Phio Pharmaceuticals Corp. 10-Q

ITEM 1. FINANCIAL STATEMENTS PHIO PHARMACEUTICALS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per share data) (Unaudited) September 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 5,390 $ 8,490 Prepaid expenses and other current assets 474 832 Total current assets 5,864 9,322 Right of use asset – 33 Property and equipment, net 1 6 Other assets – 3 Total assets $ 5,865 $ 9,364 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 184 $ 657 Accrued expenses 735 942 Lease liability – 35 Total current liabilities 919 1,634 Commitments and contingencies (Note 2) – – Stockholders’ equity: Preferred stock, $ 0.0001 par value, 100,000,000 shares authorized; no shares issued and outstanding at September 30, 2024 and December 31, 2023 – – Common stock, $ 0.0001 par value, 100,000,000 shares authorized; 958,219 and 416,368 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively – – Additional paid-in capital 149,676 146,936 Accumulated deficit ( 144,730 ) ( 139,206 ) Total stockholders’ equity 4,946 7,730 Total liabilities and stockholders’ equity $ 5,865 $ 9,364 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 PHIO PHARMACEUTICALS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except share and per share data) (Unaudited)           Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Operating expenses:         Research and development $ 644 $ 1,808 $ 2,658 $ 5,325 General and administrative 946 968 3,055 3,600 Total operating expenses 1,590 2,776 5,713 8,925 Operating loss ( 1,590 ) ( 2,776 ) ( 5,713 ) ( 8,925 ) Total other income (expense), net 66 ( 4 ) 189 ( 6 ) Net loss $ ( 1,524 ) $ ( 2,780 ) $ ( 5,524 ) $ ( 8,931 ) Net loss per common share:         Basic and diluted $ ( 1.54 ) $ ( 10.25 ) $ ( 8.23 ) $ ( 45.28 ) Weighted average number of common shares outstanding         Basic and diluted 990,033 271,129 670,875 197,227 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 PHIO PHARMACEUTICALS CORP. CONDENSED CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (Amounts in thousands, except share data) (Unaudited) Series D Preferred Stock Common Stock Additional For the Three and Nine Months Ended September 30, 2024 Shares Amount Shares Amount Paid in Capital Accumulated Deficit Total Balance at December 31, 2023 – $ – 416,368 $ – $ 146,936 $ ( 139,206 ) $ 7,730 Issuance of common stock upon exercise of warrants – – 91,820 – – – – Issuance of common stock upon vesting of restricted stock units – – 2,689 – – – – Shares withheld for payroll taxes – – ( 689 ) – ( 4 ) – ( 4 ) Stock-based compensation expense – – – – 32 – 32 Net loss – – – – – ( 2,154 ) ( 2,154 ) Balance at March 31, 2024 – $ – 510,188 $ – $ 146,964 $ ( 141,360 ) $ 5,604 Stock-based compensation expense – – – – 15 – 15 Net loss – – – – – ( 1,846 ) ( 1,846 ) Balance at June 30, 2024 – $ – 510,188 $ – $ 146,979 $ ( 143,206 ) $ 3,773 Cash-in-lieu of fractional shares for reverse stock split – – ( 255 ) – ( 1 ) – ( 1 ) Issuance of common stock and warrants, net of offering costs – – 216,528 – 2,646 – 2,646 Issuance of common stock upon exercise of warrants – – 231,758 – – – – Stock-based compensation expense – – – – 52 – 52 Net loss – – – – – ( 1,524 ) ( 1,524 ) Balance at September 30, 2024 – $ – 958,219 $ – $ 149,676 $ ( 144,730 ) $ 4,946                   Series D Preferred Stock Common Stock Additional   For the Three and Nine Months Ended September 30, 2023 Shares Amount Shares Amount Paid-in Capital Accumulated Deficit Total Balance at December 31, 2022 1 $ 2 126,558 $ – $ 139,218 $ ( 128,380 ) $ 10,838 Cash-in-lieu of fractional shares for reverse stock split – – ( 190 ) – ( 11 ) – ( 11 ) Redemption of preferred stock ( 1 ) ( 2 ) – – – – – Issuance of common stock upon vesting of restricted stock units – – 2,009 – – – – Shares withheld for payroll taxes – – ( 535 ) – ( 25 ) – ( 25 ) Stock-based compensation expense – – – – 111 – 111 Net loss – – – – – ( 3,602 ) ( 3,602 ) Balance at March 31, 2023 – $ – 127,842 $ – $ 139,293 $ ( 131,982 ) $ 7,311 Issuance of common stock and warrants, net of offering costs – – 73,292 – 5,048 – 5,048 Issuance of common stock upon exercise of warrants – – 19,444 – – – – Stock-based compensation expense – – – – 94 – 94 Net loss – – – – – ( 2,549 ) ( 2,549 ) Balance at June 30, 2023 – $ – 220,578 $ – $ 144,435 $ ( 134,531 ) $ 9,904 Issuance of common stock upon exercise of warrants – – 35,588 – – – – Issuance of common stock upon vesting of restricted stock units – – 222 – – – – Shares withheld for payroll taxes – – ( 13 ) – – – – Stock-based compensation expense – – – – 89 – 89 Net loss – – – – – ( 2,780 ) ( 2,780 ) Balance at September 30, 2023 – $ – 256,375 $ – $ 144,524 $ ( 137,311 ) $ 7,213 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 PHIO PHARMACEUTICALS CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net loss $ ( 5,524 ) $ ( 8,931 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2 46 Amortization of right of use asset 33 95 Loss on disposal of property and equipment 3 – Stock-based compensation 99 294 Changes in operating assets and liabilities: Prepaid expenses and other assets 361 ( 235 ) Accounts payable ( 473 ) ( 606 ) Accrued expenses ( 207 ) 1,058 Lease liability ( 35 ) ( 100 ) Net cash used in operating activities ( 5,741 ) ( 8,379 ) Cash flows from investing activities: Cash paid for purchase of property and equipment – ( 