What changed in this filing

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Item 1. Financial Statements

2023-05-11 compared with 2022-11-10 · 248 added, 285 removed, 159 unchanged (77% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share and per

September 30,

Current assets:

Restricted cash

Prepaid expenses

Prepaid expenses and other current assets

Total current assets

Right of use asset, net

Right of use asset

Property and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Commitments and contingencies (Note 2)

Series D Preferred Stock, $ 0.0001 par value;

0 and 1 shares authorized, issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Stockholders’ equity:

Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized

Common stock, $ 0.0001 par value, 100,000,000 shares authorized;

13,667,973 and 13,534,996 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

1,150,582 and 1,139,024 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

1 unchanged sentence

Total stockholders’ equity

Total liabilities and stockholders’ equity

Total liabilities, preferred stock and stockholders’ equity

The accompanying notes are an integral part of

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(Amounts in thousands, except share and per

Three Months Ended

September 30,

Nine Months Ended

September 30,

Ended March 31,

Operating expenses:

3 unchanged sentences

Operating loss

Total other (expense) income, net

Total other expense, net

Net loss per common share:

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PHIO PHARMACEUTICALS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

CONDENSED CONSOLIDATED STATEMENTS OF

PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share data)

For the Three and Nine Months

Ended September 30, 2022

Series D Preferred Stock

For the Three Months Ended March 31, 2023

Balance at December 31, 2022

$ ( 128,380 )

Cash-in-lieu of fractional shares for reverse stock split

Redemption of preferred stock

Issuance of common stock upon vesting of restricted stock units

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Balance at March 31, 2023

Stock-based compensation expense

Balance at June 30, 2022

Issuance of common stock upon vesting of restricted stock units

Shares withheld for payroll taxes

Stock-based compensation expense

Balance at September 30, 2022

$ ( 131,982 )

For the Three and Nine Months

Ended September 30, 2021

For the Three Months Ended March 31, 2022

Series D Preferred Stock

Balance at December 31, 2021

$ ( 116,900 )

Issuance of common stock, pre-funded warrants and warrants in connection with private placement, net of offering costs

Issuance of common stock in registered direct offering, net of offering costs

Issuance of common stock upon the exercise of warrants

Issuance of common stock upon vesting of restricted stock units

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Balance at March 31, 2022

Stock-based compensation expense

Balance at June 30, 2021

Issuance of common stock upon vesting of restricted stock units

Shares withheld for payroll taxes

Stock-based compensation expense

Balance at September 30, 2021

$ ( 119,542 )

4 unchanged sentences

(Amounts in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization

Non-cash lease expense

Non-cash stock-based compensation

Forgiveness of debt

Amortization of right of use asset

Stock-based compensation

Changes in operating assets and liabilities:

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Cash flows from financing activities:

Net proceeds from the issuance of common stock and warrants

Net proceeds from the exercise of warrants

Payment of taxes for net share settled restricted stock unit issuances

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and restricted cash

Cash in lieu of fractional shares for reverse stock split

Redemption of Series D preferred stock

Payment of taxes on net share settlements of restricted stock units

Net cash used in financing activities

Net decrease in cash and restricted cash

Cash and restricted cash at the beginning of period

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The following table provides a reconciliation of cash and restricted

cash reported within the Condensed Consolidated Balance Sheets to the totals above:

September 30,

cash reported within the consolidated balance sheets to the totals above:

Restricted cash

Total cash and restricted cash

Cash and restricted cash

The accompanying notes are an integral part of

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Phio Pharmaceuticals Corp.

(“ Phio ,” “ we ,” “ our ” or the “ Company ”) strives to address

the biggest challenges in immuno-oncology by working to create new pathways to a cancer-free future for patients.

We are developing therapeutics

that leverage our INTASYL™ technology to target both tumor and immune cells by regulating genes to strengthen a patient’s

immune system while weakening tumor defense mechanisms.

With our INTASYL self-delivering RNAi technology, we aim to bring the benefits

of RNA therapeutics to the treatment of cancer where other modalities may be ineffective.

The Company continues to respond

to and monitor the ongoing coronavirus pandemic.

