This amendment does not modify any disclosures contained in our original Form 10-Q, except for the foregoing Items and Exhibits, and all share and per share amounts for the periods presented to give effect to the 1-for-10 reverse stock split of the Company’s common stock, which was effected on January 8, 2018. This report on Form 10-Q/A is presented as of the filing date of the Original Form 10-Q and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the restatement described below. Accordingly, this Quarterly Report on Form 10-Q/A should be read in conjunction with the Original Form 10-Q, and the Company’s other filings with the Securities and Exchange Commission (“SEC”) subsequent to the filing of the Original Form 10-Q, including any amendments thereto.

The purpose of this amendment is to restate our previously reported results for the quarter ended June 30, 2017 to include the accounting for the tax-related impact of the Company’s acquisition of MirImmune Inc. (“MirImmune”) on January 6, 2017. Our results did not include the contemplation of deferred taxes based on the different book basis and tax basis for the acquisition of MirImmune. The acquisition resulted in an increase of $1.6 million to acquired in-process research and development expense and a corresponding $1.6 million income tax benefit resulting from the reduction in the Company’s valuation allowance due to the deferred tax liability created as a result of the book and tax basis difference, which were not accounted for properly. The condensed consolidated financial statements for the quarter ended June 30, 2017 included in this Form 10-Q/A have been restated to include this adjustment to reflect the tax-related impact of the acquisition of MirImmune. This adjustment does not affect previously reported net loss or operating cash flows, although certain adjustments have been made in our condensed consolidated statement of cash flows to correspond to the income statement adjustment as described in Note 2 of the notes to our condensed consolidated financial statements included in this filing, and has no impact on the Company’s balance sheet. We have made necessary conforming changes in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” resulting from the correction of this error.

RXi PHARMACEUTICALS CORPORATION

FORM10-Q — QUARTER ENDED JUNE 30, 20172018

INDEX

PART I — FINANCIAL INFORMATION

RXi PHARMACEUTICALS CORPORATION

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 PHARMACEUTICALS CORPORATION

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 PHARMACEUTICALS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

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

RXi PHARMACEUTICALS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Operations

RXi Pharmaceuticals Corporation (“RXi,” “we,” “our” or the “Company”) is a clinical-stagebiotechnology company developing innovativethe next generation of immuno-oncology therapeutics based on our proprietaryits self-delivering RNAi( (“sd-rxRNA^®”) platformtherapeutic platform. The Company’s sd-rxRNA compounds do not require a delivery vehicle to penetrate the cell and Samcyprone™ which address significant unmet medical needs.are designed to “silence,” or down-regulate, the expression of a specific gene that may be over-expressed in a disease condition. We havebelieve that this provides RXi with a pipelinedistinct advantage in adoptive cell transfer therapy, the Company’s initial focus and approach to immuno-oncology.

Prior to RXi’s acquisition of discovery,MirImmune Inc. in January 2017, the Company’s principal activities consisted of the preclinical and clinical product candidatesdevelopment of the Company’s sd-rxRNA compounds and topical immunotherapy agent in the areas of dermatology ophthalmology and cell-based cancer immunotherapy.ophthalmology. In January 2018, after a thorough review of its business operations, development programs and financial resources, the Company made a strategic decision to focus solely on immuno-oncology to accelerate growth and support a potential return on investment for its stockholders. The Company’s clinicalbusiness strategy focuses on the development programs includeRXI-109, anof immuno-oncology therapeutics utilizing our proprietary sd-rxRNA technology. The Company intends to seek a partner and/or out-licensee for the treatmenteach of dermalits dermatology and ocular scarring,ophthalmology franchises, including RXI-109 and Samcyprone™, a topical immunomodulator, forto continue their development. The goal of any such transaction would be to allow the treatment of warts. The Company’s pipeline, coupled withCompany to monetize these preclinical and clinical assets to further fund ongoing and future development work in our extensive patent portfolio, provides for product developmentimmuno-oncology programs and business development opportunities across a broad spectrum of therapeutic areas.extend our financial runway.

On January 3, 2018, the Board of Directors of the Company approved a 1-for-10 reverse stock split of the Company’s outstanding common stock, which was effected on January 8, 2018. 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.

