1 unchanged sentence
Evaluation of Disclosure Controls and Procedures
−Removed: We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
+Added: We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives.
1 unchanged sentence
In addition, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions;
−Removed: over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may
+Added: over time, controls may
+Added: become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
2 unchanged sentences
Based on this evaluation, our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2022.
−Removed: Management’s Report on Internal Control Over Financial Reporting
+Added: Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
6 unchanged sentences
Based on this assessment, management, under the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, concluded that, as of December 31, 2022, our internal control over financial reporting was effective based on those criteria.
−Removed: The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report, which is included herein.
−Removed: Report of Independent Registered Public Accounting Firm
−Removed: To the Stockholders and the Board of Directors of Arcturus Therapeutics Holdings Inc.
−Removed: Opinion on Internal Control over Financial Reporting
−Removed: We have audited Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries’ internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria).
−Removed: In our opinion, Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders‘ equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 28, 2022 expressed an unqualified opinion thereon.
−Removed: Basis for Opinion
−Removed: The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.
−Removed: Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
−Removed: We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
−Removed: federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
−Removed: We conducted our audit in accordance with the standards of the PCAOB.
−Removed: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
−Removed: Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
−Removed: We believe that our audit provides a reasonable basis for our opinion.
−Removed: Definition and Limitations of Internal Control Over Financial Reporting
−Removed: A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
−Removed: A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
−Removed: (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
−Removed: and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
−Removed: Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
−Removed: Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
−Removed: /s/ Ernst & Young LLP
−Removed: San Diego, California
−Removed: February 28, 2022
Changes in Internal Control Over Financial Reporting.
An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer of any changes in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
−Removed: There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended December 31, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
+Added: There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended December 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Other Information
−Removed: Directors, Executive Officers and Corporate Governance
+Added: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
+Added: Not Applicable.
+Added: Directors, Executive Off icers and Corporate Governance
Information required by this item will be contained in our Definitive Proxy Statement for our 2023 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A with the Securities and Exchange Commission within 120 days of December 31, 2022.
Such information is incorporated herein by reference.
−Removed: Executive Compensation
+Added: Executiv e Compensation
Information required by this item will be contained in our Definitive Proxy Statement for our 2023 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A with the Securities and Exchange Commission within 120 days of December 31, 2022.
Such information is incorporated herein by reference.
−Removed: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
+Added: Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters
Information required by this item will be contained in our Definitive Proxy Statement for our 2023 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A with the Securities and Exchange Commission within 120 days of December 31, 2022.
3 unchanged sentences
Such information is incorporated herein by reference.
−Removed: Principal Accounting Fees and Services
+Added: Principal Accoun ting Fees and Services
Information required by this item will be contained in our Definitive Proxy Statement for our 2023 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A with the Securities and Exchange Commission within 120 days of December 31, 2022.
Such information is incorporated herein by reference.
−Removed: Exhibits, Financial Statement Schedules
+Added: Exhibits, Financ ial Statement Schedules
(1) The information required by this item is included in Item 8 of Part II of this Annual Report.;
1 unchanged sentence
(3) See the exhibit index preceding the signature pages to this Annual Report, which is incorporated by reference herein.
−Removed: See the exhibit index preceding the signature pages to this Annual Report, which is incorporated by reference herein.
−Removed: Not applicable.
+Added: (b) See the exhibit index preceding the signature pages to this Annual Report, which is incorporated by reference herein.
+Added: (c) Not applicable.
Form 10-K Summary
Exhibit Index
−Removed: Underwriting Agreement, dated December 7, 2020, by and among Arcturus Therapeutics Holdings Inc., Piper Sandler & Co., Guggenheim Securities, LLC and Wells Fargo Securities, LLC.
−Removed: Incorporated by reference to Exhibit 1.1 to Current Report on Form 8-K filed on December 8, 2020 (File No.
+Added: Controlled Equity Offering℠
+Added: Sales Agreement, dated as of December 23, 2022 by and between Cantor Fitzgerald & Co, Wells Fargo Securities, LLC and Arcturus Therapeutics Holdings Inc.
+Added: Incorporated by reference to Exhibit 1.2 to Registration Statement on Form S-3 filed on December 23, 2022 (File No.
Certificate of Incorporation.
3 unchanged sentences
Bylaws of Arcturus Therapeutics Holdings Inc.
−Removed: 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.
−Removed: Description of Registrant’s Securities.
+Added: 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.
+Added: Description of Registrant’s Securities.
Form of Indemnification Agreement.
−Removed: 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.
+Added: 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.
Amended and Restated 2019 Omnibus Equity Incentive Plan.
2 unchanged sentences
Amended and Restated Compensation Policy for Company Office Holders.
−Removed: Incorporated by reference to Exhibit 99.2 to the Company’s Report of Foreign Private Issuer on Form 6-K filed on July 27, 2018 (File No.
+Added: Incorporated by reference to Exhibit 99.2 to the Company’s Report of Foreign Private Issuer on Form 6-K filed on July 27, 2018 (File No.
Loan and Security Agreement, dated October 12, 2018, by and between Western Alliance Bank and Arcturus Therapeutics, Inc.
−Removed: Incorporated by reference to Exhibit 10.1 to the Company’s Report of Foreign Private Issuer on Form 6-K filed on October 15, 2018 (File No.
+Added: Incorporated by reference to Exhibit 10.1 to the Company’s Report of Foreign Private Issuer on Form 6-K filed on October 15, 2018 (File No.
Amended and Restated Amendment to Development and Option Agreement, dated as of September 28, 2018, by and between CureVac AG and Arcturus Therapeutics Inc.
−Removed: 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.
+Added: 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.
Research Collaboration and License Agreement, by and between Arcturus Therapeutics, Inc.
4 unchanged sentences
Incorporated by reference to Exhibit 4.8 to Form 20-F filed on May 14, 2018 (File No.
−Removed: Research Agreement, by and between Arcturus Therapeutics, Inc.
−Removed: and Millennium Pharmaceuticals, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Company Limited, effective December 6, 2016, as amended December 21, 2017.
−Removed: Incorporated by reference to Exhibit 4.9 to Form 20-F filed on May 14, 2018 (File No.
Research Collaboration and License Agreement, by and between Arcturus Therapeutics, Inc.
17 unchanged sentences
Incorporated by reference to Exhibit 10.20 to Form 10-Q filed on August 14, 2019 (File No.
−Removed: Co-Development and Co-Commercialization Agreement, by and between Arcturus Therapeutics, Inc.
−Removed: and CureVac AG, dated January 1, 2018.
−Removed: Incorporated by reference to Exhibit 4.13 to Form 20-F filed on May 14, 2018 (File No.
−Removed: Termination Agreement, by and between Arcturus Therapeutics, Inc.
−Removed: and CureVac AG, dated July 26, 2019.
−Removed: Incorporated by reference to Exhibit 10.21 to Form 10-Q filed on August 14, 2019 (File No.
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.
5 unchanged sentences
and Arcturus Therapeutics Holdings Inc.
−Removed: 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.
+Added: 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.
Amended and Restated Joint Venture, Research Collaboration and License Agreement, dated as of July 14, 2018 by and between Arcturus Therapeutics, Inc.
and Providence Therapeutics, Inc.
−Removed: Incorporated by reference to Exhibit 10.14 to the Company’s Amendment No.
+Added: Incorporated by reference to Exhibit 10.14 to the Company’s Amendment No.
1 to Annual Report on Form 10-K for the year ended December 31, 2018 filed on April 10, 2019 (File No.
−Removed: Research Collaboration Agreement, dated as of March 8, 2019 by and between Arcturus Therapeutics, Inc.
−Removed: and Millennium Pharmaceuticals, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Company Limited.
−Removed: Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed on March 18, 2019 (File No.
Lease Agreement, by and between Arcturus Therapeutics, Inc.
5 unchanged sentences
44, LLC dated February 1, 2020.
−Removed: 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.
+Added: 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.
Acceptance Letter, dated March 4, 2020, by and between Arcturus Therapeutics Holdings Inc.
and the Economic Development Board of Singapore.
−Removed: 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.
−Removed: Supply Agreement, dated August 17, 2020, by and between Arcturus Therapeutics, Inc.
−Removed: and the Israeli Ministry of Health.
−Removed: Incorporated by reference to Exhibit 10.32 to Quarterly Report on Form 10-Q filed on November 9, 2020 (File No.
+Added: 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.
Manufacturing Support Agreement, dated November 7, 2020, by and between Arcturus Therapeutics Holdings Inc.
9 unchanged sentences
44, LLC, dated November 13, 2020.
−Removed: 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.
+Added: 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.
Third Amendment to Lease, by and between Arcturus Therapeutics, Inc.
1 unchanged sentence
44, LLC, dated February 25, 2021.
−Removed: 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.
+Added: 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.
+Added: Arcturus Therapeutics Holdings Inc.
+Added: Severance Policy for Executives.
+Added: Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 26, 2021 (File No.
Employment Agreement, dated as of June 13, 2019, between the Company and Joseph Payne.
16 unchanged sentences
44, LLC, dated February 25, 2021.
−Removed: 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.
+Added: 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.
Technology License and Technical Support Agreement, signed July 29, 2021 and effective July 30, 2021, by and between Arcturus Therapeutics, Inc.
4 unchanged sentences
Incorporated by reference to Exhibit 10.33 to Quarterly Report on Form 10-Q filed on August 10, 2021 (File No.
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: Severance Policy for Executives.
−Removed: Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 26, 2021 (File No.
+Added: Sixth Amendment to Loan and Security Agreement, dated April 19, 2022, by and between Arcturus Therapeutics, Inc.
+Added: and Western Alliance Bank.
+Added: Incorporated by reference to Exhibit 10.36 to Quarterly Report on Form 10-Q filed on May 9, 2022 (File No.
+Added: Amended and Restated 2019 Omnibus Equity Incentive Plan, as amended.
+Added: Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on June 24, 2022 (File No.
+Added: Study Support Agreement effective October 31, 2022 by and between Arcturus Therapeutics, Inc.
+Added: and Vinbiocare Biotechnology Joint Stock Company.
+Added: Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on November 4, 2022 (File No.
+Added: Cost Reimbursement Contract dated August 31, 2022, by and between Arcturus Therapeutics Holdings Inc.
+Added: and Biomedical Advanced Research and Development Authority of the U.S.
+Added: Department of Health and Human Services.
+Added: Incorporated by reference to Exhibit 10.36 to Quarterly Report on Form 10-Q filed on November 9, 2022 (File No.
+Added: Collaboration and License Agreement, dated November 1, 2022, by and between Arcturus Therapeutics Holdings Inc.
+Added: and CSL Limited.
+Added: Incorporated by reference to Exhibit 10.38 to Quarterly Report on Form 10-Q filed on November 9, 2022 (File No.
+Added: Manufacturing Support Agreement Termination Letter, dated March 23, 2023, by and between Arcturus Therapeutics, Inc.
+Added: and the Economic Development of Singapore.
Consent of Independent Registered Public Accounting Firm
9 unchanged sentences
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
−Removed: The following financial statements and footnotes from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 formatted in Inline Extensible Business Reporting Language (Inline XBRL):
+Added: The following financial statements and footnotes from the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 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
10 unchanged sentences
ARCTURUS THERAPEUTICS HOLDINGS INC.
−Removed: February 28, 2022
+Added: March 28, 2023
/s/ Joseph E.
6 unchanged sentences
President, Chief Executive Officer and Director
−Removed: February 28, 2022
+Added: March 28, 2023
(principal executive officer)
1 unchanged sentence
Chairman of the Board
−Removed: February 28, 2022
+Added: March 28, 2023
Peter Farrell
1 unchanged sentence
Director and Chief Financial Officer
−Removed: February 28, 2022
+Added: March 28, 2023
Andrew Sassine
1 unchanged sentence
Magda Marquet
−Removed: February 28, 2022
+Added: March 28, 2023
Magda Marquet
/s/ James Barlow
−Removed: February 28, 2022
+Added: March 28, 2023
/s/ Edward Holmes
−Removed: February 28, 2022
+Added: March 28, 2023
Edward Holmes
/s/ Jing Marantz
−Removed: February 28, 2022
+Added: March 28, 2023
+Added: March 28, 2023
Vice President of Finance and Corporate Controller
−Removed: February 28, 2022
+Added: March 28, 2023
(principal accounting officer)
2 unchanged sentences
Consolidated Balance Sheets as of December 31, 2022 and 202 1
−Removed: Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2021, 2020 and 2019
−Removed: Consolidated Statements of Changes in Stockholders’ Equity for the Years ended December 31, 2021, 2020 and 2019
+Added: Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years ended December 31, 2022 and 2021
+Added: Consolidated Statements of Changes in Stockholders’
+Added: Equity for the Years ended December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the Years ended December 31, 2022 and 2021
Notes to Consolidated Financial Statements
−Removed: Report of Independent Registered Public Accounting Firm
+Added: Report of Independent Regist ered Public Accounting Firm
To the Stockholders and the Board of Directors of Arcturus Therapeutics Holdings Inc.
