What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-31 compared with 2024-04-01 · 742 added, 598 removed, 395 unchanged (77% of the section changed)

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Phio Pharmaceuticals Corp.

Massachusetts

on the Consolidated Financial Statements

We have audited

the accompanying consolidated balance sheets of Phio Pharmaceuticals, Corp.

(the “Company”) as of December 31, 2023 and 2022,

the related consolidated statements of operations, preferred stock and stockholders’ equity, and cash flows for each of the years

then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion,

the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31,

2023 and 2022, and the results of its operations and its cash flows for the years then ended , in conformity with accounting principles

generally accepted in the United States of America.

Marlborough, Massachusetts

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Phio Pharmaceuticals

(the "Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, preferred stock

and stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the

"consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material

respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for

the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated

financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated

financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations that raise substantial

doubt about its ability to continue as a going concern.

The accompanying consolidated financial statements have been prepared assuming

that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has suffered

recurring losses from operations and negative cash flows from operations that raise substantial doubt about its ability to continue as

a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

These consolidated

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance

with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to

have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required

to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness

of the Company’s internal control over financial reporting.

The consolidated financial statements

do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required

to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal

control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to

assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as

evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for

Critical Audit Matter

The critical audit matter communicated below is a matter arising from

the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee

The critical audit matter communicated below is a matter arising from the

current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee

(i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially

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The communication of critical audit matters does not alter in any way our opinion on the

consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate

opinions on the critical audit matter or on the accounts or disclosures to which it relates.

consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate

opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for Certain Warrants Issued in 2024

As described in Note 9 to the consolidated

financial statements, the Company completed each of two registered direct offerings of common stock and concurrent private placement

offerings of warrants to purchase common stock in April and June 2023 (the “April 2023 Financing” and “June 2023

Financing”, respectively).

In December 2023, the Company issued additional warrants to purchase common stock to certain

holders of existing warrants in connection with an Inducement Letter Agreement (the “December 2023 Financing”).

Company assessed the warrants issued in the April 2023 Financing, June 2023 Financing and December 2023 Financing to determine

whether the warrants should be accounted for as either liabilities or equity instruments depending on the specific terms of the

The Company determined that the warrants issued in the April 2023 Financing, June 2023 Financing and December 2023

Financing were classified within stockholders’ equity.

We identified the assessment of the accounting for certain warrants

to purchase common stock issued in connection with the April 2023 Financing, June 2023 Financing and December 2023 Financing as a critical

audit matter.

Determining whether the certain warrants issued should be accounted for as either liabilities or equity instruments requires

significant judgment due to the application of complex technical accounting guidance.

Auditing this element required especially challenging

and complex auditor judgement due to the nature and extent of the audit effort required to address the matter, including the need for

specialized knowledge and skill in assessing elements of the agreements.

The primary procedures we performed to address this critical audit

matter included:

and analyzing agreements related to the certain warrants issued to identify relevant terms

and conditions that affect whether the certain warrants issued should be accounted for as

either liabilities or equity instruments.

whether the certain warrants issued should be accounted for as either liabilities or equity

personnel with specialized knowledge and skill in the relevant technical accounting guidance

to evaluate the appropriateness of the Company’s application of the relevant technical

accounting guidance in determining whether the certain warrants issued should be accounted

for as either liabilities or equity instruments.

As described in Note 8 to the consolidated financial statements, in

July 2024 the Company issued new Series C and Series D warrants to purchase common stock to certain holders of existing warrants in connection

with an Inducement Letter Agreement (the “July 2024 Financing”).

In December 2024, the Company issued Series E and Series

F warrants to purchase common stock to certain institutional and accredited investors in connection with registered direct offerings of

common stock and concurrent private placement offerings of warrants to purchase common stock (the "December 2024 Offerings”).

The Company first assessed the warrants and determined they were outside the scope of ASC 480 as there were no instances outside of the

Company’s control that could require cash settlement.

The Company then applied the applicable accounting guidance in ASC 815 to

account for the warrants as either derivative liabilities or equity instruments.

Warrants issued in connection with the July 2024 Financing

and December 2024 Offerings did not meet the definition of a derivative instrument as they are indexed to the Company’s stock and

are classified within stockholders’ equity.

We identified the assessment of the accounting for the Series C, D,

E and F warrants (“Certain Warrants”) to purchase common stock issued in connection with the July 2024 Financing and December

2024 Offerings as a critical audit matter.

Determining whether the Certain Warrants issued are in the scope of ASC 480 and whether these

warrants should be accounted for as either derivative liabilities or equity instruments requires significant judgment due to the application

of complex accounting guidance in evaluating whether there were no instances outside of the Company’s control that could require

cash settlement and whether they are indexed to the Company’s stock and classified within stockholders’ equity.

Auditing these

elements involved especially challenging and complex auditor judgment due to the nature and extent of the audit effort required to address

the matter, including the need for expertise in accounting for warrants.

The primary procedures we performed to address this critical audit matter

Reading and analyzing agreements related to the Certain Warrants issued

to identify relevant terms and conditions that affect whether they are in the scope of ASC 480 or should be accounted for as either derivative

liabilities or equity instruments.

With the assistance of professionals in our firm having expertise in accounting

for warrants, we evaluated the Company’s conclusions regarding whether the Certain Warrants issued are in the scope of ASC 480 or

should be accounted for as either derivative liabilities or equity instruments under accounting principles generally accepted in the United

Stated of America.

/s/ BDO USA, P.C.

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Boston, Massachusetts

April 1, 2024

March 31, 2025

PHIO PHARMACEUTICALS CORP.

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Current assets:

Restricted cash

Cash and cash equivalents

Prepaid expenses and other current assets

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Total current liabilities

Lease liability, net of current portion

Total liabilities

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Series D Preferred Stock, $ 0.0001 par value;

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

10,000,000 shares authorized, 0 issued and outstanding at December 31, 2024 and December 31, 2023

Stockholders’ equity:

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Total liabilities, preferred stock and stockholders’ equity

See accompanying notes to consolidated financial

See accompanying notes to consolidated financial statements.

PHIO PHARMACEUTICALS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per

(Amounts in thousands, except share and per share

Operating expenses:

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Operating loss

Total other expense, net

Interest income (expense), net

Net loss per common share:

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Basic and diluted

See accompanying notes to consolidated financial

See accompanying notes to consolidated financial statements.

PHIO PHARMACEUTICALS CORP.

CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS’

(Amounts in thousands, except share data)

Series D Preferred Stock

D Preferred Stock

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 and warrants, net of offering costs

Issuance of common stock upon exercise of warrants

Issuance of common stock upon vesting of restricted stock units

Shares withheld for payroll taxes

Issuance of preferred stock

Stock-based compensation expense

Balance at December 31, 2023

$ ( 128,380 )

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

Redemption of preferred stock

Issuance of common stock and warrants, net of offering costs

Issuance of common stock upon exercise of warrants

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Shares withheld for payroll taxes

Cash issued in lieu of fractional

shares for 1:9 reverse stock split

Issuance of common stock and warrants, net of offering costs

Stock-based compensation expense

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$ ( 146,356 )

See accompanying notes to consolidated financial

See accompanying notes to consolidated financial statements.

