xcur-20240630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________

FORM 10-Q

______________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39011

______________________________________

EXICURE, INC.

(Exact name of registrant as specified in its charter)

_____________________________________


Delaware						81-5333008
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

2430 N. Halsted St.

Chicago, IL 60614

(Address of principal executive offices)

Registrant’s telephone number, including area code (847) 673-1700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

XCUR

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 6, 2024, there were 8,651,204 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

EXICURE, INC.

QUARTERLY REPORT ON FORM 10-Q

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PART I - FINANCIAL INFORMATION						5
Item 1. Financial Statements						5
Unaudited Condensed Consolidated Balance Sheets						5
Unaudited Condensed Consolidated Statements of Operations						6

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity						7
Unaudited Condensed Consolidated Statements of Cash Flows						9
Notes to Unaudited Condensed Consolidated Financial Statements						11
Item 2. Management's Discussion and Analysis and Results of Operations						25
Item 3. Quantitative and Qualitative Disclosures About Market Risk						32
Item 4. Controls and Procedures						32

PART II - OTHER INFORMATION						34
Item 1. Legal Proceedings						34
Item 1A. Risk Factors						36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						45
Item 3. Defaults Upon Senior Securities						45
Item 4. Mine Safety Disclosures						45
Item 5. Other Information						45
Item 6. Exhibits						46

Signatures						48

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains express or implied “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “will,” “would,” “should,” “expect,” “plan,”, “anticipate,” “believe,” “estimate,” “intend,” “predict,” “seek,” “contemplate,” “project,” “continue,” “potential,” “ongoing” or the negative of these terms or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to such statements.

Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, such expectations or any of the forward-looking statements may prove to be incorrect and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including, but not limited to, the risk factors set forth in Part II, Item 1A “Risk Factors” below and for the reasons described elsewhere in this Quarterly Report on Form 10-Q. All forward-looking statements and reasons why results may differ included in this report are made as of the date hereof and we do not intend to update any forward-looking statements except as required by law. These forward-looking statements include, but are not limited to, statements concerning the following:

•substantial uncertainties regarding our exploration of strategic alternatives to maximize stockholder value, including whether we are able to identify potential partners and consummate transactions, in a timely manner or at all, whether we would be able to obtain sufficient funding to complete this process and whether any such transactions would generate value for stockholders;

•our ability to generate any meaningful value from sales, out-licensing or other transactions involving our historical assets;

•our ability to raise the substantial additional capital that is needed in the very near term to fund our operations and our pursuit of strategic alternatives, particularly given our current lack of a significant, ongoing revenue source or committed financing and the substantial doubt about our ability to continue as a going concern;

•our ability to remain listed on The Nasdaq Capital Market (“Nasdaq”), including the ability to maintain minimum stockholders’ equity and stock price, and comply with applicable governance requirements, among other requirements, for continued listing on Nasdaq;

•any strategic plan or alternative that we may identify and pursue may involve unexpected costs, liabilities and/or delays and may not deliver anticipated benefits to our stockholders;

•our estimates of expenses, use of cash, timing of future cash needs, ongoing losses and capital requirements may prove to be inaccurate;

•uncertainty about reaction from investors and potential business partners to our recent changes of control and board and management composition and the future direction of the Company, and the ability of our controlling stockholders and new board members and management to earn the confidence of investors and potential partners despite limited experience with U.S. public companies, and how these factors may impact our ability to obtain funding and execute any strategic alternatives that we may identify;

•potential additional turnover of senior management, and any inability to attract and retain qualified management and other key personnel, creates significant continuity risk and could impair our ability to raise capital and execute on our exploration of strategic alternatives;

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•our ability to comply with all applicable laws, which may be particularly challenging given the recent turnover in our board and management, significant reductions in force, limited resources and the potential to enter into new business areas with which we have no past experience;

•our ability to obtain and maintain intellectual property protection for our technologies and our ability to operate our business without infringing the intellectual property rights of others;

•the impact of macroeconomic conditions, including global inflation, actions taken by central banks to counter inflation, capital market and bank instability, exchange rate fluctuations, supply chain disruptions and energy and fuel prices;

•the impact of government laws and regulations; and

•other factors that may impact our financial results and condition and our ongoing strategic efforts.

These statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in Part II, Item 1A of this Quarterly Report on Form 10-Q under the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

Any forward-looking statement in this Quarterly Report on Form 10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our business, results of operations, industry and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed with the SEC as exhibits thereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements. Except as required by law, we assume no, and specifically decline any, obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains or may contain estimates, projections and other information concerning our industry, our business and the markets for certain therapeutics, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, the “Company,” “Exicure,” “we,” “us” and “our” refers to Exicure, Inc., a Delaware corporation, and, where appropriate, our subsidiary.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	June 30, 2024		December 31, 2023

ASSETS
Current assets:
Cash and cash equivalents	$	528	$	816
Other receivable	559		15
Prepaid expenses and other current assets	992		1,193
Total current assets	2,079		2,024
Property and equipment, net	40		54

Right-of-use asset	6,126		6,517
Other noncurrent assets	2,443		2,985
Total assets	$	10,688	$	11,580
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable	1,585		1,631
Accrued expenses and other current liabilities	846		879
Short-term debt	1,000		—
Total current liabilities	3,431		2,510

Lease liability, noncurrent	5,644		6,039

Total liabilities	9,075		8,549

Commitments and Contingencies (Note 12)

Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 10,000,000 shares authorized, no shares issued and outstanding, June 30, 2024 and December 31, 2023	—		—
Common stock, $0.0001 par value per share; 200,000,000 shares authorized, 8,651,148 issued and outstanding, June 30, 2024; 8,650,753 issued and outstanding, December 31, 2023	1		1
Additional paid-in capital	192,604		192,593

Accumulated deficit	(190,992)		(189,563)
Total stockholders’ equity	1,613		3,031
Total liabilities and stockholders’ equity	$	10,688	$	11,580

See accompanying notes to the unaudited condensed consolidated financial statements.

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EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue:
Revenue	$	—	$	—	$	500	$	—
Total revenue	—		—		500		—
Operating expenses:
Research and development expense	—		—		—		1,423
General and administrative expense	1,235		5,642		2,571		8,758

Total operating expenses	1,235		5,642		2,571		10,181
Operating loss	(1,235)		(5,642)		(2,071)		(10,181)
Other (expense) income, net:

Dividend income	1		15		5		32
Interest income	3		13		6		24
Interest expense	(6)		—		(6)		—
Other income	637		—		637		—
Other expense	—		(150)		—		(46)
Total other (expense) income, net	635		(122)		642		10
Net loss before provision for income taxes	(600)		(5,764)		(1,429)		(10,171)
Provision for income taxes	—		—		—		—
Net loss	$	(600)	$	(5,764)	$	(1,429)	$	(10,171)

Basic and diluted loss per common share	$	(0.07)	$	(0.68)	$	(0.17)	$	(1.38)

Weighted-average basic and diluted common shares outstanding	8,651,078		8,432,394		8,650,878		7,366,594

See accompanying notes to the unaudited condensed consolidated financial statements.

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EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except shares)


	Common Stock
	Shares	$		Additional Paid-in- Capital		Accumulated Deficit		Total Stockholders' Equity
Balance at January 1, 2024	8,650,753	$	1	$	192,593	$	(189,563)	$	3,031
Equity-based compensation	—	—		5		—		5

Vesting of restricted stock units and related repurchases	197	—		—		—		—

Net loss	—	—		—		(829)		(829)
Balance at March 31, 2024	8,650,950	$	1	$	192,598	$	(190,392)	$	2,207
Equity-based compensation	—	—		6		—		6
Vesting of restricted stock units and related repurchases	198	—		—		—		—

Net loss	—	—		—		(600)		(600)
Balance at June 30, 2024	8,651,148	$	1	$	192,604	$	(190,992)	$	1,613

See accompanying notes to the unaudited condensed consolidated financial statements.

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EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except shares)


	Common Stock
	Shares	$		Additional Paid-in- Capital		Accumulated Deficit		Total Stockholders' Equity
Balance at January 1, 2023	4,965,901	$	—	$	187,571	$	(172,649)	$	14,922
Equity-based compensation	—	—		308		—		308
Reclassification of common stock warrants to liability	—	—		(800)		—		(800)
Vesting of restricted stock units and related repurchases	5,561	1		(2)		—		(1)
Issuance of common stock, net	3,400,000	—		4,597		—		4,597
Net loss	—	—		—		(4,407)		(4,407)
Balance at March 31, 2023	8,371,462	$	1	$	191,674	$	(177,056)	$	14,619
Equity-based compensation	—	—		969		—		969
Vesting of restricted stock units and related repurchases	276,845	—		(119)		—		(119)
Net loss						(5,764)		(5,764)
Balance at June 30, 2023	8,648,307	$	1	$	192,524	$	(182,820)	$	9,705

See accompanying notes to the unaudited condensed consolidated financial statements.

