What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-14 · 239 added, 200 removed, 109 unchanged (80% of the section changed)

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This management’s discussion and analysis

of financial condition as of September 30, 2024 and results of operations for the three and nine months ended September 30, 2024 and 2023

should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the year ended December

31, 2023, which was filed with the Securities and Exchange Commission (the “ SEC ”) on April 1, 2024 (the “2023

of financial condition as of March 31, 2025 and results of operations for the three months ended March 31, 2025 and 2024 should be read

in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024,

which was filed with the Securities and Exchange Commission (the “ SEC ”) on March 31, 2025 (the “2024 Form 10-K”).

This report contains forward-looking statements

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and changes in circumstances that are difficult to predict and many of which are outside of our control.

Risks that could cause actual

results to vary from expected results expressed in our forward-looking statements include, but are not limited to, the impact to our business

and operations by inflationary pressures, rising interest rates, recession fears, the development of our product candidates, our ability

to execute on business strategies, our ability to develop our product candidates with collaboration partners, if any, and the success

of any such collaborations, the timeline and duration for advancing our product candidates into clinical development, results from our

preclinical and clinical activities, the timing or likelihood of regulatory filings and approvals, the success of our efforts to commercialize

our product candidates if approved, our ability to manufacture and supply our product candidates for clinical activities, and for commercial

use if approved, the scope of protection we are able to establish and maintain for intellectual property rights covering our technology

platform, and our ability to obtain future financing.

Our actual results and financial condition may differ materially from those indicated

in the forward-looking statements as a result of a number of important factors, including those identified in our 2023 Form 10-K under

the heading “Risk Factors” and in other filings the Company periodically makes with the SEC.

Therefore, you should not rely

on any of these forward-looking statements.

Forward-looking statements contained in this Quarterly Report on Form 10-Q speak as of the

date hereof and the Company does not undertake to update any of these forward-looking statements to reflect a change in its views or events

or circumstances that occur after the date of this report except as required by law.

Phio is a clinical stage biotechnology

company whose proprietary INTASYL® small interfering RNA gene silencing technology is designed to make immune cells more effective

in killing tumor cells.

We are developing therapeutics that are designed to leverage INTASYL to precisely target specific proteins that

reduce the body’s ability to fight cancer, without the need for specialized formulations or drug delivery systems.

Rationalization

2023, we implemented a cost rationalization program driven by our transition from a research company to a product development company.

This transition resulted in a decision not to renew the lease for our corporate headquarters and primary research facility in Marlborough,

Massachusetts, which expired on March 31, 2024.

As of April 1, 2024, we have continued operations primarily as a remote business with

a laboratory facility in Worcester, Massachusetts.

Additionally, we rationalized research personnel and reduced our headcount by approximately

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

PH-762 is an INTASYL compound

designed to reduce the expression of cell death protein 1 (“ PD-1 ”).

Our actual results and financial

condition may differ materially from those indicated in the forward-looking statements as a result of a number of important factors, including,

but not limited to:

· we are dependent on the success of our INTASYL™

technology, and our product candidates based on this technology, which is unproven and may never lead to approved and marketable products;

· our product candidates are in an early stage

of development and we may fail, experience significant delays, never advance in clinical development or not be successful in our efforts

to identify or discover additional product candidates, which may materially and adversely impact our business;

· disruptions at the FDA, including due to a

reduction in the FDA’s workforce and/or inadequate funding for the FDA, could prevent the FDA from performing normal functions on

which our business relies, which could negatively impact our business;

· if we experience delays or difficulties in

identifying and enrolling subjects in clinical trials, it may lead to delays in generating clinical data and the receipt of necessary

regulatory approvals;

· topline data may not accurately reflect or

may materially differ from the complete results of a clinical trial;

· we rely upon third parties for the manufacture

of the clinical supply for our product candidates;

· our business and operations would suffer in

the event of computer system failures, cyberattacks or a deficiency in our cybersecurity;

· we are dependent on the patents we own and

the technologies we license, and if we fail to maintain our patents or lose the right to license such technologies, our ability to develop

new products would be harmed;

· we will require substantial additional funds

to complete our research and development activities;

· future financing may be obtained through,

and future development efforts may be paid for by, the issuance of debt or equity, which may have an adverse effect on our stockholders

or may otherwise adversely affect our business;

· changes in U.S.

and international trade policies

may adversely impact our business and operating results;

· we may not be able to remain compliant with

the continued listing requirements of The Nasdaq Capital Market;

· the price of our Common Stock has been and

may continue to be volatile.

