Stock-based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock-based Compensation

10. Stock-based Compensation

Stock Plans

The Company’s approved equity plans include the Phio Pharmaceuticals Corp. 2020 Long Term Incentive Plan (the “2020 Plan”) and the Phio Pharmaceuticals Corp. 2012 Long Term Incentive Plan (the “2012 Plan”). These plans are administered by our Board and provide for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, RSU awards, performance stock awards, and performance cash awards. Upon adoption of the 2020 Plan, shares that remained available for grant under the 2012 Plan and shares that were subject to outstanding awards under the 2012 Plan were included in the authorized shares available for grant under the 2020 Plan. Further, upon adoption of the 2020 Plan, the Company no longer grants new equity awards under the 2012 Plan. In July 2023, the Company’s stockholders approved an amendment to the 2020 Plan to increase the number of shares authorized for issuance thereunder to 231,140 shares of common stock.

As of December 31, 2023, there were 10,084 shares subject to outstanding stock options, 49,683 shares subject to unvested RSUs and 133,574 shares available for future grants.

Restricted Stock Units

RSUs are issued under the Company’s 2020 Plan or as inducement grants issued outside of the 2020 Plan to new employees. RSUs are generally subject to graded vesting and the satisfaction of certain service requirements. RSUs granted by the Company to employees generally vest annually over 3 years after the grant date and over 1 year after the grant date for directors of the Board of Directors. Upon vesting, each outstanding RSU will be settled 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 Company does not expect to repurchase shares to satisfy RSU vests. 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 year ended December 31, 2023:

	Number of Shares			Weighted- Average Grant Date Fair Value Per Share
Unvested units at December 31, 2022		47,335		$	15.03
Granted		43,500			5.24
Vested		(23,414	)		14.99
Forfeited		(17,738	)		9.88
Unvested units at December 31, 2023		49,683		$	8.32

The weighted-average fair value of RSUs granted during the years ended December 31, 2023 and 2022 was $5.24 and $10.08, respectively.

Stock-based compensation expense related to RSUs was $298,000 and $401,000 for the years ended December 31, 2023 and 2022, respectively.

The aggregate fair value of awards that vested during the years ended December 31, 2023 and 2022 was $105,000 and $138,000, which represents the market value of the Company’s common stock on the date that the RSUs vested.

As of December 31, 2023, the compensation expense for all unvested RSUs in the amount of approximately $212,000 will be recognized in the Company’s results of operations over a weighted average period of 1.30 years.

Stock Options

Stock options are available for issuance under the 2020 Plan or as inducement grants issued outside of the 2020 Plan to new employees. Stock options are generally subject to graded vesting and the satisfaction of service requirements. Stock options granted by the Company to employees generally vest annually over 4 years after the grant date and generally vest over 1 year after the grant date for members of the Board of Directors and expire within ten years of grant. Upon the exercise of a stock option, the Company issues new shares and delivers them to the recipient. The Company does not expect to repurchase shares to satisfy stock option exercises.

The Company uses the Black-Scholes option-pricing model to determine the fair value of all its option grants. The risk-free interest rate used for each grant was 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. As the Company has limited stock option exercise information, the expected life assumption used 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 Company did not grant stock options during the year ended December 31, 2022. For valuing options granted during the year ended December 31, 2023, the following assumptions were used:

	December 31,
	2023
Risk-free interest rate		4.72%
Expected volatility		113.74%
Expected lives (in years)		5.25
Expected dividend yield		0%

The weighted average grant date fair value of options granted during the year ended December 31, 2023 was $1.14 per share.

The following table summarizes the Company’s stock option activity for the year ended December 31, 2023:

	Total Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance at December 31, 2022		177		$	35,231.40
Granted		10,000			1.37
Exercised		–			–
Forfeited		–			–
Expired		(93	)		52,577.53
Balance at December 31, 2023		10,084		$	134.86		9.74 years	$	–
Exercisable at December 31, 2023		84		$	16,026.76		2.78 years	$	–

Stock-based compensation expense related to stock options for the years ended December 31, 2023 and 2022 was $5,000 and $13,000, respectively.

As of December 31, 2023, the compensation expense for all unvested stock options in the amount of $6,000 will be recognized in the Company’s results of operations over a weighted average period of 0.25 years.

There is no income tax benefit as the Company is currently operating at a loss and an actual income tax benefit may not be realized.

Employee Stock Purchase Plan

The Company has 684 shares authorized for issuance under the 2013 Employee Stock Purchase Plan (“ESPP”). The ESPP allows employees to contribute a percentage of their cash earnings, subject to certain maximum amounts, to be used to purchase shares of the Company’s common stock on each of two semi-annual purchase dates at a purchase price equal to 90% of the market value per share on either (a) the date of grant of a purchase right under the ESPP or (b) the date on which such purchase right is deemed exercised, whichever is lower. As of December 31, 2023, 661 shares were reserved for future issuance under the ESPP. There was no activity under the ESPP for the years ended December 31, 2023 and 2022. 

Compensation Expense Related to Equity Awards

The following table sets forth total stock-based compensation expense for the years ended December 31, 2023 and 2022, in thousands:

	December 31,
	2023		2022
Research and development	$	132	$	154
General and administrative		171		260
Total stock-based compensation	$	303	$	414