The Company’s corporate headquarters and research facility have seen limited impact

and, during the three and nine months ended September 30, 2022, continued to operate with safety measures in place for the health and

well-being of its employees, such as working remotely and flexible scheduling, in accordance with guidance from federal, state and local

The Company believes that the coronavirus pandemic has not had a significant impact on its financial condition and results

of operations for the three and nine months ended September 30, 2022.

However, the extent to which the coronavirus pandemic may materially

impact our financial results and operations will depend on a number of factors, including the availability of supplies and services we

rely on, the ability to enroll subjects in our clinical trials, the emergence of variant strains of the coronavirus, the development,

availability, and public acceptance of effective treatments and vaccines, and the duration of the coronavirus pandemic, which remain difficult

to predict and are highly uncertain.

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

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, in order to maintain its operations.

This is dependent on a number of factors, including

the market demand or liquidity of the Company’s common stock, which may be adversely impacted by the coronavirus pandemic and the

ongoing conflict between Russia and Ukraine.

There is no guarantee that debt, additional equity or other funding will be available to

us on acceptable terms, or at all.

If we fail to obtain additional funding when needed, we would be forced to scale back or terminate

our operations or seek to merge with or to be acquired by another company.

The Company believes that

its existing cash should be sufficient to fund operations for at least the next 12 months from the date of the release of these financial

Basis of Presentation

The accompanying financial

statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“ GAAP ”).

Certain information and footnote disclosures included in the Company’s annual financial statements have been condensed or omitted.

Additionally, certain prior year amounts have been reclassified for consistency with the current year presentation.

The Company made an

adjustment to reflect patent costs within general and administrative operating expenses in the condensed consolidated statements of operations.

The reclassification increased general and administrative operating expenses and reduced research and development operating expenses by

$ 134,000 for the three months ended September 30, 2021 and by $ 430,000 for the nine months ended September 30, 2021.

This reclassification

had no effect on total operating expenses, net loss, net loss per common share and had no impact on the Company’s condensed consolidated

balance sheets, statement of stockholders’ equity and statement of cash flows for the prior year period.

The year-end condensed consolidated

balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

These statements

should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s most

recent Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “ SEC ”)

on March 22, 2022.

In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair

presentation of the condensed consolidated financial statements have been included.

Interim results are not necessarily indicative of

results for a full year.

or the “ Company ”) is a clinical stage biotechnology company whose proprietary INTASYL™ self-delivering RNAi technology

platform is designed to make immune cells more effective in killing tumor cells.

Phio 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.

Effective January 26, 2023, the Company completed

a 1-for-12 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.

Principles of Consolidation

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have been eliminated in consolidation.

Use of Estimates in Preparation of Financial Statements

Basis of Presentation

The accompanying financial statements are unaudited and have been prepared

in accordance with accounting principles generally accepted in the United States (“ GAAP ”).

Certain information and

footnote disclosures that are included in the Company’s annual financial statements, but that are not required for interim reporting

purposes, have been condensed or omitted.

Additionally, the Company made adjustments to the outstanding stock option and unvested restricted

stock unit balances, and related per share amounts, at December 31, 2022 to reflect final revisions to these outstanding equity awards

as a result of the Company’s reverse stock split.

The adjustment had no effect on the Company’s condensed consolidated financial

These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included

in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange

Commission (the “ SEC ”) on March 22, 2023 (the “ 2022 Form 10-K ”).

In the opinion of management, all

adjustments (including normal recurring accruals) considered necessary for a fair presentation of the condensed consolidated financial

statements have been included.

Interim results are not necessarily indicative of results for a full year.

Use of Estimates

The preparation of financial

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revenues and expenses during the reporting period.

The areas subject to 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, income taxes,

and our valuation allowance on our deferred tax assets.

On an ongoing basis, we evaluate our estimates and base our estimates on historical

experience and other relevant assumptions that we believe are reasonable under the circumstances, including as a result of new information

that may emerge concerning the coronavirus pandemic and the ongoing conflict between Russia and Ukraine.

Actual results could differ materially

from these estimates.

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, income

taxes, and the valuation allowance on the Company’s 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.

The Company has reported recurring

losses from operations since 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, in order to maintain its operations.

