What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 266 added, 329 removed, 166 unchanged (78% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share and per

September 30,

Current assets:

Restricted cash

Cash and cash equivalents

Prepaid expenses and other current assets

2 unchanged sentences

Property and equipment, net

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

3 unchanged sentences

Total current liabilities

Lease liability, net of current portion

Total liabilities

Commitments and contingencies (Note 2)

Series D Preferred Stock, $ 0.0001 par value;

0 and 1 shares authorized, issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Stockholders’ equity:

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

no shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

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

2,307,385 and 1,139,024 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

4,591,700 and 3,747,329 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

1 unchanged sentence

Total stockholders’ equity

Total liabilities, preferred stock and stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of

3 unchanged sentences

(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, net

Total other income, net

Net loss per common share:

8 unchanged sentences

(Amounts in thousands, except share data)

For the Three and Nine Months

Series D Preferred Stock

Ended September 30, 2023

For the Three Months Ended March 31, 2024

Balance at December 31, 2023

$ ( 139,206 )

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

Redemption of preferred stock

Issuance of common stock upon vesting of restricted stock units

Shares withheld for payroll taxes

Stock-based compensation expense

Balance at March 31, 2023

$ ( 131,982 )

Issuance of common stock and warrants, net of offering costs

Issuance of common stock upon exercise of warrants

Stock-based compensation expense

Balance at June 30, 2023

$ ( 134,531 )

Issuance of common stock upon exercise of warrants

Issuance of common stock upon vesting of restricted stock units

1 unchanged sentence

Stock-based compensation expense

Balance at September 30, 2023

Balance at March 31, 2024

$ ( 141,360 )

For the Three and Nine Months Ended

Series D Preferred Stock

September 30, 2022

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

3 unchanged sentences

$ ( 131,982 )

Stock-based compensation expense

Balance at June 30, 2022

$ ( 122,073 )

Issuance of common stock upon vesting of restricted stock units

Shares withheld for payroll taxes

Stock-based compensation expense

Balance at September 30, 2022

$ ( 125,649 )

The accompanying notes are an integral part of

3 unchanged sentences

(Amounts in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

2 unchanged sentences

Amortization of right of use asset

Loss on disposal of property and equipment

Stock-based compensation

5 unchanged sentences

Net cash used in operating activities

Cash flows from investing activities:

Cash paid for purchase of property and equipment

Net cash used in investing activities

Cash flows from financing activities:

Net proceeds from the issuance of common stock and warrants

Cash in lieu of fractional shares for reverse stock split

1 unchanged sentence

Payment of taxes on net share settlements of restricted stock units

Net cash provided by (used in) financing activities

Net decrease in cash and restricted cash

Cash and restricted cash at the beginning of period

Cash and restricted cash at the end of period

The following table provides a reconciliation of cash and restricted

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

September 30,

Net cash used in financing activities

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at the beginning of period

Cash, cash equivalents and restricted cash at the end of period

The following table provides a reconciliation of cash, cash equivalents

and restricted cash reported within the condensed consolidated balance sheets to the totals above:

Cash and cash equivalents

Restricted cash

Cash and restricted cash

Cash, cash equivalents and restricted cash

The accompanying notes are an integral part of

5 unchanged sentences

Phio Pharmaceuticals Corp.

(“ Phio ” 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

or the “ Company ”) is a clinical stage biotechnology company whose proprietary INTASYL™ small interfering RNA

gene silencing technology is designed to make immune cells more effective in killing tumor cells.

The Company is developing therapeutics

that are designed to leverage INTASYL to precisely target specific proteins that reduce the body’s ability to fight cancer, without

the need for specialized formulations or drug delivery systems.

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

Principles of Consolidation

The condensed consolidated

financial statements include the accounts of Phio and its wholly-owned subsidiary, MirImmune, LLC.

All material intercompany accounts

have been eliminated in consolidation.

Phio was incorporated in the state of Delaware

in 2011 as RXi Pharmaceuticals Corporation.

