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Item 9A. Controls and Procedures

2021-03-25 compared with 2020-03-26 · 80 added, 575 removed, 172 unchanged (79% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation

of our Chief Executive Officer (who is also acting as our principal financial officer) and our Principal Accounting Officer, evaluated

Our management, with the participation of

our Chief Executive Officer (who is also acting as our principal financial officer) and our Principal Accounting Officer, evaluated

the effectiveness of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as

2 unchanged sentences

SEC rules and forms.

Our disclosure controls and procedures

are designed to provide reasonable assurance of achieving their objectives.

We believe that a control system, no matter how well

designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation

of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been

Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this report,

management, with the participation of our Chief Executive Officer (who is also acting as our principal financial officer) and

our Principal Accounting Officer, concluded that our disclosure controls and procedures were effective as of such date.

Our disclosure controls and procedures are

designed to provide reasonable assurance of achieving their objectives.

We believe that a control system, no matter how well designed

and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls

can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

on the evaluation of our disclosure controls and procedures as of the end of the period covered by this report, management, with

the participation of our Chief Executive Officer (who is also acting as our principal financial officer) and our Principal Accounting

Officer, concluded that our disclosure controls and procedures were effective as of such date.

Management’s Annual Report on Internal Control Over

11 unchanged sentences

of our internal control over financial reporting as of December 31, 2020.

In making this assessment, management used the

criteria set forth in Internal Control –

Integrated Framework issued by the Committee of Sponsoring Organizations of the

Treadway Commission (2013 framework).

Based on this assessment, management, with the participation of our Chief Executive Officer

(who is also acting as our principal financial officer) and our Principal Accounting Officer, concluded that, as of December 31,

In making this assessment, management used the criteria

set forth in Internal Control –

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway

Commission (2013 framework).

Based on this assessment, management, with the participation of our Chief Executive Officer (who is

also acting as our principal financial officer) and our Principal Accounting Officer, concluded that, as of December 31, 2020,

our internal control over financial reporting was effective.

9 unchanged sentences

OTHER INFORMATION

Our certificate of incorporation provides

that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings:

derivative action or proceeding brought on behalf of the Company, any action asserting a claim of breach of a fiduciary duty owed

by any director, officer or other employee of the Company to the Company or the Company’s stockholders, any action asserting

a claim against the Company arising pursuant to any provision of the Delaware General Corporation Law or the Company’s certificate

of incorporation or bylaws, or any action asserting a claim against the Company governed by the internal affairs doctrine.

the fact that our certificate of incorporation provides for this exclusive forum provision to be applicable to the fullest extent

permitted by applicable law, Section 27 of the Securities Act and Exchange Act, creates exclusive federal jurisdiction over all

suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and Section

22 of the Securities Act, creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty

or liability created by the Securities Act or the rules and regulations thereunder.

As a result, this provision of our certificate

of incorporation would not apply to claims brought to enforce a duty or liability created by the Securities Act, Exchange Act,

or any other claim for which the federal courts have exclusive jurisdiction.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth our current

directors and executive officers, their ages and the positions currently held by each person:

Gerrit Dispersyn, Dr.

President and Chief Executive Officer

Chairman of the Board of Directors

Geert Cauwenbergh, Dr.

Freeman, Ph.D.

Lockshin, Ph.D.

Gerrit Dispersyn,

joined the Company in April 2017 as our Chief Development Officer and became our President and CEO in

From 2014 to April 2017, Dr.

Dispersyn was the Vice President, Global Head of Affairs at Integra LifeSciences Corporation,

a world leader in medical technology.

Prior to assuming this role, Dr.

Dispersyn held the position of Vice President, Program Management

& Clinical Affairs from 2008 to 2014.

In these positions, Dr.

Dispersyn was responsible for the global strategy and execution

of clinical and product development, clinical operations and medical affairs projects.

He received his Doctorate in Medical Sciences

from Maastricht University, Faculty of Medicine (Netherlands), a post-graduate degree in Biomedical Imaging and a Master of Science

degree in Biochemistry, both from the University of Antwerp, Belgium.

Bitterman has

served as a member and the Chairman of our Board of Directors since 2012.

Bitterman served as the President and Chief Executive

Officer of Cutanea Life Sciences, Inc., a private company he founded in 2005 that focused on developing innovative technologies

to treat diseases and disorders of the skin and subcutaneous tissue, until its acquisition by Biofrontera, Inc., USA in March 2019.

Prior to his role at Cutanea Life Sciences, Inc., Mr.

Bitterman also held the position of President and Chief Executive Officer

of Isolagen, Inc., President and General Manager of Dermik Laboratories and various positions of increasing responsibility in financial

and commercial capacities within Aventis S.A.

