Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Based on the evaluation of our disclosure controls and procedures as of December 31, 2021, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 based on the guidelines established in Internal Control-Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on the results of its evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2021.
Attestation Report of the Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm as we are a smaller reporting company and an “emerging growth company” as of December 31, 2021, as defined in the Jumpstart Our Business Startups Act of 2012.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2021 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can
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provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information.
Repricing of Outstanding and Unexercised Options
On March 24, 2022, the Board unanimously approved the repricing of all outstanding and unexercised stock options granted under the 2015 Plan and 2017 Plan (the “Plans”) and held by current employees, executive officers, and directors of the Company (the “Eligible Stock Options”). The exercise price of the Eligible Stock Options will be reduced to the closing price of the Company’s common stock on April 1, 2022. Except for the modification to the exercise price of the Eligible Stock Options, all other terms and conditions of each of the Eligible Stock Options will remain in full force and effect.
Pursuant to the Plans, the Board, as the administrator of the Plans, has discretionary authority, exercisable on such terms and conditions that it deems appropriate under the circumstances, to reduce the exercise price in effect for outstanding options under the Plans. In approving the repricing, the Board considered the impact of the current exercise prices of outstanding stock options on the incentives provided to employees and directors, the lack of retention value provided by the outstanding stock options to employees and directors, and the impact of such options on the capital structure of the Company. As of March 24, 2022, there are currently 6,996,741 stock options outstanding under the Plans, and all of the Company’s outstanding stock options have exercise prices in excess of the current fair market value of the Company’s common stock, which is why the Board made the determination to deem all outstanding and unexercised stock options held by current employees, executive officers, and directors as Eligible Stock Options.
Matthias Schroff, the Company’s Chief Executive Officer, and Elias Papadimas, the Company’s Chief Financial Officer, hold Eligible Stock Options exercisable into an aggregate of 881,200 and 375,417 shares of the Company’s common stock, respectively. Non-employee directors Jeffrey Cleland, Elizabeth Garofalo, Bali Muralidhar and James Sulat hold Eligible Stock Options exercisable into an aggregate of 115,079, 150,000, 115,079 and 93,386 shares of the Company’s common stock, respectively.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
We will file a definitive proxy statement for our 2022 Annual Meeting of Stockholders, or the Proxy Statement, with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of the Proxy Statement that specifically address the items set forth herein are incorporated by reference.
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by Item 10 is incorporated herein by reference to the sections of the 2022 Proxy Statement under the captions “Board of Directors and Corporate Governance,” “Election of Directors,” and “Executive Officers.”
Item 11. Executive Compensation.
The information required by Item 11 is incorporated herein by reference to the sections of the 2022 Proxy Statement under the captions “Executive Compensation” and “Director Compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by Item 12 is incorporated herein by reference to the sections of the 2022 Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans.”
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by Item 13 is incorporated herein by reference to the sections of the 2022 Proxy Statement under the captions “Certain Relationships and Related Party Transactions” and “Independence of the Board of Directors.”
Item 14. Principal Accounting Fees and Services.
Our independent public accounting firm is KPMG LLP, Chicago, Illinois (PCAOB ID: 185). The information required by Item 14 is incorporated herein by reference to the sections of the 2022 Proxy Statement under the caption “Ratification of Selection of Independent Registered Public Accounting Firm.”
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PART IV
Item 15. Exhibit and Financial Statement Schedules.
(a) The following documents are filed as part of this report:
1. Financial Statements
See Index to Financial Statements on page 106 of this Annual Report on Form 10-K.
2. Financial Statement Schedules
All financial statement schedules are omitted because they are not applicable or the required information is included in the financial statements or notes thereto.
3. Exhibits
Exhibit Number Exhibit Description Filed with this Report Incorporated by Reference herein from Form or Schedule Filing Date SEC File/Reg. Number
2.1† Agreement and Plan of Merger and Reorganization, dated September 26, 2017, by and among Max-1 Acquisition Corporation, Max-1 Acquisition Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, and Exicure OpCo, a Delaware corporation.
8-K (Exhibit 2.1) 10/2/2017 000-55764
3.1 Certificate of Merger relating to the merger of Max-1 Acquisition Sub., Inc. with and into Exicure OpCo, filed with the Secretary of State of the State of Delaware on September 26, 2017.
