What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-03-22 · 210 added, 199 removed, 111 unchanged (79% of the section changed)

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Phio Pharmaceuticals Corp.

(“ Phio ,” “ we ,” “ our ” 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.

We are 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.

We are committed

to discovering and developing innovative cancer treatments for patients by creating new pathways toward a cancer-free future.

Our development efforts are based on our proprietary

INTASYL self-delivering RNAi technology platform.

INTASYL compounds are designed to precisely target specific proteins that reduce the

body’s ability to fight cancer, without the need for specialized formulations or drug delivery systems, and are designed to make

immune cells more effective in killing tumor cells.

Our efforts are focused on developing immuno-oncology therapeutics using our INTASYL

We have demonstrated preclinical efficacy in both direct-to-tumor injection and adoptive cell therapy (“ ACT ”)

applications with our INTASYL compounds.

“ we ,” “ our ” 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.

We are 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.

Our efforts are focused on developing

immuno-oncology therapeutics using our INTASYL platform.

We have demonstrated preclinical efficacy in both direct-to-tumor injection and

adoptive cell therapy (“ ACT ”) applications with our INTASYL compounds.

In 2023, the Company implemented a cost rationalization

program driven by its transition from discovery research to product development.

This resulted in a decision not to renew the lease for

office and laboratory space in Marlborough, Massachusetts, which will expire on March 31, 2024.

Beginning in April of 2024, we expect

to continue operations as a remote business with a small laboratory facility in Worcester, Massachusetts for 321 square feet of space

that commenced on March 1, 2024.

Additionally, we rationalized discovery research personnel resulting in headcount reduction by approximately

Expense reductions have been redirected to funding the Phase 1b clinical trial with PH-762 directed toward skin cancer.

PH-762 is an INTASYL compound designed to reduce

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cells, which protect the body from cancer cells and infections, to kill cancer cells.

Preclinical studies conducted by the Company have

demonstrated that direct-to-tumor application of PH-762 resulted in potent anti-tumoral effects and have shown that direct-to-tumor treatment

with PH-762 inhibits tumor growth in a dose dependent fashion in PD-1 responsive and refractory models.

Our preclinical studies have demonstrated that

direct-to-tumor application of PH-762 resulted in potent anti-tumoral effects and have shown that direct-to-tumor treatment with PH-762

inhibits tumor growth in a dose dependent fashion in PD-1 responsive and refractory models.

Importantly, direct-to-tumor administration

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antibody therapy.

PH-762 is currently being

evaluated in a Phase 1b dose escalation clinical trial in France that is expected to enroll up to 21 subjects with advanced melanoma.

PH-762 will be administered as a neoadjuvant monotherapy intratumorally once a week, for a total of four injections, across five escalating

Dosing will be followed by tumoral excision after an additional two weeks.

The primary study objectives are to evaluate the

safety and tolerability, and pharmacokinetics of PH-762;

to determine the potential immunologic and pathologic tumor responses;

determine the recommended dose for later clinical trials.

Safety data from the initial cohort of three subjects in the clinical trial

was evaluated by a Data Monitoring Committee in the first quarter of 2023.

The safety data review disclosed no dose-limiting toxicity,

and no drug-related severe or serious adverse events, and the Data Monitoring Committee recommended proceeding to the enrollment of the

subsequent dose cohort.

The next cohort is now open for enrollment of subjects.

In addition to the French

clinical trial, we expect to commence a U.S.

Phase 1b clinical trial with PH-762 in the second half of 2023.

trial is expected

to focus on the application of PH-762 to treat cutaneous squamous cell carcinoma (“ cSCC ”) and other selected cutaneous

malignancies.

Due to INTASYL’s ease

of administration, we have shown that our compounds can easily be incorporated into current ACT manufacturing processes.

In ACT, T cells

are usually taken from a patient's own blood or tumor tissue, grown in large numbers in a laboratory, and then given back to the patient

to help the immune system fight cancer.

By treating T cells with our INTASYL compounds while they are being grown in the laboratory, we

believe our INTASYL compounds can improve these immune cells to make them more effective in killing cancer.

Preclinical data generated

in collaboration with AgonOx, Inc.

