Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
Or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-36304
PHIO PHARMACEUTICALS CORP.
(Exact name of registrant as specified in its charter)
Delaware
45-3215903
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
11 Apex Drive, Suite 300A PMB 2006, Marlborough, Massachusetts 01752
(Address of principal executive offices and Zip Code)
(508) 767-3861
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value, $0.0001 per share
PHIO
The Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes X No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes X No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). X Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of "large accelerated filer,” "accelerated filer,” "smaller reporting company,” and "emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
X
Smaller reporting company
X
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes X No
The aggregate market value of the registrant’s common stock, $0.0001 par value per share ("Common Stock”), held by non-affiliates of the registrant, based on the closing sale
price of the Common Stock on June 28, 2024, was approximately $3.2 million. Shares of Common Stock held by each officer and director and by each person who is known to own
10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of March 20, 2025 the registrant had 4,778,154 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
PHIO PHARMACEUTICALS CORP.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2024
Page
PART I.
Item 1.
BUSINESS
1
Item 1A.
RISK FACTORS
10
Item 1B.
UNRESOLVED STAFF COMMENTS
22
Item 1C.
CYBERSECURITY
22
Item 2.
PROPERTIES
24
Item 3.
LEGAL PROCEEDINGS
24
Item 4.
MINE SAFETY DISCLOSURES
24
PART II.
Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
25
Item 6.
RESERVED
25
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
25
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
33
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
33
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
34
Item 9A.
CONTROLS AND PROCEDURES
34
Item 9B.
OTHER INFORMATION
35
Item 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
35
PART III.
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
36
Item 11.
EXECUTIVE COMPENSATION
38
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
44
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
46
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
47
PART IV.
Item 15.
EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
48
Item 16.
FORM 10-K SUMMARY
53
Signatures
54
i
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as "intends,” "believes,” "anticipates,” "indicates,” "plans,” "expects,” "suggests,” "may,” "would,” "should,” "potential,” "designed
to,” "will,” "ongoing,” "estimate,” "forecast,” "target,” "predict,” "could,” and similar references, although not all forward-looking statements contain these words. Forward-
looking statements are neither historical facts nor assurances of future performance. These statements are based only on our current beliefs, expectations and assumptions
regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our
control. Our actual results 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;
·
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;
·
we may not be able to remain compliant with the continued listing requirements of The Nasdaq Capital Market; and
·
the price of our Common Stock has been and may continue to be volatile.
The risks set forth above are not exhaustive and additional factors, including those identified in this Annual Report on Form 10-K under the heading "Risk Factors,” for
reasons described elsewhere in this Annual Report on Form 10-K and in other filings Phio Pharmaceuticals Corp. periodically makes with the Securities and Exchange Commission,
could adversely affect our business and financial performance. Therefore, you should not rely unduly on any of these forward-looking statements. Forward-looking statements
contained in this Annual Report on Form 10-K speak as of the date hereof and Phio Pharmaceuticals Corp. 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.
ii
PART I
Unless otherwise noted, (1) the term "Phio” refers to Phio Pharmaceuticals Corp. and our subsidiary, MirImmune, LLC and (2) the terms "Company,” "we,” "us” and
"our” refer to the ongoing business operations of Phio and MirImmune, LLC, whether conducted through Phio or MirImmune, LLC.
ITEM 1.
BUSINESS
Overview
Phio Pharmaceuticals Corp. ("Phio,” "we,” "our” or the "Company”) is a clinical stage biotechnology company whose proprietary INTASYL® small interfering RNA
gene silencing technology is designed to make immune cells more effective in killing tumor cells. We are developing therapeutics that are designed to leverage INTASYL to
precisely target specific proteins that reduce the body’s ability to fight cancer, without the need for specialized formulations or drug delivery systems. We are committed to
discovering and developing innovative cancer treatments for patients by creating new pathways toward a cancer-free future. The Company operates with a single operating
segment and a single reporting segment – the Clinical segment.
PH-762 is an INTASYL compound designed to reduce the expression of cell death protein 1 ("PD-1”). PH-762 is currently being evaluated in a U.S. multi-center Phase
1b dose-escalating clinical trial through the intratumoral injection of PH-762 for the treatment of patients with cutaneous squamous cell carcinoma, melanoma and Merkel cell
carcinoma. The trial (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 May and December 2024, respectively, a Safety Monitoring
Committee (SMC) reviewed data from the first and second dose cohorts treated with PH-762, and in both instances recommended escalation to the next dose concentration. A
total of 7 patients with cutaneous carcinomas have been enrolled in dose cohorts 1 and 2. The second cohort enrolled a total of 4 patients who were diagnosed with cutaneous
squamous cell carcinoma. At Day 36 (tumor excision), while patients in the first cohort had stable disease, a complete response (100% tumor clearance) was reported for 2
patients with cutaneous squamous cell carcinoma. Partial response (90% tumor clearance) was reported for 1 patient with cutaneous squamous cell carcinoma and 1 patient had
stable disease, having not progressed. In this trial to date, intratumoral injection of PH-762 has been well tolerated in all enrolled patients and there were no dose-limiting
toxicities or clinically relevant treatment-emergent adverse effects in the patients receiving intratumoral PH-762. The third dose cohort is fully enrolled and patients in this cohort
are currently in the treatment or follow-up phase of the study. We expect to complete enrollment of all patients in the study in the third quarter of 2025.
INTASYL Technology
Overall, RNA is involved in the synthesis, regulation and expression of proteins. RNA takes the instructions from DNA and turns those instructions into proteins within
the body’s cells. RNA interference, or RNAi, is a biological process that inhibits the expression of genes or the production of proteins. Diseases are often related to the incorrect
protein being made, excessive amounts of a specific protein being made, or the correct protein being made, but at the wrong location or time. RNAi offers a novel approach to drug
development because RNAi compounds can be designed to silence any one of the thousands of human genes, many of which are considered "undruggable” by traditional
therapeutics.
Our development efforts are based on our proprietary INTASYL small interfering RNA technology. It is a patented technology from which specific patented compounds
are developed. INTASYL compounds are comprised of a unique sequence of chemically modified nucleotides (modified small interfering RNA, or siRNAs) that target a broad range
of cell types and tissues. The compounds are designed to effectively silence genes that tumors use to evade the immune system.
1
Since the initial discovery of RNAi, drug delivery has been the primary challenge in developing RNAi-based therapeutics. Other siRNA technologies require cell targeting
chemical conjugates which limit delivery to specific cell types. INTASYL is based on proprietary chemistry that is designed to maximize the activity and adaptability of the
compound and is unique in that it can be delivered to any cell type or tissue without the need to modify the chemistry. This is designed to eliminate the need for formulations or
delivery systems (for example, nanoparticles or electroporation). This provides efficient, spontaneous, cellular uptake with potent, long-lasting intracellular activity.
We believe that our INTASYL technology provides the following benefits including, but not limited to:
·
Ability to target a broad range of cell types and tissues;
·
Ability to target both intracellular and extracellular protein targets;
·
Efficient uptake by target cells, avoiding the need for assisted delivery;
·
Sustained, or long-term, effect in vivo;
·
Ability to target multiple genes in one drug product;
·
Favorable clinical safety profile with local administration; and
·
Readily manufactured under current good manufacturing practices.
Our Pipeline
INTASYL compounds are designed to precisely target specific proteins that reduce the body’s ability to fight cancer, without the need for specialized formulations or
drug delivery systems, and are designed to make immune cells more effective in killing tumor cells. Our efforts are focused on developing immuno-oncology therapeutics using our
INTASYL technology. We have demonstrated preclinical activity against multiple gene targets including PD-1, BRD4, CTLA-4, TIGIT and CTGF and have demonstrated preclinical
efficacy in both direct-to-tumor injection and adoptive cell therapy ("ACT”) applications with our INTASYL compounds.
The following table summarizes our product pipeline. Below we provide important information and context regarding each compound.
2
PH-762
PH-762 is an INTASYL compound designed to reduce the expression of PD-1. PD-1 is a protein that inhibits T cells’ ability to kill cancer cells and is a clinically validated
target in immunotherapy. Decreasing the expression of PD-1 can thereby increase 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.PH-762 is currently being evaluated in a U.S. multi-center
Phase 1b dose-escalating clinical trial through the intratumoral injection of PH-762 for the treatment of patients with cutaneous squamous cell carcinoma, melanoma and Merkel
cell carcinoma. The trial (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, and the trial is currently open for the continued enrollment
of patients. In May and December 2024, respectively, a Safety Monitoring Committee (SMC) reviewed data from the first and second dose cohorts treated with PH-762, and in
both instances recommended escalation to the next dose concentration. A total of 7 patients with cutaneous carcinomas have been enrolled in dose cohorts 1 and 2. The second
cohort enrolled a total of 4 patients who were diagnosed with cutaneous squamous cell carcinoma. At Day 36 (tumor excision), while patients in the first cohort had stable
disease, a complete response (100% tumor clearance) was reported for 2 patients with cutaneous squamous cell carcinoma. Partial response (90% tumor clearance) was reported
for 1 patient with cutaneous squamous cell carcinoma and 1 patient had stable disease, having not progressed.
Intratumoral injection of PH-762 has been well tolerated in all patients enrolled in the trial to date. There were no dose-limiting toxicities or clinically relevant treatment-
emergent adverse effects in the patients receiving intratumoral PH-762. The third dose cohort is fully enrolled and patients in this cohort are currently in the treatment or follow-
up phase of the study. We expect to complete enrollment of all patients in the study in the third quarter of 2025. Due to INTASYL’s ease of administration, we have shown that
our compounds can easily be incorporated into current ACT manufacturing processes. In ACT, immune cells such as T cells, natural killer cells or dendritic cells are taken from a
patient’s or donor’s 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 a
patient’s T cells with our INTASYL compounds while they are being grown outside the body, we believe our INTASYL compounds can improve these immune cells to make
them more effective in killing cancer. Preclinical data generated in collaboration with AgonOx, Inc. ("AgonOx”), a private company developing a pipeline of novel immunotherapy
drugs targeting key regulators of the immune response to cancer, demonstrated that treating AgonOx’s "double positive” tumor infiltrating 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 to develop a T cell-
based therapy using PH-762 and AgonOx’s DP TIL. 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.
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 agreed to pay to AgonOx all monetary 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.
3
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 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 PH-762. 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
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 by T cells.
Preclinical studies conducted have demonstrated that PH-894 resulted in a strong, concentration dependent and durable silencing of BRD4 in T cells and in various cancer
cells. 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 PH-894. As a result of the reprioritization to advance our clinical trial with PH-762 in the U.S., we have elected to defer the IND submission for PH-894.
Synergies With Other Therapies
Preclinical studies with our INTASYL compounds in combination with antibodies resulted in enhanced potency in vivo. The combination of INTASYL with antibodies
may also increase the number of addressable drug targets. Unlike other antibody combination approaches, INTASYL can target multiple protein drug targets in a specific
therapeutic dose, thereby enhancing potency while maintaining a favorable tolerability and safety profile.
We have demonstrated preclinical efficacy with INTASYL in ACT applications. In preclinical studies, INTASYL was shown to enhance the activity of ACT therapies,
including with tumor infiltrating lymphocytes and natural killer cells. As demonstrated in these preclinical studies, INTASYL is easily incorporated into current ACT manufacturing
processes.
Intellectual Property
INTASYL compounds have a single-stranded phosphorothioate region, a short duplex region, and contain a variety of nuclease-stabilizing and lipophilic chemical
modifications that we believe combine the beneficial properties of both conventional RNAi and antisense technologies. We protect our proprietary information by means of United
States and foreign patents, trademarks and copyrights. In addition, we rely upon trade secret protection and contractual arrangements to protect certain of our proprietary
information and products. We have pending patent applications that relate to potential drug targets, compounds we are developing to modulate those targets, methods of making
or using those compounds, and proprietary elements of our drug discovery platform.
We have also obtained rights to various patents and patent applications under licenses with third parties, which require us to pay royalties, milestone payments, or both.
The degree of patent protection for biotechnology products and processes, including ours, remains uncertain, both in the U.S. and in other important markets, because
the scope of protection depends on decisions of patent offices, courts and lawmakers in these countries. There is no certainty that our existing patents or others, if obtained, will
afford us substantial protection or commercial benefit. Similarly, there is no assurance that our pending patent applications or patent applications licensed from third parties will
ultimately be granted as patents or that those patents that have been issued or are issued in the future will stand if they are challenged in court. We assess our license agreements
on an ongoing basis and may from time to time terminate licenses to technology that we do not intend to employ in our technology platforms, or in our product discovery or
development activities.
4
Patents and Patent Applications
We are actively seeking protection for our intellectual property and are prosecuting a number of patents and pending patent applications covering our compounds and
technologies. A combined summary of these patents and patent applications is set forth below in the following table:
Pending
Applications
Issued
Patents
United States
11
32
Canada
2
3
Europe
7
25
Japan
5
10
Other Markets
1
7
Our portfolio includes 77 issued patents, 69 of which cover our INTASYL technology. There are 19 patent families broadly covering both the composition and methods of
use of our self-delivering INTASYL platform technology and uses of our INTASYL compounds targeting immune checkpoints for cancer therapy, as well as cellular differentiation
and metabolism targets for Adoptive Cell Therapy cancer immunotherapies. The INTASYL technology patents are scheduled to expire between 2029 and 2038.
Furthermore, there are 26 patent applications, encompassing what we believe to be important new RNAi compounds and their use as therapeutics, chemical modifications
of RNAi compounds that improve the compounds’ suitability for therapeutic uses (including delivery) and compounds directed to specific targets (i.e., that address specific
disease states). The patents that may issue from these pending patent applications will, if issued, be set to expire between 2029 and 2044, not including any patent term extensions
that may be afforded under the Federal Food, Drug, and Cosmetic Act ("FFDCA”) (and the equivalent provisions in foreign jurisdictions) for any delays incurred during the
regulatory approval process relating to human drug products (or processes for making or using human drug products).
Key Intellectual Property License Agreements
As we develop our own proprietary compounds, we continue to evaluate our in-licensed portfolio as well as the field for new technologies that could be in-licensed to
further enhance our intellectual property portfolio and unique intellectual property position.
In September 2011, the Company entered into an agreement with Advanced RNA Technologies, LLC ("Advirna”), pursuant to which Advirna assigned to us its existing
patent and technology rights related to the INTASYL technology in exchange for an annual maintenance fee, 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. In 2012, we issued shares of Common Stock to Advirna equal to 5% of our fully-diluted shares outstanding at the time of issuance and paid
$350,000 to Advirna upon the issuance of the first patent in 2014. Additionally, we also pay to Advirna an annual maintenance fee of $100,000 and are required to pay low single-
digit royalties on any licensing revenue received by us 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 minimal.
Our rights under the Advirna agreement will expire upon the later of: (i) the expiration of the last-to-expire of the "patent rights” (as defined therein) included in the
Advirna agreement 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.
Further, the Company also granted back to Advirna a license under the assigned patent and technology rights for fields of use outside human therapeutics.
5
Manufacturing and Supply
We do not have any manufacturing capability and therefore we currently rely on and intend to continue to rely on contract manufacturing organizations to produce our
product candidates in accordance with regulatory requirements.
We currently rely on and contract with third parties for the manufacture of drug substances and drug products for use in our preclinical studies and clinical trials in
accordance with regulatory requirements. We expect that we will continue to rely on and contract with third parties to manufacture our product candidates in the future.
Competition
The biotechnology and pharmaceutical industries, including the immuno-oncology field, are a constantly evolving landscape with rapidly advancing technologies and
significant competition. There are a number of competitors in the immuno-oncology field including large and small pharmaceutical and biotechnology companies, academic
institutions, government agencies and other private and public research organizations. Many of these companies are larger than us and have greater financial resources and human
capital to develop competing products.
Government Regulation
Review and Approval of Drugs in the United States
The United States and many other countries extensively regulate the preclinical and clinical testing, manufacturing, labeling, storage, record-keeping, advertising,
promotion, export, marketing and distribution of drugs and biologic products. The U.S. Food and Drug Administration ("FDA”) regulates pharmaceutical and biologic products
under the FFDCA, the Public Health Service Act and other federal statutes and regulations.
To obtain approval of our future product candidates from the FDA, we must, among other requirements, submit data supporting safety and efficacy for the intended
indication as well as detailed information on the manufacture and composition of the product candidate. In most cases, this will require extensive laboratory tests, preclinical
studies and clinical trials. The collection of these data, as well as the preparation of applications for review by the FDA involve significant time and expense. The FDA also may
require post-marketing testing to monitor the safety and efficacy of approved products or place conditions on any approvals that could restrict the therapeutic claims and
commercial applications of these products. Regulatory authorities may withdraw product approvals if we fail to comply with regulatory standards or if we encounter problems at
any time following initial marketing of our products.
The first stage of the FDA approval process for a new biologic or drug involves completion of preclinical studies and the submission of the results of these studies to the
FDA. These data, together with proposed clinical protocols, manufacturing information, analytical data and other information submitted to the FDA through an IND, must become
effective before human clinical trials may commence. Preclinical studies generally involve evaluation of product characteristics and animal studies to assess the efficacy and safety
of the product candidate. Many of these studies must be conducted in accordance with the FDA’s current Good Laboratory Practices, the Animal Welfare Act, and other
applicable regulations.
After the IND becomes effective, a company may commence human clinical trials. These are typically conducted in three sequential phases, but the phases may overlap.
Phase 1 trials consist of testing the product candidate in a small number of patients or healthy volunteers, primarily for safety at one or more doses. Phase 2 trials, in addition to
safety, evaluate the efficacy of the product candidate in a patient population somewhat larger than Phase 1 trials. Phase 3 trials typically involve additional testing for safety and
clinical efficacy in an expanded population at multiple test sites. A company must submit to the FDA a clinical protocol, accompanied by the approval of the Institutional Review
Board ("IRB”) at the institutions participating in the trials, prior to commencement of each clinical trial.
6
To obtain FDA marketing authorization, a company must submit to the FDA the results of the preclinical and clinical testing, together with, among other things, detailed
information on the manufacture and composition of the product candidate, in the form of a new drug application ("NDA”), or, in the case of a biologic, a biologics license
application ("BLA”).
The amount of time taken by the FDA to approve an NDA or BLA will depend upon a number of factors, including whether the product candidate has received priority
review, the quality of the submission and studies presented, the potential contribution that the compound will make in improving the treatment of the disease in question and
agency resources.
The FDA maintains several programs to facilitate and expedite the development and review of applications that are intended for the treatment of a serious or life-
threatening disease or condition that meet certain other criteria, including Fast Track Designation, Breakthrough Designation, Priority Review, and the Accelerated Approval
pathway.
We anticipate that our products will be manufactured by our strategic partners, licensees or other third parties. Before approving an NDA or BLA, the FDA will inspect
the facilities at which the product is manufactured and will not approve the product unless the manufacturing facilities are in compliance with the FDA’s current good
manufacturing practice regulations ("cGMP”), which are regulations that govern the manufacture, holding and distribution of a product. Manufacturers of biologics also must
comply with the FDA’s general biological product standards. Our manufacturers also will be subject to regulation under the Occupational Safety and Health Act, the Nuclear
Energy and Radiation Control Act, the Toxic Substance Control Act and the Resource Conservation and Recovery Act and other applicable environmental statutes. Following
approval, the FDA and certain state agencies periodically inspect drug and biologic manufacturing facilities to ensure continued compliance with the cGMP. Our manufacturers will
have to continue to comply with those requirements. Failure to comply with these requirements subjects the manufacturer to possible legal or regulatory action, such as
suspension of manufacturing or recall or seizure of product. Adverse patient experiences with the product must be reported to the FDA and could result in the imposition of
marketing restrictions through labeling changes or market removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if
problems concerning safety or efficacy of the product occur following approval.
The labeling, advertising, promotion, marketing and distribution of a drug or biologic product also must be in compliance with FDA and Federal Trade Commission
requirements which include, among others, standards and regulations for off-label promotion, industry sponsored scientific and educational activities, promotional activities
involving the internet, and direct-to-consumer advertising. We also will be subject to state and local requirements governing the manufacturing and distribution of pharmaceutical
products. In addition, we will be subject to a variety of federal, state and local regulations relating to the use, handling, storage and disposal of hazardous materials, including
chemicals and radioactive and biological materials. In addition, we will be subject to various laws and regulations governing laboratory practices and the experimental use of
animals. In each of these areas, failure to comply with the applicable requirements could result in administrative or judicial enforcement action, which could include refusal to permit
clinical trials, refusal to approve an application, withdrawal of an approval, issuance of a warning letter, product recall, product seizure, suspension of production or distribution,
fines, refusals of government contracts, and restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect
on us.
In the future, we may also be subject to a variety of regulations governing clinical trials and sales of our products outside the U.S. Whether or not FDA approval has been
obtained, approval of a product candidate by the comparable regulatory authorities of foreign countries and regions must be obtained prior to the commencement of marketing the
product in those countries. The approval process varies from one regulatory authority to another and the time may be longer or shorter than that required for FDA approval. In the
European Union, the United Kingdom, Canada and Australia, regulatory requirements and approval processes are similar, in principle, to those in the U.S.
7
European Union Data Laws for Review and Approval of Drugs in the European Union Including France
The collection and use of personal health data and other personal information in the European Union ("EU”) is governed by the provisions of the General Data Protection
Regulation ("GDPR”), which came into force in May 2018, and related implementing laws in individual EU Member States. In addition, following the United Kingdom’s ("UK”)
formal departure from the EU on January 31, 2020, and the end of the transition period on December 31, 2020, the UK has become a "third country” for the purposes of EU data
protection law. A "third country” is a country other than the EU Member States and the three additional European Economic Area countries (Norway, Iceland and Liechtenstein)
that have adopted a national law implementing the GDPR. However, the trade and cooperation agreement ("TCA”) entered into between the EU and UK following the end of the
transition period includes a provision, whereby the transfer of personal data from the EU to the UK will not be considered as a transfer to a "third country” for a period of four
months starting from the entry into force of the TCA. This period will be extended by two further months, unless the EU or the UK objects. Under the GDPR, personal data can
only be transferred to third countries in compliance with specific conditions for cross-border data transfers. Appropriate safeguards are required to enable transfers of personal
data from the EU Member States. This status has a number of significant practical consequences, in particular for international data transfers, competent supervisory authorities
and enforcement of the GDPR. The GDPR increased responsibility and liability in relation to personal data that we process.
The GDPR imposes a number of strict obligations and restrictions on the ability to process (processing includes collection, analysis and transfer of) personal data,
including health data from clinical trials and adverse event reporting. The GDPR also includes requirements relating to the consent of the individuals to whom the personal data
relates, the information provided to the individuals prior to processing their personal data or personal health data, notification of data processing obligations to the national data
protection authorities and the security and confidentiality of the personal data. The GDPR also prohibits the transfer of personal data to countries outside of the EU that are not
considered by the EU to provide an adequate level of data protection, except if the data controller meets very specific requirements. These countries include the United States, and
following the end of the six month period as laid out in the TCA, it may include the UK if no adequacy decision is given prior to this. Following the Schrems II decision of the Court
of Justice of the European Union on July 16, 2020, there is uncertainty as to the general permissibility of international data transfers under the GDPR. In light of the implications of
this decision we may face difficulties regarding the transfer of personal data from the EU to third countries. The European Data Protection Board has adopted draft
recommendations for data controllers and processors who export personal data to third countries regarding supplementary measures to ensure compliance with the GDPR when
transferring personal data outside of the EU. These recommendations were submitted to public consultation until December 21, 2020, however it is unclear when and in which form
these recommendations will be published in final form.
Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States may result in significant monetary fines, other
administrative penalties and a number of criminal offenses (punishable by uncapped fines) for organizations and in certain cases their directors and officers as well as civil liability
claims from individuals whose personal data was processed. Data protection authorities from the different EU Member States may still implement certain variations, enforce the
GDPR and national data protection laws differently, and introduce additional national regulations and guidelines, which adds to the complexity of processing personal data in the
EU. Guidance developed at both EU level and at the national level in individual EU Member States concerning implementation and compliance practices are often updated or
otherwise revised.
There is, moreover, a growing trend towards required public disclosure of clinical trial data in the EU which adds to the complexity of obligations relating to processing
health data from clinical trials. Such public disclosure obligations are provided in the new EU Clinical Trials Regulation, EMA disclosure initiatives and voluntary commitments by
industry. Failing to comply with these obligations could lead to government enforcement actions and significant penalties against us, harm to our reputation, and adversely impact
our business and operating results. The uncertainty regarding the interplay between different regulatory frameworks, such as the Clinical Trials Regulation and the General Data
Protection Regulation, further adds to the complexity that we face with regard to data protection regulation.
Environmental Compliance
Our research and development activities involve the controlled use of potentially harmful biological materials as well as hazardous materials, chemicals and various
radioactive compounds. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specific waste
products. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-
borne pathogens and the handling of bio-hazardous materials. The cost of compliance with these laws and regulations could be significant and may adversely affect capital
expenditures to the extent we are required to procure expensive capital equipment to meet regulatory requirements. However, to date, compliance with such environmental laws and
regulations has not had a material impact on our capital expenditures.
8
Human Capital Management
As of December 31, 2024, we had five full-time employees. One employee utilizes a rented lab space, and the other four employees are primarily remote. None of our
employees are represented by a labor union or covered by a collective bargaining agreement, nor have we experienced any work stoppages.
We continually evaluate our business needs and weigh the use of in-house expertise and capacity with outsourced expertise and capacity. We currently outsource the
functions of our accounting and finance department to a third-party consulting organization. We currently outsource substantially all preclinical and clinical trial work to third
party contract research organizations and drug manufacturing contractors.
Our ability to identify, attract, retain and integrate additional qualified key personnel is also critical to our success and the competition for skilled research, product
development, regulatory and technical personnel is intense. To attract qualified applicants, we offer a total rewards package consisting of base salary and cash target bonus, a
comprehensive benefit package and equity compensation. Bonus opportunity and equity compensation increase as a percentage of total compensation based on level of
responsibility. Actual bonus payouts are based on performance.
A majority of Phio’s employees have obtained advanced degrees in their professions and we support our employees’ further development with individualized
development plans, mentoring, coaching, group training, and conference attendance.
Corporate Information
Effective July 5, 2024, the Company completed a 1-for-9 reverse stock split of the Company’s outstanding Common Stock, including reclassifying an amount equal to
the reduction in par value to additional paid-in capital. The reverse stock split did not reduce the number of authorized shares of the Company’s common or preferred stock. All
share and per share amounts have been adjusted to give effect to the reverse stock split.
We were incorporated in the state of Delaware in 2011 as RXi Pharmaceuticals Corporation. On November 19, 2018, we changed our name to Phio Pharmaceuticals Corp., to
reflect our transition from a platform company to one that is fully committed to developing groundbreaking immuno-oncology therapeutics.
In 2023, we implemented a cost rationalization program driven by our 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. Our executive offices are located at 11 Apex Drive, Suite 300A PMB 2006, Marlborough, Massachusetts 01752 and
our telephone number is (508) 767-3861.
The Company’s website address is http://www.phiopharma.com. We make available on our website, free of charge, copies of our annual reports on Form 10-K, our
quarterly reports on Form 10-Q and our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act”) as soon as reasonably practicable after these reports are filed electronically with, or otherwise furnished to, the Securities
and Exchange Commission (the "SEC”). We also make available on our website the charters of our audit, compensation, nominating and governance committees, as well as our
corporate code of ethics and conduct.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding Phio and other issuers that file electronically
with the SEC. The SEC’s website address is http://www.sec.gov. The contents of this website, and our website, are not incorporated by reference into this report and should not be
considered to be part of this report.
9
ITEM 1A.
RISK FACTORS
Risks Relating to Our Business and Industry
We are dependent on the success of our INTASYL technology, and our product candidates based on this platform, which is unproven and may never lead to approved
and marketable products.
Our efforts have been focused on the development of product candidates based on our INTASYL technology. We have invested, and we expect to continue to invest,
significant financial resources and efforts developing our product candidates. Our ability to eventually generate revenue is highly dependent on the successful development,
regulatory approval and commercialization of our INTASYL product candidates by us or by collaborative partners, which may not occur for the foreseeable future, if ever, and is
highly uncertain and depends on a number of factors, many of which are beyond our control. Therefore, it is difficult to accurately predict challenges we may face with our product
candidates as they move through the discovery, preclinical and clinical development stages. We will spend large amounts of money developing our INTASYL technology and may
never succeed in obtaining regulatory approval. In addition, our research methodology may be unsuccessful in identifying product candidates and results from preclinical studies
and clinical trials may not predict the results that will be obtained in later phase trials of our product candidates or our product candidates may interact with patients in unforeseen
or harmful ways that may make it impractical or impossible to manufacture, receive regulatory approval or commercialize. If we are not successful in bringing an INTASYL product
candidate to market, it will negatively impact our business and financial condition and we may not be able to identify and successfully implement an alternative product
development strategy.
Our product candidates are in an early stage of development and we may fail, experience significant delays, never advance clinical development or not be successful
in our efforts to identify or discover additional product candidates, which may materially and adversely impact our business.
Our success depends heavily on the successful development of our product candidates, which may never occur. Our product candidates, which are in early stages of
development, could be delayed, not advance into the clinic, or unexpectedly fail at any stage of development. Our ability to identify, develop and commercialize product candidates
is dependent on extensive preclinical and other non-clinical tests in order to support an IND in the United States, or the equivalent with regulatory authorities in other jurisdictions,
if applicable. These research programs to identify new product candidates require substantial financial and human resources, are difficult to design and can take many years to
complete.
We cannot be certain of the outcome of our research studies and clinical trials and the results from these studies and clinical trials may not predict the results that will be
obtained in later stages of development and we may focus our efforts and resources on product candidates that may prove to be unsuccessful. There is no assurance that we will
be able to successfully develop our product candidates, and we may forego opportunities with certain product candidates or for indications that later prove to have greater
commercial potential. If we are not able to successfully develop our product candidates, we may be forced to abandon or delay our development efforts, which may materially and
adversely affect our business, financial condition, and results of operations.
Further, the FDA may not accept the results of our preclinical studies or clinical trials and may require us to complete additional studies or impose stricter approval
conditions than we expect, which could impact the value of a particular program, the approvability or commercialization of the particular product candidate or product and our
Company in general. Because of these factors, it is difficult to predict the time and cost of the development of our product candidates. Any delay or failure in obtaining required
approvals may prevent us from completing our preclinical studies or clinical trials and could have a material adverse effect on our ability to initiate or commercialize drug or biologic
candidate on a timely basis, or at all. Additionally, preclinical studies and clinical trials are lengthy and expensive and if our cash resources become limited, we may not be able to
commence, continue or complete such preclinical studies or clinical trials.
10
If we experience delays or difficulties in identifying and enrolling patients in clinical trials, it may lead to delays in generating clinical data and the receipt of
necessary regulatory approvals.
Clinical trials of a new drug or biologic candidate require the enrollment of a sufficient number of patients, including patients who are suffering from the disease or
condition the drug or biologic candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many factors, and delays in patient
enrollment can result in increased costs and longer development times, which could materially and adversely impact our business and financial condition. We may experience
slower than expected patient enrollment in our current or future clinical trials. In addition, clinical trials for drug or biologic candidates that treat the same indications as our product
candidates may result in patients who would otherwise be eligible for our clinical trials instead enrolling in clinical trials for other drug or biologic candidates.
Topline data may not accurately reflect or may materially differ from the complete results of a clinical trial.
From time to time, we may publicly disclose topline or interim data from our clinical trials based on a preliminary analysis of then-available data, of which the results,
related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular trial. We also make assumptions, estimations,
calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. Preliminary observations
made in early stages of clinical trials are not necessarily indicative of results that will be obtained when full data sets are analyzed or in subsequent clinical trials. As a result,
topline data may differ from future results from the same studies or different conclusions may qualify such results once additional data has been received and evaluated. Topline or
interim data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data that we publicly disclose
and should be viewed with caution until the complete data is available. If the topline data we report differs from future analysis of results, or if others, including regulatory
authorities, disagree with the conclusions reached, our business, financial condition, and results of operations could be materially and adversely affected.
We rely upon third-parties to conduct our clinical trials and other studies for our product candidates, and if they do not successfully fulfill their obligations, the
development of our product candidates may be materially impacted.
We rely upon third-party CROs, medical institutions, collaborators, clinical investigators, consultants and other third-parties to support and conduct our clinical trials and
we rely on these third-party CROs for the execution of certain of our preclinical studies and expect to continue to do so. Because we rely on these third-parties, we cannot
necessarily control the timing, quality of work or amount of resources that our contract partners will devote to these activities. We, our collaborators, and our CROs are responsible
for ensuring that our clinical trials are conducted in accordance with applicable regulations and protocols. If we, our collaborators, or our CROs fail to comply with these applicable
regulations, the FDA may not accept these data and may require us to complete additional preclinical studies and clinical trials, which could result in significant additional costs
and delays to us.
As we only control certain aspects of their activities, we cannot guarantee that these partners will fulfill their obligations to us under these arrangements. If these third-
parties do not successfully carry out their responsibilities, as well as within a timely fashion, our clinical trials and preclinical studies may be delayed, unsuccessful or otherwise
adversely affected. If we have to enter into alternative arrangements it may delay or adversely affect the development of our product candidates and our business operations. This
could be difficult, costly or impossible, and our preclinical studies or clinical trials may need to be extended, delayed, terminated or repeated, and we may not be able to obtain
regulatory approval in a timely fashion, or at all, for the applicable drug or biologic candidate, or to commercialize such drug or biologic candidate being tested in such studies or
trials.
11
Changes in U.S. and international trade policies may adversely impact our business and operating results.
From time to time, proposals are made to significantly change existing trade agreements and relationships between the U.S. and other countries. In recent years, the U.S.
government has implemented substantial changes to U.S. trade policies, including import restrictions, increased import tariffs and changes in U.S. participation in multilateral trade
agreements. Because some of our vendors, manufactures and suppliers are located in other foreign countries, we are exposed to the possibility of product supply disruption and
increased costs in the event of changes in the policies, laws, rules and regulations of the United States or foreign governments, as well as political unrest or unstable economic
conditions in foreign countries. The U.S. government has indicated its intent to adopt a new approach to trade policy and in some cases to renegotiate, or potentially terminate,
certain existing bilateral or multi-lateral trade agreements. For example, on February 1, 2025, President Donald Trump signed executive orders imposing a 25% tariff on certain
imports from Mexico and Canada, and a 10% tariff on certain imports from China, which were to take effect on February 4, 2025. President Donald Trump also announced a plan for
reciprocal tariffs which are to take effect on April 2. Our supply may in the future be subject to these tariffs, which could increase our manufacturing costs and could make our
products, if successfully developed and approved, less competitive than those of our competitors whose inputs are not subject to these tariffs. We may otherwise experience
supply disruptions or delays, and our suppliers may not continue to provide us with clinical supply in our required quantities, to our required specifications and quality levels or at
attractive prices. Such disruption could have adverse effects on the development of our product candidates and our business operations.
A number of different factors could prevent us from advancing into clinical development, obtaining regulatory approval, and ultimately commercializing our
product candidates on a timely basis, or at all.
Before obtaining regulatory approval for the sale of any drug or biologic candidate, we must conduct extensive preclinical tests and successful clinical trials to
demonstrate the safety and efficacy of our product candidates in humans. Before human clinical trials may commence, we must submit to the FDA an IND. An IND involves the
completion of preclinical studies and the submission of the results, together with proposed clinical protocols, manufacturing information, analytical data and other data in the IND
submission. The FDA may require us to complete additional preclinical studies or disagree with our clinical trial study design. Also, animal models may not exist for some of the
disease areas we choose to develop our product candidates for. As a result, our clinical trials may be delayed or we may be required to incur more expense than we anticipated.
Clinical trials require the review and oversight of IRBs, which approve and continually review clinical investigations and protect the rights and welfare of patients. Before
our clinical trials can begin, we must also submit to the FDA a clinical protocol accompanied by the approval of the IRB at the institution(s) participating in the clinical trial. An
inability or delay in obtaining IRB approval could prevent or delay the initiation and completion of our clinical trials, and the FDA may decide not to consider any data or
information derived from a clinical investigation not subject to initial and continuing IRB review and approval.
Preclinical studies and clinical trials are lengthy and expensive, and their outcome is highly uncertain. Historical failure rates are high due to a number of factors, such as
safety and efficacy of drug or biologic candidates. We, our collaborators, the FDA, or an IRB may suspend clinical trials of a drug or biologic candidate at any time for various
reasons, including if we or they believe the patients participating in such trials are being exposed to unacceptable health risks. Among other reasons, adverse side effects of a drug
or biologic candidate on patients in a clinical trial could result in the FDA suspending or terminating the clinical trial and refusing to approve a particular drug or biologic candidate
for any or all indications of use.
12
An additional number of factors could affect the timing, cost or outcome of our drug development efforts, including the following:
·
Delays in filing or acceptance of INDs, NDAs, or BLA for our product candidates;
·
Difficulty in securing centers to conduct clinical trials;
·
Conditions imposed on us by the FDA regarding the scope or design of our clinical trials;
·
Problems in engaging IRBs to oversee trials or problems in obtaining or maintaining IRB approval of studies;
·
Difficulty in enrolling patients in conformity with required protocols or projected timelines;
·
Third-party contractors failing to comply with regulatory requirements or to meet their contractual obligations to us in a timely manner;
·
Our drug or biologic candidates having unexpected and different chemical and pharmacological properties in humans than in laboratory testing and interacting with
human biological systems in unforeseen, ineffective or harmful ways;
·
The need to suspend or terminate clinical trials, for example, if the participants are being exposed to unacceptable health risks;
·
Insufficient or inadequate supply or quality of our product candidates or other necessary materials necessary to conduct our clinical trials;
·
Effects of our product candidates not having the desired effects or including undesirable side effects or the product candidates having other unexpected
characteristics;
·
The cost of our clinical trials being greater than we anticipate;
·
Negative or inconclusive results from our clinical trials or the clinical trials of others for similar product candidates or inability to generate statistically significant data
confirming the efficacy of the product being tested;
·
Changes in the FDA’s requirements or expectations for testing during the course of that testing;
·
Reallocation of our limited financial and other resources to other clinical programs; and
·
Adverse results obtained by other companies developing similar drugs.
A failure of any preclinical study or clinical trial can occur at any stage of testing. Any delay or failure in obtaining required approvals may prevent us from completing our
preclinical studies or clinical trials and could have a material adverse effect on our ability to initiate or commercialize any drug or biologic candidate on a timely basis, or at all.
Additionally, preclinical studies and clinical trials are lengthy and expensive and if our cash resources become limited we may not be able to commence, continue or complete our
clinical trials, which could have a material impact on our business, financial condition, and results of operations.
13
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.
The ability of the FDA to review and approve new products or review other regulatory submissions can be affected by a variety of factors, including statutory, regulatory
and policy changes, inadequate government budget and funding levels, a reduction in the FDA’s workforce and its ability to hire and retain key personnel. Disruptions at the FDA
and other agencies may also increase the time to meet with and receive agency feedback, review and/or approve our submissions, conduct inspections, issue regulatory guidance,
or take other actions that facilitate the development, approval and marketing of regulated products, which would adversely affect our business. In addition, government proposals
to reduce or eliminate budgetary deficits may include reduced allocations to the FDA and other related government agencies. For example, the current President Trump
administration (the "Trump Administration”) recently established the Department of Government Efficiency, which implemented a federal government hiring freeze and announced
certain additional efforts to reduce federal government employee headcount and the size of the federal government. It is unclear how these executive actions or other potential
actions by the Trump Administration or other parts of the federal government will impact the FDA or other regulatory authorities that oversee our business. These budgetary
pressures may reduce the FDA’s ability to perform its responsibilities. If a significant reduction in the FDA’s workforce occurs, the FDA’s budget is significantly reduced or a
prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions or take other actions critical
to the development or marketing of our products, if approved, which could have a material adverse effect on our business.
We are subject to significant competition and may not be able to compete successfully.
The biotechnology and pharmaceutical industries are intensely competitive, contain a high degree of risk and there are many other companies actively engaged in the
discovery, development and commercialization of products that may compete with our product candidates. Many of our competitors have substantially greater experience and
greater research and development capabilities, staffing, financial, manufacturing, marketing, technical and other resources than us, and we may not be able to successfully compete
with them. These companies include large and small pharmaceutical and biotechnology companies, academic institutions, government agencies and other private and public
research organizations.
In addition, even if we are successful in developing our product candidates, in order to compete successfully we may need to be first to market or to demonstrate that our
products are superior to therapies based on different technologies. Some of our competitors may develop and commercialize products that are introduced to market earlier than our
product candidates or on a more cost-effective basis. A number of our competitors have already commenced clinical testing of product candidates and may be more advanced than
we are in the process of developing such product candidates. If we are not first to market or are unable to demonstrate superiority, on a cost-effective basis or otherwise, any
products for which we are able to obtain approval may not be successful.
We also face competition acquiring technologies complementary to our INTASYL technology. Further, we may face competition with respect to product efficacy and
safety, ease of use and adaptability to modes of administration, acceptance by physicians, timing and scope of regulatory approvals, reimbursement coverage, price and patent
position, including dominant patent positions of others. If we are not able to successfully obtain regulatory approval or commercialize our product candidates, we may not be able
to establish market share and generate revenues from our technology.
If we fail to attract, hire and retain qualified personnel, we may not be able to design, develop, market or sell our products or successfully manage our business.
We have a small core management team and are particularly dependent on them. Accordingly, our business prospects are dependent on the principal members of our
executive team, the loss of whose services could make it difficult for us to manage our business successfully and achieve our business objectives. While we have entered into an
employment agreement with our Chief Executive Officer, he could leave at any time, in addition to our other employees, who are all "at will” employees. Our ability to identify,
attract, retain and integrate additional qualified key personnel is also critical to our success. Competition for skilled research, product development, regulatory and technical
personnel is intense, and we may not be able to recruit and retain the personnel we need. The loss of the services of any key personnel, or our inability to hire new personnel with
the requisite skills, could restrict our ability to develop our product candidates.
14
We are subject to potential liabilities from clinical testing and future product liability claims.
The use of our product candidates in clinical trials and, if any of our product candidates receive regulatory approval, the sale of our product candidates for commercial use
exposes us to the risk of product liability claims. Product liability claims may be brought against us by patients, healthcare providers, consumers or others who come into contact
with our product candidates or approved products. We have, and will seek to obtain, clinical trial insurance for current and any future clinical trials that we conduct, as well as
liability insurance for any products that we market. However, there is no assurance that we will be able to obtain insurance in the amounts we seek, or at all. We anticipate that
licensees who develop our products will carry liability insurance covering the clinical testing of our product candidates and the marketing of those product candidates, if approved.
There is no assurance, however, that any insurance maintained by us or our licensees will prove adequate in the event of a claim against us. If we cannot successfully defend
against product liability claims, we could incur substantial liabilities. Even if claims asserted against us are unsuccessful, they may divert management’s attention from our
operations and we may have to incur substantial costs to defend such claims. Any of these outcomes could materially impact our business and financial condition.
We rely upon third parties for the manufacture of the clinical supply for our product candidates.
We rely on third-party suppliers and manufacturers to provide us with the materials and services to manufacture our product candidates for certain preclinical studies and
for our clinical trials, and we expect that we will continue to rely on third-party manufacturers for the supply of our product candidates in the future. We have limited in-house
manufacturing capabilities and resources, and we do not own or lease manufacturing facilities or have our own supply source for the required materials to manufacture our
compounds. Further, we have limited cGMP manufacturing capabilities and limited experience scaling up of clinical supply as our internal capabilities are limited to small-scale
production of research material. Accordingly, we are dependent upon third-party suppliers and contract manufacturers to obtain supplies and manufacture our product candidates
and we will need to either develop, contract for, or otherwise arrange for the necessary manufacturers for these supplies.
There are a limited number of manufacturers that make oligonucleotides and we currently contract with multiple manufacturers for the supply of our product candidates to
reduce the risk of supply interruption or availability. However, there is no assurance that our supply of our product candidates will not be limited, interrupted, of satisfactory
quality or be available at acceptable prices. For example, constraints on the supply chain and availability of resources have resulted in delays and shortages at manufacturing
facilities. While we have engaged with multiple manufacturers for the supply of our product candidates in order to mitigate the impact of the loss or delay of any one manufacturer,
there can be no assurance that our efforts will be successful. If for any reason we are unable to obtain the clinical supply of our product candidates from our current manufacturers,
we would have to seek to contract with another major manufacturer. If we or any of these manufacturers are unable or unwilling to increase its manufacturing capacity or if we are
unable to establish alternative arrangements on a timely basis or on acceptable terms, the development and commercialization of such an approved product may be delayed or there
may be a shortage in supply. Any inability to manufacture our product candidates or future approved drugs in sufficient quantities when needed would seriously harm our
business.
Approval of any of our product candidates will not occur unless the manufacturing facilities are in compliance with the FDA’s cGMP regulations in order to ensure that
drug products are safe and that they consistently meet applicable requirements and specifications. These requirements are enforced by the FDA through periodic inspections of
the manufacturing facilities and can result in enforcement action, such as warning letters, fines and suspension of production if they are found not to be in compliance with the
regulations. If our suppliers or manufacturers do not comply with the FDA regulations for our product candidates, we may experience delays in timing or supply, be forced to
manufacture our product candidates ourselves or seek to contract with another supplier or manufacturer. If we are required to switch suppliers or manufacturers, we will be required
to verify that the new supplier or manufacturer maintains facilities and processes in line with cGMP regulations, which may result in delays, additional expenses, and may have a
material adverse effect on our ability to complete the development of our product candidates.
15
Unstable market and economic conditions, including elevated and sustained inflation, may have serious adverse consequences on our business, financial condition
and stock price.
As has been widely reported, we are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by
domestic and global monetary and fiscal policy, geopolitical instability, ongoing military conflicts, and high domestic and global inflation. The U.S. Federal Reserve and other
central banks may be unable to contain inflation through more restrictive monetary policy and inflation may increase or continue for a prolonged period of time. Inflationary factors,
such as increases in the cost of clinical supplies, interest rates, overhead costs and transportation costs may adversely affect our operating results. We continue to monitor these
events and the potential impact on our business. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we
may be adversely affected in the future due to domestic and global monetary and fiscal policy, supply chain constraints, consequences associated with the coronavirus pandemic
and the ongoing military conflicts, and such factors may lead to increases in the cost of manufacturing our product candidates and delays in initiating studies. In addition, global
credit and financial markets have experienced extreme volatility and disruptions in the past several years and the foregoing factors have led to and may continue to cause
diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, uncertainty about economic stability and increased inflation.