Therefore, you should not rely on any of these

forward-looking statements.

Forward-looking statements contained in this Quarterly Report on Form 10-Q speak as of the date hereof and

the Company does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances

that occur after the date of this report except as required by law.

Phio Pharmaceuticals Corp.

(“ Phio ,” “ we ,” “ our ” or the “ Company ”) is a clinical stage

biopharmaceutical company whose proprietary INTASYL® self-delivering small interfering RNAi(siRNA) technology is designed to make

immune cells more effective in killing tumor cells.

We are developing therapeutics that are designed to leverage INTASYL to precisely

target specific proteins that reduce the body’s ability to fight cancer, without the need for specialized formulations or drug delivery

We are committed to discovering and developing innovative cancer treatments for patients by creating new pathways toward a cancer-free

In 2023, the Company implemented

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

This resulted in a decision not

to renew the lease for office and laboratory space in Marlborough, Massachusetts, which expired on March 31, 2024.

Beginning in April

2024, we have continued operations as a remote business with a laboratory facility in Worcester, Massachusetts.

Beginning in January 2024,

we rationalized discovery research personnel resulting in an overall headcount reduction by greater than 50%.

Expense reductions have

been redirected to funding the Phase 1b clinical trial with PH-762.

PH-762 is an INTASYL

compound designed to reduce the expression of cell death protein 1 (“ PD-1 ”).

PD-1 is a protein that inhibits T cells’

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

Our preclinical studies have

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

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

Importantly, direct-to-tumor administration

of PH-762 resulted in activity against distant untreated tumors, indicative of a systemic anti-tumor response.

We believe these data further

support the potential for PH-762 to provide a strong local immune response without the dose immune-related adverse effects seen with systemic

antibody therapy.

Our preclinical

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

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

Importantly, direct-to-tumor

administration of PH-762 resulted in activity against distant untreated tumors, indicative of a systemic anti-tumor response.

these data further support the potential for PH-762 to provide a strong local immune response without the dose immune-related adverse

effects seen with systemic antibody therapy.

PH-762 is currently being

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of patients with cutaneous squamous cell carcinoma, melanoma and Merkel cell carcinoma.

The trial is designed to evaluate the safety and

tolerability of neoadjuvant use of intratumorally injected PH-762, assess the tumor response, and determine the dose or dose range for

continued study of PH-762 and is expected to enroll up to 30 patients.

In November 2023, we announced the dosing of the first patient

under a previously cleared Investigational New Drug (“ IND ”) application by the U.S.

The trial (NCT 06014086) is designed to evaluate

the safety and tolerability of neoadjuvant use of intratumorally injected PH-762, assess the tumor response, and determine the dose or

dose range for continued study of PH-762 and is expected to enroll up to 30 patients.

In November 2023, we announced the dosing of the

first patient under a previously cleared Investigational New Drug (“ IND ”) application by the U.S.

Food and Drug Administration.

May 2024, a safety monitoring committee reviewed data from the first dose cohort treated and recommended the escalation to the next dose

concentration.

Five (5) patients with cutaneous carcinomas have enrolled in Cohorts 1 and 2.

Intratumoral injection of PH-762 has been

well tolerated in all patients enrolled in the trial to date.

There were no related adverse events, no serious adverse events, and no

dose limiting toxicities or dose adjustments.

The trial is open for the continued enrollment of patients and expects to complete enrollment

of patients in the third quarter of 2025.

AgonOx Collaboration

Due to INTASYL’s ease

of administration, we have shown that our compounds can easily be incorporated into current adoptive cell therapy (“ ACT ”)

manufacturing processes.

In ACT, T cells are usually taken from a patient's own blood or tumor tissue, grown in large numbers in a laboratory,

and then given back to the patient to help the immune system fight cancer.

By treating T cells with our INTASYL compounds while they are

being grown in the laboratory, we believe our INTASYL compounds can improve these immune cells to make them more effective in killing

A Safety Monitoring Committee (SMC) reviewed data from the first, second and third dose cohorts treated with PH-762 and, in each case,

recommended escalation to the next dose concentration.

To date, a total of 10 patients with cutaneous carcinomas have been treated in

Cohorts 1, 2 and 3.

These cohorts included 9 patients with cutaneous squamous cell carcinoma (cSCC) and 1 patient with metastatic melanoma.

At Day 36 (planned tumor excision), of the 9 patients with cSCC, 4 patients had a pathologic complete response (100% tumor clearance).