1 unchanged sentence
We have audited the accompanying consolidated balance sheets of Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).
−Removed: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.
+Added: and its Subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’
+Added: equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).
+Added: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.
generally accepted accounting principles.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
−Removed: These financial statements are the responsibility of the Company’s management.
−Removed: Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
−Removed: We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
+Added: These financial statements are the responsibility of the Company’s management.
+Added: Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
+Added: We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
1 unchanged sentence
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
+Added: The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting.
+Added: As part of our audits, we are required to obtain an understanding of internal controls over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting.
+Added: Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
9 unchanged sentences
At December 31, 2022, the Company incurred $147.8 million for research and development expenses and accrued $4.5 million for clinical trial expenses.
−Removed: As described in Note 2 to the consolidated financial statements, the Company records accruals for estimated costs of research and development activities, including contract services for clinical trials and related clinical manufacturing costs in connection with early discovery efforts.
+Added: As described in Note 2 to the consolidated financial statements, the Company records accruals for estimated costs of research and development activities, including for third party contractors, laboratories, participating clinical trial sites and others.
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.
−Removed: Auditing management’s accounting for accrued research and development expenses, for which the Company has either not been invoiced or has not received information on the actual costs incurred, was especially challenging as evaluating the progress or stage of completion of the activities under the Company’s research and development agreements is dependent upon information from internal clinical personnel and third party service providers and involves a high volume of data which is tracked in spreadsheets and other end user computing programs.
+Added: Auditing management’s accounting for accrued research and development expenses, was especially challenging as evaluating the progress or stage of completion of the activities under the Company’s research and development agreements is dependent upon information from internal clinical personnel and third party service providers and involves a high volume of data which is tracked in spreadsheets and other end user computing programs.
How We Addressed the Matter in Our Audit
−Removed: We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the accounting for accrued research and development expenses.
−Removed: For example, we tested controls over management’s assessment and measurement of estimated accrued costs, including data inputs for study progress and remaining stages of completion under each study.
−Removed: To test the Company’s accrued research and development expenses, we obtained supporting evidence of the research and development activities performed for significant clinical trials.
−Removed: We attended internal clinical trial and project status meetings with accounting and clinical project managers to inspect the status of significant research and development activities.
−Removed: To assess the appropriate measurement of accrued research and development costs, our audit procedures included, among others, obtaining and inspecting significant agreements and agreement amendments, evaluating the Company’s documentation of trial timelines, confirming amounts incurred to-date with third-party service providers, and testing a sample of transactions and comparing the costs against related invoices and contracts.
+Added: To test the Company’s accrued research and development expenses, we obtained supporting evidence of the research and development activities performed for significant clinical trials.
+Added: To assess the appropriate measurement of accrued research and development costs, our audit procedures included, among others, obtaining and inspecting significant agreements and agreement amendments, evaluating the Company’s documentation of trial timelines, confirming amounts incurred to-date with third-party service providers, and testing a sample of transactions and comparing the costs against related invoices and contracts.
We also tested a sample of subsequent payments to evaluate the completeness of the accrued expenses and compared the results to the current year accrual.
/s/ Ernst & Young, LLP
−Removed: We have served as the Company’s auditor since 2018.
+Added: We have served as the Company’s auditor since 2018.
San Diego, California
−Removed: February 28, 2022
+Added: March 28, 2023
ARCTURUS THERAPEUTICS HOLDINGS INC.
AND ITS SUBSIDIARIES
−Removed: CONSOLIDATED BALANCE SHEETS
−Removed: (in thousands, except par value information)
+Added: CONSOLIDATED BA LANCE SHEETS
As of December 31,
+Added: (in thousands, except par value information)
Current assets:
7 unchanged sentences
Non-current restricted cash
−Removed: Liabilities and stockholders’ equity
+Added: Liabilities and Stockholders’
Current liabilities:
7 unchanged sentences
Operating lease liability, net of current portion
+Added: Other non-current liabilities
Total liabilities
−Removed: Stockholders’ equity:
+Added: Stockholders’
Common stock:
1 unchanged sentence
60,000 shares authorized;
−Removed: 26,372 shares issued and outstanding at December 31, 2021 and 26,192 shares issued and outstanding at December 31, 2020
+Added: issued and outstanding shares were 26,555 at December 31, 2022 and 26,372 at December 31, 2021
Additional paid-in capital
Accumulated deficit
−Removed: Total stockholders’ equity
−Removed: Total liabilities and stockholders’ equity
+Added: Total stockholders’
+Added: Total liabilities and stockholders’
The accompanying notes are an integral part of these consolidated financial statements.
1 unchanged sentence
AND ITS SUBSIDIARIES
−Removed: CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
−Removed: (in thousands, except per share data)
+Added: C ONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Year Ended December 31,
+Added: (in thousands, except per share data)
+Added: Collaboration revenue
+Added: Grant revenue
+Added: Total revenue
Operating expenses:
2 unchanged sentences
Total operating expenses
−Removed: Loss from operations
−Removed: Gain (loss) from equity-method investment
−Removed: Foreign currency transaction gain
+Added: Income (loss) from operations
+Added: (Loss) gain from equity-method investment
+Added: (Loss) gain from foreign currency
Finance expense, net
−Removed: Net loss per share, basic and diluted
−Removed: Weighted-average shares outstanding, basic and diluted
−Removed: Comprehensive loss:
−Removed: Comprehensive loss
+Added: Net income (loss) before income taxes
+Added: Provision for income taxes
+Added: Net income (loss)
+Added: Earnings (loss) per share:
+Added: Weighted-average shares used in calculation of earnings (loss) per share:
+Added: Comprehensive income (loss):
+Added: Net income (loss)
+Added: Comprehensive income (loss)
The accompanying notes are an integral part of these consolidated financial statements.
1 unchanged sentence
AND ITS SUBSIDIARIES
−Removed: CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
+Added: CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
+Added: Stockholders’
(in thousands)
−Removed: Stockholders’
−Removed: BALANCE – December 31, 2018
−Removed: Share-based compensation
−Removed: Redomiciliation share exchange
−Removed: Issuance of common stock to Ultragenyx, net of issuance costs
−Removed: Issuance of common stock, net of issuance costs
−Removed: Issuance of common stock upon exercise of stock options
−Removed: Effect of adoption of ASU 2014-09
−Removed: BALANCE – December 31, 2019
+Added: Balance at December 31, 2020
Share-based compensation
−Removed: Issuance of common stock to Ultragenyx on option exercise
−Removed: Issuance of common stock, net of issuance costs
+Added: Issuance of common stock related to acquired in-process research and development
Issuance of common stock upon exercise of stock options
−Removed: BALANCE – December 31, 2020
+Added: Issuance of common stock under equity plans
+Added: Balance at December 31, 2021
Share-based compensation
−Removed: Issuance of common stock related to acquired in-process research and development
Issuance of common stock upon exercise of stock options
Issuance of common stock under equity plans
−Removed: BALANCE – December 31, 2021
+Added: Balance at December 31, 2022
The accompanying notes are an integral part of these consolidated financial statements.
1 unchanged sentence
AND ITS SUBSIDIARIES
−Removed: CONSOLIDATED STATEMENTS OF CASH FLOWS
−Removed: (in thousands)
+Added: CONSOLIDATED STATEM ENTS OF CASH FLOWS
Year Ended December 31,
+Added: (in thousands)
Operating activities
−Removed: Adjustments to reconcile net loss to net cash used in operating activities:
+Added: Net income (loss)
+Added: Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization
1 unchanged sentence
Acquired in-process research and development expense
−Removed: (Gain) loss from equity-method investment
−Removed: Foreign currency transaction gain
+Added: Loss (gain) from equity-method investment
+Added: Foreign currency transaction loss (gain)
Other non-cash expenses
−Removed: Changes in operating assets and liabilities:
+Added: Changes in assets and liabilities:
Accounts receivable
−Removed: Prepaid expenses and other assets
+Added: Prepaid expenses and other current assets
+Added: Right-of-use assets
Accounts payable
1 unchanged sentence
Deferred revenue
−Removed: Net cash used in operating activities
+Added: Lease liabilities
+Added: Net cash provided by (used in) operating activities
Investing activities
5 unchanged sentences
Proceeds from issuance of common stock under equity plans
−Removed: Proceeds from exercise of stock option by Ultragenyx and issuance of common stock and option, net of issuance costs, to Ultragenyx
−Removed: Proceeds from issuance of common stock, net of issuance costs
−Removed: Net cash provided by financing activities
−Removed: NET (DECREASE) INCREASE IN CASH, CASH
−Removed: EQUIVALENTS AND RESTRICTED CASH
−Removed: Cash, cash equivalents and restricted cash at beginning of year
−Removed: Cash, cash equivalents and restricted cash at end of year
+Added: Principal payments on debt
+Added: Net cash (used in) provided by financing activities
+Added: Net increase (decrease) in cash, cash equivalents and restricted cash
+Added: Cash, cash equivalents and restricted cash, beginning of year
+Added: Cash, cash equivalents and restricted cash, end of year
Year Ended December 31,
2 unchanged sentences
Non-cash investing activities
−Removed: Right-of-use asset obtained in exchange for lease liabilities
+Added: Right-of-use assets acquired through operating leases
Acquisition of in-process research and development through issuance of common stock
−Removed: Purchase of property and equipment in accounts payable
+Added: Purchase of property and equipment in accounts payable and accrued expenses
The accompanying notes are an integral part of these consolidated financial statements.
4 unchanged sentences
Arcturus Therapeutics Holdings Inc.
−Removed: (the “Company”) is a late-stage global clinical messenger RNA medicines company focused on the development of infectious disease vaccines and significant opportunities within liver and respiratory rare diseases.
−Removed: 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”) candidate LUNAR-COV19 were approved by applicable health authorities.
−Removed: The financial statements for periods prior to June 17, 2019 , the effective date of the Redomiciliation, relate to Arcturus Therapeutics Ltd.
−Removed: and for the periods from and after June 17, 2019 relate to Arcturus Therapeutics Holdings Inc.
+Added: (the “Company”
+Added: or "Arcturus") is a global late-stage clinical messenger RNA medicines company focused on the development of infectious disease vaccines and significant opportunities within liver and respiratory rare diseases.
+Added: 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.
Recent Developments
−Removed: See “Note 3 Revenue – Vinbiocare” for further information on the agreements with Vinbiocare, a member of Vingroup Joint Stock Company (“Vinbiocare”), whereby the Company will provide technical expertise and support services to Vinbiocare to assist in the build out of a manufacturing facility in Vietnam.
+Added: See “Note 3 Revenue –
+Added: CSL Seqirus”
+Added: for further information on the agreement with Seqirus, Inc.
+Added: ("CSL Seqirus"), whereby CSL Seqirus and the Company will collaborate on research and development, manufacturing and global commercialization of vaccines.
The Company has incurred significant operating losses since its inception.
As of December 31, 2022 and 2021, the Company had an accumulated deficit of $ 338.1 million and $ 347.5 million, respectively.
−Removed: The Company’s activities since inception have consisted principally of research and development activities, general and administrative activities, and raising capital.
−Removed: 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.
−Removed: From the Company’s inception through the year ended December 31, 2021, the Company has funded its operations principally with the proceeds from the sale of capital stock and funds received from collaboration agreements.
−Removed: During fiscal year 2021, the Company received a term loan of $ 46.6 million from Economic Development Board of the Republic of Singapore as well as an upfront payment of $ 40.0 million from Vinbiocare to assist with funding a phase 3 clinical trial in Vietnam.
