What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-18 compared with 2024-06-06 · 134 added, 135 removed, 114 unchanged (70% of the section changed)

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In September 2022, we announced a significant reduction in force, suspension of preclinical activities and halting of all research and development, and that we were exploring strategic alternatives to maximize stockholder value.

In February 2024, we received an upfront payment of $500,000 from a licensing agreement for patents related to one of our historical drug candidates, and received a small, one-time payment and an entitlement to only modest royalties on future sales of the licensed technology that we do not believe will be material.

In the second quarter, we recognized other income of $637,000 from the sale of our samples related to the licensed product.

In the third quarter, we sold our historical biotechnology intellectual property and other assets (including the licensing agreement described above) pursuant to the purchase agreement and recognized other income of $1,500,000.

We continue to engage 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.

Following the purchase agreement, any value we may generate from our historical biotechnology intellectual property and other assets will be primarily through royalties and license fees that we may receive in the future under the purchase agreement.

However, whether we receive any royalties or licenses fees, and the amounts and timing thereof, are uncertain and out of our control.

While the foregoing efforts are continuing, with respect to our historical assets, we do not expect they will generate significant value for stockholders.

For example, in February 2024, we announced a licensing deal for patents related to one of our historical drug candidates, and received a small, one-time payment and an entitlement to only modest royalties on future sales of the licensed technology that we do not believe will be material.

Therefore, we are 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.

We are exploring transactions in industries unrelated to our historical operations.

Because we currently have no source of revenue or committed financing, we will require substantial additional funding in the very near term in order to satisfy our existing obligations, continue to operate and continue our exploration of strategic alternatives and consummate any transactions that we may identify.

We obtained significant financing late in 2024 in order to continue operations and our exploration of strategic alternatives and consummate any transactions that we may identify.

Operating, financing, and cash flow considerations

Since our inception in 2011, we have primarily funded our operations through sales of our securities, loans and collaborations.

On February 24, 2023, we raised gross proceeds of $5.4 million on the closing of the Private Placement (as defined below) (or net proceeds of approximately $4.6 million after transaction expenses).

However, we have used these net proceeds for our 2023 operation expenses (i.e.

severance payments, warrant put payments, investment in convertible notes receivable, and general working capital purposes as we pursue strategic alternatives).

As of December 31, 2023, our cash and cash equivalents cash were $0.8 million.

We had approximately $1.6 million in accounts payable as of December 31, 2023, as we deferred payments due to our deteriorating financial condition late in 2023.

Subsequent to December 31, 2023, our cash and cash equivalents have decreased to approximately $0.2 million as of May 31, 2024.

Although we are attempting to redeem the $2.0 million aggregate principal amount of our convertible notes receivable, there can be no assurance that we will be able to do so, in the near term or at all.

See “Risk Factors – We may not be able to redeem the investment in convertible notes receivable.”

Our current liquidity is not sufficient to fund operations.

As a result, there is substantial doubt about our ability to continue as a going concern.

Substantial additional financing will be needed in the very near term to fund our existing obligation, operations and exploration of strategic alternatives and pursue any alternatives that we identify.

If we are unable to raise capital, the Company could seek bankruptcy protection and/or cease operations in the near term, which may result in the Company’s stockholders receiving no or very little value in respect of their shares of the Company’s common stock.

Effective as of November 12, 2024, we entered into the Initial Common Stock Purchase Agreement with HiTron, pursuant to which we agreed to issue and sell to HiTron 433,333 shares of our common stock, par value $0.0001 per share (the “Common Stock”), for an aggregate purchase price of $1.3 million, at a purchase price per share of $3.00.

On November 13, 2024, we entered into the Subsequent Common Stock Purchase Agreement, pursuant to which we agreed to sell and issue to HiTron 2,900,000 additional shares of Common Stock for an aggregate purchase price of $8.7 million, at a purchase price per share of $3.00.

The issuance of such shares under the Subsequent Common Stock Purchase Agreement closed on December 24, 2024.

On December 9, 2024, we entered into a common stock purchase agreement (the “SangSang Purchase Agreement”) with SangSangIn Investment & Securities Co., Ltd.

