What changed in this filing

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Item 1. Financial Statements

2024-08-05 compared with 2024-05-08 · 103 added, 106 removed, 309 unchanged (40% of the section changed)

11 unchanged sentences

Property and equipment, net

Operating lease right-of-use asset, net

Operating lease right-of-use assets, net

Non-current restricted cash

12 unchanged sentences

60,000 shares authorized;

outstanding shares were 26,917 at March 31, 2024 and 26,828 at December 31, 2023

outstanding shares were 27,042 at June 30, 2024 and 26,828 at December 31, 2023

Additional paid-in capital

5 unchanged sentences

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three Months Ended

Six Months Ended

(in thousands, except per share data)

6 unchanged sentences

Total operating expenses

(Loss) income from operations

Loss from foreign currency

Loss from operations

(Loss) gain from foreign currency

Gain on debt extinguishment

Finance income, net

Net (loss) income before income taxes

Net loss before income taxes

Provision for income taxes

Net (loss) income

(Loss) earnings per share

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

Comprehensive (loss) income:

Net (loss) income

Comprehensive (loss) income

Net loss per share, basic and diluted

Weighted-average shares outstanding, basic and diluted

Comprehensive loss:

Comprehensive loss

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

4 unchanged sentences

(in thousands)

BALANCE – December 31, 2023

Balance at December 31, 2023

Share-based compensation expense

Issuance of common stock upon exercise of stock options

BALANCE – March 31, 2024

Balance at March 31, 2024

Share-based compensation expense

Issuance of common stock upon exercise of stock options

Balance at June 30, 2024

Stockholders’

(in thousands)

BALANCE – December 31, 2022

Balance at December 31, 2022

Share-based compensation expense

BALANCE – March 31, 2023

Balance at March 31, 2023

Share-based compensation expense

Issuance of common stock upon exercise of stock options

Balance at June 30, 2023

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEM ENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

Operating activities

Net (loss) income

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

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

Depreciation and amortization

11 unchanged sentences

Lease liabilities

Net cash used in operating activities

Net cash (used in) provided by operating activities

Investing activities

8 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental disclosure of cash flow information

11 unchanged sentences

Arcturus Therapeutics Holdings Inc.

(the “Company” or "Arcturus") is a global messenger RNA medicines company focused on the development of infectious disease vaccines and significant opportunities within liver and respiratory rare diseases.

(the “Company” or "Arcturus") is a global messenger RNA medicines company focused on the development of infectious disease vaccines and significant addressing unmet medical needs within liver and respiratory rare diseases.

The Company became a clinical stage company during 2020 when it announced that its Investigational New Drug (“IND”) application for ornithine transcarbamylase (“OTC”) deficiency and its Clinical Trial Application (“CTA”) for candidate LUNAR-COV19 were approved by applicable health authorities.

13 unchanged sentences

Equity method investment activity is related to the Company's joint venture in ARCALIS, Inc.

with Axcelead, Inc (“Axcelead”).

The Company’s share of the investee's results is presented as either income or loss from equity-method investment in the accompanying condensed consolidated statements of operations and comprehensive (loss) income.

with Axcelead, Inc.

(“Axcelead”).

The Company has incurred significant operating losses since its inception.

As of March 31, 2024 and December 31, 2023, the Company had an accumulated deficit of $ 394.7 million and $ 367.9 million, respectively.

As of June 30, 2024 and December 31, 2023, the Company had an accumulated deficit of $ 411.9 million and $ 367.9 million, respectively.

The Company’s activities since inception have consisted principally of research and development activities, general and administrative activities, and raising capital.

The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding before the Company achieves sustainable revenues and profit from operations.

From the Company’s inception through March 31, 2024, the Company has funded its operations principally with the proceeds from revenues earned through collaboration agreements, the sale of capital stock, expense reimbursements from government contracts and proceeds from long-term debt.

At March 31, 2024, the Company’s balance of cash and cash equivalents, including restricted cash, was $ 345.3 million.