(“ AgonOx ”), a private company developing a pipeline of novel immunotherapy drugs

targeting key regulators of the immune response to cancer, demonstrated that treating AgonOx’s “double positive” tumor

infiltrating lymphocyte (“ DP TIL ”) with PH-762 increased by two-fold their tumor killing activity.

In March 2021, we entered

into a clinical co-development collaboration agreement (the “ Clinical Co-Development Agreement ”) with AgonOx to conduct

a Phase 1 clinical trial using DP TIL and PH-762.

Under the Clinical Co-Development Agreement, we paid AgonOx $0.3 million as an upfront

payment in December 2022 and have agreed to provide up to $4 million in total financial support to AgonOx to conduct a Phase 1 clinical

trial of PH-762 treated DP TIL.

Phio is also eligible to receive certain future development milestones and low single-digit sales-based

royalty payments from AgonOx’s licensing of its DP TIL technology.

PH-762 treated DP TILs are

expected to be evaluated in a Phase 1 clinical trial in the United States with up to 18 subjects with advanced melanoma and other advanced

solid tumors.

The primary study objectives are to evaluate the safety and to study the potential for enhanced therapeutic benefit from

the administration of PH-762 treated DP TILs.

Enrollment of subjects is expected to commence in the second quarter of 2023.

PH-762 is currently being evaluated in a U.S.

multi-center Phase 1b

dose-escalating clinical trial through the intratumoral injection of PH-762 for the treatment of patients with cutaneous squamous cell

carcinoma, melanoma and Merkel cell carcinoma.

The trial is designed to evaluate the safety and tolerability of neoadjuvant use of intratumorally

injected PH-762, assess the tumor response, and determine the dose or dose range for continued study of PH-762 and is expected to enroll

up to 30 patients.

In November 2023, we announced the dosing of the first patient under a previously cleared Investigational New Drug

application (“ IND ”) application by the Food and Drug Administration and the trial is currently open for the continued

enrollment of patients.

Given our intention to

focus our efforts and resources on our U.S.

clinical trial with PH-762, we have completed the winding down process for our first-in-human

clinical trial for PH-762 in France, which was limited to the treatment of patients with metastatic melanoma.

Safety data from the initial

cohort of three patients in the French clinical trial were evaluated by a data monitoring committee in the first quarter of 2023.

safety data review disclosed no dose-limiting toxicity, and no drug-related severe or serious adverse events.

Due to INTASYL’s ease of administration,

we have shown that our compounds can easily be incorporated into current ACT manufacturing processes.

In ACT, T cells are usually taken

from a patient's own blood or tumor tissue, grown in large numbers in a laboratory, and then given back to the patient to help the immune

system fight cancer.

By treating T cells with our INTASYL compounds while they are being grown in the laboratory, we believe our INTASYL

compounds can improve these immune cells to make them more effective in killing cancer.

Preclinical data generated in collaboration with

(“ AgonOx ”), a private company developing a pipeline of novel immunotherapy drugs targeting key regulators

of the immune response to cancer, demonstrated that treating AgonOx’s “double positive” tumor infiltrating lymphocytes

(“ DP TIL ”) with PH-762 increased their tumor killing activity by twofold.

In February 2021, we entered into a clinical co-development

collaboration agreement (the “ Clinical Co-Development Agreement ”) with AgonOx to develop a T cell-based therapy using

PH-762 and AgonOx’s DP TIL.

Under the Clinical Co-Development Agreement, we agreed to reimburse AgonOx up to $4 million 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.

We are also eligible to receive certain future development milestones and low single-digit sales-based royalty payments from AgonOx’s

licensing of its DP TIL technology.

PH-762 treated DP TIL are being evaluated in a

Phase 1 clinical trial in the United States with up to 18 patients with advanced melanoma and other advanced solid tumors by AgonOx.

primary trial objectives are to evaluate the safety and to study the potential for enhanced therapeutic benefit from the administration

of PH-762 treated DP TIL.

We announced the first patient was dosed in August 2023 and the trial is open for the continued enrollment of

As of December 31, 2023,

there is approximately $2,757,000 of remaining costs not yet incurred under the Clinical Co-Development Agreement.

