What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-06-06 compared with 2023-03-27 · 335 added, 298 removed, 808 unchanged (44% of the section changed)

2 unchanged sentences

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm ( Marcum LLP , Chicago, IL , PCAOB ID 688 )

Report of Independent Registered Public Accounting Firm ( KPMG LLP , Chicago, IL , PCAOB ID 185 )

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Exicure, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Exicure, Inc.

(the “Company”) as of December 31, 2023, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 1 to the consolidated financial statements, the Company has incurred significant expenses and negative cash flows since inception and its current liquidity is not sufficient to fund operations over the next twelve months.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Marcum LLP

We have served as the Company’s auditor since 2023 .

New York, New York

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Exicure, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Exicure, Inc.

and subsidiary (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with U.S.

We have audited the accompanying consolidated balance sheet of Exicure, Inc.

and subsidiary (the Company) as of December 31, 2022, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

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These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

(signed) KPMG LLP

We have served as the Company’s auditor since 2014.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We served as the Company’s auditor from 2014 to 2023.

Chicago, Illinois

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Cash and cash equivalents $ 816 $ 8,577

Short-term investments — 4,497

Prepaid expenses and other assets 1,474 4,525

Other receivable 15 —

Prepaid expenses and other current assets 1,193 1,474

Total current assets 2,024 10,051

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Current liabilities:

Current portion of long-term debt $ — $ 6,873

Accounts payable $ 1,631 $ 361

Accrued expenses and other current liabilities 879 1,278

Deferred revenue, current — 17,317

Total current liabilities 2,510 1,639

Deferred revenue, noncurrent — 11,509

Lease liability, noncurrent 6,039 6,767

Other noncurrent liabilities — 656

Total liabilities

$ 8,549 $ 8,406

Commitments and Contingencies (Note 15)

Stockholders’ equity:

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Total stockholders' equity

14,922 11,232

Total liabilities and stockholders’ equity

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General and administrative expense 12,653 10,890

Loss from sale of property and equipment 920 —

Total operating expenses 14,996 30,657

1 unchanged sentence

Other (expense) income, net:

Changes in fair value of investment in convertible notes receivable ( 2,000 ) —

Dividend income 52 78

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Other comprehensive (loss) income, net of taxes

Unrealized (losses) gains on available for sale securities, net of tax 2 ( 85 )

Other comprehensive (loss) income 2 ( 85 )

Unrealized gains on available for sale securities, net of tax — 2

Other comprehensive income — 2

Comprehensive loss $ ( 16,914 ) $ ( 2,580 )

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Shares $ Additional Paid-in- Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity

Balance at December 31, 2020 2,921,684 $ — $ 167,388 $ ( 105,965 ) $ 83 $ 61,506

Balance at January 1, 2022 3,626,073 $ — $ 181,301 $ ( 170,067 ) $ ( 2 ) $ 11,232

Exercise of options 124 — — — — —

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Balance at December 31, 2022 4,965,901 $ — $ 187,571 $ ( 172,649 ) $ — $ 14,922

Exercise of options 124 — — — — —

Reclassification of common stock warrants to liability — — ( 800 ) — — ( 800 )

Equity-based compensation — — 1,348 — — 1,348

Vesting of restricted stock units and related repurchases 284,852 1 ( 123 ) — — ( 122 )

Issuance of common stock-ESPP 1,851 — 5 — — 5

Issuance of common stock and warrants, net 3,400,000 — 4,597 — — 4,597

Other comprehensive income, net — — — — 2 2

Net loss — — — ( 16,914 ) — ( 16,914 )

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Amortization of investments — ( 2 )

Change in fair value of warrant liabilities — ( 15 )

Changes in fair value of investment in convertible notes receivable 2,000 —

Loss from sale of property and equipment 920 —

Changes in operating assets and liabilities:

Accounts receivable — 11

Prepaid expenses and other current assets 733 3,051

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Capital expenditures — ( 10 )

Proceeds from sale of capital assets 205 —

Net cash provided by investing activities 4,696 43,085

Proceeds from sale of property and equipment 922 205

Net cash (used in) provided by investing activities ( 1,078 ) 4,696

Cash flows from financing activities:

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Proceeds from exercise of common stock warrants — 14

Proceeds from exercise of common stock options — 546

Payment of exercise of common stock warrants ( 800 ) —

Payments for minimum statutory tax withholding related to net share settlement of equity awards ( 123 ) ( 4 )

Net cash (used in) provided by financing activities ( 3,105 ) 1,116

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 34,067 ) 9,382

Cash, cash equivalents, and restricted cash - beginning of period 43,844 34,462

Cash, cash equivalents, and restricted cash - end of period $ 9,777 $ 43,844

Net cash provided by (used in) financing activities 3,674 ( 3,105 )

Net (decrease) in cash, cash equivalents, and restricted cash ( 7,761 ) ( 34,067 )

Cash, cash equivalents, and restricted cash - beginning of year 9,777 43,844

Cash, cash equivalents, and restricted cash - end of year $ 2,016 $ 9,777

EXICURE, INC.

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(in thousands)

Year Ended December 31,

Supplemental disclosure of cash flow information

Non-cash investing activities:

Capital expenditures (accounts payable and accrued expenses) — 9

Non-cash financing activities:

Common stock issuance costs (accounts payable and accrued expenses) — 142

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

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(in thousands, except share and per share data)

Description of Business and Basis of Presentation

Description of Business, Basis of Presentation and Going Concern

Description of Business

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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.

With respect to the Company’s historical assets, this includes continuing to explore out-licensing opportunities for cavrotolimod, the Company’s clinical-stage asset in immuno-oncology, as well as for the Company’s preclinical candidate associated with the SCN9A program for neuropathic pain.

While the foregoing efforts are continuing, the Company does not expect they will generate significant value for stockholders, at least in the near term.

While the foregoing efforts are continuing, with respect to the Company’s historical assets, the Company does not expect they will generate significant value for stockholders.

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 both within its historical biotechnology and life science industry and in other industries unrelated to its historical operations.

The Company is exploring transactions in industries unrelated to its historical operations.

Throughout these consolidated financial statements, the terms the “Company,” and “Exicure” refer to Exicure, Inc.

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Basis of Presentation

The accompanying consolidated financial statements as of December 31, 2022 and 2021, and for the years then ended, have been presented in conformity with generally accepted accounting principles in the United States (“GAAP”).

These consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and accounting principles generally accepted in the United States of America (“US GAAP”) as defined by the Financial Accounting Standards Board (“FASB”) within the FASB Accounting Standards Codification (“ASC”) and are presented in thousands, except number of shares and per share data.

Principles of Consolidation

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All intercompany transactions and accounts are eliminated in consolidation.

Reverse Stock Split

The Company effected a reverse stock split of its Common Stock at a ratio of 1-for-30 as of 5:00 p.m.

Eastern Time on June 29, 2022.

No fractional shares were issued in connection with the reverse stock split.