2. Liquidity and Going Concern

The Company has limited cash resources and has expended substantial funds on the research and development of the Company’s product candidates and funding general operations. As a result, the Company has reported recurring losses from operations since inception and expects that the Company will continue to have negative cash flows from its operations for the foreseeable future. Historically, the Company’s primary source of financing has been the sale of its securities. The Company’s ability to continue to fund its operations is dependent on the amount of cash on hand and its ability to raise additional capital through, but not limited to, equity or debt offerings or strategic opportunities. This is dependent on a number of factors, including the market demand or liquidity of the Company’s common stock. There can be no assurance that the Company will be successful in accomplishing these plans.

The funds available under the Company’s purchase agreement with Lincoln Park Capital Fund, LLC (“LPC”) should provide the Company with sufficient cash to fund operations for at least the next twelve months. However, certain ownership limitations under the terms of the purchase agreement preclude the Company from relying on the full available funds for going concern purposes. As a result, the Company has concluded that there is substantial doubt regarding its ability to continue as a going concern for at least the next twelve months. If the Company fails to obtain additional funding when needed, the Company would be forced to scale back or terminate its 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 amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

3. Significant Accounting Policies

Restatement of Consolidated Financial Statements

Our condensed consolidated statement of operations and our condensed consolidated statement of cash flows for the quarter ended June 30, 2017 have been restated to include the tax-related impact of the Company’s acquisition of MirImmune Inc. (“MirImmune”) on January 6, 2017. Our results did not include the contemplation of deferred taxes based on the different book basis and tax basis for the acquisition of MirImmune. The acquisition resulted in an increase to acquired in-process research and development expense and a corresponding income tax benefit resulting from the reduction in the Company’s valuation allowance due to the deferred tax liability created as a result of the book and tax basis difference. This adjustment does not affect previously reported net loss or operating cash flows, although certain adjustments have been made in our condensed consolidated statement of cash flows to correspond to the income statement adjustment as noted below. The restatement did not impact our condensed consolidated statement of operations for the three months ended June 30, 2017. The following table summarizes the effects of our restatement on the six months ended June 30, 2017 resulting from the correction of this error.

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. Theyear-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.

Principles of Consolidation

The consolidated financial statements include the accounts of RXi Pharmaceuticals Corporation 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates.

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.

Fair Value of Financial Instruments

The following table provides a reconciliation of cash, cash equivalents, and restricted cashcarrying amounts reported withinin the balance sheet that sumfor cash equivalents, restricted cash, accounts payable and accrued expenses approximate their fair values due to the total of the same such amounts shown in the statement of cash flows (in thousands):their short-term nature.

Research and Development Expenses

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 in the Company’s research and development, external services, other operating costs and overhead related to ourits research and development departments, costs to acquire technology licenses and expenses associated with preclinical activities and ourits clinical trials. 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.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 usthe Company with respect to services provided and/or materials that we haveit has received.

Preclinical and clinical trial expenses relate to estimates of costs incurred and fees connected with clinical trial sites, third-party services,clinical research organizations and other preclinical and clinical related activities and include such items as subject-related fees, at the sites where our clinical trials are being conducted, laboratory costs,work, investigator fees and analysis costs, toxicology studies and investigator fees.costs. 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 havethe Company has adequately provided for preclinical and clinical expenses during the proper period, we maintainthe Company maintains 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.study, timing of certain milestones and other information available to us. Actual results may differ from these estimates and could have a material impact on ourthe Company’s reported results. OurThe Company’s historical accrual estimates have not been materially different from ourits actual costs.

Stock-based Compensation

The Company follows the provisions of the Financial Accounting Standards Board (“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, non-employee directors, andnon-employee directors, non-employees, 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 by

Income Taxes

non-employees, theThe Company recognizes compensation expenseassets or liabilities for the deferred tax consequences of temporary differences between the tax basis of assets or liabilities and their reported amounts in the financial statements in accordance with the requirements of FASB ASC Topic505-50, 740, “Equity Based Payments toNon-EmployeesAccounting for Income Taxes”..”Non-employee option grants that do not vest immediately upon grant are recorded as an expense over On December 22, 2017, the requisite service periodPresident of the underlying stock options. AtUnited States signed into law the end of each financial reporting period priorTax Cuts and Jobs Act tax reform legislation. This legislation makes significant changes in U.S. tax law including a reduction in the corporate tax rates, changes to vesting, the value of these options, as calculated using the Black-Scholes option-pricing model, will bere-measured using the fair valuenet operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. There has been no impact to 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 amountincome tax expense as a result of the future compensation expense will include fair valuere-measurements untilTax Cuts and Jobs Act. The Company is still assessing the stock options are fully vested.impact of the Tax Cuts and Jobs Act and does not expect the other provisions to have a material impact on the Company’s financial statements.