PHIO PHARMACEUTICALS CORP.

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Impairment of property and equipment

Net loss on the disposal of property and equipment

Stock-based compensation

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Cash paid for purchase of property and equipment

Net cash used in investing activities

Asset sale proceeds

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Net proceeds from the issuance of common stock and warrants

Net proceeds from the issuance of preferred stock

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

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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 consolidated balance sheets to the totals above:

Restricted cash

Total cash and restricted cash

See accompanying notes to consolidated financial

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of year

Cash and cash equivalents at the end of year

Supplemental cash flow information

Cash paid during the year for:

See accompanying notes to consolidated financial statements.

PHIO PHARMACEUTICALS CORP.

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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.

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.

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.

Basis of Presentation

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Principles of Consolidation

The 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.

The 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.

The Company operates as one operating

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Reverse Stock Split

Effective January 26, 2023, the Company

completed a 1-for-12

reverse stock split of the Company’s outstanding common stock (the “ Reverse Stock Split ”).

and per share amounts in the consolidated financial statements have been retroactively adjusted for all periods presented to give

effect to the Reverse Stock Split, including reclassifying an amount equal to the reduction in par value to additional paid-in

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

(“ RSU ”) balances, and related per share amounts, at December 31, 2022 to reflect final revisions to those

outstanding equity awards as a result of the Reverse Stock Split.

The Reverse Stock Split did not reduce the number of authorized

shares of the Company’s common stock or preferred stock.

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.

Uses of Estimates in Preparation of Financial Statements

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these estimates.

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 us 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.

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.

This is dependent on a number of factors, including the market demand and l iquidity

of Common Stock.

There is no guarantee that debt, additional equity or other funding will be available to us on acceptable terms, or at

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

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

Restricted Cash

Restricted cash consists of certificates of deposit

held by financial institutions as collateral for the Company’s corporate credit cards.

Concentrations of Credit Risk

Financial instruments that potentially

subject the Company to concentrations of credit risk consist principally of cash.

The Company maintains cash balances in several

accounts with a reputable financial institution that management believes is creditworthy, and which at times are in excess of

federally insured limits.

These accounts are insured by the Federal Deposit Insurance Corporation for up to $ 250,000

per institution.

relies, and expects to continue to rely, on a small number of vendors to perform research activities and clinical trial activities that

continue to progress its product candidates for its development programs.

These programs could be adversely affected by a significant

interruption in the related processes of these vendors.

Financial instruments that potentially subject the

Company to concentrations of credit risk consist principally of cash.

The Company maintains cash balances in several accounts with a reputable

financial institution that management believes is creditworthy, and which at times are in excess of federally insured limits.

These accounts

are insured by the Federal Deposit Insurance Corporation for up to $ 250,000 per institution.

Property and Equipment

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For contracts that contain a lease, the Company

identifies the lease and non-lease components, determines the consideration in the contract and recognizes the classification of the lease

as operating or financing.

For leases with a term greater than one year, the Company recognizes a liability to make lease payments and

an asset representing the right to use the underlying asset during the lease term at the commencement date of the lease.

Lease liabilities and the corresponding right of

use assets are recorded based on the present value of lease payments to be made over the lease term.

The discount rate used to calculate

the present value is the rate implicit in the lease, or if not readily determinable, the Company’s incremental borrowing rate.

Company’s incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis

over a similar term an amount equal to the lease payments in a similar economic environment.

Certain adjustments to the right of use asset

may be required for items such as initial direct costs or incentives received.

Lease payments on operating leases, including scheduled

increases, are recognized on a straight-line basis over the expected term of the lease.

Lease payments on financing leases are recognized

using the effective interest method.

identifies the lease and non-lease components, determines the consideration in the contract and classifies the lease as operating or financing.

For leases with a term greater than one year, the Company recognizes a liability to make lease payments and an asset representing the

right to use the underlying asset during the lease term at the commencement date of the lease.

Lease liabilities and the corresponding right of use

assets are recorded based on the present value of lease payments to be made over the lease term.

The discount rate used to calculate the

present value is the rate implicit in the lease, or if not readily determinable, the Company’s incremental borrowing rate.

The Company’s

incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar

term an amount equal to the lease payments in a similar economic environment.

Certain adjustments to the right of use asset may be required

for items such as initial direct costs or incentives received.

Lease payments on operating leases, including scheduled increases, are

recognized on a straight-line basis over the expected term of the lease.

Lease payments on financing leases are recognized using the effective

interest method.

Fair Value of Financial Instruments

The carrying amounts of cash,

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

Derivative Financial Instruments

Financial instruments that meet the definition

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

Financial instruments that meet the definition of a

derivative are classified as an asset or liability and measured at fair value on the issuance date and are revalued on each subsequent

balance sheet date.

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when the service has been performed or when the goods have been received.

Accrued liabilities are recorded related to those

expenses for which vendors have not yet billed the Company with respect to services provided and/or materials that it has received.

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 achievement of milestones and other information available to us and are assessed

on a quarterly basis.

Actual results may differ from these estimates and could have a material impact on the Company’s reported

The Company’s historical accrual estimates have not been materially different from its actual costs.

Accrued liabilities are recorded related to those expenses

for which vendors have not yet billed the Company with respect to services provided and/or materials that it has received.

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 achievement of milestones and other information available to us and are assessed on a quarterly

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 its actual costs.

Collaborative Arrangements

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activities performed by collaborators in the period its 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

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.

Patents and Patent Application Costs

Although the Company believes that its patents

and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain.

are, therefore, expensed as general and administrative costs as incurred.

Although the Company believes that its patents and

underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain.

Patent costs are,

therefore, expensed as general and administrative costs as incurred.

Stock-based Compensation

The Company follows the provisions of the FASB

ASC Topic 718, “ Compensation — Stock Compensation ” (“ ASC 718 ”), which requires the measurement

The Company follows the provisions of the FASB ASC

Topic 718, “ Compensation — Stock Compensation ” (“ ASC 718 ”), which requires the measurement

and recognition of compensation expense for all stock-based payment awards.

The fair value of RSUs is based upon the Company’s

closing stock price at the grant date.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options

at the grant date.

The fair value of RSUs is based upon the Company’s closing

stock price at the grant date.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options at

the grant date.

The Black-Scholes valuation model requires the input of valuation assumptions to calculate the value of stock options,

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Stock-based compensation expense is recognized

on a straight-line basis over the requisite service period, which generally represents the vesting period, and commences at the date

of grant based on the fair value of the award.

Stock-based compensation expense recognized in

the consolidated financial statements is based on awards that are ultimately expected to vest.

Accordingly, we are also required to estimate

forfeitures at the time of grant and to revise those estimates in subsequent periods if actual forfeitures differ from estimates.

historical data to estimate pre-vesting award forfeitures and record stock-based compensation expense only for those awards that are expected

Our forfeiture rate estimates are based on an analysis of our actual forfeiture experience, employee turnover behavior, and other

The impact of any adjustments to our forfeiture rates or to the extent that actual forfeitures differ from our estimates, is

recorded as a cumulative adjustment in the period the estimates are revised.

