Phio Pharmaceuticals Corp

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Phio Pharmaceuticals, Corp.

Marlborough, Massachusetts

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Phio Pharmaceuticals, Corp. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, preferred stock and stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended**,** in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for Certain Warrants Issued in 2023

As described in Note 9 to the consolidated financial statements, the Company completed each of two registered direct offerings of common stock and concurrent private placement offerings of warrants to purchase common stock in April and June 2023 (the “April 2023 Financing” and “June 2023 Financing”, respectively). In December 2023, the Company issued additional warrants to purchase common stock to certain holders of existing warrants in connection with an Inducement Letter Agreement (the “December 2023 Financing”). The Company assessed the warrants issued in the April 2023 Financing, June 2023 Financing and December 2023 Financing to determine whether the warrants should be accounted for as either liabilities or equity instruments depending on the specific terms of the agreements. The Company determined that the warrants issued in the April 2023 Financing, June 2023 Financing and December 2023 Financing were classified within stockholders’ equity.

We identified the assessment of the accounting for certain warrants to purchase common stock issued in connection with the April 2023 Financing, June 2023 Financing and December 2023 Financing as a critical audit matter. Determining whether the certain warrants issued should be accounted for as either liabilities or equity instruments requires significant judgment due to the application of complex technical accounting guidance. Auditing this element required especially challenging and complex auditor judgement due to the nature and extent of the audit effort required to address the matter, including the need for specialized knowledge and skill in assessing elements of the agreements.

The primary procedures we performed to address this critical audit matter included:

/s/BDO USA, P.C.

We have served as the Company's auditor since 2011.

Boston, Massachusetts

April 1, 2024