Bitterman holds an A.B.

degree in Economics from The College of the Holy Cross

and a Master of Business Administration degree from Boston University.

He also holds a Doctor of Human Letters (Honoris Causa)

from the New York College of Podiatric Medicine and is a member of the Philadelphia Business Leaders Network.

Geert Cauwenbergh,

has served as a member of our Board of Directors since April 2012.

He served as our President and Chief

Executive Officer from April 2012 to November 2018, and as our Chief Executive Officer from November 2018 until his retirement

in March 2019.

Cauwenbergh served as Chairman and Chief Executive Officer of RHEI Pharmaceuticals, Inc., a private company

that develops and commercializes proprietary drug therapies, from 2008 to 2011.

Cauwenbergh founded Barrier Therapeutics,

Inc., a biopharmaceutical company focused on dermatology drug development, until its acquisition by Stiefel Laboratories, Inc.

Prior to Barrier Therapeutics, Inc.

Cauwenbergh was employed by Johnson & Johnson for 23 years where he held a

number of ascending senior management positions.

He currently serves as a director of Moberg Pharma AB and Cutanea Life Sciences,

Cauwenbergh received his Doctorate in Medical Sciences from the Catholic University of Leuven, Faculty of Medicine

(Belgium), where he also completed his masters and undergraduate work.

Paul Dorman has

served as a member of our Board of Directors since April 2013.

Dorman currently serves as the Chairman and CEO of DFB

Pharmaceuticals, a holdings company specializing in investing in and operating pharmaceutical businesses.

From 1990 to 2012, Mr.

also served as the Chairman and CEO of DPT Laboratories, a contract manufacturer and developer of pharmaceutical products.

to acquiring DPT, Mr.

Dorman was employed by Johnson & Johnson for 12 years, where he served in various positions,

including Vice President and as a member of the board of directors of several Johnson & Johnson companies.

Prior to Johnson &

Dorman was employed by Baxter-Travenol, a large pharmaceuticals company.

Dorman holds a B.S.

in Mechanical Engineering from Tulane University and a Juris Doctor of Law from Loyola University.

served as a member of our Board of Directors since October 2019.

He most recently served as the Chief Financial Officer of Cutanea

Life Sciences, Inc., a private company focused on developing innovative technologies to treat diseases and disorders of the skin

and subcutaneous tissue, from January 2012 to June 2019.

Prior to Cutanea, Mr.

Ferrara served as the Chief Financial Officer of

Storeroom Solutions Inc., a venture capital financed, technology enhanced, integrated supply chain solutions company, from 2004

to 2011, and NER Data Products, Inc., an IT service management company, from 2000 to 2003, as well as holding other senior level

financial positions in national and international public companies in the greater Philadelphia area.

Ferrara previously served

on the board of directors of the Planned Lifetime Assistance Network of Pennsylvania, where he was on the executive committee and

chairman of the governance and audit committees from July 2011 to September 2013.

Ferrara received a B.S.

in Accounting from

Lehigh University and is a Certified Public Accountant.

has served has a member of our Board of Directors since June 2017.

Freeman currently serves as the Chief Operating

Officer of Anthos Therapeutics Inc., a clinical-stage biopharmaceutical company developing therapies for cardiovascular patients.

Anthos Therapeutics Inc.

was launched by Novartis and Blackstone Life Sciences, a private investment firm, where Dr.

also served as a Senior Advisor since July 2018.

From 2017 to June 2018, Dr.

Freeman held the position of Chief Business Officer

of Vedanta Biosciences, a clinical-stage company developing therapies for immune-mediated diseases.

Prior to his role with Vedanta

Biosciences, Dr.

Freeman was the Senior Vice President of Strategy and Portfolio Management and Head of Business Development and

Licensing at Merck KGaA, a leading science and technology company, from 2008 to 2016.

Freeman received a Ph.D.

Pharmacology and Drug Metabolism from the Imperial Cancer Research Fund (now CRUK), an M.A.

and First Class Honours in Biochemistry

from Cambridge University and a MBA with a finance major from Webster, St.

has served as a member of our Board of Directors since April 2013.

Lockshin currently serves as the Chief Scientific

Officer of Xenetic Biosciences, Inc., a biopharmaceutical company focused on the development of novel oncology therapeutics.

to this appointment, Dr.

Lockshin served as Xenetic Biosciences, Inc.’s Vice President of Research and Operations from March

2014 to January 2017.

From July 2016 to December 2016, Dr.

Lockshin served as Chief Technical Officer of VBI Vaccines, Inc., a

company developing vaccines in infectious disease and immuno-oncology.

VBI Vaccines, Inc.

merged with SciVac Therapeutics, Inc.

and its subsidiary SciVac, Ltd., a commercial-stage biologics and vaccine company, in July 2016 where Dr.