PH-894 is an INTASYL compound that is designed

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results in T cell activation, and suppression of BRD4 in tumor cells results in tumors becoming more sensitive to being killed by T cells.

Preclinical studies conducted have demonstrated that

PH-894 resulted in a strong, concentration dependent and durable silencing of BRD4 in T cells and in various cancer cells.

PH-762, preclinical studies have also shown that direct-to-tumor application of PH-894 resulted in potent and statistically significant

anti-tumoral effects and demonstrated a systemic anti-tumor response.

These preclinical data indicate that PH-894 can reprogram T cells

and other cells in the tumor microenvironment to provide enhanced immunotherapeutic activity.

The Company has completed the investigational

new drug (“ IND ”)-enabling studies and is in the process of finalizing the study reports required for an IND submission

As a result of the reprioritization to advance the Company’s clinical trial with PH-762 in the U.S., the Company has

elected to defer the IND submission for PH-894.

of the Coronavirus Pandemic

continues to respond to and monitor the ongoing coronavirus pandemic.

The Company believes that the coronavirus pandemic has not had a

significant impact on our financial condition and results of operations, 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.

Inflation has

increased during the period covered by this Annual Report and is expected to continue to remain at elevated levels or even increase in

the near future.

Inflation generally affects us by increasing our cost of labor and third party contract costs.

We do not believe inflation

has had a material effect on our results of operations during year ended December 31, 2022.

Preclinical studies conducted have demonstrated

that PH-894 resulted in a strong, concentration dependent and durable silencing of BRD4 in T cells and in various cancer cells.

to PH-762, preclinical studies have also shown that direct-to-tumor application of PH-894 resulted in potent and statistically significant

anti-tumoral effects against distant untreated tumors, indicative of a systemic anti-tumor response.

These preclinical data indicate that

PH-894 can reprogram T cells and other cells in the tumor microenvironment to provide enhanced immunotherapeutic activity.

We have completed

the IND-enabling studies and are in the process of continuing to finalize the study reports required for an IND submission with PH-894.

As a result of the reprioritization to advance our clinical trial with PH-762 in the U.S., we have elected to defer the IND submission

Critical Accounting Policies and Estimates

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are more fully described in Note 1 to our consolidated financial statements included elsewhere in this Annual Report, we believe the following

addresses the Company’s accounting policies to be the most critical in understanding the judgments and estimates we use in preparing

our financial statements.

addresses our accounting policies to be the most critical in understanding the judgments and estimates we use in preparing our consolidated

financial statements.

Research and Development Expenses

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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 with respect to services provided and/or materials that we have received for which vendors have not yet

The financial terms of these contracts are subject to negotiation, vary from provider to provider and may result in

uneven payment flows.

There may be instances in which payments made to our vendors exceed the level of services provided and result in

a prepayment of the expense.

Payments made by us 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.

liabilities are recorded with respect to services provided and/or materials that we have received for which vendors have not yet billed

The financial terms of these contracts are subject to negotiation, vary from provider to provider and may result in uneven payment

There may be instances in which payments made to our vendors exceed the level of services provided and result in a prepayment of

In other instances, payment depends on factors such as the successful completion of milestones.

We are required to estimate our accrued research

and development expenses, of which a significant portion relate to third party providers the Company has contracted with to perform various

research activities on our behalf for the continued development of our product candidates.

This process includes reviewing open contracts

and purchase orders, estimating the service performed and the associated cost incurred for research and development services not yet billed

or otherwise notified of actual cost.

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 level of effort to be expended in each

period, the achievement of milestones and other information available to us.

Estimates of our research and development accruals are assessed

on a quarterly basis based on an evaluation of the progress to completion of specific tasks using information and data provided to us

by our vendors and facts and circumstances known to us at that time, and adjusted accordingly.

and development expenses, of which a significant portion relate to third party providers we have contracted with to perform various research

activities on our behalf for the continued development of our product candidates.

This process includes reviewing open contracts and purchase

orders, estimating the service performed and the associated cost incurred for research and development services not yet billed or otherwise

notified of actual cost.

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 level of effort to be expended in each period,

the achievement of milestones and other information available to us.

Estimates of our research and development accruals are assessed on

a quarterly basis based on an evaluation of the progress to completion of specific tasks using information and data provided to us by

our vendors and facts and circumstances known to us at that time, and adjusted accordingly.