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.

The Company has limited cash

resources, has reported recurring losses from operations since inception and has not yet received product revenues.

These factors raise

substantial doubt regarding the Company’s ability to continue as a going concern, and the Company’s current cash resources

may not provide sufficient capital to fund operations for at least the next 12 months from the date of the release of these financial

The continuation of the Company as a going concern depends upon the Company’s ability to raise additional capital through

an equity offering, debt offering and/or strategic opportunity to fund its operations.

There can be no assurance that the Company will

be successful in accomplishing these plans in order to continue as a going concern.

These financial statements do not include any adjustments

to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the

Company be unable to continue as a going concern.

Summary of Significant Accounting Policies

There have been no material

changes to the Company’s significant accounting policies as compared to those disclosed in “Note 2.

Summary of Significant

Accounting Policies” in our most recent Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on

March 22, 2022.

changes to the significant accounting policies disclosed in the Company’s 2022 Form 10-K.

Recent Accounting Pronouncements

In May 2021, the Financial

Accounting Standards Board (the “ FASB ”) issued ASU 2021-04, “ Earnings per Share (Topic 260), Debt –

Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging

– Contracts in Entity’s Own Equity (Subtopic 815-40) ” (“ ASU 2021-04 ”).

The amendments in the

updates are intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified

written call options that remain equity classified after modification or exchange.

The amendments in ASU 2021-04 are effective for all

entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

An entity should apply

the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments.

Early adoption

is permitted for all entities, including within an interim period.

The Company adopted ASU 2021-04 on January 1, 2022.

The adoption of

this standard had no impact on the Company’s condensed consolidated financial statements.

There have been no recent

accounting pronouncements that have significantly impacted this Quarterly Report on Form 10-Q, beyond those disclosed in the Company’s

2022 Form 10-K.

Collaboration Agreement

In March 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

Under the Clinical Co-Development Agreement, Phio and AgonOx are 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 committed to provide

financial support for development costs of up to $ 4,000,000

to AgonOx for expenses incurred to conduct a Phase 1 clinical trial of PH-762 treated DP TIL in subjects with advanced melanoma and

other advanced solid tumors.

The Company will recognize its share of costs arising

from research and development activities performed by AgonOx in the Company’s financial statements in the period AgonOx incurs such

Phio will be entitled to certain future development milestones and low single-digit sales-based royalty payments from AgonOx’s

licensing of its DP TIL technology.

The Company recognized

approximately $ 119,000

of expense in connection with these efforts during the three months ended March 31, 2023.

expense under the Clinical Co-Development Agreement was recognized during the three months ended March 31, 2022.

Fair Value of Financial Instruments

The Company follows the provisions

of the FASB Accounting Standards Codification (“ ASC ”) Topic 820, “ Fair Value Measurement ,” for the

Company’s financial assets and liabilities that are re-measured and reported at fair value each reporting period and are re-measured

and reported at fair value at least annually using a fair value hierarchy that is broken down into three levels.

Level inputs are defined

The Company follows the provisions of the Financial

Accounting Standards Board (the “ FASB ”) Accounting Standards Codification (“ ASC ”) Topic 820, “ Fair

Value Measurement ,” for the Company’s financial assets and liabilities that are re-measured and reported at fair value

each reporting period and are re-measured and reported at fair value at least annually using a fair value hierarchy that is broken down

into three levels.

Level inputs are defined as follows:

Level 1 – quoted prices in active markets

for identical assets or liabilities.

Level 2 – other significant observable

inputs for the assets or liabilities through corroboration with market data at the measurement date.

Level 3 – significant unobservable

inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement

At September 30, 2022 and

December 31, 2021, the Company categorized its restricted cash of $ 50,000 as Level 2 hierarchy.

The assets classified as Level 2 have

initially been valued at the applicable transaction price and subsequently valued, at the end of each reporting period, using other market

observable data.

Observable market data points include quoted prices, interest rates, reportable trades and other industry and economic

Level 2 – other significant observable inputs for the

assets or liabilities through corroboration with market data at the measurement date.