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.”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.

3.4. Recent Accounting Pronouncements

In August 2016,May 2014, the FASB issued Accounting Standards Update (“ASU”)2016-15, 2014-09, “StatementRevenue from Contracts with Customers (Topic 606)”. ASU 2014-09 states that an entity should recognize revenue to depict the transfer of Cash Flowspromised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. On July 9, 2015, the FASB voted to delay the effective date of the new revenue standard by one year but to permit entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 230)606) – ClassificationPrincipal Versus Agent Considerations,” which improves the operability and understandability of Certain Cash Receiptsthe implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and Cash PaymentsLicensing,” which clarifies how certain cash receiptstwo aspects of the guidance on accounting for revenue contracts with customers: identifying performance obligations and payments are presentedthe licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606) – Narrow Scope Improvements and classifiedPractical Expedients,” which addresses collectability assessment, presentation of sales taxes, noncash consideration and completed contracts and contract modifications at transition. The amendments in these ASUs do not change the statement of cash flows.core principles for those areas. This standard will bebecame effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is not permitted. The amendments in ASU2016-15 should be applied using a retrospective transition method to each period presented. The Company adopted this ASU2016-15 in the first quarter of 2017 and2018. Since the implementation ofCompany has no significant revenue, this standardASU had no immediate impact on the Company’sits consolidated financial statements.

In NovemberFebruary 2016, the FASB issued ASU2016-18, 2016-02, “Statement of Cash FlowsLeases (Topic 230) – Restricted Cash,842),”which requires companies that are lessees to recognize a right-of-use asset and lease liability for most leases that do not meet the definition of a short-term lease. For income statement of cash flows explain the change during the periodpurposes, leases will continue to be classified as either operating or financing. Classification will be based on criteria that are largely similar to those applied in the total of cash, cash equivalents,current lease accounting. This standard will result in extensive qualitative 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.quantitative disclosure changes. This standard will be effective for annual reporting periods beginning after December 15, 2017,2018, including interim periods within that reporting period. Early adoption is permitted. The Company adoptedis currently evaluating the impact of this 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 2. The adoption of the guidance did not have an impact on the Company’s balance sheet or statement of operations.its consolidated financial statements.

In January 2017,June 2018, the FASB issued ASU2017-01, 2018-07, “Business CombinationsCompensation – Stock Compensation (Topic 805)718) – Clarifying the Definition of a BusinessImprovements to Nonemployee Share-Based Payment Accounting,” which providesexpands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The amendment specifies that Topic 718 applies to all share-based payment transactions in which a screengrantor acquires goods or services 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 concentratedbe used or consumed 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.grantor’s own operations by issuing share-based payment awards. 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 both the prior and 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, 2017,2018, including interim periods within that reporting period. Early adoption is permitted.permitted, but no earlier than an entity’s adoption date of Topic 606. The Company early adopted this ASU2017-09 in the second quarter ended June 30, 2017 and the implementation of this standard2018. The ASU had no material impact on the Company’s consolidated financial statements.

4. MirImmune Inc. Acquisition

5. Stockholders’ Equity

Lincoln Park Capital Fund, LLC –On January 6,August 8, 2017, the Company entered into a Stock Purchase Agreementpurchase agreement (the “StockLPC Purchase Agreement”) and completed its acquisition of MirImmune. Subjecta registration rights agreement with LPC, pursuant to the terms of the Stock Purchase Agreement, the Company’s wholly owned subsidiary formed for this purpose was merged with and into MirImmune, with MirImmune surviving as a wholly-owned subsidiary of the Company. Pursuant to the Stock Purchase Agreement,which the Company acquired all ofhas the issued and outstandingright to sell to LPC shares of capital stock of MirImmune for an aggregate of 275,036 shares of common stock of the Company and an aggregate of 1,118,224 shares of Series C Convertible Preferred Stock (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 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,subject to certain limitations and fully expensed asin-process research and development.

