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.

In addition, this section discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Annual Report and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 25, 2022.

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

While the foregoing efforts are continuing, we do not expect they will generate significant value for stockholders, at least in the near term. 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 both within our historical biotechnology and life science industry and in other industries unrelated to our historical operations.

Because we currently have no source of revenue or committed financing, we will require substantial additional funding within the next few months in order to continue 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. As of December 31, 2022, our cash, cash equivalents, and restricted cash were $9.8 million. Subsequent to December 31, 2022, we raised gross proceeds of $5.4 million on the closing of the Private Placement (or net proceeds of approximately $4.6 million after transaction expenses) and expect to use the net proceeds for general working capital purposes as we pursue strategic alternatives as well as for the payout for warrant put rights that were exercised as a result of the change of control.

Our current liquidity is not sufficient to fund operations over the next twelve months from the date of the issuance of the accompanying consolidated financial statements. As a result, there is substantial doubt about our ability to continue as a going concern. Substantial additional financing will be needed by us within the next few months to fund our operations and ongoing exploration of strategic alternatives and pursue any alternatives that we identify. If we are unable to raise capital, the Company could seek bankruptcy protection 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 a combination of equity offerings, and debt financings. However, it may be difficult to obtain financing given the Company’s current condition and uncertainty over its future direction.

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Therefore, we may be unable to raise capital when needed 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 February 24, 2023, following the satisfaction of closing conditions, including the approval by our stockholders at a Special Meeting of Stockholders held on December 15, 2022, we closed our private placement (the “Private Placement”) to CBI USA. Exicure received gross proceeds of approximately $5.4 million in connection with the close of the Private Placement (or net proceeds of approximately $4.6 million after transaction expenses) and expects to use the net proceeds for general working capital purposes as we pursue strategic alternatives as well as for the payout for warrant put rights that were exercised as a result of the change of control.

Following the closing of the Private Placement, CBI USA is the beneficial owner of approximately 50.4% of the Company’s outstanding shares, resulting in a "change of control" of Exicure under the applicable rules of Nasdaq. At closing, CBI USA designated three members to the Company’s board of directors effective as of February 24, 2023. Additional directors were subsequently appointed by the board, and our board of directors currently includes 6 members, only one of which (Matthias Schroff, our Chief Executive Officer) was a director prior to the closing of the Private Placement. We are currently relying on Nasdaq’s “controlled company” exception to the requirements that a majority of our board be independent and that we have an independent compensation committee and independent nominating committee or function.

Termination of Collaboration Agreements

On December 12, 2022 (the “Ipsen Termination Agreement Effective Date”), the Company and Ipsen entered into a Mutual Termination Agreement (the “Ipsen Termination Agreement”), pursuant to which the parties mutually agreed to terminate the Ipsen Collaboration Agreement. Following such termination, the parties will jointly own R&D Term IP (as defined in the Ipsen Collaboration Agreement) and Patents Covering the R&D Term IP (as defined in the Ipsen Collaboration Agreement), with each party owning an equal, undivided interest in and to such R&D Term IP and patents. As a result of the termination of the Ipsen Collaboration Agreement, the Company regained the ability to independently develop medicines targeting Angelman syndrome and Huntington’s disease while Ipsen retains the right to re-enter into the collaboration with the Company in Huntington’s Disease and Angelman’s Syndrome.

On December 13, 2022 (the “AbbVie Termination Agreement Effective Date”), the Company and Allergan entered into a letter agreement (the “AbbVie Termination Agreement”), pursuant to which the parties mutually agreed to terminate the AbbVie Collaboration Agreement. Following such termination, the Company transferred to Allergan all data, information, and reports made or generated by the Company in the course of performing activities under the Development Plan (as defined in the AbbVie Collaboration Agreement), and granted to Allergan all rights to transfer, publish, present, or otherwise publicly disclose any Collaboration Technology (as defined in the AbbVie Collaboration Agreement) and data made or generated by the Company in the course of performing activities under the Development Plan. As a result of the termination of the AbbVie Collaboration Agreement, the Company regained the ability to independently develop medicines targeting hair loss disorders.

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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. 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. As of March 23, 2023, the Company’s stock price closed at $0.9761.

•Compliance with Nasdaq’s rule requiring stockholders’ equity of at least $2,500,000 based on the Company’s balance sheet as of June 30, 2022. The Company believes it is in compliance with this requirement based on its December 31, 2022 balance sheet, but there can be no assurance it will remain in compliance.

•Compliance with Nasdaq’s corporate governance requirements with respect to board and committee composition due to (i) the lack of a majority independent board, (ii) the lack of an audit committee comprised of three independent directors and (iii) the lack of a compensation committee comprised of at least two independent directors. With respect to the majority independence and the audit committee requirements, Nasdaq informed the Company that it was not entitled to a cure period and must submit a plan to regain compliance no later than April 10, 2023. Following the closing of the Private Placement, the Company qualifies for Nasdaq’s controlled company exemptions from the requirements to have a majority independent board and independent compensation committee. The Company still must have an audit committee comprised of three independent directors, which it believes it currently does following the additional board appointments after the closing of the Private Placement, and intends to reply to Nasdaq promptly.

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, 2022 and 2021, 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, which for the periods presented was the discovery, research and development of treatments based on our SNA technology.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the revenue and expenses incurred during the reported periods. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.

Our significant judgments and estimates are detailed below, and our significant accounting policies are more fully described in Note 2 of the accompanying consolidated financial statements.

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Revenue recognition

Revenue allocated to performance obligations relating to provision of research and development activities is recognized as the performance obligations are satisfied using an input method to measure progress, based on an estimate of the percentage of completion of the project based on the actual hours incurred on the project as a percentage of the total expected project hours. The determination of the percentage of completion requires management to estimate the total expected project hours. A detailed estimate of the total expected project hours is re-assessed every reporting period based on the latest project plan and discussions with project teams. If a change in facts or circumstances occurs, the estimate will be adjusted and the revenue will be recognized based on the revised estimate. The difference between the cumulative revenue recognized based on the previous estimate and the revenue recognized based on the revised estimate would be recognized as an adjustment to revenue in the period in which the change in estimate occurs. Determining the estimate of total project hours requires significant judgment and may have a significant impact on the amount and timing of revenue recognition. For example, revenue recognized under the AbbVie Collaboration Agreement for the year ended December 31, 2021 was $(2.8) million due primarily to the cumulative catchup adjustment (reduction) of revenue recorded in connection with a change in estimate that occurred during the third quarter of 2021 (see Note 3 to the accompanying consolidated financial statements).

Recent accounting pronouncements not yet adopted

Refer to Note 2 of the accompanying consolidated financial statements for a description of recent accounting pronouncements not yet adopted.

Components of Statements of Operations

Revenue

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. Following the termination of the AbbVie and Ipsen agreements in the fourth quarter of 2022, 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.

Research and development expense

Research and development expense consists 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:

•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.

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We expense research and development costs as they are 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.

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.

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 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.

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Results of Operations

Comparison of the Year Ended December 31, 2022 and 2021

The following table summarizes the results of our operations for the years ended December 31, 2022 and 2021:

Year EndedDecember 31,

Revenue:

Operating expenses:

Other (expense) income, net:

Provision for income taxes 209 — 209 n/m

Revenue

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

Year EndedDecember 31,

Collaboration revenue:

Collaboration revenue was $28.8 million during the year ended December 31, 2022, reflecting an increase of $29.3 million, or 6,068%, from collaboration revenue of $(0.5) million for the year ended December 31, 2021. The increase in collaboration revenue of $29.3 million is due to the recognition of the remaining deferred revenue related to the AbbVie Collaboration Agreement of $13.9 million and the Ipsen Collaboration Agreement of $15.4 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.

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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

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

Year EndedDecember 31,

Facilities, depreciation, and other expenses 4,119 4,068 51 1 %

Full time employees 5 37 (32)

Research and development expense was $19.8 million for the year ended December 31, 2022, reflecting a decrease of $29.2 million, or 60%, from research and development expense of $49.0 million for the year ended December 31, 2021. The decrease in research and development expense for the year ended December 31, 2022 of $29.2 million reflects fewer clinical, preclinical, and discovery program activities and a reduction in headcount resulting from the restructuring activities that were announced in December 2021 and September 2022. More specifically, the decrease in research and development expense for the year ended December 31, 2022 of $29.2 million was due to a decrease in costs related to our clinical development programs of $16.1 million, lower platform and discovery-related expense of $7.5 million, and lower employee-related expenses of $5.7 million.