−Removed: Through underwritten public offerings, the Company raised net proceeds of $ 423.8 million during fiscal year 2020, after deducting underwriting discounts, commissions, and offering expenses.
−Removed: At December 31, 2021, the Company’s balance of cash and cash equivalents, including restricted cash, was $ 372.6 million.
+Added: The Company’s activities since inception have consisted principally of research and development activities, general and administrative activities, and raising capital.
+Added: 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.
+Added: From the Company’s inception through the year ended December 31, 2022 , 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.
+Added: During fiscal year 2022, the Company received an upfront payment of $ 200.0 million as part of its collaboration agreement with CSL Seqirus for the research, manufacture and global commercialization of self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases.
+Added: At December 31, 2022, the Company’s balance of cash and cash equivalents, including restricted cash, was $ 394.0 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 consolidated financial statements were available to be issued.
−Removed: There can be no assurance that the Company will be successful in acquiring 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.
+Added: There can be no assurance that the Company will be successful in acquiring 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.
Arcturus Therapeutics Holdings Inc.
and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
+Added: Notes to Consolidated Financial Statements —
Summary of Significant Accounting Policies
5 unchanged sentences
GAAP), which requires management to make estimates and assumptions regarding the valuation of certain debt and equity instruments, the equity method investment, share-based compensation, accruals for liabilities, income taxes, revenue and deferred revenue, leases, expense accruals, 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 period.
−Removed: Although these estimates are based on management’s knowledge of current events and actions the Company may undertake in the future, actual results could materially differ from those estimates.
+Added: Although these estimates are based on management’s knowledge of current events and actions the Company may undertake in the future, actual results could materially differ from those estimates.
Segment Information
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.
−Removed: 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.
+Added: 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.
Cash and Cash Equivalents
1 unchanged sentence
Restricted cash
−Removed: Restricted cash represents cash required to be set aside as security for lease payments and to maintain a letter of credit for the benefit of the landlord for the Company’s offices.
+Added: Restricted cash represents cash required to be set aside as security for lease payments and to maintain a letter of credit for the benefit of the landlord for the Company’s offices.
At December 31, 2022 and 2021, the Company had restricted cash of $ 2.1 million and $ 2.1 million in conjunction with property leases in San Diego, California, and such restriction is expected to be removed at the end of the lease term.
3 unchanged sentences
Observable inputs are inputs that market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company.
−Removed: Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available under the circumstances.
+Added: Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available under the circumstances.
The hierarchy consists of three levels.
11 unchanged sentences
and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
+Added: Notes to Consolidated Financial Statements —
receivable is deemed to be uncollectible, such balance is charged against the reserve.
3 unchanged sentences
The Company limits its exposure to credit loss by placing its cash and cash equivalents with high credit quality financial institutions in instruments with short maturities.
−Removed: There were two customers that comprised 100 % of the total accounts receivable balance at December 31, 2021 and one customer that comprised 100 % of the total accounts receivable balance at December 31, 2020.
−Removed: For the year ended December 31, 2021, the Company’s top four customers collectively represented 99 % of the Company’s total revenue.
−Removed: For the year ended December 31, 2020, there were four customers that collectively represented 94 % of the Company’s total revenue.
+Added: There were two customers that comprised 100 % of the total accounts receivable balance at December 31, 2022 and two customers that comprised 100 % of the total accounts receivable balance at December 31, 2021.
+Added: For the year ended December 31, 2022, the Company’s top five customers collectively represented 99 % of the Company’s total revenue.
+Added: For the year ended December 31, 2021, there were four customers that collectively represented 99 % of the Company’s total revenue.
Joint Ventures, Equity Method Investments and Variable Interest Entities
2 unchanged sentences
(see the following paragraph for further details) and a 6 % ownership in Vallon Pharmaceuticals, Inc.
−Removed: (see “ Note 12, Related Party Transactions” for further details).
−Removed: The Company’s share of the investees results is presented as either income or loss from equity method investees in the accompanying consolidated statements of operations and comprehensive loss.
−Removed: In April 2021, Arcturus and Axcelead, Inc., a company existing under the laws of Japan (“Axcelead”), formed a joint venture entity, named Arcalis, Inc.
−Removed: (“JV Entity”), which operates as a corporation under the laws of Japan.
+Added: (see “
+Added: Note 12, Related Party Transactions”
+Added: for further details).
+Added: The Company’s share of the investees results is presented as either income or loss from equity method investees in the accompanying consolidated statements of operations and comprehensive income (loss).
+Added: In April 2021, Arcturus and Axcelead, Inc., a company existing under the laws of Japan (“Axcelead”), formed a joint venture entity, named Arcalis, Inc.
+Added: (“JV Entity”), which operates as a corporation under the laws of Japan.
Axcelead is an integrated drug discovery solutions provider to the pharmaceutical industry in Japan.
2 unchanged sentences
The joint venture includes a shareholders agreement setting forth initial funding of the JV Entity and rights of the shareholders, including certain approval rights of Arcturus.
−Removed: As part of the joint venture, the Company entered into a License and Technology Transfer Agreement with the JV Entity, pursuant to which Arcturus grants to JV Entity a nonexclusive license to certain intellectual property for use at the JV Entity’s facilities, and obligates Arcturus to conduct certain technology transfer activities.
−Removed: The Company consolidates variable interest entities (“VIEs”) where it has been determined that the Company is the primary beneficiary of those entities’ operations.
+Added: As part of the joint venture, the Company entered into a License and Technology Transfer Agreement with the JV Entity, pursuant to which Arcturus grants to JV Entity a nonexclusive license to certain intellectual property for use at the JV Entity’s facilities, and obligates Arcturus to conduct certain technology transfer activities.
+Added: The Company consolidates variable interest entities (“VIEs”) where it has been determined that the Company is the primary beneficiary of those entities’
Management believes that power is shared between Arcturus and Axcelead, as unrelated parties.
−Removed: The consent of each of the parties is substantive and is required to make the decisions about the JV Entity’s significant activities.
−Removed: Management does not believe that Arcturus has the power to direct the activities of the JV Entity that most significantly impact the JV Entity’s economic performance.
+Added: The consent of each of the parties is substantive and is required to make the decisions about the JV Entity’s significant activities.
+Added: Management does not believe that Arcturus has the power to direct the activities of the JV Entity that most significantly impact the JV Entity’s economic performance.
Therefore, the Company concluded it is not required to consolidate the JV Entity under the VIE model.
The equity method of accounting is applicable for the JV Entity as the Company does not own more than 50 % of voting power, but has influence over the operation and financial policies of the investee.
−Removed: The Company accounts for its investment in the JV Entity using the equity method of accounting as specified in ASC 323 , Investments — Equity Method and Joint Ventures .
+Added: The Company accounts for its investment in the JV Entity using the equity method of accounting as specified in ASC 323, Investments —
+Added: Equity Method and Joint Ventures .
Under ASC 323, equity method investments are recorded initially at cost.
−Removed: The Company’s initial investment in the JV Entity totaled $ 9.2 million.
+Added: The Company’s initial investment in the JV Entity totaled $ 9.2 million.
However, the JV Entity paid the Company back the initial investment of $ 9.2 million as an upfront fee/consideration for the License and Technology Transfer Agreement.
2 unchanged sentences
and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
+Added: Notes to Consolidated Financial Statements —
Property and Equipment, net
3 unchanged sentences
Long-lived assets, including property and equipment are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable.
−Removed: The determinants used for this evaluation include management’s estimate of an asset’s ability to generate positive income from operations and positive cash flow in future periods, as well as the strategic significance of the assets to the Company’s business objectives.
+Added: The determinants used for this evaluation include management’s estimate of an asset’s ability to generate positive income from operations and positive cash flow in future periods, as well as the strategic significance of the assets to the Company’s business objectives.
The Company did no t recognize any impairment losses for the years ended December 31, 2022 and 2021 .
Comprehensive Income/Loss
−Removed: Comprehensive income/loss is defined as the change in stockholders’ equity during a period from transactions and other events and circumstances from non-owner sources.
+Added: Comprehensive income/loss is defined as the change in stockholders’
+Added: equity during a period from transactions and other events and circumstances from non-owner sources.
There was no other comprehensive loss in the years ended December 31, 2022 or 2021 .
1 unchanged sentence
Revenue Recognition
−Removed: Effective January 1, 2019 , the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”), using the modified retrospective transition method.
−Removed: Topic 606 provides a unified model to determine how revenue is recognized and the Company applied the standard to collaborative research and technology agreements that were in progress as of the effective date, January 1, 2019.
+Added: 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).
+Added: 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:
4 unchanged sentences
and (v) recognize revenue when, or as, the company satisfies a performance obligation.
−Removed: 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.
+Added: 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.
5 unchanged sentences
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.
−Removed: 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.
−Removed: See “Note 3, Revenue” for specific details surrounding the Company’s arrangements.
−Removed: See “Note 11, Commitments and Contingences” for specific details surrounding the Company’s leases.
+Added: 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.
+Added: For performance obligations that are recognized over time, the Company measures the progress using an input method.
+Added: The input methods used are based on the effort expended or costs incurred toward the satisfaction of the performance obligation.
+Added: 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.
+Added: This approach requires the Company to make numerous estimates and use significant judgement.
+Added: 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.
+Added: Arcturus Therapeutics Holdings Inc.
+Added: and its Subsidiaries
+Added: Notes to Consolidated Financial Statements —
+Added: See “Note 3, Revenue”
+Added: for specific details surrounding the Company’s arrangements.
+Added: The Company determines if an arrangement is a lease at inception.
+Added: 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.
+Added: 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.
+Added: Operating lease right-of-use assets are comprised of the lease liability plus any lease payments made and excludes lease incentives.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: Lease expense for lease payments is recognized on a straight-line basis over the lease term.
+Added: The Company has elected the practical expedient to not separate lease and non-lease components.
+Added: See “Note 11, Commitments and Contingences”
+Added: for specific details surrounding the Company’s leases.
Research and Development Costs, net
1 unchanged sentence
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.
−Removed: Payments made
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
+Added: 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.
1 unchanged sentence
For the latter, the Company accrues the expenses as goods or services are used or rendered.
−Removed: Clinical trial site costs related to patient enrollment are accrued as patients enter and progress through the trial.
+Added: 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.
+Added: 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.
+Added: Arcturus Therapeutics Holdings Inc.
+Added: and its Subsidiaries
+Added: Notes to Consolidated Financial Statements —
Share-Based Compensation
−Removed: The Company recognizes share-based compensation for equity awards granted to employees, consultants, officers and directors as an expense on the statements of operations and comprehensive loss.
+Added: The Company recognizes share-based compensation for equity awards granted to employees, consultants, officers and directors as an expense on the statements of operations and comprehensive income (loss).
Share-based compensation is recognized over the requisite service period of the individual awards using the straight-line attribution method, which generally equals the vesting period.
−Removed: Employees and officers’ stock options have a ten-year life and generally vest 25 % on the first anniversary of the grant and in 1/36 th equal installments on each monthly anniversary thereafter, such that options are fully vested on the four-year anniversary of the date of grant.
+Added: Employees and officers’
+Added: stock options have a ten-year life and generally vest 25 % on the first anniversary of the grant and in 1/36 th equal installments on each monthly anniversary thereafter, such that options are fully vested on the four-year anniversary of the date of grant.
The exercisability and vesting periods of options granted to consultants and directors vary.
The fair value of stock options is estimated using a Black-Scholes valuation model on the date of grant.
−Removed: This method requires certain assumptions be used as inputs, such as the fair value of the underlying common stock, expected term of the option before exercise, expected volatility of the Company’s common stock, expected dividend yield, and a risk-free interest rate.
+Added: This method requires certain assumptions be used as inputs, such as the fair value of the underlying common stock, expected term of the option before exercise, expected volatility of the Company’s common stock, expected dividend yield, and a risk-free interest rate.
The Company has limited historical stock option activity and therefore estimates the expected term of stock options granted using the simplified method, which represents the average of the contractual term of the stock option and its weighted-average vesting period.
4 unchanged sentences
Pre-Launch Inventory
−Removed: 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 consolidated statements of operations and comprehensive loss, in the period incurred.
+Added: 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 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.
8 unchanged sentences
Income Tax Expense
−Removed: Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at the applicable tax rates, along with net operating loss and tax credit carryovers.
