Exicure, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Amounts below are in U.S. dollars; financial-statement figures are in thousands unless stated otherwise. The filing was signed June 17, 2024.
Business context
Exicure has halted research and development and substantially reduced its workforce. It is pursuing strategic alternatives, including transactions with potential partners in industries unrelated to its historical biotechnology business. Management does not expect efforts involving historical assets to generate significant value for stockholders. The company has no ongoing operating revenue source or committed financing.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 or comparison |
|---|---|---|
| Revenue | $500 | $0 |
| Research and development expense | $0 | $1,423 |
| General and administrative expense | $1,336 | $3,116 |
| Operating loss | $(836) | $(4,539) |
| Net loss | $(829) | $(4,407) |
| Basic and diluted loss per share | $(0.10) | $(0.70) |
| Net cash used in operating activities | $(450) | $(3,318) |
The $500 revenue was a one-time initial payment under a February 2024 patent license for cavrotolimod in the hepatitis field. The company may receive modest future royalties, which management does not expect to be material. No product revenue is expected for the foreseeable future. Gross margin is not separately presented in the filing.
At March 31, cash and cash equivalents were $366, versus $816 at December 31, 2023. The cash-flow statement reports $1,566 of cash, cash equivalents and restricted cash, including $1,200 of restricted cash. Total assets were $10,711; total liabilities $8,504; and stockholders’ equity $2,207. Current assets of $1,463 were below current liabilities of $2,661. Liabilities included $5,843 of noncurrent lease liability; the filing reports no conventional borrowings outstanding at quarter-end.
Changes versus the prior comparable period
- Revenue increased from zero due to the patent-license payment.
- Operating expenses fell 71%. R&D expense was zero after the company suspended its programs; G&A declined 57%, principally due to lower professional fees and lower 2023 executive separation and stock-compensation costs.
- Net loss narrowed to $829 from $4,407, while operating cash use decreased to $450 from $3,318, primarily reflecting reduced operations and headcount.
- Q1 2024 had no financing cash inflow; Q1 2023 included $4,595 of net financing cash from the private placement.
Outlook, risks and unusual items
- Going concern and funding: Management states that cash is insufficient to fund operations and that substantial doubt exists about the company’s ability to continue as a going concern. Additional funding is needed in the very near term; further cost reductions are limited. Failure to raise capital could lead to bankruptcy protection or cessation of operations, potentially leaving common stockholders with little or no value.
- Liquidity after quarter-end: Cash and cash equivalents were approximately $200 as of May 31, 2024. Subsequent to quarter-end, the company received loans of $300 from an individual investor and $700 from DGP, each bearing 6% interest. The DGP loan is related-party financing.
- Convertible notes receivable: The company’s $2 million investment in notes receivable was carried at fair value of zero because management did not believe it was recoverable. The company sought redemption for $2.090 million, but the issuer disputed the timing and asserted redemption would not be available until August 2024. Recovery and timing are uncertain.
- Lease: On June 11, 2024, the landlord notified the company that it would draw on the $1.2 million restricted lease cash account for past-due rent covering December 2023 through June 2024.
- Nasdaq listing: The company did not meet Nasdaq’s $2.5 million stockholders’ equity requirement at March 31 and reported continuing bid-price and governance-related listing issues. Nasdaq staff issued a delisting determination based on late filings and failure to hold the 2023 annual meeting. The company appealed; trading suspension was stayed pending the hearing panel’s decision, with a hearing scheduled for July 9, 2024. The filing also states the annual meeting deadline was June 28, 2024.
- Controls: Management concluded disclosure controls were ineffective as of March 31 and identified material weaknesses involving expense classification, review of non-routine accounting for the notes receivable, and accounting and IT controls. A remediation plan was being developed. The company also reported restatements of prior 2023 quarterly financial statements.
- Contingencies: Securities class-action and shareholder derivative litigation, a former employee complaint, and a dispute with Northwestern University are disclosed. The university license agreements were terminated in 2023 following an alleged breach notice. The filing does not quantify damages for the securities or derivative cases.
Important facts for investors to verify
- Current cash, restricted-cash availability and burn rate, including the effect of the landlord’s planned draw and the post-quarter loans.
- Whether additional financing or a strategic transaction is secured, on what terms, and whether it can fund operations in time.
- Whether and when the $2 million notes receivable can be redeemed or otherwise recovered.
- The outcome of the Nasdaq appeal and the company’s status against listing requirements and annual-meeting obligations.
- Progress on internal-control remediation, and developments or potential exposure in litigation and the Northwestern University dispute.