Phio Pharmaceuticals closes registered direct offering with warrants, nets about $1.6 million

Phio Pharmaceuticals Corp. sold 610,000 shares of common stock at $3.00 per share in a registered direct offering, and issued warrants for up to 1,220,000 more shares in a concurrent private placement. The company said in a Form 8-K filed January 17, 2025 that it signed the securities purchase agreement on January 16, 2025 and that both transactions closed on January 17, 2025. A press release issued January 16, 2025 gave the offering size as $1.83 million. The 8-K says net proceeds are approximately $1.6 million after fees and estimated offering expenses.

The placement agent and its fees

H.C. Wainwright & Co., LLC was the placement agent. Under an engagement letter dated June 27, 2024, as amended, Phio agreed to pay it a cash fee of 7.5% of the gross proceeds of the registered direct offering. The 8-K also lists a management fee of 1.0% of gross proceeds, $20,000 for non-accountable expenses and $10,000 for clearing fees. Phio agreed to issue the agent warrants for up to 45,750 shares, with an exercise price of $3.75, which is 125% of the offering price. Hogan Lovells US LLP gave the legal opinion on the validity of the shares.

The warrants

Each share sold in the offering came with two unregistered Series I Warrants. Each warrant is exercisable for one share at $3.00, is immediately exercisable and expires twenty-four months after issuance. The warrants were sold at $3.00 each, a price the 8-K says is included in the offering price per share. That means the warrants could bring in more money later, and they could also add up to 1,220,000 shares to the count, in addition to the shares sold in the offering.

Phio agreed to register the warrant shares for resale within 30 calendar days after the agreement date, and to use commercially reasonable efforts to have that registration declared effective within 60 calendar days. The 8-K does not say whether the warrant holders will exercise, and the offering price sits at the warrant exercise price, so exercise depends on the share price staying at or above $3.00.

How the offering was registered

The registered direct offering is a sale of shares registered with the SEC directly to selected investors, here institutional and accredited investors. The 610,000 shares were sold under a prospectus supplement dated January 16, 2025, drawn from a shelf registration statement on Form S-3 that Phio filed on May 20, 2024 and that was declared effective on July 1, 2024. Phio says it will use the net proceeds for working capital and general corporate purposes.

Limits on future financing

The agreement bars Phio from entering into or announcing new issuances of common stock or convertible securities from January 16, 2025 through February 1, 2025, subject to exceptions. It also bars Variable Rate Transactions, as the agreement defines them, until January 17, 2026. Phio may set up and use an at-the-market facility with the placement agent starting February 2, 2025.

The business behind the raise

In its annual report filed April 1, 2024, Phio describes itself as a clinical-stage biotechnology company built on its INTASYL self-delivering RNAi platform. Its lead clinical program is PH-762, a compound that silences PD-1. The annual report says the company ran a cost rationalization program in 2023, cut headcount by approximately 36%, and decided not to renew its Marlborough, Massachusetts lease. From April 2024 it expected to run as a remote business with a small laboratory in Worcester, Massachusetts.

Robert Bitterman, president and chief executive officer, signed the 8-K on January 17, 2025.

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