Level 3 – significant unobservable inputs that reflect

management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

At March 31, 2023 and December 31, 2022, the Company

categorized its restricted cash of $ 50,000 as Level 2 hierarchy.

The assets classified as Level 2 have initially been valued at the

applicable transaction price and subsequently valued, at the end of each reporting period, using other market observable data.

market data points include quoted prices, interest rates, reportable trades and other industry and economic events.

The carrying amounts of cash,

accounts payable and accrued expenses of the Company approximate their fair values due to their short-term nature.

In January 2019, the Company

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treasury yield rate and borrowing rates from a creditworthy financial institution using the above lease factors.

The lease for our corporate

headquarters represents all of our significant lease obligations.

The amounts reported in the condensed consolidated balance sheets for

operating leases in which the Company is the lessee and other supplemental balance sheet information is set forth as follows, in thousands,

except the lease term (number of years) and discount rate:

The lease for the Company’s corporate headquarters represents

all of our significant lease obligations.

The amounts reported in the condensed consolidated balance

sheets for the operating lease in which the Company is the lessee and other supplemental balance sheet information is set forth as follows,

in thousands, except the lease term (number of years) and discount rate:

Schedule of lease and supplemental balance sheet information

September 30, 2022

March 31, 2023

December 31, 2022

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Weighted average discount rate

Operating lease costs included in operating expense

were $ 33,000 for the three months ended September 30, 2022 and 2021, respectively.

Operating lease costs included in operating expense

were $ 99,000 for the nine months ended September 30, 2022 and 2021, respectively.

Operating lease costs included

in operating expense were $ 33,000 for the three months ended March 31, 2023 and 2022, respectively.

Cash paid for the amounts

included in the measurement of the operating lease liability on the Company’s condensed consolidated balance sheets and included

within changes in the lease liability in the operating activities of our condensed consolidated statements of cash flows was $ 34,000 and

$ 44,000 for the three months ended September 30, 2022 and 2021, respectively.

Cash paid for the nine months ended September 30, 2022 and

2021 was $ 101,000 and $ 110,000 , respectively.

Future lease payments for

our non-cancellable operating leases and a reconciliation to the carrying amount of the operating lease liability presented in the condensed

consolidated balance sheet as of September 30, 2022 is as follows, in thousands:

within changes in the lease liability in the operating activities of the Company’s condensed consolidated statements of cash flows

was $ 34,000 and $ 33,000 for the three months ended March 31, 2023 and 2022, respectively.

Future lease payments

for the Company’s non-cancellable operating lease and a reconciliation to the carrying amount of the operating lease liability

presented in the condensed consolidated balance sheet as of March 31, 2023 is as follows, in thousands:

Schedule of future minimum lease payments

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Imputed interest

Total operating lease liabilities (includes current portion)

May 2020, the Company received loan proceeds pursuant to the Paycheck Protection Program (the “ PPP ”) under the Coronavirus

Aid, Relief, and Economic Security Act (the “ CARES Act ”).

The Company followed the guidance under the FASB ASC Topic

470, “ Debt ,” (“ ASC 470 ”) in assessing the accounting for the PPP loan proceeds.

Per ASC 470, the

Company recorded a liability on the balance sheet for the full amount of the PPP loan proceeds received and accrued interest over the

term of the loan.

The Company believed it used the loan proceeds for eligible purposes and applied for full loan forgiveness.

2021, the Small Business Administration approved the Company’s application for full loan forgiveness, and the full amount of the

PPP loan was remitted to the lender for forgiveness.

Upon loan forgiveness, the Company recognized a gain on the extinguishment of debt

of $ 233,000 for the loan proceeds received and interest accrued in the condensed consolidated statements of operations for the nine months

ended September 30, 2021.

Total operating lease liability

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 Articles 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

On November 16, 2022,

the Company issued and sold one

share of the Company’s Series D Preferred Stock, par value $ 0.0001 per

share (the “ Series D Preferred Stock ”) to Robert Bitterman, then its interim Executive Chairman and current Chief

Executive Officer, for $ 1,750 .

