The accompanying notes are an integral part of
these condensed consolidated financial statements.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Operations
Phio Pharmaceuticals Corp. (“Phio,”
“we,” “our” or the “Company”) strives to address the biggest challenges in immuno-oncology
by working to create new pathways to a cancer-free future for patients. We are developing therapeutics that leverage our INTASYL™
technology to target both tumor and immune cells by regulating genes to strengthen a patient’s immune system while weakening tumor
defense mechanisms. With our INTASYL self-delivering RNAi technology, we aim to bring the benefits of RNA therapeutics into cancer care
where other modalities may fall short.
The
Company continues to respond to and monitor the ongoing coronavirus pandemic. The Company’s corporate headquarters and research
facility have seen limited impact and, during the three months ended March 31, 2022, continued to
operate with safety measures in place for the health and well-being of its employees, such as working remotely and flexible scheduling,
in accordance with guidance from federal, state and local authorities. The Company believes that the coronavirus pandemic has not had
a significant impact on its financial condition and results of operations for the three months ended March 31, 2022. However, the Company
may experience delays in enrollment with its current clinical trial and with its clinical trial expected to commence in the middle of
this year. The extent to which the coronavirus pandemic may materially impact our financial results and operations will depend on a number
of factors, including delays in our operations due to limited availability of supplies and services we rely on, the ability to enroll
patients in our clinical trials and the duration of the coronavirus pandemic, which remain difficult to predict and are highly uncertain.
2. Significant Accounting Policies
Basis of Presentation
The accompanying
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 included in the Company’s annual financial
statements have been condensed or omitted. Additionally, certain prior year amounts have been reclassified for consistency with the
current year presentation. The Company made an adjustment to reflect patent costs within general and administrative operating
expenses in the condensed consolidated statements of operations. The reclassification increased general and administrative operating
expenses and reduced research and development operating expenses by $192,000
for the three months ended March 31, 2021. This reclassification had no effect on total operating expenses, net loss, net loss per
common share and had no impact on the Company’s condensed consolidated balance sheets, statement of stockholders’ equity
and statement of cash flows for the prior year period.
The year-end condensed consolidated
balance
sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. These statements should
be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”)
on March 22, 2022. 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. Interim results are not necessarily indicative of results for a full year.
Principles of Consolidation
The condensed consolidated
financial statements include the accounts of Phio and its wholly-owned subsidiary, MirImmune, LLC. All material intercompany accounts
have been eliminated in consolidation.
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, income
taxes, and our valuation allowance on our deferred tax assets. On an ongoing basis we evaluate our estimates and base our estimates on
historical experience and other relevant assumptions that we believe are reasonable under the circumstances, including as a result of
new information that may emerge concerning the coronavirus pandemic.
Restricted Cash
Restricted cash consists
of certificates of deposit held by financial institutions as collateral for the Company’s corporate credit cards. The following
table provides a reconciliation of cash and restricted cash reported within the condensed consolidated balance sheet that sum to the
total of the same such amounts shown in the condensed consolidated statement of cash flows (in thousands):
Schedule of Cash and Cash Equivalents | |
| | | |
| | |
| |
March 31, | |
| |
2022 | | |
2021 | |
Cash | |
$ | 20,459 | | |
$ | 32,695 | |
Restricted cash | |
| 50 | | |
| 50 | |
Cash and restricted cash shown in the statement of cash flows | |
$ | 20,509 | | |
$ | 32,745 | |
Fair Value of Financial Instruments
The carrying amounts reported
in the condensed consolidated balance sheet for restricted cash, accounts payable and accrued expenses approximate their fair values due
to their short-term nature.
The Company follows the provisions
of the Financial Accounting Standards Board (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.
At March 31, 2022 and December 31, 2021, the Company
categorized its restricted cash of $50,000 as Level 2 hierarchy. The assets classified as Level 2 have initially been valued at the applicable
transaction price and subsequently valued, at the end of each reporting period, using other market observable data. Observable market
data points include quoted prices, interest rates, reportable trades and other industry and economic events.
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 recognizes the classification of the lease as operating or financing. For leases with a term greater than one year, the Company recognizes
a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term at the commencement
date of the lease.
