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

PHIO PHARMACEUTICALS CORP.

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.

PHIO PHARMACEUTICALS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share data)

(Unaudited)

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

PHIO PHARMACEUTICALS CORP.

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.

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

Phio Pharmaceuticals Corp. (“Phio,” “we,” “our” or the “Company”) is a biotechnology company developing the next generation of immuno-oncology therapeutics based on its self-delivering RNAi (“sd-rxRNA®INTASYL™”) therapeutic platform. The Company’sCompany's efforts are focused on developing sd-rxRNAsilencing tumor-induced suppression of the immune system through its proprietary INTASYL platform with utility in immune cells and the tumor micro-environment. The Company’s goal is to develop powerful INTASYL therapeutic compounds to be used in the context of immunotherapy by targeting checkpoints or other gene targets, by local or intravenous injections. We aim to maximize the power of our sd-rxRNA therapeutic compounds by weaponizing therapeuticthat can weaponize immune effector cells to overcome tumor immune escape, thereby providing patients with a powerful new treatment option that goes beyond current treatment modalities.

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. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. 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.

Reverse Stock Split

Effective January 15, 2020, the Company completed a 1-for-55 reverse stock split of the Company’s outstanding common stock. All share and per share amounts in the financial statements have been retroactively adjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in par value to additional paid-in capital. Unless otherwise noted, shares of common stock issued and outstanding, shares underlying warrants and stock awards, shares reserved, conversion price of convertible securities, exercise prices of warrants and stock awards and loss per share have been proportionately adjusted to reflect the reverse stock split. The reverse stock split did not reduce the number of authorized shares of the Company’s common stock or preferred stock.

Principles of Consolidation

The consolidated financial statements include the accounts of Phio and its wholly-owned subsidiary, MirImmune, LLC. All material intercompany accounts have been eliminated in consolidation.

Risks and Uncertainties

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China and has since spread to other parts of the world, including the United States. In March 2020, the World Health Organization declared the outbreak a pandemic. We have not yet experienced any significant impacts or interruptions to our financial condition or results of operations as a result of the coronavirus pandemic at this time. If the measures to contain the outbreak continue or are extended, it may affect our operations and those of third parties on which we rely, including reducing the availability of supplies that we purchase, closures of or delays in businesses that we rely on to provide services and conduct preclinical and clinical activities for our product candidates, disrupting the supplies and services we rely on for the development of our product candidates, it may affect clinical trial initiations and participant recruitment and enrollments, all of which may in turn slow, delay or pause our research and development activities. The ultimate impact of the coronavirus pandemic is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business and preclinical and clinical trial activities.

Coronavirus Aid, Relief, and Economic Security Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted. The CARES Act is an emergency economic stimulus package passed in response to the coronavirus outbreak that includes, but is not limited to, provisions providing aid to small businesses in the form of loans and grants and numerous tax provisions such as certain payroll tax benefits, changes to the net operating loss rules, and the business interest expense deduction rules. The Company does not expect the provisions in the CARES Act to have a material impact on its condensed consolidated financial statements. As there is a high degree of uncertainty around its implementation the Company is assessing and will continue to assess the potential impacts of the CARES Act on our business, results of operations and financial statements.

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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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. Actual results could differ materially from these estimates. The areas subject to significant estimates and judgement include, among others, those related to fair value of equity awards, research and development expenses, right of use lease assets, the fair value of financial instruments, useful lives of property and equipment, income taxes, and our valuation allowance on our deferred tax assets.

Restricted Cash

Restricted cash consists of certificates of deposit held by financial institutions as collateral for the Company’s corporate credit cards.

Leases

TheIn connection with the adoption on January 1, 2019, the Company follows the provisions of the Financial Accounting Standards Board (“(the “FASB”) Accounting Standards Codification (“ASC”) Topic 842, “Leases” (“ASC 842”). 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. At the commencement date of the lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term.

The Company has elected the package of practical expedients to not reassess its prior conclusions about lease identification, lease classification and indirect costs and to not separate lease and non-lease components. The Company has elected not to recognize on the balance sheet leases with a term less than one year.

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 wethe 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 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

The Company follows the provisions of the FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). 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 inpaid-in capital in stockholders’ equity at the date of issuance. No further adjustments to their valuation are made.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for restricted cash, accounts payable and accrued expenses approximate their fair values due to their short-term nature.

Research and Development Expenses

Research and development costsexpenses relate to compensation and benefits for research and development personnel, facility-related expenses, supplies, external services, costs to acquire technology licenses, 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.

The Company contracts with third parties to perform various preclinical and clinical activities on ourits behalf for the continued development of ourits product candidates. Accruals and expenses 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.

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. StockStock-based compensation expense is based on the grant date fair value estimated in accordance with the provisions of ASC 718 and is recognized as an expense over the requisite service period.

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 the FASB ASC Topic 260, “Earnings per Share.” Basic and diluted net loss per 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 loss by the weighted average number of common shares outstanding and the impact of all dilutive potential common shares.

3. Liquidity and Going Concern

The Company has reported recurring losses from operations since inception and expects that the Company will continue to have negative cash flows from operations for the foreseeable future. Historically, the Company’s primary source of funding has been the sale 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 our 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. Moreover, the global coronavirus pandemic has led to significant uncertainty and increased volatility in the capital markets. If these conditions in the capital markets continue for an extended period of time it may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity and our ability to complete our preclinical and planned clinical studies on a timely basis, or at all. The ultimate impact of the coronavirus pandemic on our liquidity is highly uncertain and subject to change. 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.