The Series D Preferred Stock was entitled to 17,500,000 votes per share exclusively with respect to any proposal to amend the

Company’s Amended Certificate to effect a reverse stock split of the Company’s common stock (“ Reverse Stock

The terms of the Series D Preferred Stock provided that it would be voted, without action by the holder, on any

such proposal in the same proportion as shares of the Company’s common stock were voted.

The Series D Preferred Stock

otherwise had no voting rights except as required by the General Corporation Law of the State of Delaware.

The Series D Preferred Stock was not convertible

into, or exchangeable for, shares of any other class or series of stock or other securities of the Company.

The Series D Preferred Stock

had no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger,

acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily.

The holder of the Series D Preferred

Stock was not entitled to receive dividends of any kind.

Under its terms, the outstanding share of Series

D Preferred Stock was to be redeemed in whole, but not in part, at any time:

(i) if such redemption was approved by the Board

in its sole discretion or (ii) automatically and effective upon the approval by the Company's stockholders of a Reverse Stock Split.

such redemption, the holder of the Series D Preferred Stock was entitled to receive consideration of $ 1,750 in cash.

The Series D Preferred Stock was redeemed in whole

on January 4, 2023, upon the approval by the Company’s stockholders of a Reverse Stock Split, such that, at March 31, 2023, there

were no shares of Series D Preferred Stock authorized, issued or outstanding and all of the Company’s authorized shares of preferred

stock were undesignated.

Stockholders’ Equity

January 2021 Private Placement — On

January 25, 2021, the Company completed a private placement of 4,420,863 shares of the Company’s common stock at a purchase

price per share of $ 3.07 , pre-funded warrants to purchase an aggregate of 140,065 shares of the Company’s common stock (the “ January

2021 Pre-Funded Warrants ”) at a purchase price per pre-funded warrant of $ 3.069 and warrants to purchase an aggregate of 3,420,696

shares of the Company’s common stock with an exercise price of $ 3.00 per warrant (the “ January 2021 Warrants ”)

(the “ Private Placement ”).

In connection with the Private Placement, the Company issued warrants to the placement agent,

Wainwright & Co., LLC (“ HCW ”), to purchase a total of 342,070 shares of the Company’s common stock at

an exercise price of $ 3.8375 per warrant (the “ January 2021 Placement Agent Warrants ”).

Net proceeds to the Company

from the Private Placement were $ 12,669,000 after deducting placement agent fees and offering expenses.

2021 Registered Direct Offering — On February 17, 2021, the Company completed a registered direct offering of 2,246,784

shares of the Company’s common stock at a purchase price of $ 3.42 per share (the “ Offering ”).

In connection with

the Offering, the Company issued warrants to the placement agent, HCW, to purchase a total of 168,509 shares of the Company’s common

stock at an exercise price of $ 4.275 per warrant (the “ February 2021 Placement Agent Warrants ”).

Net proceeds to the

Company from the Offering were $ 6,908,000 after deducting placement agent fees and offering expenses.

The Company first assesses

the warrants it issues under the FASB ASC Topic 480, “ Distinguishing Liabilities from Equity ” (“ ASC 480 ”)

to determine whether they are within the scope of ASC 480.

As there were no instances outside of the Company’s control that could

require cash settlement from any of the warrant series issued in the Company’s financing transactions, the Company’s

outstanding warrants are outside the scope of ASC 480.

The Company then applies and

follows the applicable accounting guidance in the FASB ASC Topic 815, “ Derivatives and Hedging.

” Financial instruments

are accounted for as either derivative liabilities or equity instruments depending on the specific terms of the agreement.

issued by the Company do not meet the definition of a derivative instrument as they are indexed to the Company’s common stock and

classified within stockholders’ equity.

Based on this determination, the Company’s warrants are classified within stockholders’

The following table summarizes the Company’s

outstanding equity-classified warrants at September 30, 2022:

outstanding warrants, all of which are classified as equity instruments, at March 31, 2023:

Schedule of outstanding warrants

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February 2021 Placement Agent Warrants

No warrants were exercised

during the three months ended September 30, 2022 and 2021 and during the nine months ended September 30, 2022.

The Company received net

proceeds of $ 2,146,000 from the exercise of warrants during the nine months ended September 30, 2021.