From the Company’s inception through June 30, 2024, the Company has funded its operations principally with the proceeds from revenues earned through collaboration agreements, the sale of capital stock, expense reimbursements from government contracts and proceeds from long-term debt.

At June 30, 2024, the Company’s balance of cash and cash equivalents, including restricted cash, was $ 317.2 million.

Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date these condensed consolidated financial statements were available to be issued.

12 unchanged sentences

and (v) recognize revenue when, or as, the company satisfies a performance obligation.

The terms of the Company’s revenue agreements include license fees, upfront payments, milestone payments, reimbursement for research and development activities, option exercise fees, consulting and related technology transfer fees and royalties on sales of commercialized products.

The terms of the Company’s revenue agreements include license fees, upfront payments, development or regulatory milestone payments, profit-sharing arrangements, reimbursement for research and development activities, option exercise fees, drug substance and drug product supply fees, consulting and related technology transfer fees and royalties on sales of commercialized products.

The event-based milestone payments represent variable consideration, and the Company uses the most likely amount method to estimate this variable consideration because the Company will either receive the milestone payment or will not, which makes the potential milestone payment a binary event.

32 unchanged sentences

Pre-Launch Inventory

Prior to obtaining initial regulatory approval for an investigational product candidate, the Company expenses costs relating to production of inventory as research and development expense in its condensed consolidated statements of operations and comprehensive (loss) income, 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.

1 unchanged sentence

Restricted cash includes collateral pledged and held at the Company’s securities accounts pursuant to a security agreement with Wells Fargo Bank, National Association (“Wells Fargo”) (Note 5).

At March 31, 2024 , such collateral amounted to $ 55.0 million.

At June 30, 2024 , such collateral amounted to $ 55.0 million.

Restricted cash also includes 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 March 31, 2024 and 2023 , the Company had restricted cash of $ 1.9 million and $ 2.1 million, respectively, in conjunction with property leases in San Diego, California, and such restriction is expected to be removed at the end of the lease term.

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

At June 30, 2024 and 2023 , the Company had restricted cash of $ 1.9 million and $ 2.1 million, respectively, in conjunction with property leases in San Diego, California, and such restriction is expected to be removed at the end of the lease term.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statement of cash flows as of June 30, 2024 and 2023 :

(in thousands)

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

Cash and cash equivalents

3 unchanged sentences

cash shown in the statement of cash flows

Net (Loss) Earnings per Share

Basic net (loss) earnings per share is calculated by dividing the net (loss) earnings by the weighted-average number of shares of common stock outstanding for the period, without consideration for common stock equivalents.

Diluted net (loss) earnings per share is calculated by dividing the net (loss) earnings by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock method.

Dilutive shares of common stock for the three months ended March 31, 2024 were comprised of stock options and restricted stock units.

Dilutive shares of common stock for the three months ended March 31, 2023 were comprised of stock options.

Net Loss per Share

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.

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.

Dilutive shares of common stock for the three and six months ended June 30, 2024 were comprised of stock options and restricted stock units.

Dilutive shares of common stock for the three and six months ended June 30, 2023 were comprised of stock options.

No dividends were declared or paid during the reported periods.

9 unchanged sentences

The Company cannot guarantee the achievement of these milestones due to risks associated with preclinical and clinical activities required for development of nucleic acid medicine-based therapeutics and vaccines.

The following table presents changes during the three months ended March 31, 2024 in the balances of contract assets and liabilities as compared to what was disclosed in the Company’s Annual Report.

The following table presents changes during the six months ended June 30, 2024 in the balances of contract assets and liabilities as compared to what was disclosed in the Company’s Annual Report.

(in thousands)

December 31, 2023

March 31, 2024

June 30, 2024

Contract Assets:

4 unchanged sentences

For the Three Months

Ended March 31,

Ended June 30,

For the Six Months

Ended June 30,

(in thousands)

11 unchanged sentences

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.

During the first quarter of 2024, the Company achieved a $ 19.2 million development milestone related to the CSL Collaboration Agreement which was included in accounts receivable as of March 31, 2024.