−Removed: The Company records a valuation allowance against its deferred tax assets
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: to reduce the net carrying value to an amount that it believes is more likely than not to be realized.
+Added: Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at the applicable tax rates, along with net operating loss and tax credit carryovers.
+Added: The Company records a valuation allowance against its deferred tax assets to reduce the net carrying value to an amount that it believes is more likely than not to be realized.
Management has considered estimated taxable income and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance.
−Removed: Based upon the weight of available evidence, which includes the Company’s historical operating performance and limited potential to utilize tax credit carryforwards, the Company has determined that total deferred tax assets should be fully offset by a valuation allowance.
+Added: Based upon the weight of available evidence, which includes the Company’s historical operating performance and limited potential to utilize tax credit carryforwards, the Company has determined that total deferred tax assets should be fully offset by a valuation allowance.
When the Company establishes or reduces the valuation allowance against its deferred tax assets, its provision for income taxes will increase or decrease, respectively, in the period such determination is made.
1 unchanged sentence
The Company also files income tax returns in the foreign countries in which it operates.
−Removed: The preparation of these income tax returns requires the Company to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by the Company.
+Added: Arcturus Therapeutics Holdings Inc.
+Added: and its Subsidiaries
+Added: Notes to Consolidated Financial Statements —
+Added: preparation of these income tax returns requires the Company to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by the Company.
Additionally, the Company follows an accounting standard addressing the accounting for uncertainty in income taxes that prescribes rules for recognition, measurement, and classification in the consolidated financial statements of tax positions taken or expected to be taken in a tax return.
2 unchanged sentences
The Company adopted this standard effective January 1, 2021 .
−Removed: The adoption of this standard did not have an impact on the Company’s Consolidated Financial Statements.
−Removed: Net Loss per Share
−Removed: Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for common stock equivalents.
−Removed: Diluted net loss per share is calculated by dividing the net 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.
+Added: The adoption of this standard did no t have an impact on the Company’s Consolidated Financial Statements.
+Added: Net Income (Loss) per Share
+Added: 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.
+Added: 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 years ended December 31, 2022 and 2021 are comprised of stock options.
No dividends were declared or paid during the reporting periods.
+Added: Recently Issued Accounting Standards Not Yet Adopted
+Added: 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.
+Added: The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the consolidated financial statements and disclosures.
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.
−Removed: The Company’s costs of performing these services are included within research and development expenses.
−Removed: The Company’s milestone payments are typically defined by achievement of certain preclinical, clinical, and commercial success criteria.
+Added: The Company’s costs of performing these services are included within research and development expenses.
+Added: 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.
1 unchanged sentence
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.
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: The following table presents changes during the year ended December 31, 2021 in the balances of contract assets, including receivables from collaborative partners, consulting and related technology transfer partners, and contract liabilities, including deferred revenue.
+Added: The following table presents changes in the balances of receivables and contract liabilities related to strategic collaboration agreements during the year ended December 31, 2022:
(in thousands)
+Added: December 31, 2021
+Added: December 31, 2022
Contract Assets:
−Removed: BALANCE - December 31, 2020
−Removed: Additions for revenue recognized from billings
−Removed: Deductions for cash collections
−Removed: BALANCE - December 31, 2021
−Removed: (in thousands)
+Added: Accounts receivable
Contract Liabilities:
−Removed: BALANCE - December 31, 2020
−Removed: Additions for advanced billings
−Removed: Deductions for promised services provided in current period
−Removed: BALANCE – December 31, 2021
−Removed: The following table summarizes the Company’s revenue for the periods indicated (in thousands).
−Removed: Approximately $ 5.0 million, $ 1.0 million and $ 7.0 million of total revenue represents revenue derived from foreign countries for the years ended December 31, 2021, 2020 and 2019, respectively.
+Added: Deferred revenue
+Added: Arcturus Therapeutics Holdings Inc.
+Added: and its Subsidiaries
+Added: Notes to Consolidated Financial Statements —
+Added: The following table summarizes the Company’s revenue for the periods indicated.
+Added: Approximately $ 192.7 million and $ 5.0 million of total revenue represents revenue derived from foreign countries for the years ended December 31, 2022 and 2021, respectively.
For the Year Ended December 31,
(in thousands)
−Removed: Total revenue
−Removed: The following paragraphs provide information regarding the nature and purpose of the Company’s most significant revenue arrangements.
+Added: Collaboration revenue:
+Added: Israel Ministry of Health
+Added: Total collaboration revenue
+Added: Grant revenue:
+Added: Total grant revenue
+Added: The following paragraphs provide information regarding the nature and purpose of the Company’s most significant revenue arrangements.
+Added: On November 1, 2022, the Company entered into a Collaboration and License Agreement (the “CSL Collaboration Agreement”) with Seqirus, Inc.
+Added: (“CSL Seqirus”), for the global exclusive rights to research, develop, manufacture, and commercialize vaccines.
+Added: 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.
+Added: CSL Seqirus will lead development and commercialization of vaccines under the collaboration.
+Added: The collaboration plans to advance vaccines against SARS-CoV-2 (COVID-19), influenza, pandemic preparedness as well as three other respiratory infectious diseases.
+Added: 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”
+Added: of vaccines in the various fields.
+Added: 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.
+Added: 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.
+Added: In evaluating the CSL Collaboration Agreement in accordance with Accounting Standards Codification (“ASC”) Topic 606, the Company concluded that CSL Seqirus is a customer.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: As of December 31, 2022, the transaction price consisted of upfront consideration received.
+Added: Additional variable consideration, including the milestones achieved in March 2023, was not included in the transaction price at December 31, 2022 because the Company could not conclude that it is probable that including the variable consideration will not result in a significant revenue reversal.
Arcturus Therapeutics Holdings Inc.
and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: From June 11, 2021 through August 2, 2021, the Company entered into a series of agreements with Vinbiocare, a member of Vingroup Joint Stock Company (collectively the “Vinbiocare Agreement”), whereby the Company will provide technical expertise and support services to Vinbiocare to assist in the build out of a mRNA drug product manufacturing facility in Vietnam.
−Removed: Such expertise shall include a specified level of access to the Company’s personnel and drug substance necessary to validate the successful set up of the facility.
−Removed: Under the terms of the arrangements, the Company will also provide a specified number of doses of ARCT-154 for use by Vinbiocare in a phase 3 clinical study within Vietnam.
−Removed: The Company received an upfront payment in aggregate of $ 40.0 million and subsequent to achieving emergency use authorization, the Company will receive low single digit payments per dose for drug substance and related royalties.
−Removed: In evaluating the Vinbiocare Agreement in accordance with Accounting Standards Codification (“ASC”) Topic 606, the Company concluded that Vinbiocare is a customer.
−Removed: The Company identified all promised goods/services within the Vinbiocare Agreement, and when combining certain promised goods/services, the Company concluded that there are four distinct performance obligations.
−Removed: The four performance obligations include (i) consulting to support the build out of the manufacturing facility and technical transfer, (ii) shipment of 80 grams of drug substance to validate the manufacturing facility, (iii) the sale of 2,500 vials of drug product to support the phase 3 clinical trial and (iv) consulting to support the phase 3 clinical trial and related regulatory filings.
−Removed: For each performance obligation, the Company estimated the standalone selling price based on cost plus margin for drug substance and drug product as well as estimated headcount and full-time equivalent (“FTE”) rates for consulting services to support the phase 3 clinical trial, the build out of the manufacturing facility and the technology transfer.
−Removed: As of December 31, 2021, the transaction price consists of upfront consideration received and budgeted reimbursable out-of-pocket costs to support the build out of the manufacturing facility and technology transfer.
−Removed: The Company allocated the transaction price to the performance obligations in proportion to their standalone selling price, the relative standalone selling price basis.
−Removed: The drug substance and drug product performance obligations are recognized at the point in time the goods are transferred.
−Removed: The consulting performance obligations are recognized over a period of time based on the percentage of services rendered, meaning actual costs incurred divided by total costs budgeted to satisfy the performance obligation.
−Removed: Any consideration related to sales-based royalties will be recognized when the drug product is manufactured as they are constrained.
−Removed: The revenue recognized in 2021 relates to consulting to support the build out of the manufacturing facility and technical transfer, the sale of 2,500 vials of drug product to support the phase 3 clinical trial and consulting to support the phase 3 clinical trial.
−Removed: Total deferred revenue as of December 31, 2021 for the Vinbiocare agreement was $ 37.2 million.
−Removed: For Janssen Pharmaceuticals, Inc.
−Removed: (“Janssen”), Ultragenyx Pharmaceutical Inc.
−Removed: (“Ultragenyx”) and CureVac AG (“CureVac”), the Company evaluated the respective agreement in accordance with Accounting Standards Codification (“ASC”) Topic 606.
−Removed: The Company concluded that the contract counterparty is a customer.
−Removed: The Company identified all promised goods/services within each agreement, and concluded that the promised goods/services are incapable of being distinct and consequently do not have any value on a standalone basis.
−Removed: Accordingly, the promised goods/services within each agreement were determined to represent a single performance obligation.
−Removed: Lastly, the Company concluded that any options to select additional collaboration targets and to license rights to selected targets were not priced at a discount and therefore do not represent performance obligations for which the transaction price would be allocated.
+Added: Notes to Consolidated Financial Statements —
+Added: The Company allocated the transaction price to the performance obligations in proportion to their standalone selling price.
+Added: The vaccine license is recognized at the point in time when it is transferred.
+Added: 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.
+Added: 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.
+Added: The revenue recognized in 2022 relates to the license delivered and services performed through December 31, 2022.
+Added: Total deferred revenue as of December 31, 2022 for the CSL Collaboration Agreement was $ 45.6 million.
+Added: During 2021 the Company entered into certain agreements with 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.
+Added: The Company received an upfront payment in aggregate of $ 40.0 million as part of the Vinbiocare Agreement.
+Added: In October 2022, the Company and Vinbiocare executed a letter agreement terminating the Technology License and Technical Support Agreement and the Framework Drug Substance Supply Agreement (collectively, the “License & Supply Agreements”).
+Added: 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.
+Added: In association with the termination of the License & Supply Agreements, the Company signed in October 2022 the Study Support Agreement with Vinbiocare which provides for Vinbiocare to continue serving as the regulatory and financial sponsor of clinical studies conducted in Vietnam of ARCT-154.
+Added: 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.
+Added: As of December 31, 2022, 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.
+Added: 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.
+Added: In February of 2023, the Company agreed to provide additional financial support in the amount of approximately $ 2.2 million to allow Vinbiocare to provide additional study support duties related to the ARCT-154 clinical study.
+Added: As a result, the Company adjusted the transaction price which resulted in a reversal of revenue of $ 2.2 million during the year ended December 31, 2022.
+Added: The Company has concluded that is has no remaining performance obligations as of December 31, 2022, and therefore has recognized the remaining transaction price as revenue during the year ended December 31, 2022.
+Added: As of December 31, 2022, the Company has accrued liabilities related to this arrangement of $ 7.5 million in current liabilities and $ 2.8 million in non-current liabilities that will be paid upon the occurrence of specified events through the first quarter of 2025.
+Added: 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.
Arcturus Therapeutics Holdings Inc.
and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: 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.
+Added: Notes to Consolidated Financial Statements —
+Added: Company had no remaining deferred revenue as of December 31, 2022.
+Added: As of December 31, 2021, the deferred revenue balance was $ 37.2 million.
+Added: 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.
−Removed: The Company received an upfront payment of $ 7.7 million and may receive preclinical, development and sales milestone payments of up to $ 56.5 million, as well as royalty payments on any future licensed product sales.
−Removed: In October 2021, the LUNAR-HBV program reached an incremental milestone based on demonstration of in vivo efficacy and safety for which Janssen paid the Company $ 1.0 million.
−Removed: Janssen began reimbursing the Company for research costs during the first quarter of 2019 upon the completion of the first of three research periods.
−Removed: Janssen will pay royalties of a low to mid-single digit percentage of net sales of licensed products, subject to reduction on a country-by-country and licensed-product-by-licensed-product basis and subject to certain events, such as expiration of program patents.
−Removed: As of December 31, 2021, the remaining transaction price consisting of upfront consideration received and budgeted reimbursable out-of-pocket costs, is expected to be recognized using an input method over the remaining research period of 12 months .