Lockshin had served as

its Chief Executive Officer and director since September 2014.

Since May 2013, Dr.

Lockshin has also served as President and Chief

Executive Officer of Guardum Pharmaceuticals, LLC, a private pharmaceutical company, and as Vice President of Corporate R&D

Initiatives for OPKO Health, Inc., a multinational pharmaceutical and diagnostics company, from October 2011 to February 2013.

Lockshin holds a S.B.

degree in Life Sciences and a Ph.D.

in Biological Chemistry from the Massachusetts Institute of

Board Leadership Structure and Role in Risk Oversight

The positions of Chairman of the Board of

Directors (the “

Board ”) and Chief Executive Officer are separated, which allows our Chief Executive Officer

to focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing

advice to and independent oversight of management.

Our Board recognizes the time, effort and energy that the Chief Executive Officer

is required to devote to his position in the current business environment, as well as the commitment required to serve as our Chairman.

Our Board also believes that this structure ensures a greater role for the independent directors in the oversight of our Company

and active participation of the independent directors in setting agendas and establishing priorities and procedures for the work

of our Board.

Our Board believes its administration of its risk oversight function has not affected its leadership structure.

While our Bylaws do not require that our

Chairman and Chief Executive Officer positions be separate, our Board believes that having separate positions and having an independent

outside director serve as Chairman is the appropriate leadership structure for us at this time and demonstrates our commitment

to good corporate governance.

Our separated Chairman and Chief Executive Officer positions are augmented by our independent Board

committees that provide appropriate oversight in the areas described below.

At executive sessions of independent directors, these

directors speak candidly on any matter of interest, which may be with or without the Chief Executive Officer present.

The independent

directors meet separately in executive session on at least an annual basis to discuss matters relating to the Company and the Board,

without members of the management team present.

We believe this structure provides consistent and effective oversight of our management

and the Company.

The Board has overall responsibility for

the oversight of the Company’s risk management process, which is designed to support the achievement of organizational objectives,

including strategic objectives, to improve long-term organizational performance and enhance stockholder value.

Risk management

includes not only understanding company-specific risks and the steps management implements to manage those risks, but also what

level of risk is acceptable and appropriate for the Company.

Management is responsible for establishing our business strategy,

identifying and assessing the related risks and implementing appropriate risk management practices.

The Board periodically reviews

our business strategy and management’s assessment of the related risk, and discusses with management the appropriate level

of risk for the Company.

The Board also delegates oversight to Board committees to oversee selected elements of risk as set forth

Board Committees

Audit Committee .

Audit Committee is comprised of Messrs.

Ferrara (Chairman) and Dorman and Dr.

The Audit Committee selects the Company’s

independent registered public accounting firm, approves its compensation, oversees and evaluates the performance of the independent

registered public accounting firm, oversees the accounting and financial reporting policies and internal control systems of the

Company, reviews the Company’s interim and annual financial statements, independent registered public accounting firm reports

and management letters and performs other duties, as specified in the Audit Committee Charter.

All members of the Audit Committee

satisfy the current independence and experience requirements of Rule 10A-3 of the Exchange Act and the current Nasdaq independence

standards, and the Board has determined that Mr.

Ferrara is an “audit committee financial expert,”

as the SEC has defined

that term in Item 407 of Regulation S-K.

The Compensation Committee is comprised of Messrs.

Bitterman (Chairman) and Ferrara and Dr.

The Compensation Committee determines compensation levels for the Company’s executive officers and directors, oversees administration

of the Company’s equity compensation plans and performs other duties regarding compensation for employees and consultants

as the Board may delegate from time to time.

Our Chief Executive Officer makes recommendations to the Compensation Committee regarding

the corporate and individual performance goals and objectives relevant to executive compensation and executives’

in light of such goals and objectives and recommends other executives’

compensation levels to the Compensation Committee

based on such evaluations.

The Compensation Committee considers these recommendations and then makes an independent decision regarding

officer compensation levels and awards.

All members of the Compensation Committee satisfy the current Nasdaq independence standards,

and each member of the Committee qualifies as an “outside director”

and “non-employee director”

by Section 162(m) of the Code and Rule 16b-3 of the Exchange Act, respectively.

Nominating and

Governance Committee .

The Nominating and Governance Committee is comprised of Drs.

Lockshin (Chairman) and

Freeman and Messr.

The Nominating and Governance Committee reviews potential director nominees, recommends nominees to

the Board, oversees the Company’s corporate governance principles and develops and implements policies and processes regarding

corporate governance matters.

Lockshin and Freeman and Messr.

Dorman satisfy the current Nasdaq independence standards.

