Exicure, Inc.: Form 10-Q for the period ended Mar 31, 2025

The following information should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K (the “Annual Report”) for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission, or SEC, on March 18, 2025. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act, that involve significant risks and uncertainties. Our actual results, performance or experience could differ materially from what is indicated by any forward-looking statement due to various important factors, risks, uncertainties, assumptions and other factors including, but not limited to, those identified in this Quarterly Report on Form 10-Q and those set forth under the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and in our other SEC filings.

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 2024, we entered into 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 was not material. We then sold some of its samples related to the licensed product. Also in 2024, we entered into a sale agreement to sell our historical biotechnology intellectual property and other assets pursuant to the Purchase Agreement. Any value we may generate from this the Purchase Agreement 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.

We continue to engage in a broader exploration of strategic alternatives, including but not limited to private company acquisitions, raising additional capital, strategic partnerships, some combination of these, and other arrangements that are in management’s view worth exploring. 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.

On January 19, 2025, we entered into a Share Purchase Agreement with GPCR pursuant to which we acquired from GPCR all of the issued and outstanding equity securities of GPCR USA. In connection with the closing of the Share Purchase Agreement, the Company and GPCR entered into a License and Collaboration Agreement to further develop and commercialize GPCR’s technologies related to certain intellectual property and patents. This License and Collaboration Agreement requires us to make milestone payments to GPCR upon the achievement of specific milestone events relating to clinical trials, marketing authorizations, and net sales, as well as for us to pay a recurring royalty payments, as set forth in the agreement.

GPCR USA has an ongoing Phase 2 clinical trial focused on blood cancer patients, particularly those eligible for hematopoietic stem cell transplantation, commonly referred to as bone marrow transplant. Its current clinical trial involves the combined administration of GPC-100 (a small molecule antagonist with a high binding affinity to a chemokine receptor) and propranolol (a beta-blocker drug that affects the heart and circulation) for mobilization of stem cells in Multiple Myeloma patients. GPCR USA plans to complete the administration of GPC-100 to 20 patients in the second quarter of 2025 and aims to announce the clinical trial results during the fourth quarter of 2025.

On March 26, 2025, the Company formed KC Creation, a wholly-owned South Korean subsidiary. It was established based on the future growth strategies, such as a collaboration with GPCR USA and Korean bio-platform companies, response to ESG trends by development of infrastructure based on eco-friendly renewable energy, and diversification of business and utilization of global growth potential of Korean entertainment content. These business lines are designed to enhance the Company’s mid- and long-term value through investment recovery potential and brand synergy.

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, 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 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.

On December 10, 2024, the Company entered into a common stock purchase agreement MIRTO, pursuant to which the Company agreed to issue and sell to MIRTO 87,808 shares of its Common Stock, for an aggregate purchase price of approximately $405, at a purchase price per share of $4.61, which closed on December 24, 2024.

On February 14, 2025, the Company entered into a Common Stock Purchase Agreement with Shin Chang Partners and RMS0718 Co., Ltd., pursuant to which the Company agreed to issue and sell to each of the Purchasers 145,454 shares at a purchase price of $5.50 per share. The Company received aggregate gross process of approximately $1.6 million.

As of March 31, 2025, our cash and cash equivalents were $10.4 million. Our current liquidity may not be sufficient to continue 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 may 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.

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. 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

Nasdaq Listing Requirements Deficiency Notices

As previously disclosed, the Company has received numerous deficiency notices 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 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, the Company 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 the Company’s balance sheet as of March 31, 2025. We were not in compliance with this requirement based on its September 30, 2024 balance sheet. We believe it is in compliance with this requirement based on its March 31, 2025 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 believes it is 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 held its combined 2023 and 2024 annual meeting on June 28, 2024.
• On April 17, 2024, the Company received a delinquency notification as it had not filed its Annual Report on Form 10-K for the year ended December 31, 2023. The extended deadline for compliance was established by Nasdaq as May 20, 2024, the same deadline for our Form 10-Q for the quarter ended September 30, 2023. The Annual Report on Form 10-K was filed on June 6, 2024.
• 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 on 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 (“Panel”), and the hearing took place on July 9, 2024. On July 31, 2024, the Company received formal notice that the Panel determined to continue the Company’s listing subject to the Company evidencing compliance with all applicable criteria for continued listing on Nasdaq by September 16, 2024. The Company received an additional extension to November 14, 2024 to satisfy the terms of the Panel’s decision and to ensure the Company’s continued listing on Nasdaq.
• As the Company did not meet Nasdaq’s listing requirements as of September 30, 2024, the Company 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.
• On May 21, 2025, the Company received a delinquency notification from Nasdaq that it had not filed its Form 10-Q for the period ended March 31, 2025. The Company will be compliant upon filing this Form 10-Q.

Even if the Company regains compliance with Nasdaq’s listing requirements and satisfied the Panel’s requirements, there can be no assurance that the Company 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 Nasdaq 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.

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

Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the acquired asset and its eventual disposition are less than its carrying amount.

When conducting the impairment analysis for these long-lived assets, with the primary technique being a discounted cash flow analysis. A discounted cash flow analysis requires us to make various assumptions, estimates and judgements including projected revenue, gross margins, operating costs, growth rates, and discount rates. We believe our assumptions, estimates, and judgements to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Business Combinations

We follow the acquisition method of accounting to record identifiable assets acquired and liabilities assumed recognized in connection with acquired businesses at their estimated fair value as of the date of acquisition. Identifiable intangible assets from business combinations are recognized at their estimated fair values as of the date of acquisition and consist of in-process research and development (“IPR&D”). Determination of the estimated fair value of identifiable intangible assets requires judgment. The fair value of intangible assets is estimated using the Multi-Period Excess Earnings Method (MPEEM) for the acquired IPR&D. The fair value methods are income-based valuation approaches, which require judgment to estimate appropriate discount rates, probability of success rates related to the drug under development, projected revenue, gross margins, operating costs, and growth rates.

The contingent consideration liability, associated with our business combination, is estimated based on the discounted cash flow method to determine the probability of achieving certain milestones. In order to perform the fair value calculations, the following estimates are considered: probability of achieving certain milestones, discount period, and discount rates.

We believe our assumptions, estimates, and judgements to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.

Results of Operations

Comparison of the Three Months Ended March 31, 2025 and 2024

The following table summarizes the results of our operations for the three months ended March 31, 2025 and 2024:

(dollars in thousands)

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. A total of $500 was paid to the Company after the execution of this agreement.

Research and development expense

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

(dollars in thousands)

Research and development expense was $0.8 million for the three months ended March 31, 2025, reflecting an increase of $0.8 million, or 100% from research and development expense of $0 for three months ended March 31, 2024. The Company incurred research and development expense in 2025 after the acquisition of GPCR USA. In 2022, the Company suspended its clinical, preclinical, and discovery program activities and reduced headcount as it began exploring strategic alternatives in April 2023 and stopped recording any research and development expenses until the Acquisition in the first quarter of 2025.

General and administrative expense

(dollars in thousands)

General and administrative expense was $2.2 million for the three months ended March 31, 2025, representing an increase of $0.9 million or 66%, from $1.3 million for the three months ended March 31, 2024. The increase for the three months ended March 31, 2025 was due to the additional expenses incurred from the acquisition of GPCR USA and increased professional services compared to the same prior year quarter.

Gain on early lease termination

Due to the early termination of the Chicago Lease as of January 31, 2025, the Company recognized a $6 million gain resulting from the reversal of the remaining liability related to this lease.

Other income

The Company recognized a gain from the reversal of liability related to registration rights delay amounts owed to DGP they agreed to waive the $191 penalty amount owed.

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 March 31, 2025, our cash and cash equivalents were $10.4 million.

We incurred net income of approximately $3.0 million for the three months ended March 31, 2025 and net loss of $0.8 million for the three months ended March 31, 2024. We 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 three months ended March 31, 2025 and 2024:

(in thousands)

(unaudited)

Operating activities

Net cash used in operating activities was $1.6 million and $0.5 million for the three months ended March 31, 2025 and 2024, respectively. The increase in cash used in operating activities for the three months ended March 31, 2025 of $1.1 million was due to the increase of operating activities and higher headcount from the GPCR USA acquisition.

Investing activities

Net cash used in investing activities was $2.1 million and $0.0 million for the three months ended March 31, 2025 and 2024, respectively. The increase in cash used by investing activities of $2.1 million was due to purchase of GPCR USA.

Financing activities

Net cash provided by financing activities was $1.6 million and $0.0 million for three months ended March 31, 2025 and 2024, respectively. The increase of $1.6 million is due to the funds received from the common stock purchase agreements in February.

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

Contractual Obligations and Commitments

Chicago Lease and Redwood City Lease

Refer to Note 5 - Leases to the Notes to unaudited condensed consolidated financial statements included herein.

There have been no material changes to our contractual obligations and commitments from those described in our Annual Report, other than the termination of the Chicago Lease as mentioned in Note 5.

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

Limitations on Effectiveness of Controls

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025. Based on the evaluation of our disclosure controls and procedures as of March 31, 2025, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weakness described below.

Material Weakness in Internal Control Over Financial Reporting

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified material weaknesses in the Company’s internal control over financial reporting related to the following:

1. Management’s review of the accounting treatment of non-routine activities.

2. The Company failed to design and implement controls around all accounting and information technology processes and procedures.

These matters have been reviewed with our Audit Committee.

Remediation Plan

We are evaluating the material weakness and are developing a plan of remediation to strengthen the effectiveness of the design and operation of our internal control environment. The remediation plan will include enhancing our review procedures within our accounting department, implementing additional review procedures with respect to accumulation and evaluation of information that is known or knowable to the Company at the time, and applying that information to the applicable accounting guidance. Subject to our ability to obtain additional financing and the results of our review of strategic alternatives, we will also consider whether additional personnel are necessary.

Changes in Internal Control over Financial Reporting

Other than described above, there were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.