Stockholders of record who would otherwise be entitled to receive a fractional share received a cash payment in lieu thereof.

All information presented in the accompanying consolidated financial statements, unless otherwise indicated herein, assumes a 1-for-30 reverse stock split of the Company’s outstanding shares of Common Stock, and unless otherwise indicated, all such amounts and corresponding conversion price or exercise price data set forth herein have been adjusted to give effect to such assumed reverse stock split.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Reclassification

Certain accounts in the prior period consolidated financial statements have been reclassified to conform to the presentation of the current year consolidated financial statements.

These reclassifications had no effect on the previously reported operating results.

Going Concern

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The accompanying 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 December 31, 2022, the Company has generated an accumulated deficit of $ 191,486 since inception and expects to incur significant expenses and negative cash flows for the foreseeable future.

As of December 31, 2022, the Company’s cash, cash equivalents, and restricted cash were $ 9,777 .

As of December 31, 2023, the Company expects to incur significant expenses and negative cash flows for the foreseeable future.

As of December 31, 2023, the Company’s cash and cash equivalents were $ 816 .

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.

The Company has no committed sources of additional capital at this time and substantial additional financing will be needed by the Company to fund its operations.

Management believes that existing cash and cash equivalents could enable the Company to fund its operating expenses into the beginning of 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.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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 within the next few months to pay expenses, fund the ongoing exploration of strategic alternatives and pursue any alternatives that may be identified.

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.

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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.

The preparation of the financial statements in conformity with US 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.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Significant Accounting Policies

Cash, cash equivalents, and short-term investments

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

The Company’s short-term investments have initial maturities of greater than three months from date of purchase.

The Company classifies its marketable debt security investments as “available-for-sale” and carries them at fair market value based upon prices on the last day of the fiscal period for identical or similar items.

The Company classifies its marketable debt security investments as available-for-sale (“AFS”) and carries them at fair market value based upon prices on the last day of the fiscal period for identical or similar items.

The Company records unrealized gains and losses on marketable debt securities in other comprehensive income (loss) as a component of stockholders’ equity until realized.

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The Company secures a standby letter of credit with a restricted certificate of deposit account as part of its Chicago lease agreement.

The Company considers the restricted certificate of deposit account in the amount of $ 1,200 to be restricted cash because its use to the Company is contractually limited and presents the balance within other noncurrent assets on the accompanying consolidated balance sheet at December 31, 2022.

Fair value of financial instruments

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The Company records short-term investments at their estimated fair value based on quoted market prices for identical or similar instruments.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Investment in Convertible Notes Receivable

Securities are classified as current or noncurrent based on the remaining contractual maturities of the securities.

Securities are designated by the Company at the point of investment, as either trading, AFS, or held to maturity.

Under ASC 825, Financial Instruments, the Company elected the fair value option for all outstanding convertible notes receivable.

Management evaluates the performance of the securities on a fair value basis.

Under the fair value option, the notes receivable are measured at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in the Condensed Consolidated Statements of Operations.

Investment in convertible notes receivable at fair value totaled $ 0 as of December 31, 2023.

As of December 31, 2023, the aggregate cost of the investment in convertible notes receivable accounted for under the fair value option was $ 0 , which included principal balances of $ 2,000 and the change in fair value of $ 2,000 .

Concentrations of credit risk and other risks and uncertainties

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The Company periodically reviews and modifies these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds.

The Company has not experienced any credit losses in such accounts.

The Company has no financial instruments with off-balance sheet risk of loss.

For the year ended December 31, 2022, the Company’s revenue was generated from its collaborations with Ipsen and AbbVie, which were terminated in the fourth quarter.

For the year ended December 31, 2022, the Company’s revenue was generated from its collaborations with Ipsen and AbbVie, which were terminated in the fourth quarter of 2022 resulting in no revenue for 2023.

The Company is currently not profitable and no assurance can be provided that it will ever be profitable.

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See also Note 1, Going Concern , for more information.

The Company is subject to risks common to biotechnology firms including, but not limited to, new and disruptive technological innovations, dependence on key personnel, protection of proprietary technology, the validity of and continued access to its owned and licensed intellectual property, limitations on the supply of critical materials, compliance with governmental regulations and market acceptance.

The Company is also subject to risks associated with its exploration of strategic alternatives including, but not limited, the inability to identify any

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

transactions that will generate value for stockholders, incurrence of excessive costs in seeking to identify and pursue transactions and the possibility that any transaction the Company does pursue will not provide anticipated benefits.

The Company is subject to risks associated with its exploration of strategic alternatives including, but not limited, the inability to identify any transactions that will generate value for stockholders, incurrence of excessive costs in seeking to identify and pursue transactions and the possibility that any transaction the Company does pursue will not provide anticipated benefits.

Property and equipment

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Property and equipment are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

No impairment losses were recorded from inception in December 2011 through December 31, 2022.

No impairment losses were recorded recorded for the years ended December 31, 2023 and 2022.

The Company accounts for freestanding warrants within stockholder’s equity or as liabilities based on the characteristics and provisions of each instrument.

The Company evaluates outstanding warrants in accordance with Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity , and ASC 815, Derivatives and Hedging .

If none of the criteria in the evaluation in these standards are met, the warrants are classified as a component of stockholders’ equity and initially recorded at their grant date fair value without subsequent remeasurement.

The Company evaluates outstanding warrants in accordance with ASC 480, Distinguishing Liabilities from Equity , and ASC 815, Derivatives and Hedging .

If none of the criteria in

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

the evaluation in these standards are met, the warrants are classified as a component of stockholders’ equity and initially recorded at their grant date fair value without subsequent remeasurement.

Warrants that meet the criteria are classified as liabilities and remeasured to their fair value, estimated using the Black-Scholes option-pricing model, at the end of each reporting period with changes in the fair value of the liability recorded in other income (expense), net in the consolidated statements of operations.

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The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods and services to the customer.

To the extent the transaction price includes variable consideration, the Company estimates the amount of variable

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method, depending on the nature of the variable consideration.

To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method, depending on the nature of the variable consideration.

Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

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The Company satisfies performance obligations either over time or at a point in time.

Revenue is recognized over time if either (i) the customer simultaneously receives and consumes the benefits provided by the entity’s performance, (ii) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (iii) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.

Revenue is recognized over time if either (i)

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

the customer simultaneously receives and consumes the benefits provided by the entity’s performance, (ii) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (iii) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.

If the entity does not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer.

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Milestone payments:

At the inception of each arrangement that includes development milestone payments, the Company evaluates the probability of reaching the milestones and estimates the amount to be included in the

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

transaction price using the most likely amount method.

At the inception of each arrangement that includes development milestone payments, the Company evaluates the probability of reaching the milestones and estimates the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant revenue reversal would not occur in the future, the associated milestone value is included in the transaction price.