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 our actual costs.

Due to the nature of estimates, we cannot provide assurance that we will not make changes

to our estimates in the future as we become aware of additional information about the conduct of our research activities.

and could have a material impact on our reported results.

Our historical accrual estimates have not been materially different from our

actual costs.

Due to the nature of estimates, we cannot provide assurance that we will not make changes to our estimates in the future

as we become aware of additional information about the conduct of our research activities.

Collaborative Arrangements

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 our collaborative partners that are more reflective of a vendor-customer relationship and therefore, within the scope

of Topic 606.

Under Topic 808, we determine 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 arrangement

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.

Payments or 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.

We follow 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.

We also consider the guidance in the

FASB ASC Topic 606, “ Revenue from Contracts with Customers ,” (“ Topic 606 ”) in determining the appropriate

treatment for activities between us and our collaborative partners that are more reflective of a vendor-customer relationship and therefore,

within the scope of Topic 606, as well as other accounting literature.

Under Topic 808, we determine 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 arrangement is determined based on the nature and contractual terms of the arrangement along with

the nature of the operations of the participants.

We recognize our share of costs arising from research and development activities performed

by collaborators in the period our 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.

Derivative Financial Instruments

During the normal course of business we may issue

warrants as part of a debt or equity financing.

Warrants and other derivative financial instruments are accounted for either as equity

or as an asset or liability, depending on the characteristics of each derivative financial instrument.

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.

Financial instruments that meet

the definition of a derivative are classified as an asset or liability are measured at fair value on the issuance date and are revalued

on each subsequent balance sheet date.

The changes in the fair value are recognized as current period income or loss.

Financial Operations Overview

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We have not generated any commercial product revenue and do not expect to do so in the foreseeable

In the future, we may

generate revenue from a combination of government grants, research and development agreements, license fees and other upfront payments,

milestone payments, product sales and royalties in connection with future strategic collaborators and partners.

We expect that any revenue

we generate will fluctuate from period to period as a result of the timing of the achievement of any preclinical, clinical or commercial

milestones and the timing and amount of payments received relating to those milestones and the extent to which any of our product candidates

are approved and successfully commercialized by us or strategic collaborators and partners.

If the Company or any future partner fails

to develop product candidates in a timely manner or obtain regulatory approval for them, then our ability to generate future revenue and

our results of operations and financial position would be adversely affected.

In the future, we may generate revenue from a combination

of government grants, research and development agreements, license fees and other upfront payments, milestone payments, product sales

and royalties in connection with future strategic collaborators and partners.

We expect that any revenue we generate will fluctuate from

period to period as a result of the timing of the achievement of any preclinical, clinical or commercial milestones and the timing and

amount of payments received relating to those milestones and the extent to which any of our product candidates are approved and successfully

commercialized by us or strategic collaborators and partners.

If we or any future partner fails to develop product candidates in a timely

manner or obtain regulatory approval for them, then our ability to generate future revenue and our results of operations and financial

position would be adversely affected.

Research and Development Expenses

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expenses relate to compensation and benefits for research and development personnel, facility-related expenses, supplies, external services,

costs to acquire technology licenses, research activities under our research collaborations, expenses associated with preclinical

costs to acquire technology licenses, research activities under our research collaboration, expenses associated with preclinical

and clinical development activities and other operating costs.

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expenses relate to compensation and benefits for general and administrative personnel, facility-related expenses, professional fees for

legal, audit, tax and consulting services, as well as other general corporate expenses.

legal and patent-related activities, audit, tax and consulting services, as well as other general corporate expenses.

Other (Expense) Income, net

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General and administrative

Impairment of property and equipment

Total operating expenses

Research and Development Expenses

and development expenses for the year ended December 31, 2022 decreased 21% compared with the year ended December 31, 2021.

in research and development expenses was primarily driven by manufacturing related costs of approximately $2,000,000 for our PH-762

and PH-894 compounds and approximately $195,000 in preclinical studies with PH-762 that were required for the Company’s clinical

trial in France, both of which were completed in the prior year period, offset by increases in clinical-related costs for the Company’s

clinical trials with PH-762 in France and in ACT with our partner AgonOx of approximately $334,000.