A copy of the Company’s Audit, Compensation

and Nominating and Corporate Governance Committee charters are available on the Company’s website at www.phiopharma.com.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires

our “officers”

(as defined in Rule 16a-1(f) under the Exchange Act) and directors, and persons who own more than 10%

of a registered class of our equity securities to file reports of beneficial ownership and changes in beneficial ownership with

Officers, directors and greater-than-10% stockholders (the “

Reporting Persons ”) are required by SEC

regulations to furnish us with copies of all reports filed under Section 16(a).

Based solely on our review of copies of these

reports and representations of such Reporting Persons, we believe that during fiscal year 2019, all Reporting Persons satisfied

such applicable SEC filing requirements.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct

and Ethics that applies to all our directors, officers and employees, including our principal executive officer, principal financial

officer, principal accounting officer or controller, or persons performing similar functions.

Our Code of Business Conduct and

Ethics, as well as other corporate governance materials, is located on our website at www.phiopharma.com.

We intend to disclose

future amendments to certain provisions of the Code of Business Conduct and Ethics, and waiver of the Code of Business Conduct

and Ethics granted to executive officers and directors, on the website within four business days following the date of the amendment

information required by this Item will be incorporated by reference to the information contained in our Definitive Proxy Statement

to be filed no later than 120 days after the fiscal year end of December 31, 2020.

EXECUTIVE COMPENSATION

The following describes

the compensation earned by each of the executive officers identified below in the Summary Compensation Table, who are referred

to collectively as our “named executive officers.”

Our named executive officers with respect to the fiscal year that

ended on December 31, 2019 are Gerrit Dispersyn, Dr.

Sc., our President and Chief Executive Officer, Geert Cauwenbergh,

Sc., our former Chief Executive Officer and John Barrett, Ph.D., our former Chief Development Officer.

Name and principal position

incentive plan

Gerrit Dispersyn, Dr.

President and Chief Executive Officer

Geert Cauwenbergh, Dr.

Former Chief Executive Officer

John Barrett, Ph.D.

Former Chief Development Officer

The amounts shown reflect the grant date fair value of stock options and restricted stock units computed in accordance with ASC 718 for the indicated year.

The amounts shown reflect the annual cash bonus earned for performance for each respective year under the Company’s Incentive Bonus Program.

The annual cash bonus for fiscal year 2019 was paid in March 2020 and the annual cash bonus for fiscal year 2018 was paid in February 2019.

Dispersyn received a retention bonus.

Represents amounts for the dollar value of life insurance premiums paid.

Dispersyn became our Chief Development Officer effective April 24, 2017 and served in this role until November 2018 when he was appointed President and Chief Operating Officer.

On March 1, 2019, Dr.

Dispersyn was appointed to President and Chief Executive Officer of the Company.

Cauwenbergh became our President and Chief Executive Officer effective April 27, 2012.

He retired from the Company on March 1, 2019.

On August 31, 2018 and subsequently amended on December 19, 2018 and February 13, 2019, Dr.

Cauwenbergh elected the right to receive, in lieu of cash, for the period from September 15, 2018 to February 28, 2019, up to 50% of his base salary and cash bonuses payable in the form of unvested restricted shares of the Company’s common stock with such restricted shares vesting in full on June 1, 2019.

In lieu of cash compensation, Dr.

Cauwenbergh received:

a.) 1,647 shares of common stock related to $32,385 in base salary for the year ended December 31, 2019 and b.) 2,484 shares of common stock related to $56,673 of base salary and 2,771 shares of common stock related to $57,887 of bonus compensation for the year ended December 31, 2018.

The shares of restricted stock issued to the Company’s former Chief Executive Officer are described more fully in the notes to the Company’s consolidated financial statements.

Barrett became our Chief Development Officer effective April 22, 2019.

In October 2019, Dr.

Barrett resigned from his position with the Company to pursue another opportunity.

Outstanding Equity Awards at Fiscal Year-End

The following table shows information regarding

outstanding equity awards as of December 31, 2019 for our named executive officers:

Option Awards

Unexercisable)

Value of Shares or

Market Value of

Gerrit Dispersyn,

Geert Cauwenbergh,

John Barrett, Ph.D.

Value is based on the closing price of $9.41 of the Company’s common stock on December 31, 2019.

The equity award granted to Dr.

Dispersyn in 2017 vests in equal monthly installments over a four years.

The equity awards granted to Dr.

Dispersyn subsequent to 2017, vest in equal annual installments over four years.

The equity awards granted to Dr.

Cauwenbergh prior to 2018 vest as to 25% of the award on the first anniversary of the grant date and as to the remaining 75% of the option in equal monthly installments over a three-year period thereafter.

Subsequent to 2018, equity awards granted to Dr.

Cauwenbergh vest in equal annual installments over four years.

So long as Dr.