Additionally, the Company assessed the MirImmune acquisition under ASC Topic 740, “Income Taxes” (“ASC 740”). The acquisition resulted in an income tax benefit of $1,621,000 and a corresponding increase to acquired in-process research and development expense resulting from the reductionconditions set forth in the Company’s valuation allowance due to the deferred tax liability created as a result of the book and tax basis difference.LPC Purchase Agreement.

During the three months ended June 30, 2017,2018, the Company recorded $85,000 in in-process research and development expense relatedsold 150,000 shares of common stock to the fair valueLPC for net proceeds of consideration for the holdback shares released.approximately $359,000. During the six months ended June 30, 2017,2018, the Company recorded $4,696,000 in in-process research and development expense related to the fair value of consideration given, which includes transaction costs, liabilities assumed and cancellation of notes receivable, and the deferred tax impact of the MirImmune acquisition.

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, every ten shares of the Series C Convertible Preferred Stock outstanding were automatically converted into one share of common stock, such that there were no shares of Series C Convertible Preferred Stock issued or outstanding at June 30, 2017.

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 ofsold 420,000 shares of common stock to LPC for net proceeds of approximately $1,291,000.

April 2018 Registered Direct Offering and Private Placement – On April 11, 2018, the Company closed a registered direct offering of 1,510,604 shares of the Company’s common stock at a purchase price of $3.15 per share (the “Milestone SharesOffering”) equalpursuant to the sumSecurities Purchase Agreement dated as of 251,909April 9, 2018, by and among the Company and each purchaser identified on the signature pages thereto. In a concurrent private placement, the Company sold warrants (the “Warrants”) to purchase a total of 1,132,953 shares of common stock plusat a purchase price of $0.125 per underlying warrant share and with an additional numberexercise price of $3.15 per share (the “Private Placement”). In connection with the Offering and Private Placement, the Company issued warrants to purchase a total of 75,530 shares of common stock equal to 13%with an exercise price of the common stock issued upon exercise of any warrants issued under the Company’s underwritten public offering in December 2016, but only$4.0546 per share to the extent that such warrants have beenplacement agent, H.C. Wainwright & Co., LLC (the “Placement Agent Warrants”). Assuming the Warrants and Placement Agent Warrants are not exercised, priornet proceeds to the milestone being achieved or (ii) payCompany from the equivalent value ofOffering and Private Placement were $4,210,000 after deducting placement agent fees and offering expenses paid by 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.Company.

The Company assessed the Milestone SharesWarrants and Placement Agent Warrants under the FASB ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”). The Company and determined that liability accounting would be required for the Milestone Shares underWarrants and Placement Agent Warrants were outside the scope of ASC 480. The Company will record a liability related tonext assessed the Milestone Shares ifWarrants and whenPlacement Agent Warrants under 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.

5. Fair Value Measurements

The Company follows the provisions of FASB ASC Topic 820, “Fair Value Measurements and Disclosures,”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.

The warrant issued to the Company by Thera Neuropharma, Inc. (“Thera”) is categorized as Level 3 hierarchy. The estimated fair value inputs utilizing the asset-based approach for the warrant issued to the Company by Thera include the stage of enterprise development, terms of existing contractual arrangements of the entity’s equity securities, the achievement of milestones and other unobservable inputs.

Financial assets measured at fair value on a recurring basis are summarized as follows, in thousands:

Warrants —The following table summarizes the Company’s outstanding equity-classified warrants at June 30, 2017:2018:

During

6. Net Loss per Share

The following table sets forth the three months ended June 30, 2017, 46potential common shares excluded from the calculation of the Company’s outstanding warrants with an exercise price of $390.00 expired.net loss per share because their inclusion would be anti-dilutive:

No warrants were exercised during the three or six months ended June 30, 2017 or 2016.

7. Stock-based Compensation

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 six months ended June 30, 20172018 and 2016,2017, the following assumptions were used:

The weighted average fair value of options granted during the three months ended June 30, 2018 and 2017 was $4.70. There were no options granted during the three months ended June 30, 2016.$1.72 and $4.70, respectively. The weighted average fair value of options granted during the six months ended June 30, 2018 and 2017 was $2.80 and 2016 was $4.90, and $21.50, respectively.