The Company believes that its existing cash, along with the completion of our recent capital raise in April 2020, should be sufficient to fund operations for at least the next 12 months.

4. Recent Accounting Pronouncements

In February 2016,November 2018, the FASB issued Accounting Standards Update (“ASU”) 2016-02,2018-18, “LeasesCollaborative Arrangements (Topic 842)808)” (“Topic 842808”), which requires lessees to recognize a right-of-use assetclarifies the interaction between Topic 808 and lease liabilityASC Topic 606, “Revenue from Customers.” The update provides guidance on whether certain transactions between collaborative arrangement participants should be accounted for with revenue under ASC Topic 606 and provide more comparability in the balance sheetpresentation of revenue for most leasescertain transactions between collaborative arrangement participants. This will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within that do not meet the definition of a short-term lease and to disclose key information about leasing arrangements. Leases will continuereporting period. This guidance is required to be classified as either operating or financing. applied retrospectively to the date of our adoption of ASC Topic 606, which was in the first quarter of 2018.The Company adopted Topic 842 on January 1, 2019 usingASU 2018-18 in the modified retrospective approach andfirst quarter of 2020. The Company also elected to apply ASU 2018-18 only to contracts that were not completed at the transition method that allows companies to continue applying guidance underdate of initial application of Topic 606. Since the lease standard in effect at that timeCompany has no significant revenue, this ASU has no immediate impact on its condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The amendments in the comparative periodupdate simplify the accounting for income taxes by eliminating the exceptions related to the incremental approach for intraperiod tax allocation, the recognition of a deferred tax liability for equity method investments, not recognizing a deferred tax liability for a foreign subsidiary and the general methodology for calculating income taxes in an interim period.The amendments also clarify and simplify other aspects of the accounting for income taxes. The amendments in ASU 2019-12 are effective for public entities for fiscal years, and the interim periods within those fiscal years, beginning after December 20, 2020. Early adoption is permitted.The Company is evaluating the expected impact this guidance may have on our consolidated financial statements and recognize a cumulative-effect adjustment to the balance sheet on the date of adoption. The Company has also elected the package of practical expedients to not reassess our prior conclusions about lease identification, lease classification and indirect costs and to not separate lease and non-lease components.related disclosures.

Upon adoption of Topic 842 on January 1, 2019, the Company recorded a right of use asset of $28,000 and an operating lease liability of $28,000. Comparative periods have not been restated. For additional information regarding how the Company is accounting for leases under Topic 842, refer to Note 4.

4. Leases

The Company adopted Topic 842 on January 1, 2019 using the modified retrospective approach and elected to apply the transition method that allows companies to continue applying guidance under the lease standard in effect at that time in the comparative period financial statements and recognize a cumulative-effect adjustment to the balance sheet on the date of adoption. The Company has also elected the package of practical expedients to not reassess our prior conclusions about lease identification, lease classification and indirect costs and to not separate lease and non-lease components. With the adoption of Topic 842, the Company’s balance sheet now contains line items for right of use asset, current lease liability and noncurrent lease liability.

The Company determined that it held an operating lease for its office and laboratory space as of January 1, 2019. The Company held no other lease agreements. The Company leases 7,581 square feet of office and laboratory space for its corporate headquarters and primary research facility in Marlborough, Massachusetts. On January 1, 2019, the Company recorded a right of use asset and corresponding lease liability of $28,000.5. Leases

On January 22, 2019, the Company amended the lease for its corporate headquarters and primary research facility in Marlborough, Massachusetts. The Company leases 7,581 square feet of office and laboratory space, to extend the term by five years, such that the leasewhich will expire on March 31, 2024. With the amendment, the Company also has theThe lease contains an option to terminate the lease after two years or three years by providing advance written notice. Duenotice of termination pursuant to the extensionterms of the agreement. The exercise of this option was not determined to be reasonably certain and thus is not included in the lease agreement,liability on the Company’s balance sheet.

The lease for our corporate headquarters represents substantially all of our significant lease obligations. The amounts reported in the condensed consolidated balance sheet for operating leases in which the Company increasedis the right of use assetlessee and correspondingother supplemental balance sheet information is set forth as follows, in thousands, except lease liability by $592,000.term and discount rate:

Additionally, the

Operating lease agreements did not contain information to determine the rate implicitcost included in the lease. 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. At March 31, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term for the Company’soperating expense under our operating lease was 4.46%$33,000 and 3.91 years, respectively.

As of March 31, 2019, the right of use asset and liability arising from the Company’s operating lease was $592,000. During$28,000 for the three months ended March 31, 2020 and 2019, cashrespectively. Short-term lease costs were not material for the three months ended March 31, 2020 and 2019.

Cash paid for the amounts included in the measurement of liabilities was $28,000 and the Company recorded operating lease expense of $28,000, which wasliability on the Company’s condensed consolidated balance sheet and included in lease liability within changes of operating expense.assets and liabilities in the operating activities of our condensed consolidated statement of cash flow was $31,200 and $28,000 for the three months ended March 31, 2020 and 2019, respectively.

Aggregate future minimumFuture lease payments for non-cancellable commitments underoperating leases and a reconciliation to the carrying amount of the operating lease liability presented in the condensed consolidated balance sheet as of March 31, 2019 was2020 is as follows, in thousands:

5.

6. Stockholders’ Equity

Lincoln Park Capital Fund, LLC –February 2020 Registered Direct Offering and Private Placement — On August 8, 2017,February 6, 2020, the Company entered intocompleted a purchase agreementregistered direct offering (the “Purchase AgreementFebruary 2020 Registered Offering”) and a registration rights agreement with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which the Company has the right to sell to LPCof 197,056 shares of the Company’s common stock subjectat a purchase price of $8.705 per share and in a concurrent private placement, sold warrants to certain limitations and conditions set forth in the Purchase Agreement.