Cauwenbergh remains on the Company’s Board of Directors, awards granted to him during his employment with the Company will continue to vest after his retirement.

Nonqualified Deferred Compensation Earnings

We do not have any nonqualified deferred

compensation plans.

Employment and Change of Control Agreements

The following provides

descriptions of the employment agreements currently in effect for our named executive officers:

Gerrit Dispersyn, Dr.

We entered into an

employment agreement with Dr.

Dispersyn effective April 24, 2017 as our Chief Development Officer.

As Chief Development Officer

Dispersyn was entitled to receive an initial base salary of $285,000 per annum, as well as a performance bonus of up to 30%

of his base salary, subject to the achievement of performance goals to be established annually.

In connection with Dr.

Dispersyn’s

appointment to Chief Development Officer, he received a stock option entitling him to purchase 173 shares of the Company’s

Common Stock, which is subject to vesting in equal monthly installments over four years following the date of grant.

On March 1, 2019, Dr.

Dispersyn was appointed as the Company’s President and Chief Executive Officer.

As President and Chief Executive Officer,

Dispersyn is entitled to an initial base salary of $380,000 per annum, as well as a performance bonus of up to 50% of his base

salary, subject to the achievement of performance goals to be established annually.

As a one-time award in connection with his

appointment on March 1, 2019, Dr.

Dispersyn received a restricted stock unit award giving him the conditional right to receive

7,413 shares of Company Common Stock, which is subject to vesting in equal annual installments over four years.

The award was subject

to the Company’s stockholders’

approving an increase in the number of shares available for issuance under the Company’s

2012 Incentive Plan, which occurred on October 24, 2019.

Outside of the above-mentioned changes, Dr.

Dispersyn’s employment

agreement dated April 24, 2017 continues to remain in full force and effect.

Dispersyn’s

employment agreement provides that, upon termination of Dr.

Dispersyn’s employment without “cause”

therein) by us or by Dr.

Dispersyn for “good reason”

(as defined therein), he will be entitled to payment of:

accrued but unpaid salary and unused vacation as of the date of his termination;

(2) six months of salary from the date of termination;

and (3) continued participation, at our expense, during the applicable six-month severance period in our sponsored group medical

and dental plans.

In the event his employment is terminated within twelve months following a “change of control”

the Company, he will be entitled to:

(x) twelve months of salary from the date of termination;

(y) accelerated vesting of any unvested

stock options held by him as to 50% of the unvested option shares or the portion of the unvested option shares that would have

vested over the following twenty-four months, whichever is greater;

and (z) continued participation, at our expense, during the

twelve-month severance period in our sponsored group medical and dental plans.

Geert Cauwenbergh, Dr.

Cauwenbergh was

appointed Chief Executive Officer pursuant to an employment agreement, dated April 27, 2012, pursuant to which he was entitled

to receive an initial base salary of $360,000 per annum, as well as a performance bonus of up to 50% of his base salary, subject

to the achievement of performance goals to be established annually.

Effective March 1,

Cauwenbergh retired as our Chief Executive Officer.

He did not receive any severance benefits in connection with his

termination of employment.

John Barrett, Ph.D.

Barrett was appointed

Chief Development Officer pursuant to an employment agreement, dated April 22, 2019, pursuant to which he was entitled to receive

an initial base salary of $315,000 per annum, as well as a performance bonus of up to 30% of his base salary, subject to the achievement

of performance goals to be established annually.

Effective October 24,

Barrett resigned from his position with the Company to pursue another opportunity.

He did not receive any severance benefits

in connection with his termination of employment.

Director Compensation

We compensate our non-employee

directors for their service as a member of our Board.

Each non-employee director is entitled to receive an annual cash retainer

The chairs of our Board and Audit Committee are entitled to receive an additional annual cash retainer of $15,000,

the chair of the Compensation Committee is entitled to receive an additional cash retainer of $5,000 and the chair of the Nominating

and Corporate Governance Committee is entitled to receive an additional annual cash retainer of $7,500.

The Compensation Committee

and the Board reassess the appropriate level of equity compensation for non-employee directors on an annual basis.

Future equity

compensation payments will be determined on a year-by-year basis for the foreseeable future due to the volatility of the Company’s

Non-employee directors

are also reimbursed for their travel and reasonable out-of-pocket expenses incurred in connection with attending Board and committee

meetings and in attending continuing education seminars, to the extent that attendance is required by the Board or the committee(s)

on which that director serves.

The following table

shows the compensation paid in fiscal year 2019 to the Company’s non-employee directors.

Fees Earned or

Paid in Cash ($)

Bitterman (2)

Geert Cauwenbergh, Dr.

Freeman, Ph.D.

Lockshin, Ph.D.