During the second quarter of 2024, the Company achieved a $ 17.0 million development milestone related to the CSL Collaboration Agreement which was included in accounts receivable as of June 30, 2024.

In evaluating the CSL Collaboration Agreement in accordance with ASC 606, the Company concluded that CSL Seqirus is a customer.

2 unchanged sentences

For each performance obligation, the Company estimated the standalone selling price based on 1) in the case of the license, the fair value using costs to recreate plus margin method and 2) in the case of research and development services and regulatory activities, cost plus margin for estimated full-time equivalent (“FTE”) costs, direct costs including laboratory supplies, contractors, and other out-of-pocket expenses for research and development services and regulatory activities.

As of March 31, 2024, the transaction price consisted of upfront consideration received and milestones achieved.

Additional variable consideration was not included in the transaction price at March 31, 2024 because the Company could not conclude that it is probable that including the variable consideration will not result in a significant revenue reversal.

As of June 30, 2024, the transaction price consisted of upfront consideration received and milestones achieved.

Additional variable consideration was not included in the transaction price at June 30, 2024 because the Company could not conclude that it is probable that including the variable consideration will not result in a significant revenue reversal.

The Company allocated the transaction price to the performance obligations in proportion to their standalone selling price.

2 unchanged sentences

Any consideration related to sales-based royalties will be recognized when the amounts are probable of non-reversal, provided that the reported sales are reliably measurable and the Company has no remaining promised goods/services, as they are constrained and therefore have also been excluded from the transaction price.

The revenue recognized in the first quarter of 2024 relates to the license delivered, milestones achieved and services performed through March 31, 2024.

Total deferred revenue as of March 31, 2024 and December 31, 2023 for the CSL Collaboration Agreement was $ 83.3 million and $ 87.1 million, respectively.

The revenue recognized in the second quarter of 2024 relates to the license delivered, milestones achieved and services performed through June 30, 2024.

Total deferred revenue as of June 30, 2024 and December 31, 2023 for the CSL Collaboration Agreement was $ 53.7 million and $ 87.1 million, respectively.

During 2023, the Company also received an advance payment of $ 23.6 million for the manufacturing and supply of ARCT-154 drug product.

1 unchanged sentence

The Company concluded that the promise to manufacture and supply ARCT-154 drug product is a customer option as part of the CSL Collaboration Agreement and is accounted for as a separate contract.

Approximately $ 18.8 million remained in deferred revenue as of March 31, 2024 and will be recognized as revenue when the drug product is transferred to CSL Seqirus.

During 2023, the Company entered into an amendment to the CSL Collaboration Agreement, pursuant to which the Company agreed to sponsor and conduct a Phase I clinical study in the influenza field.

The Company recognized $ 18.0 million in revenue related to this customer option during the second quarter of 2024.

No amount related to this customer option remained in deferred revenue as of June 30, 2024.

During 2023, the Company entered into an amendment to the CSL Collaboration Agreement, pursuant to which the Company agreed to sponsor and conduct a Phase 1 clinical study in the influenza field.

As part of the amendment, the Company received $ 17.5 million from CSL Seqirus.

The amendment also provides for up to $ 1.5 million in additional payments which are achievable upon meeting certain clinical milestones relating to the Phase I clinical study in the influenza field.

The amendment also provides for up to $ 1.5 million in additional payments which are achievable upon meeting certain clinical milestones relating to the Phase 1 clinical study in the influenza field.

The Company previously concluded that the expansion of research and development support services under the CSL Collaboration Agreement represented an option that was not a material right.

Therefore the Company concluded the promise to sponsor and conduct the Phase I clinical study is a separate contract and the sole performance obligation under the new arrangement.

During the quarter ended March 31, 2024, the Company recognized $ 2.2 million related to the performance obligation and the remaining amount of $ 12.9 million is included in deferred revenue.

Therefore the Company concluded the promise to sponsor and conduct the Phase 1 clinical study is a separate contract and the sole performance obligation under the new arrangement.