Nopurchase an aggregate of 197,056 shares of the Company’s common stock were soldat a purchase price of $0.125 per underlying warrant share and with an exercise price of $8.71 per share. Net proceeds to LPC under the Purchase Agreement during the three months ended March 31, 2019. During the three months ended March 31, 2018, the Company sold 270,000from the February 2020 Registered Offering were $1,467,000 after deducting placement agent fees and offering expenses paid by the Company. In connection with the February 2020 Registered Offering, the Company also issued warrants to purchase a total of 14,779 shares of the Company’s common stock with an exercise price of $11.0375 per share to LPC for net proceeds of approximately $932,000.the placement agent, H.C. Wainwright & Co., LLC (“HCW”).

February 2020 Underwritten Public Offering — On February 13, 2020, the Company completed an underwritten public offering of 993,633 shares of the Company’s common stock and pre-funded warrants (the “2020 Pre-Funded Warrants”) to purchase an aggregate of 1,006,367 shares of the Company’s common stock (the “February 2020 Underwritten Offering”). The 2020 Pre-Funded Warrants —were immediately exercisable at an exercise price per share of $0.001. Each share of Company common stock or 2020 Pre-Funded Warrant, as applicable, was sold as a unit with a warrant to purchase one share of Company common stock at an exercise price of $4.00 per share (the “February 2020 Warrants”). The combined public offering price was $4.00 per Company common stock unit or $3.999 per 2020 Pre-Funded Warrant unit. Net proceeds from the February 2020 Underwritten Offering were $7,093,000 after deducting underwriting discounts and commissions and offering expenses paid by the Company.

The Company also granted HCW, as underwriter, a 30-day option (the “Option”) to purchase up to an additional 300,000 shares of Company common stock and/or February 2020 Warrants to purchase up to an aggregate of 300,000 shares of Company common stock. On February 12, 2020, HCW partially exercised the Option to purchase an aggregate of 300,000 additional February 2020 Warrants at a public offering price per option warrant of $0.001.

Additionally, pursuant to the February 2020 Underwritten Offering, the Company issued warrants to purchase up to 150,000 shares of Company common stock, immediately exercisable at an exercise price of $5.00 per share to HCW, as underwriter.

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 are no instances outside of the Company’s control that could require cash settlement of the warrants, including the warrants issued in the February 2020 Registered Offering and February 2020 Underwritten Offering, the Company’s outstanding warrants are outside the scope of ASC 480.

The Company then applies and follows the applicable accounting guidance in ASC 815. Financial instruments are accounted for as either derivative liabilities or as equity instruments depending on the specific terms of the agreement. The Company’s outstanding warrants 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 issued in the February 2020 Registered Offering, February 2020 Underwritten Offering, and all of the Company’s remaining outstanding warrants issued are classified within stockholders’ equity.

The following table summarizes the Company’s outstanding equity-classified warrants at March 31, 2019:2020:

During the quarter ended March 31, 2020, the Company received proceeds of $1,000 from the exercise of the 2020 Pre-Funded Warrants for a total of 1,006,367 shares of common stock. During the quarter ended March 31, 2019, the Company received proceeds of $43,000 from the exercise of Pre-Funded Warrantspre-funded warrants issued in 2018 for a total of 4,304,28678,260 shares of common stock. There were no warrant exercises during the quarter ended March 31, 2018.

6.7. Net Loss per Share

The following table sets forth the potential common shares excluded from the calculation of net loss per share because their inclusion would be anti-dilutive:

7.8. Stock-based Compensation

Restricted Stock Units

Restricted stock units (“RSUs”) are issued under the Company’s 2012 Long-Term Incentive Plan or as inducement grants issued outside of the plan to new employees. RSUs are generally subject to graded vesting and the satisfaction of service requirements, similar to our option grants. 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, 2020:

Stock-based compensation expense related to RSUs for the three months ended March 31, 2020 and 2019 was $29,000 and $35,000, respectively.

Stock Options

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 months ended March 31, 2019 and 2018, the following assumptions were used:

The weighted average fair value of options granted during the three months ended March 31, 2019 and 2018 was $0.29 and $3.35, respectively.

The risk-free interest rate used for each grant is 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. The expected life assumption 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 following table summarizes the activity of the Company’s stock options for the three months ended March 31, 2019:2020:

Stock-based compensation expense related to stock options for the three months ended March 31, 2020 and 2019 was $14,000 and 2018 was $19,000, and $41,000, respectively.

Restricted Stock Units

In addition to options to purchase shares of common stock, the Company may also grant restricted stock units (“RSUs”). RSUs are generally subject to graded vesting and the satisfaction of service requirements, similar to our stock options. Upon vesting, each outstanding RSU will be exchanged for one share of the Company’s common stock. The fair value of the RSUs awarded are based on 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, 2019:

Stock-based compensation expense related to RSUs for the three months ended March 31, 2019 was $35,000. There was no stock-based compensation expense related to RSUs recorded in the same prior year period.

Restricted Stock

On August 31, 2018, and through subsequent amendments on December 19, 2018 and February 14, 2019, Geert Cauwenbergh, Dr. Med. Sc., the Company’s former Chief Executive Officer, elected the right to receive, in lieu of cash, for the period from September 15, 2018 to February 28, 2019, up to 50% of his base salary and cash bonuses, if any, (collectively, the “Compensation”) payable in the form of unvested, restricted shares of the Company’s common stock. Such restricted shares were received in the form of a series of grants made on each Company payroll date in lieu of cash payment of the Compensation. All shares issued in lieu of Compensation shall vestvested in full on June 1, 2019.

