Phio Pharmaceuticals Corp 10-Q for FY2024 Q2
Phio Pharmaceuticals Corp. (PHIO)
About this 10-Q
Phio Pharmaceuticals Corp filed this 10-Q on August 14, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $1.85M
- compared with a net loss of $2.55M a year earlier
- Diluted EPS
- -$3.62
- compared with -$13.27 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive office) (Zip code)
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 |
| The |
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.
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).
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 | ☐ | |||
| ☒ | Smaller reporting company | |||||
| 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 checkmark whether the registrant is
a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
As of August 2, 2024, Phio Pharmaceuticals Corp. had shares of common stock, $0.0001 par value, outstanding.
PHIO PHARMACEUTICALS CORP.
FORM 10-Q — QUARTER ENDED JUNE 30, 2024
INDEX
| 2 |
PART I — FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
PHIO PHARMACEUTICALS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
(Unaudited)
| June 30, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Right of use asset | ||||||||
| Property and equipment, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Lease liability | ||||||||
| Total current liabilities | ||||||||
| Commitments and contingencies (Note 2) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value, shares authorized; shares issued and outstanding at June 30, 2024 and December 31, 2023 | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
PHIO PHARMACEUTICALS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share: | ||||||||||||||||
| Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
PHIO PHARMACEUTICALS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF
PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share data)
(Unaudited)
| Series D Preferred Stock | Common Stock | Additional | |||||||||||||||||||||||||||
For the Three and Six Months Ended June 30, 2024 | Shares | Amount | Shares | Amount | Paid in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | – | ||||||||||||||||||||||||||||
| Issuance of common stock upon vesting of restricted stock units | – | ||||||||||||||||||||||||||||
| Shares withheld for payroll taxes | – | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock-based compensation expense | – | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Stock-based compensation expense | – | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Series D Preferred Stock | Common Stock | Additional | |||||||||||||||||||||||||||
| For the Three and Six Months Ended June 30, 2023 | Shares | Amount | Shares | Amount | Paid-in
Capital | Accumulated
Deficit | Total | ||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Cash-in-lieu of fractional shares for reverse stock split | – | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Redemption of preferred stock | ( | ) | ( | ) | – | ||||||||||||||||||||||||
| Issuance of common stock upon vesting of restricted stock units | – | ||||||||||||||||||||||||||||
| Shares withheld for payroll taxes | – | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock-based compensation expense | – | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | ) | |||||||||||||||||||||||
| Issuance of common stock and warrants, net of offering costs | – | ||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | – | ||||||||||||||||||||||||||||
| Stock-based compensation expense | – | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
PHIO PHARMACEUTICALS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right of use asset | ||||||||
| Loss on disposal of property and equipment | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses | ||||||||
| Lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash paid for purchase of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Net proceeds from the issuance of common stock and warrants | ||||||||
| Cash in lieu of fractional shares for reverse stock split | ( | ) | ||||||
| Redemption of Series D preferred stock | ( | ) | ||||||
| Payment of taxes on net share settlements of restricted stock units | ( | ) | ( | ) | ||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents and restricted cash at the beginning of period | ||||||||
| Cash, cash equivalents and restricted cash at the end of period | $ | $ | ||||||
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the totals above:
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Cash, cash equivalents and restricted cash | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
PHIO PHARMACEUTICALS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Significant Accounting Policies
Nature of Operations
Phio Pharmaceuticals Corp. (“Phio” or the “Company”) is a clinical stage biotechnology company whose proprietary INTASYL® small interfering RNA gene silencing technology is designed to make immune cells more effective in killing tumor cells. The Company is developing therapeutics that are designed to leverage INTASYL to precisely target specific proteins that reduce the body’s ability to fight cancer, without the need for specialized formulations or drug delivery systems.
Phio was incorporated in the state of Delaware in 2011 as RXi Pharmaceuticals Corporation. On November 19, 2018, the Company changed its name to Phio Pharmaceuticals Corp., to reflect its transition from a platform company to one that is fully committed to developing groundbreaking immuno-oncology therapeutics.
Effective
July 5, 2024, the Company completed a
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Certain information and footnote disclosures that are included in the Company’s annual consolidated financial statements, but that are not required for interim reporting purposes, have been condensed or omitted. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation of the condensed consolidated financial statements have been included.
These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024 (the “2023 Form 10-K”). Interim results are not necessarily indicative of results for a full year.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, MirImmune, LLC. All material intercompany accounts have been eliminated in consolidation.