5 ) Net cash used in investing activities – ( 5 ) Cash flows from financing activities: Net proceeds from the issuance of common stock and warrants 2,646 5,048 Cash in lieu of fractional shares for reverse stock split ( 1 ) ( 11 ) Redemption of Series D preferred stock – ( 2 ) Payment of taxes on net share settlements of restricted stock units ( 4 ) ( 25 ) Net cash provided by financing activities 2,641 5,010 Net decrease in cash, cash equivalents and restricted cash ( 3,100 ) ( 3,374 ) Cash, cash equivalents and restricted cash at the beginning of period 8,490 11,831 Cash, cash equivalents and restricted cash at the end of period $ 5,390 $ 8,457 The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the totals above: September 30, 2024 2023 Cash and cash equivalents $ 5,390 $ 8,407 Restricted cash – 50 Cash, cash equivalents and restricted cash $ 5,390 $ 8,457 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 PHIO PHARMACEUTICALS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Organization and Significant Accounting Policies Nature of Operations Phio Pharmaceuticals Corp. (“ Phio ” 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. 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. Effective July 5, 2024, the Company completed a 1-for-9 reverse stock split of the Company’s outstanding common stock, including reclassifying an amount equal to the reduction in par value to additional paid-in capital. The reverse stock split did not reduce the number of authorized shares of the Company’s common or preferred stock. All share and per share amounts have been adjusted to give effect to the reverse stock split. Basis of Presentation The accompanying condensed consolidated 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 consolidated financial statements, but that are not required for interim reporting purposes, have been condensed or omitted. 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. Segments The Company operates as one operating segment and all assets are located in the United States. 7 Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The areas subject to significant estimates and judgement include, among others, those related to the fair value of equity awards, accruals for research and development expenses, useful lives of property and equipment, and the valuation allowance on 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. Liquidity The Company has reported recurring losses from operations since its inception and expects to continue to have negative cash flows from operations for the foreseeable future. Historically, the Company’s primary source of funding has been from sales of its securities. The Company’s ability to continue to fund its operations is dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity, or strategic opportunities, 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, has negative operating cash flows 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 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. There 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 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. 8 Recent Accounting Pronouncements 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. The enhanced 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. The 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. 2. Collaboration Agreement AgonOx, Inc. (“ AgonOx ”) In February 2021, the Company entered into a clinical co-development collaboration agreement (the “ Clinical Co-Development Agreement ”) with AgonOx, a private company developing a pipeline of novel immunotherapy drugs targeting key regulators of the immune response to cancer. On May 8, 2024, the Company terminated the Clinical Co-Development Agreement with AgonOx, which such termination was effective immediately. Under the Clinical Co-Development Agreement, Phio and AgonOx were working to develop a T cell-based therapy using the Company’s lead product candidate, PH-762, and AgonOx’s “double positive” tumor infiltrating lymphocytes (“ DP TIL ”) technology. Per the terms of the Clinical Co-Development Agreement, the Company had 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 and was entitled to certain future development milestones and low single-digit sales-based royalty payments from AgonOx licensing its DP TIL technology. The Company recognized 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 incurred such expense. Effective as of the date of termination, the Clinical Co-Development Agreement and the continuing obligations of the Company and AgonOx thereunder were terminated in their entirety. As a result, the Company is no longer required to provide financial support for the development costs incurred under the Clinical Co-Development Agreement, and is not entitled to future development milestones or royalty payments from AgonOx’s licensing of its DP TIL technology. The Company will pay to AgonOx all Company payment obligations that accrued prior to the termination of the Clinical Co-Development Agreement. Remaining payments to be made to AgonOx as of September 30, 2024 were $35,000, which primarily related to remaining accrued obligations for patient fees and other miscellaneous costs as of the date of termination. Pursuant to the terms of the Clinical Co-Development Agreement, the Company and AgonOx are coordinating 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. The Company recognized approximately $ 308,000 and $ 414,000 in connection with the Clinical Co-Development Agreement during the three and nine months ended September 30, 2024, respectively, which relate to the Company’s expense obligations under the Clinical Co-Development Agreement through the date of termination. The Company recognized approximately $ 606,000 and $ 906,000 of expense in connection with the Clinical Co-Development Agreement during the three and nine months ended September 30, 2023, respectively. 