The amounts shown reflect the grant date fair value of restricted stock units issued in fiscal year 2019 as computed in accordance with ASC 718.

Bitterman’s fees include his annual compensation and compensation of $25,000 related to increased activity as Chairman of the Board during fiscal year 2019.

Brownlie did not stand for re-election to the Board at the Company’s Annual Meeting of Stockholders held on October 24, 2019 and served as a director until the end of his term.

Cauwenbergh continued to serve as a member of the Board upon his retirement from the Company as Chief Executive Officer on March 1, 2019.

The Company also entered into a consulting agreement with Dr.

Cauwenbergh upon his retirement on March 1, 2019.

Cauwenbergh’s fees include his annual compensation, compensation of $12,500 for a special project to the Board to aid in the transition to the new Chief Executive Officer upon his retirement and $90,393 in consulting fees for fiscal year 2019.

Ferrara was elected to the Board on October 24, 2019.

Ferrara’s fees include his annual compensation and a sign-on retainer of $12,500.

As of December 31,

2019, the aggregate number of shares underlying stock options and restricted stock units by our non-employee directors is as follows:

Bitterman —

22 option awards and 182 restricted stock units, Keith L.

Brownlie —

22 option awards, H.

Dorman —

19 option awards and 182 restricted stock units, Jonathan E.

Freeman, Ph.D.

6 option awards and 182 restricted

stock units and Curtis A.

Lockshin, Ph.D.

19 option awards and 182 restricted stock units.

Refer to the “Executive

Compensation”

section for the aggregate number of shares underlying stock options and restricted stock units for Dr.

as of December 31, 2019.

information required by this Item will be incorporated by reference to the information contained in our Definitive Proxy Statement

to be filed no later than 120 days after the fiscal year end of December 31, 2020.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Securities Authorized for

Issuance Under Equity Compensation Plans

The following table sets forth certain information,

as of December 31, 2019, about the securities authorized for issuance under our equity compensation plans, which consisted

of our 2012 Long Term Incentive Plan and our 2013 Employee Stock Purchase Plan:

Plan Category

Number of Securities

to be Issued Upon

Outstanding Options,

Weighted-Average

Exercise Price of

Outstanding Options,

Warrants and Rights

Number of Securities

Remaining Available for

Future Issuance

Under Equity Compensation

Plans (Excluding

Securities Reflected in

First Column)

Equity compensation plans approved by security holders (1)

Equity compensation plans not approved by security holders

Includes options outstanding representing 2,649 shares of common stock under Plan.

Also includes 14,945 restricted stock units subject to the Plan.

Beneficial Ownership

Based on information

available to us and filings with the SEC, the following table sets forth certain information regarding the beneficial ownership

(as defined by Rule 13d-3 under the Exchange Act) of our outstanding common stock for (i) each of our directors, (ii) each of our

executive officers, (iii) all of our directors and executive officers as a group and (iv) persons known to us to beneficially own

more than 5% of our outstanding common stock.

The following information is presented as of January 14, 2020 or such other date

as may be reflected below.

Beneficial ownership

and percentage ownership are determined in accordance with the rules of the SEC and include voting or investment power with respect

to shares of stock.

This information does not necessarily indicate beneficial ownership for any other purpose.

Under these rules,

shares of common stock issuable through the exercise of any option, warrant or right within 60 days of January 14, 2020 are deemed

outstanding for the purpose of computing the percentage ownership of the person holding the option, warrant or right, but are not

deemed outstanding for the purpose of computing the percentage ownership of any other person.

Unless otherwise indicated

and subject to applicable community property laws, to our knowledge, each stockholder named in the following table possesses sole

voting and investment power over their shares of common stock, except for those jointly owned with that person’s spouse.

Unless otherwise indicated below, the address of each person listed on the table is c/o Phio Pharmaceuticals Corp., 257 Simarano

Drive, Suite 101, Marlborough, MA 01752.

Shares Beneficially Owned

Name of Beneficial Owner

Greater than 5% Holders

CVI Investments, Inc.

South Church Street

George Town, Grand Cayman KY1-1104

Cayman Islands

Directors and Executive Officers:

Gerrit Dispersyn, Dr.

Bitterman (5)

Geert Cauwenbergh, Dr.

Paul Dorman (7)

Robert Ferrara

Freeman, Ph.D.

Lockshin, Ph.D.

All current directors and executive officers as a group (seven persons)

Indicates less than 1%.

Represents shares of common stock held as of January 14, 2020 plus shares of common stock that may be acquired upon exercise of options, warrants or rights within 60 days of January 14, 2020.

Based on 669,589 shares of common stock that were issued and outstanding as of January 14, 2020.