The Company recognizes assets or liabilities for

the deferred tax consequences of temporary differences between the tax basis of assets or liabilities and their reported amounts in the

consolidated financial statements in accordance with the FASB ASC Topic 740, “Accounting for Income Taxes” (“ ASC

These temporary differences will result in taxable or deductible amounts in future years when the reported amounts

of the assets or liabilities are recovered or settled.

Those temporary differences referred to as deferred tax assets and liabilities

are determined at the end of each period using the tax rate expected to be in effect when taxes are actually paid or recovered.

allowances are established if, based on the weight of available evidence, it is more likely than not that all or a portion of a deferred

tax asset will not be realized.

The provision for income taxes, if any, represents the tax payable for the period and the change in deferred

income tax assets and liabilities during the period.

on a straight-line basis over the requisite service period, which generally represents the vesting period, and commences at the date of

grant based on the fair value of the award.

Stock-based compensation expense recognized in the

consolidated financial statements is based on awards that are ultimately expected to vest.

Accordingly, the Company is also required to

estimate forfeitures at the time of grant and to revise those estimates in subsequent periods if actual forfeitures differ from estimates.

The Company uses historical data to estimate pre-vesting award forfeitures and record stock-based compensation expense only for those

awards that are expected to vest.

The Company’s forfeiture rate estimates are based on an analysis of our actual forfeiture experience,

employee turnover behavior, and other factors.

The impact of any adjustments to the Company’s forfeiture rates or to the extent

that actual forfeitures differ from the Company’s estimates, is recorded as a cumulative adjustment in the period the estimates

The Company recognizes assets or liabilities for the

deferred tax consequences of temporary differences between the tax basis of assets or liabilities and their reported amounts in the consolidated

financial statements in accordance with the FASB ASC Topic 740, “Accounting for Income Taxes” (“ ASC 740 ”) .

These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities

are recovered or settled.

Those temporary differences referred to as deferred tax assets and liabilities are determined at the end of

each period using the tax rate expected to be in effect when taxes are actually paid or recovered.

Valuation allowances are established

if, based on the weight of available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized.

The provision for income taxes, if any, represents the tax payable for the period and the change in deferred income tax assets and liabilities

during the period.

The recognition and measurement of benefits related

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Any interest and penalties accrued related

to uncertain tax positions are recorded as tax expense.

Differences between actual results and the Company’s assumptions or changes

in the Company’s assumptions in future periods are recorded in the period they become known.

to uncertain tax positions are recorded as income tax expense.

Differences between actual results and the Company’s assumptions

or changes in the Company’s assumptions in future periods are recorded in the period they become known.

Comprehensive Loss

The Company’s comprehensive loss is equal

to its net loss for all periods presented.

The Company’s comprehensive loss is equal to

its net loss for all periods presented.

Net Loss per Share

Basic net loss per share is computed by dividing

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

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

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RSUs and stock options.

Recent Accounting Pronouncements

In November 2023, 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.

Recently adopted accounting pronouncements

In November 2023, the Financial Accounting Standards Board (“ FASB ”)

issued Accounting Standards Update (“ ASU ”) 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable

Segments,” which aims to improve financial reporting by requiring disclosure of incremental segment information on an annual and

interim basis for all public entities to enable investors to develop more decision-useful financial analyses.

The amendments in this ASU

do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative

thresholds to determine its reportable segments.

This ASU is 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 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.

The Company adopted ASU 2023-07 during the

year ended December 31, 2024, which resulted in the required additional disclosures included in Note 12 to the Company’s consolidated

financial statements.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic

Improvements to Income Tax Disclosures,” which requires public business entities to disclose additional information in specified

categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes.

It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items

exceeds a specified threshold.

In addition to new disclosures associated with the rate reconciliation, the ASU requires information pertaining

to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific

jurisdictions to the extent the related amounts exceed a quantitative threshold.

The ASU also describes items that need to be disaggregated

based on their nature, which is determined by reference to the item’s fundamental or essential characteristics, such as the transaction

or event that triggered the establishment of the reconciling item and the activity with which the reconciling item is associated.

ASU eliminates the historic requirement that entities disclose information concerning unrecognized tax benefits having a reasonable possibility

of significantly increasing or decreasing in the 12 months following the reporting date.

This ASU is effective for annual periods beginning

after December 15, 2024.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for

This ASU should be applied on a prospective basis;

however, retrospective application is permitted.

The Company is currently

evaluating the impact that ASU 2023–09 will have on its consolidated financial statements.

In November 2024, the FASB issued Accounting Standards Update ASU 2024-03,

“Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40):

Disaggregation of Income

Statement Expenses,” which requires additional disclosure about the specific expense categories in the notes to financial statements

at interim and annual reporting periods.

The amendments in this ASU do not change or remove current expense disclosure requirements but

affect where this information appears in the notes to financial statements.

This ASU is effective for annual reporting periods beginning

after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

Upon adoption,

the guidance can be applied prospectively or retrospectively.

The Company is currently evaluating the impact that ASU 2024-03 will have

on its consolidated financial statements.

Collaboration Agreement

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.

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 will recognize its share of costs arising

from research and development activities performed by AgonOx in the Company’s 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 $ 1,115,000

and $ 130,000 of expense in connection with these efforts during the years ended December 31, 2023 and 2022, respectively.

There is approximately $ 2,757,000 of remaining

costs not yet incurred under the Clinical Co-Development Agreement as of December 31, 2023.

Value of Financial Instruments

follows the provisions of the FASB 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:

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.

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

Restricted cash consisted of certificates

of deposit held by financial institutions as collateral for the Company’s corporate credit cards .

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 events.

The carrying amounts of cash,

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

In 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 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 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.

In May 2024, the Company terminated the Clinical Co-Development

Agreement with AgonOx effective immediately.

Effective as of the date of termination, the Clinical Co-Development Agreement and the Company’s

continuing obligations and those of AgonOx thereunder were terminated in their entirety.

The Company no longer is required to provide

financial support for the development costs incurred in the Clinical Co-Development Agreement and the Company is no longer entitled to

future development milestones or royalty payments from AgonOx’s licensing of its DP TIL technology.

The Company will pay to AgonOx

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

Remaining payments to be made

to AgonOx as of December 31, 2024 totaled $34,320, which primarily relate to 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, 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 $ 106,000 and $ 1,115,000

of research and development expense in connection with these efforts during the years ended December 31, 2024 and 2023, respectively.

Property and Equipment

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ended December 31, 2024 and 2023 was $ 2,000 and $ 56,000 , respectively.

In November 2023, the Company decided not to

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

Beginning in April of

2024, we expect to continue operations as a remote business with a small laboratory facility.

Based on this evaluation, the Company

determined that long-lived assets with a carrying amount of $ 126,000

were no longer recoverable and an impairment charge of $ 126,000

was recorded to write those assets down to their fair value.

The Company did no t

record any impairment charges at December 31, 2022.

Accrued Expenses

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Total accrued expenses

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.

The 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 leases space for various corporate and

research purposes.

It is the Company’s policy to apply the provisions of ASC 842 when accounting for arrangements that meet the

criteria to be a lease.

The Company calculates the lease liability as the present value of the lease’s cash flows using the interest

rate implicit in the lease, if determinable.

