Phio Pharmaceuticals Corp. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (GRANT THORNTON LLP, Philadelphia, Pennsylvania PCAOB ID Number 248 ) F-1 Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; Boston, Massachusetts; PCAOB ID Number 243) F-2 Consolidated Balance Sheets as of December 31, 2025 and 2024 F-3 Consolidated Statements of Operations for the Years Ended December 31, 2025 and 2024 F-4 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2025 and 2024 F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 F-6 Notes to Consolidated Financial Statements F-7 27 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders Phio Pharmaceuticals Corp. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Phio Pharmaceuticals Corp. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2025, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accounting for Certain Warrants Issued in 2025 As described further in Note 8 to the consolidated financial statements, the Company has issued to certain institutional and accredited investors new Series G, Series H and Series I unregistered warrants to purchase shares of the Company's common stock in connection with registered direct offerings of common stock and concurrent private placement offerings of warrants to purchase common stock (the “January 2025 Offerings”), as well as, issued new Series J, Series K and Series A unregistered warrants to purchase shares of the Company's common stock to certain holders of existing warrants pursuant to Inducement Letter Agreements (the “July 2025 Financing” and “November 2025 Financing”). The Company accounted for the warrants as equity instruments as they were outside of the scope of ASC 480 and did not meet the definition of a derivative instrument within ASC 815 as they are indexed to the Company’s common stock. We identified the assessment of the accounting for the Series G, H, I, J, K, and A warrants (“Certain Warrants”) to purchase shares of the Company's common stock issued in connection with the January 2025 Offerings, July 2025 Financing and November 2025 Financing as a critical audit matter. The principal consideration for our determination that the accounting for the Certain Warrants issued in 2025 is a critical audit matter is that it requires significant judgement due to the application of complex accounting guidance under ASC 480 and ASC 815 in evaluating the classification within shareholder’s equity. Auditing these conclusions required complex auditor judgement and the need for consultation with our national office related to the application of the applicable accounting standards. Our audit procedures related to the accounting for the Certain Warrants issued in 2025 included the following, among others. ● Read and analyzed the agreements related to the Certain Warrants issued to identify relevant terms and conditions that affect whether they are in the scope of ASC 480 or should be accounted for as derivative liabilities or equity instruments; and ● We consulted with national office resources to evaluate the appropriateness of management’s conclusions that the Certain Warrants issued were appropriately classified as equity based on the application of the applicable accounting guidance related to certain terms and conditions within the warrant agreements for the Certain Warrants. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2025. Philadelphia, Pennsylvania March 5, 2026 F-1 Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Phio Pharmaceuticals Corp. King of Prussia, Pennsylvania Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Phio Pharmaceuticals Corp. (the "Company”) as of December 31, 2024, the related consolidated statements of operations, and stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern Uncertainty The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ BDO USA, P.C. We served as the Company's auditor from 2011 to 2025. Boston, Massachusetts March 31, 2025 F-2 PHIO PHARMACEUTICALS CORP. CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share data) December 31, December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 21,031 $ 5,382 Prepaid expenses and other current assets 445 354 Total current assets 21,476 5,736 Property and equipment, net 11 2 Total assets $ 21,487 $ 5,738 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 435 $ 253 Accrued expenses 905 762 Total liabilities 1,340 1,015 Commitments and contingencies Stockholders' equity: Series D Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized; 0 issued and outstanding at each of December 31, 2025 and December 31, 2024 - - Common stock, $ 0.0001 par value, 100,000,000 shares authorized; 11,617,250 and 1,733,717 shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively 1 - Additional paid-in capital 175,200 151,079 Accumulated deficit ( 155,054 ) ( 146,356 ) Total stockholders' equity 20,147 4,723 Total liabilities and stockholders' equity $ 21,487 $ 5,738 See accompanying notes to consolidated financial statements. F-3 PHIO PHARMACEUTICALS CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except share and per share data) Year Ended December 31, 2025 2024 Operating expenses: Research and development $ 4,618 $ 3,643 General and administrative 4,602 3,744 Total operating expenses 9,220 7,387 Operating loss ( 9,220 ) ( 7,387 ) Interest income, net 520 231 Other income, net 2 6 Net loss $ ( 8,698 ) $ ( 7,150 ) Net loss per common share: Basic and diluted $ ( 1.45 ) $ ( 9.08 ) Weighted average number of common shares outstanding Basic and diluted 5,984,017 787,466 See accompanying notes to consolidated financial statements. F-4 PHIO PHARMACEUTICALS CORP. CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY (Amounts in thousands, except share data) Common Stock Additional Accumulated Shares Amount Paid-in Capital Deficit Total Balance at December 31, 2023 416,368 $ - $ 146,936 $ ( 139,206 ) $ 7,730 Issuance of common stock upon the exercise of warrants 420,578 - - - - Issuance of common stock and warrants, net of offering costs 893,720 - 4,002 - 4,002 Issuance of common stock upon vesting of restricted stock units 3,995 - - - - Shares withheld for payroll taxes ( 689 ) - ( 5 ) - ( 5 ) Cash issued in lieu of fractional shares for 1:9 reverse stock split ( 255 ) - ( 1 ) - ( 1 ) Stock-based compensation expense - - 147 - 147 Net loss - - - ( 7,150 ) ( 7,150 ) Balance at December 31, 2024 1,733,717 - 151,079 ( 146,356 ) 4,723 Issuance of common stock upon the exercise of warrants 1,835,326 - 5,755 - 5,755 Issuance of common stock and warrants, net of offering costs of $ 2.9 million 7,990,187 1 17,915 - 17,916 Issuance of common stock upon vesting of restricted stock units 71,000 - - - - Shares withheld for payroll taxes ( 12,980 ) - ( 30 ) - ( 30 ) Stock-based compensation expense - - 481 - 481 Net loss - - - ( 8,698 ) ( 8,698 ) Balance at December 31, 2025 11,617,250 $ 1 $ 175,200 $ ( 155,054 ) $ 20,147 See accompanying notes to consolidated financial statements. F-5 PHIO PHARMACEUTICALS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Year Ended December 31, 2025 2024 (Amounts in thousands) Cash flows from operating activities: $ (8,698 ) $ (7,150 ) Net loss Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 3 2 Amortization of right of use asset - 33 Net gain/(loss) on disposal of property and equipment - ( 6 ) Stock-based compensation 481 147 Changes in operating assets and liabilities: Prepaid expenses and other assets ( 91 ) 481 Accounts payable 183 ( 404 ) Accrued expenses 143 ( 180 ) Lease liability - ( 35 ) Net cash (used in) operating activities ( 7,979 ) ( 7,112 ) Cash flows from investing activities: Cash paid for purchase of property and equipment ( 12 ) ( 1 ) Asset sale proceeds - 9 Net cash (used in) provided by investing activities ( 12 ) 8 Cash flows from financing activities: Net proceeds from the exercise of warrants 5,755 4,002 Net proceeds from the issuance of common stock and warrants 17,915 - Cash-in-lieu of fractional shares from reverse stock split - ( 1 ) Payments to repurchase shares withheld for payroll taxes from restricted stock issuance ( 30 ) ( 5 ) Net cash provided by financing activities 23,640 3,996 Net increase (decrease) in cash, cash equivalents and restricted cash 15,649 ( 3,108 ) Cash and cash equivalents at the beginning of period 5,382 8,490 Cash and cash equivalents at end of period $ 21,031 5,382 2025 2024 Supplemental disclosure of cash flow information: Interest paid $ - $ 13 See accompanying notes to consolidated financial statements. F-6 PHIO PHARMACEUTICALS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Significant Accounting Policies Nature of Operations Phio Pharmaceuticals Corp. (“ Phio ” or the “ Company ”) is a clinical stage biopharmaceutical company whose proprietary INTASYL® self-delivering small interfering RNAi(siRNA) technology is designed to make immune cells more effective in killing tumor cells. The Company is developing therapeutics that are designed to leverage INTASYL to precisely target specific proteins that reduce the body’s ability to fight cancer, without the need for specialized formulations or drug delivery systems. The Company is committed to discovering and developing innovative cancer treatments for patients by creating new pathways toward a cancer-free future. Phio was incorporated in the state of Delaware in 2011 as RXi Pharmaceuticals Corporation. On November 19, 2018, the Company changed its name to Phio Pharmaceuticals Corp., to reflect its transition from a platform company to one that is fully committed to developing groundbreaking immuno-oncology therapeutics. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“ GAAP ”). Reclassification Certain amounts in prior periods have been reclassified to conform to the current-period presentation in segment information and accrued liabilities. These reclassifications had no impact on previously reported net income, total assets, total liabilities, or shareholders’ equity. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, MirImmune, LLC. All material intercompany accounts have been eliminated in consolidation. Segments The Company operates as one operating segment and all assets are located in the United States. Reverse Stock Split Effective July 5, 2024, the Company completed a 1 -for- 9 reverse stock split of the Company’s outstanding common stock, including reclassifying an amount equal to the reduction in par value to additional paid-in capital. The reverse stock split did not reduce the number of authorized shares of the Company’s common or preferred stock. All share and per share amounts have been adjusted to give effect to the reverse stock split. Uses of Estimates in Preparation of Financial Statements The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The areas subject to significant estimates and judgement include, among others, those related to the fair value of equity awards, accruals for research and development expenses, useful lives of property and equipment, and the valuation allowance on our deferred tax assets. On an ongoing basis the Company evaluates its estimates and bases its estimates on historical experience and other relevant assumptions that the Company believes are reasonable under the circumstances. Actual results could differ materially from these estimates. F- 7 Liquidity The Company has reported recurring losses from operations since its inception and expects to continue to have negative cash flows from operations for the foreseeable future. Historically, the Company’s primary source of funding has been from sales of its securities. The Company’s ability to continue to fund its operations is dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity, or strategic opportunities. This is dependent on a number of factors, including the market demand or liquidity of the Company’s common stock. There is no guarantee that debt, additional equity or other funding will be available to the Company on acceptable terms, or at all. If the Company fails to obtain additional funding when needed, the Company would be forced to scale back or terminate its operations or seek to merge with or to be acquired by another company. Based on current cash flow projections, the Company believes it has sufficient cash and cash equivalents, including net proceeds from its November 2025 Financing (as defined below), to meet its current planned obligations for at least 12 months from the date these financial statements are issued. The Company has limited cash resources, has incurred recurring operating losses and negative cash flows from its operations since its inception and has not yet recognized any product revenues. These factors have previously raised doubt about the Company’s ability to continue as a going concern. With the net proceeds from the November 2025 Financing, combined with the net proceeds from the January 2025 Offerings and July 2025 Financing, the Company was able to alleviate such doubt as of the date of the filing of this Annual Report on Form 10 -K. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits with financial institutions, and balances held in a money market fund with original maturities of three months or less. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash balances with reputable financial institutions that management believes are creditworthy, and which at times exceed federally insured limits. These cash accounts are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per institution. While FDIC insurance provides protection against the failure of a financial institution, it does not guarantee the value of any investments that may fluctuate based on market conditions. Property and Equipment Property and equipment are stated at cost and depreciated using the straight-line method based on the estimated useful lives of the related assets. The Company provides for depreciation over the assets’ estimated useful lives as follows: Computer equipment (in years) 3 Lab equipment (in years) 5 Furniture & fixtures (in years) 5 Leasehold improvements Lesser of lease term or 5 years Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment annually or whenever an event or change in circumstance occurs in which the related carrying amounts may not be recoverable. An impairment loss would be recognized based on the difference between the carrying value of the asset and its estimated fair value, which would be determined based on either discounted future cash flows or other appropriate fair value methods. Leases At the inception of a contract, the Company determines whether the contract is or contains a lease based on all relevant facts and circumstances. For contracts that contain a lease, the Company identifies the lease and non-lease components, determines the consideration in the contract and classifies the lease as operating or financing. For leases with a term greater than one year, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term at the commencement date of the lease. F- 8 Lease liabilities and the corresponding right of use assets are recorded based on the present value of lease payments to be made over the lease term. The discount rate used to calculate the present value is the rate implicit in the lease, or if not readily determinable, the Company’s incremental borrowing rate. The Company’s incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right of use asset may be required for items such as initial direct costs or incentives received. Lease payments on operating leases, including scheduled increases, are recognized on a straight-line basis over the expected term of the lease. Lease payments on financing leases are recognized using the effective interest method. Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts payable and accrued expenses of the Company approximate their fair values due to their short-term nature. Derivative Financial Instruments Financial instruments that meet the definition of a derivative are classified as an asset or liability and measured at fair value on the issuance date and are revalued on each subsequent balance sheet date. The changes in fair value are recognized as current period income or loss. Financial instruments that do not meet the definition of a derivative are classified as equity and measured at fair value and recorded as additional paid-in capital in stockholders’ equity at the date of issuance. No further adjustments to their valuation are made. Research and Development Expenses Research and development expenses consist primarily of personnel expenses, including salaries, benefits and stock-based compensation expenses for employees engaged in research and development functions, consultants and third -party experts, costs to acquire technology licenses, expenses associated with preclinical studies and clinical development activities, regulatory activities and other operating costs. Research and development expenses are charged to expense as incurred. Payments made by the Company in advance for research and development services not yet provided and/or for materials not yet received are recorded as prepaid expenses and expensed when the service has been performed or when the goods have been received. Accrued liabilities are recorded related to those expenses for which vendors have not yet billed the Company with respect to services provided and/or materials that it has received. Accrued liabilities for the services provided by contract research organizations are recorded during the period incurred based on such estimates and assumptions as expected cost, passage of time, the achievement of milestones and other information available to us and are assessed on a quarterly basis. Actual results may differ from these estimates and could have a material impact on the Company’s reported results. The Company’s historical accrual estimates have not been materially