xcur-20230331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________

FORM 10-Q/A

Amendment No. 1

______________________________________

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

For the quarterly period ended March 31, 2023

☐ 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 July 10, 2023, there were 8,648,307 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

EXPLANATORY NOTE

Exicure, Inc. (the “Company,” “Exicure,” “we,” “us” and “our”) is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q/A (“Form 10-Q/A”) to amend and restate its unaudited condensed consolidated interim financial statements for the three months ended March 31, 2023 included in its Quarterly Report on Form 10-Q, which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on July 14, 2023 (the “Original Report”). This Quarterly Report on Form 10-Q/A also amends certain other Items in the Original Report, as listed in “Items Amended in this Quarterly Report on Form 10-Q/A” below.

Restatement Background

As previously announced in our Current Report on Form 8-K filed with the SEC on December 1, 2023, the management of Exicure, after discussion with its Audit Committee of the Board of Directors (the “Audit Committee”), concluded that the Company’s previously issued unaudited condensed consolidated interim financial statements included in the Original Report contained an error related to classification of research and development expenses on the condensed consolidated statement of operations for the three months ended March 31, 2023. This error is described in further detail below. As a result of the error, management and the Audit Committee determined that the Company’s consolidated financial statements included in the Original Report should no longer be relied upon. Similarly, any previously furnished or filed reports, related earnings releases, investor presentations or similar communications of the Company describing those financial statements and other information covering this period should no longer be relied upon.

Approximately $0.6 million of expenses in the first quarter of 2023 were corrected from research and development into general and administrative. These expenses primarily related to legal costs and separation payments. There was no impact to the net loss as of March 31, 2023, and none of the other financial statements included in the Original Report were affected by this correction.

An explanation of the impact on the Company’s financial statements is contained in Note 1. Nature of the Business and Basis of Presentation - Restatement to the accompanying financial statements.

Internal Control Considerations

As a result of the restatement of the Company’s financial statements and the filing of this Form 10-Q/A, management has determined that a material weakness existed in the Company’s internal control over financial reporting. The identified material weakness and the Company’s remediation plan are further described in Part I, Item 4 within this Form 10-Q/A. In addition, as a result of the restatement of the Company’s financial statements and the material weakness described above, management has reconsidered its assessment and now concludes that we did not maintain effective disclosure controls and procedures for the quarter ended March 31, 2023.

Items Amended in this Quarterly Report on Form 10-Q/A

This Form 10-Q/A sets forth our Original Report, as amended, in its entirety. Except as described below and set forth in this Form 10-Q/A, there were no changes to any other parts of the Original Report. Items included in the Original Report that are not amended by this Form 10-Q/A remain unchanged and are as of July 14, 2023, the date of the Original Report. Additionally, this Form 10-Q/A does not reflect events occurring after the date of the Original Report or modify or update those disclosures that may be affected by subsequent events, and no other changes are being made to any other disclosure contained in the Original Report. Therefore, this Form 10-Q/A should be read together with the Company’s other filings with the SEC that were made after the date of the Original Report.

The following items have been amended in this on Form 10-Q/A, solely as a result of and to reflect the restatement:

•Part I, Item 1. Financial Statements

•Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

•Part I, Item 4. Controls and Procedures

•Part II, Item 1A. Risk Factors

•Part II, Item 6. Exhibits

EXICURE, INC.

QUARTERLY REPORT ON FORM 10-Q

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PART I - FINANCIAL INFORMATION						9
Item 1. Financial Statements						9
Unaudited Condensed Consolidated Balance Sheets						9
Unaudited Condensed Consolidated Statements of Operations						10
Unaudited Condensed Consolidated Statements of Comprehensive Loss						11
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity						12
Unaudited Condensed Consolidated Statements of Cash Flows						14
Notes to Unaudited Condensed Consolidated Financial Statements						16
Item 2. Management's Discussion and Analysis and Results of Operations						34
Item 3. Quantitative and Qualitative Disclosures About Market Risk						41
Item 4. Controls and Procedures						42

PART II - OTHER INFORMATION						44
Item 1. Legal Proceedings						44
Item 1A. Risk Factors						45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						56
Item 3. Defaults Upon Senior Securities						56
Item 4. Mine Safety Disclosures						56
Item 5. Other Information						56
Item 6. Exhibits						57

Signatures						59

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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 described in the “Risk Factor Summary” below and 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 within the next few months to fund our operations and our pursuit of strategic alternatives, particularly given our current lack of a 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, 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, including our expectations relating to our needs for additional financing and the timing thereof may prove to be inaccurate;

•uncertainty about reaction from investors and potential business partners to our recent change of control and board composition and the future direction of the Company, and the ability of our controlling stockholder and new board members 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 turnover of senior management in the near term, and any inability to attract and retain qualified management and other key personnel, could create significant continuity risk and 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, potential turnover in 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 worsening macroeconomic conditions, including rising 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 as well as developments relating to our competitors or our industry; 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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SUMMARY RISK FACTORS

Investing in common stock involves numerous risks, including the risks described in “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations and prospects.