(“SangSang”), pursuant to which we agreed to issue and sell to SangSang 433,332 shares of our Common Stock, for an aggregate purchase price of approximately $2.0 million, at a purchase price per share of $4.61.

The transactions under the SangSang Purchase Agreement closed on December 24, 2024.

As of December 31, 2024, our cash and cash equivalents cash were approximately $12.5 million.

Our current liquidity may not be sufficient to fund operations for the next 12 months.

As a result, there is substantial doubt about

our ability to continue as a going concern.

Additional financing will be needed to fund our ongoing operations and exploration of strategic alternatives and pursue any alternatives that we identify.

If we are unable to raise capital, the Company could seek bankruptcy protection and/or cease operations, which may result in our stockholders receiving no or very little value in respect of their shares of our common stock.

We expect to seek financing through equity offerings.

However, it may be difficult to obtain financing given the Company’s current condition and uncertainty over its future direction.

Therefore, we may be unable to raise capital

at all or on favorable terms.

However, it may be difficult to obtain financing given our current condition and uncertainty over its future direction.

Therefore, we may be unable to raise capital at all or on favorable terms.

Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to continue operations.

Recent Developments

Restructuring

On September 26, 2022, we announced our commitment to a plan to wind down our existing preclinical programs, including the development of our SCN9A program, to suspend all of our research and development (“R&D”) activities, including suspension of all partnered programs, and to implement a reduction in force whereby we reduced approximately 66% of our then-existing workforce, as well as other cost-cutting measures (collectively, the “Plan”).

The purpose of the Plan was to decrease expenses, thereby, extending our cash runway, and enable us to maintain a streamlined organization to support key corporate functions.

Change of Control

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

(“CBI USA”), pursuant to which the Company agreed to issue and sell to CBI USA in a private placement an aggregate of 3,400,000 shares of Common Stock, at a purchase price of $1.60 per share.

The private placement closed on February 24, 2023 (the “Closing Date”).

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.

As discussed above, effective as of November 12, 2024, we entered into the Initial Common Stock Purchase Agreement with HiTron, pursuant to which we agreed to issue and sell to HiTron 433,333 shares of Common Stock for an aggregate purchase price of $1.3 million, at a purchase price per share of $3.00.

On November 13, 2024, we entered into the Subsequent Common Stock Purchase Agreement, pursuant to which we agreed to sell and issue to HiTron 2,900,000 additional shares of the Company’s Common Stock, for an aggregate purchase price of $8.7 million, at a purchase price of $3.00 per share.

The issuance of such shares under the Subsequent Common Stock Purchase Agreement closed on December 24, 2024.

As of March 12, 2025, HiTron beneficially owns 53% of the outstanding shares of Common Stock based on information available to the Company.

Nasdaq Listing Requirements Deficiency Notices

As previously disclosed, the Company has received numerous deficiency notes with respect to various Nasdaq listing requirements in the past year.

As previously disclosed, we have received numerous deficiency notes with respect to various Nasdaq listing requirements in the past year.

These related to:

• Compliance with Nasdaq’s minimum bid price rule due to the Company’s stock trading below $1.00 for a sustained period of time.

The Company effected a one-for-thirty reverse stock split on June 29, 2022 in order to attempt to raise the stock price.

On September 13, 2023, the Company received a delinquency notification that the closing bid price of the Company’s stock traded below $1.00 for the previous 30 consecutive business days.

The Company’s stock price has remained below $1.00 since receipt of the notification, which must be cured by September 9, 2024, per the March 12, 2024 extension letter received from Nasdaq.

• Compliance with Nasdaq’s rule requiring stockholders’ equity of at least $2,500,000 based on the Company’s balance sheet as of September 30, 2023.

The Company believes it is in compliance with this requirement based on its December 31, 2023 balance sheet, but we do not expect to be in compliance as of March 31, 2024.

• Compliance with Nasdaq’s minimum bid price rule due to our stock trading below $1.00 for a sustained period of time.

We effected a one-for-thirty reverse stock split on June 29, 2022 in order to attempt to raise the stock price.

