$	11,093	—	—	$	11,093


	As of December 31, 2022
Description	Total		Level 1	Level 2	Level 3
Liabilities:
Contingent consideration	$	10,184	—	—	$	10,184

The following table summarizes the change in fair value, as determined by Level 3 inputs, for all assets and liabilities using unobservable Level 3 inputs for the year ended December 31, 2022 (in thousands):


	Contingent
	Consideration
Balance at March 10, 2022	$	11,093
Payment of contingent consideration		(3,000)
Change in fair value		2,091
Balance at December 31, 2022	$	10,184

The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs:


	As of March 10, 2022
	Valuation	Significant	Weighted Average
	Methodology	Unobservable Input	(range, if applicable)
Contingent Consideration	Discounted Cash Flows	Timing of Milestone Achievment	2022-2027

		Discount rate	7.3% to 8.6	%
		Weighted Average Discount rate	7.77	%
		Probability of Occurrence (periodic for each Milestone)	11.7% to 92	%
		Probability of occurrence (cumulative through each Milestone)	5.3% to 48.8	%


	As of December 31, 2022
	Valuation	Significant	Weighted Average
	Methodology	Unobservable Input	(range, if applicable)
Contingent Consideration	Discounted Cash Flows	Timing of Milestone Achievment	2023-2028

		Discount rate	13.4% to 14.1	%
		Weighted Average Discount rate	13.6	%
		Probability of Occurrence (periodic for each Milestone)	11.7% to 95.0	%
		Probability of occurrence (cumulative through each Milestone)	6.9% to 95.0	%

2. 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.

Segment information

The Company operates in one operating segment engaged in the research, development and commercialization of therapeutic drugs in which revenues are derived from product, license, and contract revenues. Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by the chief operating decision maker (CODM), the chief executive officer, in deciding how to allocate resources and assessing performance. The Company’s CODM allocates resources and assesses performance based upon discrete financial information at the consolidated level.

Foreign Currencies

The functional currency of the Company’s VCN subsidiary is the Euro. VCN’s Assets and liabilities are translated to U.S. dollars based on exchange rates at the end of each reporting period. Income and expense items are translated at weighted average exchange rates prevailing during the reporting period. Translation adjustments are accumulated in a separate component of stockholders’ equity in the accompanying consolidated balance sheets. Transaction gains and losses are classified as other income (expense) net in the accompanying consolidated statements of operations.

Income Taxes

The Company accounts for income taxes under the liability method; under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.

The Company utilizes a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

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 has adopted ASU 2020-06 on January 1, 2022. The ASU impacted the analysis of the accounting treatment for the issuance of Convertible Preferred Series C & D stock during the third quarter, specifically the cash conversion and beneficial conversion features.

2. Summary of Significant Accounting Policies – (continued)

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, 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.

Restatement of Previously Issued Unaudited Interim Consolidated Financial Statements

In connection with the preparation of its consolidated financial statements for the twelve months ended December 31, 2022, the Company determined that its previously issued unaudited interim consolidated financial statements for the periods ended June 30, and September 30, 2022 contained errors in the application of U.S. generally accepted accounting principles as summarized below.

Application of FASB ASC 740 Income taxes

During the preparation of its annual tax provision for the year ended December 31, 2022, the Company determined that a deferred tax asset related to VCN’s indefinite-lived net operating loss generated during the second and third quarters of 2022 should have been established. Further, because of an existing deferred tax liability associated with an indefinite-lived intangible asset is considered a source of income for the deferred tax asset, the deferred tax asset was determined to be more likely than not recoverable. Since the deferred tax asset was determined to be more likely than not recoverable it would have resulted in an income tax benefit during the interim periods thereby reducing the Company’s consolidated net loss and loss per share for the three- and six-months periods ended June 30, 2022 and the three- and nine-month periods ended September 30, 2022.

Restatement

In accordance with Staff Accounting Bulletin ("SAB") No. 99, Materiality, the Company evaluated these misstatements and, based on an analysis of quantitative and qualitative factors, determined that the impact of these misstatements was material to its reporting periods ended June 30, 2022 and September 30, 2022. Accordingly, the Company has restated its unaudited interim consolidated financial statements for the interim reporting periods as of June 30, 2022 and for the three- and six-months then ended and as of September 30, 2022 and for the three- and nine-months then ended, and has included those restated financial statements within this annual report.

Immaterial Adjustments

Because we are restating prior periods, we are also reflecting other immaterial adjustments related to the valuation of the contingent consideration liabilities and the in process research and development asset, which has a corresponding effect on the associated deferred tax liability and recorded goodwill. It was determined that incorrect clinical trial success rates were used in the determination of the fair value of the contingent consideration liabilities and the in process research and development asset for the interim reporting periods as of June 30, 2022 and for the three and six-months then ended and as of September 30, 2022 and for the three and nine-months then ended.

See Note 14 - Restatement of Previously Reported Unaudited Interim Consolidated Financial Statements (Unaudited) for restatement of the Company's previously reported unaudited interim consolidated financial statements that were impacted by these misstatements.