There can be no assurance that deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be
adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit
markets deteriorate, or do not improve, it may make any necessary debt or equity financings more difficult, more costly, and more dilutive. Failure to secure any necessary financing
in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or
abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult
economic times, which could directly affect our ability to attain our operating goals.
Our business and operations would suffer in the event of computer system failures, cyberattacks or a deficiency in our cybersecurity.
Despite the implementation of security measures, our internal computer systems and those of our third-party contractors and collaborators are vulnerable to damage from
computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures, cyberattacks or cyber-intrusions over the Internet,
attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through
cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of
attempted attacks and intrusions from around the world have increased. Such an event could cause interruption of our operations. As part of our business, we and our third-party
contractors and collaborators maintain large amounts of confidential information, including non-public personal information on patients and our employees. Breaches in security
could result in the loss or misuse of this information, which could, in turn, result in potential regulatory actions or litigation, including material claims for damages, interruption to
our operations, damage to our reputation or otherwise have a material adverse effect on our business, financial condition and operating results. We expect to have appropriate
information security policies and systems in place in order to prevent unauthorized use or disclosure of confidential information, including non-public personal information, but
there can be no assurance that such use or disclosure will not occur.
Risks Relating to Our Intellectual Property
We may be involved in litigation to protect our patents and intellectual property rights and our ability to protect our patents and intellectual property rights is
uncertain and may subject us to potential liabilities.
We have filed patent applications, have pending patents that we have licensed and those that we own and expect to continue to file patent applications. We may also
need to license patents and patent applications from research sponsored by us with third-parties. There is no assurance that these applications will result in any issued patents or
that those patents would withstand possible legal challenges or protect our technologies from competition. The patent granting authorities have upheld stringent standards for the
RNAi patents that have been prosecuted so far and, consequently, pending patents that we have licensed and those that we own may continue to experience long and difficult
prosecution challenges and may ultimately issue with much narrower claims than those in the pending applications.
16
In addition, others may challenge the patents or patent applications that we currently license or may license in the future or that we own and, as a result, these patents
could be narrowed, invalidated or rendered unenforceable, which would negatively affect our ability to exclude others from using the technologies described in these patents.
There is no assurance that these patents or other pending applications or issued patents we license or that we own will withstand possible legal challenges. Moreover, the laws of
some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States. Our efforts to enforce and maintain our intellectual property
rights may not be successful and may result in substantial costs and diversion of management and key employees’ time. If we are unable to defend our licensed or owned
intellectual property, it may have a material and adverse impact on our business, results of operations and financial condition.
Third-parties may claim that we infringe their patents, which may result in substantial liabilities and prevent us from pursuing the development of our product
candidates.
Because the field we operate in is constantly changing and patent applications are still being processed by government patent offices around the world, there is a great
deal of uncertainty about which patents will issue, when, to whom and with what claims. Although we are not aware of any blocking patents or other proprietary rights, it is likely
that there will be significant litigation and other proceedings, such as interference and opposition proceedings in various patent offices, relating to patent rights in the field we
operate. Further, many patents in the fields we are pursuing have already been exclusively licensed to third-parties, including our competitors. It is possible that we may become a
party to such proceedings.
If a claim should be brought against us and we are found to infringe the rights of others, we may be required to pay substantial damages, be forced to stop the
development of product candidates affected by the claim, and/or establish licenses or similar arrangements. Furthermore, any such licenses may not be available when needed, on
commercially reasonable terms or at all. Whether an infringement claim is successful or not, the cost of these proceedings may be significant and divert the attention of
management and other key employees. As a result, we cannot be certain that our patents or those we license will not be challenged by others, which could have a material adverse
effect on our business, results of operations and financial condition.
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.
Our success depends upon our ability to obtain and maintain intellectual property protection for our product candidates. Any patents issued to us or our licensors may
not provide us with any competitive advantages, and there is no assurance that the patents of others will not have an adverse effect on our ability to do business or to continue to
develop our product candidates freely. Pending patents that we have licensed and those that we own may continue to experience long and difficult prosecution challenges and
may ultimately issue with much narrower claims than those in the pending applications. Because of the extensive time required for development, testing, and regulatory review of a
potential product, it is possible that, before any of our product candidates can be commercialized, any related patent may expire or remain in force for only a short period following
commercialization, thus reducing any advantage provided by the patent. Further, even if our rights are valid, enforceable and broad in scope, competitors may develop products
based on technology that is not covered by our licenses or patents or patent applications that we own. If we are unable to derive value from our licensed or owned intellectual
property, it may have a material and adverse impact on our business, results of operations and financial condition.
Third parties may hold or seek to obtain additional patents that could make it more difficult or impossible for us to develop products based on our technologies without
obtaining a license to such patents, which licenses may not be available on attractive terms, or at all. If there is any dispute or issue of non-performance between us and the
respective licensing partner regarding the rights or obligations under the license agreements, the ability to develop and commercialize the affected product candidate may be
adversely affected. Moreover, if any of our existing licenses are terminated, the development of the product candidates contemplated by the licenses could be delayed or
terminated and we may not be able to negotiate additional licenses on acceptable terms, if at all, which would have a material adverse effect on our business. To the extent that we
are required and are able to obtain multiple licenses from third parties to develop or commercialize a product candidate, the aggregate licensing fees and milestones and royalty
payments made to these parties may materially reduce our economic returns or even cause us to abandon development or commercialization of a product candidate.
17
Risks Relating to Our Financial Condition
We will require substantial additional funds to complete our research and development activities.
We have used substantial funds to develop our product candidates and will need to raise additional substantial funds to continue our drug development efforts and
support our operations. Our future capital requirements and the period for which our existing resources are able to support our operations may vary significantly from what we
expect. We anticipate that we will need to raise substantial amounts of money to fund a variety of future activities integral to the development of our business, which may include
but is not limited to the following:
·
To conduct research and development to successfully develop our product candidates;
·
To obtain regulatory approval for our product candidates;
·
To file and prosecute patent applications and to defend and assess patents to protect our technologies;
·
To retain qualified employees, particularly in light of intense competition for qualified personnel;
·
To manufacture products ourselves or through third parties;
·
To market our products, either through building our own sales and distribution capabilities or relying on third parties; and
·
To acquire new technologies, licenses or products.
We are dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity or strategic opportunities, in order to maintain our
operations. We cannot assure you that additional financing will be available to us on acceptable terms, or at all. If we cannot, or are limited in the ability to, issue equity, incur debt
or enter into strategic collaborations, we may be unable to fund the discovery and development of our product candidates or improve our technology. If we fail to obtain additional
funding when needed, we may ultimately be unable to continue to develop and potentially commercialize our product candidates, and we may be forced to scale back or terminate
our operations or seek to merge with or be acquired by another company.
We have a history of net losses, and we expect to continue to incur net losses for the foreseeable future and may not achieve or maintain profitability.
We have generated significant losses to date, have not generated any product revenue and may not generate product revenue in the foreseeable future, or ever. We
expect to incur significant operating losses as we advance our product candidates through drug development and the regulatory process. Our ability to achieve profitability, if
ever, will depend on, among other things, us or our collaborators, obtaining regulatory approvals and successfully commercializing our drug or biologic candidates. Even if we are
able to successfully commercialize our drug or biologic candidates, we may not be able to achieve or sustain profitability, which could have a material adverse effect on our
business, financial condition and results of operations.
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.
If we raise funds through the issuance of debt or equity, any debt securities or preferred stock issued will have rights, preferences and privileges senior to those of
holders of our Common Stock in the event of a liquidation. In such event, there is a possibility that once all senior claims are settled, there may be no assets remaining to pay out to
the holders of Common Stock. The terms of debt securities may also impose restrictions on our operations, which may include limiting our ability to incur additional indebtedness,
to pay dividends on or repurchase our capital stock, or to make certain acquisitions or investments. In addition, we may be subject to covenants requiring us to satisfy certain
financial tests and ratios, and our ability to satisfy such covenants may be affected by events outside of our control. If we raise funds through the issuance of additional equity,
whether through private placements or public offerings, such an issuance would dilute current stockholders’ ownership in us, perhaps substantially. The issuance of a significant
amount of shares of Common Stock could cause the market price of our Common Stock to decline or become highly volatile.
18
We expect to continue to incur significant research and development expenses, which may make it difficult for us to attain profitability, and may lead to uncertainty
as to our ability to continue as a going concern.
We expend substantial funds to develop our technologies, and additional substantial funds will be required for further research and development, including preclinical
testing and clinical trials of any product candidates, and to manufacture and market any products that are approved for commercial sale. Because the successful development of
our products is uncertain, we are unable to precisely estimate the actual funds we will require to develop and potentially commercialize them. In addition, we may not be able to
generate enough revenue, even if we are able to commercialize any of our product candidates, to become profitable.
Changes in our operating plans, our existing and anticipated working capital needs, the acceleration or modification of our expansion plans, increased expenses, potential
acquisitions or other events will all affect our ability to continue as a going concern. We have limited cash resources, have reported recurring losses from operations since
inception, negative operating cashflows and have not yet received product revenues. These factors raise substantial doubt regarding our ability to continue as a going concern,
and the Company’s current cash resources may not provide sufficient capital to fund operations for at least the next 12 months from the date of the release of the consolidated
financial statements included elsewhere in this Annual Report. The continuation of the Company as a going concern depends upon our ability to raise additional capital through
equity offerings, debt offerings and/or strategic opportunities to fund our operations. There can be no assurance that we will be successful in accomplishing these plans in order
to continue as a going concern. Any such inability to continue as a going concern may result in our common stockholders losing their entire investment. There is no guarantee
that we will become profitable or secure additional financing.
Our ability to utilize net operating loss carryforwards and other tax benefits may be limited.
We have historically incurred net losses and may never achieve or sustain profitability. Under the Internal Revenue Code of 1986, as amended (the "Code”), a corporation
is generally allowed a deduction for net operating losses carried forward from a prior taxable year. Under that provision, we can carry forward our net operating losses to offset our
future taxable income, if any, until such net operating losses are used or expire. Net operating losses incurred in tax years beginning after December 31, 2017, may be carried forward
indefinitely, but are limited to offsetting up to 80% of future taxable income. Certain net operating loss carryforwards predating December 31, 2017, could expire unused before
offsetting potential future income tax liabilities.
Additionally, an ownership change, as defined by Section 382 and 383 of the Code, results from transactions increasing the ownership of certain stockholders or public
groups in the stock of a corporation by more than 50% over a three-year period. Pursuant to Section 382 and 383 of the code, if the Company has experienced a change of control at
any time since inception, utilization of the Company’s net operating loss or tax credit carryforwards then in existence would be subject to an annual limitation. Any limitation may
result in expiration of a portion of the net operating loss or tax credit carryforwards before utilization.
We have completed multiple assessments of the available net operating loss and tax credit carryforwards under Sections 382 and 383 of the Code through the year ended
December 31, 2024 and determined that we underwent multiple ownership changes during the period from inception to 2024. As a result, our net operating losses and tax credit
carryforwards are subject to substantial annual limitations under Sections 382 and 383 of the Code due to these ownership changes. The Company has adjusted its net operating
loss and tax credit carryforwards to address the impact of the ownership changes. We assess the need to conduct an ownership change analysis to determine whether any
changes occurred in ownership that would limit net operating loss or tax credit carryforwards on an annual basis. We may experience ownership changes in the future as a result of
subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss and tax credit
carryforwards is materially limited, it could harm our future operating results by effectively increasing our future tax obligations.
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Risks Relating to Our Securities
The price of our Common Stock has been and may continue to be volatile.
Our stock price has historically fluctuated widely and is likely to continue to be volatile. Because we are at an early stage of development and in the absence of product
revenue as a measure of operating performance, we anticipate that the market price for our Common Stock may be influenced by, but not limited to, such factors as:
·
Announcements regarding the initiation or completion, and the results of preclinical studies and clinical trials of our product candidates;
·
Announcements regarding clinical trial results or development announcements concerning our competitors’ product candidates;
·
Regulatory or legal developments in the United States;
·
The recruitment or departure of key personnel;
·
The issuance of competitive patents or disallowance or loss of our patent rights;
·
Our ability to raise additional capital and the terms on which additional capital is raised;
·
To acquire new technologies, licenses or products; and
·
General economic, industry and market conditions.
The stock market, in general, and the markets for drug delivery and pharmaceutical company stocks, in particular, have experienced extreme volatility, that has often been
unrelated to the operating performance of these particular companies. These broad market fluctuations may adversely affect the trading price of our Common Stock and could
result in the loss of all or part of your investment. In addition, the limited trading volume of our stock may contribute to its volatility. Moreover, if we are unable to trade above
$1.00 for a certain period of time, or fulfill the other continued listing standards, The Nasdaq Stock Market ("Nasdaq”) may delist our Common Stock. Delisting our Common Stock
from Nasdaq would adversely affect our trading volume and would likely negatively impact our trading price.
We may not be able to maintain compliance with the continued listing requirements of The Nasdaq Capital Market.
To maintain continued listing on The Nasdaq Capital Market, we must satisfy minimum financial and other requirements. For example, Nasdaq Listing Rule 5550(b)(1)
requires companies listed on the Nasdaq Capital Market to maintain stockholders’ equity of at least $2.5 million for continued listing. As of December 31, 2024, our stockholders’
equity was $4.7 million and there can be no assurance that we will be able to maintain or increase our stockholders’ equity in the future. If our stockholders’ equity falls below $2.5
million, as a result of operating losses or for other reasons, or if we are unable to demonstrate to Nasdaq’s satisfaction that we subsequently regained compliance with this
requirement, Nasdaq will notify us of such non-compliance. If we receive such notice from Nasdaq, in accordance with the Nasdaq Listing Rules, we will have 45 calendar days
from the date of the notification to submit a plan to regain compliance with Nasdaq Listing Rule 5550(b)(1). If our compliance plan is accepted, we may be granted up to 180
calendar days from the date of the initial notification to evidence compliance. If our compliance plan is not accepted or we are otherwise unable to evidence compliance within
Nasdaq’s allotted timeframe, Nasdaq may take steps to delist our Common Stock.
20
In addition, Nasdaq Listing Rule 5550(a)(2) requires a minimum bid price of at least $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet
the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Although the Company is currently in compliance with this
requirement, there can be no assurance that we will be able to maintain compliance. We have in the past effected reverse stock splits of our Common Stock in order to regain or
maintain compliance with this requirement (most recently on July 5, 2024). Nasdaq Listing Rule 5810(c)(3)(A)(iv) states that any listed company that fails to meet this requirement
and has effected a reverse stock split over the prior one-year period, or has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250
shares or more to one, may not be eligible for an automatic 180-day grace compliance period and the Nasdaq Listing Qualifications Department is obligated to immediately issue a
delisting determination. Therefore, if we were to fall out of compliance with the minimum bid price requirement prior to July 5, 2025, we would not be able to effect a reverse stock
split and would immediately be issued a delisting determination.
Such a delisting would have an adverse effect on the market liquidity of our securities, decrease the market price of our securities, result in the potential loss of confidence
by investors, suppliers, customers and employees and fewer business development opportunities, and adversely affect our ability to obtain financing for the continuation of our
operations.
Our Board of Directors has the authority to issue shares of "blank check” preferred stock and the terms of the preferred stock may reduce the value of our Common
Stock.
We are authorized to issue up to 10,000,000 shares of preferred stock in one or more series. Our Board of Directors (the "Board”) may determine the terms of future
preferred stock offerings without further action by our stockholders. The issuance of our preferred stock could affect the rights of existing stockholders or reduce the value of our
outstanding preferred stock or Common Stock. In particular, rights granted to holders of certain series of preferred stock may include voting rights, preferences as to dividends and
liquidation, conversion and redemption rights and restrictions on our ability to merge with or sell our assets to a third party.
We may acquire other businesses or form joint ventures that may be unsuccessful and could dilute your ownership interest in the Company.
As part of our business strategy, we may pursue future acquisitions of other complementary businesses and technology licensing arrangements. We also may pursue
strategic alliances. We have limited experience with respect to acquiring other companies and with respect to the formation of collaborations, strategic alliances and joint ventures.
We may not be able to integrate such acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. We also could experience
adverse effects on our reported results of operations from acquisition related charges, amortization of acquired technology and other intangibles and impairment charges relating to
write-offs of goodwill and other intangible assets from time to time following the acquisition. Integration of an acquired company requires management resources that otherwise
would be available for ongoing development of our existing business. We may not realize the anticipated benefits of any acquisition, technology license or strategic alliance. There
is no assurance that we will be successful in developing such assets, and a failure to successfully develop such assets could diminish our prospects.
To finance future acquisitions, we may choose to issue shares of our Common Stock or preferred stock as consideration, which would dilute current stockholders’
ownership interest in us. Alternatively, it may be necessary for us to raise additional funds through public or private financings. Additional funds may not be available on terms
that are favorable to us and, in the case of equity financings, may result in dilution to our stockholders. Any future acquisitions by us also could result in large and immediate
write-offs, the incurrence of contingent liabilities or amortization of expenses related to acquired intangible assets, any of which could harm our operating results.
21
Provisions of our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of the Company or changes in
our management and, as a result, depress the trading price of our Common Stock.
Our certificate of incorporation and bylaws contain provisions that could discourage, delay or prevent a change of control of the Company or changes in our management
that the stockholders of the Company may deem advantageous. These provisions:
·
Authorize the issuance of "blank check” preferred stock that our Board could issue to increase the number of outstanding shares and to discourage a takeover
attempt;
·
Prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
·
Provide that the Board is expressly authorized to adopt, alter or repeal our bylaws; and
·
Establish advance notice requirements for nominations for election to our Board or for proposing matters that can be acted upon by stockholders at stockholder
meetings.
Although we believe these provisions collectively provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our Board, they
would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to
replace or remove our current management team by making it more difficult for stockholders to replace members of our Board, which is responsible for appointing the members of
our management.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person
who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person
acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 1C.
CYBERSECURITY
We are increasingly dependent on sophisticated software applications and computing infrastructure to conduct key operations. We depend on both our own systems,
networks, and technology as well as the systems, networks and technology of our contractors, consultants, vendors and other business partners.
Cybersecurity Program
Given the importance of cybersecurity to our business, we maintain a robust cybersecurity program to support both the effectiveness of our systems and our
preparedness for information security risks. This program includes a number of safeguards, such as: continuous monitoring for internal and external threats; regular evaluations of
our cybersecurity program, including periodic external reviews; and industry benchmarking. We are implementing cybersecurity awareness trainings for all employees. Our program
leverages standard industry frameworks to strengthen our program effectiveness and reduce cybersecurity risks.
22
We use a risk-based approach with respect to our use and oversight of third-party service providers, tailoring processes according to the nature and sensitivity of the
data accessed, processed, or stored by such third-party service provider. We use a number of means to assess and manage cyber risks related to our third-party service providers,
including conducting due diligence in connection with onboarding new vendors and seeking to include appropriate security terms in our contracts where applicable.
Process for Assessing, Identifying and Managing Material Risks from Cybersecurity Threats
In the event of a cybersecurity incident, designated personnel are responsible for assessing the severity of an incident and associated threat, containing the threat,
remediating the threat, including recovery of data and access to systems, analyzing any reporting obligations associated with the incident, and performing post-incident analysis
and program enhancements. We maintain a disaster recovery plan in the event of a significant cybersecurity incident.
We have relationships with a number of third-party service providers to assist with cybersecurity containment and remediation efforts, including insurance providers and
various law firms.
Governance
Management Oversight
The controls and processes employed to assess, identify and manage material risks from cybersecurity threats are implemented and overseen by the use of consultants as
the Company does not have a full-time dedicated cybersecurity position in the Company. Our consultants have over 20 years of experience in information technology matters and
are responsible for the day-to-day management of the cybersecurity program, including the prevention, detection, investigation, response to, and recovery from cybersecurity
threats and incidents, and are regularly engaged to help ensure the cybersecurity program functions effectively in the face of evolving cybersecurity threats.
Board Oversight
The Board of Directors (the "Board”) has overall responsibility for risk oversight and cybersecurity risk matters. The Board is responsible for discussing with
management the Company’s data privacy, information technology and security and cybersecurity risk exposures, including: (i) the potential impact of those exposures on the
Company’s business, financial results, operations and reputation; (ii) the programs implemented by management to monitor and mitigate any exposures; and (iii) major legislative
and regulatory developments that could materially impact the Company’s data privacy and cybersecurity risk exposure.
Cybersecurity Risks
Our cybersecurity risk management processes are integrated into our overall information technology ("IT”) processes. As part of our IT process, we identify, assess and
evaluate risks impacting our operations across the Company, including those risks related to cybersecurity. We also maintain cybersecurity insurance providing coverage for
certain costs related to cybersecurity-related incidents that impact our own systems, networks, and technology or the systems, networks and technology of our contractors,
consultants, vendors and other business partners.
As of December 31, 2024, we are not aware of any material risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have
materially affected the business strategy, results of operations or financial condition of the Company or are reasonably likely to have such a material effect. While we maintain a
robust cybersecurity program, the techniques used to infiltrate information technology systems continue to evolve. Accordingly, we may not be able to timely detect threats or
anticipate and implement adequate security measures. For additional information, see "Item 1A—Risk Factors.”
23
ITEM 2.
PROPERTIES
The Company’s lease for its corporate headquarters and primary research facility in Marlborough, Massachusetts expired on March 31, 2024. The Company has continued
operations as a primarily remote business with a rented lab space and has contracted a private mailbox with an address of 11 Apex Drive, Suite 300A, PMB 2006, Marlborough, MA
01752, to use as its principal mailing address for SEC and other purposes.
The Company has also contracted with LifeSciences PA located at 411 Swedeland Road, King of Prussia, PA 19406 for access to full working space for normal hours of
operations at a fee for $300 per month, cancellable at any time.
The Company entered into 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.
ITEM 3.
LEGAL PROCEEDINGS
From time to time, the Company may become a party to various legal proceedings and complaints arising in the ordinary course of business. To our knowledge, we are not
currently a party to any actual or threatened material legal proceedings.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
24
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Common Stock is listed on The Nasdaq Capital Market under the symbol "PHIO.”
Holders
At March 20, 2025, there were approximately 14 holders of record of our Common Stock. Because many of our shares are held by brokers and other institutions on behalf
of stockholders, we are unable to estimate the total number of individual stockholders represented by these holders of record.
Dividends
We have never paid any cash dividends and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future.
Recent Sales of Unregistered Sales of Securities
No sales or issuances of unregistered securities occurred that have not previously been disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K
for the year ended December 31, 2024.
Purchases of Equity Securities by the Issuer and Affiliated Purchases
We did not repurchase any shares of our Common Stock during the years ended December 31, 2024 or 2023.
ITEM 6.
RESERVED
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes
to those consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve significant
risks and uncertainties. As a result of many factors, such as those set forth under "Risk Factors” and elsewhere in this Annual Report on Form 10-K, our actual results may
differ materially from those anticipated in these forward-looking statements. Please refer to the discussion under the heading "Forward-Looking Statements” above.
Overview
Phio Pharmaceuticals Corp. ("Phio,” "we,” "our” or the "Company”) is a clinical stage biotechnology company whose proprietary INTASYL™ self-delivering RNAi®
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. We
are committed to discovering and developing innovative cancer treatments for patients by creating new pathways toward a cancer-free future.