The fair value of the restricted stock iswas based on the Company’s closing stock price on the date of grant and iswas expensed over the vesting period. During the three months ended March 31, 2019, the Company granted 243,0324,419 shares of restricted stock in lieu of Compensation to Dr. Cauwenbergh. Stock-basedCauwenbergh and recorded $106,000 in stock-based compensation expense related to the restricted stock for the three months ended March 31, 2019 was $106,000. There were no restricted stock issuances under this election during the three months ended March 31, 2018.stock.

Compensation Expense Related to Equity Awards

The following table sets forth total stock-based compensation expense for the three months ended March 31, 20192020 and 2018,2019, in thousands:

8.9. Subsequent Events

SubsequentApril 2020 Registered Direct Offering and Private Placement — On April 2, 2020, the Company closed a registered direct offering of 1,713,064 shares of the Company’s common stock at a purchase price of $2.21 per share and in a concurrent private placement, sold warrants to purchase an aggregate of 1,713,064 shares of the Company’s common stock at a purchase price of $0.125 per underlying warrant share and with an exercise price of $2.21 per share (the “April 2020 Registered Offering”). Net proceeds to the balance sheet date,Company from the April 2020 Registered Offering are estimated to be approximately $3,500,000 after deducting placement agent fees and offering expenses. In connection with the April 2020 Registered Offering, the Company issued warrants to purchase a total of 128,480 shares of Company common stock with an exercise price of $2.9188 per share to HCW, as the placement agent.

On May 11, 2020, the Company received loan proceeds in the amount of $5,000$231,252 from Bank of America, N.A., as lender, pursuant to the exercisePaycheck Protection Program (the “PPP”) under the CARES Act. The PPP loan matures on May 11, 2022 and bears interest at a rate of Pre-Funded Warrants1% per year.Monthly principal and interest payments are deferred for a totalsix months after the date of 500,000 sharesdisbursement. The loan may be forgiven if used for eligible purposes, including payroll, benefits, rent and utilities. The Company carefully assessed the requirements for application under the PPP and believes that the loan is necessary to support its operations. In connection with and in addition to the PPP, we have taken other proactive steps to control costs in response to the coronavirus pandemic and these actions include the reduction of common stock.the salaries of our senior management team by 10% through the remainder of 2020, or as market conditions improve. We believe these savings will help mitigate the financial impact of the coronavirus pandemic on our financial condition and reduce the need to furlough or lay-off our employees, which could be counterproductive and result in delays to our research and development activities.

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

This management’s discussion and analysis of financial condition as of March 31, 20192020 and results of operations for the three months ended March 31, 20192020 and 20182019 should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018,2019, which was filed with the Securities and Exchange Commission (the “SEC”“SEC”) on March 27, 2019.26, 2020.

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,” “predict,” “could” and similar references, although not all forward-looking statements contain these words. Forward-looking statements are neither historical facts nor assurances of future performance. These statements are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Risks that could cause actual results to vary from expected results expressed in our forward-looking statements include, but are not limited to, the impact to our business and operations by the recent coronavirus outbreak, the development of our product candidates, our ability to execute on business strategies, our ability to develop our product candidates with collaboration partners, the timeline and duration for advancing our product candidates into clinical development, results from our preclinical and clinical activities and our ability to obtain future financing. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements as a result of a number of important factors, including those identified in our Annual Report on Form 10-K for the year ended December 31, 20182019 under the heading “Risk Factors” and in other filings the Company periodically makes with the SEC. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q speak as of the date hereof and the Company does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this report.

Overview

Phio Pharmaceuticals Corp. is a biotechnology company developing the next generation of immuno-oncology therapeutics based on our self-delivering RNAi (“sd-rxRNA^®INTASYL™”) therapeutic platform. The Company’sOur efforts are focused on developing sd-rxRNAsilencing tumor-induced suppression of the immune system through our proprietary INTASYL platform with utility in immune cells and the tumor micro-environment. Our goal is to develop powerful INTASYL therapeutic compounds to be used in the context of immunotherapy by targeting checkpoints or other gene targets, by local or intravenous injections. We aim to maximize the power of our sd-rxRNA therapeutic compounds by weaponizingthat can weaponize immune effector cells to overcome tumor immune escape, thereby providing patients a powerful new treatment option that goes beyond current treatment modalities.

Our development efforts are based on our broadly patented sd-rxRNAINTASYL technology platform. Our sd-rxRNAINTASYL compounds do not require a delivery vehicle to penetrate into tissues and cells and are designed to “silence” or down-regulate, the expression of a specific gene which is over-expressed in cancer. We believe that our sd-rxRNAINTASYL platform uniquely positions the Company in the field of immuno-oncology because of this and for the following reasons:

Checkpoint Inhibition in Adoptive Cell Transfer

The Company has developed sd-rxRNA targeting PD-1, TIGIT and other undisclosed checkpoints inself-delivering nature of our compounds makes INTASYL ideally suited for use with adoptive cell transfer (“ACT”) treatments and direct therapeutic use. ACT consists of the infusion of immune cells with antitumor properties. These cells can be derived from unmodified (i.e. naturally occurring) immune cells, immune cells isolated from resected tumors, or genetically engineered immune cells recognizing tumor neoantigen/neoepitope cells.