The decrease in clinical development programs expense for the year ended December 31, 2022 of $16.1 million was primarily due to lower manufacturing and toxicology study costs in connection with IND-enabling and Phase 1 clinical trial preparation activities for the XCUR-FXN program, which we indefinitely suspended in December 2021. In addition, lower clinical trial costs in connection with our Phase 1b/2 clinical trial for cavrotolimod (AST-008), which we began to wind down in December 2021, contributed to the decrease in clinical development program expense as compared to the prior-year period.

The decrease in platform and discovery-related expense for the year ended December 31, 2022 of $7.5 million was mostly due to lower costs for materials, reagents, and supplies in connection with a reduction in headcount and fewer discovery and preclinical program activities, the absence of the license fee paid to Northwestern University of $3.0 million in the prior year period in connection with the receipt of the upfront payment of $20.0 million from Ipsen, and lower intellectual property costs, as compared to the prior-year period.

The decrease in employee-related expense for the year ended December 31, 2022 of $5.7 million was due to lower compensation and related costs in connection with a lower headcount during the period resulting from the restructuring activities that were announced in December 2021 and September 2022, partially offset by retention award expense.

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General and administrative expense

Year EndedDecember 31,

Full time employees 8 9 (1)

General and administrative expense was $10.9 million for the year ended December 31, 2022, representing a decrease of $2.2 million, or 17%, from $13.1 million for the year ended December 31, 2021. The decrease for the year ended December 31, 2022 is mostly due to lower compensation and related costs in connection with a lower headcount during the period resulting from the restructuring activities that were announced in December 2021, as well as lower costs for accounting, director fees, and investor relations. These lower costs in the current year period were partially offset by higher retention award expense, as well as higher consultant and advisory costs.

Interest expense

The decrease in interest expense of $1.1 million for the year ended December 31, 2022 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.

Provision for income taxes

The effective tax rate for the year ended December 31, 2022 of (8.8)% is attributable to the fact that the Company is 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. The effective income tax rate for the year ended December 31, 2021 was 0% because the Company generated tax losses and provided a full valuation allowance against its deferred tax assets to an amount that is more likely than not to be realized.

We completed a review of our changes in ownership through December 31, 2022 and determined that we experienced an "ownership change" within the meaning of Section 382(g) during the fourth quarter of 2022. This ownership change has and will continue to subject our net operating loss carryforwards to an annual limitation, which will significantly restrict our ability to use them to offset our taxable income in periods following the ownership change. In general, the annual use limitation equals the aggregate value of our stock at the time of the ownership change multiplied by a specified tax-exempt interest rate.

Liquidity and Capital Resources

As of December 31, 2022, our cash, cash equivalents, and restricted cash were $9.8 million. We have no current source of revenues or committed financing. Subsequent to December 31, 2022, we received gross proceeds of approximately $5.4 million in connection with the close of the Private Placement (or net proceeds of approximately $4.6 million after transaction expenses) and expect to use the net proceeds for general working capital purposes as we pursue strategic alternatives as well as for the payout for warrant put rights that were exercised as a result of the change of control.

We believe that our existing cash and cash equivalents (including the proceeds received in February 2023 in connection with the closing of the Private Placement) could enable us to fund our operating expenses into the beginning of the fourth quarter of 2023. However, this estimate is based on assumptions about how we can limit spending that may prove to be wrong and it is very difficult to project our current cash burn rate given the transitional status of the Company as we explore strategic alternatives and this estimate may prove inaccurate and we may expend our limited resources sooner. Depending on the direction of our review of strategic alternatives, we

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may use our available resources sooner than we currently expect. The Company has already engaged in significant cost reductions, so our ability to further cut costs and extend our operating runway is limited. As a result, substantial additional financing will be needed by us within the next few months to pay our expenses, fund our ongoing exploration of strategic alternatives and pursue any alternatives that we identify. If we are unable to raise sufficient capital, the Company could seek bankruptcy protection 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 a combination of equity offerings and debt financings. However, it may be difficult to obtain financing given the Company’s current financial condition and lack of sources of revenues and uncertainty over its future direction. Traditional capital markets sources of funding may not be available to us in these circumstances. Therefore, we may be unable to raise capital at all, when needed or on favorable terms.

To the extent that we do raise additional capital, 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 that otherwise might be in our best interests. Further, the global financial markets have experienced significant disruptions over the past couple years due to the COVID-19 pandemic, the ongoing conflict between Russia and Ukraine, worsening global macroeconomic conditions, including actions taken by central banks to counter inflation, volatility in the capital markets, instability in the banking industry and related market uncertainty, may impact our ability to obtain additional financing when needed on favorable terms or at all.

Private Placements

In May 2022, we entered into a securities purchase agreement with certain accredited investors, pursuant to which we issued and sold 867,369 shares of common stock, par value $0.0001 per share, at a purchase price of $5.81 per share for net proceeds of approximately $4.9 million.

In September 2022, we entered into a securities purchase agreement with CBI USA with respect to the Private Placement, which subsequently closed in February 2023.

MidCap Facility

On March 15, 2022, we repaid in full all outstanding indebtedness and other obligations under our 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, and the other Financing Documents (as defined in the MidCap Credit Agreement), including but not limited to the outstanding principal balance of $7.5 million and an exit fee of approximately $0.5 million, and terminated all obligations thereunder (other than with respect to any obligations that are expressly specified to survive the termination).

Cash Flows

The following table shows a summary of our cash flows for the years ended December 31, 2022 and 2021:

Years EndedDecember 31,

Net cash used in operating activities $ (35,658) $ (34,819)

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

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

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Operating activities

Net cash used in operating activities was $35.7 million and $34.8 million for the years ended December 31, 2022 and 2021, respectively. The slight increase in cash used in operating activities for the year ended December 31, 2022 of $0.8 million was primarily due to the absence of the prior-year period receipt of the upfront payment of $20.0 million from Ipsen in connection with the Ipsen Collaboration Agreement (net of $3.0 million license fee paid to Northwestern as a result) and the prepayment of the premium for directors and officers run-off insurance policy coverage in the fourth quarter of 2022 in anticipation of the Private Placement closing, mostly offset by lower cash used for working capital.

Investing activities

Net cash provided by investing activities was $4.7 million and $43.1 million for the years ended December 31, 2022 and 2021, respectively. The decrease in cash provided by investing activities of $38.4 million was primarily due to a decrease in proceeds from the maturity, net of purchases, of available-for-sale securities.

Financing activities

Net cash used in financing activities of $3.1 million for year ended December 31, 2022 is primarily due to the repayment in full of all outstanding indebtedness and other obligations under 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 $1.1 million for the year ended December 31, 2021 is primarily due to the net proceeds we received of $10.4 million in connection with the sale of common stock and warrants in a registered direct offering in December 2021, as well as proceeds received from the exercise of stock options and the issuance of common stock in connection with our employee stock purchase plan, mostly offset by the prepayment of $10 million of the outstanding principal balance associated with our MidCap Credit Agreement in December 2021.

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 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

In February 2020, we entered into a new lease signed in February 2020 to secure approximately 30,000 square feet of office and laboratory space at 2430 N. Halsted St., Chicago, Illinois, or the Chicago Lease. The Chicago Lease commenced on July 1, 2020, which is when the premises leased thereunder were ready for occupancy, and expires 10 years from July 1, 2020 with an option to renew for two additional successive periods of five years each.

The initial annual base rent during the original term of the Chicago Lease is approximately $1.1 million for the first 12-month period of the original term, payable in monthly installments beginning on the lease commencement. Base rent thereafter is subject to annual increases of 3%, for an aggregate amount of $12.8 million over the initial term. We must also pay our proportionate share of certain operating expenses and taxes for each calendar year during the term. During the first 12 months, the base rent and our proportionate share of operating expenses and taxes are subject to certain abatements.

In connection with the Chicago Lease, we will maintain a letter of credit for the benefit of the landlord in an initial amount of $1.2 million, which amount is subject to reduction over time, which is secured by a restricted certificate of deposit account and presented within other noncurrent assets on our consolidated balance sheet at

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December 31, 2022.