If the rate implicit in the lease is not determinable, the Company uses its incremental borrowing

The incremental borrowing rate is defined as the rate the Company would have to pay to borrow on a collateralized basis over the

The Company has elected the accounting policy election available under ASC 842 to not record a lease liability for leases

with a term of less than one year.

From April 2014 to March 2024, the Company leased

space that was utilized as its corporate headquarters and primary laboratory.

The lease expired on March 31, 2024.

On March 1, 2024,

the Company commenced a lease for a laboratory facility located at 17 Briden Street, Worcester, Massachusetts.

The lease had an

original expiration date of August

31, 2024 and was subsequently extended through February 28, 2025 .

The Company continues to lease the space on a month-to-month basis.

Monthly rent is approximately $ 2,500 .

The lease for the Company’s corporate headquarters

represents all of its significant lease obligations.

The amounts reported in the 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 amounts recorded in balance sheet

had represented all of its significant lease obligations.

The amounts reported in the 2023 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 amount recorded in balance sheet

Right of use asset

6 unchanged sentences

Operating lease costs included in operating expense

were $ 132,000 for the years ended December 31, 2023 and 2022, respectively.

were $ 58,000 and $ 132,000 for the years ended December 31, 2024 and 2023, respectively.

Cash paid for the amounts included in the measurement

2 unchanged sentences

December 31, 2024 and 2023, respectively.

Future lease payments for our non-cancellable operating

lease and a reconciliation to the carrying amount of the operating lease liability presented in the consolidated balance sheet as of December

31, 2023 is as follows, in thousands:

Schedule of future minimum lease payments

Total lease payments

Imputed interest

Total operating lease liability

Commitments and Contingencies

In February 2021, the

Company entered into the Clinical Co-Development Agreement with AgonOx to develop a T cell-based therapy using the Company’s

lead product candidate, PH-762, and AgonOx’s 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.

In February 2021, the Company

entered into the Clinical Co-Development Agreement with AgonOx to develop a T cell-based therapy using the Company’s lead product

candidate, PH-762, and AgonOx’s 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.

In May 2024, the Company terminated the Clinical Co-Development Agreement with AgonOx effective

Refer to Note 2 for further details on the Clinical Co-Development Agreement with AgonOx.

Refer to Note 6 for more information about the

Company’s obligations under its non-cancellable lease for its corporate headquarters.

In September 2011, the Company entered into

an agreement with Advanced RNA Technologies, LLC (“ Advirna ”), pursuant to which Advirna assigned to the Company

its existing patent and technology rights related to the INTASYL technology in exchange for an annual maintenance fee of $ 100,000 ,

a one-time milestone payment upon the future issuance of the first patent with valid claims covering the assigned patent and

technology rights and the issuance of shares of common stock of the Company equal to 5 %

of the Company’s fully-diluted shares outstanding at the time of issuance.

The one-time milestone payment and the issuance of

shares of common stock of the Company were completed in 2014 and 2012, respectively.

Additionally, the Company is required to pay

low single-digit royalties to Advirna on any licensing revenue received by the Company with respect to future licensing of the

In September 2011, the Company entered into an agreement

with Advanced RNA Technologies, LLC (“ Advirna ”), pursuant to which Advirna assigned to the Company its existing patent

and technology rights related to the INTASYL technology in exchange for an annual maintenance fee of $ 100,000 , a one-time milestone payment

upon the future issuance of the first patent with valid claims covering the assigned patent and technology rights and the issuance of

shares of Common Stock equal to 5 % of the Company’s fully-diluted shares outstanding at the time of issuance.

The one-time milestone

payment and the issuance of shares of Common Stock were completed in 2014 and 2012, respectively.

Additionally, the Company is required

to pay low single-digit royalties to Advirna on any licensing revenue received by the Company with respect to future licensing of the

assigned Advirna patent and technology rights.

To date, any royalties owed to Advirna under the Advirna agreement have been

To date, any royalties owed to Advirna under the Advirna agreement have been minimal.

The Company’s rights under the Advirna agreement

2 unchanged sentences

in the Advirna agreement;

or (ii) the abandonment of the last-to-be abandoned of such patents, unless earlier terminated in accordance

and (ii) the abandonment of the last-to-be abandoned of such patents, unless earlier terminated in accordance

with the provisions of the Advirna agreement.

1 unchanged sentence

technology rights for fields of use outside human therapeutics.

As part of its business, the Company may enter

into licensing agreements with third parties that require milestone and royalty payments based on the progress of the asset through development

As part of its business, the Company may enter into

licensing agreements with third parties that require milestone and royalty payments based on the progress of the asset through development

Milestone payments may be required, for example, upon progress through clinical trials, upon approval of the product by a regulatory

12 unchanged sentences

Year Ending December 31,

The Company applies the disclosure provisions of

the FASB ASC Topic 460, “ Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees

of Indebtedness of Others ” (“ ASC 460 ”), to its agreements that contain guarantee or indemnification

The Company applies the disclosure provisions of the

FASB ASC Topic 460, “ Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of

Indebtedness of Others ” (“ ASC 460 ”), to its agreements that contain guarantee or indemnification clauses.

The Company provides:

(i) indemnifications of varying scope and size to certain investors and other parties for certain

losses suffered or incurred by the indemnified party in connection with various types of third-party claims;

and (ii) indemnifications

of varying scope and size to officers and directors against third-party claims arising from the services they provide to us.

These indemnifications

give rise only to the disclosure provisions of ASC 460.

To date, the Company has not incurred costs as a result of these obligations and

does not expect to incur material costs in the future.

(i) indemnifications of varying scope and size to certain investors and other parties for certain losses suffered

or incurred by the indemnified party in connection with various types of third-party claims;

and (ii) indemnifications of varying scope

and size to officers and directors against third-party claims arising from the services they provide to us.

These indemnifications give

rise only to the disclosure provisions of ASC 460.

To date, the Company has not incurred costs as a result of these obligations and does

not expect to incur material costs in the future.

Accordingly, the Company has not accrued any liabilities in its consolidated financial

statements related to these indemnifications.

From time to time, the Company may become a party

to various legal proceedings and complaints arising in the ordinary course of business.

From time to time, the Company may become a party to

various legal proceedings and complaints arising in the ordinary course of business.

To the Company’s knowledge, it is not currently

6 unchanged sentences

The Company’s Board of Directors (the “ Board ”)

is authorized under the Company’s Amended and Restated Certificate 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.

In November 2022, the Company sold one

share of 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 not convertible into, or exchangeable for, shares of any other class or series of stock or other

securities of the Company;

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;

is authorized under the Company’s Amended and Restated Certificate 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.

In November 2022, the Company sold one share of 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 not convertible into, or exchangeable

for, shares of any other class or series of stock or other securities of the Company;

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;

and was not entitled to receive dividends of any kind.

The Series D Preferred Stock was entitled to 17,500,000

The Series D Preferred Stock is 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.

The terms 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 otherwise required by the General Corporation Law of the State of Delaware.

Under its terms, the outstanding share of Series

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

of Common Stock.

The terms provide that it would be voted, without action by the holder, on any such proposal in the same proportion as

shares of Common Stock are voted.

The Series D Preferred Stock otherwise has no voting rights except as otherwise required by the General

Corporation Law of the State of Delaware.