25
PH-762 is an INTASYL compound designed to reduce the expression of cell death protein 1 ("PD-1”). PH-762 is currently being evaluated in a U.S. multi-center Phase 1b
dose-escalating clinical trial through the intratumoral injection of PH-762 for the treatment of patients with cutaneous squamous cell carcinoma, melanoma and Merkel cell
carcinoma. The trial (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 May and December 2024, respectively, a Safety Monitoring
Committee (SMC) reviewed data from the first and second dose cohorts treated with PH-762, and in both instances recommended escalation to the next dose concentration. A total
of 7 patients with cutaneous carcinomas have been enrolled in dose cohorts 1 and 2. The second cohort enrolled a total of 4 patients who were diagnosed with cutaneous
squamous cell carcinoma. At Day 36 (tumor excision), while patients in the first cohort had stable disease, a complete response (100% tumor clearance) was reported for 2 patients
with cutaneous squamous cell carcinoma. Partial response (90% tumor clearance) was reported for 1 patient with cutaneous squamous cell carcinoma and 1 patient had stable
disease, having not progressed. In this trial to date, intratumoral injection of PH-762 has been well tolerated in all enrolled patients and there were no dose-limiting toxicities or
clinically relevant treatment-emergent adverse effects in the patients receiving intratumoral PH-762. The third dose cohort is fully enrolled and patients in this cohort are currently
in the treatment or follow-up phase of the study. Phio expects to complete enrollment of all patients in the study in the third quarter of 2025.
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
PH-762 is an INTASYL compound designed to reduce the expression of PD-1. PD-1 is a protein that inhibits T cells’ ability to kill cancer cells and is a clinically
validated target in immunotherapy. Decreasing the expression of PD-1 can thereby increase 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.
PH-762 is currently being evaluated in a U.S. multi-center Phase 1b dose-escalating clinical trial through the intratumoral injection of PH-762 for the treatment of patients
with cutaneous squamous cell carcinoma, melanoma and Merkel cell carcinoma. The trial (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.
In May and December 2024, respectively, a Safety Monitoring Committee (SMC) reviewed data from the first and second dose cohorts treated with PH-762 and recommended
escalation to the next dose concentration. A total of 7 patients with cutaneous carcinomas have enrolled in Cohorts 1 and 2. The second cohort enrolled a total of 4 patients who
were diagnosed with cutaneous squamous cell carcinoma. At Day 36 (tumor excision), while patients in the first cohort had stable disease, the a complete response (100% tumor
clearance) was reported for 2 patients with cutaneous squamous cell carcinoma. A partial response (90% tumor clearance) was reported for 1 patient with cutaneous squamous cell
carcinoma and 1 patient had stable disease, having not progressed.
26
Intratumoral injection of PH-762 has been well tolerated in all patients enrolled in the trial to date. There were no dose-limiting toxicities or clinically relevant treatment-
emergent adverse effects in the patients receiving intratumoral PH-762. The third dose cohort is fully enrolled and patients in this cohort are currently in the treatment or follow-up
phase of the study. We expect to complete enrollment of all patients in the study 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 melanoma. Safety data from the initial cohort of three patients in the French clinical trial
were evaluated by a data monitoring committee in the first quarter of 2023. The safety data review disclosed no dose-limiting toxicity, and no drug-related severe or serious
adverse events.
Due to INTASYL’s ease of administration, we have shown that our compounds can easily be incorporated into current ACT manufacturing processes. In ACT, T cells
are usually taken from a patient's own blood or tumor tissue, grown in large numbers in a laboratory, and then given back to the patient to help the immune system fight cancer.
By treating T cells with our INTASYL compounds while they are being grown in the laboratory, we believe our INTASYL compounds can improve these immune cells to make
them more effective in killing cancer. Preclinical data generated in collaboration with AgonOx, Inc. ("AgonOx”), a private company developing a pipeline of novel
immunotherapy drugs targeting key regulators of the immune response to cancer, demonstrated that treating AgonOx’s "double positive” tumor infiltrating lymphocytes ("DP
TIL”) with PH-762 increased their tumor killing activity by twofold.
In February 2021, we entered into a clinical co-development collaboration agreement (the "Clinical Co-Development Agreement”) with AgonOx to develop a T cell-
based therapy using PH-762 and AgonOx’s DP TIL. Under the Clinical Co-Development Agreement, we 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 un 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 agreed to pay to AgonOx all payment obligations that accured 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.
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 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 PH-762. 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.
27
PH-894
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 by T cells.
Preclinical studies conducted have demonstrated that PH-894 resulted in a strong, concentration dependent and durable silencing of BRD4 in T cells and in various cancer
cells. 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 PH-894. As a result of the reprioritization to advance our clinical trial with PH-762 in the U.S., we have elected to defer the IND submission for PH-894.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States ("GAAP”). The preparation of these consolidated financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we
evaluate our estimates and base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results
may differ from these estimates under different assumptions or conditions and could have a material impact on our reported results. While our significant accounting policies are
more fully described in Note 1 to our consolidated financial statements included elsewhere in this Annual Report, we believe the following addresses our accounting policies to be
the most critical in understanding the judgments and estimates we use in preparing our consolidated financial statements.
Research and Development Expenses
Research and development expenses are charged to expense as incurred. Payments made by us in advance for research and development services not yet provided and/or
for materials not yet received are recorded as prepaid expenses and expensed when the service has been performed or when the goods have been received. Accrued liabilities are
recorded with respect to services provided and/or materials that we have received for which vendors have not yet billed us. The financial terms of these contracts are subject to
negotiation, vary from provider to provider and may result in uneven payment flows. There may be instances in which payments made to our vendors exceed the level of services
provided and result in a prepayment of the expense. In other instances, payment depends on factors such as the successful completion of milestones.
We are required to estimate our accrued research and development expenses, of which a significant portion relate to third party providers we have contracted with to
perform various research activities on our behalf for the continued development of our product candidates. This process includes reviewing open contracts and purchase orders,
estimating the service performed and the associated cost incurred for research and development services not yet billed or otherwise notified of actual cost. Accrued liabilities for
the services provided by contract research organizations are recorded during the period incurred based on such estimates and assumptions as expected cost, passage of time, the
level of effort to be expended in each period, the achievement of milestones and other information available to us. Estimates of our research and development accruals are assessed
on a quarterly basis based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and facts and circumstances
known to us at that time and adjusted accordingly.
Actual results may differ from these estimates and could have a material impact on our reported results. Our historical accrual estimates have not been materially different
from our actual costs. Due to the nature of estimates, we cannot provide assurance that we will not make changes to our estimates in the future as we become aware of additional
information about the conduct of our research activities.
28
Financial Operations Overview
Revenues
We have not generated any commercial product revenue and do not expect to do so in the foreseeable future.
In the future, we may generate revenue from a combination of government grants, research and development agreements, license fees and other upfront payments,
milestone payments, product sales and royalties in connection with future strategic collaborators and partners. We expect that any revenue we generate will fluctuate from period
to period as a result of the timing of the achievement of any preclinical, clinical or commercial milestones and the timing and amount of payments received relating to those
milestones and the extent to which any of our product candidates are approved and successfully commercialized by us or strategic collaborators and partners. If we or any future
partner fail to develop product candidates in a timely manner or obtain regulatory approval for them, then our ability to generate future revenue and our results of operations and
financial position would be adversely affected.
Research and Development Expenses
Research and development expenses relate to compensation and benefits for research and development personnel, facility-related expenses, supplies, external services,
costs to acquire technology licenses, research activities under our research collaboration, expenses associated with preclinical and clinical development activities and other
operating costs. Our research and development programs are focused on the development of immuno-oncology therapeutics based on our INTASYL therapeutic platform. Since
we commenced operations, research and development expenses have been a significant portion of our total operating expenses and are expected to constitute the majority of our
spending for the foreseeable future.
General and Administrative Expenses
General and administrative expenses relate to compensation and benefits for general and administrative personnel, facility-related expenses, professional fees for legal and
patent-related activities, audit, tax and consulting services, as well as other general corporate expenses.
Interest Income (Expense), net
Interest Income (Expense) consists of interest income and expense.
Results of Operations
The following table summarizes our results of operations for the periods indicated, in thousands:
Years Ended
December 31,
Dollar
2024
2023
Change
Operating expenses
$
7,387
$
10,824
$
(3,437)
Operating loss
$
(7,387)
$
(10,824)
$
3,437
Net loss
$
(7,150)
$
(10,826)
$
3,676
29
Comparison of the Years Ended December 31, 2024 and 2023
Operating Expenses
The following table summarizes our total operating expenses, for the periods indicated, in thousands:
Years Ended
December 31,
Dollar
2024
2023
Change
Research and development
$
3,643
$
6,332
$
(2,689)
General and administrative
3,744
4,366
(622)
Impairment of property and equipment
–
126
(126)
Total operating expenses
$
7,387
$
10,824
$
(3,437)
Research and Development Expenses
Research and development expenses for the year ended December 31, 2024 decreased 42% as compared with the year ended December 31, 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. These actions
resulted in a decrease of $1,044,000 of expense due to the wind-down of preclinical studies, a reduction of $804,000 in salary-related costs including stock-based compensation
expense, and $198,000 in lab supplies associated with the reduction in headcount. Additionally, we experienced a reduction in clinical consulting fees and clinical trial-related fees
of $350,000 incurred in connection with our IND filing for PH-762 and our former PH-762 trials in ACT and European clinical trial, as well as a decrease of $245,000 in manufacturing
fees for PH-762 compared with 2023.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2024 decreased 14% as compared to the year ended December 31, 2023. The decrease in general and
administrative expenses was primarily due to decreases in professional fees for a total of $430,000 primarily related to legal and patent expenses and in our D&O insurance premium
of $88,000 as compared to the prior year period.
Impairment of Property and Equipment
The Company did not record loss on impairment in the year ended December 31, 2024. The impairment charge to our long-lived assets in the year ended December 31, 2023
was associated with our non-renewal of our office lease to operate as a remote business. The carrying value of these assets totaling $126,000 was deemed no longer recoverable
and an impairment charge of $126,000 was recorded to adjust those assets to their fair value.
Liquidity and Capital Resources
Historically, our primary source of funding has been through the sale of our securities. In the future, we will be dependent on obtaining funding from third parties, such as
proceeds from the issuance of debt, sale of equity or strategic opportunities, in order to maintain our operations. We have reported recurring losses from operations since
inception and expect that we will continue to have negative cash flows from our operations for the foreseeable future. At December 31, 2024, we had cash of $5,382,000 as
compared with $8,490,000 at December 31, 2023.
During the year ended December 31, 2024, we completed multiple financings and received total net proceeds of $4,001,000 after deducting placement agent fees and
offering expenses. For further information regarding the financings, see Note 8 to our consolidated financial statements included elsewhere in this Annual Report.
30
Subsequent to year-end, we completed financings and received total net proceeds of $6,800,000 after deducting placement agent fees and offering expenses. For further
information regarding the financings, see Note 13 to our consolidated financial statements included elsewhere in this Annual Report.
We have limited cash resources, have reported recurring losses from operations since inception, negative operating cash flows and have not yet received product
revenues. These factors raise substantial doubt regarding our ability to continue as a going concern, and our current cash resources may not provide sufficient capital to fund
operations for at least the next 12 months from the date of the release of the consolidated financial statements included elsewhere in this Annual Report. Our continuation as a
going concern depends upon our ability to raise additional capital through equity offerings, debt offerings and/or strategic opportunities to fund our operations. There can be no
assurance that we will be successful in accomplishing any of these plans in order to continue as a going concern. The consolidated financial statements included elsewhere in this
Annual Report do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we
be unable to continue as a going concern.
The following table summarizes our cash flows for the periods indicated, in thousands:
Years Ended
December 31,
2024
2023
Net cash used in operating activities
$
(7,112)
$
(10,749)
Net cash provided by (used in) investing activities
8
(5)
Net cash provided by financing activities
3,996
7,413
Net decrease in cash and cash equivalents
$
(3,108)
$
(3,341)
Net Cash Flow from Operating Activities
Net cash used in operating activities for the year ended December 31, 2024 decreased 34% as compared with the year ended December 31, 2023. This change of
approximately $3,600,000 reflects a reduction in net loss before subtracting non-cash items of $3,200,000 and a concurrent reduction of approximately $400,000 of cash outflows
driven by the reduction of outstanding accounts payable and liquidation of various current assets primarily as a result of liabilities owed for the completion of preclinical studies in
the prior year.
Net Cash Flow from Investing Activities
Net cash provided by investing activities for the year ended December 31, 2024 was approximately $8,000 as compared to the year ended December 31, 2023 where net
cash used in investing activities was $5,000. The increase in net cash provided by investing activities was primarily due to laboratory and computer equipment purchases for our
facility during the prior year and proceeds from the disposition of fixed assets in the current year.
Net Cash Flow from Financing Activities
Net cash provided by financing activities for the year ended December 31, 2024 decreased by 46% as compared to the year ended December 31, 2023, primarily due to the
lower net proceeds from the completion of our securities offerings during the prior year as compared with the current year.
31
Contractual Obligations
Commitments
In February 2021, we entered into a Clinical Co-Development Agreement with AgonOx to develop a T cell-based therapy using PH-762 and AgonOx’s DP TIL. Details of
our obligations under the Clinical Co-Development Agreement as of December 31, 2024 can be found in Note 2 of the consolidated financial statements included elsewhere in
this Annual Report. 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 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 occurred 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 party shall be responsible for
their own costs and expenses incurred in connection with the wind-down of the Phase 1 clinical trial.
Prior to the termination of the Clinical Co-Development Agreement with AgonOx, PH-762 treated DP TIL was 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 PH-762. 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.
License Commitments
We enter into licensing agreements with third parties that often require milestone and royalty payments based on the progress of the asset through development stages.
Milestone payments may be required, for example, upon progress through clinical trials, upon approval of the product by a regulatory agency and/or upon a percentage of sales of
the product pursuant to such agreements. The expenditures required under these arrangements may be material individually in relation to any product candidates covered by the
intellectual property licensed under any such arrangement, and material in the aggregate in the unlikely event that milestones for multiple products covered by these arrangements
were reached in the same period. During the years ended December 31, 2024 and 2023, we did not trigger any milestone payments.
Our contractual license obligations that will require future cash payments as of December 31, 2024 are $500,000, which result from payments expected in connection with
annual license fees.
Lease Commitments
We did not renew the lease for our corporate headquarters and primary research facility 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. The new 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.
For further information regarding our future cash commitments see Note 6 to our consolidated financial statements included elsewhere in this Annual Report.
32
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide this information.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; Boston, Massachusetts; PCAOB ID# 243)
F-1
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-3
Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023
F-4
Consolidated Statements of Preferred Stock and Stockholders’ Equity for the Years Ended December 31, 2024 and 2023
F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023
F-6
Notes to Consolidated Financial Statements
F-7
33
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Phio Pharmaceuticals Corp.
Marlborough, Massachusetts
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Phio Pharmaceuticals Corp. (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. 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.
Basis for Opinion
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 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.
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 and that: (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially
challenging, subjective, or complex judgments. 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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.
F-1
Accounting for Certain Warrants Issued in 2024
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 included:
·
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.
We have served as the Company's auditor since 2011.
Boston, Massachusetts
March 31, 2025
F-2
PHIO PHARMACEUTICALS CORP.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
December 31,
2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
5,382
$
8,490
Prepaid expenses and other current assets
354
832
Total current assets
5,736
9,322
Right of use asset
–
33
Property and equipment, net
2
6
Other assets
–
3
Total assets
$
5,738
$
9,364
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
253
$
657
Accrued expenses
762
942
Lease liability
–
35
Total current liabilities
1,015
1,634
Total liabilities
1,015
1,634
Commitments and Contingencies (Footnote 6)
Series D Preferred Stock, $0.0001 par value; 10,000,000 shares authorized, 0 issued and outstanding at December 31,
2024 and December 31, 2023
–
–
Stockholders’ equity:
Common stock, $0.0001 par value, 100,000,000 shares authorized; 1,733,717 and 416,368 shares issued and
outstanding at December 31, 2024 and December 31, 2023, respectively
–
–
Additional paid-in capital
151,079
146,936
Accumulated deficit
(146,356)
(139,206)
Total stockholders’ equity
4,723
7,730
Total liabilities, preferred stock and stockholders’ equity
$
5,738
$
9,364
See accompanying notes to consolidated financial statements.
F-3
PHIO PHARMACEUTICALS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
Year Ended
December 31,
2024
2023
Operating expenses:
Research and development
$
3,643
$
6,332
General and administrative
3,744
4,366
Loss on impairment of property and equipment
–
126
Total operating expenses
7,387
10,824
Operating loss
(7,387)
(10,824)
Interest income (expense), net
231
(8)
Other income
6
6
Net loss
$
(7,150)
$
(10,826)
Net loss per common share:
Basic and diluted
$
(9.08)
$
(46.76)
Weighted average number of common shares outstanding
Basic and diluted
787,466
231,508
See accompanying notes to consolidated financial statements.
F-4
PHIO PHARMACEUTICALS CORP.
CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share data)
Series D Preferred
Stock
Common Stock
Additional
Paid-in Accumulated
Shares
Amount Shares
Amount
Capital
Deficit
Total
Balance at December 31, 2022
1 $
2
126,558 $
– $ 139,218 $
(128,380) $
10,838
Cash-in-lieu of fractional shares for reverse stock split
–
–
(190)
–
(11)
–
(11)
Redemption of preferred stock
(1)
(2)
–
–
–
–
–
Issuance of common stock and warrants, net of offering costs
–
–
218,168
–
7,452
–
7,452
Issuance of common stock upon exercise of warrants
–
–
69,881
–
–
–
–
Issuance of common stock upon vesting of restricted stock units
–
–
2,601
–
–
–
–
Shares withheld for payroll taxes
–
–
(650)
–
(26)
–
(26)
Stock-based compensation expense
–
–
–
–
303
–
303
Net loss
–
–
–
–
–
(10,826)
(10,826)
Balance at December 31, 2023
–
–
416,368
–
146,936
(139,206)
7,730
Issuance of common stock upon exercise of warrants
–
–
420,578
–
–
–
–
Issuance of common stock upon vesting of restricted stock units
–
–
3,995
–
–
–
–
Shares withheld for payroll taxes
–
–
(689)
–
(5)
–
(5)
Cash issued in lieu of fractional shares for 1:9 reverse stock split
–
–
(255)
–
(1)
–
(1)
Issuance of common stock and warrants, net of offering costs
–
–
893,720
–
4,002
–
4,002
Stock-based compensation expense
–
–
–
–
147
–
147
Net loss
–
–
–
–
–
(7,150)
(7,150)
Balance at December 31, 2024
– $
– 1,733,717 $
– $ 151,079 $
(146,356) $
4,723
See accompanying notes to consolidated financial statements.
F-5
PHIO PHARMACEUTICALS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended
December 31,
2024
2023
Cash flows from operating activities:
Net loss
$
(7,150)
$
(10,826)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
2
56
Amortization of right of use asset
33
128
Impairment of property and equipment
–
126
Net loss on the disposal of property and equipment
(6)
–
Stock-based compensation
147
303
Changes in operating assets and liabilities:
Prepaid expenses and other assets
481
(196)
Accounts payable
(404)
(122)
Accrued expenses
(180)
(83)
Lease liability
(35)
(135)
Net cash used in operating activities
(7,112)
(10,749)
Cash flows from investing activities:
Cash paid for purchase of property and equipment
(1)
(5)
Asset sale proceeds
9
–
Net cash provided by (used in) investing activities
8
(5)
Cash flows from financing activities:
Net proceeds from the issuance of common stock and warrants
4,002
7,452
Cash-in-lieu of fractional shares for reverse stock split
(1)
(11)
Redemption of Series D Preferred Stock
–
(2)
Payment of taxes on net share settlements of restricted stock units
(5)
(26)
Net cash provided by financing activities
3,996
7,413
Net decrease in cash and cash equivalents
(3,108)
(3,341)
Cash and cash equivalents at the beginning of year
8,490
11,831
Cash and cash equivalents at the end of year
$
5,382
$
8,490
2024
2023
Supplemental cash flow information
Cash paid during the year for:
Interest
$
13
$
11
See accompanying notes to consolidated financial statements.
F-6
PHIO PHARMACEUTICALS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
Nature of Operations
Phio Pharmaceuticals Corp. ("Phio” or the "Company”) is a clinical stage biotechnology company whose proprietary INTASYL™ self-delivering RNAi technology is
designed to make immune cells more effective in killing tumor cells. The Company is developing therapeutics that are designed to leverage INTASYL to precisely target specific
proteins that reduce the body’s ability to fight cancer, without the need for specialized formulations or drug delivery systems.
Phio was incorporated in the state of Delaware in 2011 as RXi Pharmaceuticals Corporation. On November 19, 2018, the Company changed its name to Phio
Pharmaceuticals Corp., to reflect its transition from a platform company to one that is fully committed to developing groundbreaking immuno-oncology therapeutics.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
("GAAP”).
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.
Segments
The Company operates as one operating segment and all assets are located in the United States.
Reverse Stock Split
Effective July 5, 2024, the Company completed a 1-for-9 reverse stock split of the Company’s outstanding common stock, including reclassifying an amount equal to the
reduction in par value to additional paid-in capital. The reverse stock split did not reduce the number of authorized shares of the Company’s common or preferred stock. All share
and per share amounts have been adjusted to give effect to the reverse stock split.
Uses of Estimates in Preparation of Financial Statements
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. The areas subject to significant estimates and judgement include, among others, those related to the fair value of equity awards, accruals for research and development
expenses, useful lives of property and equipment, and the valuation allowance on our deferred tax assets. On an ongoing basis the Company evaluates its estimates and bases its
estimates on historical experience and other relevant assumptions that the Company believes are reasonable under the circumstances. Actual results could differ materially from
these estimates.
F-7
Liquidity
The Company has reported recurring losses from operations since its inception and expects to continue to have negative cash flows from operations for the foreseeable
future. Historically, the Company’s primary source of funding has been from sales of its securities. The Company’s ability to continue to fund its operations is dependent on
obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity, or strategic opportunities. This is dependent on a number of factors, including the
market demand and liquidity of 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.
The Company has limited cash resources, has reported recurring losses from operations since inception, negative operating cash flows and has not yet received product
revenues. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern, and the Company’s current cash resources may not provide
sufficient capital to fund operations for at least the next 12 months from the date of the release of these consolidated financial statements. The continuation of the Company as a
going concern depends upon the Company’s ability to raise additional capital through an equity offering, debt offering and/or strategic opportunity to fund its operations. There
can be no assurance that the Company will be successful in accomplishing these plans in order to continue as a going concern. These consolidated financial statements do not
include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to
continue as a going concern.
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.
Property and Equipment
Property and equipment are stated at cost and depreciated using the straight-line method based on the estimated useful lives of the related assets. The Company provides
for depreciation over the assets’ estimated useful lives as follows:
Computer equipment
3 years
Machinery & equipment
5 years
Furniture & fixtures
5 years
Leasehold improvements
Lesser of lease term or 5 years
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment annually or whenever an event or change in circumstance occurs in which the related carrying amounts may not be
recoverable. An impairment loss would be recognized based on the difference between the carrying value of the asset and its estimated fair value, which would be determined
based on either discounted future cash flows or other appropriate fair value methods.
Leases
At the inception of a contract, the Company determines whether the contract is or contains a lease based on all relevant facts and circumstances. For contracts that
contain a lease, the Company 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.
F-8
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 balance sheet date. The changes in fair value are recognized as current period income or loss. Financial instruments that do not meet the definition of a derivative are
classified as equity and measured at fair value and recorded as additional paid-in capital in stockholders’ equity at the date of issuance. No further adjustments to their valuation
are made.
