What changed in this filing

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Item 1. Financial Statements

2025-05-12 compared with 2024-11-07 · 88 added, 177 removed, 257 unchanged (51% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands, except par value information)

16 unchanged sentences

Operating lease liability, net of current portion

Other non-current liabilities

Long-term debt

Total liabilities

2 unchanged sentences

60,000 shares authorized;

outstanding shares were 27,084 at September 30, 2024 and 26,828 at December 31, 2023

outstanding shares were 27,121 at March 31, 2025 and 27,096 at December 31, 2024

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

7 unchanged sentences

Loss from operations

(Loss) gain from foreign currency

Gain on debt extinguishment

Loss from foreign currency

Finance income, net

11 unchanged sentences

(in thousands)

Balance at December 31, 2023

Share-based compensation expense

Issuance of common stock upon exercise of stock options

Balance at March 31, 2024

Share-based compensation expense

Issuance of common stock upon exercise of stock options

Balance at June 30, 2024

Balance – December 31, 2024

Share-based compensation expense

Issuance of common stock upon exercise of stock options

Issuance of common stock under equity plans

BALANCE – September 30, 2024

Balance – March 31, 2025

Stockholders’

(in thousands)

Balance at December 31, 2022

Share-based compensation expense

Balance at March 31, 2023

Share-based compensation expense

Issuance of common stock upon exercise of stock options

Balance at June 30, 2023

Balance – December 31, 2023

Share-based compensation expense

Issuance of common stock upon exercise of stock options

Issuance of common stock under equity plans

BALANCE – September 30, 2023

Balance – March 31, 2024

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEM ENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

4 unchanged sentences

Foreign currency transaction loss

Gain on debt extinguishment

Other non-cash expenses

Changes in assets and liabilities:

12 unchanged sentences

Proceeds from exercise of stock options

Proceeds from the issuance of common stock under equity plans

Proceeds from debt

Payments on debt obligations

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

1 unchanged sentence

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

Nine Months Ended September 30,

Supplemental disclosure of cash flow information

Cash paid for interest

Three Months Ended March 31,

Non-cash investing activities

1 unchanged sentence

Right-of-use assets acquired through operating leases

Purchase of property and equipment in accounts payable

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

19 unchanged sentences

Although these estimates are based on management’s knowledge of current events and actions the Company may undertake in the future, actual results may ultimately differ from these estimates and assumptions.

Joint Ventures, Equity Method Investments and Variable Interest Entities

Investments for which the Company exercises significant influence but does not have control are accounted for under the equity method.

Equity method investment activity is related to 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.

The Company has incurred significant operating losses since its inception.

As of September 30, 2024 and December 31, 2023, the Company had an accumulated deficit of $ 418.8 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 September 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 September 30, 2024, the Company’s balance of cash and cash equivalents, including restricted cash, was $ 294.1 million.

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

There can be no assurance that the Company will be successful in securing additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

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.

The Company and its chief operating decision-maker view the Company’s operations and manage its business in one operating segment, which is the research and development of medical applications for the Company’s nucleic acid-focused technology.

Revenue Recognition

At contract inception, the Company analyzes its 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 Accounting Standards Codification (“ASC”) Topic 808, Collaborative Arrangements (“ASC 808”).

For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration reflect a vendor-customer relationship and are therefore within the scope of ASC 606.

The Company determines revenue recognition for arrangements within the scope of ASC 606 by performing the following five steps:

(i) identify the contract;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

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

The terms of the Company’s revenue agreements include license fees, upfront payments, development and 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.

The most likely amount method requires the Company to determine the likelihood of earning the milestone payment.

Given the high degree of uncertainty around achievement of these milestones, the Company determines the milestone amounts to be fully constrained and does not recognize revenue until the uncertainty associated with these payments is resolved.

The Company will recognize revenue from sales-based royalty payments when or as the sales occur.

The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur.

A performance obligation is a promise in a contract to transfer a distinct good or service to the collaborative partner and is the unit of account in ASC 606.

A contract’s transaction price is allocated to each distinct performance obligation based on relative standalone selling price and recognized as revenue when, or as, the performance obligation is satisfied.

For performance obligations that are recognized over time, the Company measures the progress using an input method.

The input methods used are based on the effort expended or costs incurred toward the satisfaction of the performance obligation.

The Company estimates the amount of effort expended, including the time estimated it will take to complete the activities, or costs incurred in a given period, relative to the estimated total effort or costs to satisfy the performance obligation.