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 an amendment to the Amended Certificate

to effect a reverse stock split of the Company’s common stock.

The Series D Preferred Stock was redeemed in whole on January 4,

2023, upon the approval by the Company’s stockholders of the Reverse Stock Split.

Upon such redemption, the holder of the Series

D Preferred Stock received consideration of $ 1,750 in cash.

to effect a reverse stock split of Common Stock.

The Series D Preferred Stock was redeemed in whole on January 4, 2023, upon the approval

by the Company’s stockholders of the 2023 1-for-12 reverse stock split.

Upon such redemption, the holder of the Series D Preferred Stock received

consideration of $ 1,750 in cash.

At December 31, 2024, there were no shares of preferred

1 unchanged sentence

Stockholders’ Equity

2023 Financing — In April 2023, the Company completed a registered direct offering and a concurrent private placement of

353,983 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 per share.

Net proceeds to the Company from the

April 2023 Financing were $ 1,538,000 after deducting placement agent fees and offering expenses.

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

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

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

2023 Financing — In June 2023, the Company completed a registered direct offering and a concurrent private placement

of a total of:

233,646 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

The Company raised $ 4 .0 million and $ 7.5 million through

a series of warrants inducements, registered direct offerings, and concurrent private placements during the years ended December 31, 2024

and 2023, respectively.

April 2023 Financing

In April 2023, the Company completed a registered direct

offering and a concurrent private placement of a total of:

353,983 registered shares of 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 ”).

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 per share.

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 191,619 shares of Common Stock that

were previously issued in April 2018 through January 2021, such that each of the amended warrants had an exercise price of $ 5.40 per

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

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

In June 2023, the Company completed a registered direct

offering and a concurrent private placement of a total of:

233,646 registered shares and 72,000 unregistered shares

of 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 ”).

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.

2023 Financing – In 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 existing warrants were originally issued on dates between October 2018 and June 2023 with an

exercise price of $ 5.40 or $ 4.03 per share.

Pursuant to the Inducement Letter Agreement, these warrants were exercised for cash at a reduced

exercise price of $ 1.33 per share in consideration of the Company’s agreement to issue new five and one-half year term Series A

warrants to purchase up to 2,270,320 shares of common stock at an exercise price of $ 1.08 per share and new eighteen month term Series

B warrants to purchase up to 1,990,184 shares of common stock at an exercise price of $ 1.08 per share (collectively, the “ December

2023 Financing ”).

In addition, the Company issued warrants to the placement agent, HCW, in the December 2023 Financing to purchase

a total of 159,769 shares of common stock at an exercise price of $ 1.66 per share.

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 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 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.

proceeds to the Company from the December 2023 financing were $ 2,404,000 after deducting placement agent fees and offering expenses.

Company assessed the amendments to the exercise price of the warrants under the ASC 815 and determined that the amendment to the exercise

price was completed in connection with and contingent on the close of the December 2023 Financing.

The increase in fair value of $ 412,000

related to the modification of the terms of the warrants to induce exercise was recognized as an equity issuance cost and recorded in

additional paid in capital per ASC 815.

The Company first assessed the warrants in the

April 2023 Financing, June 2023 Financing and December 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,

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

December 2023 Financing

In 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 Common Stock.

The existing warrants were originally issued on dates between

October 2018 and June 2023 with an exercise price of $5.40 or $4.03 per share.

Pursuant to the Inducement Letter Agreement,

these warrants were exercised for cash at a reduced exercise price of $1.33 per share in consideration of the Company’s agreement

to issue new five and one-half year term Series A warrants to purchase up to 2,270,320 shares of Common Stock at an exercise

price of $1.08 per share and new eighteen month term Series B warrants to purchase up to 1,990,184 shares of Common Stock

at an exercise price of $1.08 per share (collectively, the “ December 2023 Financing ”).

In addition, the Company

issued warrants to the placement agent, HCW, in the December 2023 Financing to purchase a total of 159,769 shares of Common

Stock at an exercise price of $1.66 per share.

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.

at December 31, 2023, an aggregate of 826,370 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 are deemed

to be prepaid.

The December 2023 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 December 2023 Abeyance Shares are evidenced through the holder’s existing warrants and have

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

Net proceeds to the Company from the December 2023

financing were $ 2,404,000 after deducting placement agent fees and offering expenses.

The Company assessed the amendments to the

exercise price of the warrants under the ASC 815 and determined that the amendment to the exercise price was completed in connection with

and contingent on the close of the December 2023 Financing.

The increase in fair value of $ 412,000 related to the modification of

the terms of the warrants to induce exercise was recognized as an equity issuance cost and recorded in additional paid in capital per

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

shares of Common Stock at a purchase price of $ 0.72 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.

shares of Common Stock were sold by the Company pursuant to the Purchase Agreement prior to termination.

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 Common Stock.

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.

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.

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 year ended December 31, 2024, all of the July 2024 Abeyance Shares were released.

December 19, 2024 Concurrent Registered Direct Offering and Private

On December 19, 2024, the Company entered into a securities

purchase agreement (the “ December 19, 2024 Securities Purchase Agreement ”) with certain institutional and accredited

investors in connection with a registered direct offering (the “ December 19, 2024 Registered Direct Offering ”) and

concurrent private placement (the “ December 19, 2024 Private Placement ” and, together with the December 19, 2024 Registered

Direct Offering, the “ December 19, 2024 Offerings ”).

The December 19, 2024 Offerings closed on December 20, 2024.

net proceeds to the Company from the December 19, 2024 Offerings were approximately $ 900,000 , after deducting placement agent fees and

offering expenses.

Pursuant to the December 19, 2024 Securities Purchase

Agreement, the Company offered and sold in the December 19, 2024 Registered Direct Offering 437,192 shares of Common Stock at a purchase

price of $ 2.635 per share.

In the December 19, 2024 Private Placement, the Company also issued to such institutional and accredited investors

unregistered warrants to purchase up to 437,192 shares of Common Stock (the “ Series E Warrants ”).

Under the terms of

the December 19, 2024 Securities Purchase Agreement, for each share of Common Stock issued in the December 19, 2024 Registered Direct

Offering, an accompanying Series E Warrant was issued to the purchaser thereof.

Each Series E Warrant is exercisable for one share of

Common Stock at an exercise price of $ 2.51 per share and will expire on December 20, 2029 .

The Series E Warrants were offered and sold

at a purchase price of $ 0.125 per Series E Warrant, which purchase price is included in the offering price per share of Common Stock issued

in the December 19, 2024 Registered Direct Offering.

December 23, 2024 Concurrent Registered Direct Offering and Private

On December 23, 2024, the Company entered into a securities

purchase agreement (the “ December 23, 2024 Securities Purchase Agreement ”) with certain institutional and accredited

investors in connection with a registered direct public offering (the “ December 23, 2024 Registered Direct Offering ”)

and concurrent private placement (the “ December 23, 2024 Private Placement ” and, together with the December 23, 2024

Registered Direct Offering, the “ December 23, 2024 Offerings ” and together with the December 19 , 2024 Offerings,

the “December 2024 Offerings”).

The December 23, 2024 Offerings closed on December 24, 2024.