Currently, ACT therapies for the treatment of solid tumors. The Company has selected RXI-762, our sd-rxRNA targeting PD-1, and RXI-804, our sd-rxRNA targeting TIGIT, for development in melanoma, ovarian cancer and head and neck cancer, as well as other undisclosed indications. Whentumors face several hurdles. Multiple inhibitory mechanisms restrain immune cells used in ACT RXI-762from effectively eradicating tumors, including immune checkpoints, reduced cell fitness and RXI-804cell persistence. Furthermore, the immunosuppressive tumor micro-environment (the “TME”) can pose a formidable barrier to immune cell infiltration and function.

We have developed a product platform based on our INTASYL technology that allows easy, precise, rapid, and selective non-genetically modified programming of ACT cells (ex vivo, during manufacturing) and of the TME (in vivo, by local application), resulting in improved immunotherapy.

Adoptive Cell Transfer

ACT includes a number of different types of immunotherapy treatments. These treatments use immune cells, that are expectedgrown in a lab to resultlarge numbers, followed by administering them to the body to fight the cancer cells. Sometimes, immune cells that naturally recognize a tumor are used, while other times immune cells are modified or “engineered” to make them recognize and kill the cancer cells. There are several types of ACT, including: a.) non-engineered cell therapy in an improved efficacy to targeted tumors. We plan to enterwhich immune cells are grown from the clinic with RXI-762 as part of an investigator sponsored clinical trial with one of our collaborators in ACT therapy for solid tumors,patient’s tumor or blood, such as in melanoma, by Q1 2020.

The Center for Cancer Immune Therapy (CCIT) at Herlev Hospital is a leading European cancer center for use of tumor-infiltratingtumor infiltrating lymphocytes (“TILs”) for ACT. CCIT has carried out numerous clinical trials based on a direct translation of the discoveries, or from the laboratory. Our collaboration with CCIT is evaluating the potential of our sd-rxRNA technology platform to enhance the function of TILs for use in the treatment for a number of cancer types, including melanoma and ovarian cancer. To date, CCIT has evaluated sd-rxRNA compounds targeting immune checkpoints in preclinical screening models of matched TIL/tumor cell pairs from melanoma and cancer patients. Results have shown a marked PD-1 reduction on the surface of TILs in a pilot rapid expansion protocol.

Iovance Biotherapeutics, Inc. is a biotechnology company focused on the development and commercialization of autologous cellular immunotherapies optimizing personalized, tumor-directed TILs. Our research collaboration with Iovance will evaluate the potential synergies with our novel sd-rxRNA therapeutic compounds and Iovance’s autologous cell therapy based on TILs for the use in the treatment of cancer. Data from this collaboration has shown that a sd-rxRNA mediated knock-down of PD-1 was associated with phenotypic changes indicative of TIL activation. Our next steps with Iovance include further evaluation of the impact of sd-rxRNA mediated gene silencing on TIL tumor reactivity and implementation of optimized silencing protocols and scale-up thereof.

Cell Maturation and Metabolism in Adoptive Cell Transfer

We are also able to use our sd-rxRNA in T-cells and other immune cell types,donor blood or tissue such as natural killer (“NK”) cells, and dendritic cells for targets other than(“DC”) and macrophages, and b.) engineered immune checkpointscells that are genetically modified to recognize specific tumor proteins and to remain in an activated state (such as T cell receptor technology (“TCRs”), chimeric antigen receptor (“CAR”) T cells, or CAR-NK cells).

In ACT, immune cells are isolated from patients, donors or retrieved from allogeneic immune cell banks. The immune cells are then expanded and modified before being returned and used to treat the patient. We believe our INTASYL compounds are ideally suited to be used in combination with ACT, in order to weaponizemake these immune cells more effective.

Our approach builds on well-established methodologies of ACT and improve cell persistence and cell viabilityinvolves the treatment of immune cells with our INTASYL compoundsex vivo while they are grown in the immunosuppressive tumor micro-environment. We believe this showslab and before administering them to the broad applicabilitypatient. Because our INTASYL compounds do not require a delivery vehicle to penetrate into the cells, we are able to enhance the function of these cells by merely adding our platform technology,INTASYL compounds during the expansion process and that our potential impact in immuno-oncology is not limited to checkpoints and TILs.

We have shown that sd-rxRNAs are rapidly and efficiently taken up by immune effector cells without the use of transfection reagents. Using sd-rxRNA compounds against checkpoint inhibitors, we can suppress their expression levels upneed for genetic engineering. This step uses our INTASYL technology to 95% in immune cells, including T-cells and NK cells. Furthermore, we have demonstrated potent silencing activity as well as a phenotypic effect (enhanced degranulation activity) of NK cells treated with sd-rxRNA compounds targeting checkpoints. By treating NK cells ex-vivo, prior to ACT with sd-rxRNA reducingreduce or eliminate the expression of genes that make the immune cells less effective. For example, with our INTASYL compounds, we can reduce the expression of immunosuppressive proteins such as Cbl-bby the therapeutic immune cells, potentially enabling them to overcome tumor resistance mechanisms and TIGIT,thus improving their ability to destroy the anti-tumor responsetumor cells. In various types of immune cells tested to date, INTASYL treatment results in potent silencing while maintaining close to 100% transfection efficiency and nearly full cell viability. After enhancing these cells can be improved. Ongoing work expands these findingsex vivo, they are returned to include compoundsthe patient for more specific NK targets, including NK specific inhibitory receptors, which could be used alone or in combination.treatment.