The percentage ownership and voting power for each person (or all directors and executive officers as a group) is calculated by assuming the exercise of all options, warrants or rights within 60 days of January 14, 2020 held by such person and the non-exercise of all outstanding options, warrants or rights held by all other persons.

Based solely on information set forth in a Schedule 13G filed with the SEC on February 14, 2019.

Includes 6,420 shares of common stock and 2,298 shares of common stock underlying derivative securities exercisable within 60 days of January 14, 2020.

Includes 5,644 shares of common stock and 207 shares of common stock underlying derivative securities exercisable within 60 days of January 14, 2020.

Includes 12,542 shares of common stock and 485 shares of common stock underlying derivative securities exercisable within 60 days of January 14, 2020.

Includes 188 shares of common stock and 204 shares of common stock underlying derivative securities exercisable within 60 days of January 14, 2020.

Includes 181 shares of common stock and 188 shares of common stock underlying derivative securities exercisable within 60 days of January 14, 2020.

Includes 184 shares of common stock and 202 shares of common stock underlying derivative securities exercisable within 60 days of January 14, 2020.

information required by this Item will be incorporated by reference to the information contained in our Definitive Proxy Statement

to be filed no later than 120 days after the fiscal year end of December 31, 2020.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Procedures for Review, Approval or Ratification of Transactions

with Related Persons

Our Board of Directors

has a policy to review and approve all transactions with directors, officers and holders of more than 5% of our voting securities

and their affiliates.

The policy provides that, prior to Board of Director consideration of a transaction with such a related party,

the material facts as to the related party’s relationship or interest in the transaction must be disclosed to the Board of

Directors, and the transaction will not be considered approved by the Board of Directors unless a majority of the directors who

are not interested in the transaction (if applicable) approve the transaction.

Furthermore, when stockholders are entitled to vote

on a transaction with a related party, the material facts of the related party’s relationship or interest in the transaction

must be disclosed to the stockholders, who must approve the transaction in good faith.

Outside of the Company’s

consulting agreement with Dr.

Cauwenbergh (refer to the “Director Compensation”

section for additional details), since

the past two years, there has not been, nor is there currently proposed, any transaction or series of related transactions to which

we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which the other parties included

or will include any of our directors, executive officers, holders of 5% or more of our voting securities, or any member of the

immediate family of any of the foregoing persons, other than compensation arrangements with directors and executive officers, which

are described where required in “Executive Compensation”

and “Director Compensation.”

Indemnification Agreements

We have entered into indemnification agreements

with each of our executive officers and directors.

These agreements provide that, subject to limited exceptions and among other

things, we will indemnify each of our executive officers and directors to the fullest extent permitted by law and advance expenses

to each indemnitee in connection with any proceeding in which a right to indemnification is available.

Director Independence

We believe that the Company benefits from

having a strong and independent Board of Directors.

For a director to be considered independent, the Board must determine that

the director does not have any direct or indirect material relationship with the Company that would affect his or her exercise

of independent judgment.

On an annual basis, the Board of Directors reviews the independence of all directors under the applicable

Nasdaq listing standards.

The Company also considers each director’s affiliations with the Company and members of management,

as well as significant holdings of Company securities.

This review considers all known relevant facts and circumstances in making

an independence determination.

Based on this review, the Board of Directors has made an affirmative determination that all directors,

other than Dr.

Cauwenbergh, are independent.

It was determined that Dr.

Cauwenbergh lacks independence because of his

status as the Company’s former Chief Executive Officer.

In addition, Nasdaq listing standards require

that, subject to specified exceptions, each member of our Audit, Compensation and Nominating and Corporate Governance Committees

be independent and that our Audit Committee members also satisfy independence criteria set forth in Rule 10A-3 under the Securities

Exchange Act of 1934, as amended.

For additional information regarding director

independence and committee memberships, see “Item 10 —

Directors, Executive Officers and Corporate Governance”.

information required by this Item will be incorporated by reference to the information contained in our Definitive Proxy Statement

to be filed no later than 120 days after the fiscal year end of December 31, 2020.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The Audit Committee reviews and pre-approves

all audit and non-audit services performed by its independent registered public accounting firm, as well as the fees charged for

such services.

All fees incurred in fiscal years 2019 and 2018 for services rendered by BDO USA, LLP were approved in accordance

with these policies.

In its review of non-audit service fees, the Audit Committee considers, among other things, the possible impact

of the performance of such services on the auditor’s independence.

The following is a summary of the fees billed

to the Company by BDO USA, LLP for professional services rendered for the fiscal years ended December 31, 2019 and 2018.

fees are for work invoiced in the fiscal years indicated.

Audit-Related Fees

All Other Fees

Total All Fees

Audit Fees consist of fees for the audit of the

Company’s financial statements included in our annual reports on Form 10-K, the review of the Company’s financial statements

included in our quarterly reports on Form 10-Q and other statutory and regulatory filings, including auditor consents.