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To date, the Company has not recognized any royalty revenue resulting from any of its collaboration agreements.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Equity-based compensation

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The Company combines lease and non-lease components, which are accounted for together as a single lease component.

Variable lease payments, such as real

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

estate taxes and facility maintenance costs that are allocated by the lessor to the lessee and are not based on an index or a rate, are excluded from the measurement of the lease liability.

Variable lease payments, such as real estate taxes and facility maintenance costs that are allocated by the lessor to the lessee and are not based on an index or a rate, are excluded from the measurement of the lease liability.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

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The costs include employee‑related expenses including salaries, benefits, and stock‑based compensation expense, costs of funding research performed by third parties that conduct research and development and preclinical and clinical activities on the Company’s behalf, the cost of purchasing lab supplies and non‑capital equipment used in preclinical and clinical activities and in manufacturing preclinical and clinical study materials, consultant fees, facility costs including rent, depreciation and maintenance expenses, fees for acquiring and maintaining licenses under third party licensing agreements, including any sublicensing or success payments made to the Company’s licensors, and overhead and other expenses directly related to research and development operations.

In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period.

In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

If the actual timing of the performance of services or the level of effort varies from the Company’s estimate, the accrual or prepaid is adjusted accordingly.

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At December 31, 2023 and 2022, the Company established a full valuation allowance against its deferred tax assets to an amount that is more likely than not to be realized.

Recent Accounting Pronouncements Adopted

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) (“ASU 2016-13”).

This ASU changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The standard replaces the “incurred loss” approach with an “expected loss” model.

The new model, referred to as the current expected credit loss (“CECL”) model, will apply to:

(1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures.

ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for credit losses.

2016-13 was effective for the Company beginning on January 1, 2020.

The Company adopted this ASU in January 2023.

There was no material impact on the consolidated financial statements.

EXICURE, INC.

1 unchanged sentence

(in thousands, except share and per share data)

Recent Accounting Pronouncements Not Yet 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 expects that the adoption of ASU 2016-13 will not have a material impact to the Company’s consolidated financial statements.

Collaborative Research and License Agreements

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Under the terms of the Ipsen Collaboration Agreement, the Company was to use commercially reasonable efforts to conduct discovery and development in two collaboration programs for Huntington’s disease (the “HD Program”) and Angelman syndrome (the “AS Program”) (the “Ipsen Development Activities”) respectively.

The Company was solely responsible for all costs and expenses of conducting each Ipsen Collaboration Program through the selection of SNA therapeutic candidates for further development (“Ipsen

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Selection”), and Ipsen was responsible for all costs and expenses of all activities that were necessary to enable the first filing of an IND for each proposed product candidate.

The Company was solely responsible for all costs and expenses of conducting each Ipsen Collaboration Program through the selection of SNA therapeutic candidates for further development (“Ipsen Selection”), and Ipsen was responsible for all costs and expenses of all activities that were necessary to enable the first filing of an IND for each proposed product candidate.

In the event that Ipsen exercised an option, Ipsen would have been responsible for further development from the license effective date and commercialization of the corresponding licensed product.

1 unchanged sentence

Following the delivery of the Ipsen First Option Data Package for an Ipsen Collaboration Program, Ipsen would have had the ability for a defined period of time (the “Ipsen First Option Exercise Period”) to exercise an option (each a “First Ipsen Option”) to obtain worldwide rights and license to the Company’s SNA technology and the Company’s interest in joint collaboration technology to make, have made, import, use, sell or offer for sale any product (each an “Ipsen Licensed Product”) that resulted from such Ipsen Collaboration Program during the term of the Ipsen Collaboration Agreement.

In the event Ipsen (i) did not exercise the First Ipsen Option with respect to an Ipsen Collaboration Program, (ii) the Ipsen Collaboration Agreement had not expired or been terminated with respect to such Ipsen Collaboration Program, and (iii) Ipsen agreed to fully fund additional research activities for an Ipsen Collaboration Program through IND filing, the Company would have been responsible for research and development activities for such Ipsen Collaboration Program through IND filing (the “Ipsen Second R&D Term Activities”).

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Program, and (iii) Ipsen agreed to fully fund additional research activities for an Ipsen Collaboration Program through IND filing, the Company would have been responsible for research and development activities for such Ipsen Collaboration Program through IND filing (the “Ipsen Second R&D Term Activities”).

In the event of completion of the Ipsen Second R&D Term Activities, the Company would have been required to deliver to Ipsen a report that described the results of the Ipsen Second R&D Term Activities (the “Ipsen Second Option Data Package”).

6 unchanged sentences

Ipsen would have been required to pay a preclinical milestone payment of $ 5,000 for each Ipsen Collaboration Program upon achievement of such milestone regardless of whether an Ipsen Option was exercised.

In addition to the option exercise fees and the preclinical milestones described above, if Ipsen exercised an Ipsen Option for an Ipsen Collaboration Program, development and regulatory milestones would have been payable for that program upon the initiation of certain clinical trials and the filing for processing by the United States Food and Drug Administration (“FDA”) in the United States and by two additional regulators outside the United States of a marketing application for review, per the Ipsen Collaboration Program, with an aggregate total of up to $ 180,000 if

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

both Ipsen Options were exercised.

Commercial milestones would have been payable for that Ipsen Collaboration Program upon first commercial sale of a licensed product in certain jurisdictions and the achievement of specified aggregate sales thresholds for all licensed products from that program, with an aggregate total of up to $ 762,000 if both Ipsen Options were exercised.

3 unchanged sentences

The Company’s obligations to conduct activities defined in the Ipsen Development Plan under the Ipsen Collaboration Agreement commenced on July 30, 2021 and continued through the Ipsen Termination Agreement effective date.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Accounting Analysis

14 unchanged sentences

The preclinical, development, regulatory, and commercial milestones were fully constrained due to the significant uncertainties surrounding such payments.

The Company considered the stage of development

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

and the risks associated with the remaining development required to achieve the milestone, as well as whether the achievement of the milestone is outside the control of the Company or Ipsen.

The Company considered the stage of development and the risks associated with the remaining development required to achieve the milestone, as well as whether the achievement of the milestone is outside the control of the Company or Ipsen.

The Company has determined that any commercial milestones and sales-based royalties will be recognized when the related sales occur and therefore, they have also been excluded from the transaction price.

5 unchanged sentences

The Company believes the input method that most accurately depicts the measure of progress is the actual hours incurred to date relative to projected hours to complete the activities for the Ipsen HD Program Services and the Ipsen AS Program Services.

In connection with the Ipsen Termination Agreement, the Company recognized as revenue any remaining deferred revenue associated with the Ipsen Collaboration Agreement in the fourth quarter of 2022.

During the years ended December 31, 2022 and 2021, the Company recognized revenue under the Ipsen Collaboration Agreement of approximately $ 17,691 and $ 2,309 , respectively.

In connection with the Ipsen Termination Agreement, the

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Company recognized as revenue any remaining deferred revenue associated with the Ipsen Collaboration Agreement in the fourth quarter of 2022.