On November 19, 2018, the Company changed its name to Phio Pharmaceuticals Corp., to reflect

its transition from a platform company to one that is fully committed to developing groundbreaking immuno-oncology therapeutics.

Basis of Presentation

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consolidated 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 those 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 statements.

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.

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.

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, 2023, as filed with the Securities and Exchange Commission (the “ SEC ”)

on April 1, 2024 (the “ 2023 Form 10-K ”).

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

Principles of Consolidation

The condensed consolidated

financial statements include the accounts of the Company and its wholly-owned subsidiary, MirImmune, LLC.

All material intercompany accounts

have been eliminated in consolidation.

Company operates as one operating segment and all assets are located in the United States.

Use of Estimates

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The areas subject to significant estimates and judgement include, among others, those

related to the fair value of equity awards, accruals for research and development expenses, useful lives of property and equipment, and the valuation allowance on 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.

related to the fair value of equity awards, accruals for research and development expenses, useful lives of property and equipment, and

the valuation allowance on 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.

losses from operations since its inception and expects to continue to have negative cash flows from operations for the foreseeable future.

Historically, the Company’s primary source of funding has been from sales of its securities.

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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.

resources, has reported recurring losses from operations since inception, has negative operating cash flows and has not yet received product

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 condensed consolidated financial statements.

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.

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

These condensed

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

Cash and Cash Equivalents

Cash and cash equivalents

include unrestricted cash accounts, money market investments and highly liquid investment instruments with original maturity of three

months or less at the date of purchase.

Other than as set forth above,

there have been no material changes to the significant accounting policies disclosed in the Company’s 2023 Form 10-K.

Recent Accounting Pronouncements

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.

In November 2023, the Financial

Accounting Standards Board (the “ FASB ”) issued Accounting Standards Update (“ ASU ”) 2023-07, “Segment

Reporting (Topic 280) – Improvements to Reporting Segment Disclosures” (“ ASU 2023-07 ”), which requires

disclosure of incremental segment information on an annual and interim basis.

In addition, ASU 2023-07 clarifies circumstances in which

an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single

reportable segment, and contains other disclosure requirements.

The amendments in ASU 2023-07 are effective for fiscal years beginning

after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

disclosures are required to be applied retrospectively to all prior periods presented in the financial statements.

The Company is currently

evaluating the impact of ASU 2023-07 on its consolidated financial statements and disclosures, but does not expect that it will have a

material impact on its consolidated financial statements.

In December 2023, the FASB

issued ASU 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures” (“ASU 2023-09”),

which requires disclosure of specific categories in the rate reconciliation table along with additional information for reconciling items

that meet a quantitative threshold, disclosure of disaggregated income taxes paid and modifies other income tax-related disclosures.

amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024 and allows for adoption on a prospective

basis, with a retrospective option.

Early adoption is permitted.

The Company is currently evaluating the impact of ASU 2023-09, but does

not expect that it will have a material impact on its consolidated financial statements.

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 cancer.

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 patients 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 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.

The Company recognized approximately

$ 606,000 and $ 906,000 of expense in connection with these efforts during the three and nine months ended September 30, 2023, respectively.

No expense under the Clinical Co-Development Agreement was recognized during the three and nine months ended September 30, 2022.

There is approximately $ 2,964,000

of remaining costs not yet incurred under the Clinical Co-Development Agreement as of September 30, 2023.

February 2021, the Company entered into a clinical co-development collaboration agreement (the “ Clinical Co-Development

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

the immune response to cancer.

Under the Clinical Co-Development Agreement, Phio and AgonOx 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 agreed to reimburse AgonOx up to $4,000,000 in

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

solid tumors.

The Company recognizes

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

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.

The Company recognized approximately $ 50,000 and

$ 119,000 of expense in connection with these efforts during the three months ended March 31, 2024 and 2023, respectively.

On May 8, 2024, the Company

terminated its Clinical Co-Development Agreement with AgonOx, effective immediately.

Effective as of the date of the termination, the

Clinical Co-Development Agreement and the continuing obligations of the Company and AgonOx thereunder will be terminated in their entirety.