different from its actual costs. Collaborative Arrangements The Company follows the provisions of the Financial Accounting Standards Board (the “ FASB ”) Accounting Standards Codification (“ ASC ”) Topic 808, “ Collaborative Arrangements ,” (“ Topic 808 ”) when collaboration agreements involve joint operating activities in which both parties are active participants and that are also both exposed to significant risks and rewards. The Company also considers the guidance in the FASB ASC Topic 606, “ Revenue from Contracts with Customers ,” (“ Topic 606 ”) in determining the appropriate treatment for activities between the Company and its collaborative partners that are more reflective of a vendor-customer relationship and therefore, within the scope of Topic 606. Under Topic 808, the Company determines an appropriate recognition method, either by analogy to appropriate accounting literature or by applying a reasonable accounting policy election. Generally, the classification of transactions under the collaborative arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. The Company recognizes its share of costs arising from research and development activities performed by collaborators in the period its collaborators incur such expense. Reimbursements that are the result of a collaborative relationship instead of a customer relationship, such as co-development activities, are evaluated on a quarterly basis and recorded as an offset to research and development expense incurred. Payments in excess of our collaboration expense will be recorded as revenue. Patents and Patent Application Costs Although the Company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent costs are, therefore, expensed as incurred. F- 9 Stock-based Compensation The Company follows the provisions of the FASB ASC Topic 718, “ Compensation — Stock Compensation ” (“ ASC 718 ”), which requires the measurement and recognition of compensation expense for all stock-based payment awards. The fair value of RSUs is based upon the Company’s closing stock price at the grant date. The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options at the grant date. The Black-Scholes valuation model requires the input of valuation assumptions to calculate the value of stock options, including expected volatility, expected term, risk-free interest rate and expected dividends. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, which generally represents the vesting period, and commences at the date of grant based on the fair value of the award. Stock- based compensation expense recognized in the consolidated financial statements is based on awards that are ultimately expected to vest. Expense is adjusted for actual forfeitures of unvested awards as they occur. Income Taxes The Company recognizes assets or liabilities for the deferred tax consequences of temporary differences between the tax basis of assets or liabilities and their reported amounts in the consolidated financial statements in accordance with the FASB ASC Topic 740, “ Accounting for Income Taxes ” (“ ASC 740 ”) . These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. Those temporary differences referred to as deferred tax assets and liabilities are determined at the end of each period using the tax rate expected to be in effect when taxes are actually paid or recovered. Valuation allowances are established if, based on the weight of available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The provision for income taxes, if any, represents the tax payable for the period and the change in deferred income tax assets and liabilities during the period. The recognition and measurement of benefits related to the Company’s tax positions requires significant judgment, as uncertainties often exist with respect to new laws, new interpretations of existing laws, and rulings by taxing authorities. The Company follows a more-likely-than not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken in a tax return. The guidance relates to, amongst other things, classification, accounting for interest and penalties associated with tax positions, and disclosure requirements. Any interest and penalties accrued related to uncertain tax positions are recorded as income tax expense. Differences between actual results and the Company’s assumptions or changes in the Company’s assumptions in future periods are recorded in the period they become known. Comprehensive Loss The Company’s comprehensive loss is equal to its net loss for all periods presented. Net Loss per Share Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of outstanding common stock. Diluted net loss per share of common stock is computed by dividing the Company’s net loss by the weighted average number of common stock outstanding and the impact of all dilutive potential shares of common stock, except where such dilutive potential shares of common stock would be anti-dilutive. Dilutive potential shares of common stock primarily consist of warrants, unvested restricted stock units and stock options. Recently Adopted Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (" FASB ") issued Accounting Standards Update (" ASU ") 2023 - 09, “Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures,” which requires public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. In addition to new disclosures associated with the rate reconciliation, the ASU requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The ASU also describes items that need to be disaggregated based on their nature, which is determined F- 10 by reference to the item’s fundamental or essential characteristics, such as the transaction or event that triggered the establishment of the reconciling item and the activity with which the reconciling item is associated. The ASU eliminates the historic requirement that entities disclose information concerning unrecognized tax benefits having a reasonable possibility of significantly increasing or decreasing in the 12 months following the reporting date. This ASU became effective for annual periods beginning after December 15, 2024. The Company has adopted ASU 2023–09 for the year ended December 31, 2025 on a prospective basis in its consolidated financial statements, which resulted in the required additional disclosures included in Note 10 to the Company’s consolidated financial statements. Recent Accounting Pronouncements In November 2024, the FASB issued ASU 2024 - 03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses,” which requires additional disclosure about the specific expense categories in the notes to financial statements at interim and annual reporting periods. The amendments in this ASU do not change or remove current expense disclosure requirements but affect where this information appears in the notes to financial statements. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. The Company is currently evaluating the impact that ASU 2024 - 03 will have on its consolidated financial statements. Recent Tax Legislation On July 4, 2025, the One Big Beautiful Bill Act (the “ OBBBA ”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions and allows immediate expensing of certain domestic research and experimental expenditures under new Section 174A of the Internal Revenue Code. The Company does not expect the impact of the OBBBA to be material to its consolidated financial statements. 2. Collaboration Agreement AgonOx, Inc. ( “ AgonOx ” ) In February 2021, the Company entered into a clinical co-development collaboration agreement (the “ Clinical Co-Development Agreement ”) with AgonOx, a private company developing a pipeline of novel immunotherapy drugs targeting key regulators of the immune response to cancer. Under the Clinical Co-Development Agreement, Phio and AgonOx were working to develop a T cell-based therapy using the Company’s lead product candidate, PH- 762, and AgonOx’s “double positive” tumor infiltrating lymphocytes (“ DP TIL ”) technology. Per the terms of the Clinical Co-Development Agreement, the Company agreed to reimburse AgonOx up to $ 4,000,000 in expenses incurred to conduct a Phase 1 clinical trial of PH- 762 treated DP TIL in patients with advanced melanoma and other advanced solid tumors. In May 2024, the Company terminated the Clinical Co-Development Agreement with AgonOx effective immediately. Effective as of the date of termination, the Clinical Co-Development Agreement and the Company’s continuing obligations and those of AgonOx thereunder were terminated in their entirety. The Company no longer is required to provide financial support for the development costs incurred in the Clinical Co-Development Agreement and the Company is no longer entitled to future development milestones or royalty payments from AgonOx’s licensing of its DP TIL technology. The Company paid AgonOx all payment obligations that accrued prior to the termination of the Clinical Co-Development Agreement. Pursuant to the terms of the Clinical Co-Development Agreement, each of the Company and AgonOx were responsible for its own costs and expenses incurred in connection with the wind-down of the Phase 1 clinical trial. The Company made the final payment of $ 34,320 , which primarily related to accrued obligations for patient fees and other miscellaneous costs as of the date of termination, to AgonOx on March 21, 2025. This settled all future obligations to AgonOx. The Company did not recognize any research and development expense in connection with these efforts during the year ended December 31, 2025. The Company recognized approximately $ 106,000 of research and development expense in connection with these efforts during the year ended December 31, 2024 F- 11 3. Property and Equipment The following table summarizes the Company’s major classes of property and equipment, in thousands: December 31, 2025 2024 Computer equipment $ 15 $ 35 Lab equipment 224 265 Furniture & fixtures - 8 Total gross fixed assets 239 308 Less: accumulated depreciation and amortization ( 228 ) ( 306 ) Property and equipment, net $ 11 $ 2 Depreciation and amortization expense for the years ended December 31, 2025 and 2024 was $ 3,000 and $ 2,000 , respectively. 