This approach requires the Company to make numerous estimates and use significant judgment.

If estimates or judgments change over the course of the collaboration, a cumulative catch up of revenue is recognized in the period such changes are identified.

See “Note 2, Revenue” for specific details surrounding the Company’s arrangements.

The Company determines if an arrangement is a lease at inception.

Lease right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease.

For operating leases with an initial term greater than 12 months, the Company recognizes operating lease right-of-use assets and operating lease liabilities based on the present value of lease payments over the lease term at the commencement date.

Operating lease right-of-use assets are comprised of the lease liability plus any lease payments made and excludes lease incentives.

Lease terms include options to renew or terminate the lease when the Company is reasonably certain that the renewal option will be exercised or when it is reasonably certain that the termination option will not be exercised.

For the Company's operating leases, if the interest rate used to determine the present value of future lease payments is not readily determinable, the Company estimates its incremental borrowing rate as the discount rate for the lease.

The Company's incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in similar economic environments.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has elected the practical expedient to not separate lease and non-lease components.

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

Research and Development Costs, Net

All research and development costs are expensed as incurred.

Research and development costs consist primarily of salaries, employee benefits, costs associated with preclinical studies and clinical trials (including amounts paid to clinical research organizations and other professional services), in-process research and development expenses, pre-launch inventory and license agreement expenses.

Research and development expenses are presented net of any grants.

Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods are received or the services are performed.

The Company records accruals for estimated research and development costs, comprising payments for work performed by third party contractors, laboratories, participating clinical trial sites, and others.

Some of these contractors bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones.

For the latter, the Company accrues the expenses as goods or services are used or rendered.

Clinical trial activities performed by third parties are accrued and expensed based upon estimates of the proportion of work completed over the life of the individual clinical trial and patient enrollment rates in accordance with agreements established with Clinical Research Organizations ("CROs") and clinical trial sites.

Estimates are determined by reviewing contracts, vendor agreements and purchase orders, and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

Pre-Launch Inventory

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

Restricted Cash

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

At September 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 September 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.

At September 30, 2023, non-current restricted cash also includes $ 20.0 million related to the Wells Fargo Loan (Note 5).

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 September 30, 2024 and 2023 :

(in thousands)

September 30, 2024

September 30, 2023

Cash and cash equivalents

Restricted cash

Non-current restricted cash

Total cash, cash equivalents and restricted

cash shown in the statement of cash flows

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 nine months ended September 30, 2024 were comprised of stock options and restricted stock units.

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

No dividends were declared or paid during the reported periods.

There were no significant changes to our significant accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 .

Recently Issued Accounting Standards Not Yet Adopted

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies and adopted by the Company as of the specified effective date.

Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the condensed consolidated financial statements and disclosures.

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023, and for interim reporting periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the impact that adoption of ASU 2023-07 will have on our financial statement disclosures.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date.

The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the condensed consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which requires public entities to disclose specified information about certain costs and expenses on an interim and annual basis.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact that adoption of ASU 2024-03 will have on the financial statement 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, product revenue and government grant agreements.

5 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 nine months ended September 30, 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 three months ended March 31, 2025 in the balances of contract assets and liabilities as compared to what was disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

(in thousands)

December 31, 2024

September 30, 2024

March 31, 2025

Contract Assets:

4 unchanged sentences

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

Ended March 31,

(in thousands)

11 unchanged sentences

The Company received a $ 200.0 million upfront payment and is eligible to receive over $ 1.3 billion in development milestones if all products are registered in the licensed fields and entitled to potentially receive up to $ 3.0 billion in commercial milestones based on “net sale” of vaccines in the various fields.

In addition, the Company is eligible to receive a 40 % net profit share for COVID-19 vaccine products and up to low double-digit royalties for vaccines against flu, pandemic preparedness and three other respiratory pathogens.

During the third quarter of 2024, upon the first commercial sale of KOSTAIVE following regulatory approval in Japan, the Company achieved a $ 25.0 million development milestone related to the CSL Collaboration Agreement which was included in accounts receivable as of September 30, 2024.

In addition, the Company is eligible to receive a 40 % net profit share for COVID-19 vaccine pro ducts and up to low double-digit royalties for vaccines against flu, pandemic preparedness and three other respiratory pathogens.

During the first quarter of 2025, upon the regulatory approval of KOSTAIVE in the European Union (the “EU”), the Company achieved an initial $ 8.0 million milestone related to the CSL Collaboration Agreement which was included in accounts receivable as of March 31, 2025.

Additionally, during the first quarter of 2025, the Company achieved a $ 7.0 million development milestone related to the CSL Collaboration Agreement.

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

Additional variable consideration was not included in the transaction price at September 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.

As of March 31, 2025, the transaction price consisted of upfront consideration received and milestones achieved.

Additional variable consideration was not included in the transaction price as of March 31, 2025 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 third quarter of 2024 relates to the license delivered, milestones achieved and services performed through September 30, 2024.

Total deferred revenue as of September 30, 2024 and December 31, 2023 for the CSL Collaboration Agreement was $40.3 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.

The advance payment was for specified manufacturing runs of ARCT-154 which include the drug substance utilized, as well as the reservation fees and related manufacturing requirements.

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.

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 September 30, 2024.

The revenue recognized in the first quarter of 2025 relates to the license delivered, milestones achieved and services performed through March 31, 2025.

Total deferred revenue as of March 31, 2025 and December 31, 2024 for the CSL Collaboration Agreement was $ 20.8 million and $ 30.7 million, respectively.

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.

3 unchanged sentences

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 September 30, 2024 , the Company recognized $ 4.0 million related to the performance obligation and the remaining amount of $ 5.9 million is included in deferred revenue.

During the quarter ended March 31, 2025 , the Company recognized $ 0.7 million related to the performance obligation and the remaining amount of $ 2.4 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.

2 unchanged sentences

The Company recognized $ 5.3 million in revenue related to this customer option during the third quarter of 2024 upon the transfer of vaccine product to CSL Seqirus.

The remaining $ 5.1 million is included in deferred revenue as of September 30, 2024 and will be recognized as revenue when the remaining vaccine product is transferred to CSL Seqirus.

The remaining $ 5.1 million, along with an estimated

adjustment for costs in excess of previously invoiced amounts, was recognized as revenue during the quarter ended March 31, 2025 when the remaining vaccine product was 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.

6 unchanged sentences

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).

As of September 30, 2024, the remaining available funding net of revenue e arned was $ 41.6 million.

As of March 31, 2025, the remaining available funding net of revenue e arned was $ 36.1 million.

Fair Value Measurements

6 unchanged sentences

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

As of September 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.

As of March 31, 2025 and December 31, 2024 , 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.

Balance Sheet Details

Other Balance Sheet Details

Property and equipment, net balances consisted of the following:

(in thousands)

September 30, 2024

March 31, 2025

December 31, 2024

3 unchanged sentences

Leasehold improvements

Construction in progress

Less accumulated depreciation and amortization

Property and equipment, net

Depreciation and amortization expenses were $ 0.9 mi llion and $ 2.7 million for the three and nine months ended September 30, 2024, respectively, and $ 0.8 m illion and $ 2.1 million for the three and nine months ended September 30, 2023, respectively.

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

Depreciation and amortization expense w as $ 0.8 million for th e three months ended March 31, 2025 and $ 0.9 million for the three months ended March 31, 2024.

Accrued liabilities consisted of the following:

(in thousands)

September 30, 2024

March 31, 2025

December 31, 2024

1 unchanged sentence

Cystic Fibrosis Foundation liability

Income tax payable

Current portion of operating lease liability

1 unchanged sentence

Vinbiocare contractual liabilities

Legal accrual

Other accrued research and development expenses

(in thousands)

March 31, 2025

March 31, 2024

Cash and cash equivalents

Restricted cash

Non-current restricted cash

Total cash, cash equivalents and restricted cash

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

As of March 31, 2025 , 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 of the Company’s offices.

As of March 31, 2025 and 2024 , the Company had restricted cash of $ 1.9 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.

As of March 31, 2025 , non-current restricted cash also includes $ 16.5 million related to the Wells Fargo Loan (Note 5).

Wells Fargo Credit Agreement

6 unchanged sentences

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

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 September 30, 2024 .

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.

In March 2025, the Company drew down $ 15.0 million from the Loan, which was subsequently repaid in April 2025.

Stockholders’ Equity

Net Loss per Share

Potentially dilutive securities that were not included in the calculation of diluted net loss per share for the three and nine months ended September 30, 2024 as they were anti-dilutive totaled 0.7 million and 1.1 million, respectively, and 1.2 million and 0.8 million for the three and nine months ended September 30, 2023, respectively.

Potentially dilutive securities that were not included in the calculation of diluted net loss per share as they were anti-dilutive for the three months ended March 31, 2025 and 2024 totaled 0.5 million and 1.4 million, respectively.

Sales Agreement

3 unchanged sentences

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

During the period ended March 31, 2025 the Company did no t offer or sell any shares of common stock pursuant to the Sales Agreement.

Share-Based Compensation Expense

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 September 30, 2024 , a total of 2,203,234 shares remain available for future issuance under the 2019 Plan, subject to the terms of the 2019 Plan.

As of March 31, 2025 , a total of 1,177,945 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 September 30, 2024, a tota l of 124,697 s hares 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 and nine months ended September 30, 2024 and 2023 was as follows:

As of March 31, 2025, a tota l of 127,419 s hares remain available for future issuance under the 2021 Plan, subject to the terms of the 2021 Plan.

Share-Based Compensation

Share-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025 and 2024 was as follows:

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

Ended March 31,

(in thousands)

3 unchanged sentences

The Company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter.

The primary difference between the effective tax rate and the federal statutory tax rate 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 September 30, 2024, the Compa ny recorded $ 0.2 million of income tax benefit and for the nine months ended September 30, 2024 , the Company recorded no inco me tax benefit.

For the three and nine months ended September 30, 2023, the Company recorded $ 0.9 million and $ 1.6 million of income tax expense, respectively.

The primary difference between the effective tax rate and the federal statutory 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, 2025 and 2024 , the Company recorded no income tax expense and $ 0.4 million of income tax expense, respectively.

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

Commitments and Contingencies

1 unchanged sentence

On September 25, 2023, the Company amended its Development Program Letter Agreement, dated May 16, 2017 and as amended July 13, 2018 and August 1, 2019, with the Cystic Fibrosis Foundation (“CFF”).

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.

Total expense of $ 0.3 million was recognized during the three months ended September 30, 2024.

Total contra expense of $ 0.5 million was recognized during the nine months ended September 30, 2024.

For both the three and nine months ended September 30, 2023, the Company recognized contra expense of $ 1.8 million.

As of September 30, 2024 and December 31, 2023, $ 7.1 million and $ 7.6 million, respectively, remained in accrued liabilities.

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

During the fourth quarter of 2023, the Company received the full payment from CFF related to the amendment.

For the three months ended March 31, 2025 and 2024, the Company recognized a contra expense of $ 0.4 million and no contra expense, respectively, related to CFF.

As of March 31, 2025 and December 31, 2024, $ 7.1 million and $ 7.4 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.

11 unchanged sentences

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

As a result, no lease liability remains as of September 30, 2024.

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.

4 unchanged sentences

The Company entered into an irrevocable standby letter of credit with the landlord for a security deposit of $ 2.0 million upon executing the lease which is included (along with additional funds required to secure the letter of credit) in the balance of non-current restricted cash.

Operating lease right-of-use asset and liability on the condensed consolidated balance sheets represent the present value of remaining lease payments over the remaining lease terms.

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.

The Company does not allocate lease payments to non-lease components;

1 unchanged sentence

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

As of March 31, 2025, the remaining payments of the operating lease liability were as follows:

(in thousands)

6 unchanged sentences

Weighted-average discount rate

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 $ 1.3 million and $ 4.1 million for the three and nine months ended September 30, 2024, respectively, and $ 1.4 million and $ 4.2 million for the three and nine months ended September 30, 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 terms.

Operating lease costs were $ 1.3 million for the three months ended March 31, 2025 and $ 1.4 million for the three months ended March 31, 2024, respectively.

Segment Information

The Company operates in one business segment, which includes all activities related to the discovery, development and commercialization of messenger RNA medicines.

The determination of a single business segment is consistent with the consolidated financial information regularly provided to the Company’s chief operating decision maker (“CODM”).

The Company’s CODM is its Chief Executive Officer, who reviews and evaluates consolidated net (loss) income for purposes of assessing performance, making operating decisions, allocating resources, and planning and forecasting for future periods.

The CODM does not evaluate the operating segment using asset or liability information.

The following table presents information about reported segment revenues, segment loss and income, and significant segment expenses:

Three Months Ended March 31,

(in thousands)

Research and development:

LUNAR-CF, net

Early-stage programs

Discovery technologies

Payroll and benefits

Facilities and equipment

Total research and development

General and administrative

(1) Primarily includes interest income.

Related Party Transactions

1 unchanged sentence

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What changed 10-Q

Item 1. Financial Statements