The Company will no longer be required to provide financial support for the development costs incurred under the Clinical Co-Development

Agreement or 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 will pay to AgonOx

all Company payment obligations that have accrued prior to the termination of the Clinical Co-Development Agreement.

The Company intends

to pay to AgonOx future fees to be incurred for patients that were treated in the Phase 1 clinical trial as of the date of termination.

The Company estimates that such payments to be made to AgonOx will amount to approximately $ 388,000 ,

which primarily relate to the Company’s accrued obligations under the Clinical Co-Development Agreement as of March 31, 2024, as

well as future fees to be incurred for patients that were treated in the Phase 1 clinical trial and other miscellaneous costs as of the

date of termination.

Pursuant to the terms of the Clinical Co-Development Agreement, the Company and AgonOx shall meet and discuss the

orderly wind-down of the Phase 1 clinical trial.

Each of the Company and AgonOx shall be responsible for its own costs and expenses incurred

in connection with the wind-down of the Phase 1 clinical trial.

Other Information included elsewhere in this Quarterly Report

for further information.

Fair Value of Financial Instruments

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at the measurement date.

At September 30, 2023 and

December 31, 2022, the Company categorized its restricted cash of $ 50,000 as Level 2 hierarchy.

Restricted cash consists of certificates of deposit held by financial institutions as collateral for the Company’s

corporate credit cards.

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

As of March 31, 2024, the

Company categorized its cash equivalents as Level 1 hierarchy as the carrying amounts approximate their fair value due to their short-term

nature and market rates of interest.

As of December 31, 2023, the Company did not identify any financial instruments required to be presented

at fair value.

Schedule of financial instruments at fair value

March 31, 2024

Quoted Prices

In Active Markets

Other Significant

Observable Inputs

Cash equivalents

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

amended the lease for its corporate headquarters and primary research facility in Marlborough, Massachusetts.

The lease is for a total

of 7,581 square feet of office and laboratory space and will expire on March 31, 2024 .

The lease contains an option to terminate after

two or three years by providing advance written notice of termination pursuant to the terms of the agreement.

The exercise of this option

was not determined to be reasonably certain and thus was not included in the lease liability on the Company’s balance sheet.

Company did not exercise its option to terminate in either the second or third year of the lease, and the option to terminate has expired.

Additionally, the lease agreement did not contain information to determine the borrowing rate implicit in the lease.

As such, the Company

calculated its incremental borrowing rate based on what the Company would have to pay to borrow on a collateralized basis over the lease

term for an amount equal to the remaining lease payments, taking into consideration such assumptions as, but not limited to, the U.S.

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

The Company’s lease

for its corporate headquarters and primary research facility in Marlborough, Massachusetts was for a total of 7,581 square feet of office

and laboratory space and expired on March 31, 2024 .

The lease agreement did not contain information to determine the borrowing rate implicit

in the lease.

As such, the Company calculated its incremental borrowing rate based on what the Company would have to pay to borrow on

a collateralized basis over the lease term for an amount equal to the remaining lease payments, taking into consideration such assumptions

as, but not limited to, the U.S.

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

The Company has continued operations as a primarily remote business with the expiration of the lease, but has contracted a private mailbox with an address of 11 Apex Drive,

Suite 300A, PMB 2006, Marlborough, MA 01752 to use as its principal mailing address for SEC and other purposes.

The Company entered into

a lease for a laboratory facility located at 17 Briden Street, Worcester, Massachusetts, which commenced on March 1, 2024.

square feet of rentable space and expires on September

The total base rent for the premises over the term is expected to be $ 15,000

and the Company has the option to renew for additional 6-month periods.

The Company made an accounting policy election under the

FASB ASC Topic 824, “ Leases ” not to recognize leases with a term less than one year on the balance sheet and that

do not contain a purchase option.

Under the short-term lease election, the Company will recognize the lease payments for the

laboratory facility on a straight-line basis over the lease term.

The lease for the Company’s

corporate headquarters represents all of its 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, 2023

corporate headquarters represented all of our significant lease obligations.