Segments
The Company operates as one operating segment and all assets are located in the United States.
| 7 |
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The areas subject to significant estimates and judgement include, among others, those related to the fair value of equity awards, accruals for research and development expenses, useful lives of property and equipment, and the valuation allowance on the Company’s deferred tax assets. On an ongoing basis the Company evaluates its estimates and bases its estimates on historical experience and other relevant assumptions that the Company believes are reasonable under the circumstances. Actual results could differ materially from these estimates.
Liquidity
The Company has reported recurring losses from operations since its inception and expects to continue to have negative cash flows from operations for the foreseeable future. Historically, the Company’s primary source of funding has been from sales of its securities. The Company’s ability to continue to fund its operations is dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity, or strategic opportunities, in order to maintain its operations. This is dependent on a number of factors, including the market demand or liquidity of the Company’s common stock. There is no guarantee that debt, additional equity or other funding will be available to the Company on acceptable terms, or at all. If the Company fails to obtain additional funding when needed, the Company would be forced to scale back or terminate its operations or seek to merge with or to be acquired by another company.
The Company has limited cash resources, has reported recurring losses from operations since inception, has negative operating cash flows and has not yet received product revenues. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern, and the Company’s current cash resources may not provide sufficient capital to fund operations for at least the next 12 months from the date of the release of these condensed consolidated financial statements. The continuation of the Company as a going concern depends upon the Company’s ability to raise additional capital through an equity offering, debt offering and/or strategic opportunity to fund its operations. There can be no assurance that the Company will be successful in accomplishing these plans in order to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents include unrestricted cash accounts, money market investments and highly liquid investment instruments with original maturity of three months or less at the date of purchase.
Other than as set forth above, there have been no material changes to the significant accounting policies disclosed in the Company’s 2023 Form 10-K.
| 8 |
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280) – Improvements to Reporting Segment Disclosures” (“ASU 2023-07”), which requires disclosure of incremental segment information on an annual and interim basis. In addition, ASU 2023-07 clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The enhanced disclosures are required to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statements and disclosures, but does not expect that it will have a material impact on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures” (“ASU 2023-09”), which requires disclosure of specific categories in the rate reconciliation table along with additional information for reconciling items that meet a quantitative threshold, disclosure of disaggregated income taxes paid and modifies other income tax-related disclosures. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024 and allows for adoption on a prospective basis, with a retrospective option. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09, but does not expect that it will have a material impact on its consolidated financial statements.
2. Collaboration Agreement
AgonOx, Inc. (“AgonOx”)
In
February 2021, the Company entered into a clinical co-development collaboration agreement (the “Clinical Co-Development
Agreement”) with AgonOx, a private company developing a pipeline of novel immunotherapy drugs targeting key regulators of
the immune response to cancer. On May 8, 2024, the Company terminated the Clinical Co-Development Agreement with AgonOx, which such
termination was effective immediately. Under the Clinical Co-Development Agreement, Phio and AgonOx were working to develop a T
cell-based therapy using the Company’s lead product candidate, PH-762, and AgonOx’s “double positive” tumor
infiltrating lymphocytes (“DP TIL”) technology. Per the terms of the Clinical Co-Development Agreement, the
Company had agreed to reimburse AgonOx up to $
The Company recognized its share of costs arising from research and development activities performed by AgonOx in the Company’s condensed consolidated financial statements in the period AgonOx incurred such expense. Effective as of the date of termination, the Clinical Co-Development Agreement and the continuing obligations of the Company and AgonOx thereunder were terminated in their entirety. As a result, the Company is no longer required to provide financial support for the development costs incurred under the Clinical Co-Development Agreement, and is not entitled to future development milestones or royalty payments from AgonOx’s licensing of its DP TIL technology.
The Company will pay to AgonOx all Company payment obligations that accrued prior to the termination of the Clinical Co-Development Agreement. Remaining payments to be made to AgonOx as of June 30, 2024 were $344,000, which primarily related 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, the Company and AgonOx are coordinating the orderly wind-down of the Phase 1 clinical trial. Each of the Company and AgonOx shall be responsible for its own costs and expenses incurred in connection with the wind-down of the Phase 1 clinical trial.
| 9 |
The
Company recognized approximately $
3. Fair Value of Financial Instruments
The Company follows the provisions of the FASB Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurement,” for the Company’s financial assets and liabilities that are re-measured and reported at fair value each reporting period and are re-measured and reported at fair value at least annually using a fair value hierarchy that is broken down into three levels. Level inputs are defined as follows:
Level 1 – quoted prices in active markets for identical assets or liabilities.
Level 2 – other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
Level 3 – significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.