•Our exploration of strategic alternatives may not be successful.

•We need to obtain substantial funding in the near term in order to continue operations and our exploration of strategic alternatives.

•Our controlling stockholder, executive officers and members of our board, have limited experience controlling or governing a public company in the United States.

•Turnover of senior management, and any inability to attract and retain qualified management and other key personnel, could impair our ability to implement our business plan.

•Our unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern.

•Our common stock may be delisted from Nasdaq, which could negatively impact the price of our common stock, liquidity and our ability to access the capital markets.

•We have a history of losses. We expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability, which could result in a decline in the market value of our common stock.

•Our internal computer systems, or those of contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our business operations.

•Our information technology systems could face disruptions that could adversely affect our business.

•Our business and operations could suffer in the event of system failures or unauthorized or inappropriate use of or access to our information technology systems.

•Increasing scrutiny and changing expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

•Our current operations are concentrated in one location and any events affecting this location may have material adverse consequences.

•The investment of our cash, cash equivalents and fixed income marketable securities is subject to risks which may cause losses and affect the liquidity of these investments.

•If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

•We currently license patent rights from Northwestern University. If Northwestern University does not properly or successfully obtain, maintain or enforce the patents underlying such licenses, or if they retain or license to others any competing rights, our competitive position and business prospects may be adversely affected.

•Our licensors, or any current or future strategic partners, may become subject to third-party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to protect or enforce our patents or other proprietary rights, all of which could be costly, time consuming, or put our patents and other proprietary rights at risk.

•We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

•If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose intellectual property rights that are necessary for developing and protecting our therapeutic candidates or we could lose certain rights to grant sublicenses.

•Our status as a “controlled company” could make our Common Stock less attractive to some investors or otherwise harm the trading price of our Common Stock.

•The market price of our common stock has been, and is likely to continue to be, highly volatile, and you may not be able to resell your shares at or above the price you paid for them.

•Raising additional funds by issuing securities may cause dilution to existing stockholders and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights.

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•We are an “emerging growth company” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.

•Anti-takeover provisions in our charter documents and under the General Corporation Law of the State of Delaware could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our management.

•Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.

•Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

•FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock due to our low stock price.

•If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.

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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)


	March 31, 2023		December 31, 2022

ASSETS
Current assets:
Cash and cash equivalents	$	9,960	$	8,577

Prepaid expenses and other assets	1,317		1,474
Total current assets	11,277		10,051
Property and equipment, net	2,279		2,530
Right-of-use asset	7,077		7,257
Other noncurrent assets	3,310		3,490
Total assets	$	23,943	$	23,328
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable	452		361
Accrued expenses and other current liabilities	1,477		1,278
Common stock warrant liability	800		—
Total current liabilities	2,729		1,639

Lease liability, noncurrent	6,595		6,767

Total liabilities	9,324		8,406

Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 10,000,000 shares authorized, no shares issued and outstanding, March 31, 2023 and December 31, 2022	—		—
Common stock, $0.0001 par value per share; 200,000,000 shares authorized, 8,371,462 issued and outstanding, March 31, 2023; 4,965,901 issued and outstanding, December 31, 2022	1		—
Additional paid-in capital	191,674		187,571

Accumulated deficit	(177,056)		(172,649)
Total stockholders’ equity	14,619		14,922
Total liabilities and stockholders’ equity	$	23,943	$	23,328

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 March 31,
		2023 (Restated)		2022
Revenue:
Collaboration revenue		$	—	$	2,565
Total revenue		—		2,565
Operating expenses:
Research and development expense		1,423		7,140
General and administrative expense		3,116		3,162
Total operating expenses		4,539		10,302
Operating loss		(4,539)		(7,737)
Other income (expense), net:
Dividend income		17		2
Interest income		11		2
Interest expense		—		(595)
Other income (expense), net		104		(20)
Total other income (expense), net		132		(611)
Net loss before provision for income taxes		(4,407)		(8,348)
Provision for income taxes		—		—
Net loss		$	(4,407)	$	(8,348)

Basic and diluted loss per common share		$	(0.70)	$	(2.07)


Weighted-average basic and diluted common shares outstanding		6,288,952		4,031,316

See accompanying notes to the unaudited condensed consolidated financial statements.