During the year ended December 31, 2022, the Company recognized revenue under the Ipsen Collaboration Agreement of $ 17,691 .

AbbVie Collaboration Agreement

8 unchanged sentences

As a result of the termination of the AbbVie Collaboration Agreement, the Company regained the ability to independently develop medicines targeting hair loss disorders.

As of the AbbVie Effective Date and through the AbbVie Termination Agreement Effective Date, the Company and AbbVie had agreed upon a development plan for each AbbVie Collaboration Program that described the development activities and timelines required to advance such AbbVie Collaboration Program through its first IND

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

filing (each, an “AbbVie Development Plan”).

The activities described in the AbbVie Development Plan were conducted under the supervision of the AbbVie Joint Development Committee (the “AbbVie JDC”) consisting of three members from each of the Company and AbbVie.

2 unchanged sentences

In the event of completion of all AbbVie Initial Development Activities, the Company would have been required to deliver to AbbVie a report that described the results of the AbbVie Initial Development Activities and identified at least one SNA-based compound that satisfies certain criteria for such AbbVie Collaboration Program as determined by the AbbVie JDC (the “AbbVie Initial Development Report”).

Following the delivery of the AbbVie Initial Development Report for an AbbVie Collaboration Program, AbbVie would have had the ability for a defined period of time (the “AbbVie Initial Option Exercise Period”) to exercise an option (each an “AbbVie Option”) to obtain worldwide rights and license to the Company’s SNA technology and the Company’s interest in joint collaboration technology to make, have made, import, use, sell or offer for sale any product (each an “AbbVie Licensed Product”) that resulted from such AbbVie Collaboration Program during the term of the AbbVie Collaboration Agreement.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Licensed Product”) that resulted from such AbbVie Collaboration Program during the term of the AbbVie Collaboration Agreement.

At AbbVie’s sole option, AbbVie had the right to extend the AbbVie Initial Option Exercise Period (the “AbbVie Option Extension”) and require the Company to perform IND-enabling activities described in the AbbVie Development Plan (the “AbbVie IND-Enabling Activities”), subject to the payment of additional consideration (“AbbVie Extension Exercise”).

8 unchanged sentences

If AbbVie elected to exercise its option during the AbbVie Extended Option Exercise Period, AbbVie would have been required to pay the Company the option exercise fee of $ 15,000 .

Following the exercise by AbbVie of an AbbVie Option with respect to an AbbVie Collaboration Program, AbbVie would have been required to make certain milestone payments to the Company upon the achievement of specified development, product approval and launch, and commercial events, on an AbbVie Licensed Product by

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

AbbVie Licensed Product basis.

On an AbbVie Licensed Product by AbbVie Licensed Product basis, for the first AbbVie Licensed Product to achieve the associated milestone event, the Company was eligible to receive up to an aggregate of $ 55,000 for development milestone payments and $ 132,500 for product approval and launch milestone payments.

4 unchanged sentences

(i) the expiration date in such country of the last to expire valid claim within the licensed intellectual property covering the manufacture, use or sale of such AbbVie Licensed Product in such country, (ii) the tenth anniversary of the first commercial sale of such AbbVie Licensed Product in such country, and (iii) the expiration of regulatory exclusivity for such AbbVie Licensed Product in such country.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Accounting Analysis

17 unchanged sentences

The Company recognized revenue related to the AbbVie Collaboration Program Services as the performance obligation is satisfied using an input method to measure progress.

The Company believes the input method that most

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

accurately depicts the measure of progress is the actual hours incurred to date relative to projected hours to complete the research service.

The Company believes the input method that most accurately depicts the measure of progress is the actual hours incurred to date relative to projected hours to complete the research service.

During the third quarter of 2021, the AbbVie JDC revised the AbbVie Initial Development Plan for each AbbVie Collaboration Program.

1 unchanged sentence

In connection with the AbbVie Termination Agreement, the Company recognized as revenue any remaining deferred revenue associated with the AbbVie Collaboration Agreement in the fourth quarter of 2022.

During the years ended December 31, 2022 and 2021, the Company recognized revenue under the AbbVie Collaboration Agreement of approximately $ 11,135 and $( 2,792 ), respectively.

Summary of Contract Liabilities

Up-front payments are recorded as deferred revenue upon receipt or when due until such time as the Company satisfies its performance obligations under these arrangements.

The following table presents changes in the balances of the Company’s contract liabilities (in thousands):

AbbVie Collaboration Agreement Ipsen Collaboration Agreement

Deferred revenue - Balance at January 1, 2021 $ 8,343 $ —

Additions — 20,000

Revenue (recognized) reversed 2,792 ( 2,309 )

Deferred revenue - Balance at December 31, 2021 11,135 17,691

Additions — —

Revenue recognized ( 11,135 ) ( 17,691 )

Deferred revenue - Balance at December 31, 2022 $ — $ —

During the year ended December 31, 2022, the Company recognized revenue under the AbbVie Collaboration Agreement of $ 11,135 .

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Supplemental Balance Sheet Information

2 unchanged sentences

Prepaid insurance 508 408

Prepaid franchise tax 259 223

Lease costs 235 111

Other 191 519

Prepaid expenses and other current assets $ 1,193 $ 1,474

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Other noncurrent assets

6 unchanged sentences

Furniture and fixtures 30 30

Construction in process — 33

Property and equipment, gross 279 6,180

3 unchanged sentences

During the year ended December 31, 2023, the Company sold scientific equipment with a net book value of $ 1,834 and recognized a loss of $ 920 in the accompanying statement of operations for the year ended December 31, 2023.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Accrued expenses and other current liabilities

5 unchanged sentences

Accrued expenses and other current liabilities $ 879 $ 1,278

As of December 31, 2022 and 2021, the Company primarily invested its excess cash in debt instruments of corporations, the U.S.

Treasury, financial institutions, and U.S.

government agencies with strong credit ratings and an investment grade rating at or above a long-term rating of Aa3/AA- and a short-term rating of P1/A1.

The Company has established guidelines relative to diversification and maturities that maintain safety and liquidity.

The Company periodically reviews and modifies these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

As of December 31, 2022, the balance of available-for-sale securities was zero as the Company’s excess cash was primarily invested in money market funds.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

As of December 31, 2021, the Company’s available-for-sale securities were available to the Company for use in its current operations.

As a result, the Company categorized all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.

The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of available-for-sale securities by type of security at December 31, 2021 were as follows:

December 31, 2021

Amortized Costs Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value

Commercial paper $ 10,498 $ — $ ( 2 ) $ 10,496

$ 10,498 $ — $ ( 2 ) $ 10,496

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 conversion ratio will be one hundred percent ( 100 %) of the Notes Receivable’s face value.

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.

The Company’s debt securities are classified as AFS pursuant to ASC 320 - Investments - Debt Securities.

AFS securities are recorded at fair value.