Warrants

Following the closing of the Private Placement, a holder of warrants to purchase 526,151 shares of common stock at a price of $8.1031 per share that were acquired in the December 2021 registered-direct offering transaction exercised their put option within 30 days of the closing of the Private Placement (February 24, 2023), to receive a cash payout for the outstanding warrants in the amount of the Black-Scholes value of each warrant as prescribed in the warrant agreement (or $0.8 million in the aggregate). This obligation remains outstanding as of the date of the filing of this Annual Report of Form 10-K.

Other

We also have obligations to make future payments to Northwestern that become due and payable on the achievement of certain commercial milestones. Based on the terminations of our collaborations with Ipsen and AbbVie, we currently do not anticipate any such milestone payments becoming due.

JOBS Act

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

In addition, as an emerging growth company, we will not be required to provide an auditor’s attestation report on our internal control over financial reporting in future annual reports on Form 10-K as otherwise required by Section 404(b) of the Sarbanes-Oxley Act.

Item 7A. RESERVED

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Item 8. Financial Statements and Supplementary Data.

EXICURE, INC.

INDEX TO FINANCIAL STATEMENTS

PAGE

Consolidated Balance Sheets as of December 31, 2022 and 2021 45

Notes to Consolidated Financial Statements 51

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Exicure, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Exicure, Inc. and subsidiary (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred significant expenses and negative cash flows since inception and its current liquidity is not sufficient to fund operations over the next twelve months, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

(signed) KPMG LLP

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

Chicago, Illinois

March 27, 2023

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EXICURE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

December 31,

ASSETS

Current assets:

Short-term investments — 4,497

Prepaid expenses and other assets 1,474 4,525

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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

Accrued expenses and other current liabilities 1,278 6,464

Deferred revenue, current — 17,317

Deferred revenue, noncurrent — 11,509

Other noncurrent liabilities — 656

Stockholders’ equity:

Accumulated other comprehensive loss — (2)

Total liabilities and stockholders’ equity $ 23,328 $ 64,868

See Accompanying Notes to Consolidated Financial Statements.

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EXICURE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

Year EndedDecember 31,

Revenue:

Operating expenses:

Other (expense) income, net:

Dividend income 78 8

Other expense, net (40) (11)

Total other expense, net (542) (1,553)

Net loss before provision for income taxes (2,373) (64,102)

Provision for income taxes 209 —

Basic and diluted loss per common share $ (0.56) $ (21.70)

Weighted-average basic and diluted common shares outstanding 4,619,471 2,953,901

See Accompanying Notes to Consolidated Financial Statements.

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EXICURE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, except share and per share data)

Year EndedDecember 31,

Other comprehensive (loss) income, net of taxes

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

Other comprehensive (loss) income 2 (85)

See Accompanying Notes to Consolidated Financial Statements.

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EXICURE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except shares)

Common Stock

Equity-based compensation — — 2,939 — — 2,939

Vesting of restricted stock units and related repurchases 807 — (14) — — (14)

Other comprehensive loss, net — — — — (85) (85)

Exercise of options 124 — — — — —

Equity-based compensation — — 1,369 — — 1,369

Vesting of restricted stock units and related repurchases 3,818 — (4) — — (4)

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

Other comprehensive income, net — — — — 2 2

See Accompanying Notes to Consolidated Financial Statements.

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EXICURE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended December 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to cash used in operating activities:

Depreciation and amortization 1,163 1,123

Amortization of right-of-use asset 693 656

Amortization of long-term debt issuance costs and fees 477 284

Amortization of investments (2) 184

Change in fair value of warrant liabilities — (15)

Changes in operating assets and liabilities:

Accounts receivable — 11

Prepaid expenses and other current assets 3,051 (295)

Other noncurrent assets (2,165) 68

Net cash used in operating activities (35,658) (34,819)

Cash flows from investing activities:

Purchase of available for sale securities (1,499) (6,497)

Proceeds from sale or maturity of available for sale securities 6,000 50,550

Capital expenditures (10) (968)

Proceeds from sale of capital assets 205 —

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

Cash flows from financing activities:

Proceeds from common stock offering 5,040 11,478

Payment of common stock financing costs (154) (1,111)

Payment of long-term debt fees and issuance costs (506) —

Proceeds from issuance of employee stock purchase plan 5 209

Proceeds from exercise of common stock warrants 14 8

Proceeds from exercise of common stock options — 546

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

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

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

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EXICURE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended December 31,

Supplemental disclosure of cash flow information

Non-cash investing activities:

Capital expenditures (accounts payable and accrued expenses) — 9

Non-cash financing activities:

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

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

Year Ended December 31,

Restricted cash included in other noncurrent assets 1,200 9,200

See Accompanying Notes to Consolidated Financial Statements.

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EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

1. Description of Business and Basis of Presentation

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

While the foregoing efforts are continuing, the Company does not expect they will generate significant value for stockholders, at least in the near term. Therefore, the Company is engaging in a broader exploration of strategic alternatives. This effort involves exploring growth through transactions with potential partners that see opportunity in joining an existing, publicly-traded organization. The Company is exploring transactions both within its historical biotechnology and life science industry and in other industries unrelated to its historical operations.

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

Principles of Consolidation

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

Reverse Stock Split

The Company effected a reverse stock split of its Common Stock at a ratio of 1-for-30 as of 5:00 p.m. Eastern Time on June 29, 2022. No fractional shares were issued in connection with the reverse stock split. Stockholders of record who would otherwise be entitled to receive a fractional share received a cash payment in lieu thereof. All information presented in the accompanying consolidated financial statements, unless otherwise indicated herein, assumes a 1-for-30 reverse stock split of the Company’s outstanding shares of Common Stock, and unless otherwise indicated, all such amounts and corresponding conversion price or exercise price data set forth herein have been adjusted to give effect to such assumed reverse stock split.

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EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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 financial statements have been prepared assuming that the Company will continue as a going concern for a period of one year after the date that the financial statements are issued. As of December 31, 2022, the Company has generated an accumulated deficit of $191,486 since inception and expects to incur significant expenses and negative cash flows for the foreseeable future. As of December 31, 2022, the Company’s cash, cash equivalents, and restricted cash were $9,777. Management believes that given the Company’s current cash position, operating plans and forecasted negative cash flows from operating activities over the next twelve months, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued. The Company has no committed sources of additional capital at this time and substantial additional financing will be needed by the Company to fund its operations.

Management believes that existing cash and cash equivalents could enable the Company to fund its operating expenses into the beginning of the fourth quarter of 2023. However, this estimate is based on assumptions about how the Company can limit spending that may prove to be wrong. It is very difficult to project the Company’s current cash burn rate given the transitional status of the Company and this estimate may prove inaccurate. Depending on the direction of the Company’s review of strategic alternatives, the Company may use available resources sooner than management currently expects. 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. There can be no assurance that such additional financing will be available and, if available, can be obtained on acceptable terms.

The accompanying 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.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on certain assumptions which it believes are reasonable in the circumstances and while actual results could differ from those estimates, management does not believe that any change in those assumptions in the near term would have a significant effect on the Company’s financial position, results of operations or cash flows. Actual results in future periods could differ from those estimates.

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EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

2. Significant Accounting Policies

Cash, cash equivalents, and short-term investments

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company’s short-term investments have initial maturities of greater than three months from date of purchase. The Company classifies its marketable debt security investments as “available-for-sale” and carries them at fair market value based upon prices on the last day of the fiscal period for identical or similar items. The Company records unrealized gains and losses on marketable debt securities in other comprehensive income (loss) as a component of stockholders’ equity until realized. Any premium or discount arising at purchase is amortized and/or accreted to interest income and/or interest expense over the life of the of the underlying security. Realized gains and losses are included in other income, net. The Company uses the specific identification method to determine the cost of securities sold.

Restricted cash

The Company secures a standby letter of credit with a restricted certificate of deposit account as part of its Chicago lease agreement. The Company considers the restricted certificate of deposit account in the amount of $1,200 to be restricted cash because its use to the Company is contractually limited and presents the balance within other noncurrent assets on the accompanying consolidated balance sheet at December 31, 2022.

Fair value of financial instruments

The Company has estimated the fair value of its financial instruments. The carrying amounts for cash, cash equivalents, and accounts payable approximate their fair value due to the relatively short-term nature of these instruments. The Company records short-term investments at their estimated fair value based on quoted market prices for identical or similar instruments.

