Arcturus Therapeutics Holdings Inc. 10-Q

Item 1. Legal Proceedings. From time to time, we may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business, including those related to governmental inquiries, intellectual property and commercial relationships. The subject matter of any such legal proceedings or claims are or will be highlight complex and subject to substantial uncertainties. The outcome of any such proceedings or claims, regardless of the merits, are and will be inherently uncertain; therefore, assessing the likelihood of loss and any estimated damages is difficult and subject to considerable judgment. Item 1A. Ris k Factors. Our business is subject to various risks, including those described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which we strongly encourage you to review. Other than as set forth below, there have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Commission on March 29, 2023. We are exposed to interest rate risk, including under our loan agreements. We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results from our debt obligations, including the credit agreement entered into on April 21, 2023 by our wholly-owned subsidiary, Arcturus Therapeutics, Inc., and Wells Fargo Bank, National Association (the “Credit Agreement”), providing for a revolving credit line evidenced by a revolving line of credit note (the “Note”). Borrowings under the Credit Agreement will bear interest at a rate of 1.00% above either the Daily Simple SOFR or Term SOFR (as such terms are defined in the Note), with “SOFR” being the rate per annum equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York. All Loans shall bear interest during an Event of Default (as defined in the Credit Agreement) at a rate equal to 2.00% above the interest rate applicable immediately prior to the occurrence of the Event of Default (as defined in the Credit Agreement). As of May 9, 2023, we had no outstanding balance under the Credit Agreement. Our indebtedness could materially and adversely affect our business, financial condition and results of operations. Agreements with our lenders, including with Wells Fargo Bank, National Association, create several limitations on us, including but not limited to: • limiting our flexibility in planning for, or reacting to, changes in our business and our industry; • placing us at a competitive disadvantage compared to our competitors who may have less debt or comparable debt at more favorable interest rates or less strict covenants and other limitations or requirements; • limiting our ability to incur specified types of additional indebtedness which may be desired for working capital, capital expenditures, research and development efforts, acquisitions, debt service requirements, execution of our business strategy or other purposes; and • resulting in an acceleration of our obligations upon the occurrence of an event of default. Our ability to comply with these covenants in future periods will depend on our financial and operating performance, which in turn will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond our control. Any of these factors or others described in the Credit Agreement could materially and adversely affect our business, financial condition and results of operations. Our debt contains customary default clauses, a breach of which may result in acceleration of the repayment of some or all of this debt. The Credit Agreement contains customary default clauses. In the event we were to default on our obligations under our debt and were unable to cure or obtain a waiver of such default, the repayment of our debt may be accelerated. If such acceleration were to occur, we would be required to promptly secure alternative sources of equity or debt financing to be able to repay the debt. Alternative financing may not be available on terms satisfactory to us, or at all. New debt financing may require the cooperation and agreement of our existing lenders. If acceptable alternative financing were unavailable, we would have to consider alternatives to fund the repayment of the debt, which could materially and adversely affect our business, financial condition and results of operations. 27 Item 2. Unregistered Sales of Equi ty Securities and Use of Proceeds. None. Item 3. Defaults Upo n Senior Securities. None. Item 4. Mine Safe ty Disclosures. Not applicable.