Lease liabilities and the corresponding right of
use assets are recorded based on the present value of lease payments to be made over the lease term. The discount rate used to calculate
the present value is the rate implicit in the lease, or if not readily determinable, the Company’s incremental borrowing rate. 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.
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 FASB 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. Payments or 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. In the event the amounts paid to the Company by a collaborative
partner exceed the Company’s research and development expense incurred in a quarterly period, such amounts are classified as collaborative
arrangement revenue.
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 restricted stock units 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 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 financial statements is based on awards that are ultimately expected to vest. Accordingly, we are
also required to estimate forfeitures at the time of grant and to revise those estimates in subsequent periods if actual forfeitures differ
from estimates. We use historical data to estimate pre-vesting award forfeitures and record stock-based compensation expense only for
those awards that are expected to vest. Our 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 our forfeiture rates or to the extent that actual forfeitures differ
from our estimates, the difference is recorded as a cumulative adjustment in the period the estimates are revised.
Comprehensive Loss
The Company’s comprehensive
loss is equal to its net loss for all periods presented.
Net Loss per Common Share
Basic
net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss
per common 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, restricted stock units and stock options.
3. Liquidity and Going Concern
The Company has reported
recurring losses from operations since its inception and expects to continue to have negative cash flows from operations for the foreseeable
future. Historically, the Company’s primary source of funding has been from sales of its securities. The Company’s ability
to continue to fund its operations is dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale
of equity, or strategic opportunities, in order to maintain its operations. This is dependent on a number of factors, including the market
demand or liquidity of the Company’s common stock. There is no guarantee that debt, additional equity or other funding will be available
to us on acceptable terms, or at all. If we fail to obtain additional funding when needed, we would be forced to scale back or terminate
our operations or seek to merge with or to be acquired by another company.
While
we believe that the coronavirus pandemic has not had a significant impact on our financial condition and results of operations at this
time, the potential economic impact brought by the coronavirus pandemic, which may be exacerbated by the global macroeconomic uncertainty
from the ongoing conflict between Russia and Ukraine, is difficult to assess or predict. There may be developments outside of our control
that require us to adjust our operating plans. Given the nature of the situation, we cannot reasonably estimate the impact of the coronavirus
pandemic on our financial condition, results of operations or cash flows in the future.
The Company believes that
its existing cash should be sufficient to fund operations for at least the next 12 months from the date of the release of these financial
statements.
4. Recent Accounting Pronouncements
In May 2021, the FASB issued
ASU 2021-04, “Earnings per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation
– Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”
(“ASU 2021-04”). The amendments in the updates are intended to clarify and reduce diversity in an issuer’s accounting
for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification
or exchange. The amendments in ASU 2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, including
interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring
on or after the effective date of the amendments. Early adoption is permitted for all entities, including within an interim period. The
Company adopted ASU 2021-04 on January 1, 2022. The adoption of this standard had no impact on the Company’s condensed consolidated
financial statements.
5. Leases
In January 2019, the Company
amended the lease for its corporate headquarters and primary research facility in Marlborough, Massachusetts. The lease is for a total
of 7,581 square feet of office and laboratory space and will expire on March 31, 2024. The lease contains an option to terminate after
two or three years by providing advance written notice of termination pursuant to the terms of the agreement. The exercise of this option
was not determined to be reasonably certain and thus was not included in the lease liability on the Company’s balance sheet. The
Company did not exercise its option to terminate in either the second or third year of the lease, and the option to terminate has expired.
Additionally, the lease agreement did not contain information to determine the borrowing rate implicit in the lease. As such, the Company
calculated its incremental borrowing rate based on what the Company would have to pay to borrow on a collateralized basis over the lease
term for an amount equal to the remaining lease payments, taking into consideration such assumptions as, but not limited to, the U.S.
treasury yield rate and borrowing rates from a creditworthy financial institution using the above lease factors.