Our recently announced collaboration with Glycostem Therapeutics BV, a leading cellular immunotherapy company, will explore potential synergies of our sd-rxRNA in combination with Glyostem’s proprietary NK cell generation technology, oNKord^®, to develop cellular immunotherapies for cancer treatment with enhanced efficacy and/or safety. This collaboration will examine the applicability of our sd-rxRNA technology to be integrated into Glycostem’s processes to produce NK cells with the ultimate goal to further improve Glycostem’s immunotherapies for the treatment of cancer patients.

Through our collaboration with Medigene AG, a German biotechnology company developing highly innovative, complementary treatment platforms to target various types and stages of cancer, we are exploring the potential synergies of our sd-rxRNA technology in combination with Medigene’s recombinant TCRs to develop modified T-cells with enhanced efficacy and/or safety with the ultimate goal to further improve Medigene’s T-cell therapies for the treatment of cancer patients. In the studies completed, Medigene observed the reduction of PD-1 surface levels in T-cells transduced with TCRs and treated with our sd-rxRNA compound, RXI-762. While these studies utilized the Company’s PD-1 targeting sd-rxRNA for proof of concept, Medigene is evaluating additional targets to improve the therapeutic effects of Medigene’s receptor modified T-cells.

Direct Tumor

Our lead product candidate and most advanced program being developed in ACT is PH-762, an INTASYL compound that targets the checkpoint protein PD-1. Checkpoint proteins, such as PD-1, normally act as a type of “off switch” that prevents T cells from attacking certain cells, such as cancer cells, in the body. Our T cells are immune cells that protect the body from cancer cells and are important for the activation of immune cells to fight infection.

Data developed by Phio and with collaborators has shown that PH-762 can silence PD-1 checkpoint expression, thereby removing the “off switch” and resulting in enhanced T cell activation and tumor cytotoxicity. Data released in November 2019 further supported the application of INTASYL technology in immunotherapy of cancer. PH-762 was shown to silence the expression of PD-1 in target human T cells in a potent and durable manner suitable for both ACT and intra-tumoral injection and was also shown to increase function of patient derived TILs for ACT.

We are also developing our INTASYL compound PH-804 for use in ACT. PH-804 targets the suppressive immune receptor TIGIT, which is a checkpoint protein present on T cells and NK cells. To date, we have shown that PH-804 can silence the expression of TIGIT in NK cells and T cells, overcoming their “off switch” and the cells becoming “weaponized” to kill cancer cells.

Our third recently announced product candidate is PH-894, an INTASYL compound that targets BRD4, a regulator of gene expression impacting cell differentiation. In previous studies, PH-894 has been shown to improve T cell function and persistence by differentiating T cells into a more active state (effector memory phenotype). Data, completed in partnership with the Karolinska Institutet, presented in November 2019 demonstrated that the application of PH-894, was shown to silence BRD4 in human T cells during expansion for ACT, which has the potential to confer superior anti-tumor activity. With this data, as well as results with several compounds in both T cells and NK cells, we announced the expansion of our collaboration with the Karolinska Institutet in November 2019 to build upon these findings and develop INTASYL compounds for additional targets and cell types toward clinical application in areas of the Karolinska Institutet’s ongoing clinical research.

In March 2020, we entered into a collaboration and option agreement with Medigene AG and the Helmholtz Zentrum München (“HMGU”). This three-way collaboration expands upon our outstanding research agreement with HMGU to design and develop novel candidates for the use of INTASYL compounds in ACT to enhance immune cell function. Under the agreement, Medigene AG will contribute expertise regarding clinical development, as well as proprietary research material and has the option to an exclusive license for the clinical and/or commercial development of the potential immune cell enhancers.

Tumor Micro-Environment

We are exploringThe TME is the use of our sd-rxRNA directly towardsenvironment that surrounds and feeds a tumor, and/or tumor micro-environment (“including normal cells, blood vessels, immune cells, and the extracellular matrix. The TME”) targets. Impacting is an immunosuppressive microenvironment that inhibits the immune system’s natural ability to recognize and destroy tumor cells and/orby negatively impacting how immunosuppressive cells are being attracted and activated. Reprogramming different components of the TME may overcome resistance to immunotherapy. Such reprogramming of the TME by INTASYL compounds through a direct use of sd-rxRNA, locally administered,local administration into the tumor, could potentially become an important form of adjuvant therapy. We believe that this will also show that our contributions with our sd-rxRNA compounds in immuno-oncology are not limited to use with a cell therapy platform. Additionally, theThe Company has previously shown in a clinical setting that its sd-rxRNAour INTASYL compounds are safe and well-tolerated following local administration.administration, therefore we believe that our INTASYL technology can not only be used with ACT, but can also be used as an independent therapeutic platform.

We have pipeline programs in place for the development of INTASYL compounds for direct administration into the tumor, including the use of PH-762, PH-804 and PH-894 forin situ transfection and activation of immune cells in the TME.

Data presented in January 2020 fromin vivo studies performed by the Company showed that intra-tumoral injection of a mouse version of PH-804 reduced the tumor growth in colorectal carcinoma tumor bearing mice, which was shown to inhibit tumor growth and was correlated with the silencing of TIGIT mRNA expression and in increase in cytotoxic effector T cells in the TME.

Building on the animal data with PH-804, the Company conducted several animal studies with a mouse version of PH-762 and with PH-894 in a validated mouse model of hepatocellular carcinoma. These studies showed that a local administration of the mouse version of PH-762 or PH-894 through intra-tumoral injection resulted in potent anti-tumoral effects. The treated animals showed a complete and statistically significant inhibition of tumor growth, whereas placebo treated animals displayed exponential tumor growth. The preclinical findings demonstrate that direct injection of INTASYL compounds can successfully infiltrate solid tumors and impact the TME by activating the immune response in animal models of solid tumors resulting in reduced tumor growth. This is one of the key challenges for many other immunotherapy platforms to be able to achieve an adequate therapeutic effect in solid tumors.