Net Loss per Common Share

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:

Schedule of anti dilutive stock

September 30,

Options to purchase common stock

Unvested restricted stock units

Warrants to purchase common stock

Stock-based Compensation

Restricted Stock Units

Restricted stock units (“ RSUs ”)

are issued under the Company’s 2020 Long-Term Incentive Plan (the “ 2020 Plan ”) or as inducement grants issued

outside of the 2020 Plan to new employees.

RSUs are generally subject to graded vesting and the satisfaction of certain service requirements.

Upon vesting, each outstanding RSU will be settled for one share of the Company’s 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 fair value of the RSUs awarded are based upon the Company’s closing stock price at the grant date

and are expensed over the requisite service period.

Restricted stock units

(“ RSUs ”) are issued under the Company’s 2020 Long-Term Incentive Plan (the “ 2020 Plan ”)

or as inducement grants issued outside of the 2020 Plan to new employees.

RSUs are generally subject to graded vesting and the

satisfaction of certain service requirements.

Upon vesting, each outstanding RSU will be settled for one share of the

Company’s 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 fair value of the RSUs awarded

are based upon the Company’s closing stock price at the grant date and are expensed over the requisite service period.

The following table summarizes the activity of

the Company’s RSUs for the nine months ended September 30, 2022:

the Company’s RSUs for the three months ended March 31, 2023:

Schedule of RSU activity

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Unvested units at December 31, 2022

Unvested units at September 30, 2022

compensation expense related to RSUs was $ 98,000 and $ 132,000 for the three months ended September 30, 2022 and 2021, respectively.

compensation expense related to RSUs was $ 359,000 and $ 313,000 for the nine months ended September 30, 2022 and 2021, respectively.

The aggregate fair value of

awards that vested during the nine months ended September 30, 2022 and 2021 was $ 138,000 and $ 9,000 , respectively, which represents the

market value of the Company’s common stock on the date that the RSUs vested.

As of September 30, 2022,

the compensation expense for all unvested RSUs in the amount of approximately $ 677,000 will be recognized in the Company’s results

of operations over a weighted average period of 1.86 years.

Unvested units at March 31, 2023

The weighted-average fair

value of RSUs granted during the three months ended March 31, 2023 and 2022 was $ 5.24 and $ 10.32 , respectively.

Stock-based compensation expense

related to RSUs was $ 111,000 and $ 179,000 for the three months ended March 31, 2023 and 2022, respectively.

The aggregate fair value of awards that vested

during the three months ended March 31, 2023 and 2022 was $ 95,000 and $ 128,000 , respectively, which represents the market value of the

Company’s common stock on the date that the RSUs vested.

Stock Options

options are issued under the 2020 Plan or as inducement grants issued outside of the 2020 Plan to new employees.

Stock options are generally

subject to graded vesting and the satisfaction of certain service requirements.

Upon the exercise of a stock option, the Company issues

new shares and delivers them to the recipient.

The Company does not expect to repurchase shares to satisfy stock option exercises.

Company uses the Black-Scholes option-pricing model to determine the fair value of all its option grants.

The risk-free interest rate

used for each grant was based upon the yield on zero-coupon U.S.

Treasury securities with a term similar to the expected life of the related

The Company’s expected stock price volatility assumption is based upon the Company’s own implied volatility.

Company has limited stock option exercise information, the expected life assumption used for option grants is based upon the simplified

method provided for under ASC 718.

The dividend yield assumption is based upon the fact that the Company has never paid cash dividends

and presently has no intention of paying cash dividends.

Company did not grant stock options during the three and nine months ended September 30, 2022 and 2021.

Stock options are available

to be issued under the 2020 Plan and are generally subject to graded vesting and the satisfaction of certain service requirements.

the exercise of a stock option, the Company issues new shares and delivers them to the recipient.

The Company does not expect to net share

settle to satisfy stock option exercises.

The Company used the Black-Scholes

option-pricing model to determine the fair value of all its option grants.

The risk-free interest rate used for each grant was based upon

the yield on zero-coupon U.S.

Treasury securities with a term similar to the expected life of the related option.

The Company’s

expected stock price volatility assumption was based upon the Company’s own implied volatility.