During the year ended December 31, 2023, management does not believe these AFS investments are recoverable and booked a change in fair value to record them at a fair value of $ 0 .

The Company held no AFS debt securities as of December 31, 2022.

MidCap Credit Agreement

6 unchanged sentences

Interest on each loan advance is due and payable monthly in arrears.

Principal on each loan advance was payable in 36 equal monthly installments beginning October 1, 2022 until paid in full on October 1, 2025 (the “Maturity Date”).

Principal on each loan advance was payable in 36 equal monthly installments beginning October 1, 2022 until paid in full on October 1, 2025 (the

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

“Maturity Date”).

Prepayments of the loans under the MidCap Credit Agreement, in whole or in part, were subject to early termination fees in an amount equal to 3.0 % of principal prepaid if prepayment occurs on or prior to the first anniversary of the Closing Date and 1.0 % of principal prepaid if prepayment occurs after the first anniversary of the Closing Date and prior to the maturity date.

8 unchanged sentences

Additionally, the Company’s future subsidiaries, if any, may have been required to become co-borrowers or guarantors under the MidCap Credit Agreement.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The MidCap Credit Agreement contained customary affirmative covenants and customary negative covenants limiting the Company’s ability and the ability of the Company’s subsidiaries, if any, to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions.

5 unchanged sentences

Fees and issuance costs of $ 73 attributed to the amount available to be borrowed under Tranche 2 were paid and recorded as deferred financing costs (other assets) and were amortized and recorded to interest expense in 2021 when it was determined that amounts under Tranche 2 would not be borrowed.

The Company paid interest on the MidCap Credit Agreement of $ 194 and $ 1,375 during the years ended December 31, 2022 and 2021, respectively.

The Company’s lease arrangements at December 31, 2022 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) leases for office equipment (the “Office Equipment Leases”).

The Company paid interest on the MidCap Credit Agreement of $ 194 during the year ended December 31, 2022.

The Company’s lease arrangements at December 31, 2023 consist of (i) a lease for office space at its headquarters in Chicago, Illinois that commenced in July 2020 (the “Chicago Lease”) and (ii) leases for office equipment (the “Office Equipment Leases”).

The Chicago Lease and the Office Equipment Leases are classified as operating leases.

The Company’s lease arrangement for office and laboratory space at its former headquarters in Skokie, Illinois ended in February 2021 in accordance with the terms of that lease arrangement.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Chicago Lease

The Company has approximately thirty thousand square feet of office and laboratory space in Chicago, Illinois (the “Chicago Lease”).

The Company has approximately thirty thousand square feet of office space in Chicago, Illinois (the “Chicago Lease”).

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.

6 unchanged sentences

The Company also paid the landlord a net amount of $ 697 toward tenant improvements.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

As part of the agreement for the Chicago Lease, the Company is required to maintain a standby letter of credit during the term of the lease, currently in the amount of $ 1,200 and subject to reduction over time, which is secured by a restricted certificate of deposit account and presented within other noncurrent assets on the Company’s consolidated balance sheet at December 31, 2023.

6 unchanged sentences

Weighted-average discount rate 8.3 % 8.3 %

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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

4 unchanged sentences

The Company made cash payments for operating leases of $ 1,808 and $ 3,024 during the years ended December 31, 2023 and 2022, respectively.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Currently, the Company is several months past due with its lease payments.

Maturities of the Company’s lease liability as of December 31, 2023 were as follows:

7 unchanged sentences

Total lease liability $ 6,665

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.

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

Sublease receipts $ 550 $ —

Total $ 550 $ —

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Restructuring

14 unchanged sentences

The following table presents changes in the accrued restructuring liability balance for the periods presented (in thousands):

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

December 2021 Restructuring September 2022

5 unchanged sentences

Balance at December 31, 2022 $ 48 $ — $ 48

The accrued liability balance at December 31, 2022 associated with the strategic reduction in force announced December 2021 of separation benefits in the form of salary continuation pursuant to an employment agreement and was paid in January 2023.

Payments ( 48 ) — ( 48 )

Balance at December 31, 2023 $ — $ — $ —

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Stockholders’ Equity

11 unchanged sentences

Securities Purchase Agreement

On September 26, 2022, the Company entered into a securities purchase agreement (the “September 2022 Securities Purchase Agreement”) with 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 (the “September 2022 PIPE Shares”) of its common stock, par value $ 0.0001 per share (the “Common Stock”), at a purchase price of $ 1.60 per share (the “September 2022 PIPE”).

The September 2022 PIPE closed on February 24, 2023 (the “2023 PIPE Closing Date”).

Immediately following the closing of the September 2022 PIPE, CBI USA holds approximately 50.4 % of the shares of the Company’s common stock.

At closing of the September 2022 PIPE, the Company received aggregate gross proceeds of $ 5,440 (or net proceeds of approximately $ 4,597 after transaction expenses).

Refer to Note 17, Subsequent Event , for more information on the September 2022 PIPE.

On September 26, 2022, the Company entered into a securities purchase agreement (the “September 2022 Securities Purchase Agreement”) with 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.

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 June 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 June 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

EXICURE, INC.

1 unchanged sentence

(in thousands, except share and per share data)

September 2022 Registration Rights Agreement

Also, on September 26, 2022, the Company entered into a registration rights agreement (the “September 2022 Registration Rights Agreement”) with CBI USA, pursuant to which the Company agreed to register the resale of the September 2022 PIPE Shares.

Under the September 2022 Registration Rights Agreement, the Company has agreed to file a registration statement covering the resale of the September 2022 PIPE Shares no later than the sixtieth (60th) day following the September 2022 PIPE Closing Date.

The Company has agreed to use reasonable best efforts to cause such registration statement to become effective as promptly as practicable after the filing thereof but in any event on or prior to the Effectiveness Deadline (as defined in the September 2022 Registration Rights Agreement), and to keep such registration statement continuously effective until the earlier of (i) the date the September 2022 PIPE 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 September 2022 PIPE Closing Date.

The Company has also agreed, among other things, to pay all reasonable fees and expenses (excluding any underwriters’ discounts and commissions and all fees and expenses of legal counsel, accountants and other advisors for CBI USA except as specifically provided in the September 2022 Registration Rights Agreement) incident to the performance of or compliance with the September 2022 Registration Rights Agreement by the Company.

In the event the registration statement has not been filed within 90 days following the September 2022 PIPE Closing Date, subject to certain limited exceptions, then the Company has agreed to make pro rata payments to CBI USA as liquidated damages in an amount equal to 0.5 % of the aggregate amount invested by CBI USA in the September 2022 PIPE Shares 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 September 2022 Registration Rights Agreement.

The Company has granted CBI USA customary indemnification rights in connection with the registration statement.

CBI USA has also granted the Company customary indemnification rights in connection with the registration statement.

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.