The Company anticipates

research and development expenses to increase as a result of clinical-related activities as our pipeline programs progress in clinical

Research and development expenses for the year

ended December 31, 2023 decreased 10% as compared to the year ended December 31, 2022.

The decrease was primarily due to a decrease in

costs related to the completion of our IND-enabling preclinical studies for PH-894 of approximately $1,979,000 and

reduced lab supplies of approximately $298,000 as a result of a decrease in lab personnel and a shift in focus on clinical development

and, partially offset by an increase in clinical-related costs of approximately $1,580,000 for the two U.S.

PH-762 Phase 1 clinical trials

as compared to the prior year period.

General and Administrative Expenses

General and administrative expenses for the year ended

December 31, 2022 decreased 4% compared with the year ended December 31, 2021.

The decrease in general and administrative expenses was

primarily due to decreases in total payroll-related expenses of approximately $156,000 as a result of the departure of our former Chief

Executive Officer and a reduction in the use of consultants and outside professional services of approximately $141,000 offset by approximately

$55,000 in executive search fees.

Total Other (Expense) Income

Total other income for the year ended December 31,

2022 decreased by $242,000 as compared with the year ended December 31, 2021, primarily due to the full forgiveness of our Paycheck Protection

Program (“ PPP ”) loan in 2021.

December 31, 2023 decreased 2% as compared to the year ended December 31, 2022.

The decrease was primarily due to decreases in personnel-related

expenses of approximately $230,000 due to departmental organizational changes and one-time executive search-related fees of approximately

$78,000 for the Company’s President & CEO and reduced D&O insurance premiums of $92,000, partially offset by increased legal

fees of approximately $302,000.

Impairment of Property and Equipment

Loss on impairment of property and equipment for

the year ended December 31, 2023 increased 100% as compared to the year ended December 31, 2022.

The impairment charge to our long-lived

assets was associated with our non-renewal of our office lease to operate as a remote business.

The carrying value of these assets totaling

$126,000 was deemed no longer recoverable and an impairment charge of $126,000 was recorded to adjust those assets to their fair value.

Liquidity and Capital Resources

Historically, our primary

source of funding has been through the sale of our securities.

In the future, we will be 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 our operations.

reported recurring losses from operations since inception and expect that we will continue to have negative cash flows from our operations

for the foreseeable future.

Historically, our primary source of funding has

been through the sale of our securities.

In the future, we will be 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 our operations.

We have reported recurring

losses from operations since inception and expect that we will continue to have negative cash flows from our operations for the foreseeable

At December 31, 2023, we had cash of $8,490,000 as compared with $11,781,000 at December 31, 2022.

In August 2019, we entered

into a purchase agreement (the “ Purchase Agreement ”) with Lincoln Park Capital, LLC (“ LPC ”), pursuant

to which we had the right to sell to LPC up to $10,000,000 in shares of our common stock, subject to certain limitations and conditions

set forth in the Purchase Agreement.

The Purchase Agreement expired in May 2022 and no shares of common stock were sold to LPC under the

Purchase Agreement.

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

the financial statements included elsewhere in this Annual Report.

The continuation of the Company as a going concern depends upon the

Company’s ability to raise additional capital through equity offerings, debt offerings or strategic opportunities to fund its operations.

There can be no assurance that the Company will be successful in accomplishing any of these plans in order to continue as a going concern.

The financial statements included elsewhere in this Annual Report 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

The following table summarizes our cash flows for the periods indicated, in thousands:

During the year ended December 31, 2023, we completed

the April 2023 Financing, June 2023 Financing and December 2023 Financing (each as defined in Note 9 to our consolidated financial statements

included elsewhere in this Annual Report) and received total net proceeds of $7,452,000 after deducting placement agent fees and offering

For further information regarding the April 2023 Financing, June 2023 Financing and December 2023 Financing, see Note 9 to our

consolidated financial statements included elsewhere in this Annual Report.

We have limited cash resources, have reported recurring

losses from operations since inception, negative operating cash flows and have not yet received product revenues.

These factors raise

substantial doubt regarding our ability to continue as a going concern, and our 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 the consolidated financial statements included elsewhere

in this Annual Report.