The amounts reported in the

condensed consolidated balance sheets for the Company’s corporate headquarters classified as an 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 amounts recorded in balance sheet

March 31, 2024

December 31, 2023

Right of use asset

Lease liability, current

Lease liability, non-current

Total lease liability

Lease liability

Lease Term and Discount Rate

2 unchanged sentences

Operating lease costs included

in operating expense were $ 33,000 for the three months ended September 30, 2023 and 2022.

Operating lease costs included in operating

expense were $ 99,000 for the nine months ended September 30, 2023 and 2022.

in operating expense were $ 33,000 for the three months ended March 31, 2024 and 2023, respectively.

Cash paid for the amounts

1 unchanged sentence

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

was $ 35,000 and $ 34,000 for the three months ended September 30, 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 the Company’s condensed consolidated statements of cash flow was $ 104,000

and $ 101,000 for the nine months ended September 30, 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 September 30, 2023 is as follows, in thousands:

Schedule of future minimum lease payments

2023 (remaining)

Total lease payments

Imputed interest

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 issuance.

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.

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.

Upon 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

September 30, 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.

was $ 35,000 and $ 34,000 for the three months ended March 31, 2024 and 2023, respectively.

Stockholders’ Equity

April 2023 Financing

— On April 20, 2023, the Company completed a registered direct offering and a concurrent private placement of a total of:

registered shares of the Company’s common stock at a purchase price per share of $ 5.65 , unregistered five and one-half year term

Series A warrants to purchase up to 353,983 shares of common stock at an exercise price of $ 5.40 per share and unregistered eighteen month

term 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 unregistered warrants to the placement agent, H.C.

Wainwright & Co., LLC

(“ HCW ”), in 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 were $ 1,538,000 after deducting placement agent fees and offering

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 assessed

the amendments to the exercise price of the warrants under the FASB ASC Topic 815, “ Derivatives and Hedging ” (“ ASC

815 ”) and determined that the amendment to the exercise price was completed in connection with and contingent on the close of

the April 2023 Financing.

The increase in fair value of $ 293,000 related to the Warrant Amendment Agreements was recognized as an equity

issuance cost and recorded in additional paid in capital per ASC 815.

June 2023 Financing

— On June 2, 2023, the Company completed a registered direct offering and a concurrent private placement of a total of:

registered shares and 72,000 unregistered shares of the Company’s common stock each at a purchase price per share of $ 4.28 , unregistered

pre-funded warrants to purchase up to an aggregate of 628,935 shares of common stock at a purchase price per share of $ 4.279 and with

an exercise price of $ 0.001 per share, unregistered five and one-half year term Series A warrants to purchase up to an aggregate of 934,581

shares of common stock at an exercise price of $ 4.03 per share and unregistered eighteen month term Series B warrants to purchase up to

an aggregate of 934,581 shares of common stock at an exercise price of $ 4.03 per share (collectively, the “ June 2023 Financing ”).

In addition, the Company issued unregistered warrants to the placement agent, HCW, in the June 2023 Financing to purchase a total of 70,094

shares of common stock at an exercise price of $ 5.35 per share.

Net proceeds to the Company from the June 2023 Financing were $ 3,510,000

after deducting placement agent fees and offering expenses.

The Company first assessed

the warrants in the April 2023 Financing and June 2023 Financing under the FASB ASC Topic 480, “ Distinguishing Liabilities from

Equity ” (“ ASC 480 ”) to determine whether they were within the scope of ASC 480.

As there were no instances

outside of the Company’s control that could require cash settlement, the Company’s warrants issued in the April 2023

Financing and June 2023 Financing were determined to be outside the scope of ASC 480.

Company then applied and followed the applicable accounting guidance in ASC Topic 815 .

Financial instruments are accounted for

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

The warrants issued in the April

2023 Financing and June 2023 Financing did 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 warrants issued in the April 2023 Financing

and June 2023 Financing were classified within stockholders’ equity.