The risk-free interest rate used for each grant wasis 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.Company’s own implied volatility. The expected life assumption 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 following table summarizes the activity of Company’s stock option plan for the six months ended June 30, 2017:2018:

The Company recorded stock-based compensation expense in the condensed consolidated statement of operations for the three and six months ended June 30, 20172018 and 20162017 as follows, in thousands:

Stock-based compensation expense for the three and six months ended June 30, 2017 includes $22,000, recorded in research and development expense, related to stock option modifications in connection with the retirement of the Company’s former Chief Development Officer.

8. Net Loss per 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. Subsequent Events

On August 8, 2017, the Company entered into a purchase agreement (the “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 shares of the Company’s common stock, subject to certain limitations and conditions set forth therein, over the30-month term of the Purchase Agreement. Pursuant to the Purchase Agreement, the Company issued 45,000 shares of common stock to LPC as a commitment fee.

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

This management’s discussion and analysis of financial condition as of June 30, 20172018 and results of operations for the three and six months ended June 30, 20172018 and 20162017 should be read in conjunction with the financial statements included in our Annual Report onForm 10-K for the year ended December 31, 20162017, which was filed with the SECSecurities and Exchange Commission on March 30, 2017.26, 2018.

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,” “should,” “potential,” “designed to,” “will” 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. 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, 20162017 under the heading “Risk Factors” and in other filings the Company periodically makes with the Securities and Exchange Commission. 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 Pharmaceuticals Corporation (“RXi,” “we,” “our” or the “Company”) is a clinical-stagebiotechnology company developing innovativethe next generation of immuno-oncology therapeutics based on our proprietaryits self-delivering RNAi( (“sd-rxRNA^®”) platformtherapeutic platform. Our sd-rxRNA compounds do not require a delivery vehicle to penetrate the cell and Samcyprone™ which address significant unmet medical needs. We have a pipeline of discovery, preclinical and clinical product candidates in the areas of dermatology, ophthalmology and cell-based cancer immunotherapy. The Company’s clinical development programs includeRXI-109, ansd-rxRNA for the treatment of dermal and ocular scarring, 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.

RNAi therapies are designed to “silence,” or down-regulate, the expression of a specific gene that may be over-expressed in a disease condition. The Company’s first RNAi clinical product candidate,RXI-109, isWe believe that this provides the Company with a self-delivering RNAi compound(sd-rxRNA) that commenced human clinical trialsdistinct advantage in 2012.RXI-109 is designed to reduce the expression of connective tissue growth factoradoptive cell transfer (“CTGFACT”), a critical regulator of several biological pathways involved in fibrosis, including scar formation in the skin and eye.RXI-109 is currently being evaluated in a Phase 2 clinical trial, Study 1402, to prevent or reduce dermal scarring following scar revision surgery of an existing hypertrophic scar and a Phase 1/2 clinical trial, Study 1501, to evaluate the safety and clinical activity ofRXI-109 to prevent the progression of retinal scarring in subjects with wetage-related macular degeneration (“AMD”).

Study 1402, therapy, 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 judgedinitial focus and approach to be better at three months after a treatment regimen with five mg/cm intradermal administration ofRXI-109immuno-oncology. 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, these data extend 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 in the second half of 2017.

Study 1501,Prior to 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 evidenceacquisition 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 and dosing in the third cohort at the highest planned dose level is ongoing. The Company expects to complete subject participation in the study by the end of 2017 and to share top-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. The Company has added a second cohort and is currently enrolling subjects to explore the opportunity to reduce the sensitization dose level, which will be more convenient to physicians and subjects. With this second cohort, enrollment is expected to be completed in the second half of 2017.

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. Early read-outs of the study are anticipated in the second half of 2017.

In addition to our clinical programs, we continue to advance our preclinical and discovery programs with oursd-rxRNA technology. In October 2015, we announced the selection of lead compounds targeting tyrosinase (“TYR”) and collagenase (“MMP1”) as targets for our self-delivering platform because they are relevant for both consumer health and therapeutic development. 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.RXI-231, ansd-rxRNA compound targeting TYR, is in development as a cosmetic ingredient that may improve the appearance of uneven skin tone and pigmentation.RXI-185, ansd-rxRNA compound targeting MMP1, is in development as a cosmetic ingredient that may improve the appearance of wrinkles or skin laxity. Efficacy and toxicity testing in cell culture and skin equivalents forRXI-231 was successfully completed in December 2016. The Company initiated human testing ofRXI-231 in June 2017 with a U.S. clinical testing site. In addition to evaluating safety, the Company will assess the effect ofRXI-231 on the appearance of skin pigmentation in afollow-on study.