One patient had a near complete response (>90% clearance) and 1 patient had a partial response (>50% clearance).

The other 3 cSCC

patients and one metastatic melanoma patient had a pathologic non-response (< 50% clearance).

Patients with pathologic complete response

(100% tumor clearance) may have visual signs of residual scar or subdermal inflammation prior to resection.

No patients, however, exhibited

clinical progression of disease.

To date, there were no dose-limiting toxicities or clinically relevant treatment-emergent adverse effects

in the patients receiving intratumoral PH-762 in this trial.

Moreover, PH-762 has been well tolerated in all enrolled patients in each

escalating dose cohort.

The fourth cohort is currently enrolling patients, and we expect to complete enrollment in the trial in the third

quarter of 2025.Given our intention to focus our efforts and resources on our U.S.

clinical trial with PH-762, we have completed the winding

down process for our first-in-human clinical trial for PH-762 in France, which was limited to the treatment of patients with metastatic

Safety data from the initial cohort of three patients in the French clinical trial were evaluated by a data monitoring committee

in the first quarter of 2023.

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

Due to INTASYL’s

ease of administration, we have shown that our compounds can easily be incorporated into current Adoptive Cell Therapy (ACT) manufacturing

In ACT, T cells are usually taken from a patient's own blood or tumor tissue, grown in large numbers in a laboratory, and then

given back to the patient to help the immune system fight cancer.

By treating T cells with our INTASYL compounds while they are being

grown in the laboratory, we believe our INTASYL compounds can improve these immune cells to make them more effective in killing cancer.

Preclinical data generated in collaboration with AgonOx, Inc.

(“ AgonOx ”), a private company developing a pipeline

of novel immunotherapy drugs targeting key regulators of the immune response to cancer, demonstrated that treating AgonOx’s “double

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

novel immunotherapy drugs targeting key regulators of the immune response to cancer, demonstrated that treating AgonOx’s “double

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

In February 2021, we

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

In February 2021,

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

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

Under the Clinical Co-Development Agreement, we and AgonOx were

working to develop a T cell-based therapy using the our lead product candidate, PH-762, and AgonOx’s DP TIL technology.

We had agreed

to reimburse AgonOx up to $4 million in expenses incurred to conduct a Phase 1 clinical trial of PH-762 treated DP TIL in patients with

advanced melanoma and other advanced solid tumors.

Under the Clinical Co-Development Agreement, we had agreed to

reimburse AgonOx up to $4 million in expenses incurred to conduct a Phase 1 clinical trial of PH-762 treated DP TIL in patients with advanced

melanoma and other advanced solid tumors.

We were also eligible to receive certain future development milestones and low single-digit

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

In May 2024, we terminated

the Clinical Co-Development Agreement with AgonOx, which such termination was effective immediately.

Effective as of the date of termination,

the Clinical Co-Development Agreement and our continuing obligations and those of AgonOx thereunder were terminated in their entirety.

We are no longer required to provide financial support for the development of costs incurred under the Clinical Co-Development Agreement,

and we are no longer entitled to future development milestones or royalty payments from AgonOx’s licensing of its DP TIL technology.

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

payments to be made to AgonOx as of September 30, 2024 total $35,000, 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, we and AgonOx

are coordinating the orderly wind-down of the Phase 1 clinical trial.

Each of us and AgonOx shall be responsible for its own costs and

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

In May 2024, we

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

Effective as of the date of termination, the Clinical

Co-Development Agreement and our and AgonOx’s continuing obligations thereunder were terminated in their entirety.

We are no longer

required to provide financial support for the development costs incurred in the Clinical Co-Development Agreement and we are no longer

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

We paid to AgonOx

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

Pursuant to the terms of the Clinical

Co-Development Agreement, each of the Company and AgonOx were responsible for its own costs and expenses incurred in connection with the

wind-down of the Phase 1 clinical trial.

We made the remaining payment of $34,320, which primarily related to accrued obligations for

patient fees and other miscellaneous costs as of the date of termination to AgonOx on March 21, 2025.

This settled all future obligations

Prior to the termination

of the Clinical Co-Development Agreement with AgonOx, PH-762 treated DP TIL were being evaluated in a Phase 1 clinical trial in the United

States with up to 18 patients with advanced melanoma and other advanced solid tumors by AgonOx.

The primary trial objectives were to

evaluate the safety and to study the potential for enhanced therapeutic benefit from the administration of PH-762 treated DP TIL.

had enrolled three patients.