Concentrations of credit risk and other risks and uncertainties

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, short-term investments, and accounts receivable. The Company places its cash, cash equivalents, and short-term investments with reputable financial institutions. The Company primarily invests its excess cash in debt instruments of corporations, the U.S. Treasury, financial institutions, and U.S. government agencies with strong credit ratings and an investment grade rating at or above a long-term rating of Aa3/AA- and a short-term rating of P1/A1. The Company has established guidelines relative to diversification and maturities that maintain safety and liquidity. The Company periodically reviews and modifies these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. The Company has no financial instruments with off-balance sheet risk of loss.

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

The Company is currently not profitable and no assurance can be provided that it will ever be profitable. The Company’s research and development activities have required significant investment since inception and operations are expected to continue to require cash investment in excess of its revenues. See also Note 1, Going Concern, for more information.

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

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EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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

Property and equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the various classes of property and equipment, which range from three to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the remaining terms of the respective leases or the estimated lives of the assets. Depreciation begins at the time the asset is placed in service.

Property and equipment are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.No impairment losses were recorded from inception in December 2011 through December 31, 2022.

Warrants

The Company accounts for freestanding warrants within stockholder’s equity or as liabilities based on the characteristics and provisions of each instrument. The Company evaluates outstanding warrants in accordance with Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. If none of the criteria in the evaluation in these standards are met, the warrants are classified as a component of stockholders’ equity and initially recorded at their grant date fair value without subsequent remeasurement. Warrants that meet the criteria are classified as liabilities and remeasured to their fair value, estimated using the Black-Scholes option-pricing model, at the end of each reporting period with changes in the fair value of the liability recorded in other income (expense), net in the consolidated statements of operations.

Revenue recognition

Under ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that are within the scope of ASC 606, the Company performs the following five steps:

1.Identify the contract with the customer. A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights and obligations regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance, and (iii) the Company determines that collection of substantially all consideration for goods and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s intent and ability to pay, which is based on a variety of factors including the customer’s historical payment experience, or in the case of a new customer, published credit and financial information pertaining to the customer.

2.Identify the performance obligations in the contract. Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods and services, the Company must apply judgment to determine whether promised goods and services are both capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.

3.Determine the transaction price. The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods and services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable

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EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method, depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Any estimates, including the effect of the constraint on variable consideration, are evaluated at each reporting period for any changes. Determining the transaction price requires significant judgment.

4.Allocate the transaction price to performance obligations in the contract. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The consideration to be received is allocated among the separate performance obligations based on relative standalone selling prices.

5.Recognize revenue when or as the Company satisfies a performance obligation. The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized over time if either (i) the customer simultaneously receives and consumes the benefits provided by the entity’s performance, (ii) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (iii) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. If the entity does not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer. Examples of control are using the asset to produce goods or services, enhance the value of other assets, or settle liabilities, and holding or selling the asset.

Licenses of intellectual property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from consideration allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the licenses. For licenses that are combined with other promises, the Company utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

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

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EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur in the future, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and therefore revenue recognized is constrained as management is unable to assert that a reversal of revenue would not be possible. The transaction price is then allocated to each performance obligation on a relative standalone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. To date, the Company has not recognized any milestone payment revenue from any of its collaboration agreements.

Royalties: For arrangements that include sales-based royalties, including milestone payments based on levels of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its collaboration agreements.

Equity-based compensation

The Company measures the cost of equity-based awards at fair value and records the cost of the awards, net of estimated forfeitures, on a straight-line basis over the requisite service period. The Company measures fair value for all common stock options using the Black-Scholes option-pricing model. The fair value of common stock option awards is affected by the valuation assumptions, including the expected volatility based on comparable market participants, expected term of the common stock option, risk-free interest rate, and expected dividends. For all equity-based awards, the fair value measurement date is the date of grant and the requisite service period is the period over which the recipient is required to provide service in exchange for the equity-based awards, which is generally the vesting period.

Segments and geographic information

The Company has determined it has one reporting segment. Disaggregating the Company’s operations is impracticable because the Company’s research and development activities and its assets overlap and management reviews its business as a single operating segment. Thus, discrete financial information is not available by more than one operating segment. All long-lived assets of the Company are located in the United States.

Leases

The Company determines if an arrangement is a lease at contract inception. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized on the balance sheet at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or to terminate the lease when it is reasonably certain that the Company will exercise that option. The Company uses the implicit interest rate when readily determinable and uses the Company’s incremental borrowing rate when the implicit rate is not readily determinable based upon the information available at the commencement date in determining the present value of the lease payments.

The lease payments used to determine the Company’s operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation when determinable. In addition, the Company’s lease arrangements may contain lease and non-lease components. The Company combines lease and non-lease components, which are accounted for together as a single lease component. Variable lease payments, such as real

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EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

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

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Short-term leases, defined as leases that have a lease term of twelve months or less at the commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease. Costs for variable lease payments that are not included in the lease liability are recognized as expense as incurred.

Research and development expense

Research and development expenses are charged to expense as incurred in performing research and development activities in accordance with ASC 730, Research and Development. The costs include employee‐related expenses including salaries, benefits, and stock‐based compensation expense, costs of funding research performed by third parties that conduct research and development and preclinical and clinical activities on the Company’s behalf, the cost of purchasing lab supplies and non‐capital equipment used in preclinical and clinical activities and in manufacturing preclinical and clinical study materials, consultant fees, facility costs including rent, depreciation and maintenance expenses, fees for acquiring and maintaining licenses under third party licensing agreements, including any sublicensing or success payments made to the Company’s licensors, and overhead and other expenses directly related to research and development operations. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the Company’s estimate, the accrual or prepaid is adjusted accordingly. The Company defers and capitalizes non-refundable advance payments made by the Company for research and development activities until the related goods are received or the related services are performed. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense.

Income taxes

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of its assets and liabilities and the expected benefits of net operating loss carryforwards. The impact of changes in tax rates and laws on deferred taxes, if any, is applied during the years in which temporary differences are expected to be settled and is reflected in the financial statements in the period of enactment. The measurement of deferred tax assets is reduced, if necessary, if, based on weight of the evidence, it is more likely than not that some, or all, of the deferred tax assets will not be realized. At December 31, 2022 and 2021, the Company established a full valuation allowance against its deferred tax assets to an amount that is more likely than not to be realized.

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EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Recent Accounting Pronouncements Not Yet Adopted

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13). ASU 2016-13 is a new standard intended to improve reporting requirements specific to loans, receivables and other financial instruments. ASU 2016-13 requires that credit losses on financial assets measured at amortized cost be determined using an expected loss model, instead of the current incurred loss model, and requires that credit losses related to available-for-sale debt securities be recorded through an allowance for credit losses and limited to the amount by which carrying value exceeds fair value. ASU 2016-13 also requires enhanced disclosure of credit risk associated with financial assets. The effective date of ASU 2016-13 was deferred by ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)—Effective Dates to the annual period beginning after December 15, 2022 for companies that (i) meet the definition of an SEC filer and (ii) are eligible as “smaller reporting companies” as such term is defined by the SEC, with early adoption permitted. The Company expects that the adoption of ASU 2016-13 will not have a material impact to the Company’s consolidated financial statements.

3. Collaborative Research and License Agreements

Ipsen Collaboration Agreement

Summary of Agreement

On July 30, 2021 (the “Ipsen Effective Date”), the Company entered into a Collaboration, Option and License Agreement with Ipsen (the “Ipsen Collaboration Agreement”). Pursuant to the Ipsen Collaboration Agreement, the Company granted to Ipsen exclusive access and options to license SNA-based therapeutics arising from two collaboration programs related to the treatment of Huntington’s disease and Angelman syndrome (each, an “Ipsen Collaboration Program”), respectively. Each such license (obtained in connection with the exercise of an Ipsen Option, as defined and discussed further below) would grant to Ipsen exclusive, royalty-bearing, sublicensable, worldwide rights to develop, manufacture, use and commercialize such SNA therapeutics. Upon written notice to the Company, Ipsen may exercise its option during the corresponding collaboration program’s applicable option exercise period, (each, an “Ipsen Option Exercise Period”).

As of the Ipsen Effective Date and through the Ipsen Termination Agreement Effective Date, the Company and Ipsen had agreed upon a development plan for each Ipsen Collaboration Program that describes the development activities and timelines required to advance each such Ipsen Collaboration Program through its first IND filing (each, an “Ipsen Development Plan”). The activities described in the Ipsen Development Plans were conducted under the supervision of the Ipsen Joint Steering Committee (the “Ipsen JSC”) consisting of three members from each of the Company and Ipsen. Under the terms of the Ipsen Collaboration Agreement, the Company was to use commercially reasonable efforts to conduct discovery and development in two collaboration programs for Huntington’s disease (the “HD Program”) and Angelman syndrome (the “AS Program”) (the “Ipsen Development Activities”) respectively. The Company was solely responsible for all costs and expenses of conducting each Ipsen Collaboration Program through the selection of SNA therapeutic candidates for further development (“Ipsen

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Selection”), and Ipsen was responsible for all costs and expenses of all activities that were necessary to enable the first filing of an IND for each proposed product candidate. In the event that Ipsen exercised an option, Ipsen would have been responsible for further development from the license effective date and commercialization of the corresponding licensed product.

In the event of completion of all Ipsen Development Activities for the Ipsen Selection (the “Ipsen First R&D Term Activities”), the Company was required to deliver to Ipsen a report that described the results of the Ipsen First R&D Term Activities and identified at least one SNA-based compound that satisfies certain criteria for such Ipsen Collaboration Program as determined by the Ipsen JSC (the “Ipsen First Option Data Package”). Following the delivery of the Ipsen First Option Data Package for an Ipsen Collaboration Program, Ipsen would have had the ability for a defined period of time (the “Ipsen First Option Exercise Period”) to exercise an option (each a “First Ipsen Option”) to obtain worldwide rights and license to the Company’s SNA technology and the Company’s interest in joint collaboration technology to make, have made, import, use, sell or offer for sale any product (each an “Ipsen Licensed Product”) that resulted from such Ipsen Collaboration Program during the term of the Ipsen Collaboration Agreement.

In the event Ipsen (i) did not exercise the First Ipsen Option with respect to an Ipsen Collaboration Program, (ii) the Ipsen Collaboration Agreement had not expired or been terminated with respect to such Ipsen Collaboration Program, and (iii) Ipsen agreed to fully fund additional research activities for an Ipsen Collaboration Program through IND filing, the Company would have been responsible for research and development activities for such Ipsen Collaboration Program through IND filing (the “Ipsen Second R&D Term Activities”). In the event of completion of the Ipsen Second R&D Term Activities, the Company would have been required to deliver to Ipsen a report that described the results of the Ipsen Second R&D Term Activities (the “Ipsen Second Option Data Package”). Following the delivery of the Ipsen Second Option Data Package for an Ipsen Collaboration Program, Ipsen would have had the ability for a defined period of time (the “Ipsen Second Option Exercise Period”) to exercise an option (each a “Second Ipsen Option” and together with the First Ipsen Option, the “Ipsen Options”) to obtain worldwide rights and license to the Company’s SNA technology and the Company’s interest in joint collaboration technology to make, have made, import, use, sell or offer for sale any Ipsen Licensed Product” that results from such Ipsen Collaboration Program during the term of the Ipsen Collaboration Agreement.

In the event of Ipsen’s exercise of an Ipsen Option for an Ipsen Collaboration Program, the Company would have been required to supply to Ipsen the licensed SNAs under current Good Manufacturing Practice, at the Company’s manufacturing cost pursuant to a clinical supply agreement to be negotiated by the Company and Ipsen in good faith following the Ipsen Effective Date and executed within twelve (12) months after the Ipsen Effective Date (the “Ipsen Supply Agreement”). The Ipsen Supply Agreement would have provided for the transfer by the Company to Ipsen of all documents and information, and the provision by the Company of technical assistance and support, for Ipsen to manufacture or have manufactured by a third party contractor engaged by Ipsen the applicable licensed SNA to the extent it is intended to be actually used in the development and manufacture of the applicable licensed products.

Under the terms of the Ipsen Collaboration Agreement, the Company received a nonrefundable upfront payment of $20,000 (the “Ipsen Upfront Payment”). If Ipsen exercised a First Ipsen Option, Ipsen was required to pay the Company the First Ipsen Option exercise fee of $10,000 for each Ipsen Collaboration Program. If Ipsen exercised a Second Ipsen Option, Ipsen was required to pay the Company the Second Ipsen Option exercise fee of $25,000 for each Ipsen Collaboration Program.

Ipsen would have been required to pay a preclinical milestone payment of $5,000 for each Ipsen Collaboration Program upon achievement of such milestone regardless of whether an Ipsen Option was exercised. In addition to the option exercise fees and the preclinical milestones described above, if Ipsen exercised an Ipsen Option for an Ipsen Collaboration Program, development and regulatory milestones would have been payable for that program upon the initiation of certain clinical trials and the filing for processing by the United States Food and Drug Administration (“FDA”) in the United States and by two additional regulators outside the United States of a marketing application for review, per the Ipsen Collaboration Program, with an aggregate total of up to $180,000 if

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EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

both Ipsen Options were exercised. Commercial milestones would have been payable for that Ipsen Collaboration Program upon first commercial sale of a licensed product in certain jurisdictions and the achievement of specified aggregate sales thresholds for all licensed products from that program, with an aggregate total of up to $762,000 if both Ipsen Options were exercised. In the event a therapeutic candidate subject to the Ipsen Collaboration Agreement resulted in commercial sales, the Company was eligible to receive tiered royalties at percentages ranging from the mid-single digits to the mid-teens on future net product sales of such commercialized therapeutic candidates. A percentage of the aforementioned payments would have been due to Northwestern University upon receipt, pursuant to the terms of the Company’s existing license agreements with Northwestern University (see Note 15, Commitment and Contingencies, for more information on the Northwestern University License Agreements (as defined below)). In connection with the receipt of the Ipsen Upfront Payment, the Company paid a $3,000 license fee to Northwestern University under the terms of the Northwestern License Agreements.

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

Accounting Analysis

The Company concluded that Ipsen was a customer in this arrangement, and as such the arrangement falls within the scope of the revenue recognition guidance. Under the Ipsen Collaboration Agreement, the Company has identified two performance obligations, as follows: (1) the performance obligation related to the HD Program that includes (i) the Ipsen First R&D Term Activities related to the HD Program (the “Ipsen HD Program R&D Services”), (ii) Ipsen JSC services related to the HD Program during the Ipsen First Term (the “Ipsen HD Program JSC Services”), and (iii) activities related to the negotiation of the Ipsen Supply Agreement within twelve months of the Ipsen Effective Date; and (2) the performance obligation related to the AS Program that includes (i) the Ipsen First R&D Term Activities related to the AS Program (the “Ipsen AS Program R&D Services”), (ii) Ipsen JSC services related to the AS Program during the Ipsen First Term (the “Ipsen AS Program JSC Services”), (iii) and activities related to the negotiation of the Ipsen Supply Agreement within twelve months of the Ipsen Effective Date. The Company has concluded that the Ipsen HD Program R&D Services and the Ipsen AS Program R&D Services are not distinct from the Ipsen HD Program JSC Services and the Ipsen AS Program JSC Services, respectively. The Company has also concluded that the Ipsen HD Program JSC Services and the Ipsen AS Program JSC Services are not distinct from the activities related to entering the Ipsen Supply Agreements for each respective program. The Ipsen JSC provided oversight and management of the overall Ipsen Collaboration Agreement, and the members of the Ipsen JSC from the Company have specialized industry knowledge, particularly as it relates to SNA technology. The Ipsen JSC was meant to facilitate the early stage research being performed and coordinate the activities of both the Company and Ipsen. Further, the Ipsen JSC services were critical to the ongoing evaluation of the Ipsen Collaboration Programs and the drafting and evaluation of the Ipsen First Option Data Package. The Ipsen JSC would also have provided oversight and management of the activities to enter into the Ipsen Supply Agreement. Accordingly, the Company’s participation on the Ipsen JSC was essential to Ipsen receiving value from the Ipsen HD Program R&D Services and the Ipsen AS Program R&D Services, and as such, (i) the Ipsen HD Program JSC Services, along with the Ipsen HD Program R&D Services and the activities related to entering the Ipsen Supply Agreement within twelve months of the Ipsen Effective Date for that program are considered a single performance obligation (the “Ipsen HD Program Services”) and (ii) the Ipsen AS Program JSC Services along with the Ipsen AS Program R&D Services and the activities related to entering the Ipsen Supply Agreement within twelve months of the Ipsen Effective Date for that program are considered a single performance obligation (the “Ipsen AS Program Services”).

As of the Ipsen Effective Date, the total transaction price was determined to be $20,000, consisting solely of the Ipsen Upfront Payment. The Company also utilized the most likely amount method to estimate any development and regulatory milestone payments to be received. As of the Ipsen Effective Date, there were no milestones included in the transaction price. The preclinical, development, regulatory, and commercial milestones were fully constrained due to the significant uncertainties surrounding such payments. The Company considered the stage of development

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and the risks associated with the remaining development required to achieve the milestone, as well as whether the achievement of the milestone is outside the control of the Company or Ipsen. The Company has determined that any commercial milestones and sales-based royalties will be recognized when the related sales occur and therefore, they have also been excluded from the transaction price. The Company re-evaluated the transaction price at the end of each reporting period and as uncertain events were resolved or other changes in circumstances occurred. As of the Ipsen Termination Agreement Effective Date, the Company determined that the total transaction price was $20,000.

The Company allocated the total transaction price to each of the two identified performance obligations under the Ipsen Collaboration Agreement based on an expected cost plus a margin approach, as follows: $10,793 of the transaction price allocated to the Ipsen HD Program Services and $9,207 of the transaction price allocated to the Ipsen AS Program Services.

The Company recognized revenue related to each of Ipsen HD Program Services and the Ipsen AS Program Services as those performance obligations were satisfied using an input method to measure progress for each of those performance obligations. The Company believes the input method that most accurately depicts the measure of progress is the actual hours incurred to date relative to projected hours to complete the activities for the Ipsen HD Program Services and the Ipsen AS Program Services. In connection with the Ipsen Termination Agreement, the Company recognized as revenue any remaining deferred revenue associated with the Ipsen Collaboration Agreement in the fourth quarter of 2022.

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

AbbVie Collaboration Agreement

Summary of Agreement

On November 13, 2019 (the “AbbVie Effective Date”), the Company entered into a Collaboration, Option and License Agreement (the “AbbVie Collaboration Agreement”), with a wholly-owned subsidiary of Allergan plc, Allergan. On May 8, 2020, Allergan plc, including Allergan was acquired by AbbVie. Pursuant to the AbbVie Collaboration Agreement, the Company granted to AbbVie exclusive access and options to license SNA-based therapeutics arising from two collaboration programs related to the treatment of hair loss disorders (each, an “AbbVie Collaboration Program”). Under each such license (obtained in connection with the exercise of an AbbVie Option, as defined and discussed further below), the Company would grant to AbbVie exclusive, royalty-bearing, sublicensable, nontransferable, worldwide rights to develop, manufacture, use and commercialize such SNA therapeutics. Under the AbbVie Collaboration Agreement, the Company was to use commercially reasonable efforts to conduct the AbbVie Collaboration Programs, each focused on one or more hair loss disorders to discover one or more SNA products that are directed to, bind to or inhibit one or more specific AbbVie Collaboration Program targets.

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

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filing (each, an “AbbVie Development Plan”). The activities described in the AbbVie Development Plan were conducted under the supervision of the AbbVie Joint Development Committee (the “AbbVie JDC”) consisting of three members from each of the Company and AbbVie. The Company was primarily responsible for performing early-stage discovery and preclinical activities (the “AbbVie Collaboration Program Initial Development Activities”) set forth in the AbbVie Development Plan for each AbbVie Collaboration Program and would have been solely responsible for all costs and expenses related to the AbbVie Collaboration Program Initial Development Activities. AbbVie had the right to elect, in its sole discretion and at its sole cost and expense, to conduct formulation assessment and in vivo testing as set forth in an AbbVie Development Plan.

In the event of completion of all AbbVie Initial Development Activities, the Company would have been required to deliver to AbbVie a report that described the results of the AbbVie Initial Development Activities and identified at least one SNA-based compound that satisfies certain criteria for such AbbVie Collaboration Program as determined by the AbbVie JDC (the “AbbVie Initial Development Report”). Following the delivery of the AbbVie Initial Development Report for an AbbVie Collaboration Program, AbbVie would have had the ability for a defined period of time (the “AbbVie Initial Option Exercise Period”) to exercise an option (each an “AbbVie Option”) to obtain worldwide rights and license to the Company’s SNA technology and the Company’s interest in joint collaboration technology to make, have made, import, use, sell or offer for sale any product (each an “AbbVie Licensed Product”) that resulted from such AbbVie Collaboration Program during the term of the AbbVie Collaboration Agreement.

At AbbVie’s sole option, AbbVie had the right to extend the AbbVie Initial Option Exercise Period (the “AbbVie Option Extension”) and require the Company to perform IND-enabling activities described in the AbbVie Development Plan (the “AbbVie IND-Enabling Activities”), subject to the payment of additional consideration (“AbbVie Extension Exercise”). If AbbVie exercised the AbbVie Option Extension, the Company would have been responsible for conducting the AbbVie IND-Enabling Activities and would have been solely responsible for all costs and expenses associated with such activities. In the event of completion of the AbbVie IND-Enabling Activities, the Company would have been required to deliver a report that describes the results of the AbbVie IND-Enabling Activities (the “AbbVie IND-Enabling Activities Data Package”) to AbbVie. Following the delivery of AbbVie IND-Enabling Activities Data Package, AbbVie would have had the ability for a defined period of time (the “AbbVie Extended Option Exercise Period”) to exercise an AbbVie Option with respect to such AbbVie Collaboration Program. After the exercise of an AbbVie Option with respect to an AbbVie Collaboration Program, AbbVie would have been responsible for all development, manufacturing and commercialization activities, and costs and expense associated with such activities in connection with AbbVie Licensed Products arising from such AbbVie Collaboration Program.

The Company’s obligation to conduct the activities defined in the AbbVie Development Plan under the AbbVie Collaboration Agreement commenced on November 13, 2019 and continued through the AbbVie Termination Agreement Effective Date.

Under the terms of the AbbVie Collaboration Agreement, the Company received a $25,000 upfront, non-refundable, non-creditable cash payment (the “AbbVie Upfront Payment”) related to the Company’s research and development costs for conducting the AbbVie Development Plan for two AbbVie Collaboration Programs, each focused on one or more targets, and certain options to obtain exclusive, worldwide licenses under certain intellectual property rights owned or controlled by the Company to develop, manufacture and commercialize certain products resulting from each such AbbVie Collaboration Programs. The option exercise fee during the AbbVie Initial Option Exercise Period was $10,000 per AbbVie Collaboration Program. If AbbVie elected to extend the AbbVie Initial Option Exercise Period, AbbVie would have been required to pay an additional fee of $10,000. If AbbVie elected to exercise its option during the AbbVie Extended Option Exercise Period, AbbVie would have been required to pay the Company the option exercise fee of $15,000.

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

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AbbVie Licensed Product basis. On an AbbVie Licensed Product by AbbVie Licensed Product basis, for the first AbbVie Licensed Product to achieve the associated milestone event, the Company was eligible to receive up to an aggregate of $55,000 for development milestone payments and $132,500 for product approval and launch milestone payments. The Company was also eligible for up to $175,000 in sales milestone payments on an AbbVie Collaboration Program by AbbVie Collaboration Program basis, associated with aggregate worldwide sales. Certain product approval milestones were subject to certain reductions under specified circumstances, including for payments required to be made by AbbVie to obtain certain third-party intellectual property rights.

In addition, to the extent there was any AbbVie Licensed Product, the Company would have been entitled to receive tiered royalty payments of mid-single digits to the mid-teens percentage on future net worldwide product sales of such AbbVie Licensed Products, subject to certain reductions under specified circumstances. Royalties were due on a AbbVie Licensed Product by AbbVie Licensed Product and country by country basis from the date of the first commercial sale of each AbbVie Licensed Product in a country until the latest to occur of: (i) the expiration date in such country of the last to expire valid claim within the licensed intellectual property covering the manufacture, use or sale of such AbbVie Licensed Product in such country, (ii) the tenth anniversary of the first commercial sale of such AbbVie Licensed Product in such country, and (iii) the expiration of regulatory exclusivity for such AbbVie Licensed Product in such country.

Accounting Analysis

The Company concluded that AbbVie was a customer in this arrangement, and as such the arrangement falls within the scope of the revenue recognition guidance. Under the AbbVie Collaboration Agreement, the Company has identified a single performance obligation that includes (i) the research and development activities during the AbbVie Research Term (the “AbbVie R&D Services”), and (ii) AbbVie Joint Development Committee services during the AbbVie Research Term (the “AbbVie JDC Services”). The Company has concluded that the AbbVie R&D Services is not distinct from the AbbVie JDC Services during the AbbVie Research Term. The AbbVie JDC provided oversight and management of the overall AbbVie Collaboration Agreement, and the members of the AbbVie JDC from the Company have specialized industry knowledge, particularly as it relates to SNA technology. The AbbVie JDC was meant to facilitate the early-stage research being performed and coordinate the activities of both the Company and AbbVie. Further, the AbbVie JDC services were critical to the ongoing evaluation of an AbbVie Collaboration Program and the drafting and evaluation of the AbbVie Initial Development Report and the AbbVie IND-Enabling Data Package. Accordingly, the Company’s participation on the AbbVie JDC was essential to AbbVie receiving value from the AbbVie R&D Services and as such, the AbbVie JDC Services along with the AbbVie R&D Services are considered one performance obligation (the “AbbVie Collaboration Program Services”). In addition, the Company has concluded that the option to purchase two development and commercialization licenses was considered a marketing offer as the options did not provide any discounts or other rights that would be considered a material right in the arrangement, and thus, not a performance obligation at the onset of the agreement. The consideration for these options would have been accounted for when they are exercised.

As of the AbbVie Effective Date, the total transaction price was determined to be $25,000, consisting solely of the AbbVie Upfront Payment. The Company also utilized the most likely amount method to estimate any development and regulatory milestone payments to be received. As of the AbbVie Effective Date, there were no milestones included in the transaction price. The milestones were fully constrained due to the significant uncertainties surrounding such payments. The Company considered the stage of development and the risks associated with the remaining development required to achieve the milestone, as well as whether the achievement of the milestone is outside the control of the Company or AbbVie. The Company has determined that any commercial milestones and sales-based royalties will be recognized when the related sales occur and therefore they have also been excluded from the transaction price. The Company re-evaluated the transaction price at the end of each reporting period and as uncertain events were resolved or other changes in circumstances occurred. As of the AbbVie Termination Agreement Effective Date, the Company determined the total transaction price was $25,000.

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

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

During the third quarter of 2021, the AbbVie JDC revised the AbbVie Initial Development Plan for each AbbVie Collaboration Program. As a result, the Company had increased its estimate of total hours to complete the research services, requiring an adjustment to cumulative revenue recognized (considered a change in estimate pursuant to ASC 606), which led to a full year revenue reversal of $(2,792) in the prior year.

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

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

Summary of Contract Liabilities

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

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

AbbVie Collaboration Agreement Ipsen Collaboration Agreement

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

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

Additions — —

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

4. Supplemental Balance Sheet Information

Prepaid expenses and other current assets

December 31,

Prepaid clinical, contract research and manufacturing costs $ 213 $ 2,484

Prepaid expenses and other current assets $ 1,474 $ 4,525

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Other noncurrent assets

December 31,

Prepaid insurance, noncurrent 2,252 —

Property and equipment, net

December 31,

Computers and software 63 60

Furniture and fixtures 30 30

Construction in process — 33

Property and equipment, gross 6,180 6,594

Less: accumulated depreciation (3,650) (2,667)

Property and equipment, net $ 2,530 $ 3,927

Depreciation and amortization expense was $1,163 and $1,123, for the years ended December 31, 2022 and 2021, respectively. During the year ended December 31, 2022, the Company sold scientific equipment with a net book value of $222 and recognized a loss of $17 in the accompanying statement of operations for the year ended December 31, 2022.

Accrued expenses and other current liabilities

December 31,

Accrued clinical, contract research and manufacturing costs $ 48 $ 3,689

Accrued restructuring costs 48 1,191

Lease liability, current 539 459

Accrued payroll-related expenses 32 167

Accrued expenses and other current liabilities $ 1,278 $ 6,464

5. Investments

As of December 31, 2022 and 2021, the Company primarily invested its excess cash in debt instruments of corporations, the U.S. Treasury, financial institutions, and U.S. government agencies with strong credit ratings and an investment grade rating at or above a long-term rating of Aa3/AA- and a short-term rating of P1/A1. The Company has established guidelines relative to diversification and maturities that maintain safety and liquidity. The Company periodically reviews and modifies these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

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

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As of December 31, 2021, the Company’s available-for-sale securities were available to the Company for use in its current operations. As a result, the Company categorized all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.

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

6. Debt

MidCap Credit Agreement

On March 15, 2022, pursuant to the terms of the Company’s 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 (as amended, the “MidCap Credit Agreement”), the Company repaid all remaining outstanding obligations under the MidCap Credit Agreement, including the outstanding principal balance of $7,500 and an exit fee of $506.

The MidCap Credit Agreement provided for a secured term loan facility in an aggregate principal amount of up to $25,000 (the “MidCap Credit Facility”). The Company borrowed the first advance of $17,500 (“Tranche 1”) on September 25, 2020 (the “Closing Date”). Amendment No. 4 terminated the availability of the second advance of $7,500 (“Tranche 2”), effective as of December 9, 2021, that was previously available under the MidCap Credit Agreement subject to certain conditions.

Tranche 1 bore interest at a floating rate equal to 6.25% per annum, plus the greater of (i) 1.50% or (ii) one-month LIBOR. Interest on each loan advance is due and payable monthly in arrears. Principal on each loan advance was payable in 36 equal monthly installments beginning October 1, 2022 until paid in full on October 1, 2025 (the “Maturity Date”). Prepayments of the loans under the MidCap Credit Agreement, in whole or in part, were subject to early termination fees in an amount equal to 3.0% of principal prepaid if prepayment occurs on or prior to the first anniversary of the Closing Date and 1.0% of principal prepaid if prepayment occurs after the first anniversary of the Closing Date and prior to the maturity date. Pursuant to Amendment No. 4, the early termination fee associated with the prepayment of $10,000 made in December 2021 was waived and, since the remaining principal amount was repaid on or prior to March 31, 2022, the associated early termination fee for that prepayment was also waived. In connection with execution of the MidCap Credit Agreement, the Company paid MidCap a $125 origination fee.

At the Maturity Date or on any earlier date on which all amounts advanced to the Company become due and payable in full, or are otherwise paid in full, the Company was required to pay an exit fee equal to 3.75% of the principal amount of all loans advanced to the Company under the MidCap Credit Agreement. Upon the advance of Tranche 1, the Company accrued $656 for the related exit fee. Pursuant to Amendment No. 4, since the remaining principal amount was repaid on or prior to March 31, 2022, a portion of the related exit fee that had not been earned by MidCap was waived.

The Company’s obligations under the MidCap Credit Agreement were secured by a security interest in substantially all of its assets, excluding intellectual property (which is subject to a negative pledge). Additionally, the Company’s future subsidiaries, if any, may have been required to become co-borrowers or guarantors under the MidCap Credit Agreement.

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

The MidCap Credit Agreement also contained customary events of default relating to, among other things, payment defaults, breaches of covenants, a material adverse change, delisting of the Company’s common stock, bankruptcy and insolvency, cross defaults with certain material indebtedness and certain material contracts, judgments, and inaccuracies of representations and warranties. Upon an event of default, the agent and the lenders may declare all or a portion of the Company’s outstanding obligations to be immediately due and payable and exercise other rights and remedies provided for under the agreement. During the existence of an event of default, interest on the obligations could have been increased by 2.0%.

Total proceeds, net of fees and issuance costs, borrowed under Tranche 1 were $16,512. Fees and issuance costs of $332, as well as fees of $656 that were payable to MidCap at maturity of Tranche 1, were recorded as a reduction to the carrying amount of long-term debt on the Company’s balance sheet and, prior to the repayment of all remaining outstanding obligations under the MidCap Credit Agreement on March 15, 2022, were amortized to interest expense through the maturity date of October 1, 2025 using the effective interest method. Fees and issuance costs of $73 attributed to the amount available to be borrowed under Tranche 2 were paid and recorded as deferred financing costs (other assets) and were amortized and recorded to interest expense in 2021 when it was determined that amounts under Tranche 2 would not be borrowed.

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

7. Leases

The Company’s lease arrangements at December 31, 2022 consist of (i) a lease for office and laboratory space at its headquarters in Chicago, Illinois that commenced in July 2020 (the “Chicago Lease”) and (ii) leases for office equipment (the “Office Equipment Leases”). The Chicago Lease and the Office Equipment Leases are classified as operating leases.

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

Chicago Lease

The Company has approximately thirty thousand square feet of office and laboratory space in Chicago, Illinois (the “Chicago Lease”). The original term (the “Original Term”) of the Chicago Lease is 10 years, commencing on July 1, 2020 (the “Commencement Date”), which is the date the premises were ready for occupancy under the terms of the Chicago Lease. The Company has options to extend the term of the Chicago Lease for two additional successive periods of five years each (the “Extension Periods”) at the then prevailing effective market rental rate.

The initial annual base rent during the Original Term is approximately $1,113 for the first 12-month period of the Original Term, payable in monthly installments beginning on the Commencement Date. Base rent thereafter is subject to annual increases of 3%, for an aggregate amount of $12,761 over the Original Term. The Company must also pay its proportionate share of certain operating expenses and taxes for each calendar year during the term. During the first 12-month period of the Original Term, the base rent and the Company's proportionate share of operating expenses and taxes are subject to certain abatements.

Upon execution of the Chicago Lease, the Company paid to the landlord the first installment of base rent and the estimated monthly amount of its pro rata share of taxes and its pro rata share of operating expenses in the aggregate amount of $87 which amount had been adjusted for the abatement as set forth in the lease agreement. The Company also paid the landlord a net amount of $697 toward tenant improvements.

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As part of the agreement for the Chicago Lease, the Company is required to maintain a standby letter of credit during the term of the lease, currently in the amount of $1,200 and subject to reduction over time, which is secured by a restricted certificate of deposit account and presented within other noncurrent assets on the Company’s consolidated balance sheet at December 31, 2022.

The Company recognized a right of use asset of $8,931 and a lease liability of $8,147 on the Commencement Date. Because the rate implicit in the Chicago Lease is not readily determinable, the Company used its incremental borrowing rate of 8.3% on the Commencement Date to determine the present value of the lease payments over the Original Term. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. As of December 31, 2022, the Company determined it is not reasonably certain that the renewal option would not be exercised.

Information related to the Company’s operating lease asset and related operating lease liabilities were as follows:

December 31,

Weighted-average remaining lease term 7.5 years 8.5 years

Weighted-average discount rate 8.3 % 8.3 %

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

December 31,

Short term lease costs 17 130

The Company made cash payments for operating leases of $3,024 and $2,134 during the years ended December 31, 2022 and 2021, respectively.

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Maturities of the Company’s lease liability as of December 31, 2022 were as follows:

Years Ending December 31, Operating Leases

Less: imputed interest (2,507)

Total lease liability $ 7,306

Current operating lease liability $ 539

Noncurrent operating lease liability 6,767

Total lease liability $ 7,306

8. Restructuring

September 2022 Restructuring

On September 26, 2022, the Company announced its commitment to a plan to wind down the Company’s R&D activities (the “September 2022 Restructuring”). This plan resulted in a reduction in force where the Company reduced approximately 66% of the Company’s existing workforce in early fourth quarter of 2022. Notified employees were offered separation benefits, including severance payments and temporary healthcare coverage assistance, the majority of which were paid in October 2022 as a lump sum payment. All of the severance costs associated with the September 2022 Restructuring represented cash expenditures and were recorded within research and development expense within the accompanying consolidated statement of operations.

December 2021 Restructuring

On December 10, 2021, the Company announced its commitment to a plan to wind down the Company’s immuno-oncology program for cavrotolimod (AST-008) and the Company’s XCUR-FXN preclinical program for the treatment of Friedreich’s ataxia. The Company intended at the time to realign its research and development resources to support (i) the development of its preclinical program targeting SCN9A for neuropathic pain, (ii) the continued advancement of its partnered programs with Ipsen Biopharm Limited to develop SNA-based treatments in neuroscience targeting Huntington’s disease and Angelman syndrome, (iii) its continued advancement of its partnered program with AbbVie to develop SNA-based treatments for hair loss disorders, as well as (iv) the continued research and development of other undisclosed therapeutic product candidates. This plan resulted in a reduction in force where the Company eliminated approximately 50% of the Company’s existing workforce on a staggered basis through January 2022 as well as other cost-cutting measures.

Notified employees were offered separation benefits, including severance payments and temporary healthcare coverage assistance. In most cases, the separation benefits were paid as a lump sum in January 2022. Certain of the notified employees had employment agreements which provided for separation benefits in the form of salary continuation; these benefits were paid between February 2022 and January 2023. All of the severance costs represent cash expenditures.

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

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December 2021 Restructuring September 2022Restructuring Total

Adjustments (non-cash) 11 1 12

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

9. Stockholders’ Equity

Preferred Stock

The Company has 10,000,000 shares of preferred stock, par value $0.0001 authorized and no shares issued and outstanding.

Common Stock

The Company has 200,000,000 shares of common stock, par value $0.0001, authorized. As of December 31, 2022 and December 31, 2021, the Company had 4,965,901 and 3,626,073 shares issued and outstanding, respectively.

The holders of shares of the Company’s common stock are entitled to one vote per share on all matters to be voted upon by the Company’s stockholders and there are no cumulative rights. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of the Company’s common stock are entitled to receive ratably any dividends that may be declared from time to time by the Board out of funds legally available for that purpose. In the event of the Company’s liquidation, dissolution or winding up, the holders of shares of the Company’s common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock then outstanding. The Company’s common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Company’s common stock. The outstanding shares of the Company’s common stock are fully paid and non-assessable.

September 2022 PIPE

Securities Purchase Agreement

On September 26, 2022, the Company entered into a securities purchase agreement (the “September 2022 Securities Purchase Agreement”) with CBI USA, pursuant to which the Company agreed to issue and sell to CBI USA in a private placement an aggregate of 3,400,000 shares (the “September 2022 PIPE Shares”) of its common stock, par value $0.0001 per share (the “Common Stock”), at a purchase price of $1.60 per share (the “September 2022 PIPE”).

The September 2022 PIPE closed on February 24, 2023 (the “2023 PIPE Closing Date”). Immediately following the closing of the September 2022 PIPE, CBI USA holds approximately 50.4% of the shares of the Company’s common stock. At closing of the September 2022 PIPE, the Company received aggregate gross proceeds of $5,440 (or net proceeds of approximately $4,597 after transaction expenses).

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

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EXICURE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

September 2022 Registration Rights Agreement

Also, on September 26, 2022, the Company entered into a registration rights agreement (the “September 2022 Registration Rights Agreement”) with CBI USA, pursuant to which the Company agreed to register the resale of the September 2022 PIPE Shares. Under the September 2022 Registration Rights Agreement, the Company has agreed to file a registration statement covering the resale of the September 2022 PIPE Shares no later than the sixtieth (60th) day following the September 2022 PIPE Closing Date. The Company has agreed to use reasonable best efforts to cause such registration statement to become effective as promptly as practicable after the filing thereof but in any event on or prior to the Effectiveness Deadline (as defined in the September 2022 Registration Rights Agreement), and to keep such registration statement continuously effective until the earlier of (i) the date the September 2022 PIPE Shares covered by such registration statement have been sold or may be resold pursuant to Rule 144 without restriction, or (ii) the date that is two (2) years following the September 2022 PIPE Closing Date. The Company has also agreed, among other things, to pay all reasonable fees and expenses (excluding any underwriters’ discounts and commissions and all fees and expenses of legal counsel, accountants and other advisors for CBI USA except as specifically provided in the September 2022 Registration Rights Agreement) incident to the performance of or compliance with the September 2022 Registration Rights Agreement by the Company.

In the event the registration statement has not been filed within 90 days following the September 2022 PIPE Closing Date, subject to certain limited exceptions, then the Company has agreed to make pro rata payments to CBI USA as liquidated damages in an amount equal to 0.5% of the aggregate amount invested by CBI USA in the September 2022 PIPE Shares per 30-day period or pro rata for any portion thereof for each such month during which such event continues, subject to certain caps set forth in the September 2022 Registration Rights Agreement.

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

XCUR US Equity

XCUR · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. RESERVED

Item 8. Financial Statements and Supplementary Data.

XCUR US Equity☆

XCUR · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. RESERVED

Item 8. Financial Statements and Supplementary Data.

XCUR US Equity