8-K (Exhibit 3.1) 10/2/2017 000-55764
3.2 Certificate of Amendment to Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on September 26, 2017.
8-K (Exhibit 3.2) 10/2/2017 000-55764
3.3 Amended and Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware on November 15, 2017.
10-K (Exhibit 3.3) 3/11/2021 001-39011
3.4 Amended and Restated Bylaws, as currently in effect.
8-K (Exhibit 3.4) 10/2/2017 000-55764
4.1 Form of Warrant to Purchase Shares of Common Stock issued to Placement Agent.
8-K (Exhibit 4.1) 10/2/2017 000-55764
4.2 Form of Registration Rights Agreement by and among the Company and the persons named therein.
8-K (Exhibit 4.2) 10/2/2017 000-55764
4.3 Form of Registration Rights Agreement by and among the Company and the persons named therein.
8-K (Exhibit 4.1) 8/28/2018 000-55764
4.4 Description of Securities
10-K (Exhibit 4.4) 3/10/2020 001-39011
4.5 Form of Indenture, between the Registrant and one or more trustees to be named.
S-3 (Exhibit 4.2) 12/21/2020 333-251555
4.6 Form of Common Stock Warrant Agreement and Warrant Certificate.
S-3 (Exhibit 4.4) 12/21/2020 333-251555
4.7 Form of Preferred Stock Warrant Agreement and Warrant Certificate.
S-3 (Exhibit 4.5) 12/21/2020 333-251555
4.8 Form of Debt Securities Warrant Agreement and Warrant Certificate .
S-3 (Exhibit 4.6) 12/21/2020 333-251555
10.1+ 2015 Equity Incentive Plan and forms of awards thereunder, assumed in the Merger.
8-K (Exhibit 10.1) 10/2/2017 000-55764
10.2+ 2017 Equity Incentive Plan and forms of award agreements thereunder.
8-K (Exhibit 10.2) 10/2/2017 000-55764
10.3+ 2017 Employee Stock Purchase Plan.
8-K (Exhibit 10.3) 10/2/2017 000-55764
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10.4+ Form of Indemnification Agreement by and between the Company and each of its directors and executive officers.
8-K (Exhibit 10.4) 10/2/2017 000-55764
10.5+ Employment Agreement dated as of February 2, 2016 by and between Exicure OpCo and David A. Giljohann, Ph.D.
8-K (Exhibit 10.7) 10/2/2017 000-55764
10.6+ Separation and Transition Agreement by and between Exicure Inc. and David A. Giljohann, Ph.D.
8-K (Exhibit 10.3) 2/4/2022 001-39011
10.7+ Amended and Restated Employment Agreement dated as of February 2, 2016 by and between Exicure OpCo and David S. Snyder.
8-K (Exhibit 10.8) 10/2/2017 000-55764
10.8+ Amended and Restated Employment Agreement as of December 10, 2019 by and between Exicure, Inc. and Matthias G. Schroff, Ph.D.
10-K (Exhibit 10.9) 3/10/2020 001-39011
10.9+ Second Amendment to the Employment Agreement, by and between Exicure, Inc. and Matthias Schroff, dated December 10, 2021
8-K (Exhibit 10.3) 12/10/2021 001-39011
10.10+ Second Amended and Restated Employment Agreement, by and between Exicure, Inc. and Matthias Schroff, Ph.D.
8-K (Exhibit 10.2) 2/4/2022 001-39011
10.11+ Amended and Restated Employment Agreement dated as of June 30, 2020 by and between Douglas E. Feltner, M.D. and Exicure, Inc.
10-Q (Exhibit 10.2) 8/12/2020 001-39011
10.12+ Form of Executive Employment Side Letter Agreement
8-K (Exhibit 10.1) 6/9/2020 001-39011
10.13+ Employment Agreement dated as of April 16, 2021 by and between Brian Bock and Exicure, Inc.
8-K (Exhibit 10.1) 5/13/2021 001-39011
10.14+ First Amendment to Employment Agreement dated as of December 10, 2021 by and between Brian Bock and Exicure, Inc.
8-K (Exhibit 10.2) 12/10/2021 001-39011
10.15+ Consulting Agreement dated as of October 1, 2011 by and between AuraSense Therapeutics, LLC and Chad A. Mirkin, Ph.D.
8-K (Exhibit 10.11) 10/2/2017 000-55764
10.16+ Inducement Award Agreement dated as of May 13, 2021 by and between Brian Bock and Exicure, Inc.
8-K (Exhibit 10.2) 5/13/2021 001-39011
10.17+ Advisor Agreement by and between Exicure, Inc. and Brian C. Bock
8-K (Exhibit 10.1) 2/4/2022 001-39011
10.18+ Amended and Restated Employment Agreement dated as of June 1, 2021 by and between Elias D. Papadimas and Exicure, Inc.