During the quarter ended June 30, 2024 , the Company recognized $ 3.0 million related to the performance obligation and the remaining amount of $ 9.8 million is included in deferred revenue.

During the fourth quarter of 2023, the Company received an advance payment of $ 5.3 million from CSL Seqirus for manufacturing activities related to COVID-19 vaccine product.

1 unchanged sentence

concluded that the promise to perform manufacturing activities is a customer option as part of the CSL Collaboration Agreement and is accounted for as a separate contract.

The advance payments are included in deferred revenue as of March 31, 2024 and will be recognized as revenue when the vaccine product is transferred to CSL Seqirus.

The advance payments are included in deferred revenue as of June 30, 2024 and will be recognized as revenue when the vaccine product is transferred to CSL Seqirus.

In March 2024, the Company entered into an amendment to the CSL Collaboration Agreement, pursuant to which the parties agreed to, among other things, adjust (i) the development plans for certain product candidates, (ii) various development milestones related to such product candidates, (iii) provisions of the CSL Collaboration Agreement related to specific royalty payments, (iii) provisions of the CSL Collaboration Agreement related to distributors, and (iv) proprietary payment calculations related to the foregoing.

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.

In August 2022, the Company entered into a cost reimbursement contract (the “BARDA Contract”) with the Biomedical Advanced Research and Development Authority ("BARDA"), a division of the Office of the Assistant Secretary for Preparedness and Response (ASPR) within the U.S.

Department of Health and Human Services (HHS) for an award of up to $ 63.2 million for the development of a pandemic influenza vaccine using the Company's STARR ® self-amplifying mRNA vaccine platform technology.

The Company earns grant revenue for performing tasks under the agreement.

The Company determined that the agreement with BARDA is not in the scope of ASC 808 or ASC 606.

The Company determined that the BARDA Contract is not in the scope of ASC 808 or ASC 606.

Applying International Accounting Standards No.

1 unchanged sentence

The costs associated with these reimbursements are reflected as a component of research and development expense in the Company’s condensed consolidated statements of operations and comprehensive income (loss).

The Company recogniz ed $ 5.5 million and $ 0.6 million o f revenue during the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 , the remaining available funding net of revenue earned was $ 48.4 million.

The Company rec ognized $ 3.9 million and $ 1.0 million o f revenue during the three months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, the remaining available funding net of revenue e arned was $ 44.5 million.

Fair Value Measurements

5 unchanged sentences

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

The carrying value of cash, restricted cash, accounts receivable, accounts payable, accrued liabilities and the Singapore Loan (as defined below) approximate their respective fair values due to their relative short maturities.

As of March 31, 2024 and December 31, 2023 , all assets measured at fair value on a recurring basis consisted of cash equivalents and money market funds, which were classified within Level 1 of the fair value hierarchy.

The carrying value of cash, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values due to their relative short maturities.

As of June 30, 2024 and December 31, 2023 , all assets measured at fair value on a recurring basis consisted of cash equivalents and money market funds, which were classified within Level 1 of the fair value hierarchy.

The fair value of these financial instruments was measured based on quoted prices.

2 unchanged sentences

(in thousands)

March 31, 2024

June 30, 2024

December 31, 2023

6 unchanged sentences

Property and equipment, net

Depreciation and amortization expense was $ 0.9 million for the three months ended March 31, 2024 and $ 0.6 million for the three months ended March 31, 2023.

Depreciation and amortization expense was $ 0.9 mi llion and $ 1.8 million for the three and six months ended June 30, 2024, respectively, and $ 0.7 m illion and $ 1.3 million for the three and six months ended June 30, 2023, respectively.

Construction in progress is primarily comprised of research equipment not yet placed in service.

1 unchanged sentence

(in thousands)

March 31, 2024

June 30, 2024

December 31, 2023

7 unchanged sentences

Wells Fargo Credit Agreement

On April 21, 2023, the Company’s wholly-owned subsidiary, Arcturus Therapeutics, Inc.

entered into a credit agreement with Wells Fargo Bank, whereby Wells Fargo will make a $ 50.0 million revolving credit line available to the Company (the “Loan”) and each draw on the Loan evidenced by a revolving line of credit note (the “Note”).

The Company’s wholly-owned subsidiary, Arcturus Therapeutics, Inc.

(“Arcturus Therapeutics”) entered into a credit agreement with Wells Fargo Bank on April 21, 2023, and amended on June 26, 2024 , whereby Wells Fargo will make a $ 50.0 million revolving credit line available to the Company (the “Loan”) and each draw on the Loan evidenced by a revolving line of credit note (the “Note”).

Borrowings under the agreement will bear interest at a rate of 1.00 % above either the Daily Simple SOFR or Term SOFR (as such terms are defined in the Note), with “SOFR” being the rate per annum equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York.

If an Event of Default (as defined in the agreement) occurs, then all Loans shall bear interest at a rate equal to 2.00 % above the interest rate applicable immediately prior to the occurrence of the Event of Default.

The term of the agreement is two years , with an option for one-year renewals subject to Wells Fargo approval and the Company furnishing to Wells Fargo a non-refundable commitment fee equal to 0.25 % of the Loan amount for each such renewal.

The term of the agreement was originally two years , with an option for one-year renewals subject to Wells Fargo approval and Arcturus Therapeutics furnishing to Wells Fargo a non-refundable commitment fee equal to 0.25 % of the Loan amount for each such renewal.

There is no penalty for terminating the facility prior to the maturity date of the Note.

As collateral, the Company has agreed to pledge $ 55.0 million in cash to be held at the Company’s securities accounts with Wells Fargo Securities, LLC, an affiliate of Wells Fargo, pursuant to a security agreement.

No borrowings were outstanding as of March 31, 2024.

Termination of the Manufacturing Support Agreement with EDB

On November 7, 2020, the Company’s wholly-owned subsidiary, Arcturus Therapeutics, Inc., entered into a Manufacturing Support Agreement (the “Support Agreement”) with the Economic Development Board of the Republic of Singapore (the “EDB”).

Pursuant to the Support Agreement, the EDB agreed to make a term loan (the “Singapore Loan”) of S$ 62.1 million (approximately $ 46.6 million) to the Company, subject to the satisfaction of customary deliveries, to support the manufacture of the LUNAR-COV19 vaccine candidate (ARCT-021).

The Singapore Loan accrued interest at a rate of 4.5 % per annum calculated on a daily basis.

The Company elected to borrow the full amount available under the Support Agreement of S$ 62.1 million (approximately $ 46.6 million) on January 29, 2021.

During the first quarter of 2023, the parties terminated the Support Agreement and the EDB agreed to an extension of the reconciliation period to March 22, 2023, with unused funds not utilized for the manufacture of ARCT-021 as of such date returned to the EDB.

As of December 31, 2022, the outstanding balance of the Singapore Loan, which includes accrued interest, was $ 50.4 million of which the Company paid S$ 22.8 million (approximately $ 17.1 million) in March 2023.

During the first quarter of 2023, the remaining principal portion of the Singapore Loan plus accrued interest, totaling $ 34.0 million, was forgiven and recorded as a gain on debt extinguishment in the condensed consolidated statement of operations and comprehensive loss.

For the three months ended March 31, 2024, the Company recorded no interest expense, compared to interest expense of $ 0.5 million for the same period in 2023.

Termination of Agreement with Western Alliance Bank

On March 14, 2023, the Loan and Security Agreement, dated as of October 12, 2018 (as amended and supplemented, the “Western Alliance Agreement”) with Western Alliance Bank, an Arizona corporation (“Western Alliance”), was terminated (the “Termination”) upon the receipt by Western Alliance of a payoff amount of approximately $ 7.4 million from the Company.

The Western Alliance Agreement provided for a collateralized term loan in the aggregate principal amount of up to $ 15.0 million, with

interest at a floating rate ranging from 1.25 % to 2.75 % above the prime rate and a maturity date of October 30, 2023 .

The payoff amount was made by the Company to Western Alliance from available cash on hand, pursuant to a payoff letter, and included payment of (i) approximately $ 7.0 million in principal and interest, (ii) $ 0.3 million fee payable upon prepayment as a result of prior FDA approval of an IND and (iii) de minimis amounts in prepayment charges and various operational fees.

The Company was released from all liens under the Western Alliance Agreement.

For the three months ended March 31, 2024, the Company recorded no interest expense, compared to interest expense of $ 0.3 million for the same period in 2023.

In June 2024, Arcturus Therapeutics and Wells Fargo entered into an amendment to the Note, whereby the term of the Note was extended by one year to April 2026.

No borrowings were outstanding as of June 30, 2024 .

Stockholders’ Equity

Net (Loss) Earnings per Share

Potentially dilutive securities that were not included in the calculation of diluted net loss per share for the three months ended March 31, 2024 as they were anti-dilutive totaled 1.4 million.

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

Net Loss per Share

Potentially dilutive securities that were not included in the calculation of diluted net loss per share for the three and six months ended June 30, 2024 as they were anti-dilutive totaled 1.1 million and 1.3 million, respectively, and 1.0 million and 0.8 million for the three and six months ended June 30, 2023, respectively.

Sales Agreement

On December 23, 2022, the Company entered into a Controlled Equity Offering℠ Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

(“Cantor”) and Wells Fargo Securities, LLC (“Wells Fargo Securities”), relating to shares of the Company's common stock.

In accordance with the terms of the Sales Agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 200,000,000 from time to time through Cantor or Wells Fargo Securities, each acting as the Company's sales agent.

During the period ended March 31, 2024, the Company did no t offer or sell any shares of common stock pursuant to the Sales Agreement.

On December 23, 2022, the Company entered into a Controlled Equity Offering℠ Sales Agreement, which was amended on August 7, 2023 (as amended, the “Sales Agreement”) with Cantor Fitzgerald & Co.

(“Cantor”),Wells Fargo Securities, LLC (“Wells Fargo Securities”), and William Blair & Company, L.L.C.

(“William Blair”) relating to shares of the Company's common stock.

In accordance with the terms of the Sales Agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 200,000,000 from time to time through Cantor, Wells Fargo Securities, or William Blair, each acting as the Company's sales agent.

During the period ended June 30, 2024 the Company did no t offer or sell any shares of common stock pursuant to the Sales Agreement.

Share-Based Compensation Expense

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

As of March 31, 2024 , a total of 379,084 shares remain available for future issuance under the 2019 Plan, subject to the terms of the 2019 Plan.

In June 2024 at the Company’s 2024 Annual Meeting of Stockholders (the "2024 Annual Meeting"), the stockholders of the Company appro ved an amendment to the Company’s 2019 Omnibus Equity Incentive Plan (as amended, the “2019 Plan”) which, among other things, increased the aggregate number of shares authorized for use in making awards to eligible persons under the 2019 Plan by 2,000,000 shares, for a total of up to 10,750,000 shares available for issuance.

As of June 30, 2024 , following the 2024 Annual Meeting, a total of 2,236,360 shares remain available for future issuance under the 2019 Plan, subject to the terms of the 2019 Plan.

In October 2021, the Company adopted the 2021 Inducement Equity Incentive Plan which covers the award of up to 1,000,000 shares of common stock (the “2021 Plan”) effective as of October 15, 2021.

1 unchanged sentence

In April 2022, the compensation committee of the Company’s board of directors approved a proposal to reduce the total number of shares available for future issuance under the 2021 Plan to 130,000 .

As of March 31, 2024 , a total of 124,697 shares remain available for future issuance under the 2021 Plan, subject to the terms of the 2021 Plan.

As of June 30, 2024 , a total of 124,697 shares remain available for future issuance under the 2021 Plan, subject to the terms of the 2021 Plan.

Stock Options

Share-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023 was as follows:

Share-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024 and 2023 was as follows:

For the Three Months

Ended March 31,

Ended June 30,

For the Six Months

Ended June 30,

(in thousands)

4 unchanged sentences

The primary difference between the effective tax rate and the federal statutory tax rate is due to federal and state income tax expense offset by valuation allowance on the Company's deferred tax assets.

For the three months ended March 31, 2024 and 2023, the Company re corded $ 0.4 million and $ 0.1 million of income tax expense, respectively.

For the three and six months ended June 30, 2024, the Company recorded $ ( 0.2 ) million and $ 0.2 million of income tax expense, respectively.

For the three and six months ended June 30, 2023, the Company recorded $ 0.6 million and $ 0.7 million of income tax expense, respectively.

No tax benefit was provided for losses incurred in United States because those losses are offset by a full valuation allowance.

3 unchanged sentences

Pursuant to the amendment, CFF increased the amount it will award to advance LUNAR-CF to $ 24.6 million from approximately $ 15.6 million and the Company agreed to incur at least $ 15.0 million toward activities under the research plan.

For the three months ended March 31, 2024 and 2023, the Company recognized no contra expense related to CFF.

As of March 31, 2024 and December 31, 2023, $ 7.6 million was included in accrued liabilities.

Total contra expense of $ 0.8 million was recognized during the three and six months ended June 30, 2024.

For the three and six months ended June 30, 2023, the Company recognized no contra expense

related to the agreement.

As of June 30, 2024 and December 31, 2023, $ 6.9 million and $ 7.6 million, respectively, remained in accrued liabilities.

In October 2017, the Company entered into a non-cancellable operating lease agreement for office space adjacent to its previously occupied headquarters.

8 unchanged sentences

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 January 2024, the Company vacated the office space, and has no intention of operating out of this location in the future.

Arcturus is currently engaged in a lease for this property through March 31, 2025.

It is obligated to continue to make the remaining payments per the lease agreement through the end of the term.

As such, the Company recorded an impairment loss in the amount of $ 1.3 million during the three months ended March 31, 2024, as it will not receive any future economic benefits from the lease.

In September 2021, the Company entered into a third non-cancellable lease agreement for office, research and development, engineering and laboratory space near its current headquarters and lease term commenced during the second quarter of 2022.

The initial term of the lease extends ten years and eight months from the date of possession, and the Company has the right to extend the term of the lease for an additional five-year period .

In January 2024, the Company vacated this office space with no intention of operating out of the location in the future.

Because Arcturus was still engaged in the lease for the property and obligated to make the remaining lease payment through March 31, 2025, the Company recorded an impairment loss in the amount of $ 1.3 million during the three months ended March 31, 2024, as it would not receive any future economic benefit from the lease.

In July 2024, the Company terminated the existing lease agreement, in accordance with its terms, thereby ending their contractual obligation to pay for premise.

In September 2021, the Company entered into a third non-cancellable lease agreement for office, research and development, engineering and laboratory space near its current headquarters, and such lease term commenced during the second quarter of 2022.

The initial term of this lease extends ten years and eight months from the date of possession, and the Company has the right to extend the term of the lease for an additional five-year period.

When the lease term was determined for the operating lease right-of-use assets and lease liabilities, the extension option for the lease was not included.

6 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.

As of March 31, 2024, the remaining payments of the operating lease liability were as follows:

As of June 30, 2024, the remaining payments of the operating lease liability were as follows:

(in thousands)

5 unchanged sentences

Weighted-average discount rate

Operating lease costs consist of the fixed le ase payments included in operating lease liability and are recorded on a straight-line basis over the lease terms.

Operating lease costs were $ 1.4 million for the three months ended March 31, 2024 and $ 1.4 million for the three months ended March 31, 2023 , respectively.

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 term s.

Operating lease costs were $ 1.5 million and $ 2.9 million for the three and six months ended June 30, 2024, respectively, and $ 1.4 million and $ 2.8 million for the three and six months ended June 30, 2023, respectively.

Related Party Transactions

1 unchanged sentence

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.

What changed 10-Q

Item 1. Financial Statements