As of June 30, 2024, the Company categorized its cash equivalents as Level 1 hierarchy as the carrying amounts approximate their fair value due to their short-term nature and market rates of interest. As of December 31, 2023, the Company did not identify any financial instruments required to be presented at fair value.
| Schedule of financial instruments at fair value | ||||||||||||||||
| Description | June 30, 2024 | Quoted Prices In Active Markets | Other Significant Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The carrying amounts of cash, accounts payable and accrued expenses of the Company approximate their fair values due to their short-term nature.
4. Leases
The Company entered into
a lease for a laboratory facility located at 17 Briden Street, Worcester, Massachusetts, which covers
The total base rent for
the premises over each 6-month term is expected to be $
| 10 |
The Company’s lease
for its corporate headquarters and primary research facility in Marlborough, Massachusetts was for a total of
The lease for the Company’s former corporate headquarters represented all of the Company’s capitalized lease obligations.
The amounts reported in the condensed consolidated balance sheets for the Company’s former corporate headquarters classified as an operating lease in which the Company is the lessee and other supplemental balance sheet information is set forth as follows, in thousands, except the lease term (number of years) and discount rate:
| Schedule of lease amounts recorded in balance sheet | ||||||||
June 30, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Right of use asset | $ | $ | ||||||
| Liabilities | ||||||||
| Lease liability | $ | $ | ||||||
| Lease Term and Discount Rate | ||||||||
| Weighted average remaining lease term | – | |||||||
| Weighted average discount rate | ||||||||
There were
There was
5. Stockholders’ Equity
Financings
May 2024
Financing — On May 16, 2024, the Company entered into a purchase agreement (the “Purchase Agreement”)
with Triton Funds LP (“Triton”), pursuant to which the Company agreed to sell, and Triton agreed to purchase,
upon the Company’s request in one or more transactions, up to
shares of the Company’s common stock at a purchase price of $
per share (the “Purchase Price”), for aggregate gross proceeds of up to $
| 11 |
April 2023 Financing
— On April 20, 2023, the Company completed a registered direct offering and a concurrent private placement of a total of:
registered shares of the Company’s common stock at a purchase price per share of $, unregistered five and one-half year term
Series A warrants to purchase up to shares of common stock at an exercise price of $
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
June 2023
Financing — On June 2, 2023, the Company completed a registered direct offering and a concurrent private placement of a
total of:
registered shares and
unregistered shares of the Company’s common stock each at a purchase price per share of $,
unregistered pre-funded warrants to purchase up to an aggregate of
shares of common stock at a purchase price per share of $
and with a pre-funded warrant exercise price of $
Warrants
The Company first assesses warrants that are issued by the Company under the FASB ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) to determine whether the warrants are within the scope of ASC 480. If there are no instances outside of the Company’s control that could require cash settlement, the Company then applies and follows the applicable accounting guidance in ASC 815. Financial instruments are accounted for as either derivative liabilities or equity instruments depending on the specific terms of the agreement. Based on the assessment of the warrants issued by the Company under the guidance in ASC 480 and ASC 815, the warrants issued by the Company have been classified within stockholder’s equity.
In
December 2023, the Company entered into an inducement letter agreement (the “December 2023 Inducement Letter Agreement”)
with certain holders of the Company’s existing warrants to purchase up to an aggregate of
| 12 |
During the three months ended June 30, 2024 and 2023, there were warrant exercises. During the six months ended June 30, 2024, all of the December 2023 Abeyance Shares were released and issued, and during the six months ended June 30, 2023, shares of common stock were issued related to the exercise of pre-funded warrants from the June 2023 Financing.
The following table summarizes the Company’s outstanding warrants, all of which are classified as equity instruments, at June 30, 2024:
| Schedule of outstanding warrants | ||||||||
| Number of Shares | Weighted- Average Exercise Price Per Share | |||||||
| Outstanding at December 31, 2023 | $ | |||||||
| Issued | ||||||||
| Exercised | ( | ) | ||||||
| Expired | ||||||||
| Outstanding at June 30, 2024 | $ | |||||||
Restricted Stock Units
Restricted stock units (“RSUs”) are issued under the Company’s 2020 Long-Term Incentive Plan (the “2020 Plan”) or as inducement grants issued outside of the 2020 Plan to new employees. RSUs are generally subject to graded vesting and the satisfaction of certain service requirements. RSUs granted by the Company to employees generally vest annually over years after the grant date and over year after the grant date for non-employee members of the Board of Directors. Upon vesting, each outstanding RSU will be settled for one share of the Company’s common stock. Employee RSU recipients may elect to net share settle upon vesting, in which case the Company pays the employee’s income taxes due upon vesting and withholds a number of shares of equal value. The Company does not expect to repurchase shares to satisfy RSU vests. The fair value of the RSUs awarded are based upon the Company’s closing stock price at the grant date and are expensed over the requisite service period.