On September 13, 2023, we received a delinquency notification that the closing bid price of our stock traded below $1.00 for the previous 30 consecutive business days.

We effected a one-for-five reverse stock split on August 27, 2024 in order to attempt to raise the stock price.

On September 13, 2024, we received a letter received from Nasdaq noting it met the closing bid price requirement.

• Compliance with Nasdaq’s rule requiring stockholders’ equity of at least $2,500,000 based on our balance sheet as of December 31, 2024.

We were not in compliance with this requirement based on its September 30, 2024 balance sheet.

We believes it is in compliance with this requirement based on its December 31, 2024 balance sheet and expects to be in compliance going forward.

• Compliance with Nasdaq’s corporate governance requirements with respect to board and committee composition .

The Company has received numerous deficiency notifications with respect to these requirements in the past year.

Although the Company is currently in compliance, there can be no assurance it will remain in compliance.

We has received numerous deficiency notifications with respect to these requirements in the past year.

Although we are currently in compliance, there can be no assurance it will remain in compliance.

• Compliance with Nasdaq’s requirement to hold an annual meeting.

On January 11, 2024, Nasdaq notified the Company that it did not comply with listing requirements by not holding an annual meeting in 2023.

The Company received an extension letter on March 12, 2024 from Nasdaq noting it must hold its annual meeting by June 28, 2024.

• On November 22, 2023, the Company received a delinquency notification as it had not filed its third quarter Form 10-Q at the deadline, which was cured by filing of such Form 10-Q on May 16, 2024.

• On April 17, 2024, the Company received a delinquency notification as it had not filed its Annual Report Form 10-K for the year ended December 31, 2023.

The extended deadline for compliance was established by Nasdaq at May 20, 2024, the same deadline for our Form 10-Q for the quarter ended September 30, 2023, which had yet to be filed at the time.

• Although the Company filed its Form 10-Q for the quarter ended September 30, 2023 prior to the extended deadline of May 20, 2024, on May 21, 2024, the Company received a delisting determination from the Nasdaq staff as a result of not filing its Annual Report Form 10-K by the May 20, 2024 deadline and failure to timely file its Form 10-Q for the period ended March 31, 2024.

On January 11, 2024, Nasdaq notified us that it did not comply with listing requirements by not holding an annual meeting in 2023.

We held its combined 2023 and 2024 annual meeting on June 28, 2024.

• On April 17, 2024, we received a delinquency notification as it had not filed its Annual Report Form 10-K for the year ended December 31, 2023.

The extended deadline for compliance was established by Nasdaq at May 20, 2024, the same deadline for our Form 10-Q for the quarter ended September 30, 2023.

The Annual Report Form 10-K for the fiscal year ended December 31, 2023 was filed on June 6, 2024.

• Although we filed its Form 10-Q for the quarter ended September 30, 2023 prior to the extended deadline of May 20, 2024, on May 21, 2024, we received a delisting determination from the Nasdaq staff as a result of not filing its Annual Report Form 10-K by the May 20, 2024 deadline and failure to timely file its Form 10-Q for the quarter ended March 31, 2024 (which was subsequently filed on June 17, 2024).

The staff’s delisting determination also noted the failure to hold its 2023 annual meeting as another basis of the delisting determination.

• On May 28, 2024, the Company requested an appeal of the delisting determination to Nasdaq’s hearings panel.

A hearing has been scheduled for July 9, 2024.

In connection with its request for an appeal, the Company also requested an extended stay on the suspension of trading in the Company’s common stock through the decision of the hearings panel.

If the extended stay is not granted, the automatic stay would only be in place for 15 calendar days from the May 28 appeal request.

Even if the Company regains compliance with Nasdaq’s listing requirements and addresses the outstanding deficiency notices to Nasdaq’s satisfaction, there can be no assurance that the Company will remain in compliance with Nasdaq’s requirements and will not be delisted.

Basis of Presentation

The audited financial statements of Exicure, Inc.

for the fiscal years ended December 31, 2023 and 2022, contained herein, include a summary of our significant accounting policies and should be read in conjunction with the discussion below.

Segment Reporting

We view our operations and manage our business as one segment.

• On May 28, 2024, we requested an appeal of the delisting determination to Nasdaq’s Hearings Panel (“Panel”), and the hearing took place on July 9, 2024.

On July 31, 2024, we received formal notice that the Panel determined to continue our listing subject to us evidencing compliance with all applicable criteria for continued listing on The Nasdaq Capital Market by September 16, 2024.

We received an additional extension to November 14, 2024 to satisfy the terms of the Panel’s decision and to ensure our continued listing on Nasdaq.

• As we did not meet Nasdaq’s listing requirements as of September 30, 2024, we has requested another extension by the Panel to demonstrate compliance and another extension was granted.

We thereafter presented its plan to regain compliance with the Equity Requirement to the Panel, subsequent to which the Panel ultimately granted us extensions through December 17, 2024 to do so.

• On December 20, 2024, we received a letter from Nasdaq confirming that, as of December 17, 2024, we meet all requirements for continued listing on Nasdaq as required by the Panel’s decision dated November 20, 2024.

In accordance with the Panel’s decision, on December 17, 2024, we made public disclosure under cover of a Form 8-K, describing the transactions undertaken by us to achieve compliance with Listing Rule 5550(b)(1) and stated affirmatively that as of that date, it believes it has stockholders’ equity above the $2.5 million requirement and provided a pro-forma balance sheet as of December 17, 2024.

Pursuant to Listing Rule 5815(d)(4)(B), we will be subject to a Mandatory Panel Monitor for a period of one year from the date of Nasdaq’s letter.

If, within that one-year monitoring period, the Nasdaq Listing Qualifications staff (the “Staff”) finds us again out of compliance with the $2.5 million Equity Rule that was the subject of the exception, notwithstanding Rule 5810(c)(2), we will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and the Staff will not be permitted to grant additional time for us to regain compliance with respect to that deficiency, nor will we be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3).

Instead, the Staff will issue a Delist Determination Letter and we will have an opportunity to request a new hearing with the initial Panel or a newly convened Panel if the initial Panel is unavailable.

We will have the opportunity to respond/present to the Panel as provided by Listing Rule 5815(d)(4)(C).

Our securities may be at that time delisted from Nasdaq.

Even if we regains compliance with Nasdaq’s listing requirements and addresses the outstanding deficiency notices to Nasdaq’s satisfaction, there can be no assurance that we will remain in compliance with Nasdaq’s requirements and will not be delisted.

Reverse Stock Split

On August 26, 2024, we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation, or the Amendment, with the Secretary of State of the State of Delaware to effect a one-for-five (1-for-5) reverse stock split of our outstanding common stock.

The Amendment became effective at 5:00 p.m.

Eastern Time on August 27, 2024.

The Amendment provided that, at the effective time of the Amendment, every five (5) shares of our issued and outstanding common stock were automatically combined into one issued and outstanding share of common stock, without any change in par value per share.

The reverse stock split effected all shares of our common stock outstanding immediately prior to the effective time of the Amendment.

As a result of the reverse stock split, proportionate adjustments have been made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options, restricted share unit award issued by us and outstanding immediately prior to the effective time of the Amendment, which resulted in a proportionate decrease in the number of shares of our common stock reserved for issuance upon exercise or vesting of such stock options, restricted share unit award, and, in the case of stock options, a proportionate increase in the exercise price of all such stock options.

In addition, the number of shares reserved for issuance under our equity compensation plans immediately prior to the effective time of the Amendment was reduced proportionately.

No fractional shares were issued as a result of the reverse stock split.

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

The reverse stock split affected all stockholders proportionately and did not affect any stockholder’s percentage ownership of our common stock (except to the extent that the reverse stock split results in any stockholder owning only a fractional share).

Our common stock began trading on The Nasdaq Capital Market on a split-adjusted basis when the market opened on August 28, 2024.

The new CUSIP number for our common stock following the reverse stock split is 30205M 309.

Critical Accounting Estimates

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(1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors.

In addition, there are other items within our financial statements that require estimation, but are not deemed critical as defined above.

Changes in estimates used in these and other items could have a material impact on our financial statements.

This includes estimates where the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the impact of the estimate on financial condition or operating performance is material.

There are items within our financial statements that require estimation but are not deemed critical, as defined above.

Recent adopted accounting pronouncements

Refer to Note 2, Significant Accounting Policies , of the accompanying unaudited condensed consolidated financial statements for a description of recent accounting pronouncements ASU 2016-13 adopted during the first quarter of 2023.

There has been no impact on the financial statements from the adoption of this ASU.

Recent accounting pronouncements not yet adopted

There are no recent accounting pronouncements that the Company has not yet adopted.

In the normal course of business, we evaluate all new accounting pronouncements issued by the FASB, SEC, or other authoritative accounting bodies to determine the potential impact they may have on our Consolidated Financial Statements.

See Note 2, Significant Accounting Policies , of the notes to our consolidated financial statements in this Annual Report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations.

Components of Statements of Operations

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.

Following the termination of the AbbVie and Ipsen agreements, as discussed above, we have no current source of revenue.

We have never generated any commercial product revenue and do not expect to generate any product revenue.

For the year ended December 31, 2024, the Company’s revenue was generated from 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 received an exclusive license in the field of hepatitis to all of the Company’s relevant patents.

We have never generated any commercial product revenue and do not expect to generate any product revenue in the near term.

Research and development expense

Research and development expense consisted of costs associated with our research activities, including basic research on our SNA platform, discovery and development of novel SNAs as prospective therapeutic candidates, preclinical and clinical development activities for SNAs we have nominated for clinical development as well as maintaining and protecting our intellectual property.

Our research and development expenses in the periods presented include:

Research and development expense consisted of costs associated with our research activities, including basic research on our SNA technology platform, discovery and development of novel SNAs as prospective therapeutic candidates, preclinical and clinical development activities for SNAs we have nominated for clinical development as well as maintaining and protecting our intellectual property.

Our research and development expenses in the prior year presented include:

• employee-related expenses, including salaries, bonuses, benefits and equity-based compensation expense;

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Other general and administrative expenses include travel expenses, professional fees for auditing, tax and legal services and allocated facility-related costs not otherwise included in research and development expenses.

Loss from sale of property and equipment

The Company sold the majority of its scientific equipment through a third party auctioneer and incurred a loss on the sale of these assets in the third quarter.

Litigation legal expense

Litigation legal expense consists of expenses from its self-insured retention related to the securities litigation lawsuit.

Right-of-use asset impairment loss

This loss resulted from the impairment analysis of the Company’s right-of-use asset related to its office lease.

Changes in fair value of investment in convertible notes receivable

Changes in fair value became known and the Company impaired the entire $2 million amount of these convertible notes receivable.

The changes in fair value of investment in convertible notes receivable relate to the impairment of the convertible notes receivable and reserved their entire $2 million amount.

Dividend income

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Interest expense

Interest expense includes amounts pursuant to the MidCap Credit Agreement (as defined below).

All outstanding indebtedness and other obligations under the MidCap Credit Agreement (as defined below) was repaid in full on March 15, 2022.

Other expense, net

Other expense, net mostly consists of gains and losses on foreign currency transactions and gains and losses on the sale of capital assets.

Interest expense includes amounts pursuant to debt agreements executed in 2024 that were later converted to equity.

Gain on settlement of accounts payable

During the year, the Company agreed to settle overdue legal expenses incurred in the prior year at a discounted amount resulting in a gain on this transaction.

The Company sold samples of its clinical products during the second quarter to a private clinical stage biopharmaceutical company.

In the fourth quarter, the Company sold certain assets pursuant to the purchase agreement with the Purchaser.

Results of Operations

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(dollars in thousands) 2024 2023 Change

Collaboration revenue $ — $ 28,826 $ (28,826) (100) %

Revenue $ 500 $ — $ 500 100 %

Total revenue 500 — 500 100 %

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General and administrative expense 5,449 11,715 (6,266) (53) %

Litigation legal expense 1,562 938 624 67 %

Right-of-use asset impairment loss 5,721 — 5,721 100 %

Loss from sale of property and equipment — 920 (920) 100 %

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Interest expense (18) — (18) (100) %

Other expense, net (2) (40) 38 (95) %

Total other expense, net (1,918) (542) (1,376) 254 %

Gain on settlement of accounts payables 407 — 407 100 %

Other income, net 2,137 (2) 2,139 100 %

Total other income (expense), net 2,539 (1,918) 4,457 (232) %

Net loss before provision for income taxes (9,693) (16,914) 7,221 (43) %

Provision for income taxes — 209 (209) n/m

Provision for income taxes 8 — 8 (100) %

Net loss $ (9,701) $ (16,914) $ 7,213 (43) %

The following table summarizes our revenue earned during the periods indicated:

(dollars in thousands) 2023 2022 Change

Collaboration revenue:

AbbVie Collaboration Agreement $ — $ 11,135 $ (11,135) (100) %

Ipsen Collaboration Agreement

— 17,691 (17,691) (100) %

Total collaboration revenue $ — $ 28,826 28826000 $ (28,826) (100) %

Total revenue $ — $ 28,826 $ (28,826) (100) %

Collaboration revenue was $0.0 million during the year ended December 31, 2023, reflecting an decrease of $28.8 million, or 100%, from collaboration revenue of $28.8 million for the year ended December 31, 2022.

The decrease in collaboration revenue of $28.8 million is due to the recognition of the remaining deferred revenue related to the AbbVie Collaboration Agreement of $11.1 million and the Ipsen Collaboration Agreement of $17.7 million in connection with the terminations of those collaboration agreements in December 2022.

This revenue resulted from an accounting adjustment, did not reflect any new cash proceeds to the Company and will not recur.

Following these terminations, we currently have no source of revenues.

Refer to Note 3, Collaborative Research and License Agreements , of the accompanying consolidated financial statements for more information regarding revenue recognition for the AbbVie Collaboration Agreement and Ipsen Collaboration Agreement.

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 received an exclusive license in the field of hepatitis to all of the Company’s relevant patents.

$500,000 was paid to the Company after the execution of this agreement.

Our ability to generate revenues in the future is dependent on our ability to successfully explore and execute strategic alternatives.

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Research and development expense

The following table summarizes our research and development expenses incurred during the periods indicated:

(dollars in thousands) 2023 2022 Change

Employee-related expense $ 511 $ 6,661 $ (6,150) (92) %

Platform and discovery-related expense 93 6,177 (6,084) (98) %

Facilities, depreciation, and other expenses 755 4,119 (3,364) (82) %

Clinical development programs expense 64 2,810 (2,746) (98) %

Total research and development expense $ 1,423 $ 19,767 $ (18,344) (93) %

Full time employees — 5 (5)

Research and development expense was $1.4 million for the year ended December 31, 2023, reflecting a decrease of $18.3 million, or 93%, from research and development expense of $19.8 million for the year ended December 31, 2022.

The decrease in research and development expense for the year ended December 31, 2023 of $18.3 million reflects the suspension of clinical, preclinical and discovery program activities and the reduction in headcount resulting from the restructuring activities that were announced in December 2021 and September 2022.

We continued to incur certain expenses that were classified as research and development expenses in the first quarter of 2023.

Thereafter, we determined it was no longer appropriate to record any research and development expenses, as the Company began exploring strategic alternatives in April 2023.

Research and development expense was $0 for the year ended December 31, 2024, a $1.4 million decrease from the year ended December 31, 2023.

In 2022, the Company suspended its clinical, preclinical, and discovery program activities and reduced headcount as it began exploring strategic alternatives in April 2023.

As a result, after

the first quarter of 2023, the Company determined it was no longer appropriate to record any research and development expenses.

General and administrative expense

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Full time employees 7 6 1

General and administrative expense was $12.7 million for the year ended December 31, 2023, representing an increase of $1.8 million, or 16%, from $10.9 million for the year ended December 31, 2022.

The increase for the year ended December 31, 2023 was mostly due to $1.5 million of certain expenses that previously had been recorded as research and development expenses, such as office facilities, legal, and payroll related costs, that no longer met the criteria to be classified as research and development expenses due to the shift in our historical business operations discontinuing all research and development activities as discussed above.

The increase was also due to higher costs from the separation pay of former executives and related stock based compensation expense, and increased franchise taxes;

partially offset by lower professional fees as a result of reduced operations.

General and administrative expense was $5.4 million for the year ended December 31, 2024, representing an decrease of $6.3 million, or 53%, from $11.7 million for the year ended December 31, 2023.

The decrease for the year ended December 31, 2024 was due to higher costs in 2023 from separation pay of former executives and related stock based compensation expense, payroll and related benefits, legal and consulting fees, facility and lease costs, depreciation from assets sold, and the research and development wind down costs that no longer met the criteria to be classified as research and development due to the shift in our historical operations suspending all research and development activities as previous discussed.

Litigation legal expense

The increase of $0.6 million for the year ended December 31, 2024 was due to accruals recorded for the amount of the unsatisfied self-insured retainer and legal defense costs related to the securities litigation lawsuit.

Right-of-use asset impairment loss

This loss resulted from the impairment analysis of the Company’s right-of-use asset related to its office lease.

Loss from sale of property and equipment

In the third quarter, the Company sold the majority of its scientific equipment through a third party auctioneer and incurred a loss on the sale of these assets as a result.

In the third quarter of 2023, the Company sold the majority of its scientific equipment through a third party auctioneer and incurred a loss on the sale of these assets as a result.

Changes in fair value of investment in convertible notes receivable

Changes in fair value became known and the Company impaired the entire $2 million amount of these convertible notes receivable.

As a result, the convertible notes receivable are recognized at a fair value of $0 as of December 31, 2023.

Interest expense

The decrease in interest expense of $0.6 million for the year ended December 31, 2023 is in connection with the repayment in full of all outstanding indebtedness and other obligations under the MidCap Credit Agreement (as defined below) on March 15, 2022.

As a result, the convertible notes receivable is recognized at a fair value of $0 as of December 31, 2024.

Gain on settlement of accounts payable

During the year, the Company agreed to settle overdue legal expenses incurred in the prior year at a discounted amount resulting in a gain on this transaction.

The Company sold samples of its clinical products during the second quarter to a private clinical stage biopharmaceutical company.

On September 27, 2024, the Company entered into and closed the sale of certain assets pursuant to the purchase agreement with the Purchaser.

The assets sold to Purchaser include the Company’s spherical nucleic acid-related technology, research and development programs, and clinical assets (the “Acquired Assets”) to the Purchaser as described in the purchase agreement.

The Company will receive gross proceeds of $1,500 from the sale of the Acquired Assets.

Provision for income taxes

The effective tax rate for the year ended December 31, 2023 of 0% because the Company generated tax losses and provided a full valuation allowance against its deferred tax assets as the balance is not likely to be realized.

The effective tax rate for the year ended December 31, 2022 of (8.8)% was attributable to the fact the Company was subject to the IRC Section 174 regulations requiring companies to capitalize certain research and experimental expenditures and IRC Section 382 loss limitation rules on our ability to utilize net operating losses to offset the capitalization requirement, with the most recent ownership change being in the fourth quarter of 2022.

The effective tax rate for the year ended December 31, 2024 is attributable to the fact that the Company is subject to state income taxes.

The effective income tax rate for the year ended December 31, 2024 was (0.1)%

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.

The effective tax rate for the year ended December 31, 2023 of 0% was attributable to the fact the Company was subject to the IRC Section 174 regulations requiring companies to capitalize certain research and experimental expenditures and IRC Section 382 loss limitation rules on our ability to utilize net operating losses to offset the capitalization requirement, with the ownership change being in the fourth quarter of 2022.

This resulted in current income tax expense in 2022.

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We have funded our operations to date with proceeds received from equity financings and payments received in connection with collaboration agreements, which have since been terminated.

Currently we are exploring strategic alternatives and generating no revenue.

Currently we are exploring strategic alternatives and generating limited revenue.

As of December 31, 2024, our cash and cash equivalents cash were $12.5 million.

We had approximately $1.6 million in accounts payable as of December 31, 2023, as we deferred payments due to our deteriorating financial condition late in 2023.

Subsequent to December 31, 2023, our cash and cash equivalents have decreased to approximately $0.2 million as of May 31, 2024.

See “Risk Factors – We may not be able to redeem the investment in convertible notes receivable.”

We incurred net losses of approximately $9.7 million and $16.9 million for the years ended December 31, 2024 and 2023, respectively.

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As a result, there is substantial doubt about our ability to continue as a going concern.

Substantial additional financing will be needed in the very near term to fund our existing obligations and operations and there is no certainty we will obtain such financing.

If we are unable to raise capital, we will be unable to continue operations.

Additional financing will be needed to fund our ongoing operations and exploration of strategic alternatives and pursue any alternatives that we identify.

We may need to seek bankruptcy protection and/or cease operations in the near term, which may result in our stockholders receiving no or very little value in respect of their shares of our common stock.

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Net cash used in operating activities $ (2,910) $ (10,357)

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

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)

Net cash used in investing activities — (1,078)

Net cash provided by financing activities 13,402 3,674

Net increase (decrease) in cash, cash equivalents, and restricted cash $ 10,492 $ (7,761)

Operating activities

Net cash used in operating activities was $2.9 million and $10.4 million for the years ended December 31, 2024 and 2023, respectively.

The decrease in cash used in operating activities for the year ended December 31, 2023 of $25.3 million was due to the suspension of R&D activities and lower headcount from the September 2022 and December 2021 restructurings.

The decrease in cash used in operating activities for the year ended December 31, 2024 of $7.4 million was due to the reduction of operating activities, spending and lower headcount.

Investing activities

Net cash used in investing activities was $1.1 million and provided by investing activities was $4.7 million for the years ended December 31, 2023 and 2022, respectively.

The decrease in cash provided by investing activities of $5.8 million was primarily due to a decrease in proceeds from the maturity, net of purchases, of available-for-sale securities.

Net cash used in investing activities was $0.0 million and $1.1 million for the years ended December 31, 2024 and 2023, respectively.

The decrease in cash used in investing activities of $1.1 million was primarily due to a decrease in proceeds from the maturity, net of purchases, of available-for-sale securities.

Financing activities

Net cash provided by financing activities of $3.7 million for year ended December 31, 2023 is primarily due to the Private Placement closed in February 2023.

Net cash used in financing activities of $3.1 million for the year ended December 31, 2022 is primarily due to the repayment in full of all outstanding indebtedness and other obligations under the Credit and Security Agreement, dated as of September 25, 2020, as amended on October 21, 2020, July 30, 2021, September 30, 2021, and December 10, 2021, with MidCap Financial Trust, as agent, and the lenders party thereto from time to time, or the MidCap Credit Agreement, partially offset by net proceeds of approximately $4.9 million received in connection with the May 2022 private placement transaction.

Net cash provided by financing activities of $13.4 million for year ended December 31, 2024 is primarily due to the stock purchase agreements closed in November and December 2024.

Net cash provided by financing activities of $3.7 million for the year ended December 31, 2023 is primarily due to the Private Placement closed in February 2023.

Funding Requirements

We will need to obtain substantial additional funding in the very near term to satisfy existing obligations and continue operations.

If we are unable to raise capital at all or on acceptable terms, we would be unable to continue operations.

Our existing cash and cash equivalents are not sufficient to enable us to fund our existing obligations and ongoing operating expenses.

Our existing cash and cash equivalents may not be sufficient to enable us to fund our existing obligations and ongoing operating expenses for the near term.

Our future capital requirements are difficult to forecast and will depend on many factors, including:

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In accordance with Accounting Standards Codification 205-40, Going Concern , we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

In the absence of a significant source of recurring revenue, our continued viability is dependent on our ability to continue to raise additional capital to finance our operations.

In the absence of a significant source of recurring revenue, our continued viability is dependent on our ability to continue to raise

additional capital to finance our operations.

As discussed above, there are substantial uncertainties about our ability to raise such financing.

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Refer to Note 5 - Leases to the Notes to our Consolidated Financial Statements included herein.

Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide this information required under this item.

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 7. Management’s Discussion and Analysis