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EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(1,429)	$	(10,171)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	14		479
Equity-based compensation	11		1,277

Amortization of right-of-use asset	390		364


Other	—		44
Changes in operating assets and liabilities:
Other receivable	(544)		—
Prepaid expenses and other current assets	415		145
Other noncurrent assets	—		288
Accounts payable	(46)		(18)
Accrued expenses	(32)		(190)
Other liabilities	(395)		(347)
Net cash used in operating activities	(1,616)		(8,129)
Cash flows from investing activities:

Purchase of available-for-sale securities	—		(2,000)



Proceeds from sale of property and equipment	—		211
Net cash used in investing activities	—		(1,789)
Cash flows from financing activities:
Proceeds from short-term borrowing	1,000		—

Proceeds from common stock offering	—		5,440

Payment of common stock financing costs	—		(843)


Payment of exercise of common stock warrants	—		(800)
Payments for minimum statutory tax withholding related to net share settlement of equity awards	—		(121)
Net cash provided by provided by financing activities	1,000		3,676

Net (decrease) in cash, cash equivalents, and restricted cash	(616)		(6,242)
Cash, cash equivalents, and restricted cash - beginning of period	2,016		9,777
Cash, cash equivalents, and restricted cash - end of period	$	1,400	$	3,535

See accompanying notes to the unaudited condensed consolidated financial statements.

EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the amounts shown in the unaudited condensed consolidated statements of cash flows:


	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	528	$	816
Restricted cash included in other noncurrent assets	872		1,200
Total cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows	$	1,400	$	2,016

See accompanying notes to the unaudited condensed consolidated financial statements.

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

1. Description of Business, Basis of Presentation and Going Concern

Description of Business

Exicure, Inc. has historically been an early-stage biotechnology company focused on developing nucleic acid therapies targeting ribonucleic acid against validated targets. In September 2022, the Company announced a significant reduction in force, suspension of preclinical activities and halting of all research and development, and that the Company was exploring strategic alternatives to maximize stockholder value. The Company is attempting to license its intellectual property to generate value for stockholders. In addition, the Company is engaging in a broader exploration of strategic alternatives. This effort involves exploring growth through transactions with potential partners that see opportunity in joining an existing, publicly-traded organization.

Throughout these unaudited condensed consolidated financial statements, the terms the “Company,” and “Exicure” refer to Exicure, Inc. and where appropriate, its wholly owned subsidiary, Exicure Operating Company. Exicure Operating Company holds all material assets and conducts all business activities and operations of Exicure, Inc.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of June 30, 2024 and December 31, 2023, and for the three and six months ended June 30, 2024 and 2023, have been presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Exicure and its wholly owned subsidiary, Exicure Operating Company. All intercompany transactions and accounts are eliminated in consolidation.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated balance sheet as of June 30, 2024, the interim condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023, the interim condensed consolidated statements of changes in stockholders’ equity for the three and six months ended June 30, 2024 and 2023, and the interim condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023 are unaudited. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements and with instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended; and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of June 30, 2024, the results of its operations for the three and six months ended June 30, 2024 and 2023, and the results of its cash flows for the six months ended June 30, 2024 and 2023. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2024 and 2023 are unaudited. The results for the six months ended June 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, or any other interim periods, or any future year or period. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 6, 2024.

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Going Concern

At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date that the financial statements are issued. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern for a period of one year after the date that the financial statements are issued. As of June 30, 2024, the Company expects to incur significant expenses and negative cash flows for the foreseeable future. As of June 30, 2024, the Company’s cash and cash equivalents were $528. Management believes that, given the Company’s current cash position, operating plans and forecasted negative cash flows from operating activities over the next twelve months, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued. Substantial additional financing will be needed by the Company to fund its operations.

Management believes that the Company’s existing cash and cash equivalents are insufficient to continue to fund its operating expenses and additional funding is needed in the very near term. The Company has already engaged in significant cost reductions, so our ability to further cut costs and extend the Company’s operating runway is limited. As a result, substantial additional financing will be needed by the Company in the very near term to pay expenses, fund the ongoing exploration of strategic alternatives and pursue any alternatives that may be identified. There can be no assurance that such additional financing will be available and, if available, can be obtained on acceptable terms.

The accompanying unaudited condensed consolidated financial statements have been prepared as though the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2. Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements and the notes thereto, which are included in the in the Company’s Annual Report on Form 10-K (the “Annual Report”) for the year ended December 31, 2023 filed with the SEC on June 6, 2024. Since the date of those audited consolidated financial statements, there have been no material changes to the Company’s significant accounting policies.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on certain assumptions which it believes are reasonable in the circumstances and while actual results could differ from those estimates, management does not believe that any change in those assumptions in the near term would have a significant effect on the Company’s financial position, results of operations or cash flows. Actual results in future periods could differ from those estimates.