Research and Development Expenses
Research and development expenses relate to compensation and benefits for research and development personnel, facility-related expenses, supplies, external services,
costs to acquire technology licenses, research activities under our research collaborations, expenses associated with preclinical and clinical development activities and other
operating costs. Research and development expenses are charged to expense as incurred. Payments made by the Company in advance for research and development services not
yet provided and/or for materials not yet received are recorded as prepaid expenses and expensed when the service has been performed or when the goods have been received.
Accrued liabilities are recorded 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 basis. 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
The Company follows the provisions of the Financial Accounting Standards Board (the "FASB”) Accounting Standards Codification ("ASC”) Topic 808, "Collaborative
Arrangements,” ("Topic 808”) when collaboration agreements involve joint operating activities in which both parties are active participants and that are also both exposed to
significant risks and rewards. The Company also considers the guidance in the FASB ASC Topic 606, "Revenue from Contracts with Customers,” ("Topic 606”) in determining the
appropriate treatment for activities between the Company and its collaborative partners that are more reflective of a vendor-customer relationship and therefore, within the scope of
Topic 606. Under Topic 808, the Company determines an appropriate recognition method, either by analogy to appropriate accounting literature or by applying a reasonable
accounting policy election. Generally, the classification of transactions under the collaborative arrangements is determined based on the nature and contractual terms of the
arrangement along with the nature of the operations of the participants. The Company recognizes its share of costs arising from research and development activities performed by
collaborators in the period its collaborators incur such expense. 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.
F-9
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. 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 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 Black-Scholes valuation model requires the input of valuation
assumptions to calculate the value of stock options, including expected volatility, expected term, risk-free interest rate and expected dividends. 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, 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 are
revised.
Income Taxes
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 to the Company’s tax positions requires significant judgment, as uncertainties often exist with respect to new laws,
new interpretations of existing laws, and rulings by taxing authorities. The Company follows a more-likely-than not threshold for financial statement recognition and measurement
of a tax position taken, or expected to be taken in a tax return. The guidance relates to, amongst other things, classification, accounting for interest and penalties associated with tax
positions, and disclosure requirements. Any interest and penalties accrued related 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.
Net Loss per Share
Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per share is computed by
dividing the Company’s net loss by the weighted average number of common shares outstanding and the impact of all dilutive potential common shares outstanding, except where
such dilutive potential common shares would be anti-dilutive. Dilutive potential common shares primarily consist of warrants, RSUs and stock options.
F-10
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 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 740): 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. The 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 issuance. 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.
2. Collaboration Agreement
AgonOx, Inc. ("AgonOx”)
In February 2021, the Company entered into a clinical co-development collaboration agreement (the "Clinical Co-Development Agreement”) with AgonOx, a private
company developing a pipeline of novel immunotherapy drugs targeting key regulators of the immune response to cancer. 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.
F-11
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.
3. Property and Equipment
The following table summarizes the Company’s major classes of property and equipment, in thousands:
December 31,
2024
2023
Computer equipment
$
35
$
62
Machinery & equipment
265
964
Furniture & fixtures
8
70
Leasehold improvements
–
46
Total gross fixed assets
308
1,142
Less: accumulated depreciation and amortization
(306)
(1,136)
Property and equipment, net
$
2
$
6
Depreciation and amortization expense for the years ended December 31, 2024 and 2023 was $2,000 and $56,000, respectively.
4. Accrued Expenses
Accrued expenses consist of the following, in thousands:
December 31,
2024
2023
Compensation and benefits
$
31
$
222
Professional fees
156
126
Research and development costs
558
517
Other
17
77
Total accrued expenses
$
762
$
942
F-12
5. Leases
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 rate. The incremental borrowing rate is defined as the rate the
Company would have to pay to borrow on a collateralized basis over the lease term. 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 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:
December 31,
2024
2023
Assets
Right of use asset
$
–
$
33
Liabilities
Lease liability, current
–
35
Lease liability, non-current
–
–
Total lease liability
$
–
$
35
Lease Term and Discount Rate
Weighted average remaining lease term
–
0.25
Weighted average discount rate
–
4.70%
Operating lease costs included in operating expense 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 of the operating lease liability on the Company’s consolidated balance sheets and included within changes in the
lease liability in the operating activities of the Company’s consolidated statements of cash flows was $60,000 and $139,000 for the years ended December 31, 2024 and 2023,
respectively.
6. Commitments and Contingencies
Commitments
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 immediately. Refer to Note 2 for further details on the Clinical Co-Development Agreement with
AgonOx.
F-13
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 minimal.
The Company’s rights under the Advirna agreement will expire upon the later of: (i) the expiration of the last-to-expire of the "patent rights” (as defined therein) included
in the Advirna agreement; 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. Further, the Company also granted back to Advirna a license under the assigned patent and 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 stages. Milestone payments may be required, for example, upon progress through clinical trials, upon approval of the product by a regulatory agency
and/or upon a percentage of sales of the product pursuant to such agreements. The expenditures required under these arrangements may be material individually in relation to any
product candidates covered by the intellectual property licensed under any such arrangement, and material in the aggregate in the unlikely event that milestones for multiple
products covered by these arrangements were reached in the same period. Due to the contingent nature of these payments, they are not included in the table of contractual
obligations shown below.
During the years ended December 31, 2024 and 2023, the Company did not trigger any milestone payments.
The Company’s contractual license obligations that will require future cash payments as of December 31, 2024, which result from payments expected in connection with
annual license fees, are as follows, in thousands:
Year Ending December 31,
2025
$
100
2026
100
2027
100
2028
100
2029
100
Total
$
500
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.
Accordingly, the Company has not accrued any liabilities in its consolidated financial statements related to these indemnifications.
F-14
Litigation
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 a party to any actual or threatened material legal proceedings. Accordingly, there were no contingent liabilities recorded as of the year ended
December 31, 2024.
7. Preferred Stock
The Company has authorized up to 10,000,000 shares of preferred stock, $0.0001 par value per share, for issuance. The Company’s Board of Directors (the "Board”) is
authorized under the Company’s Amended and Restated 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 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 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 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 stock issued or outstanding.
8. Stockholders’ Equity
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”). 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.
F-15
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 share. The Company received $24,000 as consideration in connection with the
Warrant Amendment Agreements. The Company assessed the amendments to the exercise price of the warrants under the FASB ASC Topic 815, "Derivatives and Hedging”
("ASC 815”) and determined that the amendment to the exercise price was completed in connection with and contingent on the close of the April 2023 Financing. The increase in
fair value of $293,000 related to the Warrant Amendment Agreements was recognized as an equity issuance cost and recorded in additional paid in capital per ASC 815.
June 2023 Financing
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”). In addition, the Company issued unregistered warrants to the placement agent, HCW, in the June
2023 Financing to purchase a total of 70,094 shares of Common Stock at an exercise price of $5.35 per share. Net proceeds to the Company from the June 2023 Financing were
$3,510,000 after deducting placement agent fees and offering expenses.
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. Accordingly, 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 ASC 815.
F-16
May 2024 Financing
On May 16, 2024, the Company entered into a purchase agreement (the "Purchase Agreement”) with Triton Funds LP ("Triton”), pursuant to which the Company agreed
to sell, and Triton agreed to purchase, upon the Company’s request in one or more transactions, up to 862,500 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. No 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. The existing warrants were originally issued in February 2020 through December
2023, having exercise prices between $324.00 and $9.72 per share. Pursuant to the July 2024 Inducement Letter Agreements, these warrants were exercised for cash at a reduced
exercise of $5.45 per share in consideration of the Company’s agreement to issue new unregistered five and one-half year term Series C warrants to purchase up to 583,098 shares
of Common Stock at an exercise price of $5.45 and new unregistered eighteen month term Series D warrants to purchase up to 507,474 shares of Common Stock at an exercise price
of $5.45, both issued and sold at a price of $0.125 per warrant share (the "July 2024 Financing”). In addition, the Company issued warrants to the placement agent, HCW, to
purchase a total of 40,896 shares of Common Stock at an exercise price of $6.8125 per share. The net proceeds to the Company from the July 2024 Financing were approximately
$2,646,000, after deducting placement agent fees and offering expenses. The Company incurred non-cash equity issuance cost of approximately $2.4 million for the incremental fair
value of the outstanding equity classified warrants and approximately $0.2 million for placement agent warrants.
Pursuant to the terms of the July 2024 Inducement Letter Agreements, in the event that the exercise of the existing warrants in the July 2024 Financing would have
otherwise caused a holder to exceed the beneficial ownership limitations set forth in the existing warrant, the Company issued the number of shares that would not cause a holder
to exceed such beneficial ownership limitation and agreed to hold such balance of shares of Common Stock in abeyance. Accordingly, an aggregate of 328,758 shares of Common
Stock were held in abeyance (the "July 2024 Abeyance Shares”) with such July 2024 Abeyance Shares evidenced through the holder’s existing warrants and which are deemed to
be prepaid. The July 2024 Abeyance Shares were held until notice was received by the holder that the balance of the shares of Common Stock could be issued in compliance with
such beneficial ownership limitations and were exercised pursuant to a notice of exercise from the holder. Until such time, the Abeyance Shares were evidenced through the
holder’s existing warrants and have been included in the Company’s table of outstanding warrants below. During the year ended December 31, 2024, all of the July 2024 Abeyance
Shares were released.
December 19, 2024 Concurrent Registered Direct Offering and Private Placement
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. The 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.
F-17
December 23, 2024 Concurrent Registered Direct Offering and Private Placement
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 Offering. 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.
Warrants
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 accounting guidance in ASC 815. Financial instruments are accounted for as either derivative liabilities or equity
instruments depending on the specific terms of the agreement. 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’ equity.
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.
F-18
The following table summarizes the Company’s outstanding warrants, all of which are classified as equity instruments, at December 31, 2024:
Number
of Warrants
Weighted-
Average
Exercise Price
Per Share
Outstanding at December 31, 2022
60,600
$
490.75
Issued
858,162
19.55
Exercised
(214,757)
8.08
Expired
(475)
5,621.55
Outstanding at December 31, 2023
703,530
33.09
Issued
1,859,449
4.28
Exercised
(637,112)
6.39
Expired
–
–
Outstanding at December 31, 2024
1,925,867
$
12.66
9. Stock-based Compensation
Stock Plans
The Company’s approved equity plans include the Phio Pharmaceuticals Corp. 2020 Long Term Incentive Plan (the "2020 Plan”) and the Phio Pharmaceuticals Corp. 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 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 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 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:
Number
of Shares
Weighted-
Average
Grant Date Fair Value
Per Share
Unvested units at December 31, 2022
5,257
$
135.26
Granted
4,836
47.16
Vested
(2,599)
134.88
Forfeited
(1,969)
88.92
Unvested units at December 31, 2023
5,525
74.83
Granted
71,000
2.77
Vested
(3,995)
71.10
Forfeited
(1,530)
84.55
Unvested units at December 31, 2024
71,000
$
2.77
F-19
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. 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. 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:
December 31,
2023
Risk-free interest rate
4.72%
Expected volatility
113.74%
Expected lives (in years)
5.25
Expected dividend yield
0%
The weighted average grant date fair value of options granted during the year ended December 31, 2023 was $1.14 per share.
F-20
The following table summarizes the Company’s stock option activity for the year ended December 31, 2024:
Total Number
of Shares
Weighted-
Average
Exercise
Price
Per Share
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Balance at December 31, 2022
20
$
317,082.58
Granted
1,136
12.33
Exercised
–
–
Forfeited
–
–
Expired
(10)
473,197.73
Balance at December 31, 2023
1,146
$
10,120.69
9.74 years
$
–
Granted
–
–
Exercised
–
–
Forfeited
–
–
Expired
(20)
512,001.27
Balance at December 31, 2024
1,126
$
1,206.29
8.71 years
$
–
Exercisable at December 31, 2024
1,126
$
1,206.29
8.71 years
$
–
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, 2024 and 2023, in thousands:
December 31,
2024
2023
Research and development
$
30
$
132
General and administrative
117
171
Total stock-based compensation
$
147
$
303
10. Income Taxes
The provision for income taxes for the years ended December 31, 2024 and 2023 are as follows, in thousands:
Years Ended December 31,
2024
2023
Current
Federal
$
–
$
–
State
–
–
Total current
–
–
Deferred
Federal
1,589
(1,831)
State
623
(718)
Total deferred
2,212
(2,549)
Valuation allowance
(2,212)
2,549
Total provision for income taxes
$
–
$
–
F-21
The following table presents a reconciliation of the U.S. statutory tax rate to the Company’s actual effective income tax rate:
Years Ended December 31,
2024
2023
Federal statutory rate
21.0%
21.0%
State income taxes, net of federal benefit
10.6%
5.9
Non-deductible expenses
(0.8%)
(0.5)
Income tax credits
0.1%
2.1
Valuation allowance
(30.9%)
(28.5)
Effective tax rate
0.0%
0.0%
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 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. The 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:
Years Ending December 31,
2024
2023
Deferred tax assets:
Net operating loss carryforwards
$
26
$
774
Tax credit carryforwards
5
295
Stock-based compensation
21
80
Capitalized research and development expenses
295
1,384
License fees
3
3
Lease liability
–
9
Other timing differences
–
13
Deferred tax assets
350
2,558
Deferred tax liabilities:
Right of use asset
–
(9)
Other timing differences
(13)
–
Deferred tax liability
(13)
(9)
Valuation allowance
(337)
(2,549)
Net deferred tax asset
$
–
$
–
F-22
Ownership changes may limit the amount of net operating loss ("NOL”) carryforwards or tax credit carryforwards that can be utilized to offset future taxable income or tax
liability. Pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the "Code”), NOL and tax credit carryforwards may be subject to annual limitations in
the event a cumulative change in ownership of more than 50% occurs within a three-year period. Any limitation may result in expiration of a portion of the NOL carryforwards or tax
credit carryforwards 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 concluded that the Company underwent an ownership change in 2023. As a result, NOL and tax credit carryforwards attributable to the pre-ownership
change are subject to substantial annual limitations under Sections 382 and 383 of the Code. The Company adjusted its NOL and tax credit carryforwards to address the impact of
the ownership change. For the year ended December 31, 2023, federal and state NOLs were reduced by $52,000,000 and $25,900,000, respectively, and federal and state research and
development tax credit carryforwards were reduced by $918,000 and $517,000, respectively, as a result of the ownership change in 2023. The Company may experience ownership
changes in the future as a result of subsequent shifts in stock ownership, some of which may be outside of the Company’s control.
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, 2024. 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. The 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 not believe there will be any material changes in its
unrecognized tax positions over the next 12 months.
The Company has not 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 income tax expense.
The Company files income tax returns in the United States and in multiple state jurisdictions. The Company is subject to tax examinations for federal and state purposes
for tax years 2021 through 2024.
11. Net Loss per Share
Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per share is computed by
dividing the Company’s net loss by the weighted average number of common shares outstanding and the impact of the dilutive effect of potential common stock equivalents,
except when the inclusion of such potential common stock equivalents would be anti-dilutive. Dilutive potential common stock equivalents primarily consist of stock options,
RSUs and warrants. Therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented because the impact of these items is
generally anti-dilutive during periods of net loss.
F-23
The following table sets forth the potential common shares excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive:
December 31,
2024
2023
Stock options
1,126
10,084
Unvested restricted stock units
71,000
49,683
Warrants
1,925,867
5,504,918
Total
1,997,993
5,564,685
12. 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):
December 31,
2024
2023
Research and development expense
$
(3,643)
$
(6,332)
General and administrative expense
(3,744)
(4,366)
Impairment loss on property and equipment
–
(126)
Other income
6
6
Interest income
244
3
Interest expense
(13)
(11)
Net loss
$
(7,150)
$
(10,826)
Total assets
$
5,738
$
9,364
13. Subsequent Events
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, 2025. 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.
F-24
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. In addition, 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. In addition, 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.
F-25
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive Officer and our Principal Financial Officer, evaluated the effectiveness of disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act”)) as of the end of the period covered by this
report to ensure that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission’s rules and forms.
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. We believe that a control system, no matter how well
designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been detected. Based on the evaluation of our disclosure controls and procedures as of the end of the period
covered by this report, management, with the participation of our Principal Executive Officer and our Principal Financial Officer, concluded that our disclosure controls and
procedures were effective at the reasonable assurance level as of such date.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. A company’s internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.
There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of
controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in
conditions, the effectiveness of internal control may vary over time.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, management used the
criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this
assessment, management, with the participation of our Principal Executive Officer and our Principal Financial Officer, concluded that, as of December 31, 2024, our internal control
over financial reporting was effective.
Attestation Report of the Registered Public Accounting Firm
This Annual Report on Form 10-K provides only management’s report. As a smaller reporting company, we are not required to provide an attestation report by our
independent registered public accounting firm regarding our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2024 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
34
ITEM 9B.
OTHER INFORMATION
Trading Plans
During the three months ended December 31, 2024, no director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1
trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.
Employment Agreement Amendment
On March 25, 2025, we and Robert Bitterman entered into an amendment (the "Amendment”) to the existing employment agreement with Mr. Bitterman, dated February 20,
2023 (the "Existing Employment Agreement”). The Amendment amends the severance provision in the Existing Employment Agreement to provide that, in addition to the (3)
months of continued payment of Mr. Bitterman’s then-current base salary that Mr. Bitterman is entitled to under the Existing Employment Agreement in certain circumstances then,
in such cases, he shall also be entitled to an additional one (1) month of continued payment of his then-current base salary for each completed year of service with the Company,
not to exceed a total severance of six (6) months. Except as set forth in the Amendment, all other terms and conditions of the Existing Employment Agreement remain in full force
and effect, and descriptions of such terms and conditions are included within Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on May 11, 2023, which is
incorporated herein by reference. The description of the Amendment is a summary only, and is qualified in its entirety by reference to the Amendment, which is attached hereto as
Exhibit 10.30 and incorporated herein by reference.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
35
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Management
Set forth below are the present directors and executive officers of the Company as of March 20, 2025. There are no arrangements or understandings between any of the
directors, officers and other persons pursuant to which such person was selected as a director or officer.
Name and Year First Became a Director
(if applicable)
Age
Position(s) with the Company
Robert J. Bitterman (2012)
74
President, Chief Executive Officer and Chairman of the Board of Directors
Robert M. Infarinato
79
Vice President, Chief Financial Officer
Patricia A. Bradford (2022)
74
Director
Robert L. Ferrara (2019)
73
Director
Jonathan E. Freeman, Ph.D. (2017)
57
Director
Curtis A. Lockshin, Ph.D. (2013)
64
Director
David H. Deming (2025)
72
Director
Robert J. Bitterman has served as a member and the Chair of the Board since 2012 and as our President and Chief Executive Officer since February 2023. Mr. Bitterman
served as the Interim Executive Chair of the Company from September 2022 to February 2023 until his appointment as President and Chief Executive Officer. Mr. Bitterman served as
the President and Chief Executive Officer of Cutanea Life Sciences, Inc., a private company he founded in 2005 that focused on developing innovative technologies to treat
diseases and disorders of the skin and subcutaneous tissue, until its acquisition by Biofrontera, Inc., USA in March 2019. Since leaving Cutanea, Mr. Bitterman was retired until
commencing the Interim Executive Chair role with the Company in September 2022. Prior to his role at Cutanea Life Sciences, Inc., Mr. Bitterman also held the position of President
and Chief Executive Officer of Isolagen, Inc., President and General Manager of Dermik Laboratories and various positions of increasing responsibility in financial and commercial
capacities within Aventis S.A. Mr. Bitterman holds an A.B. degree in Economics from The College of the Holy Cross and a Master of Business Administration degree from Boston
University. He also holds a Doctor of Humane Letters (Honoris Causa) from the New York College of Podiatric Medicine.
Robert M. Infarinato, CPA, JD joined Phio as our Vice President and Chief Financial Officer in August 2024. From 2001 until this appointment, he served as a Principal at
International Business Consulting, He held various CFO and Vice President roles at companies such as Rosenbluth International, Rhone-Poulenc Rorer, Rorer Group (Corporate
Controller), Serono, and Revlon. He also served as the European treasurer and tax manager for Pfizer from 1975 to 1978. Additionally, he served as Chair of the Board of Trustees
for Abington Health System from 2010 until 2013. He currently is registered/licensed as an Attorney at Law and a Certified Public Accountant. He was a Board Leadership Fellow
for the National Association of Corporate Directors in 2012. Mr. Infarinato holds a JD from Fordham University School of Law and a Bachelor of Science in Accounting from
Syracuse University.
Patricia A. Bradford has served as a member of the Board since 2022. Ms. Bradford served as Senior Vice President Global Human Resources at Unisys Corporation, a
global information technology solutions company, where her total service at Unisys spanned from 1982 until her retirement in 2013. In her role at Unisys, Ms. Bradford strategically
led all global human resource programs and initiatives, including talent management, at multiple levels of the organization. Ms. Bradford’s roles at Unisys progressively included all
areas of human resources, including an overseas assignment at the Unisys European headquarters where she provided human resources leadership to the region. Prior to Unisys,
Ms. Bradford was employed by Deloitte, an audit, consulting, tax, and advisory services firm, from 1978 to 1982. Since 2014, Ms. Bradford has maintained a consulting practice
focused on individual coaching for senior executives and high potential employees recommended by management. Ms. Bradford received a B.S. degree with an emphasis on
accounting and statistics from Walsh College and is a Certified Public Accountant.
36
Robert L. Ferrara has served as a member of the Board since 2019 and currently serves as our Lead Independent Director. He most recently served as the Chief Financial
Officer of Cutanea Life Sciences, Inc., a private company focused on developing innovative technologies to treat diseases and disorders of the skin and subcutaneous tissue, from
January 2012 to his retirement in June 2019. Prior to Cutanea, Mr. Ferrara served as the Chief Financial Officer of Storeroom Solutions Inc., a venture capital financed, technology
enhanced, integrated supply chain solutions company, from 2004 to 2011, and NER Data Products, Inc., an IT service management company, from 2000 to 2003, as well as holding
other senior level financial positions in national and international public companies in the greater Philadelphia area. Mr. Ferrara received a B.S. in Accounting from Lehigh
University and is a Certified Public Accountant.
Jonathan E. Freeman, Ph.D. has served as a member of the Board since 2017. Dr. Freeman currently serves as the Chief Operating Officer of Anthos Therapeutics Inc., a
clinical-stage biopharmaceutical company developing therapies for cardiovascular patients, a position he has held since July 2021. Anthos Therapeutics Inc. was launched by
Novartis and Blackstone Life Sciences, a private investment firm, where Dr. Freeman has also served as a Senior Advisor since July 2018. From 2017 to June 2018, Dr. Freeman held
the position of Chief Business Officer of Vedanta Biosciences, a clinical-stage company developing therapies for immune-mediated diseases. Prior to his role with Vedanta
Biosciences, Dr. Freeman was the Senior Vice President of Strategy and Portfolio Management and Head of Business Development and Licensing at Merck KGaA, a leading
science and technology company, from 2008 to 2016. Dr. Freeman received a Ph.D. in Molecular Pharmacology and Drug Metabolism from the Imperial Cancer Research Fund (now
CRUK), an M.A. and First Class Honours in Biochemistry from Cambridge University and a MBA with a finance major from Webster University, St. Louis.