The net proceeds to the Company

from the December 23, 2024 Offerings were approximately $ 480,000 , after deducting placement agent fees and offering expenses.

Pursuant to the December 23, 2024 Securities Purchase

Agreement, the Company offered and sold in the December 23, 2024 Registered Direct Offering 240,000 shares of Common Stock at a purchase

price of $ 2.00 per share.

In the December 23, 2024 Private Placement, the Company also issued to such institutional and accredited investors

unregistered warrants to purchase up to 240,000 shares of Common Stock (the “ Series F Warrants ”).

Under the terms of

the December 23, 2024 Securities Purchase Agreement, for each share of Common Stock issued in the December 23, 2024 Registered Direct

Offering, an accompanying Series F Warrant was issued to the purchaser thereof.

Each Series F Warrant is exercisable for one share of

Common Stock at an exercise price of $ 2.00 per share and will expire on December 24, 2029 .

The Series F Warrants were offered and sold

at a purchase price of $ 0.125 per Series F Warrant, which purchase price is included in the offering price per share of Common Stock issued

in the December 23, 2024 Registered Direct Offering.

In connection with the December 2024 Offerings, the

Company agreed to issue to H.C.

Wainwright & Co., LLC (the “Placement Agent”), or its designees, warrants to purchase

up to an aggregate of 50,789 shares of Common Stock (the “Placement Agent Warrants”), which represent 7.5% of the aggregate

number of shares of Common Stock sold in the December 19, 2024 Registered Direct Offering and the December 23, 2024 Registered Direct

The Placement Agent Warrants have substantially the same terms as the Series E Warrants and the Series F Warrants, except that

(i) 32,789 of the Placement Agent Warrants have an exercise price equal to $3.2938, or 125% of the offering price per share of Common

Stock sold in the December 19, 2024 Registered Direct Offering, and are exercisable until December 19, 2029, and (ii) 18,000 of the Placement

Agent Warrants have an exercise price equal to $2.50, or 125% of the offering price per share of Common Stock sold in the December 23,

2024 Registered Direct Offering, and are exercisable until December 23, 2029.

The Company first assessed the warrants in the April

2023 Financing, June 2023 Financing, December 2023 Financing, July 2024 Financing, and December 2024 Offerings 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, June 2023 Financing, December 2023 Financing, July 2024 Financing, and December 2024 Offerings

were determined to be outside the scope of ASC 480.

The Company then applied and followed the applicable

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on the specific terms of the agreement.

The warrants issued in the April 2023 Financing, June 2023 Financing and December 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’

Based on this determination, the warrants issued in the April 2023 Financing, June 2023 Financing and December 2023 Financing

were classified within stockholders’ equity.

In addition to the December 2023 Financing, the

Company issued 628,935 shares of common stock related to exercises from the pre-funded warrants issued in the June 2023 Financing for

proceeds of $ 630 .

There were no warrants exercised during the year ended December 31, 2022.

The warrants issued in the April 2023 Financing, June 2023 Financing, December 2023 Financing,

July 2024 Financing, and December 2024 Offerings did not meet the definition of a derivative instrument as they are indexed to Common

Stock and classified within stockholders’ equity.

Based on this determination, the warrants issued in the April 2023 Financing,

June 2023 Financing, December 2023 Financing, July 2024 Financing, and December 2024 Offerings were classified within stockholders’

The Company accounted for the 2023 and 2024 placement

agent warrants, issued to H.C.

Wainwright & Co., LLC in conjunction with the financings, as issuance costs related to the offering

of the Company’s shares and warrants.

These warrants meet the criteria for equity classification.

In addition to the December 2023 Financing, on December

6, 2023, the Company issued 628,935 shares

of Common Stock related to exercises from the pre-funded warrants issued in the June 2023 Financing for proceeds of $ 630 .

The following table summarizes the Company’s

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

Schedule of outstanding warrants

Schedule of warrant activity

Exercise Price

Outstanding at December 31, 2022

( 1,932,817 )

Outstanding at December 31, 2023

Outstanding at December 31, 2024

Stock-based Compensation

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2012 Long Term Incentive Plan (the “ 2012 Plan ”).

These plans are administered by our Board and provide for the grant of

incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, RSU awards, performance stock

awards, and performance cash awards.

Upon adoption of the 2020 Plan, shares that remained available for grant under the 2012 Plan and

shares that were subject to outstanding awards under the 2012 Plan were included in the authorized shares available for grant under the

Further, upon adoption of the 2020 Plan, the Company no longer grants new equity awards under the 2012 Plan.

In July 2023,

the Company’s stockholders approved an amendment to the 2020 Plan to increase the number of shares authorized for issuance thereunder

to 231,140 shares of common stock.

As of December 31, 2023, there were 10,084

shares subject to outstanding stock options, 49,683 shares subject to unvested RSUs and 133,574 shares available for future grants.

These plans are administered by our Board and provide for the

grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, RSU awards,

performance stock awards, and performance cash awards.

Upon adoption of the 2020 Plan, shares that remained available for grant

under the 2012 Plan and shares that were subject to outstanding awards under the 2012 Plan were included in the authorized shares

available for grant under the 2020 Plan.

Further, upon adoption of the 2020 Plan, the Company no longer grants new equity awards

under the 2012 Plan.

In July 2024, the Company’s stockholders approved an amendment to the 2020 Plan to increase the number of

shares authorized for issuance thereunder to 110,000,000

shares, consisting of 100,000,000

shares of Common Stock and 10,000,000

shares of Preferred Stock.

As of December 31, 2024, there were 1,126 shares

subject to outstanding stock options and 71,000 shares subject to unvested RSUs.

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.

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 directors 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.

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 the satisfaction of certain service

requirements.

RSUs granted by the Company to employees generally vest 1 year after the grant date.

Upon vesting, each outstanding RSU

will be settled for one share of 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.

The following table summarizes the activity of

the Company’s RSUs for the year ended December 31, 2023:

Summary of RSU activity

The fair value of the RSUs awarded is based upon the Company’s closing stock price at the

grant date and is expensed over the requisite service period.

The following table summarizes the activity of the

Company’s RSUs for the year ended December 31, 2024:

Schedule of RSU activity

Grant Date Fair Value

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Unvested units at December 31, 2023

The weighted-average fair value of RSUs granted

during the years ended December 31, 2023 and 2022 was $ 5.24 and $ 10.08 , respectively.

Stock-based compensation expense related to RSUs

was $ 298,000 and $ 401,000 for the years ended December 31, 2023 and 2022, respectively.

The aggregate fair value of awards that vested

during the years ended December 31, 2023 and 2022 was $ 105,000 and $ 138,000 , which represents the market value of the Company’s

common stock on the date that the RSUs vested.

As of December 31, 2023, the compensation

expense for all unvested RSUs in the amount of approximately $ 212,000 will be recognized in the Company’s results of operations

over a weighted average period of 1.30 years.

Unvested units at December 31, 2024

The weighted-average fair value of RSUs granted during

the years ended December 31, 2024 and 2023 was $ 2.77 and $ 5.24 , respectively.

Stock-based compensation expense related to RSUs was

$ 141,000 and $ 298,000 for the years ended December 31, 2024 and 2023, respectively.