We are also investigating other relevant compounds for TME targets, such as PH-790, an INTASYL compound targeting PD-L1. PD-L1 is a protein formed by cancer cells that activate the PD-1 “off switch” on immune cells. Our collaborative research agreementapproach with Gustave Roussy,PH-790 is to block the formation of the PD-L1 protein, which may prevent cancer cells from inactivating T cells and attack the cancer, and will be evaluated alongside PH-762.

Impact of COVID-19 on our Business

In December 2019, a leading comprehensive cancer centernovel strain of coronavirus was reported to have surfaced in France, concentrates on determiningWuhan, China and has since spread to other parts of the feasibilityworld, including the United States. In March 2020, the World Health Organization declared the outbreak a pandemic.

Health and Safety

From the first signs of the outbreak, we have taken proactive measures to protect the health and safety of our sd-rxRNA platformemployees. We have implemented safety measures following the guidance provided by the World Health Organization and the Centers for Disease Control such as working remotely for employee personnel who do not need to targetbe physically present in our premises, social distancing protocols, suspending travel, and extensively and frequently disinfecting our workspaces. We expect to continue following these safety measures and may take further actions as we require, as government authorities require or recommend, or as we determine to be in the TMEbest interests of our employees, partners and suppliers.

Operations

The coronavirus pandemic is affecting the United States and global economies and as a result, government authorities have implemented restrictions and limited certain operations, such as limits on the number of people at a gathering, travel restrictions and shelter-in-place orders, to try and slow the spread of coronavirus. Our office and lab space are located in one facility in Marlborough, Massachusetts and on March 23, 2020, Massachusetts ordered most physical business workplaces closed, mandating work-from-home arrangements, where feasible, in response to the coronavirus pandemic. This order excluded businesses that provide certain essential services, which included companies operating in the biotechnology and life sciences industry. As a result, our facility currently remains operational with employee personnel who do not need to be physically present in our premises working remotely. While these measures may be modified or extended, we expect that our activities, including our internal research and development functions, will remain largely operational.

We have experienced limited absenteeism from our employees who are required to be physically present in our premises to perform their job functions as well as from our employees who are working remotely. We do not currently expect that our operations will be significantly impacted by employee absenteeism.

While we believe the impact to our internal operations has been minimal thus far, current and future restrictions may further impact our operations, as well as those of our partners and suppliers and may slow or diminish our research and development activities.

Supply and Services

We have not yet experienced any significant impacts or interruptions to our supply chain or third-party vendors as a result of the coronavirus pandemic. If the measures to contain the outbreak continue or are extended, it may affect our operations and those of third parties on which we rely, including causing disruptions in the supplies we order, outsourced development services for our product candidates and the conduct of current and planned preclinical and clinical studies. For example, certain third-party contract research organizations(“CROs”)that perform preclinical research studies have faced impacts to their operations due to restrictions on the shipment of critical materials that are needed for this type of research. In this instance, we have been able to engage with CROs in areas where there are no restrictions or these restrictions have been lifted. If measures such as these are modified or extended, it could reduce the availability of supplies and services that we purchase, or closures of businesses that we outsource work to and may result in higher costs or delays, which may in turn slow or delay our research and development activities.

We anticipate a decline in the commencement of clinical trials, at least in the short-term, as Institutional Review Boards (the “IRB”) are currently focused on reviewing and approving clinical trial protocols related to COVID-19. Additionally, due to the implementation of restrictive measures such as shelter-in-place orders by government authorities in the United States and global economies to try and contain the spread of coronavirus, we anticipate a significant decline, at least in the short-term, in the enrollment of patients in clinical trials outside of those related to COVID-19. Therefore, our planned preclinical and clinical activities may be temporarily delayed or paused. As we are dependent on a third-party partner for the development of PH-762 in ACT therapy, we may not be successful in negotiating agreements for its development activities due to our partners’ own strategic and corporate objectives to reduce the impact of the coronavirus pandemic on their operations and due to the decrease in clinical trials and enrollments. Therefore, our PH-762 program in ACT may be delayed as a result. The required studies and steps needed to initiate a clinical trial with PH-762 via intra-tumoral injection. Ourdirect injection in the 2021 timeframe are continuing and ongoing, however, the impact to the preclinical and clinical development activities for this program are difficult to assess or predict at this time. The ultimate impact of the coronavirus pandemic is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business and preclinical and clinical trial activities.

Liquidity and Capital Resources

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 extent to which the coronavirus pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus pandemic and the actions to contain the coronavirus or treat its impact, among others. We believe that our current cash on hand, along with the completion of our recentin-vivo study capital raise in April 2020 to strengthen our balance sheet, should be sufficient to fund our operations for at least the next twelve months.

On May 11, 2020, the Company received loan proceeds in the amount of $231,252 from Bank of America, N.A., as lender, pursuant to the PPP under the CARES Act. The PPP loan matures on May 11, 2022 and bears interest at a rate of 1% per year.Monthly principal and interest payments are deferred for six months after the date of disbursement. The loan may be forgiven if used for eligible purposes, including payroll, benefits, rent and utilities. The Company carefully assessed the requirements for application under the PPP and believes that the loan is necessary to support its operations. In connection with Gustave Roussy demonstrated that sd-rxRNA compound delivered via intra-tumoral injection showed silencing of gene expression with our sd-rxRNA compounds with a 80—85%and in addition to the PPP, we have taken other proactive steps to control costs in response to the coronavirus pandemic and these actions include the reduction of the target gene expressionsalaries of our senior management team by 10% through the remainder of 2020, or as market conditions improve. We believe these savings will help mitigate the financial impact of the coronavirus pandemic on our financial condition and reduce the need to furlough or lay-off our employees, which could be counterproductive and result in delays to our research and development activities.