The following table summarizes the activity of the Company’s RSUs for the six months ended June 30, 2024:
| Summary of RSUs activity | ||||||||
| Number of Shares | Weighted- Average Grant Date Fair Value Per Share | |||||||
| Unvested units at December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Unvested units at June 30, 2024 | $ | |||||||
| 13 |
There were RSUs granted during the three months or six months ended June 30, 2024 or the three months ended June 30, 2023. The weighted-average fair value of RSUs granted during the six months ended June 30, 2023 was $.
Stock-based compensation expense related to RSUs was $ and $ for the three months ended June 30, 2024 and 2023, respectively. Stock-based compensation expense related to RSUs was $ and $ for the six months ended June 30, 2024 and 2023, respectively.
The aggregate fair value of awards that vested during the six months ended June 30, 2024 and 2023 was $ and $, respectively, which represents the market value of the Company’s common stock on the date that the RSUs vested.
Stock Options
Stock options are available for issuance under the 2020 Plan or as inducement grants issued outside of the 2020 Plan to new employees. Stock options are generally subject to graded vesting and the satisfaction of service requirements. Stock options granted by the Company to employees generally vest annually over years after the grant date and generally vest over year after the grant date for non-employee members of the Board of Directors and expire within ten years of grant. Upon the exercise of a stock option, the Company issues new shares and delivers them to the recipient. The Company does not expect to repurchase shares to satisfy stock option exercises.
The Company uses the Black-Scholes option-pricing model to determine the fair value of all its option grants. The risk-free interest rate used for each grant was based upon the yield on zero-coupon U.S. Treasury securities with a term similar to the expected life of the related option. The Company’s expected stock price volatility assumption is based upon the Company’s own implied volatility. As the Company has limited stock option exercise information, the expected life assumption used for option grants is based upon the simplified method provided for under the FASB ASC Topic 718, “Compensation — Stock Compensation”. The dividend yield assumption is based upon the fact that the Company has never paid cash dividends and presently has no intention of paying cash dividends.
The Company did not grant any stock options during the three or six months ended June 30, 2024 and 2023.
The following table summarizes the activity of the Company’s stock options for the six months ended June 30, 2024:
| Summary of stock options activity | ||||||||||||
| Number of Shares | Weighted- Average Exercise Price Per Share | Aggregate Intrinsic Value | ||||||||||
| Balance at December 31, 2023 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited | ||||||||||||
| Expired | ( | ) | ||||||||||
| Balance at June 30, 2024 | $ | $ | ||||||||||
| Exercisable at June 30, 2024 | $ | $ | ||||||||||
Stock-based compensation expense related to stock options for the six months ended June 30, 2024 was $. The Company did t have any stock-based compensation expense related to stock options for the three months ended June 30, 2024 and 2023 or the six months ended June 30, 2023.
| 14 |
Compensation Expense Related to Equity Awards
The following table sets forth total stock-based compensation expense for the three and six months ended June 30, 2024 and 2023, in thousands:
| Schedule of stock-based compensation expense | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Research and development | $ | $ | $ | ( | ) | $ | ||||||||||
| General and administrative | ||||||||||||||||
| Total stock-based compensation | $ | $ | $ | $ | ||||||||||||
Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per share is computed by dividing the Company’s net loss by the weighted average number of common shares outstanding and the impact of the dilutive effect of potential common stock equivalents, except when the inclusion of such potential common stock equivalents would be anti-dilutive. Dilutive potential common stock equivalents primarily consist of stock options, RSUs and warrants. Therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented because the impact of these items is generally anti-dilutive during periods of net loss.
The weighted average number of common shares outstanding as of June 30, 2023 includes the pre-funded warrants issued in connection with the June 2023 Financing, the exercise of which requires nominal consideration for the delivery of the shares of common stock. Therefore, these pre-funded warrants are not included in the table below.
The following table sets forth the potential common shares excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive:
| Schedule of anti dilutive shares | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Stock options | ||||||||
| Unvested RSUs | ||||||||
| Warrants | ||||||||
| Total | ||||||||
8. Subsequent Events
In July 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
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 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 will be held until notice is received by the holder that the balance of the shares of common stock may be issued in compliance with such beneficial ownership limitations and may be exercised pursuant to a notice of exercise from the holder. Until such time, the Abeyance Shares are evidenced through the holder’s existing warrants. Subsequent to the balance sheet date and through the date of the filing with the SEC of this Quarterly Report on Form 10-Q, of the July 2024 Abeyance Shares were released.