−Removed: None of the development and commercialization milestones were included in the transaction price as they are outside the control of the Company and contingent upon success in future clinical trials and the collaborator’s efforts.
−Removed: The development milestone achieved in October 2021 was included in the transaction price during the fourth quarter of 2021.
−Removed: Any consideration related to sales-based royalties will be recognized when the related sales occur, provided that the reported sales are reliably measurable, and the Company has no remaining promised goods/services, as such sales were determined to relate predominantly to the license granted to Janssen and therefore have also been excluded from the transaction price.
+Added: The Company received an upfront payment of $ 7.7 million and was reimbursed for research costs as incurred.
+Added: On October 31, 2022, Arcturus received notice of termination from Janssen Pharmaceuticals, Inc.
+Added: of the 2017 Agreement, and the termination was effective as of December 30, 2022.
+Added: The Company will not incur any penalties as a result of this termination.
+Added: As of December 31, 2022, the licenses granted to Janssen have terminated and the Company recognized approximately $ 6.0 million of upfront consideration received and a development milestone achieved in October of 2021.
+Added: T he remaining transaction price is expected to be recognized using an input method over the remaining research period of approximately three months during the wind down period.
Total deferred revenue as of December 31, 2022 and 2021 for Janssen was $ 0.4 million and $ 6.3 million, respectively.
−Removed: In October 2015 the Company entered into a research collaboration and license agreement with Ultragenyx (the “Ultragenyx Agreement”), whereby Arcturus granted to Ultragenyx a co-exclusive license to certain Arcturus technology, which is in effect only during the reserve target exclusivity term as discussed in the following paragraphs.
+Added: In October 2015 the Company entered into a research collaboration and license agreement with Ultragenyx (the “Ultragenyx Agreement”), whereby Arcturus granted to Ultragenyx a co-exclusive license to certain Arcturus technology, which is in effect only during the reserve target exclusivity term as discussed in the following paragraphs.
This collaboration agreement was amended in 2017, 2018 and during the second quarter of 2019.
1 unchanged sentence
Ultragenyx has the option under the Ultragenyx Agreement to add additional rare disease targets during the collaborative development period.
−Removed: Additionally, during the collaborative development period, the Company will participate with Ultragenyx in a joint steering committee.
−Removed: As part of the Ultragenyx Agreement and related amendments, Ultragenyx has paid $ 27.9 million in upfront fees, exclusivity extension fees and additional consideration.
−Removed: Ultragenyx also reimburses the Company for all internal and external development costs incurred.
−Removed: Pursuant to the Ultragenyx Agreement, Ultragenyx is required to make additional payments upon exercise of the Ultragenyx expansion option or exclusivity extension (if any) and if Ultragenyx achieves certain, clinical, regulatory and sales milestones, then the Company is eligible to receive royalty payments .
−Removed: For each development target for which Ultragenyx exercises its option, Ultragenyx will pay the Company a one-time option exercise fee that increases based upon the number of development targets selected by Ultragenyx and ranges from $ 0.5 million to $ 1.5 million.
−Removed: During the fourth quarter of 2020, Ultragenyx exercised its option to move forward with Preclinical Candidate Designation for its development target, Glycogen Storage Disease III, and paid an option fee to the Company of $ 0.5 million.
The current potential development, regulatory and commercial milestone payments for the existing development targets as of December 31, 2022 are $ 138.0 million.
Ultragenyx will pay royalties as a single-digit percentage of net sales on a product-by-product and country-by-country basis during the applicable royalty term.
−Removed: As of December 31, 2021, Ultragenyx is working to identify and enroll patients in a Phase 1/2 study.
−Removed: On June 18, 2019, Arcturus and Ultragenyx amended the collaboration agreement for a third time (“Amendment 3”).
−Removed: As part of Amendment 3, the total number of targets was increased from 10 to 12 , and reserve targets will be exclusively reserved for Ultragenyx with no fees for four years after execution of the amendment.
−Removed: An equity component was also added as part of Amendment 3 wherein Ultragenyx purchased 2.4 million shares of common stock at a premium price.
−Removed: Along with the equity purchase, Ultragenyx received an option to purchase 0.6 million additional shares of common stock at $ 16.00 per share.
−Removed: In May 2020, the option was exercised.
−Removed: The consideration received from Ultragenyx as a result of Amendment 3 was equal to $ 30.0 million and was comprised of a $ 24.0 million common stock purchase and a $ 6.0 million upfront payment.
−Removed: Specifically for
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: Amendment 3, management determined the transaction price to be $ 14.4 million.
−Removed: Management determined the fair value of the premium received by using the opening stock price subsequent to execution of Amendment 3 and applying a lack of marketability discount, as the shares received by Ultragenyx were initially restricted for up to two years .
−Removed: These restrictions have since expired.
As of December 31, 2022, the transaction price included the upfront consideration received, option payments, exclusivity extension payments and additional consideration received pursuant to Amendment 3.
The Company recognizes the reimbursement of labor and expenses as costs are incurred and none of the development and commercialization milestones were included in the transaction price, as all milestone amounts were fully constrained.
−Removed: As part of its evaluation of the constraint, the Company considered numerous factors, including that the consideration is outside the control of the Company and contingent upon success in future clinical trials, approval from the FDA and the collaborator’s efforts.
+Added: As part of its evaluation of the constraint, the Company considered numerous factors, including that the consideration is outside the control of the Company and contingent upon success in future clinical trials, approval from the FDA and the collaborator’s efforts.
Any consideration related to sales-based royalties will be recognized when the related sales occur as they are constrained, provided that the reported sales are reliably measurable and the Company has no remaining promised goods/services, as such sales were determined to relate predominantly to the license granted to Ultragenyx and therefore have also been excluded from the transaction price.
−Removed: Amendment 3 was deemed a contract modification and accounted for as part of the original Ultragenyx Agreement.
The transaction price is recognized to revenue on a straight-line basis using an input method over the 4 -year reserve target exclusivity period.
1 unchanged sentence
Total deferred revenue at December 31, 2022 and December 31, 2021 from Ultragenyx was $ 1.8 million and $ 5.5 million, respectively.
−Removed: In January 2018 , the Company entered into a Development and Option Agreement (the “Development and Option Agreement”) with CureVac.
−Removed: Under the terms of the Development and Option Agreement, the parties agreed to conduct joint preclinical development programs once CureVac makes a payment to pull down a target on the basis of which CureVac is granted options for taking a license on pre-agreed license terms to develop and commercialize certain products incorporating the Company’s patents and know-how related to LUNAR delivery technology (the “Arcturus Delivery Technology”), and CureVac patents and know-how related to mRNA technology.
−Removed: Prior to expiration of the initial term of eight years (which was subsequently amended, as discussed below), the Development and Option Agreement also includes an option to extend the term on an annual basis for up to three years , subject to payment by CureVac to Arcturus of a non-refundable annual extension fee.
−Removed: The Development and Option Agreement includes potential milestone payments from CureVac to the Company for selected targets.
−Removed: The current potential milestone payments for the remaining targets as of December 31, 2021 are $ 14.0 million for rare disease targets and $ 23.0 million for non-rare disease targets.
−Removed: CureVac will pay royalties as a percentage of net sales on a product-by-product and country-by-country basis during the applicable royalty term in the low single-digit range .
−Removed: As of December 31, 2021, CureVac has not yet reached the clinical phase of the contract.
−Removed: Pursuant to a May 2018 amendment to the Development and Option Agreement (and as amended and restated on September 28, 2018), the Company increased the number of targets available to CureVac under the Development and Option Agreement and agreed upon the license forms to be executed upon selection of the targets by CureVac.
−Removed: On July 26, 2019, the Company entered into an amendment (“CureVac Amendment”) to its Development and Option Agreement with CureVac (as amended, the “Development and Option Agreement”), pursuant to which the Company and CureVac agreed to shorten the time period during which CureVac may select potential targets to be licensed from the Company from eight years to four years , and to reduce the overall number of maximum targets that may be reserved and licensed.
−Removed: In connection with the July 2019 CureVac Amendment, the Company and CureVac also entered into a Termination Agreement (the “Termination Agreement”) terminating the January 1, 2018 Co-Development Agreement between the Company and CureVac.
+Added: In January 2018 , the Company entered into a Development and Option Agreement (the “Development and Option Agreement”) with CureVac.
+Added: Under the terms of the Development and Option Agreement, the parties agreed to conduct joint preclinical development programs once CureVac makes a payment to pull down a target on the basis of which CureVac is granted options for taking a license on pre-agreed license terms to develop and commercialize certain products incorporating the Company’s patents and know-how related to LUNAR ® delivery technology (the “Arcturus Delivery Technology”), and CureVac patents and know-how related to mRNA technology.
+Added: Arcturus Therapeutics Holdings Inc.
+Added: and its Subsidiaries
+Added: Notes to Consolidated Financial Statements —
As of December 31, 2022 , the transaction price included the upfront consideration received.
The Company recognizes the reimbursement of labor and expenses as costs are incurred and none of the development and commercialization milestones were included in the transaction price, as all milestone amounts were fully constrained.
−Removed: As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the collaborator’s efforts.
+Added: As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the collaborator’s efforts.
Any consideration related to sales-based royalties will be recognized when the related sales occur as they are constrained, provided that the reported sales are reliably measurable and the Company has no remaining promised goods/services, as such sales were determined to relate predominantly to the license granted to CureVac and therefore have also been excluded from the transaction price.
As of December 31, 2022 , no adjustments were made to the transaction price.
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: The upfront consideration of $ 5.0 million was recorded as deferred revenue in the Company’s balance sheet upon receipt and is currently being recognized as revenue on a straight-line basis using an input method over the remaining 19 month contractual term as of Dec ember 3 1 , 2021.
+Added: The upfront consideration of $ 5.0 million was recorded as deferred revenue in the Company’s balance sheet upon receipt and is currently being recognized as revenue on a straight-line basis using an input method over the remaining seven-month contractual term as of December 31, 2022.
Total deferred revenue as of December 31, 2022 and December 31, 2021 for CureVac was $ 0.5 million and $ 1.4 million, respectively.
−Removed: Other Agreements
−Removed: Subsequent to December 31, 2021, the Company entered into an agreement with a pharmaceutical company, whereby the pharmaceutical company agreed to fund up to $ 25 million for a clinical trial for a LUNAR-COV19 vaccine candidate as a booster.
Israeli Ministry of Health
−Removed: On August 17, 2020, the Company entered into an agreement with the Israeli Ministry of Health (“MOH”) to supply the Company’s COVID-19 vaccine candidate to Israel (the “Israel Supply Agreement”) subject to certain conditions, including applicable regulatory approvals.
−Removed: In October 2020, and in association with the Israel Supply Agreement, the Company received a non-refundable payment of $ 12.5 million from the MOH which is included in deferred revenue as of December 31, 2021.
−Removed: This payment of $ 12.5 million is associated with a specified clinical trial milestone and serves as an initial reserve payment for a specified number of doses of the LUNAR-COV19 vaccine candidate pursuant to the Israel Supply Agreement.
−Removed: As a result of the making of this payment, the MOH became bound to purchase an initial quantity of 500,000 reserved vaccine doses, as set forth in and subject to the terms and conditions of the Israel Supply Agreement.
+Added: On August 17, 2020, the Company entered into an agreement with the Israeli Ministry of Health (the “MOH”) to supply the Company’s COVID-19 vaccine candidate to Israel (the “Israel Supply Agreement”) subject to certain conditions, including applicable regulatory approvals.
+Added: In October 2020, and in association with the Israel Supply Agreement, the Company received a non-refundable payment of $ 12.5 million from the MOH.
+Added: This payment was associated with a specified clinical trial milestone and served as an initial reserve payment for a specified number of doses of the LUNAR-COV19 vaccine candidate pursuant to the Israel Supply Agreement.
+Added: As a result of making this payment, the MOH became bound to purchase an initial quantity of 500,000 reserved vaccine doses, as set forth in and subject to the terms and conditions of the Israel Supply Agreement.
+Added: Furthermore, the Israel Supply Agreement permitted termination by the MOH immediately upon written notice to Arcturus if the Company did not obtain certain regulatory approvals by December 31, 2021.
+Added: On April 14, 2022, Arcturus received notice from the MOH to terminate the Israel Supply Agreement.