10-Q (Exhibit 10.3) 8/12/2021 001-39011
10.19+ First Amendment to Amended and Restated Employment Agreement by and between Exicure, Inc. and Elias D. Papadimas, dated January 17, 2022
8-K (Exhibit 10.2) 1/18/2022 001-39011
10.20+ Retention Agreement by and between Exicure, Inc. and Elias D. Papadimas
X
10.21 Lease Agreement dated as of February 28, 2020 by and between 2430 N. Halsted, LLC and Exicure, Inc.
10-Q (Exhibit 10.1) 5/14/2020 001-39011
10.22 Credit and Security Agreement, dated as of September 25, 2020, by and among Exicure, Inc., Exicure Operating Company, the lenders party thereto from time to time and MidCap Financial Trust, as agent.
8-K (Exhibit 10.1) 10/1/2020 001-39011
10.23 Amendment No. 1 dated as of October 21, 2020 to Credit and Security Agreement, dated as of September 25, 2020 by and among Exicure, Inc., Exicure Operating Company, the lenders party thereto from time to time and MidCap Financial Trust, as agent.
10-Q (Exhibit 10.2) 11/12/2020 001-39011
10.23.1 Amendment No. 2 dated as of July 30, 2021 to Credit and Security Agreement, dated as of September 25, 2020 by and among Exicure, Inc., Exicure Operating Company, the lenders party thereto from time to time and MidCap Financial Trust, as agent.
10-Q (Exhibit 10.4) 8/12/2021 001-39011
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10.23.2 Amendment No. 3 dated as of September 30, 2021 to Credit and Security Agreement, dated as of September 25, 2020 by and among Exicure, Inc., Exicure Operating Company, the lenders party thereto from time to time and MidCap Financial Trust, as agent.
8-K (Exhibit 10.1) 10/6/2021 001-39011
10.23.3 Amendment No. 4 dated as of December 10, 2021 to Credit and Security Agreement, dated as of September 25, 2020 by and among Exicure, Inc., Exicure Operating Company, the lenders party thereto from time to time and MidCap Financial Trust, as agent.
8-K (Exhibit 10.1) 12/10/2021 001-39011
10.24 Loan and Security Agreement dated as of February 17, 2016 by and between Exicure OpCo and Hercules.
8-K (Exhibit 10.16) 10/2/2017 000-55764
10.25 Amendment No. 1 to Loan and Security Agreement dated as of October 10, 2016 by and between Exicure OpCo and Hercules.
8-K (Exhibit 10.17) 10/2/2017 000-55764
10.25.1 Amendment No. 2 to Loan and Security Agreement dated as of January 15, 2018 by and between Exicure OpCo and Hercules.
S-1/A (Exhibit 10.17.1) 1/26/2018 333-221791
10.25.2 Amendment No. 3 to Loan and Security Agreement dated as of December 28, 2018 by and between Exicure OpCo and Hercules.
10-K (Exhibit 10.18.2) 3/8/2019 000-55764
10.25.3 Amendment No. 4 to Loan and Security Agreement dated as of March 8, 2019 by and between Exicure OpCo and Hercules.
8-K (Exhibit 10.1) 3/14/2019 000-55764
10.26* Restated License Agreement between Exicure OpCo and Northwestern University dated as of August 15, 2015.
8-K/A (Exhibit 10.20) 11/7/2017 000-55764
10.27* Amendment One to the Amended Restated License Agreement between Exicure OpCo and Northwestern University dated as of September 27, 2016.
8-K/A (Exhibit 10.23) 11/7/2017 000-55764
10.27.1* Amendment Two to the Amended Restated License Agreement between Exicure OpCo and Northwestern University dated as of November 30, 2017.
10-K (Exhibit 10.22) 3/10/2020 001-39011
10.27.2* Amendment Three to the Amended Restated License Agreement between Exicure OpCo and Northwestern University dated as of January 1, 2019.
10-K (Exhibit 10.23) 3/10/2020 001-39011
10.27.3 Amendment Four to the Amended Restated License Agreement between Exicure OpCo and Northwestern University dated as of November 13, 2019.
10-K (Exhibit 10.24) 3/10/2020 001-39011
10.27.4 Amendment Five to the Amended Restated License Agreement between Exicure OpCo and Northwestern University dated as of September 8, 2021.
10- Q (Exhibit 10.5) 11/19/2021 001-39011
10.28* License Agreement between Exicure OpCo and Northwestern University dated as of February 10, 2016 and effective as of May 27, 2014.
8-K/A (Exhibit 10.21) 11/7/2017 000-55764
10.29* Amendment One dated and effective as of June 11, 2018 to the License Agreement between Exicure OpCo and Northwestern University dated as of February 10, 2016 and effective as of May 27, 2014.
10-K (Exhibit 10.26) 3/10/2020 001-39011
10.29.1 Amendment Two dated and effective as of November 13, 2019 to the License Agreement between Exicure OpCo and Northwestern University dated as of February 10, 2016 and effective as of May 27, 2014.
10-K (Exhibit 10.27) 3/10/2020 001-39011
10.30* License Agreement between Exicure OpCo and Northwestern University dated as of June 17, 2016.
8-K/A (Exhibit 10.22) 11/7/2017 000-55764
10.31* Amendment One dated and effective June 11, 2018 to the License Agreement between Exicure OpCo and Northwestern University dated as of June 17, 2016.
10-K (Exhibit 10.27) 3/10/2020 001-39011
10.32* Research Collaboration, Option and License Agreement between Exicure OpCo and Purdue Pharma L.P. dated as of December 2, 2016.
8-K/A (Exhibit 10.24) 11/7/2017 000-55764
10.33* License and Development Agreement between Exicure, Inc. and DERMELIX LLC dated February 17, 2019.
10-Q (Exhibit 10.2) 5/8/2019 000-55764
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10.34 Side Agreement to Northwestern Agreements by and among Exicure OpCo, Northwestern University and Purdue Pharma L.P. dated as of October 11, 2016.
8-K/A (Exhibit 10.25) 11/7/2017 000-55764
10.35* Collaboration, Option and License Agreement between Exicure, Inc. and Allergan Pharmaceuticals International Limited dated as of November 13, 2019
10-K (Exhibit 10.33) 3/10/2020 001-39011
10.36 Side Agreement to Northwestern Agreements by and among Exicure Inc., Northwestern University and Allergan Pharmaceuticals International Limited dated as of November 13, 2019.
10-K (Exhibit 10.34) 3/10/2020 001-39011
10.37* Collaboration, Option and License Agreement between Exicure, Inc. and Ipsen Biopharm Limited dated as of July 30, 2021
10- Q (Exhibit 10.3) 11/19/2021 001-39011
10.38 Side Agreement to Northwestern Agreements by and among Exicure Inc., Northwestern University and Ipsen Biopharm Limited dated as of July 30, 2021.
10- Q (Exhibit 10.4) 11/19/2021 001-39011
10.39 Form of Securities Purchase Agreement, dated December 14, 2021, by and among Exicure, Inc. and the purchaser parties thereto.
8-K (Exhibit 10.1) 12/16/2021 001-39011
10.40 Form of Subscription Agreement by and between the Company and each investor in the initial closing of the 2017 Private Placement.
8-K (Exhibit 10.5) 10/2/2017 000-55764
21.1 Subsidiaries of Exicure, Inc.
X
23.1 Consent of KPMG LLP, independent registered public accounting firm.
X
24.1 Power of Attorney (included on the signature page hereto).
X
31.1 Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2 Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1** Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document X
101.SCH Inline XBRL Taxonomy Extension Schema Document X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) X
† Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. We hereby undertake to furnish supplementally a copy of any of the omitted schedules and exhibits to the SEC on a confidential basis upon request.
+ Indicates a management contract or compensatory plan.
* Indicates that portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
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** This certification is not deemed filed with the SEC and is not to be incorporated by reference into any filing of Exicure, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of such Form 10-K), irrespective of any general incorporation language contained in such filing.
Item 16. Form 10-K Summary.
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on March 25, 2022.
EXICURE, INC.
By: /s/ Matthias Schroff, Ph.D.
Matthias Schroff, Ph.D.
Chief Executive Officer
By: /s/ Elias D. Papadimas
Elias D. Papadimas
Chief Financial Officer
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POWER OF ATTORNEY
We, the undersigned directors and officers of Exicure, Inc., hereby severally constitute and appoint Matthias Schroff, Ph.D. and Elias D. Papadimas, and each of them singly, our true and lawful attorneys-in-fact, with full power to them, and to each of them singly, to sign for us and in our names in the capacities indicated below, any and all amendments to this Annual Report on Form 10-K and to file or cause to be filed the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as each of them might or could do in person, and hereby ratifying and confirming all that said attorneys-in-fact, and each of them, or their substitute or substitutes, shall do or cause to be done by virtue of this Power of Attorney. This Power of Attorney does not revoke any power of attorney previously granted by the undersigned, or any of them.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Matthias Schroff, Ph.D. President, Chief Executive Officer, and Director
( Principal Executive Officer)
March 25, 2022
Matthias Schroff, Ph.D.
/s/ Elias D. Papadimas Chief Financial Officer
( Principal Financial Officer and Principal Accounting Officer)
March 25, 2022
Elias D. Papadimas
/s/ Elizabeth Garofalo, M.D. Chair of the Board of Directors March 25, 2022
Elizabeth Garofalo, M.D.
/s/ Jeffrey L. Cleland, Ph.D. Director March 25, 2022
Jeffrey L. Cleland, Ph.D.
/s/ Bali Muralidhar, M.D., Ph.D. Director March 25, 2022
Bali Muralidhar, M.D., Ph.D.
/s/ James R. Sulat Director March 25, 2022
James R. Sulat
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