Curtis A. Lockshin, Ph.D. has served as a member of the Board since 2013. Dr. Lockshin currently serves as the Chief Scientific Officer of Xenetic Biosciences, Inc., a
biopharmaceutical company focused on the development of novel oncology therapeutics, a position he has held since January 2017. Prior to this appointment, Dr. Lockshin served
as Xenetic Biosciences, Inc.’s Vice President of Research and Operations from March 2014 to January 2017. From July 2016 to December 2016, Dr. Lockshin served as Chief
Technical Officer of VBI Vaccines, Inc., a company developing vaccines in infectious disease and immuno-oncology. VBI Vaccines, Inc. merged with SciVac Therapeutics, Inc. and
its subsidiary SciVac, Ltd., a commercial-stage biologics and vaccine company, in July 2016 where Dr. Lockshin had served as its Chief Executive Officer and director since
September 2014. Since 2004, Dr. Lockshin has served as a Director of the Ruth K. Broad Biomedical Research Foundation, a Duke University Support Corporation. Since May 2013,
Dr. Lockshin has also served as President and Chief Executive Officer of Guardum Pharmaceuticals, LLC, a private pharmaceutical company. Dr. Lockshin holds a S.B. degree in Life
Sciences and a Ph.D. in Biological Chemistry from the Massachusetts Institute of Technology.
David H. Deming has served as a member of the Board since February 2025. Mr. Deming currently serves as the President and CEO of Barramundi Capital LLC (formerly
Parker Street Securities), a broker-dealer for private placements of private securities, a position he has held since April 2023. Mr. Deming has also been a Senior Advisor at ID Fund
Advisors LLC, a registered investment adviser, since June 2018. From April 2013 to February 2018, Mr. Deming served as Managing Partner of TAG Healthcare Advisors, where he
advised healthcare companies on business and financial strategies. Mr. Deming currently serves on the board of directors of Better For You Wellness, Inc. (OTC: BFYW), where he
is a member of the audit committee. Mr. Deming began his career at J.P. Morgan in 1976 and was a Managing Director in charge of the Global Healthcare Investment Banking Group
from 1991 to 2003. Mr. Deming received a B.A. in Economics from Hobart College.
As of the date of this Annual Report on Form 10-K, we have two executive officers, Robert Bitterman, who serves as our President and Chief Executive Officer, and Robert
Infarinato, who serves as our Vice President and Chief Financial Officer. The size of the Board of Directors (the "Board”) is currently set at six directors.
Audit Committee
We have a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act”). The Audit Committee of the Board (the "Audit Committee”) is comprised of Mr. Ferrara (Chairman), Ms. Bradford and Dr. Freeman. The Board has determined
that all members of the Audit Committee satisfy the current independence and experience requirements of Rule 10A-3 of the Exchange Act and the current Nasdaq independence
standards, and Mr. Ferrara is an "audit committee financial expert,” as the Securities and Exchange Commission (the "SEC”) has defined that term in Item 407 of Regulation S-K.
37
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all employees, officers and directors. Our Code of Business Conduct and Ethics, as well as other
corporate governance materials, is located on our website at www.phiopharma.com. Waivers of our Code of Business Conduct and Ethics may only be granted by the Board. We
intend to disclose on our website any amendments to, or waivers from, the Code of Business Conduct and Ethics that are required to be disclosed pursuant to the disclosure
requirements of Item 5.05 of Form 8-K within four business days following the date of such amendment or waiver.
Insider Trading Arrangements and Policies
We are committed to promoting high standards of ethical business conduct and compliance with applicable laws, rules and regulations. As part of this commitment, we
have adopted an insider trading policy (the "Insider Trading Policy”) governing the purchase, sale, and/or other dispositions of our securities by our directors, officers,
employees and designated contractors, as well as by Phio Pharmaceuticals Corp. itself, that we believe is reasonably designed to promote compliance with insider trading laws,
rules and regulations, and the exchange listing standards applicable to us. A copy of the Insider Trading Policy is filed as Exhibit 19.1 to this Form 10-K.
ITEM 11.
EXECUTIVE COMPENSATION
The following describes the compensation earned by each of the executive officers identified below in the Summary Compensation Table, who are referred to collectively
as our "named executive officers” or NEOs. Our NEOs with respect to the fiscal year that ended on December 31, 2024 are Robert J. Bitterman and Robert M. Infarinato.
Summary Compensation Table
Name and principal position
Year
Salary
($)
Stock
awards
($)(1)
Non-equity
incentive plan
compensation
($)
All other
compensation
($)(2)
Total
($)
Robert J. Bitterman (3)
2024
342,615
43,245
–
1,159
387,019
President and Chief Executive Officer
2023
380,000
57,640
–
252
437,892
Robert M. Infarinato (4)
2024
75,462
29,330
–
414
105,206
Vice President and Chief Financial Officer
(1)
The amounts shown reflect the grant date fair value of restricted stock units ("RSUs”) computed in accordance with the Financial Accounting Standards Board (the
"FASB”) Accounting Standards Codification ("ASC”) Topic 718, "Compensation — Stock Compensation” for the indicated year. See Note 9 to our consolidated
financial statements included elsewhere in this Annual Report for further information.
(2)
Represents amounts for the dollar value of life insurance premiums paid.
(3)
Mr. Bitterman has served as a member of the Company’s Board of Directors since 2012 and served as the Company’s Interim Executive Chairman from September 2022 to
February 2023 and was appointed as our President and Chief Executive Officer in February 2023. Upon his appointment to Interim Executive Chairman, Mr. Bitterman
ceased receiving compensation in connection with his position as a director of the Company, including as Chairman of the Board. Effective as of October 16, 2023, Mr.
Bitterman voluntarily reduced his base salary by $100,000.
(4)
Mr. Infarinato was appointed Vice President and Chief Financial Officer effective August 1, 2024.
38
Outstanding Equity Awards at Fiscal Year-End
The following table shows information regarding outstanding equity awards as of December 31, 2024 for our NEOs:
Option Awards
Stock Awards
Name
Grant
Date
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares or
Units of
Stock That
Have Not
Vested
(#)
Equity
Incentive
Plan
Awards:
Market Value
of
Unearned
Shares or
Units of
Stock That
Have Not
Vested
($)(1)
Robert J. Bitterman (2)
6/1/2015
1
–
225,720.00
6/1/2025
–
–
–
–
2/10/2016
1
–
169,884.00
2/10/2026
–
–
–
–
2/1/2017
1
–
37,362.60
2/1/2027
–
–
–
–
9/11/2024
–
–
–
–
15,500
43,245
–
–
Robert M. Infarinato(3)
8/13/2024
–
–
–
–
8,000
20,960
–
–
9/11/2024
–
–
–
–
3,000
8,370
–
–
(1)
Value is based on the closing price of $1.80 of Common Stock on December 31, 2024.
(2)
The equity awards granted to Mr. Bitterman on June 2, 2014, June 1, 2015, February 10, 2016, and February 1, 2017 vested in one installment on the first anniversary of the
grant date. The equity award granted to Mr. Bitterman on September 11, 2024 will vest in full on the first anniversary of the grant date.
(3)
The equity awards granted to Mr. Infarinato on August 13, 2024 and September 11, 2024 will each vest on the first anniversary of the respective grant date.
Base Salary
When reviewing and approving our executive compensation arrangements, including the base salaries paid to our executive officers, the Compensation Committee of the
Board (the "Compensation Committee”) considers a number of factors, including, but not limited to: the performance of the executive officer to the Company’s overall performance,
the performance of the executive officer against the Company’s corporate objectives, the executive officer’s skills, experience and qualifications in such executive officer’s role,
review of compensation surveys of base salaries paid by comparable organizations and market compensation data. These factors provide the framework for decisions regarding the
base salary compensation for each executive officer. No single factor is determinative in setting base salary levels, nor was the impact of any factor on the determination of pay
levels quantifiable.
39
Incentive Compensation
Annual Incentive Bonus
Annual bonuses are based on the achievement of corporate goals typically comprised of a mix of clinical development, discovery, financial, business development, and
investor relations related performance objectives. The corporate goals are approved by the Board on an annual basis at the start of each year. Annual bonuses for all employees,
including executive officers, take into account the achievement of specified business objectives and individual performance objectives, with the exception of the Company's
President and Chief Executive Officer, whose annual bonus is determined solely by the achievement of business objectives. The Compensation Committee reviews our
achievements against these corporate goals and their assessment of the goals and recommendations regarding funding is presented to our full Board for approval. The
Compensation Committee maintains full discretion in determining overall performance under the annual bonus and may adjust bonus payouts based on factors it deems relevant.
Neither of our NEOs received any annual incentive bonus payments in 2024 or 2023.
Equity Incentive
We maintain the Phio Pharmaceuticals Corp. 2020 Long Term Incentive Plan (the "2020 Plan”) pursuant to which we currently grant RSU awards to eligible participants.
Grants of restricted stock units under this plan to our NEOs are disclosed in the Summary Compensation and Outstanding Equity Awards at Fiscal Year-End tables above.
The Compensation Committee last granted a stock option in October 2023. We have no program, practice or plan to grant stock options in coordination with the release of
material nonpublic information. We also have not timed the release of material nonpublic information for the purpose of affecting the value of stock options or other compensation,
and we have no plan to do so. These considerations are not applicable to RSUs or other types of equity awards that do not include an exercise price related to the market price of
our stock on the date of grant.
Employment and Change of Control Agreements
The following provides description of the employment agreements that are currently in effect for our NEOs:
Robert J. Bitterman
Mr. Bitterman was appointed President and Chief Executive Officer and entered into an employment agreement, dated February 20, 2023, pursuant to which he was entitled
to an initial annual base salary of $440,000 and is eligible to receive an annual bonus of up to 40% of his annual base salary, based on the achievement of certain performance goals
established annually by the Board. In connection with his appointment, the Company granted Mr. Bitterman RSUs settleable for 11,000 shares of Common Stock under the
Company's 2020 Plan. The RSUs vested in two equal annual installments, commencing on the first anniversary of the date of grant. Effective as of October 16, 2023, Mr. Bitterman
voluntarily reduced his base salary by $100,000.
If Mr. Bitterman’s employment is terminated by the Company due to death or disability, the Company shall pay to Mr. Bitterman or to his estate, as applicable, any earned,
but unpaid, base salary and any amounts owed to Mr. Bitterman for reimbursement of expenses properly incurred which are reimbursable, in each case as earned or incurred, as
applicable through the date of termination (the "Accrued Benefits”), as well as pay any accrued but unpaid bonus then due to Mr. Bitterman and all equity awards that have been
granted will immediately vest on a pro-rata basis. If Mr. Bitterman’s employment is terminated by the Board for cause or by Mr. Bitterman without good reason, the Company shall
pay to Mr. Bitterman the Accrued Benefits through the date of termination. If Mr. Bitterman’s employment is terminated by Mr. Bitterman for good reason or by the Company other
than as a result of death or disability and other than for cause, then the Company shall pay to Mr. Bitterman the Accrued Benefits through the date of termination, continue to pay
Mr. Bitterman his base salary for three months from the date of separation, pay any accrued but unpaid bonus and if, and only if, such termination occurs within one year of a
change in control all equity awards that have been granted but are not exercisable at the time of such termination shall immediately become exercisable in full.
Mr. Bitterman is eligible to participate in the Company’s 2020 Plan and other benefits available to the Company’s executive officers.
40
Robert M. Infarinato
Mr. Infarinato was appointed Vice President and Chief Financial Officer and entered into an offer letter and employment agreement, effective August 1, 2024, pursuant to
which he is entitled to an initial annual base salary of $180,000 and is eligible to receive an annual bonus of up to 30% of his annual base salary, based on the achievement of
certain performance goals established annually by the Board. In connection with his appointment, the Company granted Mr. Infarinato RSUs settleable for 8,000 shares of Common
Stock under the 2020 Plan. The RSUs vest in equal annual installments over three years, commencing on the first anniversary of the grant date, subject to Mr. Infarinato’s
continuous service with us through each such vesting date.
Mr. Infarinato’s employment is at-will, which means that we or Mr. Infarinato may terminate his employment with us at any time, with or without notice or cause.
Mr. Infarinato is eligible to participate in the Company’s 2020 Plan and other benefits available to the Company’s executive officers.
Pay versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following
information about the relationship between the SEC-defined Compensation Actually Paid ("CAP”) to our NEOs and certain of our financial performance metrics during the fiscal
years listed below. The SEC-defined CAP data set forth in the table below does not necessarily reflect amounts actually paid, earned or received by our NEOs, and the metrics are
not those that the Compensation Committee uses when setting executive compensation.
The following table sets forth additional compensation information of our principal executive officer ("PEO”) along with total shareholder return and net income for our
2024, 2023 and 2022 fiscal years. The Company appointed Robert M. Infarinato as Chief Financial Officer in August of 2024, and Mr. Infarinato is considered a non-PEO NEO for
fiscal year 2024. The Company did not have any non-PEO NEOs for 2023 and 2022 fiscal years.
Year
Summary Compensation
Table Total for PEO
(1)
CAP to PEO
(2)
Summary Compensation
Table Total for Non-PEO
NEO
CAP to
Non-PEO
NEO
(3)
Value of Initial Fixed $100
Investment Based On
Total Shareholder Return
(4)
Net Income (Loss)
(Thousands)
2024
$387,019
$384,546
$105,206
$106,566
$23.25
$(7,150)
2023
$437,892
$379,393
–
–
$6.33
$(10,826)
2022
$109,380
$94,715
–
–
$13.83
$(11,480)
(1) Mr. Bitterman has served as a member of the Company’s Board since 2012, served as the Company’s Interim Executive Chair from September 2022 to February 2023 and was
appointed as our President and Chief Executive Officer in February 2023.
41
(2) CAP reflects the following exclusions and inclusions for the PEO in the table above:
Year
Summary
Compensation
Table Total
Minus: Grant Date
Fair Value of Stock
Awards and
Option Awards
from Summary
Compensation
Table
Plus: Year-end Fair
Value of Unvested
Equity Awards
Granted During
Year
Plus: Year-Over-
Year Difference of
Year-End Fair
Value of
Unvested
Awards
Granted in
Prior Years
Plus: Fair Value at
Vest Date for
Awards Granted
and Vested During
Year
Plus: Year-Over-
Year Difference of
Year-End Fair
Value of Prior
Years’ Awards
Vested During
Year
Minus: Fair Value
at Prior Year-end
for Prior Years’
Awards that Fail to
Meet Vesting
Conditions During
Year
Compensation
Actually Paid
2024
$387,019
$(43,245)
$43,245
–
–
$(2,473)
–
$384,546
2023
$437,892
$(57,640)
$8,360
–
–
$(9,219)
–
$379,393
2022
$109,380
$(31,464)
$18,590
–
–
$(1,791)
–
$94,715
(3) CAP reflects the following exclusions and inclusions for the Non-PEO NEO in the table above:
Year
Summary
Compensation
Table Total
Minus: Grant Date
Fair Value of Stock
Awards and
Option Awards
from Summary
Compensation
Table
Plus: Year-end Fair
Value of Unvested
Equity Awards
Granted During
Year
Plus: Year-Over-
Year Difference of
Year-End Fair
Value of
Unvested
Awards
Granted in
Prior Years
Plus: Fair Value at
Vest Date for
Awards Granted
and Vested During
Year
Plus: Year-Over-
Year Difference of
Year-End Fair
Value of Prior
Years’ Awards
Vested During
Year
Minus: Fair Value
at Prior Year-end
for Prior Years’
Awards that Fail to
Meet Vesting
Conditions During
Year
Compensation
Actually Paid
2024
$105,206
$(29,330)
$30,690
$0
$0
$0
$0
$106,566
2023
–
–
–
–
–
–
–
–
2022
–
–
–
–
–
–
–
–
(4) Total shareholder return as calculated based on a fixed investment of $100 measured from the market close on December 31, 2022 through and including the end of the fiscal
year for each year reported in the table.
42
Relationship Between Pay and Performance
The following charts shown below illustrate the relationship of compensation actually paid to our PEO and, for 2024, to our Non-PEO NEO, as set forth in the table above,
as compared to: our (1) total shareholder return and (2) net income (loss).
Director Compensation
Non-Employee Director Compensation Policy
We compensate our non-employee directors for their service as a member of our Board. Each non-employee director is entitled to receive an annual cash retainer of
$35,000. The chairs of our Board and Audit Committee are entitled to receive an additional annual cash retainer of $15,000 and the chairs of the Compensation, Governance and
Nominating Committees are entitled to receive an additional cash retainer of $7,500. In addition, the Lead Independent Director, if any, is entitled to receive an additional annual
cash retainer of $12,500. Each non-employee director is also entitled to receive an annual grant of RSUs as determined by the Board, which vest in full on the one-year anniversary
of the respective date of grant.
43
The Compensation Committee and the Board reassess the appropriate levels of cash and equity compensation for non-employee directors on an annual basis.
Non-employee directors are also reimbursed for their travel and reasonable out-of-pocket expenses incurred in connection with attending Board and committee meetings
and in attending continuing education seminars, to the extent that attendance is required by the Board or the committee(s) on which that director serves.
Non-Employee Director Compensation Table
The following table shows the compensation to the Company’s non-employee directors in fiscal year 2024. We compensate our non-employee directors for their service
as a member of our Board. Compensation paid to Robert J. Bitterman, the Company's President, Chief Executive Officer and Chairman of the Board, is set forth above in the
Summary Compensation Table due to Mr. Bitterman’s status as an NEO of the Company. As noted above, Mr. Deming did not join the Board until February 2025; accordingly, he
is not included in the table below as this table relates to fiscal year 2024.
Name
Fees Earned or
Paid in Cash
($)
Stock Awards
($)(1)
Total
($)
Patricia A. Bradford
50,000
22,320
72,320
Robert L. Ferrara
62,500
27,900
90,400
Jonathan E. Freeman, Ph.D.
35,000
2,790
37,790
Curtis A. Lockshin, Ph.D.
42,500
5,580
48,080
(1)
The amounts shown reflect the grant date fair value of RSUs computed in accordance with the FASB ASC Topic 718, "Compensation — Stock Compensation”.
As of December 31, 2024, the aggregate number of shares underlying stock options and RSUs by our non-employee directors is as follows: Patricia A. Bradford — 8,000
RSUs, Robert L. Ferrara — 10,000 RSUs, Jonathan E. Freeman, Ph.D. — 1,000 RSUs, and Curtis A. Lockshin, Ph.D. —2,000 RSUs. Mr. Bitterman’s outstanding equity awards are
also included in the Outstanding Equity Awards at Fiscal Year-End table above due to his status a NEO during the fiscal year ended December 31, 2024.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners and Management
Based on information available to us and filings with the SEC, the following table sets forth certain information regarding the beneficial ownership (as defined by Rule 13d-
3 under the Exchange Act) of our outstanding Common Stock for (i) each of our directors, (ii) each of our executive officers, (iii) all of our directors and executive officers as a group
and (iv) persons known to us to beneficially own more than 5% of our outstanding Common Stock. The following information is presented as of March 20, 2025 or such other date
as may be reflected below.
Beneficial ownership and percentage ownership are determined in accordance with the rules of the SEC and include voting or investment power with respect to shares of
stock. This information does not necessarily indicate beneficial ownership for any other purpose. Under these rules, shares of Common Stock not outstanding but deemed
beneficially owned by virtue of the right of a person to acquire them as of March 20, 2025, or within 60 days of March 20, 2025, are deemed outstanding for the purpose of
computing the percentage ownership of each person, but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
44
Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each stockholder named in the following table possesses sole voting
and investment power over their shares of Common Stock, except for those jointly owned with that person’s spouse. Unless otherwise indicated below, the address of each person
listed on the table is c/o Phio Pharmaceuticals Corp., 11 Apex Drive Suite 300A, PMB 2006, Marlborough, MA, 01752.
Shares Beneficially Owned
Name and Address of Beneficial Owner
Number (1)
Percent of
Class (2)
Greater than 5% Holders
Intracoastal Capital LLC(3)
472,907
9.99%
Directors and Named Executive Officers:
Robert J. Bitterman
2,418
*
Robert M. Infarinato
–
*
Patricia A. Bradford
352
*
Robert Ferrara
666
*
Jonathan E. Freeman, Ph.D.
356
*
Curtis A. Lockshin, Ph.D.
356
*
David H. Deming
–
*
All current directors and executive officers as a group (seven persons)
4,148
*
__________________
*
Indicates less than 1%.
(1)
Represents shares of Common Stock held as of March 20, 2025 plus shares of Common Stock that may be acquired upon the exercise of options and warrants within 60 days
of March 20, 2025.
(2)
Based on 4,778,154 shares of Common Stock that were issued and outstanding as of March 20, 2025. Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them as of March 20, 2025, or within 60 days of March 20, 2025, are treated as outstanding only when determining the ownership and voting
power for each person (or all directors and executive officers as a group).
(3)
Based on information provided by Intracoastal Capital LLC ("Intracoastal”). Each of Intracoastal, Mitchell P. Kopin ("Mr. Kopin”) and Daniel B. Asher ("Mr. Asher”) be
deemed to have beneficial ownership of 472,907 shares of Common Stock issuable upon the exercise of certain warrants held by Intracoastal. Certain of the warrants held by
Intracoastal contain a blocker provision under which the holder thereof does not have the right to exercise its warrants to the extent (but only to the extent) that such exercise
would result in beneficial ownership by the holder thereof, together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the
holder’s affiliates, of more than 9.99% of the Company’s Common Stock. Based upon information provided by Intracoastal, Intracoastal and Messrs. Kopin and Asher would
be deemed to have beneficial ownership of 1,045,576 shares of Common Stock in the absence of such blocker provisions. The principal business office of Mr. Kopin and
Intracoastal is 245 Palm Trail, Delray Beach, Florida 33483. The principal business office of Mr. Asher is 111 W. Jackson Boulevard, Suite 2000, Chicago, Illinois 60604.
45
Equity Compensation Plan Information
The following table sets forth certain information as of December 31, 2024 about the securities authorized for issuance under our equity compensation plans, which
consist of our 2020 Plan and our 2013 Employee Stock Purchase Plan. Upon adoption of the 2020 Plan, shares that remained available for grant under our prior Phio Pharmaceuticals
Corp. 2012 Long-Term Incentive Plan (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.
Plan Category
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and
Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Number of Securities
Remaining Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities Reflected in
First Column)
Equity compensation plans approved by security holders(1)
72,126
$
1,206.29
889
Equity compensation plans not approved by security holders
–
–
–
Total
72,126
$
1,206.29
889
___________________
(1)
Includes 1,126 outstanding options and 71,000 unvested RSUs under the 2020 Plan.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The Board, with the assistance of the Audit Committee, reviews and approves all transactions with directors, officers and holders of more than 5% of our voting securities
and their affiliates. Prior to the Board’s consideration of a transaction with such a related party, the material facts as to the related party’s relationship or interest in the transaction
must be disclosed to the Board, and the transaction will not be considered approved by the Board unless a majority of the directors who are not interested in the transaction (if
applicable) approve the transaction. Furthermore, when stockholders are entitled to vote on a transaction with a related party, the material facts of the related party’s relationship or
interest in the transaction must be disclosed to the stockholders, who must approve the transaction in good faith.
During the last two completed fiscal years, there has not been, nor is there currently proposed, any transaction or series of related transactions to which we were or will be
a party in which the amount involved exceeded or will exceed the lesser of (i) $120,000 and (ii) one percent of the average of Company's total assets at yearend for the last two
completed fiscal years and in which the other parties included or will include any of our directors, executive officers, holders of 5% or more of our voting securities, or any member
of the immediate family of any of the foregoing persons, other than compensation arrangements with directors and executive officers, which are described where required in Item
11. Executive Compensation of this Annual Report on Form 10-K.
Indemnification Agreements
We have entered into indemnification agreements with each of our executive officers and directors. These agreements provide that, subject to limited exceptions and
among other things, we will indemnify each of our executive officers and directors to the fullest extent permitted by law and advance expenses to each indemnitee in connection
with any proceeding in which a right to indemnification is available.