The first two patients were treated with DP TIL only and the third patient was treated with a combination

of DP TIL and PH-762.

of the Clinical Co-Development Agreement with AgonOx, PH-762 treated DP TIL were being evaluated in a Phase 1 clinical trial in the U.S.

with up to 18 patients with advanced melanoma and other advanced solid tumors by AgonOx.

The primary trial objectives were to evaluate

the safety and to study the potential for enhanced therapeutic benefit from the administration of PH-762 treated DP TIL.

AgonOx had enrolled

three patients.

The first two patients were treated with DP TIL only and a third patient was treated with a combination of DP TIL and

Clinical results for the single patient who received a combination of DP TIL and PH-762 showed tumor size reductions of 65%, 100%

and 81%, respectively, in three melanoma lesions.

PH-894 is an INTASYL compound

that is designed to silence BRD4, a protein that controls gene expression in both T cells and tumor cells, thereby affecting the immune

system as well as the tumor.

Intracellular and/or commonly considered “undruggable” targets, such as BRD4, represent a challenge

for small molecule and antibody therapies.

Therefore, what sets this compound apart is its dual mechanism:

PH-894 suppression of BRD4

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

Preclinical studies conducted

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

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

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

These preclinical data

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

We have completed the IND-enabling studies and are in the process of finalizing the study reports required for an IND submission with

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

Critical Accounting Policies and Estimates

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changes to our critical accounting policies and estimates as compared to those disclosed in our 2024 Form 10-K.

For a discussion of our

critical accounting policies and estimates, refer to “ Management’s Discussion and Analysis of Financial Condition and Results

of Operations - Critical Accounting Policies and Estimates ” in Part II, Item 7 of our Form 10-K for the fiscal year

ended December 31, 2024.

Results of Operations

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses

Operating loss

Comparison of the Three and Nine Months Ended September 30, 2024

Comparison of the Three Months Ended March 31, 2025 and 2024

Operating Expenses

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

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Our research and development programs are focused on the development of immuno-oncology

therapeutics based on our INTASYL therapeutic platform.

therapeutics based on our INTASYL technology.

Since we commenced operations, research and development expenses have been a significant

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Research and development expenses

for the three months ended September 30, 2024 decreased 64% as compared with the three months ended September 30, 2023.

The decrease in

research and development expenses was primarily driven by our cost rationalization measures in transitioning from a research company to

a product development company resulting in a decrease of $286,000 in salary-related costs, including stock-based compensation expense,

and $85,000 due to the wind-down of preclinical studies, and $835,000 primarily related to our former Clinical Co-Development Agreement

from the prior year period.

Research and development expenses

for the nine months ended September 30, 2024 decreased 50% as compared with the nine months ended September 30, 2023.

The decrease in

research and development expenses was primarily driven by our cost rationalization measures in transitioning from a research company to

a product development company resulting in a decrease of $880,000 of expense due to the wind-down of preclinical studies, $1,108,000 in

salary-related costs, including stock-based compensation expense, and $204,000 in lab supplies associated with the reduction in headcount,

in addition to decreases in clinical consulting fees of $350,000 incurred in connection with our IND filing for PH-762 in the prior period,

decreases in clinical trial-related fees for our former PH-762 trials in ACT and European clinical trial, and a decrease of $208,000 in

manufacturing fees for PH-762.

We anticipate our research

and development expenses will remain relatively consistent for the remainder of 2024.

for the three months ended March 31, 2025 decreased 23% as compared with the three months ended March 31, 2024.

The decrease in research

and development expenses was primarily driven by a $106,000 decrease in salary-related costs and a $94,000 decrease in consulting expense.

General and Administrative Expenses

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General and administrative

expenses for the three months ended September 30, 2024 decreased 2% as compared with the three months ended September 30, 2023.

in general and administrative expenses was primarily due to a decrease in salary-related expenses.

administrative expenses for the nine months ended September 30, 2024 decreased 15% as compared with the nine months ended September

The decrease in general and administrative expenses was primarily due to decreases in salary-related expenses due to

reductions in headcount of $196,000, in professional fees for a total of $229,000 primarily related to legal and patent expenses,

and in our D&O insurance premium of $74,000 as compared to the prior year period.

We anticipate our general

and administrative expenses will remain relatively consistent for the remainder of 2024.

expenses for the three months ended March 31, 2025 decreased 7% as compared with the three months ended March 31, 2024.

The Company considers

this to be an immaterial fluctuation.

Liquidity and Capital Resources

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the foreseeable future.

At September 30, 2024, we had cash of $5,390,000 as compared with $8,490,000 at December 31, 2023.