May 2022 PIPE

34 unchanged sentences

Common Stock Warrants

In December 2021, 252,315 Pre-Funded Warrants were exercised for a total exercise price of $ 8 , resulting in the issuance of 252,315 shares of common stock.

In January 2022, Pre-Funded Warrants were exercised for a total exercise price of $ 14 , resulting in the issuance of 466,666 shares of common stock.

As of December 31, 2023, there are no unexercised pre-funded warrants that are outstanding.

As of December 31, 2022, warrants to purchase 576,261 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.

Warrants to purchase 576,261 shares of common stock at a price of $ 8.1031 per share that were acquired in the December 2021 registered-direct offering transaction remained outstanding.

The warrants are classified as equity.

As a result of the closing of the September 2022 PIPE (see Note 17, Subsequent Events ), 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 (or $ 800 in the aggregate).

Accumulated Other Comprehensive Loss

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for 2022:

Unrealized gains (losses) on short-term investments Total

Balance at December 31, 2021 $ ( 2 ) $ ( 2 )

Other comprehensive income before reclassifications 2 2

Net current period other comprehensive income 2 2

Balance at December 31, 2022 $ — $ —

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for 2021:

Unrealized gains (losses) on short-term investments Total

Balance at December 31, 2020 $ 83 $ 83

Other comprehensive loss before reclassifications ( 84 ) ( 84 )

Net losses reclassified from accumulated other comprehensive income ( 1 ) ( 1 )

Net current period other comprehensive loss ( 85 ) ( 85 )

Balance at December 31, 2021 $ ( 2 ) $ ( 2 )

The net gain reclassified from accumulated other comprehensive loss during the year ended December 31, 2021 resulted from available-for-sale securities that were called prior to maturity.

The basis on which the cost of the securities was determined was specific identification.

Proceeds related to these sales were $ 4,000 .

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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 warrants were settled as a result.

As of December 31, 2023, warrants to purchase 50,110 shares of common stock at a price of $ 8.031 per share that were acquired in the December 2021 registered-direct offering transaction remain outstanding.

Equity-Based Compensation

6 unchanged sentences

No future awards will be made under the 2015 Plan upon the effectiveness of the 2017 Plan.

As of December 31, 2022, the aggregate number of awards available for grant under the 2017 Plan was 259,031 .

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 December 31, 2023, the aggregate number of awards available for grant under the 2017 Plan was 454,636 .

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.

4 unchanged sentences

The term of common stock option grants is 10 years unless terminated earlier as described above.

Inducement Grant

In May 2021, the Company granted stock options to purchase up to 20,000 shares of common stock as a material inducement to Brian C.

Bock to enter into employment with the Company as the Company’s Chief Financial Officer (the “Inducement Grant”).

The Inducement Grant, which was made pursuant to a stand-alone nonstatutory stock option agreement (the “Inducement Award Agreement”), was approved by the Compensation Committee, was awarded in accordance with Nasdaq Listing Rule 5635(c)(4) and outside of the Company’s 2017 Equity Incentive Plan and is subject to the terms and conditions of the Inducement Award Agreement.

As such, any shares underlying the Inducement Grant are not, upon forfeiture, cancellation or expiration, returned to a pool of shares reserved for future issuance.

In connection with Mr.

Bock’s resignation from the Company on February 4, 2022, the stock options underlying the Inducement Grant were forfeited.

EXICURE, INC.

8 unchanged sentences

During 2022, the Company issued 1,851 shares of common stock that were purchased under the ESPP.

No shares were issued during 2023.

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;

40 unchanged sentences

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

Year ended December 31, 2022 $ 3.46 to $ 5.51 ;

Year ended December 31, 2023 $ 1.58 ;

weighted avg.

$ 3.46 to $ 5.51 ;

weighted avg.

12 unchanged sentences

Outstanding - December 31, 2022 222,833 $ 4.74 7.5 $ —

Granted 10,000 1.58

Forfeited ( 220,718 ) 5.40

Outstanding - December 31, 2023 12,115 $ 4.28 5.4 $ —

Exercisable - December 31, 2023 12,115 $ 4.26 5.4 $ —

4 unchanged sentences

See below section titled “Repricing of Outstanding and Unexercised Options” for more information.

The aggregate intrinsic value of common stock options exercised during the years ended December 31, 2022 and 2021 was $ 0 and $ 243 , respectively.

EXICURE, INC.

8 unchanged sentences

Unvested balance - December 31, 2022 20,885 $ 12.65

Granted 295,992 1.02

Vested ( 309,026 ) 1.91

Forfeited ( 4,808 ) 14.58

Unvested balance - December 31, 2023 3,043 $ 10.41

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.

The restricted stock units granted during the 2022 period 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.

The restricted stock units granted in the past 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.

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

3 unchanged sentences

Unvested balance - December 31, 2022 97,643 $ 3.45

Settled ( 97,643 ) 1.91

Unvested balance - December 31, 2023 — $ —

The grant date fair value of performance-based restricted stock units is based on the Company’s closing stock price at the date of grant.

7 unchanged sentences

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 were 233,224 stock options outstanding under the Plans, and all of the Company’s outstanding stock options had exercise prices in excess of the current fair market

In approving the repricing, the Board considered the impact of the current

EXICURE, INC.

1 unchanged sentence

(in thousands, except share and per share data)

value of the Company’s common stock as of March 24, 2022, 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, held Eligible Stock Options exercisable into an aggregate of 29,373 and 12,513 shares of the Company’s common stock, respectively.

Former non-employee directors, Jeffrey Cleland, Elizabeth Garofalo, Bali Muralidhar and James Sulat, held Eligible Stock Options exercisable into an aggregate of 3,835 , 5,000 , 3,835 and 3,112 shares of the Company’s common stock, respectively.

The option repricing resulted in incremental stock-based compensation of $ 291 , of which $ 213 was recorded as expense in the year ended December 31, 2022 and the remaining balance is expected to be recognized as expense over the requisite service period in which the stock options vest.

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 were 233,224 stock options outstanding under the Plans, and all of the Company’s outstanding stock options had exercise prices in excess of the current fair market value of the Company’s common stock as of March 24, 2022, 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.

The option repricing resulted in incremental stock-based compensation of $ 213 recorded as expense in the year ended December 31, 2022.

Most of the individuals holding stock options left the Company in early 2023 resulting in minimal expense recognition in 2023 as their options were forfeited upon departure.

Pre-tax loss before income taxes was $ 16,914 and $ 2,373 for the years ended December 31, 2023 and 2022, respectively, which consists entirely of losses in the U.S.