The lease for our corporate
headquarters represents substantially all of our significant lease obligations. The amounts reported in the condensed consolidated balance
sheets for operating leases 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 and supplemental balance sheet information | |
| | |
| |
| |
March
31, 2022 | | |
December 31, 2021 | |
Assets | |
| | | |
| | |
Right of use asset | |
$ | 253 | | |
$ | 283 | |
Liabilities | |
| | | |
| | |
Lease liability, current | |
| 127 | | |
| 125 | |
Lease liability, non-current | |
| 138 | | |
| 170 | |
Total lease liability | |
$ | 265 | | |
$ | 295 | |
Lease Term and Discount Rate | |
| | | |
| | |
Weighted average remaining lease term | |
| 2.00 | | |
| 2.25 | |
Weighted average discount rate | |
| 4.70% | | |
| 4.70% | |
Operating lease costs
included in operating expense were $33,000
for the three months ended March 31, 2022 and 2021, respectively.
Cash paid for the amounts
included in the measurement of the operating lease liability on the Company’s condensed consolidated balance sheets and included
within changes in the lease liability in the operating activities of our condensed consolidated statements of cash flows was $33,000 and
$32,000 for the three months ended March 31, 2022 and 2021, respectively.
Future lease payments for
our non-cancellable operating leases and a reconciliation to the carrying amount of the operating lease liability presented in the condensed
consolidated balance sheet as of March 31, 2022 is as follows, in thousands:
Schedule of future minimum lease payments | |
| | |
2022 (remaining) | |
$ | 102 | |
2023 | |
| 140 | |
2024 | |
| 35 | |
Total lease payments | |
| 277 | |
Less: Imputed interest | |
| (12 | ) |
Total operating lease liabilities (includes current portion) | |
$ | 265 | |
6. Debt
In
May 2020, the Company received loan proceeds pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus
Aid, Relief, and Economic Security Act (the “CARES Act”). The Company followed the guidance under the FASB ASC Topic
470, “Debt,” (“ASC 470”) in assessing the accounting for the PPP loan proceeds. Per ASC 470, the
Company recorded a liability on the balance sheet for the full amount of the PPP loan proceeds received and accrued interest over the
term of the loan. The Company believed it used the loan proceeds for eligible purposes and applied for full loan forgiveness. In February
2021, the Small Business Administration approved the Company’s application for full loan forgiveness, and the full amount of the
PPP loan was remitted to the lender for forgiveness. Upon loan forgiveness, the Company recognized a gain on the extinguishment of debt
of $233,000
for the loan proceeds received and interest accrued in the condensed consolidated statements of operations for the three months
ended March 31, 2021.
7. Stockholders’ Equity
January 2021 Private
Placement — On January 25, 2021, the Company completed a private placement of 4,420,863
shares of the Company’s common stock at a purchase price per share of $3.07,
pre-funded warrants to purchase an aggregate of 140,065
shares of the Company’s common stock (the “January 2021 Pre-Funded Warrants”) at a purchase price per
pre-funded warrant of $3.069
and warrants to purchase an aggregate of 3,420,696
shares of the Company’s common stock with an exercise price of $3.00
per warrant (the “January 2021 Warrants”) (the “Private Placement”). In connection with the
Private Placement, the Company issued warrants to the placement agent, H.C. Wainwright & Co., LLC (“HCW”), to
purchase a total of 342,070
shares of the Company’s common stock at an exercise price of $3.8375
per warrant (the “January 2021 Placement Agent Warrants”). Net proceeds to the Company from the Private Placement
were $12,669,000
after deducting placement agent fees and offering expenses.
February
2021 Registered Direct Offering — On February 17, 2021, the Company completed a registered direct offering
of 2,246,784
shares of the Company’s common stock at a purchase price of $3.42
per share (the “Offering”). In connection with the Offering, the Company issued warrants to the placement agent,
HCW, to purchase a total of 168,509
shares of the Company’s common stock at an exercise price of $4.275
per warrant (the “February 2021 Placement Agent Warrants”). Net proceeds to the Company from the Offering were
$6,908,000
after deducting placement agent fees and offering expenses.
Warrants
The Company first assesses the warrants it
issues under the FASB ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) to determine
whether they are within the scope of ASC 480. As there were no instances outside of the Company’s control that could require cash
settlement from any of the warrant series issued in the Company’s financing transactions, the Company’s outstanding warrants
are outside the scope of ASC 480.