On January 6, 2017, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) by and among the Company, RXi Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“RXi Merger Sub”), MirImmune Inc. (“MirImmune”), in January 2017, the stockholdersCompany’s principal activities consisted of MirImmune set forththe preclinical and clinical development of our sd-rxRNA compounds and topical immunotherapy agent in the areas of dermatology and ophthalmology. In January 2018, after a thorough review of our business operations, development programs and financial resources, the Company made a strategic decision to focus solely on immuno-oncology to accelerate growth and support a potential return on investment for its stockholders. The Company’s business strategy focuses on the signature pages thereto (eachdevelopment of immuno-oncology therapeutics utilizing our proprietary sd-rxRNA technology. The Company intends to seek a “Seller”partner and/or out-licensee for both its dermatology and collectively, the “Sellers”)ophthalmology franchises, including RXI-109 and Samcyprone™, and Alexey Wolfson, Ph.D., in his capacity as the Sellers’ Representative. Pursuant to the Stock Purchase Agreement,continue their development. The goal of any such transaction would be to allow the Company acquiredto monetize these preclinical and clinical assets to further fund ongoing and future development work in our immuno-oncology programs and extend our financial runway.

In ACT, immune cells are isolated from specific patients or retrieved from allogeneic immune cell banks, which are banks of cells donated from healthy volunteers. The immune cells are then expanded and modified before being returned and used to treat the Sellers allsame patient. We believe our sd-rxRNA compounds are ideally suited to be used in combination with ACT, in order to make these immune cells more effective. Our approach involves the treatment of the issuedimmune cells with our sd-rxRNA compounds during the expansion and outstanding shares of capital stock of MirImmune for an aggregate of 275,036 shares of common stock ofmodification phase. Because our sd-rxRNA compounds do not require a delivery vehicle to penetrate into the Company and an aggregate of 1,118,224 shares of Series C Convertible Preferred Stock (the “Series C Convertible Preferred Stock”). On June 9, 2017, withcells, we are able to enhance these cells (for example by inhibiting the approval of the Company’s stockholders in accordance with the stockholder approval requirements of Nasdaq Marketplace Rule 5635, every ten shares of the Company’s Series C Convertible Preferred Stock outstanding were automatically converted into one share of common stock, such that no shares of Series C Convertible Preferred Stock remained issued or outstanding.

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”. As a result of the Merger, MirImmune, LLC remains and will operate as a wholly-owned subsidiary of the Company.

Building on the work completed by MirImmune prior to its acquisition by the Company, our cell-based cancer immunotherapy program with sd-rxRNA includes lead compounds for a numberexpression of immune checkpoint targets that provide long lasting immune checkpoint silencing, individually and in combination, in adoptively transferred cells. An improved efficacy upongenes) by merely adding our sd-rxRNA compounds during the silencing of checkpoints has been demonstrated inexpansion process. After enhancing these cells ex-vivo, they are returned to the patient for treatment. In various types of adoptively transferredimmune cells relevanttested to date, the sd-rxRNA treatment results in cancer immunotherapy, such as CAR T-cellspotent silencing while maintaining close to 100% transfection efficiency and tumor infiltrating lymphocytes (TILs). The Company’s ongoingnearly full cell viability.

We believe that our sd-rxRNA therapeutics are uniquely positioned in the immuno-oncology field for the following reasons:

We currently have discovery and preclinical programs include, butto develop our sd-rxRNA targeting PD-1, TIGIT and other undisclosed checkpoints in ACT for the treatment of solid tumors. We are not limitedalso developing sd-rxRNA against multiple undisclosed targets that influence cell differentiation and metabolism for use in ACT to the evaluation oftreat hematologic cancers and solid tumors.

Our most advanced immuno-oncology programs are RXI-762 and RXI-804, sd-rxRNA compounds that are designed to silence targets related to cytokine release syndrome. The Company has also initiated in vivo evaluations of multiple checkpoint inhibiting sd-rxRNA compounds co-transfected in CAR T-cells in mouse models for solid tumors, with data from this study expected in the second half of 2017.