46
Director Independence
We believe that the Company benefits from having a strong and independent Board. For a director to be considered independent, the Board must determine that the
director does not have any direct or indirect material relationship with the Company that would affect his or her exercise of independent judgment. On an annual basis, the Board
reviews the independence of all directors under the applicable SEC rules and Nasdaq listing standards. The Board also considers each director’s affiliations with the Company and
members of management, as well as significant holdings of Company securities. This review considers all known relevant facts and circumstances in making an independence
determination. Based on this review, the Board has made an affirmative determination that all directors are independent, other than our President and Chief Executive Officer and
Chairman of the Board, Mr. Bitterman.
In addition, Nasdaq listing standards require that, subject to specified exceptions, each member of our Audit, Compensation, Governance and Nominating Committees of
the Board be independent and that members of our Audit Committee also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act. The Board has determined
that all members of the Audit Committee, Compensation Committee, Governance Committee, and Nominating Committee are independent under the applicable Nasdaq listing
standards and the Exchange Act.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Pre-Approval Policies and Procedures
Under the Sarbanes-Oxley Act of 2002, all audit and permissible non-audit services provided by our independent registered public accounting firm must be approved in
advance by our Audit Committee to ensure that such services do not impair the independent registered public accounting firm’s independence from us. Accordingly, the Audit
Committee reviews and pre-approves all audit and non-audit services performed by our independent registered public accounting firm, as well as the fees charged for such
services. In its review of non-audit service fees, the Audit Committee considers, among other things, the possible impact of the performance of such services on the independent
registered public accounting firm’s independence.
The following is a summary of the fees billed and expected to be billed to the Company by BDO USA, P.C. ("BDO”), our independent registered public accounting firm,
for professional services rendered for the fiscal years ended December 31, 2024 and 2023. All fees incurred in fiscal years 2024 and 2023 for services rendered by BDO were
approved in accordance with the pre-approval policies and procedures described above.
2024
2023
Audit Fees
$
440,150
$
443,162
Audit-Related Fees
–
–
Tax Fees
–
–
All Other Fees
–
–
Total All Fees:
$
440,150
$
443,162
Audit Fees consist of fees for the audit of the Company’s consolidated financial statements included in our annual reports on Form 10-K, the review of the Company’s
consolidated financial statements included in our quarterly reports on Form 10-Q and other statutory and regulatory filings, including auditor consents.
Audit-Related Fees consist of fees billed for assurance and related services that are also performed by our independent registered public accounting firm.
Tax Fees consist of services rendered for tax compliance, tax advice and tax planning.
All Other Fees consist of the aggregate fees billed for products and services provided by BDO and not otherwise included in Audit Fees, Audit-Related Fees or Tax Fees.
47
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements
Our consolidated financial statements are set forth in Item 8 to this Annual Report on Form 10-K.
Financial Statement Schedules
Certain schedules are omitted because they are not applicable, or are not required by smaller reporting companies.
Exhibits
Exhibit
Incorporated by Reference Herein
Number
Description
Form
Date
3.1
Amended and Restated Certificate of Incorporation of Phio
Pharmaceuticals Corp.
Current Report on Form 8-K (File No. 001-36304)
November 19, 2018
3.2
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of Phio Pharmaceuticals Corp.
Current Report on Form 8-K (File No. 001-36304)
January 14, 2020
3.3
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of Phio Pharmaceuticals Corp.
Current Report on Form 8-K (File No. 001-36304)
January 25, 2023
3.4
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of Phio Pharmaceuticals Corp.
Current Report on Form 8-K (File No. 001-36304)
July 2, 2024
3.5
Certificate of Designation of Series D Preferred Stock, dated November
16, 2022.
Current Report on Form 8-K (File No. 001-36304)
November 16, 2022
3.6
Amended and Restated Bylaws of Phio Pharmaceutical Corp.
Current Report on Form 8-K (File No. 001-36304)
May 2, 2022
4.1
Form of Warrant.
Amendment No. 1 to the Registration Statement on
Form S-1 (File No. 333-221173)
September 28, 2018
4.2
Form of Placement Agent Warrant.
Current Report on Form 8-K (File No. 001-36304)
November 19, 2019
4.3
Form of Warrant.
Current Report on Form 8-K (File No. 001-36304)
February 6, 2020
4.4
Form of Warrant.
Current Report on Form 8-K (File No. 001-36304)
February 13, 2020
4.5
Form of Underwriter Warrant.
Current Report on Form 8-K (File No. 001-36304)
February 13, 2020
48
Exhibit
Incorporated by Reference Herein
Number
Description
Form
Date
4.6
Form of Warrant.
Current Report on Form 8-K (File No. 001-36304)
April 2, 2020
4.7
Form of Common Stock Warrant.
Current Report on Form 8-K (File No. 001-36304)
January 25, 2021
4.8
Form of Placement Agent Warrant.
Current Report on Form 8-K (File No. 001-36304)
February 17, 2021
4.9
Form of Series A Common Stock Warrant.
Current Report on Form 8-K (File No. 001-36304)
April 20, 2023
4.10
Form of Series B Common Stock Warrant.
Current Report on Form 8-K (File No. 001-36304)
April 20, 2023
4.11
Form of Existing Warrant Amendment.
Current Report on Form 8-K (File No. 001-36304)
April 20, 2023
4.12
Form of Series A Common Stock Warrant.
Current Report on Form 8-K (File No. 001-36304)
June 2, 2023
4.13
Form of Series B Common Stock Warrant.
Current Report on Form 8-K (File No. 001-36304)
June 2, 2023
4.14
Form of Series A/B Warrant.
Current Report on Form 8-K (File No. 001-36304)
December 8, 2023
4.15
Form of Placement Agent Warrant.
Current Report on Form 8-K (File No. 001-36304)
December 8, 2023
4.16
Description of Securities Registered Pursuant to Section 12(b) of the
Securities Exchange Act of 1934.
Annual Report on Form 10-K (File No. 00136304)
April 1, 2024
4.17
Form of Series C/D Warrant
Current Report on Form 8-K (File No. 001-36304)
July 12, 2024
4.18
Form of Placement Agent Warrant
Current Report on Form 8-K (File No. 001-36304)
July 12, 2024
4.19
Form of Series E Common Stock Warrant
Current Report on Form 8-K (File No. 001-36304)
December 20, 2024
4.20
Form of Placement Agent Warrant
Current Report on Form 8-K (File No. 001-36304)
December 20, 2024
49
Exhibit
Incorporated by Reference Herein
Number
Description
Form
Date
4.21
Form of Series F Common Stock Warrant
Current Report on Form 8-K (File No. 001-36304)
December 26, 2024
4.22
Form of Placement Agent Warrant
Current Report on Form 8-K (File No. 001-36304)
December 26, 2024
4.23
Form of Series G Common Stock Warrant
Current Report on Form 8-K (File No. 001-36304)
January 14, 2024
4.24
Form of Placement Agent Warrant
Current Report on Form 8-K (File No. 001-36304)
January 14, 2024
4.25
Form of Series H Common Stock Warrant
Current Report on Form 8-K (File No. 001-36304)
January 15, 2024
4.26
Form of Placement Agent Warrant
Current Report on Form 8-K (File No. 001-36304)
January 15, 2024
4.27
Form of Series I Common Stock Warrant
Current Report on Form 8-K (File No. 001-36304)
January 17, 2024
4.28
Form of Placement Agent Warrant
Current Report on Form 8-K (File No. 001-36304)
January 17, 2024
10.1
Patent and Technology Assignment Agreement between RXi
Pharmaceuticals Corporation (formerly RNCS, Inc.) and Advirna, LLC,
effective as of September 24, 2011.
Registration Statement on Form S-1 (File No. 333-
177498)
October 25, 2011
10.2
Clinical Co-development Agreement, dated February 26, 2021, by and
between Phio Pharmaceuticals Corp. and AgonOx, Inc.+
Annual Report on Form 10-K (File No. 00136304)
March 22, 2023
10.3
Phio Pharmaceuticals Corp. 2020 Long Term Incentive Plan, as amended
and restated.#
Quarterly Report on Form 10-Q (File No. 001-36304)
November 9, 2023
10.4
Form of Restricted Stock Unit Award under the Company’s 2020 Long
Term Incentive Plan.#
Annual Report on Form 10-K (File. 001-36304)
March 25, 2021
10.5
Form of Nonqualified Stock Option Award under the Company’s 2020
Long Term Incentive Plan.#
Annual Report on Form 10-Q (File. 001-36304)
November 9, 2023
10.6
Phio Pharmaceuticals Corp. 2012 Long Term Incentive Plan.#
Quarterly Report on Form 10-Q (File No. 001-36304)
November 12, 2019
10.7
Form of Restricted Stock Unit Award under the Company’s 2012 Long
Term Incentive Plan, as amended.#
Amendment No. 2 to the Registration Statement on
Form S-1 (File No. 333-177498)
December 29, 2011
50
Exhibit
Incorporated by Reference Herein
Number
Description
Form
Date
10.8
Form of Incentive Stock Option Award under the Company’s 2012 Long
Term Incentive Plan, as amended.#
Registration Statement on Form S-1 (File No. 333-
191236)
September 18, 2013
10.9
Form of Non-Qualified Stock Option Award under the Company’s 2012
Long Term Incentive Plan, as amended.#
Registration Statement on Form S-1 (File No. 333-
191236)
September 18, 2013
10.10
RXi Pharmaceuticals Corporation Employee Stock Purchase Plan.#
Registration Statement on Form S-8 (File No. 333-
277013)
August 24, 2018
10.11
Form of Indemnification Agreement.#
Amendment No. 3 to the Registration Statement on
Form S-1 (File No. 333-177498)
January 23, 2012
10.12
Employment Agreement, dated February 20, 2023, by and between Phio
Pharmaceuticals Corp. and Robert Bitterman.#
Current Report on Form 8-K (File No. 001-36304)
February 22, 2023
10.13
Lease Agreement dated December 17, 2013 between RXi
Pharmaceuticals Corporation and 257 Simarano Drive, LLC, Brighton
Properties, LLC, Robert Stubblebine 1, LLC and Robert Stubblebine 2,
LLC.
Current Report on Form 8-K (File No. 000-54910)
December 20, 2013
10.14
First Amendment to Lease dated January 22, 2019.
Current Report on Form 8-K (File No. 001-36304)
January 28, 2019
10.15
Registration Rights Agreement, dated January 21, 2021, by and between
the Company and the Purchasers signatory therein.
Current Report on Form 8-K (File No. 001-36304)
January 25, 2021
10.16
Form of Securities Purchase Agreement, dated April 18, 2023, by and
between the Company and each of the Purchasers signatory thereto.
Current Report on Form 8-K (File No. 001-36304)
April 20, 2023
10.17
Form of Securities Purchase Agreement, dated May 31, 2023, by and
between the Company and each of the Purchasers signatory thereto
Current Report on Form 8-K (File No. 001-36304)
June 2, 2023
(Registered Direct Offering).
10.18
Form of Securities Purchase Agreement, dated May 31, 2023, by and
between the Company and each of the Purchasers signatory thereto
(PIPE Private Placement).
Current Report on Form 8-K (File No. 001-36304)
June 2, 2023
10.19
Form of Registration Rights Agreement, dated May 31, 2023, by and
between the Company and each of the Purchasers signatory thereto.
Current Report on Form 8-K (File No. 001-36304)
June 2, 2023
10.20
Form of Inducement Letter Agreement, dated December 6, 2023, by and
between Phio Pharmaceuticals Corp. and the Holders.
Current Report on Form 8-K (File No. 001-36304)
December 8, 2023
10.21
Purchase Agreement, dated May 16, 2024, by and between the
Company and Triton Funds LP.
Current Report on Form 8-K (File No. 001-36304)
May 17, 2024
51
Exhibit
Incorporated by Reference Herein
Number
Description
Form
Date
10.22
Phio Pharmaceuticals Corp. 2020 Long Term Incentive Plan
Current Report on Form 8-K (File No. 001-36304)
June 21, 2024
10.23
Form of Inducement Letter Agreement, dated July 11, 2024, by and
between the Company and the Holders.
Current Report on Form 8-K (File No. 001-36304)
July 12, 2024
10.24
Employment Agreement, dated July 9, 2024, by and between the
Company and Robert M. Infarinato.
Current Report on Form 8-K (File No. 001-36304)
August 1, 2024
10.25
Form of Securities Purchase Agreement, dated December 19, 2024, by
and between the Company and each of the Purchasers signatory
thereto.
Current Report on Form 8-K (File No. 001-36304)
December 20, 2024
10.26
Form of Securities Purchase Agreement, dated December 23, 2024, by
and between the Company and each of the Purchasers signatory
thereto.
Current Report on Form 8-K (File No. 001-36304)
December 26, 2024
10.27
Form of Securities Purchase Agreement, dated January 13, 2025, by and
between the Company and each of the Purchasers signatory thereto.
Current Report on Form 8-K (File No. 001-36304)
January 14, 2025
10.28
Form of Securities Purchase Agreement, dated January 14, 2025, by and
between the Company and each of the Purchasers signatory thereto.
Current Report on Form 8-K (File No. 001-36304)
January 15, 2025
10.29
Form of Securities Purchase Agreement, dated January 16, 2025, by and
between the Company and each of the Purchasers signatory thereto.
Current Report on Form 8-K (File No. 001-36304)
January 17, 2025
10.30
First Amendment to the Employment Agreement of Robert J. Bitterman,
dated March 25, 2025, by and between the Company and Robert
Bitterman.*
19.1
Insider Trading Policy.*
23.1
Consent of BDO USA, P.C., an Independent Registered Public
Accounting Firm.*
31.1
Sarbanes-Oxley Act Section 302 Certification of Principal Executive
Officer.*
31.2
Sarbanes-Oxley Act Section 302 Certification of Principal Financial
Officer.*
32.1
Sarbanes-Oxley Action Section 906 Certification of Principal Executive
Officer and Principal Financial Officer.**
97.1
Phio Pharmaceuticals Corp. Incentive Compensation Recovery Policy.* Annual Report on Form 10-K (File No. 001-35304)
April 1, 2024
52
Exhibit
Incorporated by Reference Herein
Number
Description
Form
Date
101.INS
Inline XBRL Instance Document.*
101.SCH
Inline XBRL Taxonomy Extension Schema Document.*
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.*
104
The cover page for this report, formatted in Inline XBRL (included in
Exhibit 101).*
_________
*
Filed herewith.
**
Furnished herewith.
#
Indicates a management contract or compensatory plan or arrangement.
+
Certain portions of this Exhibit have been redacted pursuant to Item 601(b)(10) of Regulation S-K. The Company agrees to furnish supplementally an unredacted copy of
this Exhibit to the SEC upon request.
ITEM 16.
FORM 10-K SUMMARY
None.
53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PHIO PHARMACEUTICALS CORP.
By:
/s/ Robert J. Bitterman
Robert J. Bitterman
President and Chief Executive Officer
(as Principal Executive Officer)
Date: March 31, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signatures
Title
Date
/s/ Robert J. Bitterman
Robert J. Bitterman
President, Chief Executive Officer and Director
(Principal Executive Officer)
March 31, 2025
/s/ Robert Infarinato
Robert Infarinato
Vice President and Chief Financial Officer
(Principal Financial Officer)
March 31, 2025
/s/ Patricia Bradford
Patricia Bradford
Director
March 31, 2025
/s/ Robert L. Ferrara
Robert L. Ferrara
Director
March 31, 2025
/s/ Jonathan E. Freeman
Jonathan E. Freeman, Ph.D.
Director
March 31, 2025
/s/ Curtis A. Lockshin
Curtis A. Lockshin, Ph.D.
Director
March 31, 2025
/s/ David H. Deming
Director
March 31, 2025
David H. Deming
54
Exhibit 10.30
FIRST AMENDMENT TO THE
EMPLOYMENT AGREEMENT OF ROBERT J. BITTERMAN
This First Amendment to the Employment Agreement of Robert J. Bitterman (the “Amendment”) is entered into this 25th day of March, 2025, by and between Robert J.
Bitterman (“Executive”) and Phio Pharmaceuticals Corp., a Delaware corporation (the “Company”).
Recitals
WHEREAS, the Company and Executive have entered into that certain Employment Agreement dated February 20, 2023 (the “Executive Agreement”); and
WHEREAS, the Company and Executive wish to amend the Executive Agreement as set forth in this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valid consideration, the sufficiency of which is acknowledged, the parties
hereto agree as follows:
Agreement
1.
Amendment to Section 10(c). Section 10(c) of the Executive Agreement is hereby amended by replacing Section 10(c) in its entirety with the following:
(c) If the Executive’s employment is terminated by the Company other than as a result of the Executive’s death or Disability or other than for reasons specified in
Section 10(b), then in addition to the Accrued Benefits, the Executive shall receive (i) continued Base Salary, for the three (3) months from date of separation plus
an additional one (1) month of continued Base Salary for each completed year of service, not to exceed a total severance of six (6) months (the “Severance
Period”) (ii) any earned but unpaid Annual Incentive Bonus for completed fiscal years and (iii) if, and only if, such termination as described in this Section 10(c)
occurs within one (1) year following a Change in Control (as defined in the 2020 LTIP) and during the Term, all outstanding equity awards held by the Executive
as of such termination and not then exercisable shall immediately become exercisable in full.
2.
Except as modified or amended in this Amendment, no other term or provision of the Executive Agreement is amended or modified in any respect. The Executive
Agreement and this Amendment set forth the entire understanding between the parties with regard to the subject matter hereof and supersedes any prior oral discussions
or written communications and agreements. This Amendment cannot be modified or amended except in writing signed by Executive and an authorized officer of the
Company.
The parties have executed this First Amendment to the Employment Agreement of Robert J. Bitterman on the day and year first written above.
PHIO PHARMACEUTICALS CORP.
/s/ Robert L. Ferrara
Name: Robert L. Ferrara
Title: Lead Independent Director, Phio Pharmaceuticals Corp.
EXECUTIVE
/s/ Robert J. Bitterman
Robert J. Bitterman
Exhibit 19.1
PHIO PHARMACEUTICALS CORP.
Insider Trading Policy
Purpose
This Insider Trading Policy (the “Policy”) provides guidelines with respect to transactions in the securities of Phio Pharmaceuticals Corp. (the “Company”) and the
handling of confidential information about the Company and the companies with which the Company does business. The Company’s Board of Directors has adopted this Policy to
promote compliance with federal and state securities laws that prohibit certain persons who are aware of material nonpublic information about a company from:
·
trading in securities of that company; or
·
providing material nonpublic information to other persons who may trade on the basis of that information (also known as “tipping”).
Insider trading is a crime. Violations are pursued vigorously by the Securities and Exchange Commission (“SEC”), U.S. Attorneys, state enforcement authorities and
foreign jurisdictions. Violations can result in severe penalties, including significant fines and imprisonment. See the Section below captioned “Consequences of Violations.”
Persons Subject to the Policy
This Policy applies to (i) all members of the Company’s Board of Directors, (ii) all officers of the Company and its subsidiaries, and (iii) all employees of the Company and
its subsidiaries. The Company may also determine that other persons should be subject to this Policy, such as contractors or consultants who have access to material nonpublic
information. This Policy also applies to family members, other members of a person’s household and entities controlled by a person covered by this Policy, as described below.
Transactions Subject to the Policy
This Policy applies to all transactions in the Company’s securities (collectively referred to in this Policy as “Company Securities”), including the Company’s common
stock, any securities that are exercisable for, or convertible or exchangeable into, shares of common stock, and any other type of securities that the Company may issue from time
to time, including (but not limited to) preferred stock, notes, convertible debt and warrants, as well as derivative securities that are not issued by the Company, such as exchange-
traded put or call options or swaps relating to the Company’s Securities.
Statement of Policy
It is the policy of the Company that no director, officer or employee of the Company or its subsidiaries (or any other person designated by this Policy or by the
Compliance Officer, as such term is defined below under the heading “Administration of the Policy”, as subject to this Policy) who is aware of material nonpublic information
relating to the Company or its subsidiaries may, directly, or indirectly through family members or other persons or entities:
·
engage in transactions in Company Securities, except as otherwise specified in this Policy under the headings “Transactions Not Subject to Trading
Restrictions” and “Rule 10b5-1 Plans;”
·
recommend the purchase or sale of any Company Securities;
·
disclose material nonpublic information to persons within the Company whose jobs do not require them to have that information, or outside of the Company to
other persons, including, but not limited to, family, friends, business associates, investors and expert consulting firms, unless any such disclosure is made in
accordance with the Company’s policies regarding the protection or authorized external disclosure of information regarding the Company; or
·
assist anyone engaged in the above activities.
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In addition, it is the policy of the Company that no director, officer or employee of the Company or its subsidiaries (or any other person designated as subject to this
Policy) who, in the course of working for the Company, learns of material nonpublic information about a company with which the Company does business, including a customer or
supplier of the Company, may trade in that company’s securities until the information becomes public or is no longer material.
There are no exceptions to this Policy, except as specifically noted herein. Transactions that may be necessary or justifiable for independent reasons (such as the need to
raise money for an emergency expenditure), or small transactions, are not exempted from this Policy. The securities laws do not recognize any mitigating circumstances, and, in any
event, even the appearance of an improper transaction must be avoided to preserve the Company’s reputation for adhering to the highest standards of conduct.
Individual Responsibility
Persons subject to this Policy have ethical and legal obligations to maintain the confidentiality of information about the Company and to not engage in transactions in
Company Securities while in possession of material nonpublic information. Persons subject to this Policy must not engage in illegal trading and must avoid the appearance of
improper trading. Each individual is responsible for making sure that he or she complies with this Policy, and that any family member, household member or entity whose
transactions are subject to this Policy, as discussed below, also comply with this Policy. In all cases, the responsibility for determining whether an individual is in possession of
material nonpublic information rests with that individual, and any action on the part of the Company, the Compliance Officer or any other employee or director pursuant to this
Policy (or otherwise) does not in any way constitute legal advice or insulate an individual from liability under applicable securities laws. You could be subject to severe legal
penalties and disciplinary action by the Company for any conduct prohibited by this Policy or applicable securities laws, as described below in more detail under the heading
“Consequences of Violations.”
Administration of the Policy
The Chief Executive Officer shall serve as the Compliance Officer for the purposes of this Policy, and in his or her absence, another employee designated by the
Compliance Officer shall be responsible for administration of this Policy. All determinations and interpretations by the Compliance Officer shall be final and not subject to further
review.
When in doubt about a matter covered by this Policy, or if you have questions, please contact the Compliance Officer before engaging in any transaction involving
Company Securities. See “Company Assistance” below.