Additionally, while the potential economic impact brought by, and the duration of, the coronavirus pandemic is difficult to assess or predict, the impact of the coronavirus on the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity and our ability to complete our preclinical and planned clinical studies on a mouse modeltimely basis, or at all. The ultimate impact of melanoma.the coronavirus pandemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or the impact on our business, financial condition, or our preclinical and clinical trial activities. There may be developments outside of our control that require us to adjust our operating plans and given the nature of the situation, cannot reasonably estimate the impact of the coronavirus on our financial condition, results of operations or cash flows in the future.

In addition, risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2019 under the heading “Risk Factors,” which was filed with the SEC on March 26, 2020, should be read in conjunction with Part II—Item 1A, “Risk Factors,” included herein for updates to our risk factors regarding risks associated with the COVID-19 pandemic.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance withGAAP. The preparation of these 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. Other than our accounting policy for leases in connection with the adoption of Topic 842 on January 1, 2019, as described below, thereThere have been no significant changes to our critical accounting policies since the beginning of this fiscal year. Our critical accounting policies are described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2018,2019, which we filed with the SEC on March 27, 2019.26, 2020.

Leases

The Company follows the provisions of the FASB ASC 842. 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. At the commencement date of the lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The Company has elected not to recognize on the balance sheet leases with a term less than one year.

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 we 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 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.

Results of Operations

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

Comparison of the Three Months Ended March 31, 20192020 and 20182019

Revenues

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

We believe that our current cash on hand along with the continued listing requirementscompletion of The Nasdaq Capital Market.our recent capital raise in April 2020 to strengthen our balance sheet should be sufficient to fund our operations for at least the next twelve months.However, we have generated significant losses to date, have not generated any product revenue and may not generate product revenue in the foreseeable future, or ever. We expect to incur significant operating losses as we advance our product candidates through drug development and the regulatory process. In the future, we may need to issue equity or incur debt in order to fund our planned expenditures, as well as to make acquisitions and other investments. We cannot assure you that equity or debt financing will be available to us on acceptable terms, or at all. If we cannot, or are limited in the ability to, issue equity, incur debt or enter into strategic collaborations, we may be unable to fund the discovery and development of our product candidates, address gaps in our product offerings or improve our technology.

On November 2, 2018, we received written notice (the “Notification Letter”) fromMoreover, the Nasdaq Stock Market (“Nasdaq”) notifying us that we are notglobal coronavirus pandemic has led to significant uncertainty and increased volatility in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securitiescapital markets.Additionally, while the potential economic impact brought by, and the duration of, the coronavirus pandemic is difficult to maintain a minimum bid priceassess or predict, the impact of $1.00 per share, and Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Basedcoronavirus on the closing bid price of our common stock for the 30 consecutive business days prior to the date of the Notification Letter, we no longer meet the minimum bid price requirement.

The Notification Letter provided an initial 180-day period to regain compliance, which was extended for a second 180-day period on May 14, 2019. As a result of the extension, we have until November 11, 2019 to regain compliance by maintaining a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. In the event that we do not regain compliance by that date, Nasdaqglobal financial markets may commence delisting proceedings and our common stock will trade, if at all, on the over-the counter market, such as the OTC Bulletin Board or OTCQX market, which could adversely impact us by, among other things, reducing the liquidity and market price of our common stock; reducing the number of investors willing to hold or acquire our common stock; limitingreduce our ability to issue additional securities in the future;access capital, which could negatively impact our short-term and limitinglong-term liquidity and our ability to fundcomplete our operations.preclinical and planned clinical studies on a timely basis, or at all. The ultimate impact of coronavirus is highly uncertain and subject to change. We do not yet know the full extent of potential delays or the impact on our business, financial condition, or our preclinical and clinical trial activities. There may be developments outside of our control that require us to adjust our operating plans and given the nature of the situation, cannot reasonably estimate the impact of the coronavirus on our financial condition, results of operations or cash flows in the future.

We anticipate that we will need to raise substantial amounts of money to fund a variety of future activities integral to the development of our business, which may include but is not limited to the following:

None.

None.

Not applicable.

As previously reported, on November 12, 2018, the Company received the Notification Letter from Nasdaq notifying the Company that it was not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market, because the bid price of the Company’s common stock had closed below the minimum $1.00 per share for the 30 consecutive business days prior to the date of the Notification Letter. In accordance with Nasdaq listing rules, the Company was afforded 180 calendar days, or until May 13, 2019, to regain compliance with Nasdaq Listing Rule 5550(a)(2).None.

The Company was unable to regain compliance with the bid price requirement by May 13, 2019. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(ii), on May 14, 2019, Nasdaq granted the Company an additional 180 calendar days, or until November 11, 2019, to regain compliance with the bid price requirement. The Nasdaq determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Capital Market, with the exception of the bid price requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.

To regain compliance, the bid price of the Company’s common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days at any time during the second 180-day compliance period. The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider implementing available options, including a reserve stock split, to regain compliance with the minimum bid price requirement under the Nasdaq listing rules.

EXHIBIT INDEX

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.