The aggregate fair value of awards that vested during

the years ended December 31, 2024 and 2023 was $ 21,000 and $ 105,000 , which represents the market value of Common Stock on the date that

the RSUs vested.

As of December 31, 2024, the compensation expense

for all unvested RSUs in the amount of approximately $ 142,000 will be recognized in the Company’s results of operations over a weighted

average period of .95 years.

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 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.

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

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

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 ASC 718.

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 stock options during

the year ended December 31, 2022.

For valuing options granted during the year ended December 31, 2023, the following assumptions were

Schedule of assumptions

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 ASC 718.

The dividend yield assumption

is based upon the fact that the Company has never paid cash dividends and presently has no intention of paying cash dividends.

The Company did not grant stock options during the

year ended December 31, 2024.

For valuing options granted during the year ended December 31, 2023, the following assumptions were used:

Schedule of assumptions for option valuation

Risk-free interest rate

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stock option activity for the year ended December 31, 2024:

Summary of stock option activity

Schedule of stock option activity

Balance at December 31, 2022

Balance at December 31, 2023

Balance at December 31, 2024

Exercisable at December 31, 2024

Stock-based compensation expense related to stock

options for the years ended December 31, 2023 and 2022 was $ 5,000 and $ 13,000 , respectively.

As of December 31, 2023, the compensation expense

for all unvested stock options in the amount of $ 6,000 will be recognized in the Company’s results of operations over a weighted

average period of 0.25 years.

There is no income tax benefit as the Company is

currently operating at a loss and an actual income tax benefit may not be realized.

Employee Stock Purchase Plan

The Company has 684 shares authorized for issuance under the 2013 Employee Stock Purchase

Plan (“ ESPP ”).

The ESPP allows employees to contribute a percentage of their cash earnings, subject to certain maximum

amounts, to be used to purchase shares of the Company’s common stock on each of two semi-annual purchase dates at a purchase price

equal to 90% of the market value per share on either (a) the date of grant of a purchase right under the ESPP or (b) the date on which

such purchase right is deemed exercised, whichever is lower.

As of December 31, 2023, 661 shares were reserved for future issuance under

There was no activity under the ESPP for the years ended December 31, 2023 and 2022.

Stock-based compensation expense related to stock options

for the years ended December 31, 2024 and 2023 was $ 6,000 and $ 5,000 , respectively.

As of December 31, 2024, there was no compensation

expense for unvested stock options.

There is no income tax benefit as the Company is currently

operating at a loss and an actual income tax benefit may not be realized.

Compensation Expense Related to Equity Awards

The following table sets forth total stock-based

compensation expense for the years ended December 31, 2023 and 2022, in thousands:

The following table sets forth total stock-based compensation

expense for the years ended December 31, 2024 and 2023, in thousands:

Schedule of stock-based compensation expense

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Total provision for income taxes

The following table presents a reconciliation of

The following table presents a reconciliation of the

statutory tax rate to the Company’s actual effective income tax rate:

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Effective tax rate

The Company recognizes deferred tax assets and

liabilities to reflect the tax effects of temporary differences between the tax basis of assets or liabilities and their reported amounts

in the consolidated financial statements in accordance with ASC 740.

These temporary differences will result in taxable or deductible

amounts in future years when the reported amounts of the assets or liabilities are recovered or settled.

The Company recognizes deferred tax assets and liabilities

to reflect the tax effects of temporary differences between the tax basis of assets or liabilities and their reported amounts in the consolidated

financial statements in accordance with ASC 740.

These temporary differences will result in taxable or deductible amounts in future years

when the reported amounts of the assets or liabilities are recovered or settled.

ASC 740 requires that a valuation allowance be

established when management determines that it is more likely than not that all or a portion of a deferred asset will not be realized.

The Company evaluates the realizability of its net deferred income tax assets and valuation allowances as necessary, at least on an annual

During this evaluation, the Company reviews its forecasts of income in conjunction with other positive and negative evidence surrounding

the realizability of its deferred income tax assets to determine if a valuation allowance is required.

As a result of this evaluation,

the Company has recorded a full valuation allowance against its deferred tax assets as the Company believes it is more likely than not

that the benefit of all of its deferred tax assets will not be realized.

The significant components of the Company’s

deferred tax assets and liabilities are as follows, in thousands:

established when management determines that it is more likely than not that all or a portion of a deferred asset will not be

The Company evaluates the realizability of its net deferred income tax assets and valuation allowances as necessary, at

least on an annual basis.

During this evaluation, the Company reviews its forecasts of income in conjunction with other positive and

negative evidence surrounding the realizability of its deferred income tax assets to determine if a valuation allowance is required.

As a result of this evaluation, the Company has recorded a full valuation allowance against its deferred tax assets as the Company

believes it is more likely than not that the benefit of all of its deferred tax assets will not be realized.

The federal valuation

allowance for the years ended December 31, 2024 and December 31, 2023 was $ 337,000

and $ 2,549,000 , respectively.

decrease of $2,212,000 is primarily due to a reduction in carryforwards during the year ended December 31, 2024.

The significant components of the Company’s deferred

tax assets and liabilities are as follows, in thousands:

Schedule of deferred tax assets and liabilities

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Right of use asset

Other timing differences

Deferred tax liability

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before utilization.

During 2023, the Company completed an assessment

of the available NOL and tax credit carryforwards under Sections 382 and 383 of the Code since the last assessment completed in 2021 and

During 2023, the Company completed an assessment of

the available NOL and tax credit carryforwards under Sections 382 and 383 of the Code since the last assessment completed in 2021 and

concluded that the Company underwent an ownership change in 2023.

8 unchanged sentences

future as a result of subsequent shifts in stock ownership, some of which may be outside of the Company’s control.

At December 31, 2023, the Company had federal

and state NOL carryforwards of approximately $ 2,900,000 and

$ 2,475,000 ,

respectively, to reduce future taxable income.

The utilization of the federal carryforwards as an available offset to future taxable

income is subject to limitations under federal income tax laws.

Under current federal income tax law, federal NOLs generated in tax years

beginning after 2017 may be carried forward indefinitely, but are limited to offset up to 80% of future taxable income.

As of December

31, 2023, all of our federal NOL carryforwards will carryforward indefinitely.

The Company’s available state NOL carryforwards

will begin to expire in 2044,

unless previously utilized.

At December 31, 2023, the Company also had federal

and state research and development credits of approximately $ 227,000

and $ 87,000 ,

respectively.

The federal tax credit carryforwards will begin to expire in 2044

and the state tax credit carryforwards will begin to expire in 2039.

The Company has not recorded any uncertain tax

positions as of December 31, 2023 or 2022.

The Company does no t believe there will be any material changes in its unrecognized tax

positions over the next 12 months.

For 2024, the Company updated its analysis to

determine the annual Section 382 NOL utilization limitation as a result of a change in ownership that occurred on December 20,

As a result of this ownership change, the Company’s NOLs were reduced by $ 6,265,000 and $ 4,893,000 , respectively, and federal

and state research and development tax credits carryforwards were reduced by $ 401,000 and $ 174,000 , respectively.

At December 31, 2024, the Company had federal and state

NOL carryforwards of approximately $ 103,000 and $ 75,000 , respectively, to reduce future taxable income.