Additionally, the Company recently selected two sd-rxRNA compounds from its immunotherapy pipeline for preclinical development. For oncology treatments based on adoptive cell transfer (ACT), compounds RXI-762 and RXI-804 suppress the expression of immune checkpoint proteins PD-1 and TIGIT, respectively, which, canwhen used in ACT, are expected to result in an improved efficacy to the targeted tumors. This decision triggeredIn August 2017, the Company announced the selection of a manufacturing facility to initiate production of cGMP grade material, initially for the first of these two sd-rxRNA compounds (RXI-762). This also supports moving RXI-762 intofor preclinical development in ACT for solid tumors. We expect to enter clinical development as early as 2018with RXI-762 as part of an ACT therapy.therapy for solid tumors within the next 12 – 18 months.

On August 8, 2017,

We are advancing these compounds and our other discovery and preclinical ACT compounds towards clinical development, both independently and with our strategic collaborations. We plan to focus our internal resources on therapeutic areas where research and development is appropriate for the size and financial resources of the Company entered into a purchase agreement (the “Purchase Agreement”)and to seek partners in therapeutic areas with Lincoln Park Capital Fund, LLC (“LPC”), pursuantthe requisite expertise and resources to whichadvance our product and research candidates through clinical development. To that end, we have established research collaborations with the Center for Cancer Immune Therapy at Herlev Hospital (a leading European cancer center); Gustave Roussy (a leading comprehensive cancer center in Europe); Medigene AG (a German biotechnology company); PCI Biotech (a private biotechnology firm); the University of Minnesota (a highly ranked public research university) and Iovance Biotherapeutics, Inc. (a biotechnology company developing novel cancer immunotherapies).

One aspect of our ongoing strategy is to build upon these current collaborations to add additional partnerships to our immuno-oncology pipeline. If results from these collaborations and others are positive, the synergies between the Company’s technology and its partner’s technology and expertise may provide multiple avenues for human clinical testing of the Company’s sd-rxRNA compounds in ACT within the next 12 – 18 months.

While the Company announced in January 2018 that its current business strategy is to focus solely on its immuno-oncology pipeline development, the Company has completed its clinical trials in dermatology and ophthalmology with RXI-109, our first sd-rxRNA clinical candidate, and Samcyprone™. In parallel, the rightCompany intends to sellpartner and/or out-license each of its dermatology and ophthalmology franchises, including RXI-109 and Samcyprone™, to LPC up to $15,000,000 in sharescontinue their development. The status of the Company’s common stock, subject to certain limitations and conditions set forth therein, over the30-month term of the Purchase Agreement.

Since inception, we have incurred significant losses. Substantially all of our losses to date have resulted from research and development expenses in connectionclinical trials with our clinical and research programs and from general and administrative costs. At June 30, 2017, we had an accumulated deficit of $74.1 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.is as follows:

On January 3, 2018, the Board of Directors of the Company approved a 1-for-10 reverse stock split of the Company’s outstanding common stock, which was effected on January 8, 2018. 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.capital in the financial statements.

On April 11, 2018, the Company closed a registered direct offering of 1,510,604 shares of the Company’s common stock at a purchase price of $3.15 per share (the “Offering”) pursuant to the Securities Purchase Agreement dated as of April 9, 2018, by and among the Company and each purchaser identified on the signature pages thereto. In a concurrent private placement, the Company sold warrants (the “Warrants”) to purchase a total of 1,132,953 shares of common stock at a purchase price of $0.125 per underlying warrant share and with an exercise price of $3.15 per share (the “Private Placement”). In connection with the Offering and Private Placement, the Company issued warrants to purchase a total of 75,530 shares of common stock with an exercise price of $4.0546 per share to the placement agent, H.C. Wainwright & Co., LLC (the “Placement Agent Warrants”). Assuming the Warrants and Placement Agent Warrants are not exercised, net proceeds to the Company from the Offering and Private Placement were $4,210,000 after deducting placement agent fees and offering expenses paid by the Company.

Critical Accounting Policies and Estimates

There 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 Form10-K for the year ended December 31, 2016,2017, which we filed with the SEC on March 30, 2017.