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

3. Supplemental Balance Sheet Information

Prepaid expenses and other current assets


	June 30, 2024		December 31, 2023

Prepaid insurance	$	476	$	508
Prepaid franchise tax	61		259
Lease costs	255		235
Prepaid professional fees	70		95
Prepaid software	62		72
Other	68		24
Prepaid expenses and other current assets	$	992	$	1,193

Other noncurrent assets


	June 30, 2024		December 31, 2023
Restricted cash	$	872	$	1,200
Prepaid insurance	1,571		1,785


Other noncurrent assets	$	2,443	$	2,985

Property and equipment, net


	June 30, 2024		December 31, 2023
Scientific equipment	$	246	$	246
Computers and software	3		3
Furniture and fixtures	30		30

Property and equipment, gross	279		279
Less: accumulated depreciation and amortization	(239)		(225)
Property and equipment, net	$	40	$	54

Depreciation and amortization expense was $14 and $479 for the six months ended June 30, 2024 and 2023, respectively.

Accrued expenses and other current liabilities


	June 30, 2024		December 31, 2023


Current lease liability	$	671	$	626
Accrued payroll-related expenses	—		71

Accrued other expenses	175		182
Accrued expenses and other current liabilities	$	846	$	879

4. Leases

The Company’s lease arrangements at June 30, 2024 consist of (i) a lease for office space at its headquarters in Chicago, Illinois that commenced in July 2020 (the “Chicago Lease”) and (ii) a lease for office equipment (the “Office Equipment Lease”). The Chicago Lease and the Office Equipment Lease are classified as operating leases.

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Chicago Lease

The Company has approximately thirty thousand square feet of office space in Chicago, Illinois. The original term (the “Original Term”) of the Chicago Lease is 10 years, commencing on July 1, 2020 (the “Commencement Date”), which is the date the premises were ready for occupancy under the terms of the Chicago Lease. The Company has options to extend the term of the Chicago Lease for two additional successive periods of five years each (the “Extension Periods”) at the then prevailing effective market rental rate.

The initial annual base rent during the Original Term is approximately $1,113 for the first 12-month period of the Original Term, payable in monthly installments beginning on the Commencement Date. Base rent thereafter is subject to annual increases of 3%, for an aggregate amount of $12,761 over the Original Term. The Company must also pay its proportionate share of certain operating expenses and taxes for each calendar year during the term. During the first 12-month period of the Original Term, the base rent and the Company's proportionate share of operating expenses and taxes were subject to certain abatements.

The following table summarizes lease costs in the Company’s unaudited condensed consolidated statement of operations:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Operating lease costs	$	142	$	326	$	285	$	652
Variable lease costs	(117)		(19)		3		313
Short term lease costs	9		—		20		—
Total lease costs	$	34	$	307	$	308	$	965

The Company made cash payments for operating leases $327 and $860 during the six months ended June 30, 2024 and 2023, respectively. On June 11, 2024, the Company received a formal notice from its landlord indicating the landlord will draw on the restricted cash account designated for the lease as a result of past due rent for December 2023 through June 2024. The landlord also withdrew the July 2024 payment from the restricted cash account. These draws are within the terms and conditions of the lease and the related restricted cash account.

Sublease of Office Space

The Company entered into a sublease agreement with Cyclopure, Inc. (the “Subtenant”) to sublease approximately 57% of its office space pursuant to that certain sublease agreement (the “Sublease Agreement”), dated as of May 4, 2023. The term of the Sublease Agreement began on May 15, 2023 and ends on June 30, 2030, the expiration date of the Chicago Lease. The first three months under the Sublease Agreement are rent free. Beginning August 15, 2023, the Company began charging the Subtenant for 57% of the base rent under the Chicago Lease, and the subtenant is responsible for its pro rata share of operating expenses and taxes payable. In 2024, the Company does not receive payment from the Subtenant as the Subtenant pays the Company’s landlord directly.