9 3. 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 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 date. As of September 30, 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 Description September 30, 2024 Quoted Prices In Active Markets (Level 1)   Other Significant Observable Inputs (Level 2) Unobservable Inputs (Level 3) Assets: Cash equivalents $ 5,390 $ 5,390 $ – $ – Total $ 5,390 $ 5,390 $ – $ – The carrying amounts of cash, accounts payable and accrued expenses of the Company approximate their fair values due to their short-term nature. 4. Leases The Company entered into a lease for a laboratory facility located at 17 Briden Street, Worcester, Massachusetts, which covers 321 square feet of rentable space. The lease commenced on March 1, 2024 and had an original expiration date of August 31, 2024 . The Company has the option to renew the lease for additional 6-month periods. On June 1, 2024, the Company elected the option to renew the lease for an additional 6-month period, and the lease will expire on February 28, 2025. The Company made an accounting policy election under the FASB ASC Topic 842, “ 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 total base rent for the premises over each 6-month term is expected to be $ 15,000 . During the three and nine month periods ending September 30, 2024, the Company recognized $ 8,129 and $ 18,909 , respectively, of rent expense and variable lease costs related to the laboratory facility. 10 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 factors. 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 lease for the Company’s former corporate headquarters represented all of the Company’s capitalized lease obligations. The amounts reported in the condensed consolidated balance sheets for the Company’s former 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 September 30, 2024 December 31, 2023 Assets Right of use asset $ – $ 33 Liabilities Lease liability $ – $ 35 Lease Term and Discount Rate Weighted average remaining lease term – 0.25 Weighted average discount rate – 4.70 % There were no operating lease costs for our former corporate headquarters included in operating expense for the three months ended September 30, 2024. Operating lease costs for our former corporate headquarters included in operating expense were $ 33,000 for the three months ended September 30, 2023. Operating expenses were $ 33,000 and $ 99,000 for the nine months ended September 30, 2024 and 2023, respectively. The Company’s condensed consolidated statements of cash flows for the Company’s former corporate headquarters was $ 35,000 and $ 104,000 for the nine months ended September 30, 2024 and 2023, respectively. 5. Stockholders’ Equity Financings May 2024 Financing — On May 16, 2024, the Company entered into a purchase agreement (the “ Purchase Agreement ”) with Triton Funds LP (“ Triton ”), pursuant to which the Company agreed to sell, and Triton agreed to purchase, upon the Company’s request in one or more transactions, up to 95,833 shares of the Company’s common stock at a purchase price of $ 6.48 per share (the “ Purchase Price ”), for aggregate gross proceeds of up to $ 621,000 . The Company recorded expense of approximately $100,000, primarily related to legal fees, in connection with the execution of the Purchase Agreement with Triton. On July 3, 2024, the Company terminated the Purchase Agreement with Triton effective immediately. No shares of common stock were sold by the Company pursuant to the Purchase Agreement prior to termination. 11 July 2024 Financing — On July 11, 2024, the Company entered into inducement letter agreements (the “ July 2024 Inducement Letter Agreements ”) with certain holders of certain of the Company’s existing warrants to purchase up to an aggregate of 545,286 shares of the Company’s common stock. The existing warrants were originally issued in February 2020 through December 2023, having exercise prices between $324.00 and $9.72 per share. Pursuant to the July 2024 Inducement Letter Agreements, these warrants were exercised for cash at a reduced exercise of $ 5.45 per share in consideration of the Company’s agreement to issue new unregistered five and one-half year term Series C warrants to purchase up to 583,098 shares of common stock at an exercise price of $ 5.45 and new unregistered eighteen month term Series D warrants to purchase up to 507,474 shares of common stock at an exercise price of $ 5.45 , both issued and sold at a price of $0.125 per warrant share (the “ July 2024 Financing ”). In addition, the Company issued warrants to the placement agent, HCW, to purchase a total of 40,896 shares of common stock at an exercise price of $6.8125 per share. The net proceeds to the Company from the July 2024 Financing were approximately $ 2,646,000 , after deducting placement agent