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EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, except share and per share data)


	Three Months Ended March 31,
		2023		2022
Net loss		$	(4,407)	$	(8,348)
Other comprehensive (loss), net of taxes
Unrealized (loss) on available for sale securities, net of tax		—		(3)
Other comprehensive (loss)		—		(3)
Comprehensive loss		$	(4,407)	$	(8,351)

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		Accumulated Other Comprehensive Loss		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

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		Accumulated Other Comprehensive Income		Total Stockholders' Equity
Balance at January 1, 2022	3,626,073	$	—	$	181,301	$	(170,067)	$	(2)	$	11,232
Exercise of common stock warrants	466,666	—		14		—		—		14
Equity-based compensation	—	—		342		—		—		342
Vesting of restricted stock units and related repurchases	324	—		(1)		—		—		(1)
Other comprehensive loss, net	—	—		—		—		(3)		(3)
Net loss	—	—		—		(8,348)		—		(8,348)
Balance at March 31, 2022	4,093,063	$	—	$	181,656	$	(178,415)	$	(5)	$	3,236

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)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(4,407)	$	(8,348)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	251		302
Equity-based compensation	308		342
Amortization of long-term debt issuance costs and fees	—		477
Amortization of right-of-use asset	180		169
Amortization of investments	—		(1)
Other	(105)		19

Changes in operating assets and liabilities:

Prepaid expenses and other current assets	157		1,727
Other noncurrent assets	180		4
Accounts payable	91		(1,495)
Accrued expenses	199		(3,237)
Deferred revenue	—		(2,565)
Other liabilities	(172)		(150)
Net cash used in operating activities	(3,318)		(12,756)
Cash flows from investing activities:
Purchase of available for sale securities	—		(1,499)
Proceeds from sale or maturity of available for sale securities	—		3,500
Capital expenditures	—		(6)
Proceeds from sale of capital assets	106		—
Net cash provided by investing activities	106		1,995
Cash flows from financing activities:
Repayment of long-term debt	—		(7,500)
Payment of long-term debt fees and issuance costs	—		(506)
Proceeds from common stock offering	5,440		—
Payment of common stock financing costs	(843)		—


Proceeds from exercise of common stock warrants	—		14

Payments for minimum statutory tax withholding related to net share settlement of equity awards	(2)		(1)
Net cash provided by (used in) provided by financing activities	4,595		(7,993)

Net increase (decrease) in cash, cash equivalents, and restricted cash	1,383		(18,754)
Cash, cash equivalents, and restricted cash - beginning of period	9,777		43,844
Cash, cash equivalents, and restricted cash - end of period	$	11,160	$	25,090

See accompanying notes to the unaudited condensed consolidated financial statements.

EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)


	Three Months Ended March 31,
	2023		2022
Supplemental disclosure of cash flow information:
Non-cash financing activities:
Reclassification of common stock warrants to liability	$	800	$	—

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:


	March 31, 2023		December 31, 2022
Cash and cash equivalents	$	9,960	$	8,577
Restricted cash included in other noncurrent assets	1,200		1,200
Total cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows	$	11,160	$	9,777

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, Going Concern and Restatement of Financial Statement

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. While the foregoing efforts are continuing, the Company does not expect they will generate significant value for stockholders, at least in the near term. Therefore, 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. The Company is exploring transactions in industries unrelated to its historical operations.

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 March 31, 2023 and December 31, 2022, and for the three months ended March 31, 2023 and 2022, have been presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

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 March 31, 2023, the interim condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022, the interim condensed consolidated statements of comprehensive loss for the three months ended March 31, 2023 and 2022, the interim condensed consolidated statements of changes in stockholders’ equity for the three months ended March 31, 2023 and 2022, and the interim condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022 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 March 31, 2023, the results of its operations for the three months ended March 31, 2023 and 2022, and the results of its cash flows for the three months ended March 31, 2023 and 2022. The financial data and other information disclosed in these notes related to the three months ended March 31, 2023 and 2022 are unaudited. The results for the three months ended March 31, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, or any other interim periods, or any future year or period.

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

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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 March 31, 2023, the Company has generated an accumulated deficit of $195,893 since inception and expects to incur significant expenses and negative cash flows for the foreseeable future. As of March 31, 2023, the Company’s cash, and cash equivalents were $9,960. 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 will fund its operating expenses into the fourth quarter of 2023. However, this estimate is based on assumptions about how the Company can limit spending that may prove to be wrong. It is very difficult to project the Company’s current cash burn rate given the transitional status of the Company and this estimate may prove inaccurate. Depending on the direction of the Company’s review of strategic alternatives, the Company may use available resources sooner than management currently expects. 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 within the next few months to pay expenses, fund the ongoing exploration of strategic alternatives and pursue any alternatives that may be identified. The Company seeks to raise capital in the third quarter of 2023 to fund its operations through 2024. 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.

Restatement

The Company is restating its previously issued condensed consolidated financial statements and related notes as of and for the three months ended March 31, 2023. The Company identified an error related to the incorrect classification of certain expenses as research and development expenses on the condensed consolidated statements of operations for the three months ended March 31, 2023.

The following table illustrates the effects of the error corrections to operating expenses:


	Previously Reported		Adjustments		Restated
Research and development expense	$	1,981	$	(558)	$	1,423
General and administrative expense	2,558		558		3,116
Total operating expenses	$	4,539	$	—	$	4,539

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 for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 27, 2023, as amended by Amendment No. 1 filed with the SEC on May 1, 2023 (the “Annual Report”). Since the date of those

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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.

Significant estimates include the recording of its warrant liability. The Company calculated its warrant liability based on the Black-Scholes Model, see Note 7, Stockholders’ Equity, for further details.

Recent Accounting Pronouncements Adopted

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 is a new standard intended to improve reporting requirements specific to loans, receivables and other financial instruments. ASU 2016-13 requires that credit losses on financial assets measured at amortized cost be determined using an expected loss model, instead of the current incurred loss model, and requires that credit losses related to available-for-sale debt securities be recorded through an allowance for credit losses and limited to the amount by which carrying value exceeds fair value. ASU 2016-13 also requires enhanced disclosure of credit risk associated with financial assets. The effective date of ASU 2016-13 was deferred by ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)—Effective Dates to the annual period beginning after December 15, 2022 for companies that (i) meet the definition of an SEC filer and (ii) are eligible as “smaller reporting companies” as such term is defined by the SEC, with early adoption permitted. The Company adopted this ASU in January 2023, there was no material impact on the consolidated financial statements.

3. Supplemental Balance Sheet Information

Prepaid expenses and other current assets


	March 31, 2023		December 31, 2022
Prepaid clinical, contract research and manufacturing costs	$	51	$	213
Prepaid insurance	750		408
Other	516		853
Prepaid expenses and other current assets	$	1,317	$	1,474

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Other noncurrent assets


	March 31, 2023		December 31, 2022
Restricted cash	$	1,200	$	1,200
Prepaid insurance	2,106		2,252
Other	4		38
Other noncurrent assets	$	3,310	$	3,490

Property and equipment, net


	March 31, 2023		December 31, 2022
Scientific equipment	$	5,932	$	6,087
Computers and software	63		63
Furniture and fixtures	30		30

Property and equipment, gross	6,025		6,180
Less: accumulated depreciation and amortization	(3,746)		(3,650)
Property and equipment, net	$	2,279	$	2,530

Depreciation and amortization expense was $251 and $302 for the three months ended March 31, 2023 and 2022, respectively. During the three months ended March 31, 2023, the Company sold scientific equipment with a net book value of $7 and recognized a gain of $99 in the accompanying statement of operations for the three months ended March 31, 2023.

Accrued expenses and other current liabilities


	March 31, 2023		December 31, 2022
Accrued clinical, contract research and manufacturing costs	$	10	$	48
Accrued restructuring costs	—		48
Lease liability	561		539
Accrued payroll-related expenses	184		32
Accrued federal and state tax payable	209		209
Accrued other expenses	513		402
Accrued expenses and other current liabilities	$	1,477	$	1,278

4. Debt

On March 15, 2022, pursuant to the terms of the Company’s Credit and Security Agreement, dated as of September 25, 2020, as amended on October 21, 2020, July 30, 2021, September 30, 2021, and December 10, 2021 with MidCap Financial Trust, as agent, and the lenders party thereto from time to time (as amended, the “MidCap Credit Agreement”), the Company repaid all remaining outstanding obligations under the MidCap Credit Agreement, including the outstanding principal balance of $7,500 and an exit fee of $506.

The Company paid interest on the MidCap Credit Agreement of $194 during the three months ended March 31, 2022.

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

5. Leases

The Company’s lease arrangements at March 31, 2023 consist of (i) a lease for office and laboratory 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.

Chicago Lease

The Company has approximately thirty thousand square feet of office and laboratory 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 March 31,
	2023		2022
Operating lease costs	$	326	$	326
Variable lease costs	332		341
Short term lease costs	—		13
Total lease costs	$	658	$	680

SEC Form 10-Q/A filed by Exicure Inc. (Amendment)