+Added: Therefore, the Company recognized the payment as revenue during the second quarter of 2022 as there were no remaining performance obligations under the agreement.
+Added: No termination penalties were incurred by the Company connection therewith.
+Added: 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.
+Added: 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.
+Added: The Company earns grant revenue for performing tasks under the agreement.
+Added: The Company determined that the agreement with BARDA is not in the scope of ASC 808 or ASC 606.
+Added: Applying International Accounting Standards No.
+Added: 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.
+Added: The costs associated with these reimbursements are reflected as a component of research and development expense in the Company’s consolidated statements of operations and comprehensive income (loss).
+Added: The Company recognized $ 0.2 million of revenue during the year ended December 31, 2022, which is included in revenue on the Company's consolidated statements of operations.
+Added: As of December 31, 2022, the remaining available funding net of revenue earned was $ 63.0 million.
Fair Value Measurements
4 unchanged sentences
Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
+Added: Arcturus Therapeutics Holdings Inc.
+Added: and its Subsidiaries
+Added: Notes to Consolidated Financial Statements —
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 approximate their respective fair values due to their relative short maturities.
−Removed: 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.
+Added: 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 December 31, 2022 and 2021 , all assets measured at fair value on a recurring basis consisted of cash equivalents, 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 .
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
Balance Sheet Details
3 unchanged sentences
Cystic Fibrosis Foundation liability
−Removed: Singapore Economic Development Board liability
+Added: Income tax payable
Current portion of operating lease liability
Clinical accruals
+Added: Vinbiocare contractual liabilities
Other accrued research and development expenses
9 unchanged sentences
Property and equipment, net
−Removed: Depreciation and amortization expense was $ 1.2 million , $ 0.9 million and $ 0.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.
+Added: Depreciation and amortization expense was $ 1.5 million and $ 1.2 million for the years ended December 31, 2022 and 2021, respectively.
+Added: Construction in progress is primarily comprised of research equipment not yet placed in service.
Manufacturing Supply Agreement
−Removed: 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”).
−Removed: 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).
−Removed: The EDB has agreed to an extension of the reconciliation period to March 31, 2022 with unused funds as of such date to be subsequently returned within thirty days, subject to any further agreed upon extension of the reconciliation date.
−Removed: The parties are in continued negotiations with respect to amendments of the Singapore Loan terms.
−Removed: Under current terms, (i) the Company will provide a quarterly reconciliation report within forty-five days of each financial quarter end, (ii) the Company will provide a projection of expenditures through March 31, 2022 followed by an audited statement of actual expenditures through March 31, 2022 by June 30, 2022, (iii) the Company will provide EDB with a right of first refusal on GMP manufacturing slots of the LUNAR-COV19 vaccine candidate up to an agreed-upon maximum amount, (iv) and the obligation to repay the Singapore Loan will be secured by an interest in the raw materials and manufacturing equipment purchased by the Company with the funds from the Singapore Loan in form and substance satisfactory to the EDB in its sole discretion.
−Removed: 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.
−Removed: As of December 31, 2021, the Company has reported a portion of the Singapore Loan as current to reflect a potential principal repayment of approximately 20.9 million Singapore dollars (US $ 15.2 million) in fiscal year 2022 based on amounts not used toward the manufacture of ARCT-021.
+Added: 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”).
+Added: 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 accrues interest at a rate of 4.5 % per annum calculated on a daily basis.
−Removed: Subject to certain exceptions, the Singapore Loan is intended to be a limited recourse loan that will be repaid solely through a royalty
+Added: 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.
+Added: Subsequent to year end, on March 23, 2023, the EDB agreed to an extension of the reconciliation period to March 22, 2023, with unused funds not
Arcturus Therapeutics Holdings Inc.
and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: payment of 10 % of net sales proceeds of the LUNAR-COV19 vaccine candidate, up to the amount of the outstanding principal and interest under the Singapore Loan.
−Removed: However, all unpaid principal and interest under the Singapore Loan will be due and payable five years after draw date, if net sales of the LUNAR-COV19 vaccine exceed a certain minimum threshold during this five year period or the Company obtains clearance to sell the vaccine in specified jurisdictions.
−Removed: Unpaid principal and interest under the Singapore Loan will also become due and payable upon an event of default under the Support Agreement.
−Removed: The first vaccine sales, including the amount of net sales, shall be reported to EDB within 10 days of delivery and quarterly reports of aggregate vaccine sales, including net sales proceeds shall be provided within 30 days after quarter end.
−Removed: The Singapore Loan is forgivable if the Company has not obtained regulatory approval by the final repayment date and net sales of the LUNAR-COV19 vaccine candidate are less than $ 100 million.
−Removed: If, any portion of the Singapore Loan is required to be forgiven pursuant to the terms of the Support Agreement, the EDB has the right to take ownership of certain raw materials and equipment that were purchased by the Company with proceeds of the Singapore Loan (the “Specified Assets”).
−Removed: The Company entered into a security agreement (the “Security Agreement”) for the benefit of the EDB to provide that repayment of the Singapore Loan and related obligations are secured by a lien on the Specified Assets.
−Removed: In connection with the entry into the Support Agreement, the Company entered into a consent agreement with Western Alliance Bank (the “Bank”) and an amendment to the Loan and Security Agreement, dated as of October 12, 2018, between Western Alliance Bank and the Company (the “Loan Agreement”), to exclude the Specified Assets from Western Alliance Bank’s lien on certain assets of the Company.
+Added: Notes to Consolidated Financial Statements —
+Added: utilized for the manufacture of ARCT-021 as of such date returned to the EDB.
+Added: On March 27, 2023 the Company paid in full S$ 22.8 million ($ 17.1 million) of the outstanding balance at December 31, 2022 of $ 50.4 million.
+Added: During March 2023, the Company was forgiven the remaining portion of the Singapore Loan including accrued interest which was approximately $ 33.3 million.
The Singapore Loan was initially recorded as long-term debt at $ 46.6 million, the amount of cash proceeds at the time the Company received the funding.
−Removed: As of December 31, 2021, the debt balance was adjusted to reflect the current exchange rate resulting in a debt balance of $ 46.0 million and a net foreign currency transaction gain of $ 0.6 million for the year ended December 31, 2021.
−Removed: The Company also recorded interest expense of $ 1.9 million for the year ended December 31, 2021.
−Removed: Lastly, the Company was in compliance with all covenants under the Singapore Loan and related commitments.
−Removed: Long-term debt with Western Alliance Bank
+Added: As of December 31, 2022 and 2021, the debt balance including all accrued interest was adjusted to reflect the current exchange rate resulting in debt balances of $ 50.4 and $ 47.9 million, respectively.
+Added: The Company recorded a net foreign currency translation loss of $ 0.5 million for the year ended December 31, 2022 and a net foreign currency translation gain of $ 0.6 million for the year ended December 31, 2021.
+Added: The Company also recorded interest expense of $ 2.1 million and $ 1.9 million for the years ended December 31, 2022 and 2021, respectively.
+Added: As of December 31, 2022, the Company was in compliance with all covenants under the Singapore Loan and related commitments.
+Added: As noted above, the Company no longer has debt or interest related to this agreement as of March 27, 2023.
+Added: Debt with Western Alliance Bank
On October 12, 2018, Arcturus Therapeutics, Inc.
1 unchanged sentence
The Loan is collateralized by all of the assets of Arcturus Therapeutics, Inc., excluding intellectual property, which is subject to a negative pledge.
−Removed: The Loan contains customary conditions of borrowing, events of default and covenants, including covenants that restrict Arcturus Therapeutics, Inc.’s ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of its capital stock.
+Added: The Loan contains customary conditions of borrowing, events of default and covenants, including covenants that restrict Arcturus Therapeutics, Inc.’s ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of its capital stock.
In addition, Arcturus Therapeutics, Inc.
1 unchanged sentence
On October 30, 2019, Arcturus Therapeutics, Inc.
−Removed: and the Bank entered into a Third Amendment (the “Third Amendment”) to the Loan (as amended, the “Loan Agreement”).
+Added: and the Bank entered into a Third Amendment (the “Third Amendment”) to the Loan (as amended, the “Loan Agreement”).
Pursuant to the amendment, the Bank agreed to make a term loan to Arcturus Therapeutics, Inc.
−Removed: on October 30, 2019, in the amount of $ 15.0 million (the “Term Loan”).
+Added: on October 30, 2019, in the amount of $ 15.0 million (the “Term Loan”).
The resulting net increase in the indebtedness of Arcturus Therapeutics, Inc.
2 unchanged sentences
The amendment further provides that the Term Loan has a maturity date of October 30, 2023 .
−Removed: Arcturus Therapeutics, Inc.
−Removed: will make monthly payments of interest only until October 1, 2021 .
−Removed: The Fourth Amendment was executed in connection with the Singapore Loan.
−Removed: In October of 2021, the Company and the Bank entered into a Fifth Amendment to Loan Agreement that provides for a six month extension to the interest only period which moves the first principal payment to May 1, 2022 .
−Removed: Arcturus Therapeutics, Inc.
−Removed: paid a loan origination fee of $ 54,000 which was recorded as a debt discount along with the remaining loan origination fee from the Loan and is being accreted over the term of the Term Loan.
−Removed: In addition, Arcturus Therapeutics, Inc.
−Removed: is required to pay a fee of $ 525,000 upon certain change of control events.
−Removed: The Term Loan may be prepaid in full at any time, subject to a prepayment fee ranging from 0.50 % to 2.00 % of the prepaid principal amount depending upon the date of the prepayment.
−Removed: Upon maturity or prepayment (as previously discussed), Arcturus Therapeutics, Inc.
−Removed: will be required to pay a 2 % fee as a result of the FDA’s approval to proceed with the Company’s LUNAR-OTC program based on its IND submission.
+Added: The Loan Agreement was amended such that Arcturus Therapeutics, Inc.
+Added: made monthly payments of interest only until August 1, 2022.
+Added: Upon maturity or prepayment, Arcturus Therapeutics, Inc.
+Added: will be required to pay a 2 % fee as a result of the FDA’s approval to proceed with the Company’s LUNAR-OTC program based on its IND submission.
Such fee is accreted to the long-term debt balance using the effective interest method over the term of the Loan Agreement.
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
Should an event of default occur, including the occurrence of a material adverse effect, the Company could be liable for immediate repayment of all obligations under the Loan Agreement.
As of December 31, 2022, the Company was in compliance with all covenants under the Loan Agreement.
−Removed: Principal payments, including the final payment due at repayment, on the long-term debt are as follows:
−Removed: Year Ending December 31,
−Removed: The Company recognized interest expense related to its long-term debt of $ 2.7 million, $ 0.9 million and $ 0.9 million during the years ended December 31, 2021, 2020 and 2019, respectively.
−Removed: Stockholders’ Equity
+Added: Arcturus Therapeutics, Inc.
+Added: made principal payments related to the Term Loan of $ 5.0 million during the year ended December 31, 2022.
+Added: During March 2023, the Loan was terminated and the Company paid in full the remaining principal and interest, including a $ 0.3 million fee payable upon prepayment as a result of prior FDA approval of an IND.
+Added: Note 13 Subsequent Events ”
+Added: for further information.
+Added: The Company recognized interest expense related to its long-term debt with Western Alliance Bank of $ 0.9 million and $ 0.8 million during the years ended December 31, 2022 and 2021.
+Added: Stockholders’
Alexion Pharmaceuticals License Agreement
On February 17, 2021, the Company entered into an exclusive license agreement with Alexion Pharmaceuticals, Inc.
−Removed: (“ Alexion ”) pursuant to which Alexion granted to the Company an exclusive, worldwide license to exploit certain specified Alexion patent applications.
+Added: Alexion ”) pursuant to which Alexion granted to the Company an exclusive, worldwide license to exploit certain specified Alexion patent applications.
In accordance with the terms of the license agreement, and in exchange for the license, the Company issued 74,713 shares of its common stock to Alexion on February 19, 2021 valued at approximately $ 5.0 million.
−Removed: The number of shares issued under the agreement was calculated by dividing (i) five million dollars ($5.0 million) by (ii) the volume-weighted average price per share of the Company’s common stock on the Nasdaq Global Market for the thirty (30) trading days immediately preceding the Effective Date (rounded to the nearest whole share).
−Removed: The Company recorded the transaction as an asset purchase as management concluded that all of the value received was related to a single identifiable asset.
+Added: The number of shares issued under the agreement was calculated by dividing (i) five million dollars ($5.0 million) by (ii) the volume-weighted average price per share of the Company’s common stock on the Nasdaq Global Market for the thirty (30) trading days immediately preceding the Effective Date (rounded to the nearest whole share).
+Added: The Company recorded the transaction as an asset purchase
+Added: Arcturus Therapeutics Holdings Inc.
+Added: and its Subsidiaries
+Added: Notes to Consolidated Financial Statements —
+Added: as management concluded that all of the value received was related to a single identifiable asset.
Further, the Company concluded that there was no alternative future use for the asset and recorded a charge at the closing of the transaction for the full $ 5.0 million value assigned to the shares issued in connection with the license agreement.
−Removed: This non-cash charge was recorded as acquired in-process research and development expense in the statements of operations and comprehensive loss .
−Removed: Net Loss per Share
−Removed: Dilutive securities that were not included in the calculation of diluted net loss per share for the years ended December 31, 2021, 2020 and 2019 as they were anti-dilutive totaled 1,261,112 , 1,157,175 and 138,377 , respectively.
−Removed: For the year ended December 31, 2019, the calculation of the weighted-average number of shares outstanding excludes 622,667 unvested restricted common shares held by founders of the Company.
−Removed: During the year ended 2020, the remaining milestones under the founder share agreements were achieved and the related restricted common shares fully vested.
+Added: This non-cash charge was recorded as acquired in-process research and development expense in the statements of operations and comprehensive income (loss).
+Added: Earnings Per Share
+Added: Potentially dilutive securities that were not included in the calculation of diluted earnings per share for the year ended December 31, 2022 as they were anti-dilutive totaled 3.7 million.
+Added: Potentially dilutive securities that were not included in the calculation of diluted net loss per share for the year ended December 31, 2021 as they were anti-dilutive totaled 1.3 million.
Share-Based Compensation
−Removed: In October 2021, t he 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.
−Removed: 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 Nasdaq inducement plan rules.
−Removed: On October 20, 2021, the Company filed a Form S-8 with the United States Securities and Exchange Commission to register 1,000,000 awards.
+Added: 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 December 31, 2022, a total of 1,806,659 shares remain available for future issuance under the 2019 Plan, subject to the terms of the 2019 Plan.
−Removed: In June 2020, the stockholders of the Company approved an increase to the number of shares authorized for use in making awards under the 2019 Omnibus Equity Incentive Plan (the “2019 Plan”) by 2,400,000 shares to 5,000,000 .
−Removed: Accordingly, as of December 31, 2021, a total of 78,840 shares remain available for future issuance under the 2019 Plan, subject to the terms of the 2019 Plan.
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: Employee Stock Purchase Plan
−Removed: In June 2020, the stockholders of the Company approved the 2020 Employee Stock Purchase Plan (“2020 Plan”) which provides for 600,000 shares of Company common stock reserved for future issuance.
−Removed: The first accumulation period under the 2020 Plan commenced on August 17, 2020 and ended on the purchase date, August 13, 2021, at which point 12,601 shares of common stock were purchased.
−Removed: The next accumulation period commenced on August 16, 2021.
−Removed: Under the 2020 Plan, eligible employees may purchase shares of the Company’s common stock at a discount annually, subject to a maximum of $ 25,000 per year.
−Removed: The discounted purchase price is equal to the lower of 85 % of (i) the market value per share of the common stock on the first day of the accumulation period or (ii) the market value per share of common stock on the purchase date.
−Removed: Share-based compensation expense recognized under the 2020 Plan was $ 0.3 million and $ 0.1 million for 2021 and 2020, respectively.
+Added: 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.
+Added: 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 Nasdaq inducement plan rules.
+Added: 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 .
+Added: As of December 31, 2022, a total of 93,142 shares remain available for future issuance under the 2021 Plan, subject to the terms of the 2021 Plan.
Share Options
6 unchanged sentences
Grant date weighted average fair value
−Removed: The following table summarizes the Company’s stock option activity for the year ended December 31, 2021:
+Added: The following table summarizes the Company’s stock option activity for the year ended December 31, 2022:
Exercise Price
1 unchanged sentence
(in thousands)
−Removed: Outstanding – December 31, 2020
+Added: Outstanding –
+Added: December 31, 2021
Forfeited/cancelled
−Removed: Outstanding – December 31, 2021
−Removed: Exercisable – December 31, 2021
−Removed: Exercisable and expected to vest –
+Added: Outstanding –
December 31, 2022
+Added: Exercisable –
+Added: December 31, 2022
+Added: Exercisable and expected to vest –
+Added: December 31, 2022
+Added: Arcturus Therapeutics Holdings Inc.
+Added: and its Subsidiaries
+Added: Notes to Consolidated Financial Statements —
At December 31, 2022 , the total unrecognized compensation cost of $ 81.8 million will be recognized over the weighted-average remaining service period of approximately 3.0 years.
−Removed: The fair value of the options vested during the years ended December 31, 2021, 2020 and 2019 was $ 28.4 million, $ 4.2 million and $ 1.9 million, respectively.
−Removed: The total intrinsic value of options exercised during the years ended December 31, 2021, 2020 and 2019 was $ 3.6 million, $ 20.2 million and $ 0.1 million, respectively.
−Removed: Share-based compensation expenses included in the Company’s statements of operations and comprehensive loss for the years ended December 31, 2021, 2020 and 2019 were:
+Added: The fair value of the options vested during the years ended December 31, 2022 and 2021 was $ 39.2 million and $ 28.4 million, respectively.
+Added: The total intrinsic value of options exercised during the years ended December 31, 2022 and 2021 was $ 1.6 million and $ 3.6 million, respectively.
+Added: Share-based compensation expenses included in the Company’s statements of operations and comprehensive income (loss) for the years ended December 31, 2022 and 2021 were:
For the Year Ended December 31,
2 unchanged sentences
General and administrative
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: A reconciliation of loss before income taxes for domestic and foreign locations is as follows:
+Added: A reconciliation of income (loss) before income taxes for domestic and foreign locations is as follows:
For the Year Ended December 31,
1 unchanged sentence
United States
−Removed: Total loss before income taxes
−Removed: The Company accounts for income taxes in accordance with ASC 740-10, Accounting for Uncertainty in Income Taxes .
−Removed: The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority.
−Removed: An uncertain tax position will not be recognized if it has less than 50 % likelihood of being sustained.
−Removed: A reconciliation of unrecognized tax benefits is as follows (in millions):
−Removed: Beginning balance of unrecognized tax benefits
−Removed: Settlement of prior period tax positions
−Removed: (Decrease) increase for prior period tax positions
−Removed: Increase for current period tax positions
−Removed: Ending balance of unrecognized tax benefits
−Removed: Amounts in the summary rollforward would no t impact our effective tax rate as the Company maintains a full valuation on its net deferred tax assets.
−Removed: The Company is subject to taxation and files income tax returns in the United States, California and Israel.
−Removed: The Company’s tax years from 2014 to date are subject to examination by the Israeli, U.S., and state taxing authorities due to the carryforward of unutilized net operating losses and research and development credits.
−Removed: The Company’s policy is to recognize interest expense and penalties related to income tax matters as income tax expense.
−Removed: As of December 31, 2021, 2020 and 2019, there are unrecognized tax benefits of $ 2.4 million, $ 1.5 million and $ 0.4 million, respectively, for both the United States and California.
−Removed: There was no tax related interest or penalties recognized for the years ended December 31, 2021, 2020 and 2019 .
−Removed: The Company does not anticipate any material changes to its unrecognized tax benefits within the next twelve months.
+Added: Total income (loss) before income taxes
+Added: A reconciliation of income tax expense for the years ended December 31, 2022 and 2021 is as follows:
+Added: For the Year Ended December 31,
+Added: Total current income tax expense
+Added: Total deferred income tax expense
+Added: Total income tax expense
Arcturus Therapeutics Holdings Inc.
and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
+Added: Notes to Consolidated Financial Statements —
+Added: A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows:
+Added: For the Year Ended December 31,
+Added: Federal statutory income tax rate
+Added: State income taxes, net of federal benefit
+Added: Stock-based compensation
+Added: Officers compensation
+Added: Research and development credits
+Added: Uncertain tax positions
+Added: Change in tax rate
+Added: Change in valuation allowance
+Added: Permanent differences
+Added: Provision for income taxes
The significant components of deferred income taxes are as follows:
6 unchanged sentences
Depreciation and amortization
−Removed: Lease liability
+Added: Capitalized R&D
+Added: Right-of-use lease liability
Share-based compensation
3 unchanged sentences
Right-of-use asset
+Added: Total gross deferred tax liabilities
Valuation allowance
Net deferred tax asset
−Removed: The Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized.
−Removed: The Company periodically evaluates the recoverability of the deferred tax assets.
−Removed: At such time as it is determined that it is more likely than not that deferred tax assets will be realizable, the valuation allowance will be reduced.
−Removed: At December 31, 2021, the Company had federal and state net operating losses (“NOL”) carryforwards of approximately $ 258.0 million and $ 226.8 million, respectively.
−Removed: The federal NOL carryforwards begin to expire in 2034 , and the state NOL carryforwards begin to expire in 2034 .
−Removed: The federal net operating loss carryover includes $ 242.2 million of net operating losses generated in 2018 and after.
−Removed: Federal net operating losses generated in 2018 and after carryover indefinitely and may generally be used to offset up to 80 % of future taxable income.
+Added: In assessing the realization of the deferred tax assets, the Company considers whether it is more likely than not that some portion of the deferred tax assets will not be realized.
+Added: The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.
+Added: Due to lack of available sources of taxable income, the Company recorded a full valuation allowance against its net deferred tax assets as sufficient uncertainty exists regarding the future realization of these assets.
+Added: As of December 31, 2022 and 2021, the Company recorded a valuation allowance of $ 98.6 million and $ 99.6 million, respectively.
+Added: The valuation allowance (decreased)/increased by ($ 1.0 ) million and $ 54.3 million for the years ended December 31, 2022 and 2021, respectively.
+Added: At December 31, 2022, the Company has federal and state net operating losses, or NOL, carryforwards of approximately $ 157.1 million and $ 216.5 million, respectively.
+Added: The federal net operating loss carryover includes $ 156.3 million of net operating losses generated in 2018 and after which can be carried for indefinitely.
+Added: The Company has $ 0.6 million of state net operating losses that do not expire and the remaining start to expire 2038 .
At December 31, 2022, the Company has federal and state research and development credit carryforwards of approximately $ 6.1 million and $ 5.8 million, respectively.
−Removed: The federal credit carryforwards begin to expire in 2033 , and the state credits carry forward indefinitely.
−Removed: Additionally, the Company has an Orphan Drug Credit of $ 3.1 million as of December 31, 2021 which will begin to expire in 2039 unless previously utilized.
−Removed: Pursuant to Internal Revenue Code (IRC) Sections 382 and 383, annual use of the Company’s federal and California net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50 % occurs within a three-year period.
−Removed: The Company has not completed an IRC Section 382 analysis regarding the limitation of net operating loss carryforwards and other tax attributes.
−Removed: There is a risk that changes in ownership have occurred since Company's formation.
−Removed: If a change in ownership were to have occurred, the NOL carryforwards and other tax attributes could be limited or restricted.
−Removed: If limited, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance.
−Removed: Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, related to the Company’s operations in the U.S.
−Removed: will not impact the Company’s effective tax rate.
+Added: The federal credit carryforwards begin to expire in 2033 ,
Arcturus Therapeutics Holdings Inc.
and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows:
−Removed: For the Year Ended December 31,
−Removed: Federal statutory income tax rate
−Removed: State income taxes, net of federal benefit
−Removed: Foreign rate differential
−Removed: Share-based compensation
−Removed: Officers compensation
−Removed: Research and development credits
−Removed: Uncertain tax position
−Removed: Change in tax rate
−Removed: Foreign net operating losses
−Removed: Change in valuation allowance
−Removed: Permanent differences
−Removed: Provision for income taxes
+Added: Notes to Consolidated Financial Statements —
+Added: and the state credits carry forward indefinitely.
+Added: Additionally, the Company has an Orphan Drug Credit of $ 2.3 million as of December 31, 2022 which will begin to expire in 2040 unless previously utilized.
+Added: Pursuant to Internal Revenue Code (IRC) Sections 382 and 383, annual use of the Company’s federal and California net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50 % occurs within a three-year period.
+Added: The Company has completed an IRC Section 382 analysis through December 31, 2022 regarding the limitation of net operating loss carryforwards and other tax attributes.
+Added: The Company experienced ownership changes in 2018 and 2020;
+Added: however, the Company estimates that all tax attributes can be utilized.
+Added: There is a risk that additional ownership changes may occur in the future.
+Added: If a change in ownership occurs, the NOL carryforwards and other tax attributes could be limited or restricted.
+Added: The company accounts for income taxes in accordance with ASC 740-10, Accounting for Uncertainty in Income Taxes .
+Added: The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority.
+Added: An uncertain tax position will not be recognized if it has less than 50 % likelihood of being sustained.
+Added: A reconciliation of unrecognized tax benefits is as follows (in millions):
+Added: Beginning balance of unrecognized tax benefits
+Added: Settlement of prior period tax positions
+Added: Decrease for prior period tax positions
+Added: Increase for current period tax positions
+Added: Ending balance of unrecognized tax benefits
+Added: Amounts in the summary rollforward would no t impact the effective tax rate as the Company maintains a full valuation on its net deferred tax assets.
+Added: The Company is subject to taxation and files income tax returns in the United States, various U.S.
+Added: states and foreign jurisdictions.
+Added: The Company’s tax years from 2014 to date are subject to examination by the U.S., and state taxing authorities due to the carryforward of unutilized net operating losses and research and development credits.
+Added: The Company’s policy is to recognize interest expense and penalties related to income tax matters as income tax expense.
+Added: There was no tax related interest or penalties recognized for the years ended December 31, 2022 and 2021.
+Added: The Company does not anticipate any material changes to its unrecognized tax benefits within the next twelve months.
Commitments and Contingencies
−Removed: COVID-19 Vaccine Development
−Removed: On March 4, 2020, the Company was awarded a grant (“Grant 1”) from the Singapore EDB to support the co-development of a potential COVID-19 vaccine with the Duke-NUS Medical School.
−Removed: The Grant provides for up to S$ 14.0 million (approximately US$ 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.
−Removed: The Grant 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.
−Removed: The funds received have been recognized as contra research and development expense.
−Removed: The parties are in continued negotiations with respect to amendments of Grant 1.
−Removed: Currently, the Company is liable for certain expenses during the program and is also subject to certain conditions including the requirement to pay an agreed upon royalty rate to Duke-NUS on future net sales of the LUNAR-COV19 vaccine candidate developed with Duke-NUS in markets or jurisdictions outside of Singapore.
−Removed: For the year ended December 31, 2021 and 2020, the Company recognized $ 1.3 million and $ 8.7 million, respectively, of contra expense for Grant 1.
−Removed: At December 31, 2021, no amount remained in accrued expenses.
−Removed: At December 31, 2020, $ 1.3 million remained in accrued expenses.
−Removed: On October 2, 2020, the Company was awarded another grant (“Grant 2”) from the Singapore EDB to support the clinical development of a potential COVID-19 vaccine (ARCT-021).
−Removed: The grant provides for up to S$ 9.3 million (approximately US$ 6.7 million) to support the clinical development of the vaccine candidate for costs incurred in Singapore subject to certain conditions.
−Removed: The grant is paid in two installments upon the achievement of certain milestones related to the progress of the development of the vaccine candidate.
−Removed: The Company received the first installment of $ 3.6 million in the fourth quarter of 2020.
−Removed: The funds received are recognized as contra research and development expense as costs are incurred.
−Removed: As of the year ended December 31, 2021, the Company recognized the remaining amount of the first installment as contra research and development expense for Grant 2.
−Removed: The parties are in continued negotiations with respect to amendments of Grant 2.
+Added: Cystic Fibrosis Foundation Therapeutics Funding agreement
+Added: 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”).
+Added: 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.
+Added: 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 Drug (“IND”) application.
+Added: The funds received from CFF are recognized as contra research and development expense.
+Added: For the years ended December 31, 2022 and 2021, the Company recognized contra expense of $ 5.2 million and $ 3.8 million, respectively.
+Added: As of December 31, 2022, no accrued liability balance was held by the Company.
+Added: As of December 31, 2021, $ 2.8 million remained in accrued liabilities.
Arcturus Therapeutics Holdings Inc.
and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: Cystic Fibrosis Foundation Therapeutics Funding agreement
−Removed: 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”).
−Removed: 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 $ 2.3 million, will be disbursed upon Arcturus Sub invoicing CFF to meet good manufacturing practices and opening an Investigational New Drug (“IND”) application.
−Removed: The funds received from CFF are recognized as contra research and development expense in proportion to the percentage covered by CFF of the overall budget.
−Removed: For the years ended December 31, 2021 and 2020, the Company recognized $ 3.8 million and $ 3.4 million of contra expense with $ 2.8 million and $ 6.6 million remaining in accrued expenses, respectively.
+Added: Notes to Consolidated Financial Statements —
In October 2017, the Company entered into a non-cancellable operating lease agreement for office space adjacent to its previously occupied headquarters.
−Removed: The commencement of the lease began in March 2018 and extends for approximately 84 months from the commencement date with a remaining lease term through March 2025.
+Added: 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.
4 unchanged sentences
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.
−Removed: In February 2020, the Company entered into a non-cancellable operating lease agreement for office space near its current headquarters.
−Removed: The lease extends for 13 months from the commencement date and included a right to extend the lease for one twelve-month period.
−Removed: In February 2021, the Company opted to extend the lease through March 2025 to coincide with the Company’s headquarters.
+Added: In February 2020, the Company entered into a second non-cancellable operating lease agreement for office space near its current headquarters.
+Added: The lease extended for 13 months from the commencement date and included a right to extend the lease for one twelve-month period.
+Added: 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 February 2021, the Company entered into a third non-cancellable operating lease agreement for office space near its current headquarters.
The lease extends for 12 months from the commencement date with monthly base rent of approximately $ 11,000 .
−Removed: During the year ended 2021, the Company opted to extend the lease for an additional 12 months.
−Removed: In September 2021, the Company entered into a non-cancellable lease agreement for office, research and development, engineering and laboratory space near its current headquarters.
+Added: During the third quarter of 2021, the Company opted to extend the lease for an additional 12 months .
+Added: The lease will expire during the first quarter of 2023 and the Company does not plan to extend the lease.
+Added: In September 2021, the Company entered into a fourth 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 will extend ten years and eight months from the date of possession, and the Company will have the right to extend the term of the lease for an additional five-year period .
+Added: 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.
−Removed: The Company is expecting that it will gain access to the space in the second quarter of 2022.
+Added: The Company received a free rent period of four months and also pays for various operating costs, including utilities and real property taxes.
+Added: 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 consolidated balance sheets represent the present value of remaining lease payments over the remaining lease terms.
2 unchanged sentences
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.
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
As of December 31, 2022, the payments of the operating lease liability were as follows:
6 unchanged sentences
Weighted-average discount rate
+Added: Arcturus Therapeutics Holdings Inc.
+Added: and its Subsidiaries
+Added: Notes to Consolidated Financial Statements —
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.
−Removed: Operating lease costs were $ 1.9 million, $ 1.9 million and $ 1.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.
+Added: Operating lease costs were $ 4.7 million and $ 1.9 million for the years ended December 31, 2022 and 2021 , respectively.
Related Party Transactions
−Removed: On June 17, 2019, Arcturus and Ultragenyx executed Amendment 3 to the Ultragenyx Agreement.
−Removed: Pursuant to the amended Ultragenyx Agreement, the Company granted Ultragenyx a two-year option to purchase up to 600,000 additional shares of common stock at a price of $ 16.00 per share, and in May 2020 Ultragenyx exercised the option.
−Removed: During 2021, Ultragenyx sold 1,800,000 shares of common stock resulting in an ownership of 4.6 % of the outstanding common stock of Arcturus as of December 31, 2021.
−Removed: For the years ended December 31, 2021, 2020 and 2019, the Company has recognized revenue of $ 3.7 million, $ 4.0 million and $ 5.9 million, respectively, related to the Ultragenyx Agreement.
−Removed: As of December 31, 2021 and 2020, the Company holds accounts receivable balances of negligible amounts related to the Ultragenyx Agreement.
Equity-Method Investment
1 unchanged sentence
Pursuant to the asset purchase agreement for ADAIR, the Company received a 30 % ownership interest in the common stock of Vallon Pharmaceuticals, Inc.
−Removed: (“ Vallon ”) in consideration for the sale of the ADAIR technology.
+Added: (“Vallon”) in consideration for the sale of the ADAIR technology.
The Company has no requirement to invest further in Vallon.
−Removed: Vallon completed an initial public offering and began trading on The Nasdaq Stock Market under the ticker “VLON” in February 2021.
−Removed: Immediately after this offering, Arcturus owned 843,750 shares of Vallon , or approximately 12 % .
−Removed: Based on the Company’s ownership and the Vallon board of directors seat held by an executive of Arcturus, the Company has the ability to exercise significant influence over the operating and financial policies of Vallon ;
+Added: Vallon completed an initial public offering and began trading on The Nasdaq Stock Market under the ticker “VLON”
+Added: in February 2021.
+Added: 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.
+Added: As a result, Arcturus owns 843,750 shares of Vallon, or approximately 6 %.
+Added: Based on the Company’s ownership and the Vallon board of directors seat held by an executive of Arcturus, the Company has the ability to exercise significant influence over the operating and financial policies of Vallon;
therefore, the Company accounts for this investment as an equity-method investment.
The Company accounts for its share of the earnings or losses of the investee with a reporting lag of three months, as the financial statements of the investee are not completed on a basis that is sufficient for the Company to apply the equity method on a current basis.
−Removed: The offering was at a share price of $ 8.00 , greater than the initial investment which resulted in the Company recording a gain in its equity-method investment.
−Removed: Using a three month lag, the gain has been offset by losses incurred by Vallon through September 30, 2021.
+Added: Exercise of the aforementioned warrants in August and December of 2022 was at a share price of $ 0.94 , greater than the initial investment of $ 0.70 , resulted in the Company recording a gain in its equity-method investment.
+Added: As of December 31, 2022, the gain has been fully offset by losses incurred by Vallon.
+Added: On December 13, 2022, Vallon entered into an agreement with GRI Bio pursuant to which GRI Bio will merge with a wholly-owned subsidiary of Vallon in an all-stock transaction.
+Added: Following the closing of the merger, the combined company is expected to operate under the name “GRI Bio, Inc.”
+Added: and will focus on the development of GRI Bio’s pipeline and trade on the Nasdaq under the ticker symbol “GRI”.
+Added: The transaction is expected to close in the first quarter of 2023.
+Added: See “Note 2, Joint Ventures, Equity Method Investments and Variable Interest Entities”
+Added: for specific details surrounding the Company’s agreement with Axcelead to form the joint venture entity, Arcalis, Inc.
Subsequent Events
−Removed: Arcturus Therapeutics Holdings Inc.
−Removed: and its Subsidiaries
−Removed: Notes to Consolidated Financial Statements — Continued
−Removed: Selected Quarterly Financial Data (Unaudited)
−Removed: A summary of our quarterly results is as follows:
−Removed: (in thousands, except per share data)
−Removed: First Quarter
−Removed: Second Quarter
−Removed: Third Quarter
−Removed: Fourth Quarter
−Removed: Year Ended December 31, 2021:
−Removed: Research and development expenses, net
−Removed: General and administrative expenses
−Removed: Loss from operations
−Removed: Net loss per share, basic and diluted
−Removed: Weighted average shares outstanding, basic and diluted
−Removed: Year Ended December 31, 2020:
−Removed: Research and development expenses, net
−Removed: General and administrative expenses
−Removed: Loss from operations
−Removed: Net loss per share, basic and diluted
−Removed: Weighted average shares outstanding, basic and diluted
+Added: Termination of Agreement with Western Alliance Bank
+Added: 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 $ 7.36 million from the Company.
+Added: 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 .
+Added: 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 $ 7.02 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.
+Added: The Company was released from all liens under the Western Alliance Agreement.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.