EXICURE, INC. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties as described under the heading “Cautionary Note Regarding Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K. You should review the disclosure under the heading “Risk Factors” in this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview Historically, we have been an early-stage biotechnology company focused on developing nucleic acid therapies targeting ribonucleic acid against validated targets. 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. Therefore, we are engaging in a broader exploration of strategic alternatives. 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. 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 25 Table of Contents 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 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 Change of Control 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, 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 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 . 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 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. 26 Table of Contents • 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, 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. 27 Table of Contents 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 We prepare our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis. We consider an accounting estimate to be critical if: (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. There are items within our financial statements that require estimation but are not deemed critical, as defined above. Recent adopted accounting pronouncements 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. 28 Table of Contents Components of Statements of Operations 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 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; • early research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations, and consultants; • preclinical and clinical development expenses with third parties such as contract research organizations, contract manufacturing organizations, and consultants; • costs of maintaining and protecting our intellectual property portfolio, including legal advisory fees, license fees, sublicense fees, patent maintenance and other similar fees; • laboratory materials and supplies; • facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of leasehold improvements and equipment and laboratory and other supplies. We expensed research and development costs as they were incurred. A significant portion of our research and development costs were not tracked by project as they benefit multiple projects or our technology. As previously announced, we halted all research and development activities in 2022 and no longer incurred research and development expenses after the first quarter of 2023. General and administrative expense General and administrative expense consists primarily of salaries and related benefits, including equity-based compensation, related to our executive, finance, legal, business development and support functions. 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. 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. 29 Table of Contents Changes in fair value of investment in 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 Dividend income consists of income earned on our money market funds that are recorded as cash equivalents on our consolidated balance sheets. Interest income Interest income consists of income earned on our available for sale securities that are recorded as short-term investments on our consolidated balance sheets, as well as income earned on our cash balances. Interest expense 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. Other income 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. 30 Table of Contents Results of Operations Comparison of the Year Ended December 31, 2024 and 2023 The following table summarizes the results of our operations for the years ended December 31, 2024 and 2023: Year Ended December 31, (dollars in thousands) 2024 2023 Change Revenue: Revenue $ 500 $ — $ 500 100 % Total revenue 500 — 500 100 % Operating expenses: Research and development expense — 1,423 (1,423) (100) % 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 % Total operating expenses 12,732 14,996 (2,264) (15) % Operating loss (12,232) (14,996) 2,764 (18) % Other (expense) income, net: Changes in fair value of investment in convertible notes receivable — (2,000) 2,000 100 % Dividend income 5 52 (47) (90) % Interest income 8 32 (24) (75) % Interest expense (18) — (18) (100) % 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 8 — 8 (100) % Net loss $ (9,701) $ (16,914) $ 7,213 (43) % Revenue 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. Therefore, there is substantial uncertainty as to how, when or if we might be able to generate revenues in the future. Research and development expense 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 31 Table of Contents the first quarter of 2023, the Company determined it was no longer appropriate to record any research and development expenses. General and administrative expense Year Ended December 31, (dollars in thousands) 2024 2023 Change General and administrative expense $ 5,449 $ 11,715 $ (6,266) (53) % Full time employees 7 6 1 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 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 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. Other Income 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, 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)% 32 Table of Contents 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. As of December 31, 2023, the Company has “discontinued the original business” of Exicure within the meaning of Section 382(c). This change has and will continue to subject our net operating loss carryforwards as of the fourth quarter of 2022 to an annual zero limitation, which will fully restrict our ability to use loss carryforwards and deductions from built in loss assets generated before the ownership change date to offset our taxable income in periods following the ownership change. Liquidity and Capital Resources Since our inception, we have incurred significant operating losses. We generated limited revenue from our collaboration agreements, which have since been terminated. 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 limited revenue. As of December 31, 2024, our cash and cash equivalents cash were $12.5 million. We incurred net losses of approximately $9.7 million and $16.9 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we have generated an accumulated deficit of $218.1 million, including $18,837 of additional paid-in capital reclassed to accumulated deficit upon C-corporation conversion, since inception and expect to incur significant expenses and negative cash flows for the foreseeable future. Our current liquidity is not sufficient to continue to fund existing obligations and operations. 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. 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. See “Funding Requirements” below for additional information on our future capital needs. Cash Flows The following table shows a summary of our cash flows for the years ended December 31, 2024 and 2023: Years Ended December 31, (in thousands) 2024 2023 Net cash used in operating activities $ (2,910) $ (10,357) 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) 33 Table of Contents 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, 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 $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 $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 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: • the results of our exploration of strategic alternatives, including any potential transactions; • the results of any future or pending litigation against the Company; • the extent to which we encounter increased costs as a result of global and macroeconomic conditions, including rising inflation and interest rates, supply chain disruptions, fluctuating exchange rates, and increases in commodity, energy and fuel prices; and • unknown legal, administrative, regulatory, accounting, and information technology costs as well as additional costs associated with operating as a public company. Until such time, if ever, as we can generate substantial revenue, we expect to finance our cash needs primarily through equity offerings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. Further, the global financial markets have experienced significant disruptions over the past couple of years due to the COVID-19 pandemic, the ongoing conflict between Russia and Ukraine, and worsening global macroeconomic conditions, including actions taken by central banks to counter inflation, volatility in the capital markets and related market uncertainty, may impact our ability to obtain additional financing when needed on favorable terms or at all. Any further disruption or slowdown in the global financial markets and economy may negatively affect our ability to raise funding through equity or debt financings on attractive terms or at all, which could in the future negatively affect our operations. Going Concern 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 34 Table of Contents additional capital to finance our operations. As discussed above, there are substantial uncertainties about our ability to raise such financing. Contractual Obligations and Commitments Chicago Lease Refer to Note 5 - Leases to the Notes to our Consolidated Financial Statements included herein. Item 7A. 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. 35 Table of Contents