Phio Pharmaceuticals(PHIO) - 2022 Q3 - Quarterly Report

Part I — FINANCIAL INFORMATION Financial Statements Phio Pharmaceuticals Corp.'s unaudited condensed consolidated financial statements as of September 30, 2022, show decreased cash and total assets, continued net losses of $8.7 million, and stable operating cash usage compared to 2021 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash | $14,484 | $24,057 | | Total current assets | $15,377 | $24,727 | | Total assets | $15,791 | $25,170 | | Total current liabilities | $2,194 | $3,068 | | Total liabilities | $2,264 | $3,238 | | Total stockholders' equity | $13,527 | $21,932 | Condensed Consolidated Statements of Operations Operating Results for the Three Months Ended September 30 (in thousands, except per share data) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Research and development | $2,508 | $2,673 | | General and administrative | $1,063 | $1,066 | | Total operating expenses | $3,571 | $3,739 | | Operating loss | $(3,571) | $(3,739) | | Net loss | $(3,576) | $(3,742) | | Net loss per common share (Basic & Diluted) | $(0.26) | $(0.28) | Operating Results for the Nine Months Ended September 30 (in thousands, except per share data) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Research and development | $5,398 | $6,661 | | General and administrative | $3,334 | $3,400 | | Total operating expenses | $8,732 | $10,061 | | Operating loss | $(8,732) | $(10,061) | | Net loss | $(8,749) | $(9,836) | | Net loss per common share (Basic & Diluted) | $(0.64) | $(0.78) | Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity decreased from $21.9 million at December 31, 2021, to $13.5 million at September 30, 2022, primarily driven by the net loss of $8.7 million for the nine-month period[15] - In contrast, during the nine months ended September 30, 2021, stockholders' equity increased from $13.0 million to $25.2 million, largely due to $19.6 million in net proceeds from a private placement and a registered direct offering, and $2.1 million from warrant exercises[16] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(9,424) | $(9,387) | | Net cash used in investing activities | $(121) | $(51) | | Net cash (used in) provided by financing activities | $(28) | $21,723 | | Net (decrease) increase in cash and restricted cash | $(9,573) | $12,285 | | Cash and restricted cash at end of period | $14,534 | $26,579 | Notes to Condensed Consolidated Financial Statements - The company believes its existing cash is sufficient to fund operations for at least the next 12 months from the date of the financial statements' release[23] - In February 2021, the Small Business Administration approved the full forgiveness of the company's Paycheck Protection Program (PPP) loan, resulting in a recognized gain on debt extinguishment of $233,000 for the nine months ended September 30, 2021[39] - In March 2021, the company entered into a clinical co-development collaboration with AgonOx, Inc., committing to future payments of up to $4.0 million to reimburse AgonOx for clinical trial expenses, with no expenses incurred under this agreement as of September 30, 2022[56] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on developing immuno-oncology therapeutics, with lead candidate PH-762 in Phase 1b trials and PH-894 IND-enabling studies nearing completion, noting decreased operating expenses and sufficient cash for the next 12 months Overview - Phio is developing therapeutics using its INTASYL™ self-delivering RNAi technology to target tumor and immune cells, aiming to strengthen the immune system and weaken tumor defenses[61] - Lead product candidate PH-762 is in a Phase 1b clinical trial for advanced melanoma, with top-line data from the first group of subjects anticipated in Q1 2023[65][67] - Second product candidate PH-894 is designed to silence the epigenetic protein BRD4, with IND-enabling studies expected to be finalized in Q4 2022[68][69] - The company is collaborating with AgonOx, Inc. to develop T cell-based therapies using PH-762 and AgonOx's DP TIL technology, with a clinical trial expected to start in Q4 2022[74] Results of Operations Operating Expenses Comparison (in thousands) | Expense Category | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $2,508 | $2,673 | $5,398 | $6,661 | | General and administrative | $1,063 | $1,066 | $3,334 | $3,400 | | Total operating expenses | $3,571 | $3,739 | $8,732 | $10,061 | - R&D expenses for the nine months ended Sep 30, 2022 decreased by 19% YoY, primarily due to lower manufacturing and preclinical study costs for PH-762 in the prior year, partially offset by increased costs for PH-894 preclinical studies in the current year[87] - General and administrative expenses remained relatively flat for both the three and nine-month periods compared to the prior year[89][90] Liquidity and Capital Resources - As of September 30, 2022, the company had cash of $14.5 million, compared to $24.1 million at December 31, 2021[92] - Management believes that existing cash is sufficient to fund operations for at least the next 12 months[93] - Net cash used in operating activities was $9.4 million for the nine months ended September 30, 2022, consistent with the prior year period[97][98] - Net cash from financing activities decreased significantly from $21.7 million provided in the first nine months of 2021 (from capital raising and warrant exercises) to $28,000 used in the same period of 2022[100] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Phio Pharmaceuticals is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Phio Pharmaceuticals is not required to provide quantitative and qualitative disclosures about market risk[101] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by the report[103] - There were no changes in internal control over financial reporting during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[104] Part II — OTHER INFORMATION Legal Proceedings The company is not currently a party to any actual or threatened material legal proceedings - To the company's knowledge, it is not currently a party to any actual or threatened material legal proceedings[107] Risk Factors The company faces a new risk factor regarding non-compliance with Nasdaq's minimum bid price requirement, with an extension granted until February 20, 2023, to regain compliance and avoid delisting - On February 25, 2022, the company received a notice from Nasdaq for non-compliance with the minimum bid price requirement of $1.00 per share[110] - On August 25, 2022, Nasdaq granted an additional 180-day period, until February 20, 2023, for the company to regain compliance[111] - Failure to regain compliance could lead to delisting, which would adversely impact the liquidity and market price of the company's common stock and its ability to raise future financing[112] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no previously undisclosed sales or issuances of unregistered equity securities - No previously undisclosed sales or issuances of unregistered securities occurred[113] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[114] Mine Safety Disclosures This item is not applicable to the company - Not applicable[115] Other Information The company reports no other information - None[116] Exhibits This section lists exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and Inline XBRL documents - The report includes an index of exhibits filed, such as Sarbanes-Oxley Act certifications (31.1, 32.1) and Inline XBRL data files[119]