4. Accrued Expenses and Accounts Payable Accrued expenses and Accounts payable consist of the following, in thousands: December 31, 2025 2024 Accounts payable trade $ 435 $ 253 Research and development accruals 477 558 Professional fee accrual 68 173 Payroll accruals 360 31 Total accrued expenses and accounts payable $ 1,340 $ 1,015 5. Leases The Company leases space for various corporate and research purposes. It is the Company’s policy to apply the provisions of ASC 842 when accounting for arrangements that meet the criteria to be a lease. The Company calculates the lease liability as the present value of the lease’s cash flows using the interest rate implicit in the lease, if determinable. If the rate implicit in the lease is not determinable, the Company uses its incremental borrowing rate. The incremental borrowing rate is defined as the rate the Company would have to pay to borrow on a collateralized basis over the lease term. The Company has elected the accounting policy election available under ASC 842 to not record a lease liability for leases with a term of less than one year. From April 2014 to March 2024, the Company leased space that was utilized as its corporate headquarters and primary laboratory. The lease expired on March 31, 2024. On March 1, 2024, the Company commenced a lease for a laboratory space located at 17 Briden Street, Worcester, Massachusetts. The lease expired on February 28, 2026. We currently have shared office space at LifeSciences PA located at 411 Swedeland Road, King of Prussia, PA 19406 for access to full working space for normal hours of operations at a fee of $ 300 per month, which can be cancelled at any time. The lease for the Company’s corporate headquarters in Worcester, Massachusetts represented all of its significant lease obligations. Operating lease costs included in operating expense were $ 31,000 and $ 58,000 for the years ended December 31, 2025 and 2024 , respectively. Cash paid for the amounts included in the measurement of the operating lease liability on the Company’s consolidated balance sheets and included within changes in the lease liability in the operating activities of the Company’s consolidated statements of cash flows was $ 60,000 for the year ended December 31, 2024 . There was no cash paid for the amounts included in the measurement of the operating lease liability during the year ended December 31, 2025. F- 12 6. Commitments and Contingencies Commitments In February 2021, the Company entered into the Clinical Co-Development Agreement with AgonOx to develop a T cell-based therapy using the Company’s lead product candidate, PH- 762, and AgonOx’s DP TIL technology. Per the terms of the Clinical Co-Development Agreement, the Company agreed to reimburse AgonOx up to $ 4,000,000 in expenses incurred to conduct a Phase 1 clinical trial of PH- 762 treated DP TIL in patients with advanced melanoma and other advanced solid tumors. In May 2024, the Company terminated the Clinical Co-Development Agreement with AgonOx effective immediately. Refer to Note 2 for further details on the Clinical Co-Development Agreement with AgonOx. In September 2011, the Company entered into an agreement with Advanced RNA Technologies, LLC (“ Advirna ”), pursuant to which Advirna assigned to the Company its existing patent and technology rights related to the INTASYL technology in exchange for an annual maintenance fee of $ 100,000 , until the patent's expiration date, a one -time milestone payment upon the future issuance of the first patent with valid claims covering the assigned patent and technology rights and the issuance of shares of Common Stock equal to 5 % of the Company’s fully-diluted shares outstanding at the time of issuance. The one -time milestone payment and the issuance of shares of Common Stock were completed in 2014 and 2012, respectively. Additionally, the Company is required to pay low single-digit royalties to Advirna on any licensing revenue received by the Company with respect to future licensing of the assigned Advirna patent and technology rights. To date, any royalties owed to Advirna under the Advirna agreement have been minimal. The Company’s rights under the Advirna agreement will expire upon the later of: (i) the expiration of the last-to-expire of the “patent rights” (as defined therein) included in the Advirna agreement; and (ii) the abandonment of the last-to-be abandoned of such patents, unless earlier terminated in accordance with the provisions of the Advirna agreement. Further, the Company also granted back to Advirna a license under the assigned patent and technology rights for fields of use outside human therapeutics. As part of its business, the Company may enter into licensing agreements with third parties that require milestone and royalty payments based on the progress of the asset through development stages. Milestone payments may be required, for example, upon progress through clinical trials, upon approval of the product by a regulatory agency and/or upon a percentage of sales of the product pursuant to such agreements. The expenditures required under these arrangements may be material individually in relation to any product candidates covered by the intellectual property licensed under any such arrangement, and material in the aggregate in the unlikely event that milestones for multiple products covered by these arrangements were reached in the same period. Due to the contingent nature of these payments, they are not included in the table of contractual obligations shown below. During the years ended December 31, 2025 and 2024 , the Company did not trigger any milestone payments. The Company’s contractual license obligations that will require future cash payments as of December 31, 2025 , which result from payments expected in connection with annual license fees, are as follows, in thousands: Year Ending December 31, 2026 $ 100 2027 100 2028 100 2029 100 Total $ 400 The Company applies the disclosure provisions of the FASB ASC Topic 460, “ Guarantor ’ s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ” (“ ASC 460 ”), to its agreements that contain guarantee or indemnification clauses. The Company provides: (i) indemnifications of varying scope and size to certain investors and other parties for certain losses suffered or incurred by the indemnified party in connection with various types of third -party claims; and (ii) indemnifications of varying scope and size to officers and directors against third -party claims arising from the services they provide to us. These indemnifications give rise only to the disclosure provisions of ASC 460. To date, the Company has not incurred costs as a result of these obligations and does not expect to incur material costs in the future. Accordingly, the Company has not accrued any liabilities in its consolidated financial statements related to these indemnifications. F- 13 Litigation From time to time, the Company may become a party to various legal proceedings and complaints arising in the ordinary course of business. To the Company’s knowledge, it is not currently a party to any actual or threatened material legal proceedings. Accordingly, there were no contingent liabilities recorded as of the year ended December 31, 2025 . 7. Preferred Stock The Company has authorized up to 10,000,000 shares of preferred stock, $ 0.0001 par value per share, for issuance. The Company’s Board of Directors (the “ Board ”) is authorized under the Company’s Amended and Restated Certificate of Incorporation (as may be amended and/or restated from time to time, the “ Amended Certificate ”), to designate the authorized preferred stock into one or more series and to fix and determine such rights, preferences, privileges and restrictions of any series of preferred stock, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Board upon its issuance. At December 31, 2024 and December 31, 2025 , there were no shares of preferred stock issued or outstanding. 