On May 16, 2024, we entered

into a purchase agreement (the “ Purchase Agreement ”) with Triton Funds LP (“ Triton ”), pursuant to

which we agreed to sell, and Triton agreed to purchase, upon our request in one or more transactions, up to 95,833 shares of our common

stock at a purchase of $6.48 per share (the “ Purchase Price ”), for aggregate gross proceeds of up to $621,000.

3, 2024, we terminated the Purchase Agreement with Triton effective immediately.

No shares of common stock were sold by us pursuant to

the Purchase Agreement prior to termination.

In July 2024, we entered into

inducement letter agreements (the “ July 2024 Inducement Letter Agreements ”) with certain holders of certain of our

existing warrants to purchase up to an aggregate of 545,286 shares of the Company’s common stock.

The existing warrants were originally

issued in February 2020 through December 2023, having exercise prices between $324.00 and $9.72 per share.

Pursuant to the July 2024 Inducement

Letter Agreements, these warrants were exercised for cash at a reduced exercise of $5.45 per share in consideration of our 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 ”).

The net proceeds

to us from the July 2024 Financing were approximately $2,646,000, after deducting placement agent fees and offering expenses.

At March 31, 2025, we had cash and cash equivalents of $13,278,000 as compared with $5,382,000 at December 31,

We have limited cash resources,

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our cash flows for the periods indicated, in thousands:

Nine Months Ended

September 30,

Three Months Ended

Net cash used in operating activities

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Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

Net Cash Flow from Operating Activities

Net increase in cash and cash equivalents

Net Cash Used in Operating Activities

Net cash used in operating

activities was $5,741,000 for the nine months ended September 30, 2024 as compared with $8,379,000 for the nine months ended September

The decrease was primarily due to a decrease in net loss of $3,407,000, a decrease in non-cash related items of $298,000 primarily

related to reduced stock-based compensation expense, and a decrease in the changes in operating assets and liabilities of $472,000 primarily

as a result of liabilities owed for the completion of preclinical studies in the prior year period.

Net Cash Flow from Investing Activities

were no investing activities for the nine months ended September 30, 2024 as compared with $5,000 for the nine months ended September

The decrease in net cash used in investing activities was primarily due to laboratory and computer equipment purchases for our

facility during the prior year period .

Net Cash Flow from Financing Activities

activities for the three months ended March 31, 2025 decreased 37% as compared to the three months ended March 31, 2024.

This was primarily

due to a decrease in net loss of $385,000, and a decrease of $350,000 of cash outflows driven by a reduction in prepaid expenses and a

comparative increase in operating liabilities during the three months ended March 31, 2025.

Net Cash Used in Investing Activities

Net cash used in investing

activities for the three months ended March 31, 2025 was approximately $2,000 as compared to the three months ended March 31, 2024 where

net cash used in investing activities was $0.

The increase in net cash used in investing activities was primarily due to computer equipment

purchases during the three months ended March 31, 2025.

Net Cash Flow Provided by Financing Activities

Net cash provided by financing

activities was $2,641,000 for the nine months ended September 30, 2024 as compared with $5,010,000 for the nine months ended September

The decrease was primarily due to the net proceeds from the completion of our financing activities during the prior year period

as compared with the current year period.

activities for the three months ended March 31, 2025 was approximately $9,173,000 as compared to the three months ended March 31, 2024

where net cash used in financing activities was $4,000.

The increase in net cash provided by financing activities was primarily due to

the issuance of common stock and warrants, and the exercise of warrants, both as described in Note 2 of the condensed consolidated financial

Contractual Obligations

Details of our obligations

under the Clinical Co-Development Agreement with our former collaboration partner AgonOx can be found in Note 2 of the condensed consolidated

financial statements.

Outside of the above, there have been no material changes to the contractual obligations as disclosed in our 2023

Funding Requirements

September 30, 2024, we had cash and cash equivalents of $5,390,000 and received estimated net proceeds of $2,646,000 from our July

2024 Financing .

We expect that our cash and cash equivalents will enable us to fund our current

operating plan into Q2 2025.

Due to the difficulty and uncertainty associated with the design and implementation of preclinical studies

and clinical trials, we will continue to assess our cash and cash equivalents and future funding requirements.

However, there is no assurance

that additional funding will be achieved and that we will succeed in our future operations.

We expect to continue to incur substantial

additional operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval

and, subject to obtaining such approval, the eventual commercialization of our product candidates.

If we obtain marketing approval for

any of our product candidates, we will incur significant sales, marketing and manufacturing expenses.