The following table summarizes sublease receipts in the Company’s condensed consolidated statement of operations:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Sublease amounts paid to landlord	$	173	$	—	$	346	$	—
Total	$	173	$	—	$	346	$	—

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

5. Investment in Convertible Notes Receivable

In May 2023, the Company entered into two subscription agreements to purchase non-guaranteed private placement convertible notes receivable (the “Notes Receivable”) for a subscription amount of $1 million each. The Notes Receivable mature in May 2026 and the yield to maturity is 4.5% per annum. The Company has the option to request that the issuer redeem part or the entire principal amount of the Notes Receivable on the first anniversary after the issue date and every three months thereafter before the maturity date. The redemption price will be one hundred percent (100%) of the Notes Receivable’s face value, plus accrued interest. The Company also has the ability to convert the debt into shares based on the number of shares computed by dividing the face value of each security by a calculated conversion price, which is subject to adjustment provisions, determined at the time of issuance. The securities may be converted from May 3, 2024, the first anniversary of the issue date of the first agreement, to April 15, 2026, one month prior to the maturity date to the second agreement. In March 2024, the Company notified the issuer of the Notes Receivable that it was exercising its redemption right with respect to the entire principal amount of the Notes Receivable after the first anniversary of their issue dates (May 3 and May 16, 2024, respectively) for an aggregate redemption price of $2.090 million (representing the principal amount plus 4.5% per annum yield to the redemption date). The issuer has taken the position that the Notes Receivable are not redeemable until August 3, 2024 and August 16, 2024, and as a result that redemption notice submitted in March were premature. We have attempted to redeem the $2 million aggregate principal amount of the convertible Notes Receivable in June 2024, but have not received a response to our most recent request.

The Company’s debt securities are classified as available-for-sale (“AFS”) pursuant to Accounting Standards Codification (“ASC”) 320 - Investments - Debt Securities. AFS securities are recorded at fair value. As of June 30, 2024 and December 31, 2023, management does not believe these AFS investments are recoverable and recorded them at a fair value of $0.

6. Debt

On May 3, 2024, the Company executed a promissory note (“Note”) and subsequently received a loan in the amount of $300 from an individual investor. All principal and accrued interest will be due and payable on the earlier of (i) May 3, 2025 or (ii) upon an event of default, at such time, such amounts declared by the investor will become due and payable by Company. Interest will accrue on this Note at 6.0% and is payable at maturity.

On June 3, 2024, the Company executed another promissory note (“DGP Note”) and subsequently received a loan in the amount of $700 from DGP, a related party. All principal and accrued interest will be due and payable on the earlier of (i) March 25, 2025 or (ii) upon an event of default, at such time, such amounts declared by the investor will become due and payable by Company. Interest will accrue on this DGP Note at 6.0% and is payable at maturity.

7. Stockholders’ Equity

Preferred Stock

As of June 30, 2024 and December 31, 2023, the Company had 10,000,000 shares of preferred stock, par value $0.0001 authorized and no shares issued and outstanding.

Common Stock

As of June 30, 2024 and December 31, 2023, the Company had authorized 200,000,000 shares of common stock, par value $0.0001. As of June 30, 2024 and December 31, 2023, the Company had 8,651,148 shares and 8,650,753 shares issued and outstanding, respectively.

The holders of shares of the Company’s common stock are entitled to one vote per share on all matters to be voted upon by the Company’s stockholders and there are no cumulative rights. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of the Company’s common stock are entitled to receive ratably any dividends that may be declared from time to time by the Board of Directors (the “Board”) out of

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

funds legally available for that purpose. In the event of the Company’s liquidation, dissolution or winding up, the holders of shares of the Company’s common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock then outstanding. The Company’s common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Company’s common stock. The outstanding shares of the Company’s common stock are fully paid and non-assessable.

September 2022 PIPE (Private Investment in Public Equity)

Securities Purchase Agreement

On September 26, 2022, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with CBI USA, Inc. (“CBI USA”), pursuant to which the Company agreed to issue and sell to CBI USA in a private placement an aggregate of 3,400,000 shares of Common Stock, at a purchase price of $1.60 per share. The private placement closed on February 24, 2023 (the “Closing Date”). The Company received gross proceeds of $5,440 from the September 2022 PIPE (or net proceeds of $4,597 after transaction expenses).

CBI USA funded the acquisition pursuant to the Securities Purchase Agreement through a loan from its affiliate, DGP Co., Ltd. (“DGP”). On June 23, 2023, DGP exercised its the option pursuant to the loan and acquired the 3,400,000 shares of Common Stock initially acquired by CBI USA pursuant to the Securities Purchase Agreement. DGP subsequently agreed to sell its shares to a third party, with the closing of 10% (340,000 shares) occurring in February 2024 and the remainder to close by or on September 30, 2024.

The Securities Purchase Agreement, as confirmed and clarified by that certain letter agreement, dated October 31, 2022, between the Company and CBI USA, provided CBI USA together with its affiliates and any “group” of which it or they are a member with the right to designate directors to the Company’s board of directors in proportion to the ownership of CBI USA and its affiliates and any such group. CBI USA and DGP have announced they expect to exercise such rights as a group. Together, they beneficially own 45% of the outstanding shares of Common Stock based on their most recent Schedule 13D amendment. As noted above, DGP has entered into an agreement to sell its remaining shares to a third party by or on September 30, 2024.