Definition of Material Nonpublic Information
Material Information. Information is considered “material” if a reasonable investor would consider that information important in making a decision to buy, hold or sell
securities. Any information that could be expected to affect the Company’s stock price, whether it is positive or negative, should be considered material. There is no bright-line
standard for assessing materiality; rather, materiality is based on an assessment of all of the facts and circumstances, and is often evaluated by enforcement authorities with the
benefit of hindsight. While it is not possible to define all categories of material information, some examples of information that ordinarily would be regarded as material are:
·
financial condition and results of operation of the Company, including quarterly and annual results;
·
forward-looking information regarding the Company’s financial performance, such as earnings guidance, projections or “outlook” for future financial results;
·
changes to previously announced earnings guidance or the decision to suspend earnings guidance;
·
pending or proposed mergers, investments, acquisitions, dispositions or tender offers;
·
pending or proposed joint ventures or strategic alliances;
·
a restructuring of the Company;
·
significant related party transactions;
·
declaration of a dividend or stock split or a change in dividend policy;
·
an offering of any Company Securities;
·
the establishment of, or any significant developments or changes regarding, a repurchase program for Company Securities (such as planned repurchases,
increases or decreases in the program’s authorization, suspensions and similar changes);
·
bank borrowings or other financing transactions outside the ordinary course of business;
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·
a change in the Company’s pricing or cost structure;
·
major marketing changes;
·
an award or loss of a major contract or subcontract;
·
the gain or loss of a significant customer or supplier;
·
a change in management or the board of directors;
·
a change in auditors or notification that the auditor's reports may no longer be relied upon;
·
write-ups or write-downs of assets or changes in accounting methods;
·
development of a significant new product, process, technical innovation or service;
·
significant pending or threatened litigation or government inquiries or investigations, or the resolution of such litigation, inquiry or investigation;
·
impending bankruptcy or the existence of severe liquidity problems;
·
significant actual or potential cybersecurity incidents (e.g., a data breach or any other significant disruption in the Company’s operations, or loss, potential loss,
breach or unauthorized access of its property or assets, whether at its facilities or through its information technology infrastructure); or
·
the imposition of a restriction on trading in Company Securities or the extension or termination of such restriction.
References in this list to the Company or otherwise in the context of assessing whether information is material shall mean the Company and/or its subsidiaries and
business units, as the context requires.
When Information is Considered Public. Information that has not been disclosed to the public is generally considered to be nonpublic information. In order to establish
that the information has been disclosed to the public, it may be necessary to demonstrate that the information has been widely disseminated. Information generally would be
considered widely disseminated if it has been disclosed through a press release, a broadcast on widely-available radio or television programs, publication in a widely-available
newspaper, magazine or news website, a Dow Jones “broad tape,” newswire services or public disclosure documents filed with the SEC that are available on the SEC’s website
(such as Form 8-K, Form 10-Q and Form 10-K). By contrast, information would likely not be considered widely disseminated if it is available only to the Company’s employees, or if
it is only available to a select group of persons, such as analysts, brokers and institutional investors. In addition, please be aware that disclosure on the Company’s website, by
itself, may not be considered wide dissemination.
Once information is widely disseminated, it is still necessary to afford the investing public with sufficient time to absorb the information. As a general rule, information
should not be considered fully absorbed by the marketplace until after the first full business day after the day on which the information is released. If, for example, the Company
were to make an announcement on a Monday, you should not trade in Company Securities until Wednesday. Depending on the particular circumstances, the Company may
determine that a longer or shorter period should apply to the release of specific material nonpublic information.
Precautions to Prevent Misuse or Unauthorized Disclosure
When a person covered under this policy has exposure to material nonpublic information, that individual should consider taking extraordinary precautions to prevent
misuse or unauthorized disclosure, including:
·
maintaining files securely and avoiding storing information on computer systems that can be accessed by other individuals;
·
avoiding discussing confidential matters in areas were conversation could be overheard;
·
restricting information on a “need to know” basis; and
·
refrain from making any statement on the Internet or via social media (e.g. Twitter, Facebook) regarding the Company, as it may be seen as a recommendation to
buy or sell the Company’s securities.
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Transactions by Family Members and Others
This Policy applies to your family members who reside with you (including a spouse, a child, a child away at college, stepchildren, grandchildren, parents, stepparents,
grandparents, siblings and in-laws), anyone else who lives in your household, and any family members who do not live in your household but whose transactions in Company
Securities are directed by you or are subject to your influence or control, such as parents or children who consult with you before they trade in Company Securities (collectively
referred to as “Family Members”). You are responsible for the transactions of these other persons and therefore should make them aware of the need to confer with you before
they trade in Company Securities, and you should treat all such transactions for the purposes of this Policy and applicable securities laws as if the transactions were for your own
account. This Policy does not, however, apply to personal securities transactions of Family Members where the purchase or sale decision is made by a third party not controlled
by, influenced by or related to you or your Family Members.
Transactions by Entities that You Influence or Control
This Policy applies to any entities that you influence or control, including any corporations, partnerships or trusts (collectively referred to as “Controlled Entities”), and
transactions by these Controlled Entities should be treated for the purposes of this Policy and applicable securities laws as if they were for your own account.
Transactions Not Subject to Trading Restrictions
Transactions Under Company Plans. This Policy does not apply in the case of the following transactions, except as specifically noted:
·
Stock Option Exercises. This Policy does not apply to the exercise of an employee stock option acquired pursuant to the Company’s plans, or to the exercise of a
tax withholding right pursuant to which a person has elected to have the Company withhold shares subject to an option to satisfy tax withholding requirements.
Similarly, this Policy does not apply to the exercise of options on a “net exercise” basis pursuant to which a person either (i) delivers outstanding shares of
common stock to the Company or (ii) authorizes the Company to withhold from issuance shares of common stock issuable upon exercise of the option, in either
case, having a fair market value on the date of exercise equal to the aggregate exercise price. This Policy does apply, however, to any sale of stock as part of a
broker-assisted cashless exercise of an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option.
·
Restricted Stock Awards. This Policy does not apply to the vesting of restricted stock, or the exercise of a tax withholding right pursuant to which a person has
elected to have the Company withhold shares to satisfy tax withholding requirements upon the vesting of any restricted stock. The Policy does apply, however,
to any market sale of restricted stock.
·
401(k) Plan. This Policy does not apply to purchases of Company Securities in any 401(k) plan maintained by the Company resulting from your periodic
contribution of money to the plan pursuant to your payroll deduction election. This Policy does apply, however, to certain elections you may make under any
such 401(k) plan, including: (a) an election to increase or decrease the percentage of your periodic contributions that will be allocated to the Company stock
fund; (b) an election to make an intra-plan transfer of an existing account balance into or out of the Company stock fund; (c) an election to borrow money against
your 401(k) plan account if the loan will result in a liquidation of some or all of your Company stock fund balance; and (d) an election to pre-pay a plan loan if the
pre-payment will result in allocation of loan proceeds to the Company stock fund. It should be noted that sales of Company Securities from a 401(k) account are
also subject to Rule 144, and therefore affiliates should ensure that a Form 144 is filed when required.
·
Employee Stock Purchase Plan. This Policy does not apply to purchases of Company Securities in any employee stock purchase plan maintained by the
Company resulting from your periodic contribution of money to the plan pursuant to the election you previously made. This Policy also does not apply to
purchases of Company Securities resulting from lump sum contributions to the plan, provided that you elected to participate by lump sum payment at the
beginning of the applicable enrollment period. This Policy does apply, however, to your election to participate in any such plan for any enrollment period, and to
your sales of Company Securities purchased pursuant to the plan.
·
Dividend Reinvestment Plan. This Policy does not apply to purchases of Company Securities under any dividend reinvestment plan maintained by the Company
resulting from your reinvestment of dividends paid on Company Securities. This Policy does apply, however, to voluntary purchases of Company Securities
resulting from additional contributions you choose to make to any such dividend reinvestment plan, and to your election to participate in the plan or increase
your level of participation in the plan. This Policy also applies to your sale of any Company Securities purchased pursuant to the plan.
·
Other Similar Transactions. Any other purchase of Company Securities from the Company or sales of Company Securities to the Company are not subject to this
Policy.
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Transactions Not Involving a Purchase or Sale. Bona fide gifts of securities are not transactions subject to this Policy, unless the person making the gift has reason to
believe that the recipient intends to sell the Company Securities while the person making the gift is aware of material nonpublic information, provided that Restricted Persons (as
defined below) must still pre-clear any such transaction as described below under the heading “Additional Procedures—Pre-clearance Procedures.” Finally, transactions in mutual
funds that are invested in Company Securities are not transactions subject to this Policy.
Special and Prohibited Transactions
The Company has determined that there is a heightened legal risk and/or the appearance of improper or inappropriate conduct if the persons subject to this Policy engage
in certain types of transactions. Therefore, it is the Company’s policy that any persons covered by this Policy may not engage in any of the following transactions, or should
otherwise consider the Company’s preferences as described below:
·
Short-Term Trading. Short-term trading of Company Securities may be distracting to the person and may unduly focus the person on the Company’s short-term
stock market performance instead of the Company’s long-term business objectives. For these reasons, any director, officer or employee of the Company who
purchases Company Securities in the open market may not sell any Company Securities of the same class during the six months following the purchase (or vice
versa).
·
Short Sales. Short sales of Company Securities (i.e., the sale of a security that the seller does not own) may evidence an expectation on the part of the seller that
the securities will decline in value, and therefore have the potential to signal to the market that the seller lacks confidence in the Company’s prospects. In
addition, short sales may reduce a seller’s incentive to seek to improve the Company’s performance. For these reasons, short sales of Company Securities are
prohibited. In addition, Section 16(c) of the Exchange Act prohibits officers and directors from engaging in short sales.
·
Publicly-Traded Options. Given the relatively short term of publicly-traded options, transactions in options may create the appearance that a director, officer or
employee is trading based on material nonpublic information and focus a director’s, officer’s or other employee's attention on short-term performance at the
expense of the Company’s long-term objectives. Accordingly, transactions in put options, call options or other derivative securities, on an exchange or in any
other organized market, are prohibited by this Policy.
·
Hedging Transactions. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through the use of
financial instruments such as prepaid variable forward contracts, equity swaps, collars and exchange funds or other transactions which hedge or offset, or are
designed to hedge or offset, any decrease in the market value of Company Securities. Such hedging transactions may permit a director, officer or employee to
continue to own Company Securities directly or indirectly, including those obtained through employee benefit plans or otherwise, but without the full risks and
rewards of ownership. When that occurs, the director, officer or employee may no longer have the same objectives as the Company’s other shareholders.
Therefore, directors, officers and employees are prohibited from engaging in any such transactions.
·
Margin Accounts and Pledged Securities. Securities held in a margin account as collateral for a margin loan may be sold by the broker without the customer's
consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower
defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or otherwise is
not permitted to trade in Company Securities, directors, officers and other employees are prohibited from holding Company Securities in a margin account or
otherwise pledging Company Securities as collateral for a loan, except as may be pre-approved by the Audit Committee of the Board of Directors.
·
Standing and Limit Orders. Standing and limit orders (except standing and limit orders under approved Rule 10b5-1 Plans, as described below) create heightened
risks for insider trading violations similar to the use of margin accounts. There is no control over the timing of purchases or sales that result from standing
instructions to a broker, and as a result the broker could execute a transaction when a director, officer or employee is in possession of material nonpublic
information. The Company therefore discourages placing standing or limit orders on Company Securities. If a person subject to this Policy determines that they
must use a standing order or limit order, the order should be limited to short duration and should otherwise comply with the restrictions and procedures outlined
below under the heading “Additional Procedures.”
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Additional Procedures
The Company has established additional procedures in order to assist the Company in the administration of this Policy, to facilitate compliance with laws prohibiting
insider trading while in possession of material nonpublic information, and to avoid the appearance of any impropriety. These additional procedures are applicable only to those
individuals described below.
·
Pre-Clearance Procedures. All directors and executive officers of the Company and its subsidiaries and any other persons designated by the Compliance Officer
as being subject to these procedures, as well as the Family Members and Controlled Entities of such persons (all of the foregoing are referred to as “Restricted
Persons”), may not engage in any transaction in Company Securities without first obtaining pre-clearance from the Compliance Officer. Restricted Persons are
more likely to have access to material non-public information because of their positions or affiliations with the Company and, as a result, their trades in Company
Securities are more likely to be subject to greater scrutiny. A request for pre-clearance should be submitted to the Compliance Officer at least two business days
before the proposed transaction and shall comply with any other procedures established by the Compliance Officer. The Compliance Officer is under no
obligation to approve a transaction submitted for pre-clearance and will have sole discretion to determine whether to permit the transaction. In evaluating each
proposed transaction, the Compliance Officer may consult as necessary with senior management and outside counsel.
If a Restricted Person seeks pre-clearance and the request is denied, then he or she should refrain from engaging in any transaction in Company Securities, and
should not inform any other person of the restriction. Moreover, pre-clearance does not, in any circumstance, relieve anyone of their legal obligation to refrain
from trading while in possession of material nonpublic information. In other words, even if pre-clearance is received, if the requesting person becomes aware of
material nonpublic information or becomes subject to a blackout period or event-specific trading restriction (as discussed below), the transaction may not be
completed. Pre-clearance of a transaction is valid only for the 5-business day period immediately following receipt by the Restricted Person of such pre-clearance.
When a request for pre-clearance is made, the requesting person should carefully consider whether he or she may be aware of any material nonpublic information
about the Company and should provide a detailed description of those circumstances to the Compliance Officer.
·
Post-Transaction Notice. The Restricted Persons who have a reporting obligation under Section 16 of the Exchange Act shall also notify the Compliance Officer
of the occurrence of any purchase, sale or other acquisition or disposition of Company Securities as soon as possible following the transaction, but in any event
within one business day after the transaction. Such notification may be oral or in writing (including by e-mail) and should include the identity of the Restricted
Persons, the type of transaction, the date of the transaction, the number of shares involved and the purchase or sale price.
For both the “Pre-Clearance Procedures” section above and this “Post-Transaction Notice” section, a purchase, sale or other acquisition or disposition shall be
deemed to occur at the time the person or entity becomes irrevocably committed to it (for example, in the case of an open market purchase or sale, this occurs
when the trade is executed, not when it settles).
·
Quarterly Blackout Period Restrictions. Because trades in Company Securities by Restricted Persons are more likely to be subject to greater scrutiny, as
mentioned above, Restricted Persons may not engage in any transactions involving the Company Securities (other than as specified by this Policy), during a
“Blackout Period” beginning on the last business day of each fiscal quarter and ending on the first full business day following the date of the public release of
the Company’s earnings results for that quarter.
Please note that Blackout Periods are compliance requirements of the Company and do not create or constitute a legal right to trade when they are not in effect.
Accordingly and for the avoidance of doubt, even when a Blackout Period is not in effect, if you are in possession of material non-public information, you may
not trade in the Company’s securities.
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·
Event-Specific Trading Restrictions. From time to time, an event may occur that is material to the Company and is known by only a few directors, officers and/or
employees. So long as the event remains material and nonpublic, the persons designated by the Compliance Officer may not trade Company Securities. In
addition, the Company’s financial results may be sufficiently material in a particular fiscal quarter that, in the judgment of the Compliance Officer, designated
persons should refrain from trading in Company Securities even sooner than the typical Blackout Period described above. In that situation, the Compliance
Officer may notify these persons that they should not trade in the Company’s Securities, without disclosing the reason for the restriction. The existence of an
event-specific trading restriction period or extension of a Blackout Period will not be announced to the Company as a whole, and should not be communicated to
any other person. Exceptions to this Policy will not be granted while an event-specific trading restriction is in effect.
·
Exceptions. Blackout Period and event-specific trading restrictions do not apply to any transactions to which this Policy does not apply, as described above
under the heading “Transactions Not Subject to Trading Restrictions.” In addition, the pre-clearance requirements, Blackout Period and event-specific trading
restrictions do not apply to transactions under approved Rule 10b5-1 Plans.
Rule 10b5-1 Plans
Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability. In order to be eligible to rely on this defense, a person subject to this Policy must
enter into a Rule 10b5-1 plan for transactions in Company Securities that meets certain conditions specified in the Rule (a “Rule 10b5-1 Plan”). If the plan meets the requirements of
Rule 10b5-1, Company Securities may be purchased or sold without regard to certain insider trading restrictions. To comply with the Policy, a Rule 10b5-1 Plan must be approved
by the Compliance Officer and meet the requirements of Rule 10b5-1. In general, a Rule 10b5-1 Plan must be entered into at a time when the person entering into the plan is not
aware of material nonpublic information or otherwise at a time when trading is restricted under this Policy. Once the plan is adopted, the person must not exercise any influence
over the amount of securities to be traded, the price at which they are to be traded or the date of the trade. The plan must either specify the amount, pricing and timing of
transactions in advance or delegate discretion on these matters to an independent third party.
Any adoption of a new Rule 10b5-1 Plan, or amendment (including early termination) to any existing Rule 10b5-1 Plan, must be submitted to the Compliance Officer for
approval at least five business days prior to the entry into the Rule 10b5-1 Plan or amendment. No further pre-approval of transactions conducted pursuant to the Rule 10b5-1 Plan
is required.
Applicability of Policy
to Former Insiders
This Policy continues to apply to transactions in Company Securities even after termination of service to the Company. If an individual is in possession of material
nonpublic information when his or her service terminates, that individual may not trade in Company Securities until that information has become public or is no longer material. The
pre-clearance procedures applicable to such individual specified under the heading “Additional Procedures” above, however, will cease to apply to transactions in Company
Securities upon the expiration of any Blackout Period or other Company-imposed trading restrictions in force at the time of such individual’s termination of service.
Consequences of Violations
Insider trading is a crime. Violations are pursued vigorously by the SEC, U.S. Attorneys and state enforcement authorities and foreign jurisdictions. Punishment for
insider trading violations is severe, and could include significant fines and imprisonment. While the regulatory authorities concentrate their efforts on the individuals who trade, or
who tip inside information to others who trade, the federal securities laws also impose potential liability on companies and other “controlling persons” within the organization if
they fail to take reasonable steps to prevent insider trading by company personnel.
Under federal securities laws, individuals found liable for insider trading could, among other things, face (i) up to 20 years in jail, (ii) a criminal fine of up to $5 million, and
(iii) civil penalties of up to three times the profit gained or loss avoided.
In addition, for failing to take steps to prevent insider trading, the Company (and/or its executive officers and directors) could itself face (i) a criminal penalty of up to $25
million, and (ii) civil penalties of the greater of $1 million or three times the profit gained or loss avoided as a result of an employee’s violation. Please note that individual states
may impose their own penalties.
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Furthermore, an individual's failure to comply with this Policy may subject the individual to Company imposed sanctions, including dismissal for cause, whether or not the
employee's failure to comply results in a violation of law. Any sanctions imposed upon or liabilities incurred by an employee for insider trading will be the sole responsibility of the
employee. The Company will not cover or indemnify the employee for these costs. Neither the Company nor any of its directors, officers or employees will be liable for the legal or
financial consequences of any approval or pre-clearance, refusal to approve or pre-clear or delay in reviewing any requests for approval or pre-clearance of any transaction, Rule
10b5-1 Plan or other request under this Policy. Needless to say, a violation of law, or even an SEC investigation that does not result in prosecution, can tarnish a person's
reputation and irreparably damage a career.
Company Assistance
If you have any questions about this Policy or its application to any proposed transaction, please contact the Company’s Compliance Officer, who can be reached by
telephone at (508) 929-3610 or by e-mail at rbitterman@phiopharma.com, for additional guidance.
Certification
You must sign, date and return the Certification attached as Exhibit A (or any other certification the Compliance Officer deems appropriate) stating that you have received,
read, understand and agree to comply with this Policy. The Company may require you to sign this Certification on an annual basis, including in electronic format. Please note that
you are bound by the Policy whether or not you sign the Certification.
* * *
This Policy supersedes any previous policy of the Company concerning securities trading. In the event of any conflict or inconsistency between this Policy and other
materials previously distributed by the Company, this Policy shall govern.
Adopted: March 25, 2025
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EXHIBIT A
CERTIFICATION
I hereby certify that:
1.
I have read and understand the Company’s Insider Trading Policy.
2.
I understand that the Company’s Compliance Officer is available to answer any questions I have regarding the Insider Trading Policy.
3.
Since March 25, 2025, or such shorter period of time that I have been an employee or director of the Company, I have complied with the Insider Trading Policy.
4.
I will continue to comply with the Insider Trading Policy for as long as I am subject to the Policy.
Print name:
Signature:
Date:
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REQUEST FOR CLEARANCE TO TRADE
To:
Phio Pharmaceuticals Corp.
Name: Title:
I hereby request clearance for myself (or a member of my immediate family or household) to execute the following transaction relating to the securities of Phio Pharmaceuticals
Corp.
Type of Transaction:
I wish to purchase. Number and type of securities to be purchased: ________________
I wish to sell. Number and type of securities to be sold: ________________
I wish to exercise an option and sell all or a portion of the shares of common stock purchased at the then market price in a “cashless exercise” or “same day sale” and
hold any remaining shares of common stock in my brokerage account.
Number of options to be exercised:
Number of shares of common stock to be sold:
Number of shares of common stock held in account:
Other transaction:
If the request is for a member of my immediate family or household:
Name of Person: Relationship:
I hereby represent and certify that I am not aware of any material, non-public information concerning Phio Pharmaceuticals Corp. at the time of submitting this request, and I agree
that should I become aware of any material, non-public information concerning Phio Pharmaceuticals Corp. before completing the approved transaction, I will not complete the
transaction. I understand that once approved, this authorization is valid on the date of approval and for five business days thereafter. I further understand that the approval will
lapse if I become in possession of, or, in the judgment of the Compliance Officer, I am likely to be in possession of material, non-public information, or otherwise on the earliest of
expiration of (i) the five-business day period of this approval, or (ii) the trading window in which approval is granted, whichever is the first to occur.
Date _____________________
Signature _________________________
Approved by: ______________________________
Compliance Officer __________________________
Date ______________________
10
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Phio Pharmaceuticals Corp.
Marlborough, Massachusetts
We hereby consent to the incorporation by reference in the Registration Statements on Form S-1 (Nos. 333-224799, 333-227173, 333-227617, 333-233584, 333-234032, 333-238204,
333-239779, 333-271521, 333-272526, 333-276146, 333-279511, 333-281052 and 333-284381), Form S-8 (Nos. 333-274787, 333-251670, 333-236784, 333-230547, 333-227013, 333-215871,
333-215870, 333-189522, 333-189521 and 333-183633) and Form S-3 (Nos. 333-279557, 333-256100 and 333-252588) of Phio Pharmaceuticals Corp. (the Company), of our report dated
March 31, 2025, relating to the consolidated financial statements, which appears in this Annual Report on Form 10-K. Our report contains an explanatory paragraph regarding the
Company’s ability to continue as a going concern.
/s/ BDO USA, P.C.
Boston, Massachusetts
March 31, 2025
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
SECURITIES EXCHANGE ACT OF 1934 RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert J. Bitterman, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Phio Pharmaceuticals Corp.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during
the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial
reporting.
Dated: March 31, 2025
/s/ Robert J. Bitterman
Robert J. Bitterman
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
SECURITIES EXCHANGE ACT OF 1934 RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert M. Infarinato, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Phio Pharmaceuticals Corp.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during
the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial
reporting.
Dated: March 31, 2025
/s/ Robert M. Infarinato
Robert M. Infarinato
Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Phio Pharmaceuticals Corp. (the “Company”) on Form 10-K for the period ended December 31, 2024 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that to their knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the Company’s financial condition and result of operations.
Dated: March 31, 2025
/s/ Robert J. Bitterman
Robert J. Bitterman
President and Chief Executive Officer
(Principal Executive Officer)
Dated: March 31, 2025
/s/ Robert M. Infarinato
Robert M. Infarinato
Chief Financial Officer
(Principal Financial Officer)