fees and offering expenses. The Company incurred non-cash equity issuance cost of approximately $ 2.4 million for the incremental fair value of the outstanding equity classified warrants and approximately $ 0.2 million for placement agent warrants. Pursuant to the terms of the July 2024 Inducement Letter Agreements, in the event that the exercise of the existing warrants in the July 2024 Financing would have otherwise caused a holder to exceed the beneficial ownership limitations set forth in the existing warrant, the Company issued the number of shares that would not cause a holder to exceed such beneficial ownership limitation and agreed to hold such balance of shares of common stock in abeyance. Accordingly, an aggregate of 328,758 shares of common stock were held in abeyance (the “ July 2024 Abeyance Shares ”) with such July 2024 Abeyance Shares evidenced through the holder’s existing warrants and which are deemed to be prepaid. The July 2024 Abeyance Shares were held until notice was received by the holder that the balance of the shares of common stock could be issued in compliance with such beneficial ownership limitations and were exercised pursuant to a notice of exercise from the holder. Until such time, the 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 September 30, 2024, 231,758 of the July 2024 Abeyance Shares were released. The remainder of the July 2024 Abeyance Shares were subsequently released in October 2024. April 2023 Financing — On April 20, 2023, the Company completed a registered direct offering and a concurrent private placement of a total of: 39,331 registered shares of the Company’s common stock at a purchase price per share of $ 50.85 , unregistered five and one-half year term Series A warrants to purchase up to 39,331 shares of common stock at an exercise price of $ 48.60 per share and unregistered eighteen month term Series B warrants to purchase up to 39,331 shares of common stock at an exercise price of $ 48.60 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 2,950 shares of common stock at an exercise price of $ 63.56 per share. Net proceeds to the Company from the April 2023 Financing were $ 1,538,000 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 21,291 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 $ 48.60 per share. The Company received $ 23,952 as consideration in connection with the Warrant Amendment Agreements. The Company assessed the amendments to the exercise price of the warrants under 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: 25,961 registered shares and 8,000 unregistered shares of the Company’s common stock each at a purchase price per share of $ 38.52 , unregistered pre-funded warrants to purchase up to an aggregate of 69,881 shares of common stock at a purchase price per share of $ 38.511 and with a pre-funded warrant exercise price of $ 0.009 per share, unregistered five and one-half year term Series A warrants to purchase up to an aggregate of 103,842 shares of common stock at an exercise price of $ 36.27 per share and unregistered eighteen month term Series B warrants to purchase up to an aggregate of 103,842 shares of common stock at an exercise price of $ 36.27 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 7,788 shares of common stock at an exercise price of $ 48.15 per share. Net proceeds to the Company from the June 2023 Financing were $ 3,510,000 after deducting placement agent fees and offering expenses. 12 December 2023 Financing — In December 2023, the Company entered into an inducement letter agreement (the “ December 2023 Inducement Letter Agreement ”) with certain holders of the Company’s existing warrants to purchase up to an aggregate of 236,695 shares of the Company’s common stock (the “ December 2023 Financing ”). Pursuant to the terms of the December 2023 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 abeyance. Accordingly, an aggregate of 91,820 shares of common stock were held in abeyance (the “ December 2023 Abeyance Shares ”) with such December 2023 Abeyance Shares evidenced through the holder’s existing warrants and which were deemed to be prepaid. The December 2023 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 December 2023 Abeyance Shares were evidenced through the holder’s existing warrants and have been included in the Company’s table of outstanding warrants below. 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 abeyance. Accordingly, at December 31, 2023, an aggregate of 91,819 shares of common stock were held in abeyance (the “ Abeyance Shares ”) with such Abeyance Shares evidenced through the holder’s existing warrants and which are deemed to be prepaid. The Abeyance Shares will be held until notice is received by the holder that the balance of the shares of common stock may be issued in compliance with such beneficial ownership limitations and may be exercised pursuant to a notice of exercise from the holder. Until such time, the Abeyance Shares are evidenced through the holder’s existing warrants and have been included in the Company’s table of outstanding warrants below. The remainder of the December 2023 Abeyance Shares were subsequently released during the first quarter of 2024. Warrants 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 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. During the three months ended September 30, 2024, 231,758 of the July 2024 Abeyance Shares were released and issued. During the three months ended September 30, 2023, 35,588 shares of common stock were issued related to the exercise of pre-funded warrants from the June 2023 Financing. During the nine months ended September 30, 2024, all of the December 2023 Abeyance Shares were released and issued and 231,758 of the July 2024 Abeyance Shares were released and issued. During the nine months ended September 30, 2023, 55,032 shares of common stock were issued related to the exercise of pre-funded warrants from the June 2023 Financing. 