The Company then applies
and follows the applicable accounting guidance in the FASB ASC Topic 815, “Derivatives and Hedging.” Financial
instruments are accounted for as either derivative liabilities or equity instruments depending on the specific terms of the
agreement. The warrants issued by the Company do not meet the definition of a derivative instrument as they are indexed to the
Company’s common stock and classified within stockholders’ equity. Based on this determination, the Company’s
warrants are classified within stockholders’ equity.
The following table summarizes the Company’s
outstanding equity-classified warrants at March 31, 2022:
Schedule of outstanding warrants | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
Exercise | | |
Expiration | | |
Balance December 31, | | |
Warrants | | |
Warrants | | |
Warrants | | |
Balance
March
31, | |
Description | |
Price | | |
Date | | |
2021 | | |
Issued | | |
Exercised | | |
Expired | | |
2022 | |
April 2018 Warrants | |
$ | 173.25 | | |
| 5/31/2023 | | |
| 20,599 | | |
| – | | |
| – | | |
| – | | |
| 20,599 | |
April 2018 Placement Agent Warrants | |
$ | 223.00 | | |
| 4/9/2023 | | |
| 1,373 | | |
| – | | |
| – | | |
| – | | |
| 1,373 | |
October 2018 Warrants | |
$ | 10.45 | | |
| 10/3/2025 | | |
| 389,610 | | |
| – | | |
| – | | |
| – | | |
| 389,610 | |
October 2018 Underwriter Warrants | |
$ | 13.06 | | |
| 10/1/2023 | | |
| 29,220 | | |
| – | | |
| – | | |
| – | | |
| 29,220 | |
November 2019 Placement Agent Warrants | |
$ | 6.875 | | |
| 11/18/2024 | | |
| 13,636 | | |
| – | | |
| – | | |
| – | | |
| 13,636 | |
February 2020 Registered Direct Warrants | |
$ | 8.71 | | |
| 8/6/2025 | | |
| 197,056 | | |
| – | | |
| – | | |
| – | | |
| 197,056 | |
February 2020 Placement Agent Warrants | |
$ | 11.0375 | | |
| 2/4/2025 | | |
| 14,779 | | |
| – | | |
| – | | |
| – | | |
| 14,779 | |
February 2020 Warrants | |
$ | 4.00 | | |
| 2/13/2025 | | |
| 1,326,500 | | |
| – | | |
| – | | |
| – | | |
| 1,326,500 | |
February 2020 Underwriter Warrants | |
$ | 5.00 | | |
| 2/11/2025 | | |
| 150,000 | | |
| – | | |
| – | | |
| – | | |
| 150,000 | |
April 2020 Warrants | |
$ | 2.21 | | |
| 10/2/2025 | | |
| 428,266 | | |
| – | | |
| – | | |
| – | | |
| 428,266 | |
April 2020 Placement Agent Warrants | |
$ | 2.9188 | | |
| 3/31/2025 | | |
| 41,756 | | |
| – | | |
| – | | |
| – | | |
| 41,756 | |
January 2021 Warrants | |
$ | 3.00 | | |
| 7/27/2026 | | |
| 3,420,696 | | |
| – | | |
| – | | |
| – | | |
| 3,420,696 | |
January 2021 Placement Agent Warrants | |
$ | 3.8375 | | |
| 7/27/2026 | | |
| 342,070 | | |
| – | | |
| – | | |
| – | | |
| 342,070 | |
February 2021 Placement Agent Warrants | |
$ | 4.275 | | |
| 2/12/2026 | | |
| 168,509 | | |
| – | | |
| – | | |
| – | | |
| 168,509 | |
| |
| | | |
| | | |
| 6,544,070 | | |
| – | | |
| – | | |
| – | | |
| 6,544,070 | |
No warrants were exercised
during the three months ended March 31, 2022. The Company received net proceeds of $2,146,000 from the exercise of warrants during the
three months ended March 31, 2021.
8. Net
Loss per Common Share
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 antidilutive stock | |
| | | |
| | |
| |
March 31, | |
| |
2022 | | |
2021 | |
Options to purchase common stock | |
| 2,499 | | |
| 2,499 | |
Unvested restricted stock units | |
| 886,784 | | |
| 335,379 | |
Warrants to purchase common stock | |
| 6,544,070 | | |
| 6,567,303 | |
Total | |
| 7,433,353 | | |
| 6,905,181 | |
9. Stock-based Compensation
Restricted Stock Units
Restricted stock units (“RSUs”) are issued under
the Company’s 2020 Long-Term Incentive Plan (the “2020 Plan”) or as inducement grants issued outside of the 2020
Plan to new employees. RSUs are generally subject to graded vesting and the satisfaction of certain service requirements. Upon vesting,
each outstanding RSU will be exchanged 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 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 three months ended March 31, 2022:
Schedule of RSU activity | |
| | |
| |
| |
Number of Shares | | |
Weighted- Average Grant Date Fair Value Per Share | |
Unvested units at December 31, 2021 | |
| 367,101 | | |
$ | 3.21 | |
Granted | |
| 675,000 | | |
| 0.86 | |
Vested | |
| (155,317 | ) | |
| 3.27 | |
Forfeited | |
| – | | |
| – | |
Unvested units at March 31, 2022 | |
| 886,784 | | |
$ | 1.41 | |
Stock-based
compensation expense related to RSUs was $179,000 and $57,000 for the three months ended March 31, 2022 and 2021, respectively.
The aggregate fair value of awards that
vested during the three months ended March 31, 2022 and 2021 was $128,000
and $8,000,
respectively, which represents the market value of the Company’s common stock on the date that the RSUs vested.
Stock Options
Stock
options are issued 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 certain service requirements. 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 three months ended March 31, 2022 and 2021.
The following table summarizes the activity of
the Company’s stock options for the three months ended March 31, 2022:
Schedule of Stock Option Activity | |
| | |
| | |
| |
| |
Number of Shares | | |
Weighted- Average Exercise Price Per Share | | |
Aggregate Intrinsic Value | |
Balance at December 31, 2021 | |
| 2,499 | | |
$ | 3,401.90 | | |
| | |
Granted | |
| – | | |
| – | | |
| | |
Exercised | |
| – | | |
| – | | |
| | |
Cancelled | |
| – | | |
| – | | |
| | |
Balance at March 31, 2022 | |
| 2,499 | | |
$ | 3,401.90 | | |
$ | – | |
Exercisable at March 31, 2022 | |
| 2,153 | | |
$ | 3,932.78 | | |
$ | – | |
Stock-based compensation expense
related to stock options for the three months ended March 31, 2022 and 2021 was $7,000 and $10,000, respectively.
Compensation Expense Related to Equity Awards
The following table sets
forth total stock-based compensation expense for the three months ended March 31, 2022 and 2021, in thousands:
Schedule of stock based compensation expense | |
| | | |
| | |
| |
March 31, | |
| |
2022 | | |
2021 | |
Research and development | |
$ | 56 | | |
$ | 13 | |
General and administrative | |
| 130 | | |
| 54 | |
Total stock-based compensation | |
$ | 186 | | |
$ | 67 | |
10. Collaboration Agreements
In March 2021, the Company
entered into a clinical co-development collaboration agreement with AgonOx Inc. (“AgonOx”), a private company developing
a pipeline of novel immunotherapy drugs targeting key regulators of the immune response to cancer. Under the clinical development agreement,
the companies are working to develop a T cell-based therapy using PH-762 and AgonOx’s “double positive” TIL (“DP
TIL”) technology. Per the terms of the clinical development agreement, the Company committed to make future payments of up to
$4,000,000 to reimburse AgonOx for expenses incurred to support a clinical trial with AgonOx’s DP TIL technology and PH-762. The
Company will recognize its share of costs arising from research and development activities performed by AgonOx in the Company’s
financial statements in the period AgonOx incurs such expense. Phio will be entitled to certain future development milestones and low
single-digit sales-based royalty payments from AgonOx’s licensing of its DP TIL technology. There were no reimbursable costs incurred
by AgonOx under the clinical development agreement during the three months ended March 31, 2022 and 2021. No milestone or sales-based
royalty payments from AgonOx have been received to date.