Item 1.01 Entry into a Material Definitive Agreement
On August 7, 2019, Phio Pharmaceuticals Corp. (“we”
or the “Company”) entered into a purchase agreement (the “Purchase Agreement”) and a registration rights
agreement (the “Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to
which the Company has the right to sell to LPC up to $10,000,000 in shares of the Company’s common stock, $0.0001 par value
per share (the “Common Stock”), subject to certain limitations and conditions set forth in the Purchase Agreement.
Under the Purchase Agreement, the Company has the right, from
time to time at its sole discretion and subject to certain conditions, to direct LPC to purchase up to 200,000 shares of Common
Stock on any business day (or $50,000 worth of common stock, whichever is greater) (the “Regular Purchase Amount”).
The Company may increase the amount which it directs LPC to purchase, up to a maximum of 500,000 shares of Common Stock, if on
the date of the purchase the closing sale price of the Common Stock is not below certain threshold prices, as set forth in the
Purchase Agreement, subject in each case to $1,000,000 in total purchase proceeds per purchase date. The purchase price of shares
of Common Stock will be based on the market prices of the Common Stock at the time of such purchases. Such sales of Common Stock
by the Company, if any, may occur from time to time, at the Company’s option, over the 30-month period commencing on the
date that a registration statement, which the Company agreed to file with the Securities and Exchange Commission (the “SEC”)
pursuant to the Registration Rights Agreement, is declared effective by the SEC and a final prospectus in connection therewith
is filed and the other terms and conditions of the Purchase Agreement are satisfied.
In addition to regular purchases, the Company may also direct
LPC to purchase additional amounts as accelerated purchases or as additional purchases if the Company has utilized the Regular
Purchase Amount in full and if the closing sale price of the Common Stock exceeds certain threshold prices, as set forth in the
Purchase Agreement. In all instances, the Company may not sell shares of its Common Stock to LPC under the Purchase Agreement if
it would result in LPC beneficially owning more than 9.99% of the Common Stock.
The Purchase Agreement also limits the Company’s issuance
of shares of Common Stock to Lincoln Park thereunder to 5,015,730 shares of Common Stock, representing 19.99% of the shares of
Common Stock outstanding on the date of the Purchase Agreement unless (a) stockholder approval is obtained to issue more than such
amount or (b) the average price of all applicable sales of our common stock to Lincoln Park under the Purchase Agreement equals
or exceeds the lower of (i) the closing price of our common stock on the Nasdaq Capital Market immediately preceding August 7,
2019 or (ii) the average of the closing price of our common stock on the Nasdaq Capital Market for the five Business Days immediately
preceding August 7, 2019.
LPC represented to the Company, among other things, that it
was an “accredited investor” (as such term is defined in Rule 501(a)(3) of Regulation D under the Securities Act of
1933, as amended (the “Act”)), and the Company sold the securities in reliance upon private placement exemptions from
the registration requirements under Section 4(a)(2) of the Act, as well as Rule 506 under Regulation D under the Act. The Company
has agreed with Lincoln Park that it will not enter into any “variable rate” transactions with any third party for
a period defined in the Purchase Agreement.
The Purchase Agreement and the Registration Rights Agreement
contain customary representations, warranties, agreements and conditions to completing future sale transactions, indemnification
rights and obligations of the parties. The Company has the right to terminate the Purchase Agreement at any time, at no cost or
penalty. During any “event of default” under the Purchase Agreement, all of which are outside of LPC’s control,
LPC does not have the right to terminate the Purchase Agreement; however, the Company may not initiate any regular or other purchase
of shares by LPC, until such event of default is cured.
Actual sales of shares of Common Stock to LPC under the Purchase
Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market
conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding for
the Company and its operations. As a commitment fee for entering into the Purchase Agreement, the Company has agreed to issue to
LPC 500,000 shares of Common Stock (the “Commitment Shares”). The Company will not receive any cash proceeds from the
issuance of the Commitment Shares.
The net proceeds under the Purchase Agreement to the Company
will depend on the frequency and prices at which the Company sells shares of its stock to LPC. The Company expects that any proceeds
received by the Company from such sales to LPC will be used for working capital and general corporate purposes.
This current report on Form 8-K shall not constitute an offer
to sell or a solicitation of an offer to buy any shares of Common Stock, nor shall there be any sale of shares of Common Stock
in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state or other jurisdiction.
The foregoing descriptions of the Purchase Agreement and the
Registration Rights Agreement are qualified in their entirety by reference to the full text of such agreements, copies of which
are attached hereto as Exhibit 10.1 and 10.2, respectively, and each of which is incorporated herein in its entirety by reference.
The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as
of specific dates, were solely for the benefit of the parties to such agreements, and may be subject to limitations agreed upon
by the contracting parties.