13 The following table summarizes the Company’s outstanding warrants, all of which are classified as equity instruments, at September 30, 2024: Schedule of outstanding warrants Number of Shares Weighted- Average Exercise Price Per Share Outstanding at December 31, 2023 703,530 $ 35.99 Issued 1,131,468 5.50 Exercised ( 540,112 ) 6.56 Expired – – Outstanding at September 30, 2024 1,294,886 $ 21.62 6. 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. RSUs granted by the Company to employees and to non-employee members of the Board of Directors generally vest annually over 1 year after the grant date. 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 Company 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. On September 11, 2024, the Company modified all unvested RSUs to reduce the vesting term for employees from 3 years after the grant date to 1 year after the grant date. No incremental expense was recognized as a result of the modification, as the fair value of the RSUs immediately before and after the modification was unchanged. The following table summarizes the activity of the Company’s RSUs for the nine months ended September 30, 2024: Summary of RSUs activity Number of Shares Weighted- Average Grant Date Fair Value Per Share Unvested units at December 31, 2023 5,527 $ 74.83 Granted and accepted 71,000 2.77 Vested ( 3,997 ) 71.10 Forfeited ( 1,530 ) 84.55 Unvested units at September 30, 2024 71,000 $ 2.77 The weighted-average fair value of RSUs granted during both the three and nine months ended September 30, 2024 was $2.77. There were no RSUs granted during the three months ended September 30, 2023. During the nine months ended September 30, 2023, 4,833 RSUs were granted. The weighted-average fair value of RSUs granted during the nine months ended September 30, 2023 was $ 47.16 . 14 Stock-based compensation expense related to RSUs was $ 52,000 and $ 89,000 for the three months ended September 30, 2024 and 2023, respectively. Stock-based compensation expense related to RSUs was $ 99,000 and $ 294,000 for the nine months ended September 30, 2024 and 2023, respectively. The aggregate fair value of awards that vested during the nine months ended September 30, 2024 and 2023 was $ 21,000 and $ 100,000 , 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 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 non-employee 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. The Company 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 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 or nine months ended September 30, 2024 and 2023. The following table summarizes the activity of the Company’s stock options for the nine months ended September 30, 2024: Summary of stock options activity Number of Shares Weighted- Average Exercise Price Per Share Aggregate Intrinsic Value Balance at December 31, 2023 1,146 $ 10,120.69 Granted – – Exercised – – Forfeited – – Expired ( 13 ) 598,313.35 Balance at September 30, 2024 1,133 $ 3,371.79 $ – Exercisable at September 30, 2024 1,133 $ 3,371.79 $ – Stock-based compensation expense related to stock options for the nine months ended September 30, 2024 was $ 6,000 . The Company did no t have any stock-based compensation expense related to stock options for the three months ended September 30, 2024 and 2023 or the nine months ended September 30, 2023. 15 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, 2024 and 2023, in thousands: Schedule of stock-based compensation expense   Three Months Ended Nine Months Ended   September 30, September 30,   2024 2023 2024 2023 Research and development $ 25 $ 51 $ 14 $ 163 General and administrative 27 38 85 131 Total stock-based compensation $ 52 $ 89 $ 99 $ 294 7. Net Loss per Common Share 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 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. Therefore, these pre-funded warrants are not included in the table below. 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 shares September 30, 2024 2023 Stock options 1,133 14 Unvested RSUs 71,000 7,694 Warrants 1,2 1,197,886 357,481 Total 1,270,019 365,189 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. 2 The weighted average number of common shares outstanding as of September 30, 2024 includes the Abeyance Shares from the July 2024 Financing, the exercise of which was prepaid and requires no further consideration for the delivery of the shares of common stock. Therefore, 97,000 of these Abeyance Shares are not included in the table above. 8. Subsequent Events In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the consolidated balance sheet date but before the consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after September 30, 2024, up through the date the Company issued the condensed consolidated financial statements. 16