During the three and nine

months ended September 30, 2023, shares of common stock issued related to exercises from the pre-funded warrants issued in the June 2023

Financing totaled 320,290 and 495,290 , respectively.

The Company realized proceeds of $ 320 and $ 495 , respectively, from the exercises

of the pre-funded warrants.

There were no warrants exercised during the three and nine months ended September 30, 2022.

The Company first assesses warrants that are issued

by the Company under the FASB ASC Topic 480, “ Distinguishing Liabilities from Equity ” (“ ASC 480 ”)

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

If there are no instances outside of the Company’s control that

could require cash settlement, the Company then applies and follows the applicable accounting guidance in the FASB ASC Topic 815, “ Derivatives

and Hedging ” (“ ASC 815 ”).

Financial instruments are accounted for as either derivative liabilities or equity

instruments depending on the specific terms of the agreement.

Based on the assessment of the warrants issued by the Company under the

guidance in ASC 480 and ASC 815, the warrants issued by the Company have been classified within stockholder’s equity.

December 2023, the Company entered into an inducement letter agreement (the “ Inducement Letter Agreement ”) with certain

holders of the Company’s existing warrants to purchase up to an aggregate of 2,130,252

shares of the Company’s common stock (the “ December 2023 Financing ”).

Pursuant to the terms of the Inducement

Letter Agreement, in the event that the exercise of the existing warrants in the December 2023 Financing would have otherwise caused

a holder to exceed the beneficial ownership limitations set forth in the existing warrant, the Company issued the number of shares that

would not cause a holder to exceed such beneficial ownership limitation and agreed to hold such balance of shares of common stock in

Accordingly, an aggregate of 826,370

shares of common stock were held in abeyance (the “ Abeyance Shares ”) with such Abeyance Shares evidenced through

the holder’s existing warrants and which were deemed to be prepaid.

The Abeyance Shares were held until notice was received by

the holder that the balance of the shares of common stock could be issued in compliance with such beneficial ownership limitations and

were exercised pursuant to a notice of exercise from the holder.

Until such time, the Abeyance Shares were evidenced through the holder’s

existing warrants and have been included in the Company’s table of outstanding warrants below.

During the three months ended March 31, 2024, all

of the Abeyance Shares were released and issued.

There were no warrant exercises during the three months ended March 31, 2023.

The following table summarizes the Company’s

outstanding warrants, all of which are classified as equity instruments, at September 30, 2023:

Summary of outstanding warrants

outstanding warrants, all of which are classified as equity instruments, at March 31, 2024:

Schedule of outstanding warrants

Exercise Price

Outstanding at December 31, 2023

Outstanding at September 30, 2023

The Company’s outstanding warrants as of

September 30, 2023 expire at various dates between October 2023 and December 2028.

Outstanding at March 31, 2024

Stock-based Compensation

In July 2023, the Company’s

stockholders approved an amendment to the Company’s 2020 Long-Term Incentive Plan (the “2020 Plan”) to increase the

number of shares authorized for issuance thereunder by 125,500 shares.

Restricted Stock Units

Restricted stock units (“ RSUs ”)

are issued under the Company’s 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.

RSUs granted by the Company to employees generally vest annually over 3

years after the grant date and over 1

year after the grant date for non-employee members of the Board of Directors.

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.

does not expect to repurchase shares to satisfy RSU vests.

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, 2023:

the Company’s RSUs for the three months ended March 31, 2024:

Summary of RSU activity

Grant Date Fair Value

Unvested units at December 31, 2023

Unvested units at September 30, 2023

There were no RSU grants during

the three months ended September 30, 2023.

The weighted-average fair value of RSUs granted during the nine months ended September 30,

Unvested units at March 31, 2024

There were no RSUs granted

during the three months ended March 31, 2024.

The weighted-average fair value of RSUs granted during the three months ended March 31,

2023 was $ 5.24 .

The weighted-average fair value of RSUs granted during the three and nine months ended September 30, 2022 was $ 9.00 and

$ 10.32 , respectively.