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| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
In this report, “we,” “our,” “ours,” “us,” “Phio” and the “Company” refers to Phio Pharmaceuticals Corp. and our subsidiary, MirImmune, LLC and the ongoing business operations of Phio Pharmaceuticals Corp. and MirImmune, LLC, whether conducted through Phio Pharmaceuticals Corp. or MirImmune, LLC.
This management’s discussion and analysis of financial condition as of June 30, 2024 and results of operations for the three and six months ended June 30, 2024 and 2023 should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024 (the “2023 Form 10-K”).
This report 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. Risks that could cause actual results to vary from expected results expressed in our forward-looking statements include, but are not limited to, the impact to our business and operations by inflationary pressures, rising interest rates, recession fears, the development of our product candidates, our ability to execute on business strategies, our ability to develop our product candidates with collaboration partners, if any, and the success of any such collaborations, the timeline and duration for advancing our product candidates into clinical development, results from our preclinical and clinical activities, the timing or likelihood of regulatory filings and approvals, the success of our efforts to commercialize our product candidates if approved, our ability to manufacture and supply our product candidates for clinical activities, and for commercial use if approved, the scope of protection we are able to establish and maintain for intellectual property rights covering our technology platform, and our ability to obtain future financing. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements as a result of a number of important factors, including those identified in our 2023 Form 10-K under the heading “Risk Factors” and in other filings the Company periodically makes with the SEC. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q speak as of the date hereof and the Company does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this report except as required by law.
Overview
Phio is a clinical stage biotechnology company whose proprietary INTASYL® small interfering RNA gene silencing technology is designed to make immune cells more effective in killing tumor cells. We are developing therapeutics that are designed to leverage INTASYL to precisely target specific proteins that reduce the body’s ability to fight cancer, without the need for specialized formulations or drug delivery systems.
Cost Rationalization
In 2023, we implemented a cost rationalization program driven by our transition from a research company to a product development company. This transition resulted in a decision not to renew the lease for our corporate headquarters and primary research facility in Marlborough, Massachusetts, which expired on March 31, 2024. As of April 1, 2024, we have continued operations primarily as a remote business with a laboratory facility in Worcester, Massachusetts. Additionally, we rationalized research personnel and reduced our headcount by approximately 36%. These expense reductions have been redirected to funding the Phase 1b clinical trial with PH-762 directed toward skin cancer.
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PH-762
PH-762 is an INTASYL compound designed to reduce the expression of cell death protein 1 (“PD-1”). PD-1 is a protein that inhibits T cells’ 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 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 2024, a safety monitoring committee reviewed data from the first dose cohort treated and recommended the escalation to the next dose concentration. The trial is open for the continued enrollment of patients and expects to complete enrollment of patients in the second quarter of 2025.
AgonOx Collaboration
Due to INTASYL’s ease of administration, we have shown that our compounds can easily be incorporated into current adoptive cell therapy (“ACT”) manufacturing processes. In ACT, T cells are usually taken from a patient's own blood or tumor tissue, grown in large numbers in a laboratory, and then given back to the patient to help the immune system fight cancer. By treating T cells with our INTASYL compounds while they are being grown in the laboratory, we believe our INTASYL compounds can improve these immune cells to make them more effective in killing 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 and AgonOx were working to develop a T cell-based therapy using the our lead product candidate, PH-762, and AgonOx’s DP TIL technology. We had agreed to reimburse AgonOx up to $4 million in expenses incurred to conduct a Phase 1 clinical trial of PH-762 treated DP TIL in patients with advanced melanoma and other advanced solid tumors. We were also eligible to receive certain future development milestones and low single-digit sales-based royalty payments from AgonOx’s licensing of its DP TIL technology.
In May 2024, we terminated the Clinical Co-Development Agreement with AgonOx, which such termination was effective immediately. Effective as of the date of termination, the Clinical Co-Development Agreement and our continuing obligations and those of AgonOx thereunder were terminated in their entirety. We are no longer required to provide financial support for the development of costs incurred under the Clinical Co-Development Agreement, and we are no longer entitled to future development milestones or royalty payments from AgonOx’s licensing of its DP TIL technology. We will pay to AgonOx all payment obligations that accrued prior to the termination of the Clinical Co-Development Agreement. Remaining payments to be made to AgonOx as of June 30, 2024 total $344,000, which primarily relate to accrued obligations for patient fees and other miscellaneous costs as of the date of termination. Pursuant to the terms of the Clinical Co-Development Agreement, we and AgonOx are coordinating the orderly wind-down of the Phase 1 clinical trial. Each of us and AgonOx shall be responsible for its own costs and expenses incurred in connection with the wind-down of the Phase 1 clinical trial.