September 2022 Registration Rights Agreement

In connection with the Securities Purchase Agreement, the Company entered into a registration rights agreement with CBI USA (the “Registration Rights Agreement’). CBI USA assigned its rights under the Registration Rights Agreement to DGP when DGP acquired the 3,400,000 shares of Common Stock initially sold to CBI USA. Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement covering the resale of the shares of Common Stock sold pursuant to the Securities Purchase Agreement, to use reasonable best efforts to cause such registration statement to become effective as promptly as practicable, and to keep such registration statement continuously effective until the earlier of (i) the date the shares covered by such registration statement have been sold or may be resold pursuant to Rule 144 without restriction, or (ii) the date that is two (2) years following the Closing Date.

In the event the registration statement was not filed within 90 days following the Closing Date, subject to certain limited exceptions, the Company agreed to make payments as liquidated damages in an amount equal to 0.5% of the aggregate amount invested in the shares of Common Stock pursuant to the Securities Purchase Agreement per 30-day period or pro rata for any portion thereof for each such month during which such event continues, subject to certain caps set forth in the Registration Rights Agreement. We have paid $27 to CBI USA and accrued $191 to DGP pursuant to this provision.

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Registered Direct Offering

On December 16, 2021, the Company completed a securities purchase agreement (the “Purchase Agreement”) with certain institutional purchasers (the “Purchasers”) entered into on December 14, 2021, pursuant to which the Company offered to the Purchasers, in a registered direct offering priced at-the-market consistent with the rules of Nasdaq (the “Registered Direct Offering”), (i) an aggregate of 433,553 shares (the “Shares”) of the Company’s common stock, $0.0001 par value per share, (ii) pre-funded warrants to purchase up to an aggregate of 718,981 shares of Common Stock (the “Pre-Funded Warrants”), and (iii) warrants to purchase up to 576,261 shares of Common Stock (the “Warrants”). The combined purchase price of each share of Common Stock and accompanying Warrant is $9.9780 per share. The combined purchase price of each Pre-Funded Warrant and accompanying Warrant is $9.9480 (equal to the combined purchase price per share of Common Stock and accompanying Warrant, minus $0.03). The per share exercise price for the Warrants is $8.1031, the closing bid price of the Company’s Common Stock on December 13, 2021 (and as adjusted for the reverse stock split referenced in Note 1). The Warrants will be exercisable immediately from the closing December 16, 2021, and will expire on the five-year anniversary of the date of issuance, or December 16, 2026. The Pre-Funded Warrants and Warrants, which met equity classification, were recognized as a component of permanent stockholders’ equity within additional paid-in-capital together with the net proceeds from the Registered Direct Offering. The gross proceeds to the Company from the Registered Direct Offering (excluding effect of subsequent exercises of pre-funded warrants) were $11,478 and net proceeds after deducting the placement agent’s fees and other offering expenses paid or payable by the Company were $10,226. The securities were offered by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-251555) previously filed with the Securities and Exchange Commission (the “SEC”) on December 21, 2020, and which was declared effective by the SEC on January 7, 2021 (the “Registration Statement”).

Each Warrant is exercisable for one share of Common Stock at an exercise price of $8.1031 per share. The Warrants are immediately exercisable as of the date of issuance of December 16, 2021 and will expire on the five-year anniversary of the date of issuance, or December 16, 2026. The Pre-Funded Warrants were offered in lieu of shares of Common Stock to one of the Purchasers whose purchase of shares of Common Stock in the Registered Direct Offering would otherwise result in said Purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the Purchaser, 9.99%) of the Company’s outstanding Common Stock immediately following the consummation of the Registered Direct Offering. Each Pre-Funded Warrant is exercisable for one share of Common Stock at an exercise price of $0.030 per share. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.

A holder (together with its affiliates) of the Warrant or Pre-Funded Warrant may not exercise any portion of the Warrant or Pre-Funded Warrant, as applicable, to the extent that the holder would own more than 4.99% (or, at the holder’s option upon issuance, 9.99%) of the Company’s outstanding Common Stock immediately after exercise, as such percentage ownership is determined in accordance with the terms of the Warrant or Pre-Funded Warrant, as applicable. In lieu of making the cash payment otherwise contemplated to be made to the Company upon exercise of a Warrant in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of Common Stock determined according to a formula set forth in the Warrants, provided that such cashless exercise shall only be permitted if the Registration Statement is not effective at the time of such exercise or if the prospectus to which the Registration Statement is a part is not available for the issuance of shares of Common Stock to the Warrant holder.