Stock-based compensation expense

related to RSUs was $ 89,000 and $ 294,000 for the three and nine months ended September 30, 2023, respectively.

Stock-based compensation

expense related to RSUs was $ 98,000 and $ 359,000 for the three and nine months ended September 30, 2022, respectively.

related to RSUs was $ 26,000 and $ 111,000 for the three months ended March 31, 2024 and 2023, respectively.

The aggregate fair value of

awards that vested during the nine months ended September 30, 2023 and 2022 was $ 100,000 and $ 138,000 , respectively, which represents

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

awards that vested during the three months ended March 31, 2024 and 2023 was $ 17,000 and $ 95,000 , respectively, which represents the market

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

Stock Options

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.

Stock options are available for issuance 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 service requirements.

Stock options granted by the Company to employees generally vest annually over 4

years after the grant date and generally vest over 1 year after the grant date for members of the Board of Directors and expire within

ten years of grant.

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

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

The 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 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 the FASB ASC Topic 718, “ Compensation – Stock

Compensation ”.

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 Company’s expected stock

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

As the Company has limited stock option exercise

information, the expected life assumption used for option grants is based upon the simplified method provided for under the FASB ASC Topic

718, “ Compensation — Stock Compensation ”.

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.

The Company did not grant any stock options during

the three months ended March 31, 2024 and 2023.

The following table summarizes the activity of

the Company’s stock options for the nine months ended September 30, 2023:

the Company’s stock options for the three months ended March 31, 2024:

Summary of stock option activity

Balance at December 31, 2023

Balance at September 30, 2023

Exercisable at September 30, 2023

Balance at March 31, 2024

Exercisable at March 31, 2024

Stock-based compensation expense

related to stock options for the three and nine months ended September 30, 2022 was $ 5,000 and $ 13,000 , respectively.

As of September

30, 2022, the compensation expense for all unvested stock options had been recognized in the Company’s results of operations.

related to stock options for the three months ended March 31, 2024 was $ 6,000 .

The Company did no t have any stock-based compensation expense

related to stock options for the three months ended March 31, 2023.

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, 2023 and 2022, in thousands:

The following table sets forth

total stock-based compensation expense for the three months ended March 31, 2024 and 2023, in thousands:

Schedule of stock-based compensation expense

Three Months Ended

Nine Months Ended

September 30,

Research and development

2 unchanged sentences

Net Loss per Common Share

net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding.

Diluted net loss per

share is computed by dividing the Company’s net loss by the weighted average number of common shares outstanding and the impact

of the dilutive effect of potential common stock equivalents, except when the inclusion of such potential common stock equivalents would

be anti-dilutive.

Dilutive potential common stock equivalents primarily consist of stock options, RSUs and warrants.

Therefore, basic

and diluted net loss per share applicable to common stockholders were the same for all periods presented because the impact of these items

is generally anti-dilutive during periods of net loss.

The weighted average number

of common shares outstanding as of September 30, 2023 includes the pre-funded warrants issued in connection with the June 2023 Financing,

the exercise of which requires nominal consideration for the delivery of the shares of common stock.

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:

Basic net loss per share is computed by dividing

net loss by the weighted average number of common shares outstanding.

Diluted net loss per share is computed by dividing the Company’s

net loss by the weighted average number of common shares outstanding and the impact of the dilutive effect of potential common stock equivalents,

except when the inclusion of such potential common stock equivalents would be anti-dilutive.

Dilutive potential common stock equivalents

primarily consist of stock options, RSUs and warrants.

Therefore, basic and diluted net loss per share applicable to common stockholders

were the same for all periods presented because the impact of these items is generally anti-dilutive during periods of net loss.

The following table sets forth the potential common

shares excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive:

Schedule of anti dilutive stock

September 30,

Stock options

Unvested restricted stock units

__________________

1 The weighted average number of common shares outstanding

as of September 30, 2023 includes pre-funded warrants issued in the June 2023 Financing because the exercise of such warrants requires

only nominal consideration.

Therefore, these pre-funded warrants are not included in the table above.

Unvested RSUs

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