Our continuation as a going concern depends upon our ability to raise additional capital through equity offerings,

debt offerings and/or strategic opportunities to fund our operations.

There can be no assurance that we will be successful in accomplishing

any of these plans in order to continue as a going concern.

The consolidated financial statements included elsewhere in this Annual Report

do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that

might be necessary should we be unable to continue as a going concern.

The following table summarizes our cash flows for

the periods indicated, in thousands:

Net cash used in operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and restricted cash

Net cash provided by (used in) financing activities

Net decrease in cash and restricted cash

Net Cash Flow from Operating Activities

Net cash used in operating activities for the year

ended December 31, 2022 increased as compared with the year ended December 31, 2021, primarily due to an increase of $2,246,000 in the

changes in operating assets and liabilities primarily due to payments made for the preclinical studies conducted for PH-894 and for the

manufacturing of our PH-762 and PH-894 compounds and an increase of $168,000 in non-cash related items primarily as a result of the full

forgiveness of the Company’s PPP loan in the prior year period offset by a decrease in net loss of $1,807,000.

ended December 31, 2023 decreased 11% as compared to the year ended December 31, 2022, primarily due to decreased cash outflows from changes

in operating assets and liabilities of $720,000 as a result of liabilities owed for the payments related to the IND-enabling studies with

PH-894 and clinical supply manufacturing of PH-762 and PH-894 in the prior year period and a decrease in net loss of $654,000.

Net Cash Flow from Investing Activities

Net cash used in investing activities for the year

ended December 31, 2022 increased as compared with the year ended December 31, 2021, primarily due to an increase of $70,000 in laboratory

and computer equipment purchases for the Company’s facility as compared to the prior year period.

ended December 31, 2023 decreased 96% as compared to the year ended December 31, 2022, primarily due to changes in laboratory and computer

equipment purchases for our facility over the comparative period.

Net Cash Flow from Financing Activities

Net cash from financing activities

for the year ended December 31, 2022 decreased as compared with the year ended December 31, 2021, primarily due to the net proceeds of

$21,722,000 received by the Company from capital raising activities and warrant exercises in the comparable prior year period.

Net cash provided by financing activities for the

year ended December 31, 2023 increased as compared to the net cash used in financing activities for the year ended December 31, 2022,

primarily due to the Company’s capital raise activities over the comparative period (see Note 9 to our consolidated annual consolidated

financial statements included elsewhere in this Annual Report).

Contractual Obligations

In March 2021, we entered into

a Clinical Co-Development Agreement with AgonOx to develop a T cell-based therapy using PH-762, and AgonOx’s DP TIL technology.

Under the Clinical Agreement, we committed to make future payments of up to $4,000,000 to reimburse AgonOx for expenses incurred

to support the Phase 1 clinical trial with PH-762 treated DP TIL.

During the year ended December 31, 2022, the Company paid AgonOx $250,000

as an upfront payment.

No amounts were paid to AgonOx during the year ended December 31, 2021 under the Clinical Co-Development Agreement.

In February 2021, we entered into a Clinical Co-Development

Agreement with AgonOx to develop a T cell-based therapy using PH-762 and AgonOx’s DP TIL.

Details of our obligations under the Clinical

Co-Development Agreement as of December 31, 2023 can be found in Note 2 of the consolidated financial statements included elsewhere in

this Annual Report.

As of December 31, 2023, there is approximately $2,757,000 of remaining costs not yet incurred under the Clinical

Co-Development Agreement.

License Commitments

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non-cancellable operating lease are expected to be approximately $35,000 over the remaining duration of our lease, or through March 31,

We do not intend to renew the lease for our corporate headquarters and primary research facility in Marlborough, Massachusetts,

which will expire on March 31, 2024.

Beginning in April of 2024, we expect to continue operations as a remote business with a small laboratory

The term of the laboratory facility commenced on March 1, 2024 and has a 6-month term, with lease payments expected to be $15,000

over the term of the lease.

For further information regarding

our future cash commitments see Note 8 to our consolidated financial statements.

our future cash commitments see Note 7 to our consolidated financial statements included elsewhere in this Annual Report.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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 7. Management’s Discussion and Analysis