The utilization of the federal

carryforwards as an available offset to future taxable income is subject to limitations under federal income tax laws.

Under current federal

income tax law, federal NOLs generated in tax years beginning after December 31, 2017 may be carried forward indefinitely, but are limited

to offset up to 80% of future taxable income.

As of December 31, 2024, all our federal NOL carryforwards will carryforward indefinitely.

The Company’s available state NOL carryforwards will begin to expire in 2045, unless previously utilized.

At December 31, 2024, the Company also had

federal research and development credits of approximately $ 5,000 ,and no

state research and development credits.

federal tax credit carryforwards will begin to expire in 2045.

The Company has not recorded any uncertain tax positions

as of December 31, 2024 or 2023.

The Company does no t believe there will be any material changes in its unrecognized tax positions

over the next 12 months.

The Company has no t incurred any interest or penalties.

In the event that the Company is assessed interest or penalties at some point in the future, they will be classified in the consolidated

financial statements as general and administrative expenses.

financial statements as income tax expense.

The Company files income tax returns in the United

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Net Loss per Share

Basic net loss per share is computed by dividing

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

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

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

Schedule of anti dilutive stock

Schedule of antidilutive shares

Stock options

Unvested restricted stock units

The weighted average number of common shares outstanding as of December 31, 2023 includes the Abeyance Shares from the December 2023

Financing, the exercise of which was prepaid and requires no further consideration for the delivery of the shares of common stock.

these Abeyance Shares are not included in the table above.

Segment Information

The Company is a clinical stage biotechnology company

that has yet to generate operating revenues.

Management has determined that the Company operates with a single operating segment and a

single reporting segment – the Clinical segment.

The Chief Operating Decision Maker (CODM) is the Chief Executive Officer (CEO).

The CEO assesses performance and allocates resources to achieve the Company’s goals based on operating income/(loss) and net income/(loss)

as reported in the Consolidated Statements of Operations.

The measure of segment assets is Total Assets as presented on the Consolidated

Balance Sheets.

All of the Company’s operations occur within the United States.

The following table presents selected financial information

with respect to the Company's single operating segment (in thousands):

Segment information

Research and development expense

General and administrative expense

Impairment loss on property and equipment

Interest income

Interest expense

Subsequent Events

In connection with the Inducement Letter Agreement,

shares were held in abeyance 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.

These Abeyance Shares will be held until

notice is received by the holder that the balance, or portion thereof, may be issued in compliance with the beneficial ownership limitations.

Subsequent to the balance sheet date, 826,370 Abeyance Shares were released and issued.

On January 13, 2025, the Company entered into

a securities purchase agreement (the “ January 13, 2025 Securities Purchase Agreement ”) with certain institutional and

accredited investors in connection with a registered direct public offering (the “ January 13, 2025 Registered Direct Offering ”)

and concurrent private placement (the “ January 13, 2025 Private Placement ” and, together with the January 13, 2025

Registered Direct Offering, the “ January 13, 2025 Offerings ”).

The January 13, 2025 Offerings closed on January 14,

In addition, the Company issued warrants to the placement agent, HCW, to purchase a total of 79,775 shares of Common

Stock at an exercise price of $3.75 per share.

The net proceeds to the Company from the January 13, 2025 Registered Direct Offerings and

the January 13, 2025 Private Placement is approximately $2.9 million, after deducting fees and estimated offering expenses.

Pursuant to the January 13, 2025 Securities Purchase

Agreement, the Company offered and sold in the January 13, 2025 Registered Direct Offering 1,063,670 shares of Common Stock at a purchase

price of $3.00 per share.

In the January 13, 2025 Private Placement, the Company also issued to certain institutional and accredited investors

unregistered warrants to purchase up to 2,127,340 shares of Common Stock (the “ Series G Warrants ”).

Under the terms

of the January 13, 2025 Securities Purchase Agreement, for each share of Common Stock issued in the January 13, 2025 Registered Direct

Offering, two accompanying Series G Warrants were issued to the purchaser thereof.

Each Series G Warrant is exercisable for one share

of Common Stock at an exercise price of $3.00 per share and will expire on January 14, 2027.

On January 14, 2025, the Company entered into

a securities purchase agreement (the “ January 14, 2025 Securities Purchase Agreement ”) with certain institutional and

accredited investors in connection with a registered direct public offering (the “ January 14, 2025 Registered Direct Offering ”)

and concurrent private placement (the “ January 14, 2025 Private Placement ” and together with the January 14, 2025 Registered

Direct Offering, the “ January 14, 2025 Offerings ”).

The January 14, 2025 Offerings closed on January 15, 2025.

the Company issued warrants to the placement agent, HCW, to purchase a total of 62,500 shares of Common Stock at an exercise price of

$3.75 per share.

The net proceeds to the Company from the January 14, 2025 Registered Direct Offering and the January 14, 2025 Private

Placement are approximately $2.2 million, after deducting fees and estimated offering expenses.

Pursuant to the January 14, 2025 Securities Purchase

Agreement, the Company offered and sold in the January 14, 2025 Registered Direct Offering 833,335 shares of Common Stock

at a purchase price of $3.00 per share.

In the January 14, 2025 Private Placement, the Company also issued to such institutional

and accredited investors unregistered warrants to purchase up to 1,666,670 shares of Common Stock (the “ Series H Warrants ”).

Under the terms of the January 14, 2025 Securities Purchase Agreement, for each share of Common Stock issued in the January

14, 2025 Registered Direct Offering, two accompanying Series H Warrants were issued to the purchaser thereof.

Each Series H Warrant

is exercisable for one share of Common Stock at an exercise price of $3.00 per share and will expire on January 15, 2027.

On January 16, 2025, the Company entered into

a securities purchase agreement (the “ January 16, 2025 Securities Purchase Agreement ”) with certain institutional and

accredited investors in connection with a registered direct public offering (the “ January 16, 2025 Registered Direct Offering ”)

and concurrent private placement (the “ January 16, 2025 Private Placement ” and together with the January 16, 2025 Registered

Direct Offering, the “ January 16, 2025 Offerings ”).

The January 16, 2025 Offerings closed on January 17, 2025.

the Company issued warrants to the placement agent, HCW, to purchase a total of 45,750 shares of Common Stock at an exercise price of

$3.75 per share The net proceeds to the Company from the January 16, 2025 Registered Direct Offering and the January 16, 2025 Private

Placement are approximately $1.6 million, after deducting fees and estimated offering expenses.

Pursuant to the January 16, 2025 Securities Purchase

Agreement, the Company offered and sold in the January 16, 2025 Registered Direct Offering 610,000 shares of Common Stock

at a purchase price of $3.00 per share.

In the January 16, 2025 Private Placement, the Company also issued to such institutional

and accredited investors unregistered warrants to purchase up to 1,220,000 shares of Common Stock (the “ Series I Warrants ”).

Under the terms of the January 16, 2025 Securities Purchase Agreement, for each share of Common Stock issued in the January

16, 2025 Registered Direct Offering, two accompanying Series I Warrants were issued to the purchaser thereof.

Each Series I Warrant

is exercisable for one share of Common Stock at an exercise price of $3.00 per share and will expire on January 19, 2027.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data