Description of Business, Basis of Presentation, Going Concern and Restatement of Financial Statement

6 Months Ended

Jun. 30, 2023

Description of Business, Basis of Presentation, Going Concern and Restatement of Financial Statement

Description of Business

Exicure, Inc. has historically been an early-stage biotechnology company focused on developing nucleic acid therapies targeting ribonucleic acid against validated targets. In September 2022, the Company announced a significant reduction in force, suspension of preclinical activities and halting of all research and development, and that the Company was exploring strategic alternatives to maximize stockholder value. While the foregoing efforts are continuing, the Company does not expect they will generate significant value for stockholders, at least in the near term. Therefore, the Company is engaging in a broader exploration of strategic alternatives. This effort involves exploring growth through transactions with potential partners that see opportunity in joining an existing, publicly-traded organization. The Company is exploring transactions in industries unrelated to its historical operations.

Throughout these unaudited condensed consolidated financial statements, the terms the “Company,” and “Exicure” refer to Exicure, Inc. and where appropriate, its wholly owned subsidiary, Exicure Operating Company. Exicure Operating Company holds all material assets and conducts all business activities and operations of Exicure, Inc.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of June 30, 2023 and December 31, 2022, and for the three and six months ended June 30, 2023 and 2022, have been presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Exicure and its wholly owned subsidiary, Exicure Operating Company. All intercompany transactions and accounts are eliminated in consolidation.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated balance sheet as of June 30, 2023, the interim condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022, the interim condensed consolidated statements of comprehensive loss for the three and six months ended June 30, 2023 and 2022, the interim condensed consolidated statements of changes in stockholders’ equity for the three and six months ended June 30, 2023 and 2022, and the interim condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022 are unaudited. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements and with instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended; and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of June 30, 2023, the results of its operations for the three and six months ended June 30, 2023 and 2022, and the results of its cash flows for the six months ended June 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the six months ended June 30, 2023 and 2022 are unaudited. The results for the six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, or any other interim periods, or any future year or period.

Going Concern

At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date that the

financial statements are issued. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern for a period of one year after the date that the financial statements are issued. As of June 30, 2023, the Company has generated an accumulated deficit of $201,657 since inception and expects to incur significant expenses and negative cash flows for the foreseeable future. As of June 30, 2023, the Company’s cash, and cash equivalents were $2,335. Management believes that, given the Company’s current cash position, operating plans and forecasted negative cash flows from operating activities over the next twelve months, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued. Substantial additional financing will be needed by the Company to fund its operations.

Management believes that the Company’s existing cash and cash equivalents will fund its operating expenses into the fourth quarter of 2023. However, this estimate is based on assumptions about how the Company can limit spending that may prove to be wrong. It is very difficult to project the Company’s current cash burn rate given the transitional status of the Company and this estimate may prove inaccurate. Depending on the direction of the Company’s review of strategic alternatives, the Company may use available resources sooner than management currently expects. The Company has already engaged in significant cost reductions, so our ability to further cut costs and extend the Company’s operating runway is limited. As a result, substantial additional financing will be needed by the Company within the next few months to pay expenses, fund the ongoing exploration of strategic alternatives and pursue any alternatives that may be identified. The Company seeks to raise capital in the third quarter of 2023 to fund its operations through 2024. There can be no assurance that such additional financing will be available and, if available, can be obtained on acceptable terms.

The accompanying unaudited condensed consolidated financial statements have been prepared as though the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Restatement

The Company is restating its previously issued condensed consolidated financial statements and related notes as of and for the three and six months ended June 30, 2023. The Company identified errors related to the incorrect classification of certain expenses as research and development expenses on the condensed consolidated statements of operations. The Company also incorrectly classified its investment in convertible notes receivable as held-to-maturity instead of as available-for-sale (“AFS”) and incorrectly did not record such investment at fair value on the condensed consolidated balance sheet as of June 30, 2023.

The following table illustrates the effects of the error corrections on the balance sheet:


As of June 30, 2023	Previously Reported		Adjustments		Restated
ASSETS



Total current assets	$	3,664	$	—	$	3,664
Property and equipment, net	1,796		—		1,796
Right-of-use asset	6,893		—		6,893
Investment in convertible notes receivable	—		2,000		2,000
Other noncurrent assets	5,202		(2,000)		3,202
Total assets	$	17,555	$	—	$	17,555

LIABILITIES AND STOCKHOLDERS’ EQUITY





Total liabilities	7,850		—		7,850

Contingencies (Note 11)

Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 10,000,000 shares authorized, no shares issued and outstanding, June 30, 2023 and December 31, 2022	—		—		—
Common stock, $0.0001 par value per share; 200,000,000 shares authorized, 8,648,307 issued and outstanding, June 30, 2023; 4,965,901 issued and outstanding, December 31, 2022	1		—		1
Additional paid-in capital	192,524		—		192,524

Accumulated deficit	(182,820)		—		(182,820)
Total stockholders’ equity	9,705		—		9,705
Total liabilities and stockholders’ equity	$	17,555	$	—	$	17,555

The following table illustrates the effects of the error corrections to operating expenses:


For the three months ended June 30, 2023	Previously Reported		Adjustments		Restated
Research and development expense	$	921	$	(921)	$	—
General and administrative expense	4,721		921		5,642

Total operating expenses	$	5,642	$	—	$	5,642


For the six months ended June 30, 2023	Previously Reported		Adjustments		Restated
Research and development expense	$	2,902	$	(1,479)	$	1,423
General and administrative expense	7,279		1,479		8,758

Total operating expenses	$	10,181	$	—	$	10,181