8. Stockholders ’ Equity The Company raised $ 20.6 million and $ 4.0 million through a series of warrants inducements, registered direct offerings, and concurrent private placements during the years ended December 31, 2025 and 2024 , respectively. May 2024 Financing On May 16, 2024, the Company entered into a purchase agreement (the “ Purchase Agreement ”) with Triton Funds LP (“ Triton ”), pursuant to which the Company agreed to sell, and Triton agreed to purchase, upon the Company’s request in one or more transactions, up to 862,500 shares of Common Stock at a purchase price of $ 0.72 per share (the “ Purchase Price ”), for aggregate gross proceeds of up to $ 621,000 . The Company recorded expense of approximately $ 100,000 , primarily related to legal fees, in connection with the execution of the Purchase Agreement with Triton. On July 3, 2024, the Company terminated the Purchase Agreement with Triton effective immediately. No shares of Common Stock were sold by the Company pursuant to the Purchase Agreement prior to termination. July 2024 Financing On July 11, 2024, the Company entered into inducement letter agreements (the “ July 2024 Inducement Letter Agreements ”) with certain holders of certain of the Company’s existing warrants to purchase up to an aggregate of 545,286 shares of Common Stock. The existing warrants were originally issued in February 2020 through December 2023, having exercise prices between $ 324.00 and $ 9.72 per share. Pursuant to the July 2024 Inducement Letter Agreements, these warrants were exercised for cash at a reduced exercise of $ 5.45 per share in consideration of the Company’s agreement to issue new unregistered five and one -half year term Series C warrants to purchase up to 583,098 shares of Common Stock at an exercise price of $ 5.45 and new unregistered eighteen month term Series D warrants to purchase up to 507,474 shares of Common Stock at an exercise price of $ 5.45 , both issued and sold at a price of $ 0.125 per warrant share (the “ July 2024 Financing ”). In addition, the Company issued warrants to the placement agent, H.C. Wainwright & Co, LLC (“ HCW ”), to purchase a total of 40,896 shares of Common Stock at an exercise price of $ 6.8125 per share. The net proceeds to the Company from the July 2024 Financing were approximately $ 2.6 million, after deducting placement agent fees and offering expenses. The Company incurred non-cash equity issuance cost of approximately $ 2.4 million for the incremental fair value of the outstanding equity classified warrants and approximately $ 0.2 million for placement agent warrants. F- 14 Pursuant to the terms of the July 2024 Inducement Letter Agreements, in the event that the exercise of the existing warrants in the July 2024 Financing would have otherwise caused a holder to exceed the beneficial ownership limitations set forth in the existing warrant, the Company issued the number of shares of Common Stock that would not cause a holder to exceed such beneficial ownership limitation and agreed to hold such balance of shares of Common Stock in abeyance. Accordingly, an aggregate of 328,758 shares of Common Stock were held in abeyance (the “ July 2024 Abeyance Shares ”) with such July 2024 Abeyance Shares evidenced through the holder’s existing warrants and which are deemed to be prepaid. The July 2024 Abeyance Shares were held until notice was received by the holder that the balance of the shares of Common Stock could be issued in compliance with such beneficial ownership limitations and were exercised pursuant to a notice of exercise from the holder. Until such time, the July 2024 Abeyance Shares were evidenced through the holder’s existing warrants and have been included in the Company’s table of outstanding warrants below. During the year ended December 31, 2024, all of the July 2024 Abeyance Shares were released. December 19, 2024 Concurrent Registered Direct Offering and Private Placement On December 19, 2024, the Company entered into a securities purchase agreement (the “ December 19, 2024 Securities Purchase Agreement ”) with certain institutional and accredited investors in connection with a registered direct offering (the “ December 19, 2024 Registered Direct Offering ”) and concurrent private placement (the “ December 19, 2024 Private Placement ” and, together with the December 19, 2024 Registered Direct Offering, the “ December 19, 2024 Offerings ”). The December 19, 2024 Offerings closed on December 20, 2024. The net proceeds to the Company from the December 19, 2024 Offerings were approximately $ 900,000 , after deducting placement agent fees and offering expenses. Pursuant to the December 19, 2024 Securities Purchase Agreement, the Company offered and sold in the December 19, 2024 Registered Direct Offering 437,192 shares of Common Stock at a purchase price of $ 2.635 per share. In the December 19, 2024 Private Placement, the Company also issued to such institutional and accredited investors unregistered warrants to purchase up to 437,192 shares of Common Stock (the “ Series E Warrants ”). Under the terms of the December 19, 2024 Securities Purchase Agreement, for each share of Common Stock issued in the December 19, 2024 Registered Direct Offering, an accompanying Series E Warrant was issued to the purchaser thereof. Each Series E Warrant is exercisable for one share of Common Stock at an exercise price of $ 2.51 per share and will expire on December 20, 2029. The Series E Warrants were offered and sold at a purchase price of $ 0.125 per Series E Warrant, which purchase price is included in the offering price per share of Common Stock issued in the December 19, 2024 Registered Direct Offering. December 23, 2024 Concurrent Registered Direct Offering and Private Placement On December 23, 2024, the Company entered into a securities purchase agreement (the “ December 23, 2024 Securities Purchase Agreement ”) with certain institutional and accredited investors in connection with a registered direct public offering (the “ December 23, 2024 Registered Direct Offering ”) and concurrent private placement (the “ December 23, 2024 Private Placement ” and, together with the December 23, 2024 Registered Direct Offering, the “ December 23, 2024 Offerings ” and together with the December 19 , 2024 Offerings, the “ December 2024 Offerings ”). The December 23, 2024 Offerings closed on December 24, 2024. The net proceeds to the Company from the December 23, 2024 Offerings were approximately $ 480,000 , after deducting placement agent fees and offering expenses. Pursuant to the December 23, 2024 Securities Purchase Agreement, the Company offered and sold in the December 23, 2024 Registered Direct Offering 240,000 shares of Common Stock at a purchase price of $ 2.00 per share. In the December 23, 2024 Private Placement, the Company also issued to such institutional and accredited investors unregistered warrants to purchase up to 240,000 shares of Common Stock (the “ Series F Warrants ”). Under the terms of the December 23, 2024 Securities Purchase Agreement, for each share of Common Stock issued in the December 23, 2024 Registered Direct Offering, an accompanying Series F Warrant was issued to the purchaser thereof. Each Series F Warrant is exercisable for one share of Common Stock at an exercise price of $ 2.00 per share and will expire on December 24, 2029. The Series F Warrants were offered and sold at a purchase price of $ 0.125 per Series F Warrant, which purchase price is included in the offering price per share of Common Stock issued in the December 23, 2024 Registered Direct Offering. F- 15 In connection with the December 2024 Offerings, the Company agreed to issue to the placement agent, HCW, or its designees, warrants to purchase up to an aggregate of 50,789 shares of Common Stock (the “ December 2024 Placement Agent Warrants ”), which represent 7.5 % of the aggregate number of shares of Common Stock sold in the December 19, 2024 Registered Direct Offering and the December 23, 2024 Registered Direct Offering. The December 2024 Placement Agent Warrants have substantially the same terms as the Series E Warrants and the Series F Warrants, except that (i) 32,789 of the December 2024 Placement Agent Warrants have an exercise price equal to $ 3.2938 , or 125 % of the offering price per share of Common Stock sold in the December 19, 2024 Registered Direct Offering, and are exercisable until December 19, 2029, and (ii) 18,000 of the December 2024 Placement Agent Warrants have an exercise price equal to $ 2.50 , or 125 % of the offering price per share of Common Stock sold in the December 23, 2024 Registered Direct Offering, and are exercisable until December 23, 2029. January 13, 2025 Concurrent Registered Direct Offering and Private Placement On January 13, 2025, the Company entered into a securities purchase agreement (the “ January 13, 2025 Securities Purchase Agreement ”) with certain institutional and accredited investors in connection with a registered direct public offering (the “ January 13, 2025 Registered Direct Offering ”) and concurrent private placement (the “ January 13, 2025 Private Placement ” and, together with the January 13, 2025 Registered Direct Offering, the “ January 13, 2025 Offerings ”). The January 13, 2025 Offerings closed on January 14, 2025. In addition, the Company issued warrants to the placement agent, HCW, to purchase a total of 79,775 shares of Common Stock at an exercise price of $ 3.75 per share. The net proceeds to the Company from the January 13, 2025 Offerings were approximately $ 2.8 million, after deducting fees and offering expenses. Pursuant to the January 13, 2025 Securities Purchase Agreement, the Company offered and sold in the January 13, 2025 Registered Direct Offering 1,063,670 shares of Common Stock at a purchase price of $ 3.00 per share. In the January 13, 2025 Private Placement, the Company also issued to certain institutional and accredited investors unregistered warrants to purchase up to 2,127,340 shares of Common Stock (the “ Series G Warrants ”). Under the terms of the January 13, 2025 Securities Purchase Agreement, for each share of Common Stock issued in the January 13, 2025 Registered Direct Offering, two accompanying Series G Warrants were issued to the purchaser thereof. Each Series G Warrant is exercisable for one share of Common Stock at an exercise price of $ 3.00 per share and will expire on January 14, 2027. January 14, 2025 Concurrent Registered Direct Offering and Private Placement On January 14, 2025, the Company entered into a securities purchase agreement (the “ January 14, 2025 Securities Purchase Agreement ”) with certain institutional and accredited investors in connection with a registered direct public offering (the “ January 14, 2025 Registered Direct Offering ”) and concurrent private placement (the “ January 14, 2025 Private Placement ” and together with the January 14, 2025 Registered Direct Offering, the “ January 14, 2025 Offerings ”). The January 14, 2025 Offerings closed on January 15, 2025. In addition, the Company issued warrants to the placement agent, HCW, to purchase a total of 62,500 shares of Common Stock at an exercise price of $ 3.75 per share. The net proceeds to the Company from the January 14, 2025 Offerings were approximately $ 2.1 million, after deducting fees and offering expenses. Pursuant to the January 14, 2025 Securities Purchase Agreement, the Company offered and sold in the January 14, 2025 Registered Direct Offering 833,335 shares of Common Stock at a purchase price of $ 3.00 per share. In the January 14, 2025 Private Placement, the Company also issued to such institutional and accredited investors unregistered warrants to purchase up to 1,666,670 shares of Common Stock (the “ Series H Warrants ”). Under the terms of the January 14, 2025 Securities Purchase Agreement, for each share of Common Stock issued in the January 14, 2025 Registered Direct Offering, two accompanying Series H Warrants were issued to the purchaser thereof. Each Series H Warrant is exercisable for one share of Common Stock at an exercise price of $ 3.00 per share and will expire on January 15, 2027. January 16, 2025 Concurrent Registered Direct Offering and Private Placement On January 16, 2025, the Company entered into a securities purchase agreement (the “ January 16, 2025 Securities Purchase Agreement ”) with certain institutional and accredited investors in connection with a registered direct public offering (the “ January 16, 2025 Registered Direct Offering ”) and concurrent private placement (the “ January 16, 2025 Private Placement ” and, together with the January 16, 2025 Registered Direct Offering, the “ January 16, 2025 Offerings ” and the January 16, 2025 Offerings, together with the January 13, 2025 Offerings and the January 14, 2025 Offerings, the “ January 2025 Offerings ”). The January 16, 2025 Offerings closed on January 17, 2025. In addition, the Company issued warrants to the placement agent, HCW, to purchase a total of 45,750 shares of Common Stock at an exercise price of $ 3.75 per share. The net proceeds to the Company from the January 16, 2025 Offerings were approximately $ 1.5 million, after deducting fees and offering expenses. F- 16 Pursuant to the January 16, 2025 Securities Purchase Agreement, the Company offered and sold in the January 16, 2025 Registered Direct Offering 610,000 shares of Common Stock at a purchase price of $ 3.00 per share. In the January 16, 2025 Private Placement, the Company also issued to such institutional and accredited investors unregistered warrants to purchase up to 1,220,000 shares of Common Stock (the “ Series I Warrants ”). Under the terms of the January 16, 2025 Securities Purchase Agreement, for each share of Common Stock issued in the January 16, 2025 Registered Direct Offering, two accompanying Series I Warrants were issued to the purchaser thereof. Each Series I Warrant is exercisable for one share of Common Stock at an exercise price of $ 3.00 per share and will expire on January 19, 2027. July 2025 Financing On July 25, 2025, the Company entered into inducement letter agreements (the “ July 2025 Inducement Letter Agreements ”) with certain holders of certain of the Company’s existing warrants to purchase an aggregate of 928,596 shares of Common Stock. The existing warrants were originally issued in December 2024 and January 2025, having exercise prices between $ 2.00 and $ 3.00 per share. Warrants to purchase 100,000 shares of Common Stock at the existing exercise price of $ 2.00 per share were exercised at their existing exercise price of $ 2.00 per share, and warrants to purchase 828,596 shares of Common Stock were exercised at a reduced exercise price of $ 2.485 per share. Pursuant to the July 2025 Inducement Letter Agreements, in consideration for the immediate exercise of such warrants for cash and the payment of an additional $ 0.125 per New July 2025 Warrant (as defined below), or an aggregate of $ 232,149 for all New July 2025 Warrants, the Company agreed to issue new unregistered five -year term Series J warrants (the “ Series J Warrants ”) to purchase an aggregate of up to 318,596 shares of Common Stock at an exercise price of $ 2.485 and new unregistered 24 -month term Series K warrants (the “ Series K Warrants ” and, together with the Series J Warrants, the “ New July 2025 Warrants ”) to purchase an aggregate of up to 1,538,596 shares of Common Stock at an exercise price of $ 2.485 (the “ July 2025 Financing ”). In addition, the Company issued warrants to the placement agent, HCW, to purchase up to 69,645 shares of Common Stock. 7,500 of the placement agent warrants issued have an exercise price of $ 2.8125 per share of Common Stock and a term of five years, 16,395 of the placement agent warrants issued have an exercise price of $ 3.4188 per share of Common Stock and a term of five years, and 45,750 of the placement agent warrants issued have an exercise price of $ 3.4188 per share of Common Stock and a term of twenty-four months. The net proceeds to the Company from the July 2025 Financing were approximately $ 2.1 million, after deducting placement agent fees and offering expenses. November 2025 Financing On November 3, 2025, the Company entered into inducement letter agreements (the “ November 2025 Inducement Letter Agreements ”) with certain holders of the Company’s existing warrants to purchase an aggregate of 5,663,182 shares of Common Stock. The existing warrants were originally issued in July 2024, December 2024, January 2025 and July 2025, having exercise prices between $ 2.00 and $ 5.45 per share. Warrants to purchase 60,000 shares of Common Stock were exercised at their existing exercise price of $ 2.00 per share, warrants to purchase 948,596 shares of Common Stock were exercised at their existing exercise price of $ 2.485 per share and warrants to purchase 4,654,586 shares of Common Stock were exercised at a reduced exercise price of $ 2.05 per share. Pursuant to the November 2025 Inducement Letter Agreements, in consideration for the exercise of such warrants for cash and the payment of an additional $ 0.125 per Series A Warrant (as defined below), or an aggregate of $ 1.4 million for all Series A 2025 Warrants, the Company agreed to issue new unregistered twenty-four month term Series A Warrants (the “ Series A Warrants ”) to purchase an aggregate of up to 11,326,364 shares of Common Stock at an exercise price of $ 2.05 (the “ November 2025 Financing ”). In addition, the Company issued warrants to the placement agent, HCW, to purchase up to 424,739 shares of Common Stock. 4,500 of the placement agent warrants issued have an exercise price of $ 2.8125 per share of Common Stock and a term of twenty-four months, 349,094 of the placement agent warrants issued have an exercise price of $ 2.875 per share of Common Stock and a term of twenty-four months, and 71,145 of the placement agent warrants issued have an exercise price of $ 3.4188 per share of Common Stock and a term of twenty-four months. The net proceeds to the Company from the November 2025 Financing were approximately $ 12.1 million, after deducting placement agent fees and offering expenses. F- 17 Warrants The Company first assessed the warrants in the July 2024 Financing, December 2024 Offerings, January 2025 Offerings, July 2025 Financing and November 2025 Financing (collectively, the “2024 and 2025 Offerings”) under the FASB ASC Topic 480, “ Distinguishing Liabilities from Equity ” (“ ASC 480 ”) to determine whether they were within the scope of ASC 480. As there were no transactions outside of the Company’s control that could require cash settlement, the Company’s warrants issued in the 2024 and 2025 Offerings were determined to be outside the scope of ASC 480. The Company then applied and followed the applicable accounting guidance in ASC 815. Financial instruments are accounted for as either derivative liabilities or equity instruments depending on the specific terms of the agreement. The warrants issued in the 2024 and 2025 Offerings did not meet the definition of a derivative instrument as they are indexed to Common Stock and classified within stockholders’ equity. Based on this determination, the warrants issued in the 2024 and 2025 Offerings were classified within stockholders’ equity. The Company accounted for the 2025 and 2024 placement agent warrants, issued to HCW in conjunction with the financings, as issuance costs related to the applicable offering of the Company’s shares of Common Stock and warrants to purchase shares of Common Stock. These placement agent warrants meet the criteria for equity classification. The following table summarizes the Company’s outstanding warrants, all of which are classified as equity instruments, at December 31, 2025 : Weighted- Average Number Exercise Price of Warrants Per Share Outstanding at December 31, 2023 703,530 $ 33.09 Issued 1,859,449 4.28 Exercised ( 637,112 ) 6.39 Expired - - Outstanding at December 31, 2024 1,925,867 12.66 Issued 18,934,479 2.40 Exercised ( 7,318,508 ) 3.10 Expired ( 13,870 ) 527.10 Outstanding at December 31, 2025 13,527,968 $ 2.94 9. Stock-based Compensation Stock Plans The Company’s approved equity plans include the Phio Pharmaceuticals Corp. 2020 Long Term Incentive Plan (the “ 2020 Plan ”) and the Phio Pharmaceuticals Corp. 2012 Long Term Incentive Plan (the “ 2012 Plan ”). These plans are administered by our Board and provide for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards (RSUs), performance stock awards, and performance cash awards. Upon adoption of the 2020 Plan, (i) shares that remained available for grant under the 2012 Plan and (ii) shares that were subject to outstanding awards under the 2012 Plan that were later forfeited, terminated, expired or otherwise lapsed without being exercised were included in the authorized shares available for grant under the 2020 Plan. Further, upon adoption of the 2020 Plan, the Company no longer grants new equity awards under the 2012 Plan. On September 11, 2025, the Company’s stockholders, upon the recommendation of the Board, approved an amendment and restatement of the 2020 Plan to increase the number of shares of Common Stock that may be issued thereunder by 950,000 shares, to a total of 1,023,017 shares. As of December 31, 2025 , there were 1,121 shares subject to outstanding stock options and 477,700 shares subject to unvested RSUs and 473,196 shares remained available for grant under the 2020 Plan. F- 18 Restricted Stock Units RSUs can be issued either under the 2020 Plan or as inducement grants issued outside of the 2020 Plan to new employees. RSUs granted by the Company to employees generally vest 1 year after the grant date. Upon vesting, each outstanding RSU will be settled for one share of Common Stock. Employee RSU recipients may elect to net share settle upon vesting, in which case the Company pays the employee’s income taxes due upon vesting and withholds a number of shares of equal value. The Company does not expect to repurchase shares to satisfy RSU vests. The fair value of the RSUs awarded is based upon the Company’s closing stock price at the grant date and is expensed over the requisite service period. The following table summarizes the activity of the Company’s RSUs for the years ended December 31, 2024 and 2025: Number of Shares Weighted-Average Grant Date Fair Value Per Share Unvested units at December 31, 2023 5,525 $ 74.83 Granted 71,000 2.77 Vested ( 3,995 ) 71.10 Forfeited ( 1,530 ) 84.55 Unvested units at December 31, 2024 71,000 $ 2.77 Granted 512,800 $ 2.32 Vested ( 71,000 ) 2.77 Forfeited ( 35,100 ) 2.32 Unvested units at December 31, 2025 477,700 $ 2.32 The weighted-average fair value of RSUs granted during the years ended December 31, 2025 and 2024 was $ 2.32 and $ 2.77 , respectively. Stock-based compensation expense related to RSUs was $ 481,000 and $ 141,000 for the years ended December 31, 2025 and 2024 , respectively. The aggregate fair value of awards that vested during the years ended December 31, 2025 and 2024 was $ 163,680 and $ 21,000 , respectively, which represents the market value of Common Stock on the date that the RSUs vested. As of December 31, 2025 , the compensation expense for all unvested RSUs in the amount of approximately $ 769,000 will be recognized in the Company’s results of operations over a weighted average period of 0.79 years. Stock Options The Company did not issue any stock option awards during the years ended December 31, 2025 or 2024. All remaining outstanding stock options continue to be accounted for in accordance with ASC 718. These options are service-based awards granted by the Company to employees that generally vest annually over four years from the grant date and expire ten years from the date of grant. Upon the exercise of a stock option, the Company issues new shares of common stock. Because no stock options were granted during the periods presented, no Black-Scholes fair value calculations were required. F- 19 The following table summarizes the Company’s stock option activity for the years ended December 31, 2024 and 2025: Number of Shares Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term (in years) Balance at December 31, 2023 1,146 $ 10,120.69 9.74 Granted - - Exercised - - Forfeited - - Expired ( 20 ) 512,001.27 Balance at December 31, 2024 1,126 $ 1,206.29 8.71 Granted - - Exercised - - Forfeited - - Expired ( 5 ) 133,863.84 Balance at December 31, 2025 1,121 $ 614.60 7.74 Exercisable at December 31, 2025 1,121 $ 614.60 7.74 Stock-based compensation expense related to stock options for the year ended December 31, 2024 was $ 6,000 . There was no compensation expense related to stock options for the year ended December 31, 2025 . There is no income tax benefit as the Company is currently operating at a loss and an actual income tax benefit may not be realized. Compensation Expense Related to Equity Awards The following table sets forth total stock-based compensation expense for the years ended December 31, 2025 and 2024 , in thousands: December 31, 2025 2024 Research and development $ 119 $ 30 General and administrative 362 117 Total stock-based compensation expense $ 481 $ 147 F- 20 10. Income Taxes As further described in Note 1, Summary of Significant Accounting Policies, the Company has elected to prospectively adopt the guidance in ASU No. 2023 - 09. The following table is a reconciliation of the U.S. federal statutory rate of 21 % to the Company's effective tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023 - 09, in thousands, except percentages: Year Ended December 31, 2025 % Provision for income taxes at U.S. federal statutory rate $ ( 1,827 ) 21.00 Tax Credits ( 179 ) 2.06 Changes in valuation allowances 1,993 ( 22.91 ) Non-taxable or non-deductible items 10 ( 0.11 ) Other reconciling items 3 ( 0.03 ) Effective tax rate - - The following table is a reconciliation of the U.S. federal statutory rate of 21 % to the Company's effective rate for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023 - 09: Year Ended December 31, 2024 Federal statutory rate 21.0 % State income taxes, net of federal benefit 10.6 Non-deductible expenses ( 0.8 ) Income tax credits 0.1 Valuation allowance ( 30.9 ) Effective tax rate 0.00 % The provision for income taxes for the years ended December 31, 2025 and 2024 are as follows, in thousands: Year Ended December 31, 2025 2024 Current Federal $ - $ - State - - Total current - - Deferred Federal 2,255 1,589 State 358 623 Total deferred 2,613 2,212 Valuation allowance $ ( 2,613 ) $ ( 2,212 ) Total provision for income taxes $ - $ - The Company recognizes deferred tax assets and liabilities to reflect the tax effects of temporary differences between the tax basis of assets or liabilities and their reported amounts in the consolidated financial statements in accordance with ASC 740. These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. F- 21 ASC 740 requires that a valuation allowance be established when management determines that it is more likely than not that all or a portion of a deferred asset will not be realized. The Company evaluates the realizability of its net deferred income tax assets and valuation allowances as necessary, at least on an annual basis. During this evaluation, the Company reviews its forecasts of income in conjunction with other positive and negative evidence surrounding the realizability of its deferred income tax assets to determine if a valuation allowance is required. As a result of this evaluation, the Company has recorded a full valuation allowance against its deferred tax assets as the Company believes it is more likely than not that the benefit of all of its deferred tax assets will not be realized. The significant components of the Company’s deferred tax assets and liabilities are as follows, in thousands: Year Ended December 31, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 1,986 $ 26 Tax credit carryforwards 212 5 Stock-based compensation 84 21 Capitalized research and development expenses 248 295 License fees 2 3 Lease liability - - Other timing differences 98 - Deferred tax assets 2,630 350 Deferred tax liabilities: Right of use asset - - Other timing differences ( 17 ) ( 13 ) Deferred tax liability ( 17 ) ( 13 ) Valuation allowance ( 2,613 ) ( 337 ) Net deferred tax asset $ - $ - During the year ended December 31, 2025, the Company paid no federal income taxes, net of refunds. Additionally, the amount paid in state income taxes, net of refunds received, was immaterial for the year ended December 31, 2025. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted, reinstating full expensing of domestic research and experimental (R&E) expenditures under new Internal Revenue Code Section 174A, effective for tax years beginning after December 31, 2024. The legislation also provides taxpayers with the option to accelerate deductions for unamortized domestic R&E costs incurred during the 2022–2024 period. The Company intends to continue Tax Cuts and Jobs Act amortization for unamortized domestic R&E costs incurred during 2022–2024 period. As of December 31, 2025, $ 77,000 remained unamortized related to domestic R&D costs. Final elections will be made with the 2025 tax return filing. Ownership changes may limit the amount of net operating loss (“NOL”) carryforwards or tax credit carryforwards that can be utilized to offset future taxable income or tax liability. Pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), NOL and tax credit carryforwards may be subject to annual limitations in the event a cumulative change in ownership of more than 50% occurs within a three -year period. Any limitation may result in expiration of a portion of the NOL carryforwards or tax credit carryforwards before utilization. For 2024, the Company updated its previously completed assessment of the available NOL and tax credit carryforwards to determine the annual Section 382 NOL utilization limitation as a result of a change in ownership that occurred on December 20, 2024. As a result of this ownership change, federal and state NOLs were reduced by $ 6,265,000 and $ 4,893,000 respectively, federal and state research and development tax credits carryforwards were reduced by $ 401,000 and $ 174,000 respectively. The federal capitalized research and development expense deferred tax asset has been reduced by $ 0 and $ 4,122,000 as a result of the Section 382 limitations as of December 31, 2025 and 2024, respectively. F- 22 Under Section 382 of the Internal Revenue Code the utilization of the Company's NOLs and certain other tax attributes may be limited if the Company experiences an ownership change, as defined in Section 382. An ownership change generally occurs when there is a cumulative change in ownership of more than 50 percentage points among certain stockholders over a three -year testing period. The Company did not complete a formal Section 382 study during the year ended December 31, 2025 to determine whether an ownership change has occurred. Accordingly, no assurance can be given that the Company has not experienced, or will not experience in the future, an ownership change that could limit the ability to utilize its NOLs and other tax attributes. If such limitations were to apply, the Company's future cash flows and income tax expense could be adversely affected. At December 31, 2025, the Company had federal and state NOL carryforwards of approximately $ 8,153,000 and $ 4,331,000 , respectively, to reduce future taxable income. The utilization of the federal carryforwards as an available offset to future taxable income is subject to limitations under federal income tax laws. Under current federal income tax law, federal NOLs incurred in tax years beginning after December 31, 2017 may be carried forward indefinitely, but are limited to offset up to 80% of future taxable income. As of December 31, 2025, all of the Company's federal NOL carryforwards will carry forward indefinitely. The Company's available state NOL carryforwards will begin to expire in 2045, unless previously utilized. At December 31, 2025, the Company also had federal and state research and development credits of approximately $ 185,000 and $ 34,000 , respectively. The federal tax credit carryforwards will begin to expire in 2045. The Company has not recorded any uncertain tax positions as of December 31, 2025 or 2024. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. The Company has not incurred any interest or penalties. In the event that the Company is assessed interest or penalties at some point in the future, they will be classified in the financial statements as general and administrative expenses. The Company files income tax returns in the United States and in multiple state jurisdictions. The Company is subject to tax examinations for federal and state purposes for tax years 2022 through 2025.Ownership changes may limit the amount of NOL carryforwards or tax credit carryforwards that can be utilized to offset future taxable income or tax liability. Pursuant to Sections 382 and 383 of the Code, NOL and tax credit carryforwards may be subject to annual limitations in the event a cumulative change in ownership of more than 50% occurs within a three -year period. Any limitation may result in expiration of a portion of the NOL carryforwards or tax credit carryforwards before utilization. F- 23 11. Net Loss per Share Basic net loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding. Diluted net loss per share is computed by dividing the Company’s net loss by the weighted average number of shares of Common Stock outstanding and the impact of the dilutive effect of potential Common Stock equivalents, except when the inclusion of such potential Common Stock equivalents would be anti-dilutive. Dilutive potential Common Stock equivalents primarily consist of stock options, RSUs and warrants. Therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented because the impact of these items is generally anti-dilutive during periods of net loss. The following table sets forth the potential common shares excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive: December 31, 2025 2024 Stock options 1,121 1,126 Unvested RSUs 477,700 71,000 Warrants 13,527,968 1,925,867 Total 14,006,789 1,997,993 12. Segment Information The Company is a clinical stage biopharmaceutical company that has yet to generate operating revenues. Management has determined that the Company operates with a single operating segment and a single reportable segment – the Clinical segment. The Chief Operating Decision Maker (CODM) is the Chief Executive Officer (CEO). The CEO assesses performance and allocates resources to achieve the Company’s goals based on operating loss and net loss as reported in the Consolidated Statements of Operations. The measure of segment assets is Total Assets as presented on the Consolidated Balance Sheets. All of the Company’s operations occur within the United States. The following table presents selected financial information with respect to the Company's single operating segment (in thousands): December 31, 2025 2024 Research and development PH-762 $ 2,789 $ 2,070 PH-894 231 149 Employee expense, lab supplies and overhead 1,598 1,424 Total research and development 4,618 3,643 General and administrative 4,602 3,743 Total operating expenses $ 9,220 $ 7,386 Other income, net ( 522 ) ( 236 ) Net loss $ 8,698 $ 7,150 F-24 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.