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Prior to the termination of the Clinical Co-Development Agreement with AgonOx, PH-762 treated DP TIL were being evaluated in a Phase 1 clinical trial in the United States with up to 18 patients with advanced melanoma and other advanced solid tumors by AgonOx. The primary trial objectives were to evaluate the safety and to study the potential for enhanced therapeutic benefit from the administration of PH-762 treated DP TIL. AgonOx had enrolled three patients. The first two patients were treated with DP TIL only and the third patient was treated with a combination of DP TIL and PH-762.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed 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.
There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our 2023 Form 10-K.
Results of Operations
The following data summarizes the results of our operations for the periods indicated, in thousands:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
| Description | 2024 | 2023 |
Dollar Change |
2024 | 2023 | Dollar Change | ||||||||||||||||||
| Operating expenses | $ | 1,914 | $ | 2,547 | $ | (633 | ) | $ | 4,123 | $ | 6,149 | $ | (2,026 | ) | ||||||||||
| Operating loss | $ | (1,914 | ) | $ | (2,547 | ) | $ | 633 | $ | (4,123 | ) | $ | (6,149 | ) | $ | 2,026 | ||||||||
| Net loss | $ | (1,846 | ) | $ | (2,549 | ) | $ | 703 | $ | (4,000 | ) | $ | (6,151 | ) | $ | 2,151 | ||||||||
Comparison of the Three and Six Months Ended June 30, 2024 and 2023
Operating Expenses
The following table summarizes our total operating expenses, for the periods indicated, in thousands:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||
| Description | 2024 | 2023 |
Dollar Change |
2024 | 2023 |
Dollar Change | ||||||||||||||||||
| Research and development | $ | 866 | $ | 1,383 | $ | (517 | ) | $ | 2,014 | $ | 3,517 | $ | (1,503 | ) | ||||||||||
| General and administrative | 1,048 | 1,164 | (116 | ) | 2,109 | 2,632 | (523 | ) | ||||||||||||||||
| Total operating expenses | $ | 1,914 | $ | 2,547 | $ | (633 | ) | $ | 4,123 | $ | 6,149 | $ | (2,026 | ) | ||||||||||
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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 agreement, 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.
Research and development expenses for the three months ended June 30, 2024 decreased 37% as compared with the three months ended June 30, 2023. The decrease in research and development expenses was primarily driven by our cost rationalization measures in transitioning from a research company to a product development company resulting in a decrease of $246,000 in salary-related costs, including stock-based compensation expense, and $74,000 in lab supplies associated with the reduction in headcount, in addition to a decrease in clinical consulting fees of $110,000 incurred in connection with our IND filing for PH-762 in the prior period.
Research and development expenses for the six months ended June 30, 2024 decreased 43% as compared with the six months ended June 30, 2023. The decrease in research and development expenses was primarily driven by our cost rationalization measures in transitioning from a research company to a product development company resulting in a decrease of $321,000 of expense due to the wind-down of preclinical studies, $470,000 in salary-related costs, including stock-based compensation expense, and $182,000 in lab supplies associated with the reduction in headcount, in addition to a decrease in clinical consulting fees of $335,000 incurred in connection with our IND filing for PH-762 in the prior period and a decrease of $176,000 in manufacturing fees for PH-762.
We anticipate our research and development expenses will remain relatively consistent for the remainder of 2024.
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.
General and administrative expenses for the three months ended June 30, 2024 decreased 10% as compared with the three months ended June 30, 2023. The decrease in general and administrative expenses was primarily due to decreases in salary-related expenses for our President & CEO of $78,000 and in professional fees of $60,000 related to consulting expenses as compared to the prior year period.
General and administrative expenses for the six months ended June 30, 2024 decreased 20% as compared with the six months ended June 30, 2023. The decrease in general and administrative expenses was primarily due to decreases in salary-related expenses for our President & CEO of $120,000 and in professional fees for a total of $364,000 related to consulting, legal and patent expenses as compared to the prior year period.
We anticipate our general and administrative expenses will remain relatively consistent for the remainder of 2024.
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 June 30, 2024, we had cash of $4,698,000 as compared with $8,490,000 at December 31, 2023.
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On May 16, 2024, we entered into a purchase agreement (the “Purchase Agreement”) with Triton Funds LP (“Triton”), pursuant to which we agreed to sell, and Triton agreed to purchase, upon our request in one or more transactions, up to 95,833 shares of our common stock at a purchase of $6.48 per share (the “Purchase Price”), for aggregate gross proceeds of up to $621,000. On July 3, 2024, we terminated the Purchase Agreement with Triton effective immediately. No shares of common stock were sold by us pursuant to the Purchase Agreement prior to termination.
In July 2024, we entered into inducement letter agreements (the “July 2024 Inducement Letter Agreements”) with certain holders of certain of our existing warrants to purchase up to an aggregate of 545,286 shares of the Company’s common stock. The existing warrants were originally issued in February 2020 through December 2023, having exercise prices between $324.00 and $9.72 per share. Pursuant to the July 2024 Inducement Letter Agreements, these warrants were exercised for cash at a reduced exercise of $5.45 per share in consideration of our agreement to issue new unregistered five and one-half year term Series C warrants to purchase up to 583,098 shares of common stock at an exercise price of $5.45 and new unregistered eighteen month term Series D warrants to purchase up to 507,474 shares of common stock at an exercise price of $5.45, both issued and sold at a price of $0.125 per warrant share (the “July 2024 Financing”). The net proceeds to us from the July 2024 Financing are approximately $2,600,000, after deducting placement agent fees and offering expenses.
We have limited cash resources, have reported recurring losses from operations since inception, have 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 condensed consolidated financial statements included elsewhere in this Quarterly 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 condensed consolidated financial statements included elsewhere in this Quarterly 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:
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (3,788 | ) | $ | (5,479 | ) | ||
| Net cash used in investing activities | – | (5 | ) | |||||
| Net cash used in (provided by) financing activities | (4 | ) | 5,010 | |||||
| Net decrease in cash, cash equivalents and restricted cash | $ | (3,792 | ) | $ | (474 | ) | ||
Net Cash Flow from Operating Activities
Net cash used in operating activities was $3,788,000 for the six months ended June 30, 2024 as compared with $5,479,000 for the six months ended June 30, 2023. The decrease was primarily due to a decrease in net loss of $2,151,000, a decrease in non-cash related items of $214,000 primarily related to reduced stock-based compensation expense, and a decrease in the changes in operating assets and liabilities of $246,000 primarily as a result of liabilities owed for the completion of preclinical studies in the prior year period.
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Net Cash Flow from Investing Activities
There were no investing activities for the six months ended June 30, 2024 as compared with $5,000 for the six months ended June 30, 2023. The decrease in net cash used in investing activities was primarily due to laboratory and computer equipment purchases for our facility during the prior year period.
Net Cash Flow from Financing Activities
Net cash used in financing activities was $4,000 for the six months ended June 30, 2024 as compared with net cash provided by financing activities of $5,010,000 for the six months ended June 30, 2023. The decrease was primarily due to the completion of our financing activities during the prior year period.
Contractual Obligations
Details of our obligations under the Clinical Co-Development Agreement with our former collaboration partner AgonOx can be found in Note 2 of the condensed consolidated financial statements. Outside of the above, there have been no material changes to the contractual obligations as disclosed in our 2023 Form 10-K.
Future Funding Requirements
At June 30, 2024, we had cash and cash equivalents of $4,698,000 and received estimated net proceeds of $2,600,000 from our July 2024 Financing. We expect that our cash and cash equivalents will enable us to fund our current operating plan into Q2 2025. Due to the difficulty and uncertainty associated with the design and implementation of preclinical studies and clinical trials, we will continue to assess our cash and cash equivalents and future funding requirements. However, there is no assurance that additional funding will be achieved and that we will succeed in our future operations. We expect to continue to incur substantial additional operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval and, subject to obtaining such approval, the eventual commercialization of our product candidates. If we obtain marketing approval for any of our product candidates, we will incur significant sales, marketing and manufacturing expenses. We also expect to continue to incur significant costs to comply with corporate governance, internal controls and similar requirements associated with operating as a public reporting company.
Actual cash requirements could differ from management’s projections due to many factors including additional investments in research and development programs, clinical trial expenses for PH-762, competing technological and market developments, general and administrative expenses, and the costs of any strategic acquisitions and/or development of complementary business opportunities.
We expect to seek additional funding to sustain our future operations and while we have successfully raised capital in the past, the ability to raise capital in future periods is not assured. We do not know if additional capital will be available when needed or on terms favorable to us or our stockholders. Collaboration, licensing or other agreements may not be available on favorable terms, or at all. If we seek to sell our equity securities, we do not know whether and to what extent we will be able to do so, or on what terms. If available, additional equity financing may be dilutive to stockholders, debt financing may involve restrictive covenants or other unfavorable terms and dilute our existing stockholders’ equity, and funding through collaboration, licensing or other commercial agreements may be on unfavorable terms, including requiring us to relinquish rights to certain of our technologies or products. If adequate financing is not available if and when needed, we may delay, reduce the scope of, or eliminate research or development programs, if any, postpone or cancel the pursuit of product candidates, or otherwise significantly curtail our operations to reduce our cash requirements and extend our capital.