17 unchanged sentences

Research and development credit — — ( 31 ) 1.3

Other ( 16 ) 0.7 ( 32 ) —

Federal and state rate differential 72 ( 0.5 ) ( 16 ) 0.7

Change in valuation allowance ( 39,891 ) 236.9 733 ( 30.9 )

Reduction of worthless attributes 44,253 ( 262.6 ) — —

$ — — % $ 209 ( 8.8 ) %

3 unchanged sentences

The effective income tax rate for the year ended December 31, 2023 was 0 % because the Company generated tax losses and provided a full valuation allowance against its deferred tax assets to an amount that is more likely than not to be realized.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The significant components of the Company’s net deferred tax assets are as follows:

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Equity-based compensation — 1,874

Deferred revenue — 3,191

Investment Loss Adjustment 570 —

Valuation allowance ( 4,250 ) ( 44,145 )

3 unchanged sentences

Fixed assets and other ( 15 ) ( 292 )

Deferred Rent ( 57 ) —

Right-of-use asset ( 1,858 ) ( 2,083 )

1 unchanged sentence

Deferred taxes, net $ — $ —

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The Company’s effective income tax rate for the year ended December 31, 2023 is $ 0 .

5 unchanged sentences

Projections of future pre-tax book loss and taxable losses based on the Company's recent actual performance and current industry data indicate it is more likely than not that the benefits will not be recognized.

At December 31, 2022, the Company had a federal net operating loss carryforward of $ 120,346 , which will begin to expire in 2035.

At December 31, 2023, the Company had a federal net operating loss carryforward of $ 11,034 , which are indefinitely lived.

At December 31, 2023, the Company had $ 11,033 of state net operating loss carryforwards, which will begin to expire in 2043.

As provided by Section 382 of the Internal Revenue Code of 1986 (“Section 382”), and similar state provisions, utilization of net operating losses and tax credit carryforwards may be subject to substantial annual limitations due to ownership change limitations that have previously occurred or that could occur in the future.

Ownership changes may limit the amount of net operating losses and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.

In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of five percent stockholders in the stock of a corporation by more than 50 percent in the aggregate over a three-year period.

The Company completed a review of its changes in ownership through December 31, 2022 and determined that it had experienced an “ownership change” within the meaning of Section 382(g) during the fourth quarter of 2022.

This ownership change has and will continue to subject the Company’s net operating loss carryforwards to an annual limitation, which will significantly restrict the Company’s ability to use them to offset its taxable income in periods following the ownership change.

We experienced an “ownership change” within the meaning of Section 382(g) (“Section 382”) of the Internal Revenue Code of 1986, as amended, during the fourth quarter of 2022.

In general, the annual use limitation equals the aggregate value of our stock at the time of the ownership change multiplied by a specified tax-exempt interest rate.

The Company determined that at the date of the 2022 ownership change, it had a net unrealized built-in loss ("NUBIL").

The NUBIL was determined based on the difference between the fair market value of the Company’s assets and their tax basis at the ownership change date.

Because of the NUBIL, certain deductions recognized during the five-year period beginning on the date of the Section 382 ownership change (the “recognition period”) are subject to the same limitation as the net operating loss carryforwards or certain other deductions.

We determined that at the date of the 2022 ownership change, we had a net unrealized built-in loss (“NUBIL”).

The NUBIL was determined based on the difference between the fair market value of our assets and their tax basis as the ownership change date.

Because of the NUBIL, certain deductions recognized during the five-year period beginning on the date of the IRC Section 382 ownership change (the “recognition period”) are subject to the same limitation as the net operating loss carryforwards or certain other deductions.

As of 2023, the business model has

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

substantially changed which fully limits our ability to recognize these deductions.

As the Company disposed of the majority of their operating business, they are subject to a zero limitation under Section 382 of the Internal Revenue Code which makes the net operating losses unusable.

Accordingly, the Company has not recorded federal and state net operating losses from prior to ownership change.

At December 31, 2023 and 2022, the Company had no unrecognized tax benefits.

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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-

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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 years ended December 31, 2023 and 2022.

8 unchanged sentences

Warrants to purchase common stock 50,110 576,261

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Fair Value Measurements

7 unchanged sentences

Money market funds $ 418 $ 418 $ — $ —

Short-term investments:

Investment in convertible notes receivable — — —

Total financial assets $ 418 $ 418 $ — $ —

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Assets measured at fair value on a recurring basis as of December 31, 2022 are as follows:

2 unchanged sentences

Money market funds $ 1,612 $ 1,612 $ — $ —

Commercial paper 5,999 — 5,999 —

Short-term investments:

Commercial paper 4,497 — 4,497 —

Total financial assets $ 1,612 $ 1,612 $ — $ —

The Company uses the market approach and Level 1 and Level 2 inputs to value its cash equivalents and Level 2 inputs to value its short-term investments.

The Company’s long-term debt bore interest at the prevailing market rates for instruments with similar characteristics and, accordingly, the carrying value for this instrument also approximated its fair value and the financial measurement was also classified within Level 2 of the fair value hierarchy.

As of December 31, 2022, the Company’s common stock warrant liability associated with warrants issued in a private placement offering of common stock in 2017 was $ 0 and no warrants were outstanding underlying the common stock warrant liability as those warrants expired unexercised during 2021.

The following is a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) for the years ended December 31, 2022 and 2021:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Common Stock Warrant Liability

The Company uses the market approach and Level 3 inputs to value its liabilities.

There were no liabilities measured at fair value on a recurring basis as of December 31, 2022.

Warrant Liability

A summary of the warrant liability activity for the year ended December 31, 2023 is as follows:

Warrants Outstanding Fair Value Per Share Fair Value

(in thousands, except per share data)

Balance at December 31, 2022 — $ — $ —

Gain included in other income (expense), net ( 15 )

Option to exercise 526 $ 1.52 $ 800

Payment to warrant holder ( 526 ) $ 1.52 $ ( 800 )

Balance at December 31, 2023 — 0 $ — —

Gain included in other income (expense), net —

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Investment in convertible notes receivable

A summary of the AFS securities activity for the year ended December 31, 2023 is as follows:

Balance at December 31, 2022 $ —

Investment in available for sale securities 2,000

Change in fair value of investment in convertible notes receivable ( 2,000 )

Balance at December 31, 2023 $ —

As of December 31, 2023, management does not believe these AFS investments are recoverable and recorded a change in fair value of $ 2,000 .

There were no transfers between Level 1, 2, or 3, during the years ended December 31, 2023, and 2022.

Both observable and unobservable in puts were used to determine fair value of the positions that the Company classified within the Level 3 category.

Unrealized gains and losses associated with the liabilities within the Level 3 category include changes in fair value that were attributable to both observable and unobservable inputs.

Defined Contribution Plan

11 unchanged sentences

On February 4, 2021, plaintiff filed an amended putative securities class action complaint.

The amended complaint alleges that Dr.

Giljohann and Mr.

Bock made materially false and/or misleading statements related to the Company’s clinical programs purportedly causing losses to investors who acquired Company securities between January 7, 2021 and December 10, 2021.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

complaint does not quantify any alleged damages but, in addition to attorneys’ fees and costs, plaintiff seeks to recover damages on behalf of himself and others who acquired the Company’s stock during the putative class period at allegedly inflated prices and purportedly suffered financial harm as a result.