We also expect to continue to incur

significant costs to comply with corporate governance, internal controls and similar requirements associated with operating as a public

reporting company.

cash requirements could differ from management’s projections due to many factors including additional investments in research and

development programs, clinical trial expenses for PH-762 , competing technological and market

developments, general and administrative expenses, and the costs of any strategic acquisitions and/or development of complementary business

opportunities.

expect to seek additional funding to sustain our future operations and while we have successfully raised capital in the past, the ability

to raise capital in future periods is not assured.

We do not know if additional capital will be available when needed or on terms favorable

to us or our stockholders.

Details of our

obligations under the Clinical Co-Development Agreement with our former collaboration partner AgonOx can be found in Note 2 of the

condensed consolidated financial statements.

Outside of the above, there have been no material changes to the contractual

obligations as disclosed in our 2024 Form 10-K.

For a discussion of our critical accounting policies and estimates, refer to

“ Management’s Discussion and Analysis of Financial Condition and Results of Operations - Contractual

Obligations ” in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2024.

Future Funding Requirements

At March 31, 2025, we had

cash and cash equivalents of $13,278,000, which includes aggregate net proceeds of approximately $6,700,000, after deducting fees

and estimated offering expenses, from our January 2025 Financings.

We expect that our cash and cash equivalents will enable us to fund

our current operating plan into the second quarter of 2026.

Due to the difficulty and uncertainty associated with the design and implementation

of preclinical studies and clinical trials, we will continue to assess our cash and cash equivalents and future funding requirements.

However, there is no assurance that additional funding will be achieved and that we will succeed in our future operations.

continue to incur substantial additional operating losses for at least the next several years as we continue to develop our product candidates

and seek marketing approval and, subject to obtaining such approval, the eventual commercialization of our product candidates.

marketing approval for any of our product candidates, we will incur significant sales, marketing and manufacturing expenses.

We also expect

to continue to incur significant costs to comply with corporate governance, internal controls and similar requirements associated with

operating as a public reporting company.

Actual cash requirements could

differ from management’s projections due to many factors including additional investments in research and development programs such

as PH-894, clinical trial expenses for PH-762, competing technological and market developments, general and administrative expenses,

and the costs of any strategic acquisitions and/or development of complementary business opportunities.

The amount of additional capital

we will require will be influenced by many factors, including, but not limited to:

· the scope, progress, results, and costs of clinical

trials of PH-762;

· our expectations regarding the timing and clinical

development of PH-762;

· whether and to what extent we internally fund,

whether and when we initiate, and how we conduct additional pipeline product development programs, including PH-894;

· whether and when we are able to enter into strategic

arrangements for our product candidates and the nature of those arrangements;

· the costs involved in preparing, filing, prosecuting,

maintaining, defending, and enforcing any patent claims;

· changes in our operating plan, resulting in increases

or decreases in our need for capital;

and international trade policies;

· our views on the availability, timing, and desirability

of raising capital.

We expect to seek additional

funding to sustain our future operations and while we have successfully raised capital in the past, the ability to raise capital in future

periods is not assured.

We do not know if additional capital will be available when needed or on terms favorable to us or our stockholders.

Collaboration, licensing or other agreements may not be available on favorable terms, or at all.

to sell our equity securities, we do not know whether and to what extent we will be able to do so, or on what terms.

If available, additional

equity financing may be dilutive to stockholders, debt financing may involve restrictive covenants or other unfavorable terms and dilute

our existing stockholders’ equity, and funding through collaboration, licensing or other commercial agreements may be on unfavorable

terms, including requiring us to relinquish rights to certain of our technologies or products.

If adequate financing is not available

if and when needed, we may delay, reduce the scope of, or eliminate research or development programs, if any, postpone or cancel the pursuit

of product candidates, or otherwise significantly curtail our operations to reduce our cash requirements and extend our capital.

If we seek to sell our equity securities,

we do not know whether and to what extent we will be able to do so, or on what terms.

If available, additional equity financing may be

dilutive to stockholders, debt financing may involve restrictive covenants or other unfavorable terms and dilute our existing stockholders’

equity, and funding through collaboration, licensing or other commercial agreements may be on unfavorable terms, including requiring us

to relinquish rights to certain of our technologies or products.

If adequate financing is not available if and when needed, we may delay,

reduce the scope of, or eliminate research or development programs, if any, postpone or cancel the pursuit of product candidates, or otherwise

significantly curtail our operations to reduce our cash requirements and extend our capital.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis