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Arcturus Therapeutics Holdings Inc. - Quarter Report: 2023 March (Form 10-Q)

10-Q

 

cs

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission File Number: 001-38942

img266237483_0.jpg 

 

ARCTURUS THERAPEUTICS HOLDINGS INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

32-0595345

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

10628 Science Center Drive, Suite 250

San Diego, California

 

92121

(Address of principal executive offices)

 

(Zip Code)

 

(858) 900-2660

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

ARCT

 

The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

As of May 2, 2023, the registrant had 26,562,951 shares of voting common stock outstanding.

 

 

 


 

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

 

TABLE OF CONTENTS

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (unaudited)

1

Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022

1

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022

2

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2023 and 2022

3

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022

4

Notes to Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

PART II.

OTHER INFORMATION

27

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

29

Signatures

32

 

i


 

Special Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q, or this quarterly report, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the documents incorporated by reference herein may contain express or implied “forward-looking statements” within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under Part II, Item 1A, “Risk Factors” in this quarterly report. Except as required by law, we assume no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise. These statements, which represent our current expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. Forward-looking statements in this quarterly report include, but are not limited to, statements about:

 

our compliance, and ability to remain in compliance, with the stringent requirements of our current and potential government contracts, including our arrangements with the Biomedical Advanced Research and Development Authority, a division of the Office of the Assistant Secretary for Preparedness and Response within the U.S. Department of Health and Human Services and the Department of Defense;
our compliance, and ability to remain in compliance, with the requirements of our collaboration agreements, including our collaboration with Seqirus Inc. (“CSL Seqirus”);
the anticipated benefits and success of our collaboration agreement with CSL Seqirus related to the licensure of our STARR™ mRNA technology and LUNAR® lipid-mediated delivery, including our timely receipt of upfront and potential royalty and other payments thereunder;
the status, success and benefits of our arrangements with private and governmental entities, some of which are subject to termination for convenience by our counterparties;
the initiation, design, cost, timing, progress and results of, and our expected ability to undertake certain activities and accomplish certain goals with respect to, our research and development activities, preclinical studies and clinical trials, including those related to ARCT-154, ARCT-810 and ARCT-032;
the completion and acceptance of a protocol amendment for our cystic fibrosis candidate;
the potential safety, immunogenicity, efficacy or regulatory approval of any of our COVID-19 vaccine candidates as a booster or primary vaccination series;
the potential effects and benefits of our technologies and product candidates on their own and in comparison to technologies, drugs or courses of treatment currently available or that may be developed by competitors;
the likelihood that preclinical or clinical data will be predictive of future clinical results or efficacy or safety of a product candidate;
the anticipated timing of enrollment, duration, milestones and announcements of results of clinical trials, and the submission of applications to conduct clinical trials;
the likelihood that clinical data will be sufficient for regulatory approval or completed in time to submit an application for regulatory approval within a particular timeframe;
the likelihood or timing of any regulatory approval, including of the NDA filed in Japan for ARCT-154;
the potential administration regimen or dosage, or ability to administer multiple doses of, any of our product candidates;
our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate;
our plans to research, develop and commercialize our product candidates;
our ability to successfully commercialize, and our expectations regarding future therapeutic and commercial potential with respect to, our product candidates;
the rate and degree of market acceptance of our product candidates;
the success of competing therapies that are or may become available;
the size and growth potential of the markets for our product candidates, and our ability to serve those markets and address unmet medical needs;
our ability to obtain and maintain intellectual property protection for our product candidates; interactions with regulatory authorities in the United States and foreign countries;

ii


 

our ability to attract and retain experienced and seasoned scientific and management professionals;
the performance of our third-party suppliers and manufacturers, including our ability to scale-up manufacturing levels as necessary;
our strategic alliance partners’ election to pursue development and commercialization of any programs or product candidates that are subject to our collaboration and license agreements with such partners;
our ability to attract collaborators with relevant development, regulatory and commercialization expertise;
future activities to be undertaken by our strategic alliance partners, collaborators and other third parties;
our ability to develop sales and marketing capabilities, whether alone or with potential future collaborators;
our ability to avoid, settle or be victorious at costly litigation with shareholders, former executives or others, should these situations arise;
our ability to obtain and deploy funding for our operations and to efficiently use our financial and other resources;
our ability to continue as a going concern; and
the accuracy of our estimates regarding future expenses, future revenues, cash flows, capital requirements need for additional financing, and possible sources of revenue.

 

These and other forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. In addition, historic results of scientific research, preclinical and clinical trials do not guarantee that future research or trials will suggest the same conclusions, nor that historic results referred to herein will be interpreted in the same manner due to additional research, preclinical and clinical trial results or otherwise. The forward-looking statements contained in this quarterly report are subject to risks and uncertainties, including those discussed in our other filings with the United States Securities and Exchange Commission, or the Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof unless specifically stated otherwise. Although we currently believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,
2023

 

 

December 31,
2022

 

(in thousands, except par value information)

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

327,935

 

 

$

391,883

 

Accounts receivable

 

 

92,483

 

 

 

2,764

 

Prepaid expenses and other current assets

 

 

4,137

 

 

 

8,686

 

Total current assets

 

 

424,555

 

 

 

403,333

 

Property and equipment, net

 

 

12,635

 

 

 

12,415

 

Operating lease right-of-use asset, net

 

 

31,557

 

 

 

32,545

 

Non-current restricted cash

 

 

2,116

 

 

 

2,094

 

Total assets

 

$

470,863

 

 

$

450,387

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

19,344

 

 

$

7,449

 

Accrued liabilities

 

 

32,293

 

 

 

30,232

 

Current portion of long-term debt

 

 

 

 

 

60,655

 

Deferred revenue

 

 

38,493

 

 

 

28,648

 

Total current liabilities

 

 

90,130

 

 

 

126,984

 

Deferred revenue, net of current portion

 

 

20,569

 

 

 

20,071

 

Operating lease liability, net of current portion

 

 

29,187

 

 

 

30,216

 

Other non-current liabilities

 

 

1,729

 

 

 

2,804

 

Total liabilities

 

 

141,615

 

 

 

180,075

 

Stockholders’ equity

 

 

 

 

 

 

Common stock, $0.001 par value; 60,000 shares authorized; issued and
outstanding shares were
26,555 at March 31, 2023 and 26,555 at December 31, 2022

 

 

27

 

 

 

27

 

Additional paid-in capital

 

 

616,608

 

 

 

608,426

 

Accumulated deficit

 

 

(287,387

)

 

 

(338,141

)

Total stockholders’ equity

 

 

329,248

 

 

 

270,312

 

Total liabilities and stockholders’ equity

 

$

470,863

 

 

$

450,387

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands, except per share data)

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

Collaboration revenue

 

$

79,729

 

 

$

5,244

 

Grant revenue

 

 

556

 

 

 

 

Total revenue

 

 

80,285

 

 

 

5,244

 

Operating expenses:

 

 

 

 

 

 

Research and development, net

 

 

51,768

 

 

 

44,893

 

General and administrative

 

 

13,762

 

 

 

10,730

 

Total operating expenses

 

 

65,530

 

 

 

55,623

 

Income (loss) from operations

 

 

14,755

 

 

 

(50,379

)

Loss from equity-method investment

 

 

 

 

 

(384

)

(Loss) gain from foreign currency

 

 

(328

)

 

 

158

 

Gain on debt extinguishment

 

 

33,953

 

 

 

 

Finance income (expense), net

 

 

2,477

 

 

 

(564

)

Net income (loss) before income taxes

 

 

50,857

 

 

 

(51,169

)

Provision for income taxes

 

 

103

 

 

 

-

 

Net income (loss)

 

$

50,754

 

 

$

(51,169

)

Earnings (loss) per share:

 

 

 

 

 

 

Basic

 

$

1.91

 

 

$

(1.94

)

Diluted

 

$

1.87

 

 

$

(1.94

)

Weighted-average shares used in calculation of earnings (loss) per share:

 

 

 

 

 

 

Basic

 

 

26,555

 

 

 

26,376

 

Diluted

 

 

27,149

 

 

 

26,376

 

Comprehensive income (loss):

 

 

 

 

 

 

Net income (loss)

 

$

50,754

 

 

$

(51,169

)

Comprehensive income (loss)

 

$

50,754

 

 

$

(51,169

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders’

 

(in thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

   Balance at December 31, 2022

 

 

26,555

 

 

$

27

 

 

$

608,426

 

 

$

(338,141

)

 

$

270,312

 

Net income

 

 

 

 

 

 

 

 

 

 

 

50,754

 

 

 

50,754

 

Share-based compensation expense

 

 

 

 

 

 

 

 

8,182

 

 

 

 

 

 

8,182

 

   Balance at March 31, 2023

 

 

26,555

 

 

$

27

 

 

$

616,608

 

 

$

(287,387

)

 

$

329,248

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders’

 

(in thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

   Balance at December 31, 2021

 

 

26,372

 

 

$

26

 

 

$

575,675

 

 

$

(347,490

)

 

$

228,211

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(51,169

)

 

 

(51,169

)

Share-based compensation expense

 

 

 

 

 

 

 

 

7,371

 

 

 

 

 

 

7,371

 

Issuance of common stock upon exercise of stock options

 

 

35

 

 

 

 

 

 

336

 

 

 

 

 

 

336

 

   Balance at March 31, 2022

 

 

26,407

 

 

$

26

 

 

$

583,382

 

 

$

(398,659

)

 

$

184,749

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2023

 

 

2022

 

Operating activities

 

 

 

 

 

 

Net income (loss)

 

$

50,754

 

 

$

(51,169

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

578

 

 

 

224

 

Share-based compensation expense

 

 

8,182

 

 

 

7,371

 

Loss from equity-method investment

 

 

 

 

 

384

 

Foreign currency translation loss (gain)

 

 

160

 

 

 

(158

)

Gain on debt extinguishment

 

 

(33,953

)

 

 

 

Other non-cash expenses

 

 

502

 

 

 

546

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(89,719

)

 

 

(324

)

Prepaid expense and other assets

 

 

4,549

 

 

 

1,466

 

Right-of-use assets

 

 

988

 

 

 

373

 

Accounts payable

 

 

11,788

 

 

 

(44

)

Accrued liabilities

 

 

986

 

 

 

(3,553

)

Deferred revenue

 

 

10,343

 

 

 

(3,710

)

Lease liabilities

 

 

(1,029

)

 

 

(445

)

Net cash used in operating activities

 

 

(35,871

)

 

 

(49,039

)

Investing activities

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(691

)

 

 

(2,111

)

Net cash used in investing activities

 

 

(691

)

 

 

(2,111

)

Financing activities

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

 

 

 

336

 

Payments on debt obligations

 

 

(27,364

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(27,364

)

 

 

336

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(63,926

)

 

 

(50,814

)

Cash, cash equivalents and restricted cash at beginning of the period

 

 

393,977

 

 

 

372,569

 

Cash, cash equivalents and restricted cash at end of the period

 

$

330,051

 

 

$

321,755

 

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

2,102

 

 

$

169

 

Non-cash investing activities

 

 

 

 

 

 

Purchase of property and equipment in accounts payable and accrued expenses

 

$

107

 

 

$

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Description of Business, Basis of Presentation and Summary of Significant Accounting Policies

Description of Business

Arcturus Therapeutics Holdings Inc. (the “Company” or "Arcturus") is a global late-stage clinical messenger RNA medicines company focused on the development of infectious disease vaccines and opportunities within liver and respiratory rare diseases. The Company became a clinical stage company during 2020 when it announced that its Investigational New Drug (“IND”) application for ornithine transcarbamylase (“OTC”) deficiency and its Clinical Trial Application (“CTA”) for candidate LUNAR-COV19 were approved by applicable health authorities.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Arcturus and its subsidiaries and are unaudited. All intercompany accounts and transactions have been eliminated in consolidation. These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results for the interim periods presented.

Interim financial results are not necessarily indicative of results anticipated for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

These condensed consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates and assumptions regarding the valuation of debt instruments, the equity-method investment, share-based compensation expense, accruals for liabilities, income taxes, revenue and deferred revenue, leases, and other matters 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 periods. Although these estimates are based on management’s knowledge of current events and actions the Company may undertake in the future, actual results may ultimately differ from these estimates and assumptions.

Joint Ventures, Equity Method Investments and Variable Interest Entities

Investments for which the Company exercises significant influence, but does not have control are accounted for under the equity method. Equity method investment activity is related to a 49% joint venture with Axcelead, Inc. (see the following paragraph for further details) and an ownership in GRI Bio, Inc. (formerly Vallon Pharmaceuticals, Inc.) (see “Note 10, Related Party Transactions” for further details). The Company’s share of the investees’ results is presented as either income or loss from equity method investees in the accompanying condensed consolidated statements of operations and comprehensive income (loss).

Liquidity

The Company has incurred significant operating losses since its inception. As of March 31, 2023 and December 31, 2022, the Company had an accumulated deficit of $287.4 million and $338.1 million, respectively.

The Company’s activities since inception have consisted principally of research and development activities, general and administrative activities, and raising capital. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding before the Company achieves sustainable revenues and profit from operations. From the Company’s inception through March 31, 2023, the Company has funded its operations principally with the proceeds from the sale of capital stock, revenues earned through collaboration agreements and proceeds from long-term debt.

At March 31, 2023, the Company’s balance of cash and cash equivalents, including restricted cash, was $330.1 million.

Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date these condensed consolidated financial statements were available to be issued. There can be no assurance that the Company will be successful in securing additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

5


 

Segment Information

In making decisions regarding resource allocation and assessing performance, the chief operating decision-maker identifies operating segments as components of an enterprise for which separate discrete financial information is available for evaluation. The Company and its chief operating decision-maker view the Company’s operations and manage its business in one operating segment, which is the research and development of medical applications for the Company’s nucleic acid-focused technology.

Revenue Recognition

At contract inception, the Company analyzes the collaboration arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808). For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration reflect a vendor-customer relationship and are therefore within the scope of ASC 606.

The Company determines revenue recognition for arrangements within the scope of Topic 606 by performing the following five steps: (i) identify the contract; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, the company satisfies a performance obligation.

The terms of the Company’s revenue agreements include license fees, upfront payments, milestone payments, reimbursement for research and development activities, option exercise fees, consulting and related technology transfer fees and royalties on sales of commercialized products. Arrangements that include upfront payments are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until the Company performs obligations under these arrangements. The event-based milestone payments represent variable consideration, and the Company uses the most likely amount method to estimate this variable consideration because the Company will either receive the milestone payment or will not, which makes the potential milestone payment a binary event. The most likely amount method requires the Company to determine the likelihood of earning the milestone payment. Given the high degree of uncertainty around achievement of these milestones, the Company determines the milestone amounts to be fully constrained and does not recognize revenue until the uncertainty associated with these payments is resolved. The Company will recognize revenue from sales-based royalty payments when or as the sales occur. The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur.

A performance obligation is a promise in a contract to transfer a distinct good or service to the collaborative partner and is the unit of account in Topic 606. A contract’s transaction price is allocated to each distinct performance obligation based on relative standalone selling price and recognized as revenue when, or as, the performance obligation is satisfied.

For performance obligations that are recognized over time, the Company measures the progress using an input method. The input methods used are based on the effort expended or costs incurred toward the satisfaction of the performance obligation. The Company estimates the amount of effort expended, including the time estimated it will take to complete the activities, or costs incurred in a given period, relative to the estimated total effort or costs to satisfy the performance obligation. This approach requires the Company to make numerous estimates and use significant judgement. If estimates or judgements change over the course of the collaboration, a cumulative catch up of revenue is recognized in the period such changes are identified.

See “Note 3, Revenue” for specific details surrounding the Company’s arrangements.

Leases

The Company determines if an arrangement is a lease at inception. Lease right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. For operating leases with an initial term greater than 12 months, the Company recognizes operating lease right-of-use assets and operating lease liabilities based on the present value of lease payments over the lease term at the commencement date. Operating lease right-of-use assets are comprised of the lease liability plus any lease payments made and excludes lease incentives. Lease terms include options to renew or terminate the lease when the Company is reasonably certain that the renewal option will be exercised or when it is reasonably certain that the termination option will not be exercised. For the Company's operating leases, if the interest rate used to determine the present value of future lease payments is not readily determinable, the Company estimates its incremental borrowing rate as the discount rate for the lease. The Company's incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in similar economic environments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has elected the practical expedient to not separate lease and non-lease components.

See “Note 9, Commitments and Contingencies” for specific details surrounding the Company’s leases.

6


 

Research and Development Costs, Net

All research and development costs are expensed as incurred. Research and development costs consist primarily of salaries, employee benefits, costs associated with preclinical studies and clinical trials (including amounts paid to clinical research organizations and other professional services), in process research and development expenses and license agreement expenses, net of any grants and prelaunch inventory. Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

The Company records accruals for estimated research and development costs, comprising payments for work performed by third party contractors, laboratories, participating clinical trial sites, and others. Some of these contractors bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones. For the latter, the Company accrues the expenses as goods or services are used or rendered.

Clinical trial activities performed by third parties are accrued and expensed based upon estimates of the proportion of work completed over the life of the individual clinical trial and patient enrollment rates in accordance with agreements established with Clinical Research Organizations ("CROs") and clinical trial sites. Estimates are determined by reviewing contracts, vendor agreements and purchase orders, and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

Pre-Launch Inventory

Prior to obtaining initial regulatory approval for an investigational product candidate, the Company expenses costs relating to production of inventory as research and development expense in its condensed consolidated statements of operations and comprehensive income (loss), in the period incurred. When the Company believes regulatory approval and subsequent commercialization of an investigational product candidate is probable, and the Company also expects future economic benefit from the sales of the investigational product candidate to be realized, it will then capitalize the costs of production as inventory.

Statement of Cash Flows

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheet to the total of the same such amounts shown in the condensed consolidated statement of cash flows:

 

(in thousands)

 

March 31, 2023

 

 

March 31, 2022

 

Cash and cash equivalents

 

$

327,935

 

 

$

319,678

 

Non-current restricted cash

 

 

2,116

 

 

 

2,077

 

Total cash, cash equivalents and restricted
   cash shown in the statement of cash flows

 

$

330,051

 

 

$

321,755

 

 

Net Income (Loss) per Share

Basic net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive shares of common stock for the three months ended March 31, 2023 and 2022 are comprised of stock options.

No dividends were declared or paid during the reported periods.

Recently Issued Accounting Standards Not Yet Adopted

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the condensed consolidated financial statements and disclosures.

7


 

Note 2. Revenue

The Company has entered into license agreements and collaborative research and development arrangements with pharmaceutical and biotechnology companies, as well as consulting, related technology transfer and product revenue agreements. Under these arrangements, the Company is entitled to receive license fees, consulting fees, product fees, technological transfer fees, upfront payments, milestone payments if and when certain research and development milestones or technology transfer milestones are achieved, royalties on approved product sales and reimbursement for research and development activities. The Company’s costs of performing these services are included within research and development expenses. The Company’s milestone payments are typically defined by achievement of certain preclinical, clinical, and commercial success criteria. Preclinical milestones may include in vivo proof of concept in disease animal models, lead candidate identification, and completion of IND-enabling toxicology studies. Clinical milestones may, for example, include successful enrollment of the first patient in or completion of Phase 1, 2 and 3 clinical trials, and commercial milestones are often tiered based on net or aggregate sale amounts. The Company cannot guarantee the achievement of these milestones due to risks associated with preclinical and clinical activities required for development of nucleic acid medicine-based therapeutics and vaccines.

The following table presents changes during the three months ended March 31, 2023 in the balances of receivables and contract liabilities related to strategic collaboration agreements as compared to what was disclosed in the Company’s Annual Report.

 

(in thousands)

 

December 31, 2022

 

 

Additions

 

 

Deductions

 

 

March 31, 2023

 

Contract Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

2,764

 

 

$

90,763

 

 

$

(1,044

)

 

$

92,483

 

Contract Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

$

48,719

 

 

$

90,628

 

 

$

(80,285

)

 

$

59,062

 

The following table summarizes the Company’s revenues for the periods indicated.

 

For the Three Months
Ended March 31,

 

(in thousands)

2023

 

 

2022

 

Collaboration Revenue:

 

 

 

 

 

CSL Seqirus

 

$

78,218

 

 

$

 

Vinbiocare

 

 

 

 

 

2,858

 

Janssen

 

491

 

 

 

1,131

 

Other

 

 

1,020

 

 

 

1,255

 

Total collaboration revenue

 

$

79,729

 

 

$

5,244

 

Grant revenue:

 

 

 

 

 

 

BARDA

 

$

556

 

 

$

 

Total grant revenue

$

556

 

 

$

 

The following paragraphs provide information regarding the nature and purpose of the Company’s most significant collaboration arrangements.

8


 

CSL Seqirus

On November 1, 2022, the Company entered into a Collaboration and License Agreement (the “CSL Collaboration Agreement”) with Seqirus, Inc., a part of CSL Limited (“CSL Seqirus”), for the global exclusive rights to research, develop, manufacture, and commercialize vaccines. Under the terms of the CSL Collaboration Agreement, the Company will provide CSL Seqirus with an exclusive global license to its STARR™ self-amplifying mRNA technology, LUNAR® lipid-mediated delivery, along with mRNA drug substance and drug product manufacturing process. CSL Seqirus will lead development and commercialization of vaccines under the collaboration. The collaboration plans to advance vaccines against SARS-CoV-2 (COVID-19), influenza, pandemic preparedness as well as three other respiratory infectious diseases.

The Company received a $200.0 million upfront payment and is eligible to receive over $1.3 billion in development milestones if all products are registered in the licensed fields and entitled to potentially receive up to $3.0 billion in commercial milestones based on “net sale” of vaccines in the various fields. In addition, the Company is eligible to receive a 40% net profit share for COVID-19 vaccine products and up to low double-digit royalties for vaccines against flu, pandemic preparedness and three other respiratory pathogens.

In March 2023, Arcturus achieved development milestones, including milestones associated with nominating next generation vaccine candidates, resulting in $90.0 million due from CSL Seqirus. Subsequently, in April 2023 the Company received an advance payment of $23.6 million for the manufacturing and supply of ARCT-154. The advance payment is for specified manufacturing runs of ARCT-154 which includes the drug substance utilized, as well as the reservation fees and related manufacturing requirements.

In evaluating the CSL Collaboration Agreement in accordance with Accounting Standards Codification (“ASC”) Topic 606, the Company concluded that CSL Seqirus is a customer. The Company identified all promised goods/services within the CSL Collaboration Agreement, and when combining certain promised goods/services, the Company concluded that there are five distinct performance obligations. The nature of the performance obligations consists of delivery of the vaccine license, research and development services for COVID and non-COVID vaccines and regulatory activities for COVID vaccines. For each performance obligation, the Company estimated the standalone selling price based on 1) in the case of the license, the fair value using costs to recreate plus margin method and 2) in the case of research and development services and regulatory activities, cost plus margin for estimated full-time equivalent (“FTE”) costs, direct costs including laboratory supplies, contractors, and other out-of-pocket expenses for research and development services and regulatory activities.

As of March 31, 2023, the transaction price consisted of upfront consideration received and milestones achieved in March 2023. Additional variable consideration was not included in the transaction price at March 31, 2023 because the Company could not conclude that it is probable that including the variable consideration will not result in a significant revenue reversal.

The Company allocated the transaction price to the performance obligations in proportion to their standalone selling price. The vaccine license was recognized at the point in time when it was transferred and any additional consideration allocated to the license is recognized at the point that the consideration becomes probable of non-reversal as the performance obligation has been delivered. The research and development and regulatory activities performance obligations are recognized over a period of time based on the percentage of services rendered using the input method, meaning actual costs incurred divided by total costs budgeted to satisfy the performance obligation. Any consideration related to sales-based royalties will be recognized when the amounts are probable of non-reversal, provided that the reported sales are reliably measurable and the Company has no remaining promised goods/services, as they are constrained and therefore have also been excluded from the transaction price. The revenue recognized during the quarter ended March 31, 2023 relates to the license delivered, milestones achieved and services performed.

Total deferred revenue as of March 31, 2023 and December 31, 2022 was $57.4 million and $45.6 million, respectively.

9


 

Vinbiocare

During 2021 the Company entered into certain agreements (collectively, the “Vinbiocare License & Supply Agreements”) with Vinbiocare Biotechnology Joint Stock Company (“Vinbiocare”), a member of Vingroup Joint Stock Company, whereby the Company would provide technical expertise and support services to Vinbiocare to assist in the build out of a mRNA drug product manufacturing facility in Vietnam. The Company received an upfront payment in aggregate of $40.0 million as part of the Vinbiocare License & Supply Agreements. In October 2022, the Company and Vinbiocare executed a letter agreement terminating the License & Supply Agreements. The Company incurred no financial penalties in connection with the termination of the License & Supply Agreements and has no further financial obligations to Vinbiocare under these terminated agreements.

In October 2022, in association with the termination of the License & Supply Agreements, the Company signed the Study Support Agreement with Vinbiocare which provides that Vinbiocare shall continue to serve as the regulatory and financial sponsor of clinical studies conducted in Vietnam of ARCT-154 pursuant to the Company’s arrangements with Vinbiocare (the “Study Support Agreement”). To support the continuing activities of these studies, the Study Support Agreement further provides for the Company to conduct certain services and to compensate Vinbiocare to help achieve the objectives of these studies. In February of 2023, the Company agreed to provide additional financial support in the amount of approximately $2.1 million to allow Vinbiocare to provide additional study support duties related to the ARCT-154 clinical study. As a result, the Company reserved $11.8 million of the original upfront payment to be paid to Vinbiocare over the future periods pursuant to the Study Support Agreement by reclassifying a portion of the upfront payment received from Vinbiocare pursuant to the License & Supply Agreements, from deferred revenue to short-term and long-term liabilities, based on the anticipated timing of the payments to Vinbiocare, and removed that portion of the upfront payment from the transaction price of the modified arrangement. The transaction price was not adjusted for payments that are contingent upon the occurrence of future regulatory or sales related events based on the information currently available to the Company.

The Company has concluded that it has no remaining performance obligations under its prior arrangements with Vinbiocare as summarized above as of March 31, 2023. As of March 31, 2023, the Company has accrued liabilities related to this arrangement of $8.1 million in current liabilities and $1.9 million in non-current liabilities that will be paid upon the occurrence of specified events through the first quarter of 2025. Vinbiocare is also eligible to receive a single digit percentage of amounts from net sales, if any, of ARCT-154 (or next-generation COVID vaccine) up to a capped amount of low single digit millions. The Company has no remaining deferred revenue as of March 31, 2023 and December 31, 2022.

Janssen

In October 2017, the Company entered into a research collaboration and license agreement with Janssen (the “2017 Agreement”) to collaborate on developing candidates for treating HBV with RNA therapeutics. The 2017 Agreement allocated discovery, development, funding obligations, and ownership of related intellectual property among the Company and Janssen. The Company received an upfront payment of $7.7 million and was reimbursed for research costs as incurred.

On October 31, 2022, Arcturus received notice of termination from Janssen Pharmaceuticals, Inc. of the 2017 Agreement, and the termination was effective as of December 30, 2022. The Company did not incur any penalties as a result of this termination. As of March 31, 2023, the licenses granted to Janssen have terminated and the Company recognized upfront consideration received and a portion of a development milestone achieved in October of 2021. The remaining transaction price of approximately $0.1 million is expected to be recognized using an input method during the second quarter of 2023.

Total deferred revenue as of March 31, 2023 and December 31, 2022 for Janssen was $0.1 million and $0.4 million, respectively.

BARDA Grant

In August 2022, the Company entered into a cost reimbursement contract with the Biomedical Advanced Research and Development Authority ("BARDA"), a division of the Office of the Assistant Secretary for Preparedness and Response (ASPR) within the U.S. Department of Health and Human Services (HHS) for an award of up to $63.2 million for the development of a pandemic influenza vaccine using the Company's STARR™ self-amplifying mRNA vaccine platform technology. The Company earns grant revenue for performing tasks under the agreement.

The Company determined that the agreement with BARDA is not in the scope of ASC 808 or ASC 606. Applying International Accounting Standards No. 20 ("IAS 20"), Accounting for Government Grants and Disclosure of Government Assistance, by analogy, the Company recognizes grant revenue from the reimbursement of direct out-of-pocket expenses, overhead allocations and fringe benefits for research costs associated with the grant. The costs associated with these reimbursements are reflected as a component of research and development expense in the Company’s condensed consolidated statements of operations and comprehensive income (loss).

10


 

The Company recognized $0.6 million of revenue during the three months ended March 31, 2023. As of March 31, 2023, the remaining available funding net of revenue earned was $62.4 million.

Other Agreements

Remaining collaboration revenue recognized for the quarters ended March 31, 2023 and 2022 related to amortization of upfront payments received from Curevac N.V. ("Curevac") and Ultragenyx. Total deferred revenue as of March 31, 2023 and December 31, 2022 for Curevac was $0.3 million and $0.5 million, respectively. Total deferred revenue as of March 31, 2023 and December 31, 2022 for Ultragenyx was $0.9 million and $1.8 million, respectively.

Note 3. Fair Value Measurements

The Company establishes the fair value of its assets and liabilities using the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company established a fair value hierarchy based on the inputs used to measure fair value.

The three levels of the fair value hierarchy are as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

Level 3: Unobservable inputs in which little or no market data exists and are therefore determined using estimates and assumptions developed by the Company, which reflect those that a market participant would use.

The carrying value of cash, restricted cash, accounts receivable, accounts payable, accrued liabilities and the Singapore Loan (as defined below) approximate their respective fair values due to their relative short maturities. The carrying amounts of long-term debt for the amount drawn on the Company’s debt facility approximates fair value as the interest rate is variable and reflects current market rates.

As of March 31, 2023 and December 31, 2022, all assets measured at fair value on a recurring basis consisted of cash equivalents and money market funds, which were classified within Level 1 of the fair value hierarchy. The fair value of these financial instruments was measured based on quoted prices.

Note 4. Balance Sheet Details

Property and equipment, net balances consisted of the following:

 

(in thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Research equipment

 

$

11,063

 

 

$

10,251

 

Computers and software

 

 

1,232

 

 

 

1,154

 

Office equipment and furniture

 

 

958

 

 

 

958

 

Leasehold improvements

 

 

2,524

 

 

 

2,491

 

Construction in progress

 

 

3,219

 

 

 

3,344

 

Total

 

 

18,996

 

 

 

18,198

 

Less accumulated depreciation and amortization

 

 

(6,361

)

 

 

(5,783

)

Property and equipment, net

 

$

12,635

 

 

$

12,415

 

 

Depreciation and amortization expense was $0.6 million and $0.2 million for the three months ended March 31, 2023 and 2022, respectively. Construction in progress primarily includes research equipment that is expected to be placed into service during 2023.

Accrued liabilities consisted of the following:

 

(in thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Accrued compensation

 

$

6,686

 

 

$

4,038

 

Income tax payable

 

 

1,398

 

 

 

1,295

 

Current portion of operating lease liability

 

 

3,987

 

 

 

3,884

 

Clinical accruals

 

 

4,787

 

 

 

4,531

 

Vinbiocare contractual liabilities

 

 

8,076

 

 

 

7,468

 

Other accrued research and development expenses

 

 

7,359

 

 

 

9,016

 

Total

 

$

32,293

 

 

$

30,232

 

 

11


 

 

Note 5. Debt

Manufacturing Supply Agreement

On November 7, 2020, the Company’s wholly-owned subsidiary, Arcturus Therapeutics, Inc., entered into a Manufacturing Support Agreement (the “Support Agreement”) with the Economic Development Board of the Republic of Singapore (the “EDB”). Pursuant to the Support Agreement, the EDB agreed to make a term loan (the “Singapore Loan”) of S$62.1 million to the Company, subject to the satisfaction of customary deliveries, to support the manufacture of the LUNAR-COV19 vaccine candidate (ARCT-021). The Singapore Loan accrued interest at a rate of 4.5% per annum calculated on a daily basis. The Company elected to borrow the full amount available under the Support Agreement of S$62.1 million ($46.6 million) on January 29, 2021. On March 23, 2023, the EDB agreed to an extension of the reconciliation period to March 22, 2023, with unused funds not utilized for the manufacture of ARCT-021 as of such date returned to the EDB. As of December 31, 2022, the outstanding balance of the Singapore Loan, which includes accrued interest, was $50.4 million of which the Company paid S$22.8 million ($17.1 million) in March 2023. As of March 31, 2023, the remaining principal portion the Singapore Loan plus accrued interest, totaling $34.0 million, was forgiven. This has been recorded as a gain on debt extinguishment in the condensed consolidated statement of operations and comprehensive income (loss).

The Company recorded a net foreign currency translation loss of $0.2 million for the three months ended March 31, 2023 and a net foreign currency translation gain of $0.2 million for the three months ended March 31, 2022. The Company also recorded interest expense of $0.5 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively.

Termination of Agreement with Western Alliance Bank

On March 14, 2023, the Loan and Security Agreement, dated as of October 12, 2018 (as amended and supplemented, the “Western Alliance Agreement”) with Western Alliance Bank, an Arizona corporation (“Western Alliance”), was terminated (the “Termination”) upon the receipt by Western Alliance of a payoff amount of approximately $7.4 million from the Company. The Western Alliance Agreement provided for a collateralized term loan in the aggregate principal amount of up to $15.0 million, with interest at a floating rate ranging from 1.25% to 2.75% above the prime rate and a maturity date of October 30, 2023. The payoff amount was made by the Company to Western Alliance from available cash on hand, pursuant to a payoff letter, and included payment of (i) approximately $7.0 million in principal and interest, (ii) $0.3 million fee payable upon prepayment as a result of prior FDA approval of an IND and (iii) de minimis amounts in prepayment charges and various operational fees. The Company was released from all liens under the Western Alliance Agreement.

12


 

The Company recognized interest expense related to its debt with Western Alliance Bank of $0.3 million and $0.2 million during the three months ended March 31, 2023 and 2022, respectively.

Note 6. Stockholders’ Equity

Earnings per Share

Potentially dilutive securities that were not included in the calculation of diluted earnings per share for the three months ended March 31, 2023 as they were anti-dilutive totaled 5.2 million. Potentially dilutive securities that were not included in the calculation of diluted net loss per share for the three months ended March 31, 2022 as they were anti-dilutive totaled 0.8 million.

Note 7. Share-Based Compensation Expense

In June 2022 at the Company’s 2022 Annual Meeting of Stockholders (the "2022 Annual Meeting"), the stockholders of the Company approved an amendment to the Company’s 2019 Omnibus Equity Incentive Plan (as amended, the “2019 Plan”) which, among other things, increases the aggregate number of shares authorized for use in making awards to eligible persons under the 2019 Plan by 3,750,000 shares, for a total of up to 8,750,000 shares available for issuance. As of March 31, 2023, a total of 1,712,029 shares remain available for future issuance under the 2019 Plan, subject to the terms of the 2019 Plan.

In October 2021, the Company adopted the 2021 Inducement Equity Incentive Plan which covers the award of up to 1,000,000 shares of common stock (the “2021 Plan”) effective as of October 15, 2021. Approval of the Company’s stockholders will not be required as a condition to the effectiveness of the 2021 Plan for so long as the plan is in compliance with applicable Nasdaq inducement plan rules. In April 2022, the compensation committee of the Company’s board of directors approved a proposal to reduce the total number of shares available for future issuance under the 2021 Plan to 130,000. As of March 31, 2023, a total of 96,400 shares remain available for future issuance under the 2021 Plan, subject to the terms of the 2021 Plan.

Stock Options

Share-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2023 and 2022 was as follows:

 

 

 

For the Three Months
Ended March 31,

 

(in thousands)

 

2023

 

 

 

2022

 

 Research and development

 

$

3,508

 

 

 

$

3,455

 

 General and administrative

 

 

4,674

 

 

 

 

3,916

 

 Total

 

$

8,182

 

 

 

$

7,371

 

 

Note 8. Income Taxes

The Company is subject to taxation in the United States and various states. The Company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter. The primary difference between the effective tax rate and the federal statutory tax rate relates to the valuation allowances on the Company’s net operating losses.

For the three months ended March 31, 2023 and 2022, the Company recorded $0.1 million of income tax expense. No tax benefit was provided for losses incurred in United States because those losses are offset by a full valuation allowance.

Note 9. Commitments and Contingencies

Cystic Fibrosis Foundation Agreement

On August 1, 2019, the Company amended its Development Program Letter Agreement, dated May 16, 2017 and as amended July 13, 2018, with the Cystic Fibrosis Foundation (“CFF”). Pursuant to the amendment, (i) CFF increased the amount it will award to advance LUNAR-CF to $15.0 million from approximately $3.2 million, (ii) the Company will provide $5.0 million in matching funds for remaining budgeted costs, (iii) the related disbursement schedule from CFF to Arcturus will be modified such that (a) $4.0 million will be disbursed upon execution of the CFF Amendment, (b) $2.0 million will be disbursed within 30 days of the first day of each of January, April, July and October 2020 upon Arcturus invoicing CFF to meet project goals, and (c) the last payment of $3.0 million less the prior award previously paid out, equaling approximately $2.1 million. In the first quarter of 2023, the last payment of $2.1 million was disbursed upon the Company invoicing CFF to meet good manufacturing practices and opening an Investigational New

13


 

Drug (“IND”) application. All remaining funds received from CFF were recognized as contra research and development expense during the year ended 2022. As such, no contra expense was recognized during the three months ended March 31, 2023. For the three months ended March 31, 2022, the Company recognized contra expense of $1.4 million.

Leases

In October 2017, the Company entered into a non-cancellable operating lease agreement for office space adjacent to its previously occupied headquarters. The commencement of the lease began in March 2018 and the lease extends for approximately 84 months from the commencement date with a remaining lease term through March 2025. Monthly rental payments are due under the lease and there are escalating rent payments during the term of the lease. The Company is also responsible for its proportional share of operating expenses of the building and common areas. In conjunction with the new lease, the Company received free rent for four months and received a tenant improvement allowance of $74,000. The lease may be extended for one five-year period at the then current market rate with annual escalations; however, the Company deemed the extension option not reasonably certain to be exercised and therefore excluded the option from the lease terms. The Company entered into an irrevocable standby letter of credit with the landlord for a security deposit of $96,000 upon executing the lease which is included (along with additional funds required to secure the letter of credit) in the balance of non-current restricted cash.

In February 2020, the Company entered into a second non-cancellable operating lease agreement for office space near its current headquarters. The lease extended for 13 months from the commencement date and included a right to extend the lease for one twelve-month period. In February 2021, the Company opted to extend the lease through March 2025 to coincide with the lease term of the Company’s headquarters.

In September 2021, the Company entered into a third non-cancellable lease agreement for office, research and development, engineering and laboratory space near its current headquarters and lease term commenced during the second quarter of 2022. The initial term of the lease extends ten years and eight months from the date of possession, and the Company has the right to extend the term of the lease for an additional five-year period. When the lease term was determined for the operating lease right-of-use assets and lease liabilities, the extension option for the lease was not included. The lease has a monthly base rent ranging from $268,000 to $360,000 which escalates over the lease term. The Company received a free rent period of four months and also pays for various operating costs, including utilities and real property taxes. The Company entered into an irrevocable standby letter of credit with the landlord for a security deposit of $2.0 million upon executing the lease which is included (along with additional funds required to secure the letter of credit) in the balance of non-current restricted cash.

Operating lease right-of-use asset and liability on the condensed consolidated balance sheets represent the present value of remaining lease payments over the remaining lease terms. The Company does not allocate lease payments to non-lease components; therefore, payments for common-area-maintenance and administrative services are not included in the operating lease right-of-use asset and liability. The Company uses its incremental borrowing rate to calculate the present value of the lease payments, as the implicit rate in the lease is not readily determinable.

As of March 31, 2023, the remaining payments of the operating lease liability were as follows:

 

(in thousands)

 

Remaining Lease Payments

 

2023

 

$

4,133

 

2024

 

 

5,646

 

2025

 

 

4,019

 

2026

 

 

3,603

 

Thereafter

 

 

23,284

 

Total remaining lease payments

 

 

40,685

 

Less: imputed interest

 

 

(7,511

)

Total operating lease liabilities

 

$

33,174

 

Weighted-average remaining lease term

 

8.7 years

 

Weighted-average discount rate

 

 

5.0

%

 

Operating lease costs consist of the fixed lease payments included in operating lease liability and are recorded on a straight-line basis over the lease terms. Operating lease costs were $1.4 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively.

14


 

Note 10. Related Party Transactions

Equity-Method Investment

In June 2018, the Company completed the sale of its intangible asset related to the ADAIR technology. Pursuant to the asset purchase agreement for ADAIR, the Company received a 30% ownership interest in the common stock of Vallon Pharmaceuticals, Inc. (“Vallon”) in consideration for the sale of the ADAIR technology. Vallon completed an initial public offering and began trading on The Nasdaq Stock Market under the ticker “VLON” in February 2021. Additionally, Vallon executed the sale of 3,700,000 shares of common stock through a private placement in May 2022 as well as an exercise of warrants for 2,960,000 shares of common stock in August and December 2022. As a result, Arcturus owned 843,750 shares of Vallon, or approximately 6% as of March 31, 2023.
 

On December 13, 2022, Vallon entered into an agreement with GRI Bio, Inc. (“GRI Bio”) pursuant to which GRI Bio will merge with a wholly-owned subsidiary of Vallon in an all-stock transaction. The transaction closed in April 2023 and the Company's executive resigned from the board of directors of Vallon. Following the closing of the merger, the combined company now operates under the name “GRI Bio, Inc.” and will focus on the development of GRI Bio’s pipeline and trade on the Nasdaq under the ticker symbol “GRI”. Following the closing of the merger, the Company holds 28,125 shares in GRI Bio, or approximately 1%.

See “Note 1, Joint Ventures, Equity Method Investments and Variable Interest Entities” for specific details surrounding the Company’s agreement with Axcelead to form the joint venture entity, Arcalis, Inc.

 

 

Note 11. Subsequent Events

Wells Fargo Credit Agreement

On April 21, 2023, the Company’s wholly-owned subsidiary, Arcturus Therapeutics, Inc. entered into a credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”) whereby Wells Fargo will make a $50.0 million revolving credit line available to the Company (the “Loan”) and each Loan evidenced by a revolving line of credit note (the “Note”).
 

Borrowings under the agreement will bear interest at a rate of 1.00% above either the Daily Simple SOFR or Term SOFR (as such terms are defined in the Note), with “SOFR” being the rate per annum equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York. If an Event of Default (as defined in the agreement) occurs, then all Loans shall bear interest at a rate equal to 2.00% above the interest rate applicable immediately prior to the occurrence of the Event of Default.
 

The term of the agreement is two years, with an option for one-year renewals subject to Wells Fargo approval and the Company furnishing to Wells Fargo a non-refundable commitment fee equal to 0.25% of the Loan amount for each such renewal. There is no penalty for terminating the agreement. There is no penalty for terminating the facility prior to the maturity date of the Note. As collateral, the Company has agreed to pledge $55.0 million in cash to be held at the Company’s securities accounts with Wells Fargo Securities, LLC, an affiliate of Wells Fargo, pursuant to a security agreement.

15


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following is a discussion of the financial condition and results of operations of Arcturus Therapeutics Holdings Inc. for the three month period ended March 31, 2023. Unless otherwise specified herein, references to the “Company,” “Arcturus,” “we,” “our” and “us” mean Arcturus Therapeutics Holdings Inc. and its consolidated subsidiaries. You should read the following discussion and analysis together with the interim condensed consolidated financial statements and related notes included elsewhere herein. For additional information relating to our management’s discussion and analysis of financial conditions and results of operations, please see our Annual Report on Form 10‑K for the year ended December 31, 2022 (the “2022 Annual Report”), which was filed with the U.S. Securities and Exchange Commission (the “Commission”) on March 29, 2023. Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2022 Annual Report.

This report includes forward-looking statements which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements.

You should read this report and the documents that we reference in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. You should also review the factors and risks we describe in the reports we will file or submit from time to time with the Commission after the date of this report.

Overview

We are a global late-stage clinical messenger RNA medicines company focused on the development of infectious disease vaccines and opportunities within liver and respiratory rare diseases. In addition to our messenger RNA (“mRNA”) platform, our proprietary lipid nanoparticle (“LNP”) delivery system, LUNAR®, has the potential to enable multiple nucleic acid medicines, and our proprietary self-amplifying mRNA technology (Self-Transcribing and Replicating RNA, or STARR™, technology) has the potential to provide longer-lasting RNA and sustained protein expression at lower dose levels as compared to conventional mRNA.

We are leveraging our proprietary LUNAR platform and our nucleic acid technologies to develop and advance a pipeline of mRNA-based vaccines and therapeutics for infectious diseases and rare genetic disorders with significant unmet medical needs. We continue to expand this platform by adding new innovative delivery solutions that allow us to expand our discovery efforts. Our proprietary LUNAR technology is intended to address the major hurdles in RNA drug development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues. We believe the versatility of our platform to target multiple tissues, its compatibility with various nucleic acid therapeutics, and our expertise in developing scalable manufacturing processes can allow us to deliver on the next generation of nucleic acid medicines.

 

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Key Updates on our Vaccine Program

In November 2022, we entered into a Collaboration and License Agreement (the “CSL Collaboration Agreement”) with Seqirus, Inc. (“CSL Seqirus”), a part of CSL Limited, and one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases with non-exclusive rights to pandemic pathogens. The CSL Collaboration Agreement became effective on December 8, 2022. The collaboration combines CSL Seqirus’ established global vaccine commercial and manufacturing infrastructure with Arcturus’ manufacturing expertise and innovative STARR™ self-amplifying mRNA vaccine and LUNAR® delivery platform technologies. Under the framework of our collaboration with CSL Seqirus, we are evaluating in preclinical studies the efficacy and safety of a seasonal influenza vaccine (our LUNAR-FLU mRNA vaccine candidate). Pursuant to a third party study agreement executed in December 2022 with Meiji Seika Pharma Co., Ltd. (“Meiji”), a Japanese leader in the area of infectious disease, a Phase 3 clinical trial of ARCT-154 was initiated in Japan by Meiji to evaluate safety and immunogenicity of a booster shot of ARCT-154, and to evaluate non-inferiority of ARCT-154 as a booster. The trial targeted a total of 780 adult participants, with half in the ARCT-154 group and half in a comparator group (Comirnaty®, Pfizer-BioNTech), and completed enrollment with 828 participants in February 2023.

On April 11, 2023, Meiji announced that it entered into a distribution agreement with CSL Seqirus for the distribution and sales of ARCT-154, our self-amplifying mRNA vaccine candidate against COVID-19, in Japan.

On April 28, 2023, Meiji announced that it submitted to the Japanese Pharmaceuticals and Medical Devices Agency (PMDA) a New Drug Application (NDA) to manufacture and market ARCT-154 for primary immunization to prevent COVID-19 in adults in Japan.

In April 2023 we received an advance payment of $23.6 million for the manufacturing and supply of ARCT-154 from CSL Seqirus. The advance payment is for specified manufacturing runs of ARCT-154 which includes the drug substance utilized, as well as the reservation fees and related manufacturing requirements.

Key Updates on Arcturus-Owned mRNA Therapeutic Development Candidates

The following chart represents our current pipeline of Arcturus-Owned mRNA Therapeutic Candidates:

img266237483_1.jpg 

 

LUNAR-OTC/ARCT-810 - Our rare disease program for ornithine transcarbamylase (OTC) deficiency is continuing to advance. A Phase 1b study in stable OTC-deficient adults is being conducted in the United States. The trial is designed to assess safety, tolerability and pharmacokinetics of a single dose of ARCT-810, as well as various exploratory biomarkers of drug activity. Fifteen of the planned sixteen subjects, divided among four cohorts, have completed the study. A Phase 2 multiple-dose study of ARCT-810 in OTC-deficient adolescents and adults initiated dosing in December 2022 and plans to enroll approximately 24 participants in 2 dose cohorts. The study has been approved by the regulatory authorities in the UK and several other countries in Europe.
LUNAR-CF/ARCT-032 – Our preclinical program for cystic fibrosis is being supported in part by the Cystic Fibrosis Foundation. Results from preclinical studies demonstrate robust protein expression in respiratory epithelium treated with LUNAR-mRNA in vitro and in vivo. Further, CF human bronchial epithelial cells treated with ARCT-032 in vitro demonstrate restoration of CFTR activity. Nonclinical studies also support advancement of ARCT-032 into clinical development. A CTA was filed in December 2022 for the first-in-human study, and we have achieved the recruitment target and administration in a Phase 1 single ascending dosing study with 32 health participants (8 subjects in each of 4 cohorts). We are working on a protocol amendment to allow the dosing of patients with CF.

 

Updates on our Program Partnered with Ultragenyx

17


 

On October 26, 2015, we entered into a Research Collaboration and License Agreement with Ultragenyx, which was later amended in 2017, 2018 and during the second quarter of 2019 (as amended, the “Ultragenyx Agreement”). On December 1, 2021, Ultragenyx announced that the first patient had been dosed in its Phase 1/2 study of UX053, an investigational messenger RNA therapy in development under the collaboration for the treatment of Glycogen Storage Disease Type III, and thus the first milestone under the collaboration agreement had been met. Ultragenyx has completed dosing in the single ascending dose, or SAD, stage of the Phase 1/2 study of UX053 with no safety issues observed. Ultragenyx has disclosed that it will not enroll patients in the multiple ascending dose cohorts at this time to allow greater focus on its other late-stage and larger indication clinical programs. Ultragenyx has announced that the data from the SAD cohort are being analyzed and expected in the second quarter of 2023.

 

Key Updates on our Research and Platform Activities

We continue to conduct exploratory platform development activities, including the evaluation of genome editing, and new targeting approaches, where our LUNAR® and STARR™ platforms could potentially be useful for identification and development of additional products for our portfolio.

Discovery Program – Hepatitis B (HBV)

In April 2023, we presented LUNAR-HBV Gene Editing Data at the 18th annual Global Hepatitis Summit Conference in Paris, France. LUNAR-HBV, a potential genome editing therapeutic for Hepatitis B consisting of a pair of transcription activator-like effector nucleases (TALENs), delivered as mRNA encapsulated in our proprietary liver-directed LUNAR lipid nanoparticles. TALENs translated in the liver are designed to specifically target and irreversibly inactivate both cccDNA and integrated HBV DNA by inducing targeted mutations, typically frameshift deletions (Figure 1, Figure 2).

img266237483_2.jpg 

Figure 1 LNP-mRNA Technology for the delivery of TALENs as a potential genome editing therapy for HBV

18


 

img266237483_3.jpg 

Figure 2 HBV TALEN pair designed to target specific HBV DNA sequences

In vitro assessment of LUNAR-HBV mRNA activity and specificity in multiple cell types demonstrated a strong reduction of HBsAg production with concomitant deletions in the HBV DNA targeted sequence. Using various HBV mouse models, LUNAR-HBV showed significant dose dependent efficacy and targeting of both integrated and non-integrated HBV DNA in the liver of infected mice. In the AAV-HBV mouse model, LUNAR- HBV achieved greater than a two-log reduction of both HBV DNA and HBsAg levels in the plasma (Figure 3). Furthermore, these reductions directly correlated with the levels of edited HBV DNA observed in the livers of treated mice (Figure 3, Figure 4). LUNAR-HBV TALEN with an inactivated Fok1 nuclease did not demonstrate any gene editing activity.

img266237483_4.jpg 

Figure 3 LUNAR-HBV targets and edits episomal HBV DNA and reduces HBsAg in serum and HBV DNA levels in the AAV-HBV Mouse Model

19


 

img266237483_5.jpg 

Figure 4 LUNAR-HBV reduces the levels of rcDNA and nuclear HBV DNA in AAV-HBV mouse hepatocytes

In addition to this, LUNAR-HBV showed a significant safety margin relative to the minimal efficacious dose either with single or repeat dosing. Biodistribution studies in mice show that the liver is the main target organ of LUNAR-HBV with no genome editing activity detected in other organs. Furthermore, both the therapeutic TALEN mRNAs and proteins are short lived and are not detected in the liver 24 hours after dosing.

Orthogonal scientific approaches, combined with a rigorous risk assessment, are being used to examine the potential off target activity of LUNAR-HBV. Bioinformatic tools did not reveal any significant LUNAR-HBV potential off-target site and cell-based assays using the highest tolerated dose of mRNA encoding the genome editing nucleases (at least five-fold higher than the estimated therapeutic dose) preliminarily generated a small number of potential off-target sites at low occurrence. These potential sites are in non-coding regions of genomic areas not associated with any disease or disorder.

Ex-vivo assays using human PBMCs from multiple donors suggest a low risk of an immunogenic response to LUNAR-HBV from pre-existing immunity. Furthermore, mice receiving repeat doses of LUNAR-HBV did not show evidence of an immunogenic response based on the absence of antibodies against the genome editing nucleases in the plasma and immune cells (T-cells, B-cells or NK cells) in the liver.

Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Report and our audited financial statements and related notes for the year ended December 31, 2022. Our historical results of operations and the year-to-year comparisons of our results of operations that follow are not necessarily indicative of future results.

Revenue

We enter into arrangements with pharmaceutical and biotechnology partners and government agencies that may contain upfront payments, license fees for research and development arrangements, research and development funding, milestone payments, option exercise and exclusivity fees, royalties on future sales, consulting fees and payments for technology transfers. The following table summarizes our total revenues for the periods indicated (in thousands):

 

 

 

Three Months Ended March 31,

 

 

2022 to 2023

(in thousands)

 

2023

 

 

2022

 

 

$ change

 

 

% change

Revenue

 

$

80,285

 

 

$

5,244

 

 

$

75,041

 

 

*

* Greater than 100%

20


 

 

Revenue increased by $75.0 million during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The increase in revenue is primarily attributable to an increase in revenue of $78.2 million related to the agreement with CSL Seqirus and the associated milestones achieved in the first quarter of 2023.

 

Our operating expenses consist of research and development and general and administrative expenses.

 

 

 

Three Months Ended March 31,

 

 

2022 to 2023

 

(in thousands)

 

2023

 

 

2022

 

 

$ change

 

 

% change

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development, net

 

$

51,768

 

 

$

44,893

 

 

$

6,875

 

 

 

15.3

%

General and administrative

 

 

13,762

 

 

 

10,730

 

 

 

3,032

 

 

 

28.3

%

Total

 

$

65,530

 

 

$

55,623

 

 

$

9,907

 

 

 

17.8

%

 

Research and Development Expenses, net

The following table presents our total research and development expenses by category:

 

 

 

Three Months Ended March 31,

 

 

2022 to 2023

 

(in thousands)

 

2023

 

 

2022

 

 

$ change

 

 

% change

 

External pipeline development expenses:

 

 

 

 

 

 

 

 

 

 

 

 

LUNAR-COVID, net

 

$

22,828

 

 

$

27,816

 

 

$

(4,988

)

 

 

-17.9

%

LUNAR-OTC, net

 

 

3,319

 

 

 

1,645

 

 

 

1,674

 

 

*

 

Early stage programs

 

 

4,870

 

 

 

1,906

 

 

 

2,964

 

 

*

 

Discovery technologies

 

 

4,751

 

 

 

1,365

 

 

 

3,386

 

 

*

 

External platform development expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Personnel related expenses

 

 

13,271

 

 

 

10,317

 

 

 

2,954

 

 

 

28.6

%

Facilities and equipment expenses

 

 

2,729

 

 

 

1,844

 

 

 

885

 

 

 

48.0

%

Total research and development expenses, net

 

$

51,768

 

 

$

44,893

 

 

$

6,875

 

 

 

15.3

%

* Greater than 100%

Our research and development expenses consist primarily of external manufacturing costs, in-vivo research studies and clinical trials performed by contract research organizations, clinical and regulatory consultants, personnel related expenses, facility related expenses and laboratory supplies related to conducting research and development activities. Research and development expense was $51.8 million for the three months ended March 31, 2023, compared with $44.9 million in the comparable period last year, primarily reflecting increased manufacturing costs of $5.7 million, an increase of $2.3 million in personnel related expenses, an increase of travel and consulting expenses of $0.9 million, and increase in facility expenses of $0.7 million. Additionally, the increase was partially caused by $1.5 million less contra research and development expense related to the CFF agreement recognized in the three months ended March 31, 2023 as compared to the same period in 2022. The increases were offset by a decrease in clinical-related expenses of $4.4 million. We expect that our research and development efforts and associated costs will increase and continue to be substantial over the next several years as our pipeline progresses.

Early stage programs represent programs that are in the pre-clinical or Phase 1 clinical stage and may be partnered or unpartnered, including the CF program. Discovery technologies represents our efforts to expand our product pipeline and are primarily related to pre-partnered studies and new capabilities assessment. For several of our programs, the activities are part of our collaborative and other relationships and the expenses may be partially
offset with funds that have been awarded to the Company. The expenses primarily consist of external manufacturing costs, lab supplies, equipment, and consulting and professional fees. Both early stage programs and discovery technologies expenses are expected to steadily increase over the coming years.

Personnel related expenses primarily consist of employee salaries and benefits, share-based compensation and consultants and are expected to continue to increase in the near future as we continue increase headcount to meet the needs of our external pipeline, platform and clinical trial efforts. Additionally, personnel related expenses will continue to rise as we increase salaries in line with increases in the market rates in order to retain our employees.

Facilities and equipment expenses continue to increase as we expand. The three months ended March 31, 2023 includes increased rent and associated costs related to a new facility we took possession of in April 2022. Facilities and equipment expenses are expected to increase in the near term due to increased rent expense related to our three facilities.

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General and Administrative Expenses

General and administrative expenses primarily consist of salaries and related benefits for our executive, administrative, legal and accounting functions and professional service fees for legal and accounting services as well as other general and administrative expenses.

General and administrative expense was $13.8 million for the three months ended March 31, 2023, compared with $10.7 million in the comparable period last year. The increases resulted primarily from personnel expense due to increased headcount and salaries, increased travel and consulting expenses as well as increased rent expense associated with the new facility.

Finance (expense) income, net

 

 

 

Three Months Ended March 31,

 

 

2022 to 2023

 

(in thousands)

 

2023

 

 

2022

 

 

$ change

 

 

% change

 

Interest income

 

$

3,220

 

 

$

154

 

 

$

3,066

 

 

*

 

Interest expense

 

 

(743

)

 

 

(718

)

 

 

(25

)

 

 

3.5

%

Total

 

$

2,477

 

 

$

(564

)

 

$

3,041

 

 

*

 

* Greater than 100%

Interest income is generated on cash and cash equivalents. The increase in interest income for the three months ended March 31, 2023 as compared to the prior year period was the result of increased interest rates. Interest expense was incurred in conjunction with the Western Alliance Agreement and the Singapore Loan and was relatively flat for the three months ended March 31, 2023 as compared to the prior year period.

Other income and expense

 

 

 

Three Months Ended March 31,

 

 

2022 to 2023

(in thousands)

 

2023

 

 

2022

 

 

$ change

 

 

% change

Loss from equity-method investment

 

$

 

 

$

(384

)

 

$

384

 

 

*

(Loss) gain from foreign currency

 

 

(328

)

 

 

158

 

 

 

(486

)

 

*

Gain on debt extinguishment

 

 

33,953

 

 

 

 

 

 

33,953

 

 

*

Total

 

$

33,625

 

 

$

(226

)

 

$

33,851

 

 

*

* Greater than 100%

Other income and expense items relate to gains and losses from foreign currency transactions and from equity-method investments. Additionally, we recorded a gain on debt extinguishment related to the Singapore Loan of $34.0 million during the three months ended March 31, 2023.

We recorded a foreign currency loss of $0.3 million for the three months ended March 31, 2023 compared with a gain of $0.2 million in the comparable period last year which is primarily attributable to the Singapore Loan. We recorded no gain or loss for the three months ended March 31, 2023 compared with a $0.4 million loss in the comparable period last year in connection with our equity-method investment in Vallon Pharmaceuticals, Inc.

Off-balance sheet arrangements

Through March 31, 2023, we have not entered into and did not have any relationships with unconsolidated entities or financial collaborations, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Liquidity and Capital Resources

From the Company’s inception through the quarter ended March 31, 2023, the Company has funded its operations principally with the proceeds from the sale of capital stock, long-term debt and revenues earned through collaboration agreements and government contracts. Additionally, during the fourth quarter of 2022, we received a $200.0 million upfront payment from CSL Seqirus and expect to receive future payments primarily from meeting future milestones related to the arrangement. At March 31, 2023, we had $327.9 million in unrestricted cash and cash equivalents.

Pursuant to the Third Amendment to the Loan and Security Agreement (as amended and supplemented, the “Western Alliance Agreement”) with Western Alliance Bank, an Arizona corporation (“Western Alliance”), Western Alliance agreed to make a term loan to us on October 30, 2019, in the amount of $15.0 million (the “Term Loan”). The Term Loan bore interest at a floating rate ranging from 1.25% to 2.75% above the prime rate. The amendment further provides that the Term Loan has a maturity date of October 30, 2023. In October of 2021, we entered into a Fifth Amendment to the Western Alliance Agreement, which provided for a six month

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extension to the interest only period which moves the first principal payment to May 1, 2022. On March 14, 2023, the Western Alliance Agreement was terminated (the “Termination”) upon the receipt by Western Alliance of a payoff amount of approximately $7.36 million. The payoff amount was made to Western Alliance from available cash on hand, pursuant to a payoff letter, and included payment of (i) approximately $7.02 million in principal and interest, (ii) $300,000 fee payable upon prepayment as a result of prior FDA approval of an IND, (iii) $35,000 in prepayment charges and (iv) de minimis amounts for various operational fees. We were released from all liens under the Western Alliance Agreement.

CSL Seqirus, Inc. Collaboration and License Agreement

We entered into the CSL Collaboration Agreement with Seqirus, Inc. (“CSL Seqirus”), a part of CSL Limited, one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize of self-amplifying mRNA vaccines.

CSL Seqirus received exclusive global rights to our technology for vaccines against SARS-CoV-2 (COVID-19), influenza and three other respiratory infectious diseases with non-exclusive rights to pandemic pathogens. We received an up-front payment of $200.0 million during the fourth quarter of 2022. We will be eligible to potentially receive development milestones totaling more than $1.3 billion if all products are registered in the licensed fields. We will also be entitled to potentially receive up to $3.0 billion in commercial milestones based on “net sales” of vaccines in the various fields.

In addition, we are entitled to receive a 40% share of net profits from COVID-19 vaccine sales and up to low double-digit royalties of annual net sales for vaccines against influenza and the other three specified infectious disease pathogens, as well as royalties on revenues from vaccines that may be developed for pandemic preparedness.

In March 2023, Arcturus achieved development milestones, including milestones associated with nominating next generation vaccine candidates, resulting in $90.0 million due from CSL Seqirus.

The CSL Collaboration Agreement sets forth how CSL Seqirus and us shall collaborate to research and develop vaccine candidates. In the COVID-19 field, we will lead activities for certain regulatory filings for ARCT-154 in the US and Europe and for research and development activities of a next-generation COVID vaccine candidate. CSL Seqirus will lead and be responsible for all other research and development in COVID-19, influenza and the other fields.

Grant from the Biomedical Advanced Research and Development Authority

On August 31, 2022, we entered into a cost reimbursement contract (the “BARDA Contract”) with the Biomedical Advanced Research and Development Authority (“BARDA”), a division of the Office of the Assistant Secretary for Preparedness and Response (ASPR) within the U.S. Department of Health and Human Services (HHS) to support the development of a low-dose pandemic influenza candidate based on our proprietary self-amplifying messenger RNA-based vaccine platform. The BARDA Contract is to support our non-clinical and pre-clinical development, early-stage clinical development through Phase 1, and associated drug product manufacturing, regulatory and quality-assurance activities over a period of three years. It provides for reimbursement by BARDA of our permitted costs up to $63.2 million. During the three months ended March 31, 2023, we incurred $0.6 million that is expected to be reimbursed during the second quarter of 2023.

Grants from the Economic Development Board of the Republic of Singapore

On March 4, 2020, we were awarded a grant (“Grant 1”) from the Economic Development Board of the Republic of Singapore (the “EDB”) to support the co-development of a potential COVID-19 vaccine program with the Duke-NUS Medical School. Grant 1 provided for up to S$14.0 million (approximately $10.0 million using the exchange rate at the time the grant contract was entered into) in grants to support the development of the vaccine. Grant 1 has been paid in full by the EDB as a result of the achievement of certain milestones related to the progress of the development of the vaccine, as set forth in the award agreement. The funds received have been recognized as contra research and development expense. The parties are in continued negotiations with respect to amendments of Grant 1. We do not believe there will be any further obligations related to this grant.

On October 2, 2020, we were awarded another grant (“Grant 2”) from the EDB to support the clinical development of a potential COVID-19 vaccine (ARCT-021). Grant 2 provides for up to S$9.3 million (approximately $6.7 million) to support the clinical development of the vaccine candidate for costs incurred in Singapore subject to certain conditions. Grant 2 is to be paid in two installments upon the achievement of certain milestones related to the progress of the development of the vaccine candidate. We received the first installment of $3.6 million in the fourth quarter of 2020. A portion of the funds received were recognized as contra research and development expense as costs were incurred during the fourth quarter of 2020. As costs were incurred during fiscal year 2021, we recognized the remaining amount of the first installment as contra expense for Grant 2. The parties are in continued negotiations with respect to amendments of Grant 2. We do not believe there will be any further obligations related to this grant.

Manufacturing Support Agreement

On November 7, 2020, we entered into the EDB “Support Agreement” with the EDB. Pursuant to the EDB Support Agreement, the EDB agreed to make a term loan (the “Singapore Loan”) of $62.1 million, subject to the satisfaction of customary deliveries, to support the manufacture of the LUNAR-COV19 vaccine candidate (ARCT-021). On March 23, 2023, we and the EDB agreed to

23


 

certain amendments to the EDB Agreement, including that (i) the audit of the funds utilized for ARCT-021 is to be completed on March 22, 2023, (ii) EDB waiving the loan and interest on funds used to manufacture ARCT-021, (iii) upon audit completion we will pay EDB interest (calculated at 4.5% per annum) and principal for outstanding funds not used for ARCT-021 by March 30, 2023 and (iv) the delivery requirement of ARCT-021 shall be waived. The result of this notice is that we paid $17.1 million to the EDB and recorded a gain on debt forgiveness of $34.0 million during the first quarter of 2023.

Vinbiocare Agreement

During 2021, we entered into a technology license and technical support agreement and the framework drug substance supply agreement with Vinbiocare, a member of Vingroup Joint Stock Company (collectively, the “Vinbiocare License & Supply Agreements”), whereby we would provide technical expertise and support services to Vinbiocare to assist in the build out of an mRNA drug product manufacturing facility in Vietnam. We received an upfront payment in aggregate of $40.0 million as part of the Vinbiocare License and Supply Agreements. In October 2022, in association with the termination of the Vinbiocare License and Supply Agreements, we signed the Vinbiocare Support Agreement with Vinbiocare which continues Vinbiocare’s clinical obligations and reserved a portion of the original $40.0 million upfront payment received from the License and Supply Agreements to be paid over the future periods.

The Vinbiocare Support Agreement requires us to pay to Vinbiocare certain limited payments, including upon the occurrence of specified events through the first quarter of 2025. Vinbiocare is also eligible to receive a single digit percentage of amounts received by Arcturus on net sales, if any, of ARCT-154 (or next-generation COVID vaccine) up to a capped amount.


 

General Financial Resources

A portion of our current cash balance of $330.1 million is expected to be utilized during fiscal year 2023 to fund (i) the continued Phase 2 trial of ARCT-810, our LUNAR-OTC candidate, (ii) advances to our LUNAR-CF program in clinical trials, (iii) expenses incurred prior to customer payments under the CSL Collaboration Agreement and BARDA agreement and (iv) continued exploratory activities related to our platform and other general administrative activities.

Our future capital requirements are difficult to forecast and will depend on many factors that are out of our control. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected. There can be no assurance that we will be able to obtain additional needed financing on acceptable terms or at all. Additionally, equity or debt financings may have a dilutive effect on the holdings of our existing shareholders.

We expect to continue to incur additional losses in the long term, and we will need to execute on milestones within the CSL Collaboration Agreement, raise additional debt or equity financing or enter into additional partnerships to fund development. Our ability to transition to profitability is dependent on executing on milestones within the CSL Collaboration Agreement and identifying and developing successful mRNA drug and vaccine candidates. If we are not able to achieve planned milestones, incur costs in excess of our forecasts, or do not meet covenant requirements of our debt, we will need to reduce discretionary spending, discontinue the development of some or all of our programs, which will delay part of our development programs, all of which will have a material adverse effect on our ability to achieve our intended business objectives.

Funding Requirements

We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin commercialization of our products. As a result, we will require additional capital to fund our operations in order to support our long-term plans. We believe that our current cash position will be sufficient to meet our anticipated cash requirements through at least the next twelve months, assuming, among other things, no significant unforeseen expenses and continued funding from partners at anticipated levels. We intend to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements with partners or through other sources of financing. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations.

24


 

Our future funding requirements are difficult to forecast and will depend on many factors, including the following:

the development of our LUNAR-COV19 and LUNAR-FLU vaccine candidates;
the achievement of milestones under our strategic alliance agreements;
maintaining and/or expanding our manufacturing network and capabilities;
the terms and timing of any other strategic alliance, licensing and other arrangements that we may establish;
the initiation, progress, timing and completion of preclinical studies and clinical trials for our product candidates;
the number and characteristics of product candidates that we pursue;
the outcome, timing and cost of regulatory approvals;
delays that may be caused by changing regulatory requirements;
the cost and timing of hiring new employees to support our continued growth;
the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;
the costs and timing of procuring clinical and commercial supplies of our product candidates;
the costs and timing of establishing sales, marketing and distribution capabilities;
the costs associated with legal proceedings;
the costs associated with potential litigation related to collaboration agreements; and
the extent to which we acquire or invest in businesses, products or technologies.

Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in conformity with GAAP. As such, we make certain estimates, judgments and assumptions that we believe are reasonable, based upon information available to us. These judgements involve making estimates about the effect of matters that are inherently uncertain and may significantly impact our reported results of operations and financial condition. We describe our significant accounting policies more fully in Note 2 to our consolidated financial statements for the year ended December 31, 2022.

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the 2022 Annual Report.

25


 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our primary exposure to market risk is interest income and expense sensitivity and foreign currency exchange rates. Interest income and expense sensitivity is affected by changes in the general level of interest rates in the United States. Foreign exchange market risks relate to the grants and loan from the Singapore Economic Development Board which is discussed in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 1. Description of Business.” When deemed appropriate, we may manage our exposure to foreign exchange market risks through the use of derivative financial instruments. We may utilize such derivative financial instruments for hedging or risk management purposes. Due to the nature of our cash and cash equivalents and our evaluation of the potential impact of foreign currency exchange rates, we believe that we are not currently subject to any material market risk exposure.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(b) of the Exchange Act, our management, including our principal executive officer, our principal financial officer and our principal accounting officer, conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, management has concluded that as of March 31, 2023, the Company’s disclosure controls and procedures were effective at the reasonable assurance level, and we believe the condensed consolidated financial statements included in this Form 10-Q for the quarterly periods ended March 31, 2023 fairly present, in all material respects, our financial position, results of operations, comprehensive income (loss), statements of stockholders’ equity and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d) and Rule 15d-15(d) of the Exchange Act, our management, including our principal executive officer, our principal financial officer and our principal accounting officer, conducted an evaluation of the internal control over financial reporting to determine whether any other changes occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our principal executive officer, principal financial officer and principal accounting officer concluded that there were no changes in our internal controls over financial reporting during the periods covered by this Quarterly Report on Form 10-Q that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

From time to time, we may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business, including those related to governmental inquiries, intellectual property and commercial relationships. The subject matter of any such legal proceedings or claims are or will be highlight complex and subject to substantial uncertainties. The outcome of any such proceedings or claims, regardless of the merits, are and will be inherently uncertain; therefore, assessing the likelihood of loss and any estimated damages is difficult and subject to considerable judgment.

Item 1A. Risk Factors.

Our business is subject to various risks, including those described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which we strongly encourage you to review. Other than as set forth below, there have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Commission on March 29, 2023.

We are exposed to interest rate risk, including under our loan agreements.

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results from our debt obligations, including the credit agreement entered into on April 21, 2023 by our wholly-owned subsidiary, Arcturus Therapeutics, Inc., and Wells Fargo Bank, National Association (the “Credit Agreement”), providing for a revolving credit line evidenced by a revolving line of credit note (the “Note”). Borrowings under the Credit Agreement will bear interest at a rate of 1.00% above either the Daily Simple SOFR or Term SOFR (as such terms are defined in the Note), with “SOFR” being the rate per annum equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York. All Loans shall bear interest during an Event of Default (as defined in the Credit Agreement) at a rate equal to 2.00% above the interest rate applicable immediately prior to the occurrence of the Event of Default (as defined in the Credit Agreement). As of May 9, 2023, we had no outstanding balance under the Credit Agreement.

Our indebtedness could materially and adversely affect our business, financial condition and results of operations.

Agreements with our lenders, including with Wells Fargo Bank, National Association, create several limitations on us, including but not limited to:

limiting our flexibility in planning for, or reacting to, changes in our business and our industry;
placing us at a competitive disadvantage compared to our competitors who may have less debt or comparable debt at more favorable interest rates or less strict covenants and other limitations or requirements;
limiting our ability to incur specified types of additional indebtedness which may be desired for working capital, capital expenditures, research and development efforts, acquisitions, debt service requirements, execution of our business strategy or other purposes; and
resulting in an acceleration of our obligations upon the occurrence of an event of default.

Our ability to comply with these covenants in future periods will depend on our financial and operating performance, which in turn will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond our control. Any of these factors or others described in the Credit Agreement could materially and adversely affect our business, financial condition and results of operations.

Our debt contains customary default clauses, a breach of which may result in acceleration of the repayment of some or all of this debt.

The Credit Agreement contains customary default clauses. In the event we were to default on our obligations under our debt and were unable to cure or obtain a waiver of such default, the repayment of our debt may be accelerated. If such acceleration were to occur, we would be required to promptly secure alternative sources of equity or debt financing to be able to repay the debt. Alternative financing may not be available on terms satisfactory to us, or at all. New debt financing may require the cooperation and agreement of our existing lenders. If acceptable alternative financing were unavailable, we would have to consider alternatives to fund the repayment of the debt, which could materially and adversely affect our business, financial condition and results of operations.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

 

Exhibit Index

 

Exhibit Number

 

Description

 

 

3.1

 

Certificate of Incorporation. Incorporated by reference to Annex B to the proxy statement/prospectus which forms part of the Registration Statement on Form S-4 filed on March 18, 2019 (File No. 333-230353).

 

 

 

3.2

 

Certificate of Amendment, dated November 25, 2020. Incorporated by reference to Exhibit 3.1 to Form 8-K filed on November 25, 2020 (File No. 001-38942).

 

 

 

3.3

 

Bylaws of Arcturus Therapeutics Holdings Inc. Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-3, filed with the SEC on May 8, 2020 (File No. 333-238139).

 

 

 

4.1

 

Description of Registrant’s Securities. Incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed on February 28, 2022 (File No. 001-38942).

 

 

 

10.1†

 

Form of Indemnification Agreement. Incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed on March 16, 2020 (File No. 001-38942).

 

 

 

10.2†

 

Amended and Restated 2019 Omnibus Equity Incentive Plan. Incorporated by reference Exhibit 4.3 to the Registration Statement on Form S-8 filed on August 5, 2020 (File No. 333-240397).

 

 

 

10.3**

 

Amended and Restated Amendment to Development and Option Agreement, dated as of September 28, 2018, by and between CureVac AG and Arcturus Therapeutics Inc. Incorporated by reference to Exhibit 99.2 to the Company’s Report of Foreign Private Issuer on Form 6-K filed on October 1, 2018 (File No. 001-35932).

 

 

 

10.4**

 

Research and Exclusive License Agreement, by and between Arcturus Therapeutics, Inc. and Synthetic Genomics, Inc., effective October 24, 2017. Incorporated by reference to Exhibit 4.8 to Form 20-F filed on May 14, 2018 (File No. 001-35932).

 

 

 

10.5**

 

Research Collaboration and License Agreement, by and between Arcturus Therapeutics, Inc. and Ultragenyx Pharmaceutical Inc., entered into as of October 26, 2015, as amended October 17, 2017 and April 20, 2018. Incorporated by reference to Exhibit 4.10 to Form 20-F filed on May 14, 2018 (File No. 001-35932).

 

 

 

10.6**

 

Third Amendment to Research Collaboration and License Agreement, by and between Arcturus Therapeutics, Inc. and Ultragenyx Pharmaceutical Inc., effective June 18, 2019. Incorporated by reference to Exhibit 10.2 to Form 8-K filed on June 20, 2019 (File No. 001- 38942).

 

 

 

10.7**

 

Letter Agreement, by and between Arcturus Therapeutics, Inc. and the Cystic Fibrosis Foundation, dated May 16, 2017. Incorporated by reference to Exhibit 4.11 to Form 20-F filed on May 14, 2018 (File No. 001-35932).

 

 

 

10.8**

 

Amendment No. 2 to Letter Agreement, by and between Arcturus Therapeutics, Inc. and the Cystic Fibrosis Foundation, dated August 1, 2019. Incorporated by reference to Exhibit 10.16 to Form 10-Q filed on August 14, 2019.

 

 

 

10.9**

 

Development and Option Agreement, by and between Arcturus Therapeutics, Inc. and CureVac AG, dated January 1, 2018, as amended May 3, 2018. Incorporated by reference to Exhibit 4.12 to Form 20-F filed on May 14, 2018 (File No. 001-35932).

 

 

 

10.10**

 

Third Amendment to Development and Option Agreement, by and between Arcturus Therapeutics, Inc. and CureVac AG, dated July 26, 2019. Incorporated by reference to Exhibit 10.20 to Form 10-Q filed on August 14, 2019 (File No. 001-38942).

 

 

 

10.11**

 

License Agreement, by and between Arcturus Therapeutics, Inc., as successor-in-interest to Marina Biotech, Inc., and Protiva Biotherapeutics Inc., dated as of November 28, 2012. Incorporated by reference to Exhibit 4.14 to Form 20-F/A filed on July 10, 2018 (File No. 001-35932).

 

 

 

10.12**

 

Patent Assignment and License Agreement, by and between Arcturus Therapeutics, Inc. and Marina Biotech, Inc., dated as of August 9, 2013. Incorporated by reference to Exhibit 4.15 to Form 20-F filed on May 14, 2018 (File No. 001-35932).

 

 

 

10.13

 

Share Exchange Agreement, dated as of February 11, 2019, by and between Arcturus Therapeutics Ltd. and Arcturus Therapeutics Holdings Inc. Incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed on March 18, 2019 (File No. 001-35932).

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10.14

 

Lease Agreement, by and between Arcturus Therapeutics, Inc. and ARE-SD Region No. 44, LLC, dated October 4, 2017. Incorporated by reference to Exhibit 4.6 to Form 20-F filed on May 14, 2018 (File No. 001-35932).

 

 

 

10.15

 

First Amendment to Lease Agreement, by and between Arcturus Therapeutics Holdings Inc. and ARE-SD Region No. 44, LLC dated February 1, 2020. Incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed on March 16, 2020 (File No. 001-38942).

 

 

 

10.16**

 

Acceptance Letter, dated March 4, 2020, by and between Arcturus Therapeutics Holdings Inc. and the Economic Development Board of Singapore. Incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed on March 16, 2020 (File No. 001-38942).

 

 

 

10.17†

 

2020 Employee Stock Purchase Plan. Incorporated by reference to Exhibit 4.3 to Form S-8 filed on August 5, 2020 (File No. 333-240392).

 

 

 

10.18

 

Second Amendment to Lease, by and between Arcturus Therapeutics, Inc. and ARE-SD Region No. 44, LLC, dated November 13, 2020. Incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 1, 2020 (File No. 001-38942).

 

 

 

10.19

 

Third Amendment to Lease, by and between Arcturus Therapeutics, Inc. and ARE-SD Region No. 44, LLC, dated February 25, 2021. Incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 1, 2020 (File No. 001-38942).

 

 

 

10.20

 

Arcturus Therapeutics Holdings Inc. Severance Policy for Executives. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 26, 2021 (File No. 001-38942).

 

 

 

10.21

 

Lease, by and between Arcturus Therapeutics, Inc. and TPSC IX, LLC, dated September 29, 2021. Incorporated by reference to Exhibit 10.35 to Form 10-Q filed on November 9, 2021 (File No. 001-38942).

 

 

 

10.22†

 

Arcturus Therapeutics Holdings Inc. 2021 Inducement Equity Incentive Plan. Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 filed on October 20, 2021 (File No. 333-260391).

 

 

 

10.23†

 

Amended and Restated 2019 Omnibus Equity Incentive Plan, as amended. Incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-8 filed on June 30, 2022.

 

 

 

10.24**

 

Cost Reimbursement Contract dated August 31, 2022, by and between Arcturus Therapeutics Holdings Inc. and Biomedical Advanced Research and Development Authority of the U.S. Department of Health and Human Services. Incorporated by reference to Exhibit 10.36 to Quarterly Report on Form 10-Q filed on November 9, 2022 (File No. 001-38942).

 

 

 

10.25**

 

Study Support Agreement, dated October 31, 2022, by and between Arcturus Therapeutics, Inc. and Vinbiocare Research and Manufacture Joint Stock Company. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on November 4, 2022 (File No. 001-38942).

 

 

 

10.26**

 

Collaboration and License Agreement, dated November 1, 2022, by and between Arcturus Therapeutics Holdings Inc. and CSL Limited. Incorporated by reference to Exhibit 10.38 to Quarterly Report on Form 10-Q filed on November 9, 2022 (File No. 001-38942).

 

 

 

10.27**

 

Manufacturing Support Agreement Termination Letter, dated March 23, 2023, by and between Arcturus Therapeutics, Inc. and the Economic Development of Singapore. Incorporated by reference to Exhibit 10.41 to Annual Report on Form 10-K filed on March 29, 2023 (File No. 001-38942).

 

 

 

10.28* **

 

Credit Agreement dated April 21, 2023, by and between Arcturus Therapeutics, Inc. and Wells Fargo Bank, National Association.

 

 

 

10.29* **

 

Security Agreement dated April 21, 2023, by and between Arcturus Therapeutics, Inc. and Wells Fargo Bank, National Association.

 

 

 

10.30* **

 

Revolving Line of Credit Note dated April 21, 2023, by and between Arcturus Therapeutics, Inc. and Wells Fargo Bank, National Association.

 

 

 

31.1*

 

Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

 

31.2*

 

Certification by Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

 

30


 

32.1*

 

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2*

 

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101*

 

The following financial statements and footnotes from the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023 formatted in Inline Extensible Business Reporting Language (Inline XBRL):

 

 

101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

 

 

101.SCH Inline XBRL Taxonomy Extension Schema

 

 

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase

 

 

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase

 

 

101.LAB Inline XBRL Taxonomy Extension Label Linkbase

 

 

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

 

* Filed herewith.

** Certain confidential portions of this exhibit have been redacted from the publicly filed document because such portions are (i) not material and (ii) would be competitively harmful of publicly disclosed.

† Management compensatory plan, contract or arrangement.

 

31


 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

ARCTURUS THERAPEUTICS HOLDINGS INC.

Date: May 9, 2023

By:

/s/ Andy Sassine

Andy Sassine

 

Chief Financial Officer

 

32