On March 20, 2023, the Court issued an Order appointing James Mathew as Lead Plaintiff, and Bleichmar Fonti & Auld LLP as Lead Counsel for the purported class.

The parties are required to submit, within two weeks of that Order, a schedule to the Court governing the filing of a further amended complaint and the timing of defendants’ answer or response.

On March 20, 2023, the court entered an order appointing James Mathew as lead plaintiff and Bleichmar Fonti & Auld LLP as lead counsel in the action pursuant to the Private Securities Litigation Reform Act of 1995.

On May 26, 2023, lead plaintiff filed a second amended complaint against the Company, Dr.

Giljohann, Mr.

Bock, and Grant Corbett.

The second amended complaint alleges that Dr.

Giljohann, Mr.

Bock, and Dr.

Corbett made materially false and/or misleading statements related to the Company’s clinical programs purportedly causing losses to investors who acquired Company securities between January 7, 2021 and December 10, 2021.

The second amended complaint does not quantify any alleged damages but, in addition to attorneys’ fees and costs, lead plaintiff seeks to recover damages on behalf of himself and others who acquired the Company’s stock during the putative class period at allegedly inflated prices and purportedly suffered financial harm as a result.

The parties filed a joint status report noting the mediation efforts taken by the parties.

The report also proposes a litigation schedule going forward, which the Court adopted:

plaintiff’s third amended complaint is due on or before June 28, 2024, and any motion to dismiss is due on or before August 27, 2024, with response due on or before October 8, 2024 and any reply due on or before November 5, 2024.

Accordingly, the status hearing set for May 22, 2024 is reset to July 23, 2024.

On March 1, 2022, Kapil Puri filed a shareholder derivative lawsuit on behalf of the Company in the United States District Court for the Northern District of Illinois, against Dr.

11 unchanged sentences

1:22-cv-00526.

Based on similar factual allegations presented in the Colwell complaint, described above, the Puri, Sim, and Stourbridge complaints (collectively, the “Derivative Complaints”) allege that the defendants caused the Company to issue false and/or misleading statements in the proxy statement for its 2021 Annual Meeting of Stockholders regarding risk oversight, code of conduct, clinical program and compensation matters, among other things, in violation of federal securities law, and committed breaches of fiduciary duties.

Based on similar factual allegations presented in the Colwell complaint, described above, the Puri, Sim, and Stourbridge complaints (collectively, the

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

“Derivative Complaints”) allege that the defendants caused the Company to issue false and/or misleading statements in the proxy statement for its 2021 Annual Meeting of Stockholders regarding risk oversight, code of conduct, clinical program and compensation matters, among other things, in violation of federal securities law, and committed breaches of fiduciary duties.

The Derivative Complaints also assert that Dr.

3 unchanged sentences

The plaintiffs do not quantify any alleged damages in the Derivative Complaints, but seek restitution for damages to the Company, attorneys’ fees, costs, and expenses, as well as an order directing that certain proposals for strengthening board oversight be put to a vote of the Company’s shareholders.

On March 18, 2022, James McNabb, through counsel, sent a written demand to the Company (the “Demand Letter”) demanding that the Board of Directors investigate certain allegations and commence proceedings on the Company’s behalf against certain of the Company’s officers and directors for alleged breaches of fiduciary duties and corporate waste.

All of the Derivative Cases have been stayed pending a decision on any motion to dismiss that may be filed in the Colwell case.

In addition, the Stourbridge case has been administratively closed pending the decision on motion to dismiss that may be filed in the Colwell case.

Further, pursuant to agreement, the Demand Letter is being held in abeyance and any related statute of limitations tolled pending such motion and decision.

On October 3, 2023, a former employee filed a complaint against the Company and its executives related to the former employee’s separation from the Company.

The parties will proceed with paper discovery and an in-person settlement conference is scheduled for June 26, 2024.

Refer to Note 7, Leases , for a discussion of the commitments associated with the Company’s lease agreements.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Northwestern University License Agreements

7 unchanged sentences

As of December 31, 2023, the Company has paid to NU an aggregate of $ 11,567 in consideration of each of the obligations described above.

EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

On August 3, 2023, the company received a notice letter (the “Letter”) from counsel for NU alleging the Company breached the Northwestern University License Agreements.

The Letter alleges that a lack of development required under the Northwestern University License Agreements is a breach.

The Northwestern University License Agreements were subsequently terminated on September 10, 2023 and October 3, 2023, respectively.

Related-Party Transactions

The Company received consulting services from, and paid fees to, one of its co-founders who is not an employee but, through April 30, 2021, served as a member of the Board.

The consulting agreement with this co-founder and former Board member expired on September 30, 2021 under the terms of the agreement and was not renewed.

The Company recognized expense of $ 75 for the year ended December 31, 2021 in connection with these consulting services in the accompanying consolidated statement of operations.

Pursuant to a Consulting Agreement, effective as of September 25, 2022, between the Company and Alta Companies LTD (“Alta”), the Company paid Alta $ 218 on February 27, 2023 for a consulting fee earned as a result of the September 2022 PIPE closing.

Paul Kang, a director of the Company since February 2023 and the CEO of the Company since August 2023, is the President of Alta.

Subsequent Events

Closing of September 2022 PIPE

The September 2022 PIPE (see Note 9, Stockholders’ Equity) closed on February 24, 2023.

As a result of the closing of the September 2022 PIPE, CBI USA is the beneficial owner of approximately 50.4 % of the Company’s outstanding shares.

Pursuant to the board designation rights of CBI USA, CBI USA designated three members to the Company’s board of directors effective as of February 24, 2023.

Subsequently, the board appointed additional directors.

As a result, the board of directors current has 6 members, only one which, Matthias Schroff, the Company’s Chief Executive Officer, served as a director prior to the closing.

In February 2023, the Company received gross proceeds of $ 5,440 from the September 2022 PIPE (or net proceeds of $ 4,597 after transaction expenses).

Following the closing, a holder of warrants to purchase 526,151 shares of common stock at a price of $ 8.1031 per share that were acquired in the December 2021 registered-direct offering transaction elected to exercise their option 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 (or $ 800 in the aggregate).

On February 5, 2024, the Company entered into a patent license agreement to develop cavrotolimod for potential treatment for hepatitis with a private clinical stage biopharmaceutical company.

Under the terms of the agreement, this biopharmaceutical company will receive an exclusive license in the field of hepatitis to all of Exicure’s relevant patents.

An initial payment of $ 500 was paid to Exicure after the execution of this agreement that was recorded as other income.

Exicure will also be entitled to modest royalties on future net sales on all licensed technology during the term of the licensed patents.

Exicure will be responsible for, and make all decisions concerning, the preparation, filing, prosecution, and maintenance for each patent and patent application included within the licensed patents.

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) the 1st anniversary of the date of this Note or (ii) upon an event of default, at that 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) ten months from the date of this DGP Note or (ii) upon an event of default, at that 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.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data