In lieu of making the cash payment otherwise contemplated to be made to the Company upon exercise of a Pre-Funded Warrant in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of Common Stock determined according to a formula set forth in the Pre-Funded Warrants.

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Common Stock Warrants

Warrants to purchase 576,261 shares of common stock at a price of $8.1031 per share were acquired in the December 2021 registered-direct offering transaction. The warrants were classified as equity. As a result of the closing of the September 2022 PIPE, a warrant holder elected to exercise their option within 30 days of the closing of the September 2022 PIPE (February 24, 2023) to receive a cash payout for the outstanding warrants in the amount of the Black-Scholes value of each warrant as prescribed in the warrant agreement. The Company paid $800 to this warrant holder on June 23, 2023 and 526,151 were settled as a result. As of June 30, 2024, warrants to purchase 50,110 shares of common stock at a price of $8.1031 per share that were acquired in the December 2021 registered-direct offering transaction remain outstanding.

8. Equity-Based Compensation

2017 Equity Incentive Plan

On September 22, 2017, the Company’s stockholders approved the Exicure, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which became effective on November 15, 2017. The 2017 Plan provides for the issuance of incentive awards of up to 194,750 shares of Exicure common stock, which includes 72,330 shares of Exicure common stock to be issued to officers, employees, consultants and directors, plus a number of shares not to exceed 122,793 that are subject to issued and outstanding awards under the Exicure OpCo 2015 Equity Incentive Plan (the “2015 Plan”) and were assumed in the merger transaction on September 26, 2017. Awards that may be awarded under the 2017 Equity Incentive Plan include non-qualified and incentive stock options, stock appreciation rights, bonus shares, restricted stock, restricted stock units, performance units and cash-based awards. The number of shares of common stock reserved for issuance under the 2017 Equity Incentive Plan automatically increases on January 1 of each year, beginning on January 1, 2020, by the lesser of (i) 153,333 shares, (ii) 5% of the total number of shares of its capital stock outstanding on December 31 of the preceding calendar year, or (iii) a lesser number of shares determined by the Compensation Committee of the Board (the “Compensation Committee”). No future awards will be made under the 2015 Plan upon the effectiveness of the 2017 Plan. On January 1, 2024, pursuant to the terms of the 2017 Plan, the number of awards that are reserved and may be awarded under the 2017 Plan was automatically increased by 153,333 awards.

As of June 30, 2024, the aggregate number of equity awards available for grant under the 2017 Equity Incentive Plan was 455,292.

Awards granted under the 2017 Plan are contingent on the participants’ continued employment or provision of non-employee services and are subject to forfeiture if employment or continued service terminates for any reason. The initial award granted to an employee or consultant generally vests 25% on the first 12-month anniversary of the grant date and vests 1/48th monthly thereafter until fully vested at the end of 48 months. Subsequent awards granted to employees or consultants generally vest 1/48th monthly until fully vested at the end of 48 months. The initial stock option grant to a non-employee director vests 1/36th monthly until fully vested at the end of 36 months. Subsequent stock option grants to a non-employee director vests 1/12th monthly until fully vested at the end of 12 months. The term of common stock option grants is 10 years unless terminated earlier as described above.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Employee Stock Purchase Plan

The 2017 Employee Stock Purchase Plan (the “ESPP”) was adopted by the Board in September 2017 and approved by the Company’s stockholders in September 2017. Through the ESPP, eligible employees may authorize payroll deductions of up to 15% of their compensation to purchase common stock. The maximum number of shares that an employee may purchase on any exercise date in an offer period will be the smaller of (i) 250 shares or (ii) such number of shares as has a fair market value (determined as of the offering date for such offer period) equal to $25,000 within one calendar year minus the fair market value of any other shares of common stock that are attributed to such calendar year. The purchase price per share at each purchase date is equal to 85% of the lower of (i) the closing market price per share of Exicure common stock on the employee’s offering date or (ii) the closing market price per share of Exicure common stock on the exercise date.

The ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2018 and each January 1 thereafter through January 1, 2027, by the least of (i) 10,000 shares; (ii) 0.3% of the outstanding shares of common stock on the last day of the immediately preceding calendar year; or (iii) a lesser number of shares determined by the Board. On January 1, 2024, the number of shares of common stock available for issuance under the ESPP increased by 10,000 shares. As of June 30, 2024, there were 61,971 shares available for issuance under the ESPP.

Equity-based compensation expense is classified in the statements of operations as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Research and development expense	$	—	$	—	$	—	$	154
General and administrative expense	6		969		11		1,123
	$	6	$	969	$	11	$	1,277

Unamortized equity-based compensation expense at June 30, 2024 was $21, which is expected to be amortized over a weighted-average period of 1.4 years.

The Company utilizes the Black-Scholes option-pricing model to determine the fair value of common stock option grants. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model also requires the input of highly subjective assumptions. No options were granted during the six months ended June 30, 2024. The following table presents the assumptions used in the Black-Scholes option-pricing model for stock options granted during the six months ended June 30, 2023:


	Six Months Ended June 30,
	2023
Expected term	5.8 to 5.8 years
Risk-free interest rate	3.83% to 3.83%; weighted avg. 3.83%
Expected volatility	101.0% to 101.0%; weighted avg. 101.0%
Forfeiture rate	5	%
Expected dividend yield	—	%

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The expected term is based upon the “simplified method” as described in Staff Accounting Bulletin Topic 14.D.2. Currently, the Company does not have sufficient experience to provide a reasonable estimate of an expected term of its common stock options. The Company will continue to use the “simplified method” until there is sufficient experience to provide a more reasonable estimate in conformance with ASC 718-10-30-25 through 30-26. The risk-free interest rate assumptions were based on the U.S. Treasury bond rate appropriate for the expected term in effect at the time of grant. For stock options granted after December 31, 2021, the expected volatility is based on the volatility of shares of the Company. For stock options granted prior to January 1, 2022, the expected volatility is based on calculated enterprise value volatilities for publicly traded companies in the same industry and general stage of development. The estimated forfeiture rates were based on historical experience for similar classes of employees. The dividend yield was based on expected dividends at the time of grant.

The fair value of the underlying common stock and the exercise price for the common stock options granted during the six months ended June 30, 2023 are summarized in the table below. No options were granted during the six months ended June 30, 2024.


	Fair Value of Underlying Common Stock	Exercise Price of Common Stock Option

Six months ended June 30, 2023	$1.58; weighted avg. $1.58	$1.58; weighted avg. $1.58

The weighted-average grant date fair value of common stock options granted in the six months ended June 30, 2023 was $1.26 per common stock option.

A summary of common stock option activity as of the periods indicated is as follows:


	Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (thousands)
Outstanding - December 31, 2023	12,115	$	4.28	5.4	$	—
Granted	—	—
Exercised	—	—
Forfeited	(416)	5.51

Outstanding - June 30, 2024	11,699	$	5.51	4.9	$	—
Exercisable - June 30, 2024	11,699	$	5.51	4.9	$	—
Vested and Expected to Vest - June 30, 2024	11,699	$	5.51	4.9	$	—

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(in thousands, except share and per share data)

A summary of restricted stock unit activity of the periods indicated is as follows:


	Restricted Stock Units	Weighted-Average Grant Date Fair Value
Unvested balance - December 31, 2023	3,043	$	10.41
Granted	—	—

Vested	(592)	18.47
Forfeited	(417)	3.45
Unvested balance - June 30, 2024	2,034	$	12.24

The grant date fair value of restricted stock units is based on the Company’s closing stock price at the date of grant. At vesting, each outstanding restricted stock unit will be exchanged for one share of the Company’s common stock. Restricted stock units generally vest evenly on a quarterly basis over a period of 4 years in exchange for continued service provided by the restricted stock unit recipient during that vesting period.

9. Income Taxes

The Company incurred a pretax loss in each of the six months ended June 30, 2024 and 2023, which consists entirely of loss in the United States and resulted in no provision for income tax expense during the periods then ended. The effective tax rate is 0% in each of the six months ended June 30, 2024 and 2023 because the Company has generated tax losses and has provided a full valuation allowance against its deferred tax assets.

10. Loss Per Common Share

Basic loss per common share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted loss per common share is calculated using the treasury share method by giving effect to all potentially dilutive securities that were outstanding. Potentially dilutive options, restricted stock units and warrants to purchase common stock that were outstanding during the periods presented were excluded from the diluted loss per share calculation for the periods presented because such shares had an anti-dilutive effect due to the net loss reported in those periods. Therefore, basic and diluted loss per common share is the same for each of the six months ended June 30, 2024 and 2023.

The following is the computation of loss per common share for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net loss	$	(600)	$	(5,764)	$	(1,429)	$	(10,171)

Weighted-average basic and diluted common shares outstanding	8,651,078		8,432,394		8,650,878		7,366,594

SEC Form 10-Q filed by Exicure Inc.