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| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
As a smaller reporting company, we are not required to provide this information.
| ITEM 4. | 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.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ending June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
From time to time, we may become a party to various legal proceedings and complaints arising in the ordinary course of business. We are not currently a party to any actual or threatened material legal proceedings of which we are aware.
| ITEM 1A. | RISK FACTORS |
Other than set forth below, there have been no material changes in our risk factors set forth in Part I, “Item 1A. Risk Factors” in our 2023 Form 10-K. The risk factor set forth below and risk factors disclosed in Part I, “Item 1A. Risk Factors” in our 2023 Form 10-K could materially adversely affect our business, financial condition, or results of operations. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including these risks. Additional risks not currently known or currently material to us may also harm our business.
We may not be able to maintain compliance with the continued listing requirements of The Nasdaq Capital Market.
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 June 30, 2024, our stockholders’ equity was $3.8 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.
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. We are actively monitoring our stockholders’ equity and will consider any and all options available to us to maintain compliance with Nasdaq Listing Rule 5550(b)(1).
On January 24, 2024, we received notice (the “Notification Letter”) from Nasdaq notifying us that we were not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and 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. Based on the closing bid price of our common stock for the 30 consecutive business days prior to the date of the Notification Letter, we no longer met the minimum bid price requirement. On July 19, 2024, we received written notice (the “Second Notification Letter”) from Nasdaq notifying us that we had regained compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. The Second Notification Letter was sent following the implementation of a one-for-nine reverse split of our common stock (the “Reverse Split”), which became effective on July 5, 2024. Additional information regarding the Reverse Split can be found in our Current Report on Form 8-K filed on July 2, 2024.
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| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
No sales or issuances of unregistered securities occurred that have not previously been disclosed in a Current Report on Form 8-K.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
| ITEM 5. | OTHER INFORMATION |
During the three months ended
June 30, 2024, no director or officer of the Company
| 24 |
| ITEM 6. | EXHIBITS |
EXHIBIT INDEX
| Incorporated by Reference Herein | ||||||
| Exhibit 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 | Amended and Restated Bylaws of Phio Pharmaceuticals Corp. | Current Report on Form 8-K (File No. 001-36304) | May 2, 2022 | |||
| 10.1 | Purchase Agreement, dated May 16, 2024, by and between Phio Pharmaceuticals Corp. and Triton Funds LP. | Current Report on Form 8-K (File No. 001-36304) | May 17, 2024 | |||
| 10.2 | 2020 Phio Pharmaceuticals Corp. Long Term Incentive Plan, as amended and restated. † | Current Report on Form 8-K (File No. 001-36304) | June 21, 2024 | |||
| 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 Act Section 906 Certification of Principal Executive Officer.** | |||||
| 32.2 | Sarbanes-Oxley Act Section 906 Certification of Principal Financial Officer.** | |||||
| 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 and not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section or incorporated by reference into any filing under the Securities Act or the Exchange Act. |
| 25 |
SIGNATURES
Pursuant to the requirements 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: August 14, 2024 | |||
| By: | /s/ Robert M. Infarinato | ||
| Robert M. Infarinato | |||
|
Vice President, Chief Financial Officer (as Principal Financial Officer) | |||
| Date: August 14, 2024 | |||
| 26 |
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 Quarterly Report on Form 10-Q 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: August 14, 2024
|
/s/ Robert J. Bitterman |
|
| Robert J. Bitterman | |
| President and Chief Executive Officer | |
| (as Principal 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 Quarterly Report on Form 10-Q 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: August 14, 2024
|
/s/ Robert M. Infarinato |
|
| Robert M. Infarinato | |
| Vice President, Chief Financial Officer | |
| (as Principal Financial Officer) | |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE 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 Quarterly Report of Phio Pharmaceuticals Corp. (the “Company”) on Form 10-Q for the period ended June 30, 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: August 14, 2024
| /s/ Robert J. Bitterman | |
| Robert J. Bitterman | |
| President and Chief Executive Officer | |
| (as Principal Executive Officer) | |
Exhibit 32.2
CERTIFICATION OF 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 Quarterly Report of Phio Pharmaceuticals Corp. (the “Company”) on Form 10-Q for the period ended June 30, 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: August 14, 2024
| /s/ Robert M. Infarinato | |
| Robert M. Infarinato | |
| Vice President, Chief Financial Officer | |
| (as Principal Financial Officer) | |