The expected life assumption used

for option grants was based upon the simplified method provided for under ASC 718.

The dividend yield assumption was based upon the fact

that the Company has never paid cash dividends and presently has no intention of paying cash dividends.

The following table summarizes the activity of

the Company’s stock options for the nine months ended September 30, 2022:

the Company’s stock options for the three months ended March 31, 2023:

Schedule of Stock Option Activity

Balance at December 31, 2022

Balance at September 30, 2022

Exercisable at September 30, 2022

Stock-based compensation expense

related to stock options for the three months ended September 30, 2022 and 2021 was $ 5,000 and $ 11,000 , respectively.

Balance at March 31, 2023

Exercisable at March 31, 2023

Stock-based compensation

expense related to stock options for the nine months ended September 30, 2022 and 2021 was $ 13,000 and $ 29,000 , respectively.

As of September 30, 2022,

the compensation expense for all unvested stock options was recognized in the Company’s results of operations.

expense related to stock options for the three months ended March 31, 2022 was $ 7,000 .

As of December 31, 2022, the compensation expense for all unvested stock options had been recognized in the Company’s results of

Compensation Expense Related to Equity Awards

The following table sets forth

total stock-based compensation expense for the three and nine months ended September 30, 2022 and 2021, in thousands:

total stock-based compensation expense for the three months ended March 31, 2023 and 2022, in thousands:

Schedule of stock based compensation expense

Three Months Ended

Nine Months Ended

September 30,

Research and development

1 unchanged sentence

Total stock-based compensation

Collaboration Agreements

In March 2021, the

Company entered into a clinical co-development collaboration agreement with AgonOx, Inc.

(“ AgonOx ”), a private

company developing a pipeline of novel immunotherapy drugs targeting key regulators of the immune response to cancer.

clinical development agreement, the companies are working to develop a T cell-based therapy using the Company’s lead product

candidate, PH-762, and AgonOx’s “double positive” TIL (“ DP TIL ”) technology.

Per the terms of

the clinical development agreement, the Company committed to make future payments of up to $ 4,000,000

to reimburse AgonOx for expenses incurred to support a clinical trial with AgonOx’s DP TIL technology and PH-762.

will recognize its share of costs arising from research and development activities performed by AgonOx in the Company’s

financial statements in the period AgonOx incurs such expense.

Phio will be entitled to certain future development milestones and

low single-digit sales-based royalty payments from AgonOx’s licensing of its DP TIL technology.

During the three and nine

months ended September 30, 2022 and 2021, the Company did no t incur research and development expense under the clinical development agreement.

Net Loss per Common Share

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:

Schedule of anti-dilutive stock

Options to purchase common stock

Unvested restricted stock units

Warrants to purchase common stock

Subsequent Events

On April 20, 2023, the

Company completed a registered direct offering of 353,983

shares of the Company’s common stock at a purchase price per share of $ 5.65 .

In a concurrent private placement, the Company also issued five and one-half years Series A warrants to purchase up to 353,983

shares of common stock at an exercise price of $ 5.40

per share and eighteen months Series B warrants to purchase up to 353,983

shares of common stock at an exercise price of $ 5.40

per share (collectively, the “ April 2023 Financing ”).

In addition, the Company issued warrants to the placement

Wainwright & Co., LLC, for the April 2023 Financing to purchase a total of 26,549

shares of common stock at an exercise price of $ 7.0625

Net proceeds to the Company from the April 2023 Financing are estimated to be approximately $ 1,654,000

after deducting placement agent fees and offering expenses.

In connection with the April

2023 Financing, the Company entered into warrant amendment agreements (the “ Warrant Amendment Agreements ”) with the

participating investors to amend the exercise price of certain existing warrants to purchase up to an aggregate of 191,619 shares of common

stock that were previously issued in April 2018 through January 2021, such that each of the amended warrants have an exercise price of

$ 5.40 per share.

The Company received $ 24,000 as consideration in connection with the Warrant Amendment Agreements.

The Company is currently reviewing

the accounting for the warrants issued in the April 2023 Financing and for the warrants amended under the Warrant Amendment Agreements.

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-Q

Item 1. Financial Statements