Audit-Related Fees consist of fees billed for assurance

and related services that are also performed by our independent registered public accounting firm.

Tax Fees consist of services rendered for tax compliance,

tax advice and tax planning.

information required by this Item will be incorporated by reference to the information contained in our Definitive Proxy Statement

to be filed no later than 120 days after the fiscal year end of December 31, 2020.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

14 unchanged sentences

Current Report on Form 8-K (File No.

November 19, 2018

Form of Warrant.

Amendment No.

the Registration Statement on Form S-1 (File No.

October 13, 2020

Form of Warrant.

13 unchanged sentences

September 28, 2018

Form of Pre-Funded Warrant.

Amendment No.

Registration Statement on Form S-1 (File No.

September 28, 2018

Form of Underwriter Warrant.

10 unchanged sentences

February 13, 2020

Form of Pre-Funded Warrant.

Form of Underwriter Warrant.

Current Report on Form 8-K (File No.

February 13, 2020

Form of Underwriter Warrant.

Form of Warrant.

Current Report on Form 8-K (File No.

April 2, 2020

Form of Warrant.

Current Report on Form 8-K (File No.

January 25, 2021

Form of Placement Agent Warrant.

Current Report on Form 8-K (File No.

February 17, 2021

Description of Securities Registered Pursuant to Section 12(b) of the Securities Exchange Act of 1934.**

Annual Report on Form 10-K (File.

March 26, 2020

Patent and Technology Assignment Agreement between RXi Pharmaceuticals Corporation (formerly RNCS, Inc.) and Advirna, LLC, effective as of September 24, 2011.

3 unchanged sentences

2020 Long Term Incentive Plan.

Registration Statement on Form S-8 (File No.

December 23, 2020

Form of Restricted Stock Unit Award under the Company’s 2020 Long Term Incentive Plan.

Phio Pharmaceuticals Corp.

2012 Long Term Incentive Plan.

Quarterly Report on Form 10-Q (File No.

28 unchanged sentences

and Lincoln Park Capital Fund, LLC.

Registration Statement on Form S-1 (File No.

August 18, 2017

Registration Rights Agreement, dated as of August 8, 2017, by and between Phio Pharmaceuticals Corp.

and Lincoln Park Capital Fund, LLC.

Current Report on Form 8-K (File No.

August 9, 2019

Purchase Agreement, dated as of August 7, 2019 by and between Phio Pharmaceuticals Corp.

and Lincoln Park Capital Fund, LLC.

Current Report on Form 8-K (File No.

August 9, 2019

First Amendment to Purchase Agreement by and between Phio Pharmaceuticals Corp.

9 unchanged sentences

February 6, 2020

Securities Purchase Agreement, dated March 31, 2020, by and between the Company and the

Purchasers signatory therein.

Current Report on Form 8-K (File No.

April 2, 2020

Securities Purchase Agreement, dated January 21, 2021, by and between the Company and the

Purchasers signatory therein.

Current Report on Form 8-K (File No.

January 25, 2021

Registration Rights Agreement, dated January 21, 2021, by and between the Company and the

Purchasers signatory therein.

Current Report on Form 8-K (File No.

January 25, 2021

Securities Purchase Agreement, dated February 12, 2021, by and between the Company and the

Purchasers signatory therein.

Current Report on Form 8-K (File No.

February 17, 2021

Consent of BDO USA, LLP, an Independent Registered Public Accounting Firm.**

1 unchanged sentence

Sarbanes-Oxley Action Section 906 Certification of Principal Executive Officer and Principal Financial Officer.**

The following financial information from the Annual Report on Form 10-K of Phio Pharmaceuticals Corp.

for the year ended December 31, 2019, formatted in XBRL (eXtensible Business Reporting Language):

The following financial information from the Annual Report on Form

10-K of Phio Pharmaceuticals Corp.

for the year ended December 31, 2020, formatted in XBRL (eXtensible Business Reporting

(1) Consolidated Balance Sheets as of December 31, 2020 and 2019;

(2) Consolidated Statements of Operations for the Years Ended December 31, 2019 and 2018;

(2) Consolidated Statements of Operations for

the Years Ended December 31, 2020 and 2019;

(3) Consolidated Statements of Stockholders’

Equity for the Years Ended December 31, 2019 and 2018;

Equity for the Years Ended

December 31, 2020 and 2019;

(4) Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019;

18 unchanged sentences

Gerrit Dispersyn, Dr.

President and Chief Executive Officer

President, Chief Executive Officer and Director

(Principal Executive Officer and Principal

9 unchanged sentences

March 25, 2021

/s/ Robert L.

March 25, 2021

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures