Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

☒FORM10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

For the quarterly period ended September 30, 2017March 31, 2022

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number:001-36304

RXiPhio Pharmaceuticals CorporationCorp.

(Exact name of registrant as specified in its charter)

257 Simarano Drive, Suite 101, Marlborough, MA01752

(Address of principal executive office) (Zip code)

Registrant’s telephone number:(508)  (508) 767-3861

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 Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter time that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-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 Rule12b-2 of the Exchange Act.

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 7(a)(2)(B)13(a) of the SecuritiesExchange Act. ☒☐

Indicate by checkmark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 3, 2017, RXiMay 6, 2022, Phio Pharmaceuticals CorporationCorp. had 23,697,33813,658,722 shares of common stock, $0.0001 par value, outstanding. 

PHIO PHARMACEUTICALS CORPORATIONCORP.

FORM10-Q — QUARTER ENDED SEPTEMBER 30, 2017MARCH 31, 2022

INDEX

PART I — FINANCIAL INFORMATION

RXi

PHIO PHARMACEUTICALS CORPORATIONCORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

RXi

PHIO PHARMACEUTICALS CORPORATIONCORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share data)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

RXi

PHIO PHARMACEUTICALS CORPORATIONCORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ EQUITY

(Amounts in thousands)thousands, except share data)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

RXi

PHIO PHARMACEUTICALS CORPORATIONCORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

PHIO PHARMACEUTICALS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Operations

RXi

Phio Pharmaceuticals CorporationCorp. (“RXiPhio,” “we,” “our” or the “Company”) isstrives to address the biggest challenges in immuno-oncology by working to create new pathways to a clinical-stage companycancer-free future for patients. We are developing innovative therapeutics based onthat leverage our proprietaryINTASYL™ 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(sd-rxRNA^®) platform 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 Samcyprone™ which address significant unmet medical needs. We have a pipeline of discovery, preclinical and clinical product candidates inmonitor the areas of dermatology, ophthalmology and cell-based cancer immunotherapy.ongoing coronavirus pandemic. The Company’s clinical development programs includeRXI-109, ansd-rxRNAcorporate 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 treatmenthealth and well-being of dermalits employees, such as working remotely and ocular scarring,flexible scheduling, in accordance with guidance from federal, state and Samcyprone™, a topical immunomodulator, for the treatment of warts. The Company’s pipeline, coupled with our extensive patent portfolio, provides for product development and business development opportunities across a broad spectrum of therapeutic areas.

2. Liquidity and Going Concern

local authorities. The Company believes that the coronavirus pandemic has limited cash resources, certain limitations under the purchase agreement with Lincoln Park Capital Fund, LLC (“LPC”)not had a significant impact on its financial condition and has expended substantial funds on the research and developmentresults of our product candidates and funding general operations. As a result, 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. Historically,three months ended March 31, 2022. However, the Company’s primary sourceCompany may experience delays in enrollment with its current clinical trial and with its clinical trial expected to commence in the middle of financing has beenthis year. The extent to which the sale of its securities. Our ability to continue to fundcoronavirus pandemic may materially impact our financial results and operations is dependent on the amount of cash on hand and our ability to raise additional capital through, but not limited to, equity or debt offerings or strategic opportunities. This is dependentwill depend on a number of factors, including the market demand or liquiditydelays in our operations due to limited availability of our common stock. There can be no assurance thatsupplies and services we rely on, the Company will be successful in accomplishing these plans. As a result, we have concluded that there is substantial doubt regarding our ability to continue as a going concern for at least one year. If we failenroll patients in our clinical trials and the duration of the coronavirus pandemic, which remain difficult to obtain additional funding when needed, we would be forced to scale back or terminate our operations or to seek to merge with or to be acquired by another company. These financial statements do not include any adjustments to, or classification of, recorded asset amountspredict and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.are highly uncertain.

3.

2. Significant Accounting Policies

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 of America (“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 atas of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.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.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents. Cash equivalents consist primarily of amounts invested in certificates of deposit.

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 cash equivalents, 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):

Research and Development ExpensesFair Value of Financial Instruments

Research and development costs are charged to expense as incurred and relate to salaries, employee benefits, facility-related expenses, supplies, stock-based compensation related to employees andnon-employees involved

The carrying amounts reported in the Company’s researchcondensed consolidated balance sheet for restricted cash, accounts payable and development, external services, other operating costs and overhead relatedaccrued expenses approximate their fair values due to our research and development departments, costs to acquire technology licenses and expenses associated with preclinical activities and our clinical trials. 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. Accrued liabilities are recorded related to those expenses for which vendors have not yet billed us with respect to services provided and/or materials that we have received.their short-term nature.

Preclinical and clinical trial expenses relate to third-party services, subject-related fees at the sites where our clinical trials are being conducted, laboratory costs, analysis costs, toxicology studies and investigator fees. Costs associated with these expenses are generally payable on the passage of time or when certain milestones are achieved. Expense is recorded during the period incurred or in the period in which a milestone is achieved. In order to ensure that we have adequately provided for preclinical and clinical expenses during the proper period, we maintain an accrual to cover these expenses. These accruals are assessed on a quarterly basis and are based on such assumptions as expected total cost, the number of subjects and clinical trial sites and length of the study. Actual results may differ from these estimates and could have a material impact on our reported results. Our historical accrual estimates have not been materially different from our actual costs.

Stock-based Compensation

The Company follows the provisions of the Financial Accounting Standards Board (“(the “FASB”) Accounting Standards Codification (“ASC”) Topic 718, “Compensation — Stock Compensation” (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees, officers andnon-employee directors, including stock options. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of ASC 718 is recognized as an expense over the requisite service period.

For stock options granted as consideration for services rendered bynon-employees, the Company recognizes compensation expense in accordance with the requirements of FASB ASC Topic505-50, “Equity Based Payments toNon-Employees.”Non-employee option grants that do not vest immediately upon grant are recorded as an expense over the requisite service period of the underlying stock options. At the end of each financial reporting period prior to vesting, the value of these options, as calculated using the Black-Scholes option-pricing model, will bere-measured using the fair value of the Company’s common stock and thenon-cash compensation recognized during the period will be adjusted accordingly. Since the fair market value of options granted tonon-employees is subject to change in the future, the amount of the future compensation expense will include fair valuere-measurements until the stock options are fully vested.

Comprehensive Loss

The Company’s comprehensive loss is equal to its net loss for all periods presented.

Net Loss per Share

The Company accounts for and discloses net loss per share in accordance with FASB ASC Topic 260, “Earnings per Share.” Basic and diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing the Company’s net earnings by the weighted average number of common shares outstanding and the impact of all dilutive potential common shares.

4. Recent Accounting Pronouncements

In August 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-15, “Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments,” which clarifies how certain cash receipts and payments are presented and classified in the statement of cash flows. This standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. The amendments in ASU2016-15 should be applied using a retrospective transition method to each period presented. The Company adopted ASU2016-15 in the first quarter of 2017 and the implementation of this standard had no impact on the Company’s financial statements.

In November 2016, the FASB issued ASU2016-18, “Statement of Cash Flows (Topic 230) — Restricted Cash,”which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. With this standard, amounts generally described as restricted cash or restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. This standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. The Company adopted ASU2016-18 in the first quarter of 2017, and the guidance has been retrospectively applied to all periods presented. The total of cash, cash equivalents and restricted cash is described in Note 3. The adoption of the guidance did not have an impact on the Company’s balance sheet or statement of operations.

In January 2017, the FASB issued ASU2017-01, “Business Combinations (Topic 805) — Clarifying the Definition of a Business,” which provides a screen to determine when an integrated set of assets and activities are not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. This standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company adopted ASU2017-01 effective January 1, 2017. The implementation of this standard did not have an impact on the Company’s financial statements as the acquisition of MirImmune Inc., (“MirImmune”), the Company’s transaction that this ASU would have affected, did not meet the definition of a business under either the prior guidance or the new guidance.

In May 2017, the FASB issued ASU2017-09, “Compensation — Stock Compensation (Topic 718) — Scope of Modification Accounting,” which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. This standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. The Company adopted ASU2017-09 in the second quarter of 2017, and the implementation of this standard had no impact on the Company’s financial statements.

5. MirImmune Inc. Acquisition

On January 6, 2017, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) and completed its acquisition of MirImmune. Subject to the terms of the Stock Purchase Agreement, RXi Merger Sub, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“RXi Merger Sub”), was merged with and into MirImmune, with RXi Merger Sub continuing as the surviving entity and changing its name to “MirImmune, LLC”. As a result of the merger, MirImmune, LLC remains and operates as a wholly-owned subsidiary of the Company. Pursuant to the Stock Purchase Agreement, the Company acquired all of the issued and outstanding shares of capital stock of MirImmune for an aggregate of 2,750,371 shares of common stock of the Company and an aggregate of 1,118,224 shares of Series C Convertible Preferred Stock of the Company (the “Series C Convertible Preferred Stock”). The shares of common stock and Series C Convertible Preferred Stock were subject to a holdback of 3% of the aggregate closing consideration for any purchase price adjustments. The shares subject to the holdback, adjusted for post-closing items, were released and issued on April 12, 2017.

Upon the closing of the acquisition, the notes receivable outstanding on the Company’s balance sheet as of December 31, 2016 were cancelled.

The Company assessed the acquisition of MirImmune under FASB ASC Topic 805, “Business Combinations” (“ASC 805”). Under ASC 805, the Company determined that the acquired assets did not constitute a business and that the transaction would be accounted for as an asset acquisition. The assets and development programs acquired from MirImmune are at an early stage of development and will require a significant investment of time and capital if we are to be successful in developing them. There is no assurance that we will be successful in developing such assets, and a failure to successfully develop such assets could diminish our prospects. Under ASC 805, the assets acquired are considered to have no alternative future uses, as determining the future economic benefit of the acquired assets at the date of acquisition is highly uncertain. The fair value of the assets was determined using the quoted market price of the Company’s common stock on January 6, 2017, the date of the acquisition, and fully expensed asin-process research and development.

During the nine months ended September 30, 2017, the aggregate fair value of the consideration given of $3,075,000 was fully expensed asin-process research and development expense. The aggregate fair value of the consideration also included transaction costs, liabilities assumed and cancellation of notes receivable.

The Company was restricted from converting any of the Series C Convertible Preferred Stock into common stock to the extent that such conversion was not approved by the Company’s stockholders in accordance with the stockholder approval requirements of NASDAQ Marketplace Rule 5635. On June 9, 2017, with the approval of the Company’s stockholders in accordance with the NASDAQ stockholder approval requirements, each share of the Series C Convertible Preferred Stock outstanding was automatically converted into one share of common stock, such that there were no shares of Series C Convertible Preferred Stock issued or outstanding at September 30, 2017. On November 7, 2017, the Company filed a Certificate Eliminating the Series C Convertible Preferred Stock from the Certificate of Incorporation of the Company with the Secretary of State of the State of Delaware. Please refer to Note 10 for further discussion of the filing.

Under the terms of the Stock Purchase Agreement, if certain development or commercial milestones are achieved within two years, the Company will be required to either (i) issue a number of shares of common stock (the “Milestone Shares”) equal to the sum of 2,519,091 shares of common stock, plus an additional number of shares of common stock equal to 13% of the common stock issued upon exercise of any warrants issued under the Company’s underwritten public offering in December 2016, but only to the extent that such warrants have been exercised prior to the milestone being achieved or (ii) pay the equivalent value of the Milestone Shares in cash. The Company received shareholder approval in accordance with Rule 5635 of the NASDAQ Marketplace Rules at its 2017 Annual Meeting of Stockholders to issue any shares in satisfaction of the achievement of the milestones.

The Company assessed the Milestone Shares under FASB ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”). The Company determined that liability accounting would be required for the Milestone Shares under ASC 480. The Company will record a liability related to the Milestone Shares if and when the milestones are achieved and the consideration becomes payable. At that time, the Company will record the cost of the Milestone Shares asin-process research and development expense. No milestones have been met as of September 30, 2017.

6. Fair Value Measurements

The Company follows the provisions of FASB ASC Topic 820, “Fair Value Measurements and Disclosures,Measurement,”for the Company’s financial assets and liabilities that arere-measured and reported at fair value at each reporting period and arere-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 warrant issuedassets 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 Company by Thera Neuropharma, Inc. (“Thera”) is categorizedlease payments in a similar economic environment. Certain adjustments to the right of use asset may be required for items such as Level 3 hierarchy. The estimatedinitial 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 inputs utilizingon the asset-based approachissuance 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 warrant issued toservices provided by contract research organizations are recorded during the Company by Thera include the stageperiod incurred based on such estimates and assumptions as expected cost, passage of enterprise development, terms of existing contractual arrangements of the entity’s equity securities,time, the achievement of milestones and other unobservable inputs.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.

Financial assets measured at

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 a recurring basis are summarized as follows, in thousands:the fair value of the award.

A reconciliationStock-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 beginning and ending Level 3 assets forextent that actual forfeitures differ from our estimates, the nine months ended September 30, 2017difference is recorded as follows (in thousands):a cumulative adjustment in the period the estimates are revised.

Fair Value of Financial InstrumentsComprehensive Loss

The carrying amountsCompany’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 inrecurring losses from operations since its inception and expects to continue to have negative cash flows from operations for the balance sheet for cash equivalents, restricted cash and accounts payable approximate their fair values due to their short-term nature.

7. Stockholders’ Equity

Series B Convertible Preferred Stock—foreseeable future. Historically, the Company’s primary source of funding has been from sales of its securities. The Company’s remaining shares of Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock”) outstanding at December 31, 2016 were fully converted into 6,374,444 shares of common stock of the Company during the first quarter of 2017,ability to continue to fund its operations is dependent on obtaining funding from third parties, such that there are no shares of Series B Convertible Preferred Stock issued or outstanding at September 30, 2017. On November 7, 2017, the Company filed a Certificate Eliminating the Series B Convertible Preferred Stockas proceeds from the Certificate of Incorporation of the Company with the Secretary of State of the State of Delaware. Please refer to Note 10 for further discussion of the filing.

Series C Convertible Preferred Stock— In connection with the Stock Purchase Agreement, on January 5, 2017, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (the “Series C Convertible Preferred Stock Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series C Convertible Preferred Stock Certificate of Designation provides for the issuance of updebt, sale of equity, or strategic opportunities, in order to 1,800,000 sharesmaintain its operations. This is dependent on a number of Series C Convertible Preferred Stock. The Series C Convertible Preferred Stock have no voting rights, with certain exceptions as described infactors, including the Series C Convertible Preferred Stock Certificate of Designations, and shall receive dividends on anas-converted basis at the same time and in the same form as any dividends paid out on sharesmarket demand or liquidity of the Company’s common stock. Other than as set forthThere 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 previous sentence,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 other dividends shall be paidimpact on the Series C Convertible Preferred Stock.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 Company has never paid dividendslease is for a total of 7,581 square feet of office and laboratory space and will expire on its common stock and presently has no intentionMarch 31, 2024. The lease contains an option to terminate after two or three years by providing advance written notice of paying dividends.

Upon its issuance,termination pursuant to the Series C Convertible Preferred Stock was assessed under ASC 480.terms of the agreement. The Company determined that the Series C Convertible Preferred Stockexercise of this option was not within the scope of ASC 480determined to be reasonably certain and therefore, the Series C Convertible Preferred Stockthus was not considered a liability. The Series C Convertible Preferred Stock was recordedincluded in permanent equitythe 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 Series C Convertible Preferred Stocklease 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: 

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 then assessed$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: 

6. Debt

In May 2020, the Company received loan proceeds pursuant to the Paycheck Protection Program (the “PPP”) under FASB ASC 815,the Coronavirus Aid, Relief, and Economic Security Act (the “Derivatives and Hedging” (“ASC 815CARES Act”). The Company believes thatfollowed the Series C Convertible Preferred Stock is an equity hostguidance under the FASB ASC Topic 470, “Debt,” (“ASC 470”) in assessing the accounting for the purposesPPP loan proceeds. Per ASC 470, the Company recorded a liability on the balance sheet for the full amount of assessing the embedded conversion option for potential bifurcation.PPP loan proceeds received and accrued interest over the term of the loan. The Company concluded thatbelieved it used the conversion option feature is clearlyloan proceeds for eligible purposes and closely relatedapplied 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 preferred stock host. As such, the conversion feature did not require bifurcation under ASC 815.

Pursuant to the Stock Purchase Agreement,lender for forgiveness. Upon loan forgiveness, the Company acquired all of the issued and outstanding shares of capital stock of MirImmune for an aggregate of 2,750,371 shares of common stock of the Company and an aggregate of 1,118,224 shares of Series C Convertible Preferred Stock. The Company was restricted from converting any of the Series C Convertible Preferred Stock into common stock to the extent that such conversion was not approved by the Company’s stockholders in accordance with the stockholder approval requirements of NASDAQ Marketplace Rule 5635. On June 9, 2017, with the approval of the Company’s stockholders in accordance with the NASDAQ stockholder approval requirements, each share of the Series C Convertible Preferred Stock outstanding was automatically converted into one share of common stock, such that there were no shares of Series C Convertible Preferred Stock issued or outstanding at September 30, 2017. Please refer to Notes 5 and 10 for further detailsrecognized a gain on the shares issuedextinguishment of debt of $233,000 for the loan proceeds received and interest accrued in connection with the acquisitioncondensed consolidated statements of MirImmune.operations for the three months ended March 31, 2021.

7. Stockholders’ Equity

Lincoln Park Capital Fund, LLCJanuary 2021 Private Placement— On August 8, 2017,January 25, 2021, the Company entered intocompleted a purchase agreement (the “2017 Purchase Agreement”) and a registration rights agreement with LPC, pursuant to which the Company

has the right to sell to LPC up to $15,000,000 inprivate placement of 4,420,863 shares of the Company’s common stock subjectat a purchase price per share of $3.07, pre-funded warrants to certain limitations and conditions set forth in the 2017 Purchase Agreement. As a commitment fee for entering into the 2017 Purchase Agreement, the Company issued to LPC 450,000purchase an aggregate of 140,065 shares of Companythe Company’s common stock (the “Commitment SharesJanuary 2021 Pre-Funded Warrants”). The Commitment Shares had at a valuepurchase price per sharepre-funded warrant of $0.58$3.069 and were recorded as a costwarrants to purchase an aggregate of capital. The Company intends to use the net proceeds from the 2017 Purchase Agreement for working capital and general corporate purposes. There have been no purchases under the 2017 Purchase Agreement as of September 30, 2017.

Warrants —The following table summarizes the Company’s outstanding warrants at September 30, 2017:

During the second quarter of 2017, outstanding warrants for the purchase of 4623,420,696 shares of the Company’s common stock with an exercise price of $39.00 expired.$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.

No

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: 

NaN warrants were exercised during the ninethree months ended September 30, 2017March 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: 

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 2016.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.

8.

The following table summarizes the activity of the Company’s RSUs for the three months ended March 31, 2022: 

Stock-based Compensationcompensation 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. For valuing options granted during the three and nine months ended September 30, 2017 and 2016, the following assumptions were used:

The weighted average fair value of options granted during the three months ended September 30, 2017 and 2016 was $0.49 and $2.27, respectively. The weighted average fair value of options granted during the nine months ended September 30, 2017 and 2016 was $0.49 and $2.15, respectively.

The risk-free interest rate used for each grant was based upon the yield onzero-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 volatility of a composition of comparable companies. TheCompany’s own implied volatility. As the Company has limited stock option exercise information, the expected life assumption used for employeeoption grants wasis based upon the simplified method provided for under ASC 718, and the expected life assumption fornon-employees was based upon the contractual term of the option.718. The dividend yield assumption of zero 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 option planoptions for the ninethree months ended September 30, 2017:March 31, 2022: 

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 Company recordedfollowing table sets forth total stock-based compensation expense for the three and nine months ended September 30, 2017March 31, 2022 and 2016 as follows,2021, in thousands:

10. Collaboration Agreements

Stock-based compensation expenseIn 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 the nine months ended September 30, 2017 includes $22,000, recorded inexpenses 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 expense, related to stock option modificationsactivities performed by AgonOx in connection with the retirement of the Company’s former Chief Development Officer.

9. Net Loss per Share

The following table sets forthfinancial statements in the potential common shares excludedperiod 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 calculation of net loss per common share because their inclusion would be anti-dilutive: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.

10. Subsequent Events

On November 7, 2017, the Company filed a Certificate Eliminating the Series B Convertible Preferred Stock from the Certificate of Incorporation of the Company and a Certificate Eliminating the Series C Convertible Preferred Stock from the Certificate of Incorporation of the Company (together, the “Certificates of Elimination”) with the Secretary of State of the State of Delaware, in order to eliminate from the Certificate of Incorporation all matters set forth in the Certificate of Incorporation, including the related certificates of designation, relating to the previously issued Series B Convertible Preferred Stock and Series C Convertible Preferred Stock. As a result, the 8,100 shares of unissued Series B Convertible Preferred Stock and 1,800,000 shares of unissued Series C Convertible Preferred Stock were returned to the status of authorized but unissued shares of preferred stock of the Company, without designation as to series or preferences or rights. The foregoing summary of the Certificates of Elimination is qualified in its entirety by reference to the full text of the Certificates of Elimination, which are attached hereto as Exhibits 3.1 and 3.2 to this Quarterly Report on Form10-Q and incorporated herein by reference.

In this document,report, “we,” “our,” “ours,” “us,” “RXi”“Phio” and the “Company” refers to RXiPhio Pharmaceuticals CorporationCorp. and our subsidiary, MirImmune, LLC and the ongoing business operations of RXiPhio Pharmaceuticals CorporationCorp. and MirImmune, LLC, whether conducted through RXiPhio Pharmaceuticals CorporationCorp. or MirImmune, LLC.

This management’s discussion and analysis of financial condition as of September 30, 2017March 31, 2022 and results of operations for the three and nine months ended September 30, 2017March 31, 2022 and 20162021 should be read in conjunction with the financial statements included in our Annual Report onForm 10-K for the year ended December 31, 20162021, which was filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2017.22, 2022.

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”“will,” “ongoing,” “estimate,” “forecast,” “target,” “predict,” “could” and similar references. Suchreferences, although not all forward-looking statements include, but are not limited to, statements about: our ability to successfully developRXI-109, Samcyprone™ and our other product candidates (collectively, “our

product candidates”); the future success of our clinical trials with our product candidates; the timing for the commencement and completion of clinical trials; the future success of our strategic partnerships; and our ability to implement cost-saving measures.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 the ongoing coronavirus pandemic, the development of our product candidates, our ability to execute on business strategies, our ability to develop our product candidates with collaboration partners, 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. Therefore, you should not rely on anystatements as a result of these forward-looking statements. Importanta number of important factors, that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others: the risk that our clinical trials with our product candidates may not be successful in evaluating the safety and tolerability of these candidates or providing evidence of increased surgical scar reduction compared to placebo or clearance of common warts; the successful and timely completion of clinical trials; uncertainties regarding the regulatory process; the availability of funds and resources to pursue our research and development projects, including our clinical trials with our product candidates; general economic conditions; and those identified in our Annual Report on Form10-K for the year ended December 31, 20162021 under the heading “Risk Factors” and in other filings the Company periodically makes with the Securities and Exchange Commission.SEC. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form10-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.

Overview

RXi

Phio Pharmaceuticals CorporationCorp. (“RXiPhio,” “we,” “our” or the “Company”) isstrives to address the biggest challenges in immuno-oncology by working to create new pathways to a clinical-stage companycancer-free future for patients. We are developing innovative therapeutics based onthat leverage our proprietaryINTASYL™ 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(sd-rxRNA^®) platform and Samcyprone™ which address significant unmet medical needs. technology, we aim to bring the benefits of RNA therapeutics into cancer care where other modalities may fall short.

We haveare developing a pipeline of discovery, preclinicalimmuno-oncology therapies using our INTASYL technology, which has the ability to attack cancers in multiple ways. Our INTASYL-based therapeutics are used to: (1) strengthen immune cells, including those administered as part of adoptive cell therapy (“ACT”), and clinical product candidates(2) directly modify cells in the areastumor microenvironment (the “TME”) to weaken a tumor’s defense mechanisms. These two strategies allow for multiple therapeutic applications of dermatology, ophthalmologyour INTASYL products.

In contrast to other RNA technologies and cell-basedplatforms, we believe the self-delivering nature of our INTASYL platform makes it ideally suited for use with ACT treatments, as well as for direct therapeutic use. By using our INTASYL technology during the manufacturing of ACT cell products we can improve the phenotype and function of these cells, potentially leading to better therapeutic outcomes. Multiple inhibitory mechanisms restrain immune cells from effectively eradicating tumors, including immune checkpoints and reduced cell fitness and cell persistence. Furthermore, the immunosuppressive TME can pose a formidable barrier to immune cell infiltration and function. By using INTASYL-based therapeutics administered directly, we can also reprogram cells in the TME to help overcome these immunosuppressive mechanisms.

Use of INTASYL To Improve Adoptive Cell Therapy Products

ACT consists of the administration of immune cells with antitumor properties to patients to fight cancer immunotherapy. The Company’s clinical development programs includeRXI-109,after growing the cells in a lab to large numbers. There are several types of ACT, including: 1.) non-engineered cell therapy in which immune cells are grown from the patient’s tumor or blood, such as tumor infiltrating lymphocytes (“TILs”), or from donor blood or tissue such as natural killer (“NK”) cells, dendritic cells (“DC”) or macrophages and 2.) genetically engineered immune cells that are genetically modified to recognize specific tumor proteins and to remain in ansd-rxRNA activated state (such as T cell receptor technology (“TCRs”), chimeric antigen receptor (“CAR”) T cells, or CAR-NK cells).

Regardless of the source, most of the immune cells used for ACT have several shortcomings that inhibit their full therapeutic potential in patients with solid tumors, which we believe can be overcome with INTASYL-based therapeutics. For example, multiple inhibitory mechanisms restrain immune cells used in ACT from effectively eradicating tumors, including immune checkpoints, reduced cell fitness and cell persistence in addition to other barriers to immune cell infiltration and function occurring mainly in solid tumors. When used in ACT, we believe our INTASYL compounds can improve immune cell function, differentiation and metabolism, in order to make these immune cells more effective without the need for additional complicated manufacturing steps and/or genetic engineering.

Our approach builds on well-established methodologies of ACT and involves the treatment of dermal and ocular scarring, and Samcyprone™, a topical immunomodulator, for the treatment of warts. The Company’s pipeline, coupledimmune cells with our extensive patent portfolio, providesINTASYL compounds ex vivo while they are growing in the lab and before administering them to the patient. In contrast to other RNA technologies, our INTASYL compounds do not require a delivery vehicle or specialized delivery tools to deliver the RNA drugs into the cells. Therefore, we are able to enhance the function of these cells by merely adding our INTASYL compounds during the expansion process and without the need for product development and business development opportunities across a broad spectrum of therapeutic areas.

RNAi therapies are designedgenetic engineering, complex delivery vehicles or formulations, or additional complex manufacturing steps, which in themselves may be detrimental to “silence,”the cells. By adding INTASYL to the cell culture media used during the cell expansion, we can reduce or down-regulate,eliminate the expression of a specific genegenes that may be over-expressedmake the immune cells less effective.

Our lead product candidate, and our most advanced program being developed by the Company in a disease condition. The Company’s first RNAi clinical product candidate,RXI-109,ACT, is a self-delivering RNAiPH-762. PH-762 is an INTASYL compound(sd-rxRNA) that commenced human clinical trials in 2012.RXI-109 is designedactivates immune cells to reducebetter recognize and kill cancer cells by reducing the expression of connective tissue growth factor (“CTGF”),the checkpoint protein PD-1, a critical regulatorclinically validated target for immunotherapy. Checkpoint proteins, such as PD-1, normally act as a type of several biological pathways involved in fibrosis, including scar formation“off switch” that prevent T cells, immune cells that protect the body from cancer cells and infections, from attacking certain cells in the skinbody, such as cancer cells. The expression of PD-1 enables the cancer cell to evade the T cell. Reducing the expression of PD-1 can thereby reduce the ability of cancer cells to avoid T cell detection.

Data has shown that PH-762 silences PD-1 checkpoint expression in T cells, thereby removing the “off switch” and eye.RXI-109 is currently being evaluatedenabling T cells to overcome tumor resistance mechanisms, which improves their ability to destroy tumor cells. Preclinical studies show that PH-762 can silence the expression of PD-1 in target human T cells in a Phase 2 clinical trial, Study 1402,potent and durable manner and can increase their tumor cell-killing ability. Patient derived T cells treated with PH-762, in comparison to prevent or reduce dermal scarring following scar revision surgeryuntreated T cells, were shown to have increased tumor killing potency against tumor cells of an existing hypertrophic scar andthe same patient. As a Phase 1/2 clinical trial, Study 1501,result, we believe that PH-762 in ACT is well-positioned to evaluate the safety and clinical activity ofRXI-109 to prevent the progression of retinal scarringenhance therapeutic responses in subjects with wetage-related macular degeneration (“AMD”).cancer patients.

Study 1402, the Company’s Phase 2 clinical trial in hypertrophic scars, commenced in July 2014. In October 2015, we reported that preliminary data from Study 1402 demonstrated that scars at revision sites were judged to be better at three months after a treatment regimen with five mg/cm intradermal administration ofRXI-109 than scars at untreated revision sites in those same subjects. Based in part on this new information, two more cohorts (Cohorts 3 and 4) were added to Study 1402 in November 2015. For these two cohorts, the number of doses was increased to either eight or nine doses ofRXI-109 over asix-month period to better cover the extended wound healing/scarring profile of hypertrophic scars. Enrollment of subjects into these two new cohorts completed ahead of schedule during the third quarter of 2016.

In December 2016, the Company announced that preliminary data from the first two cohorts from Study 1402 at nine months confirmed the positive differentiation by a blinded panel of observers from untreated surgery incisions in hypertrophic scars from the previously presented data for a subset of subjects treated with five mg/cm ofRXI-109 at three months. In addition, this data extends this observation to all time points, including the post-treatmentfollow-up period through nine months post-surgery.RXI-109 was safe and well tolerated. Additionally, as expected, the limited three-month data available from Cohort 3 appeared to align with that of the first two cohorts as these subjects all had the same dosing schedule through the third month. A completeread-out of the whole study, including all four cohorts withfollow-up until nine months post-surgery, is expected by the end of 2017.

Study 1501, the Company’s Phase 1/2 clinical trial in retinal scars, commenced in November 2015, and is a multi-dose, dose escalation study conducted in subjects with AMD with evidence of subretinal fibrosis. Each subject receives four doses ofRXI-109 by intraocular injection at one month intervals for a total dosing period of three months. The safety and tolerability ofRXI-109, as well as the potential for clinical activity, is evaluated over the course of the study using numerous assessments to monitor the health of the retina and to assess visual acuity. To date, there have been no safety issues that have precluded continuation of dosing. Study 1501 has been completely enrolled, dosing in the third cohort at the highest planned dose level is completed and patient follow-up is ongoing. The Company expects to complete subject participation in the study by the end of 2017 and to sharetop-line data in early 2018.

Samcyprone™, the Company’s second clinical candidate, is a proprietary topical formulation of the small molecule diphenylcyclopropenone (“DPCP”), an immunomodulator that works by initiating aT-cell response. The use of Samcyprone™ allows sensitization using much lower concentrations of DPCP than are used with existing compounded DPCP solutions, avoiding hyper-sensitization to subsequent challenge doses. Samcyprone™ is currently being evaluated in a Phase 2a clinical trial, Study 1502, for the clearance of common warts.

Study 1502 was initiated in December 2015. Study 1502 includes a sensitization phase in which a spot on the subject’s upper arm and one or more warts are treated with Samcyprone™. After being sensitized in this way, the subjects enter into the treatment phase where up to four warts are treated on a once weekly basis for ten weeks with aten-fold lower concentration of Samcyprone™ than in the sensitization phase. During the trial, the warts are scored, photographed and measured to monitor the level of clearance.

In December 2016, the Company announced the results from a preliminary review of sensitization and wart clearance data from a subset of subjects that have completed theten-week treatment phase of Study 1502. Results showed that greater than 90% of the subjects demonstrated a sensitization response, a prerequisite to be able to develop a therapeutic response. Additionally, more than 60% of the subjects responded to the treatment by exhibiting either complete or greater than 50% clearance of all treated warts with up to ten weekly treatments. Samcyprone^™ treatment has been generally safe and well tolerated and has had drug-related adverse events relating to local reactions, which are typically expected for this type of treatment due to the sensitization and challenge responses in the skin. The Company added a second cohort, which was fully enrolled in September 2017, to Study 1502 to explore the opportunity to reduce the sensitization dose level, which will be more convenient to physicians and subjects. Early read-outs of the study are anticipated by the end of 2017.

In addition to our clinical programs, we continue to advance our preclinical and discovery programs with oursd-rxRNA technology.RXI-231, our leadsd-rxRNA compound targeting tyrosinase (“TYR”), is in cosmetic development as a cosmetic ingredient that may improve the appearance of uneven skin tone and pigmentation. Cosmetics are compounds that affect the appearance of the skin and make no preventative or therapeutic claims. These compounds may be developed more rapidly than therapeutics, therefore the path to market may be much shorter and less expensive. Efficacy and toxicity testing in cell culture and skin equivalents forRXI-231 has been successfully completed and human testing ofRXI-231 commenced in June 2017 with a U.S. clinical testing site. The Company has completed irritation and sensitization studies withRXI-231, the first two of three studies planned. Early results from the irritation and sensitization studies demonstrated thatRXI-231 is not a skin irritant, and it does not cause allergic contact dermatitis. The third study investigates the potential ofRXI-231 to improve the appearance of skin pigmentation induced by UV exposure and is ongoing. Full reports from these studies are expected before the end of 2017.

On January 6, 2017,March 2021, the Company entered into a Stock Purchase Agreementclinical co-development collaboration agreement (the “Stock PurchaseClinical Agreement”) bywith AgonOx, Inc. (“AgonOx”) to develop novel T cell-based therapies using PH-762 and amongAgonOx’s “double positive” TIL (“DP TIL”) technology. AgonOx has demonstrated that its DP TIL enriched cell populations have increased tumor killing activity when compared to TILs that were not enriched prior to expansion. Further, preclinical data from our research collaboration with AgonOx has shown that treating DP TILs with PH-762 increases the Company, RXi Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiarytumor killing activity of the Company (“RXi Merger Sub”), MirImmune Inc. (“MirImmune”), the stockholders of MirImmune set forth on the signature pages thereto (each a “Seller” and collectively, the “Sellers”), and Alexey Wolfson, Ph.D., in his capacity as the Sellers’ Representative. Pursuant to the Stock Purchase Agreement, the Company acquired from the Sellers all of the issued and outstanding shares of capital stock of MirImmune for an aggregate of 2,750,371 shares of common stock of the Company and an aggregate of 1,118,224 shares of Series C Convertible Preferred Stock of the Company (the “Series C Convertible Preferred Stock”). On June 9, 2017, with the approval of the Company’s stockholders in accordance with the stockholder approval requirements of Nasdaq Marketplace Rule 5635, each share of Series C Convertible Preferred Stock outstanding was automatically converted into one share of common stock, such that no shares of Series C Convertible Preferred Stock remained issued or outstanding. On November 7, 2017, the Company filed a Certificate Eliminating the Series C Convertible Preferred Stock from the Certificate of Incorporation of the Company with the Secretary of State of the State of Delaware. Please refer to Part II, Item 5 of this quarterly report on Form 10-Q forDP TILs even further discussion of the filing.

In connection with and promptly following the closing of the Stock Purchase Agreement, MirImmune was merged with and into RXi Merger Sub (the “Merger”), with RXi Merger Sub continuing as the surviving entity and changing its name to “MirImmune, LLC”(a two-fold increase). As a result, we expect the use of PH-762 treated DP TILs to enhance therapeutic responses in cancer patients. Based on this data, our collaboration with AgonOx will focus on conducting a clinical trial for PH-762 treated DP TILs. Under the Clinical Agreement, we will provide financial support to AgonOx to conduct a clinical trial in ACT with their DP TIL technology and PH-762. We 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. Financial support to AgonOx under the Clinical Agreement has not yet commenced. The Company expects to start the clinical trial evaluating the use of PH-762 and DP TILs in ACT in the third quarter of 2022.

PH-762’s use in ACT is not limited to TILs, but can also be used on other forms of T cell-based cell therapy. We presented in vivo data showing that PH-762 significantly enhanced the antitumor efficacy of HER2-targeted CAR-T cells (“HER2CART”) in solid tumors. Compared to untreated HER2CART cells, HER2CART cells treated with PH-762 showed a statistically significant and durable inhibition of tumor growth. Analysis of the Merger, MirImmune, LLC remainsPH-762 treated HER2CART cells isolated from the tumors suggest that PH-762 enhances CAR-T function through multiple mechanisms including enhanced efficiency, degranulation and operatespromotion of memory/stem populations. We believe that this data provides proof of concept for the application of PD-1 checkpoint silencing with INTASYL in CAR-T cells prior to ACT to enhance the therapeutic efficacy of CAR-T cell therapy in solid tumors.

Our second product candidate in development for use in ACT is PH-894. PH-894 is an INTASYL compound that silences the epigenetic protein BRD4, which is an intracellular regulator of gene expression that impacts cell differentiation, and hence, cell function. Like other epigenetic targets, BRD4 is a protein that has been shown to be difficult to target with current drug modalities. Since BRD4 is an intracellular protein, antibody therapies cannot be used and small molecule inhibitors tested to date typically lack the required specificity. As our INTASYL compounds can target intracellular proteins as well as extracellular proteins with a wholly-owned subsidiaryhigh level of specificity, we believe that PH-894 has significant potential. In collaboration with the Company.Karolinska Institutet in Sweden, PH-894 has been shown to improve T cell function and persistence by differentiating T cells into a more active state (stem-cell like memory phenotype). We have demonstrated that the application of PH-894 can silence BRD4 in human T cells during expansion for ACT, which has the potential to confer superior anti-tumor activity.

Building

Our INTASYL compound PH-804 is also being developed for use in ACT. PH-804 targets the suppressive immune receptor TIGIT, which is a checkpoint protein present on immune cells, such as T cells and NK cells. Similar to PD-1, cancer cells can suppress the activity of these immune cells by activating TIGIT. This triggers an “off switch,” resulting in tumor immune evasion, which can be prevented by blocking or silencing TIGIT. PH-804 provides powerful dose-dependent silencing of TIGIT that can be seen in both T cells and NK cells. We have shown that PH-804 can silence the expression of TIGIT in these cells, overcoming their “off switch” and thereby becoming “weaponized” to kill cancer cells.

Direct Therapeutic Use of INTASYL Towards the Tumor Microenvironment

Cancer cells have evolved natural defenses that can suppress the immune system surrounding the tumor, in an area called the TME, which decreases the effectiveness of many traditional immunotherapies. Reprogramming different cell types in the TME, such as cancer cells and immune cells, may overcome these natural tumor defenses and decrease resistance to immunotherapy. An optimal treatment therapy should have the ability to address targets both inside and on the work completedsurface of tumor and immune cells, creating multiple ways to prevent tumors from evading immune detection. Our INTASYL compounds can target both intracellular and extracellular targets and are also being developed for use as direct therapeutics to reprogram the TME, including by MirImmune priorlocal administration and activation of immune cells in the TME, and/or lowering the tumor cells defenses. Therefore, we believe INTASYL-based therapeutics can be a novel way of fighting cancer by reprogramming the cells in the TME to its acquisitionmake cancer more responsive to a patient’s immune system and to other anti-cancer drugs.

Our most advanced program being developed by the Company in our cell-baseddirect therapeutic programs, is PH-762. We have shown that we can reprogram the TME with PH-762 and achieve local activation of immune cells. Preclinical studies conducted by the Company demonstrated that local administration of PH-762 through intratumoral injection resulted in potent anti-tumoral effects. Treated animals showed a complete and statistically significant inhibition of tumor growth, whereas placebo treated animals displayed exponential tumor growth. In vivo data has shown that intratumoral treatment with PH-762 inhibits tumor growth in a dose dependent fashion in PD-1 responsive and refractory models. Furthermore, on-target efficacy was supported by modulation of immune cell populations toward anti-tumor phenotypes. Importantly, local administration of PH-762 resulted in activity against distal untreated tumors, indicative of a systemic anti-tumor response. The Company believes this data further supports the potential for PH-762 to provide a strong local immune checkpoint blockade without the dose immune-related adverse effects seen with systemic antibody therapy.

In January 2022, the Company was granted clinical trial authorization by the French National Agency for the Safety of Medicines and Health Products to proceed with our first in-human clinical trial for PH-762 to treat patients with melanoma at the Gustave Roussy Institute, one of the largest cancer immunotherapy programcenters in Europe. This first clinical trial withsd-rxRNA includes lead PH-762 will be a Phase 1b study to evaluate the safety, tolerability, pharmacokinetics and anti-tumor activity of PH-762 in a neoadjuvant setting in subjects with advanced melanoma. Currently, there are no neoadjuvant treatment options approved for these patients. The clinical trial will feature a dose escalation of PH-762 monotherapy with a maximum of 5 dose escalation cohorts and up to a maximum of 21 patients. Patients eligible for enrollment include those with Stage IIIB/IIIC or Stage IV resectable oligometastatic melanoma. Enrolled patients will receive a weekly dose of PH-762 for four weeks and receive surgical resection surgery of their tumor(s) four weeks after treatment with PH-762. The clinical trial design allows for a data driven evaluation of the recommended Phase 2 dose. The clinical trial site is open for enrollment and the Company anticipates top-line data from the first group of patients in the first quarter of 2023. However, the impact of the ongoing coronavirus pandemic on the enrollment of patients in the clinical trial is not yet known and highly difficult to predict and therefore, may result in delays to our expected timelines.

Our second direct to tumor product candidate is PH-894. In a study conducted in collaboration with the Karolinska Institutet in Sweden, we demonstrated that PH-894 resulted in a strong, concentration dependent and durable silencing of BRD4 in T cells, and in various cancer cells. Data published with PH-894 in a hepatocellular carcinoma model showed potent and statistically significant anti-tumoral effects when administered locally. These data show that our PH-894 compound can reprogram T cells and other cells in the TME to provide enhanced immunotherapeutic activity. In vivo data by the Company has shown that local administration of PH-894 also resulted in a systemic anti-tumor response, similar to PH-762. Data recently presented at the 2022 American Association for Cancer Research Annual Meeting demonstrated that PH-894 provided abscopal efficacy toward untreated distal tumors and potentiated the efficacy of systemic anti-PD-1 antibody therapy. After local administration of PH-894 in in vivo studies conducted in colon and liver cancer models, strong anti-tumor efficacy was seen in directly treated, as well as distal untreated tumors. Additionally, intratumoral treatment with PH-894 enhanced the anti-tumor efficacy of systemic anti-PD-1 antibody therapy for both the locally treated tumors and the untreated tumors. With this data, there is potential for PH-894 to be used in treating patients who do not respond to anti-PD-1 therapy, or patients who progress after initially responding to such therapy. PH-894 demonstrates the power of our INTASYL compounds to modulate the expression of intracellular and/or commonly considered “undruggable” targets, a limitation for small molecule and antibody therapies. The Company currently expects to finalize IND-enabling studies for PH-894 in the second half of 2022.

We are also investigating the use of INTASYL to target multiple genes in a single formulation. New study data showed that PH-3861, a dual-targeting INTASYL towards PD-1 and BRD4, elicited a complete cure of tumors in an in vivo hepatoma model and outperformed the efficacy of the small molecule and antibody control treatments toward the same targets. In addition, local INTASYL therapy was shown to induce a systemic anti-tumor response with the clearance of untreated distal tumors. The animals which showed a complete cure of their tumors were then rechallenged over two months after the original treatment of PH-3861 by re-implanting hepatoma cancer cells at a different location than the original tumor. All of the animals that were rechallenged with new tumors were cured again without requiring further treatment, while tumors grew steadily in the control group as expected. We believe that these data demonstrate that local administration of PH-3861 provides a durable and systemic anti-tumor immune response that can combat tumor growth.

Impact of the Coronavirus Pandemic

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 that 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 will materially impact our financial results and operations will depend on a number of immune checkpoint targets that provide long lasting immune checkpoint silencing, individually andfactors, including delays in combination, in adoptively transferred cells. An improved efficacy upon the silencing of checkpoints has been demonstrated in various types of adoptively transferred cells relevant in cancer immunotherapy, such as CART-cells and tumor infiltrating lymphocytes (TILs). The Company’s ongoing discovery programs include, but are not limitedour operations due to the evaluationlimited availability ofsd-rxRNA compounds supplies and services we rely on, the ability to impactenroll patients in our clinical trials and the differentiation of various immune effector cells. The Company has also initiated in vivo evaluations of multiple checkpoint inhibitingsd-rxRNA compoundsco-transfected in CART-cells in mouse models for solid tumors, with data from these studies expected by the end of 2017.

Additionally, the Company recently selected twosd-rxRNA compounds from its immunotherapy pipeline for preclinical development. For oncology treatments based on adoptive cell transfer (ACT), compoundsRXI-762 andRXI-804 suppress the expression of immune checkpoint proteinsPD-1 and TIGIT, respectively, which can result in an improved efficacy to the targeted tumors. This decision triggered the selection of a manufacturing facility to initiate production of cGMP grade material, initially for RXI-762. This also supports movingRXI-762 into clinical development as early as 2018 as part of an ACT therapy.

On August 8, 2017, the Company entered into a purchase agreement (the “2017 Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which the Company has the right to sell to LPC up to $15,000,000 in sharesduration of the Company’s common stock, subjectcoronavirus pandemic, which remain difficult to certain limitationspredict and conditions set forth therein, over the30-month term of the 2017 Purchase Agreement.are highly uncertain.

Since inception, we have incurred significant losses. Substantially all of our losses to date have resulted from research and development expenses in connection with our clinical and research programs and from general and administrative costs. At September 30, 2017, we had an accumulated deficit of $76.5 million. We expect to continue to incur significant losses for the foreseeable future, particularly as we advance our development programs forRXI-109 and Samcyprone™ and expand our program in cell-based cancer immunotherapy.

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 significantmaterial changes to our critical accounting policies since the beginning of this fiscal year. Our critical accounting policies are describedand estimates as compared to those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of ourCompany’s most recent Annual Report on Form10-K for the year ended December 31, 2016, which we filed with the SEC on March 30, 2017.2021.

Results of Operations

The following data summarizes the results of our operations for the periods indicated, in thousands:

Comparison of the Three and Nine Months Ended September 30, 2017March 31, 2022 and 2016

Net Revenues

To date, we have primarily generated revenues through government grants. The following table summarizes our total net revenues, for the periods indicated, in thousands:2021

The Company did not have net revenues for the three and nine months ended September 30, 2017 and the three months ended September 30, 2016.

Net revenues were approximately $19,000 for the nine months ended September 30, 2016, which related to the Company’s exclusive license agreements with Thera Neuropharma, Inc. and MirImmune, prior to its acquisition by the Company.

Operating Expenses

The following table summarizes our total operating expenses, for the periods indicated, in thousands: