6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO SECTION 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of September, 2018

Commission File Number: 001-35932

ARCTURUS THERAPEUTICS LTD.

(Exact Name of Registrant as Specified in Its Charter)

10628 Science Center Drive, Suite 250San Diego, California 92121

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

CONTENTS

Furnished as exhibits to this Report on Form 6-K is information regarding the Company’s financial results for the six months ended June 30, 2018.

INCORPORATION BY REFERENCE

Exhibits 99.1 and 99.2 of this report on Form 6-K shall be deemed to be incorporated by reference into the registration statements on  Form F-3 (File No. 333-209960) and Forms S-8 (File No. 333-194875, File No. 333-202394, File No. 333-209947 and File No. 333-217556) of Arcturus Therapeutics Ltd. (the “Company”) (including any prospectuses forming a part of such registration statements) and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

Exhibits

Exhibit No.	Description
99.1	Unaudited Condensed Consolidated Interim Financial Statements
99.2	Management’s Discussion and Analysis of Financial Condition and Results of Operations
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.IAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURE

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

	ARCTURUS THERAPEUTICS LTD.
Date: September 28, 2018	By:	/s/ Joseph E. Payne
		Joseph E. Payne
		President and Chief Executive Officer

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EX-99

Exhibit 99.1

ARCTURUS THERAPEUTICS LTD. AND ITS SUBSIDIARIES

TABLE OF CONTENTS

	Page
Financial Statements	1
Condensed Consolidated Balance Sheets as of June 30, 2018 (Unaudited) and December 31, 2017	1
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2018 and 2017 (Unaudited)	2
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)	3
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 (Unaudited)	4
Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Operating and financial review and prospects

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ARCTURUS THERAPEUITCS LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value information)

	June 30, 2018			December 31, 2017
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	29,322		$	24,965
Restricted cash		-			166
Short-term investments		10,455			23,608
Accounts receivable		1,371			480
Prepaid expenses and other current assets		534			1,059
Intangible asset held for sale		-			590
Total current assets		41,682			50,868
Property and equipment, net (Note 5)		1,943			1,049
Equity investment		590			—
Other assets		107			107
Total assets	$	44,322		$	52,024
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	2,781		$	1,790
Accrued liabilities		4,304			2,793
Deferred revenue		11,168			6,457
Total current liabilities		18,253			11,040
Deferred revenue, net of current portion		8,021			7,190
Other liabilities		253			—
Total liabilities		26,527			18,230
Commitments and Contingencies (Note 9)
Shareholders' equity
Ordinary shares: NIS 0.07 par value; 30,000 shares authorized, 10,783 issued,    10,740 outstanding and 43 held in treasury at June 30, 2018; NIS 0.07 par    value; 30,000 shares authorized, 10,699 issued, 10,656 outstanding and    43 held in treasury at December 31, 2017		214			212
Additional paid-in capital		57,189			56,674
Accumulated other comprehensive gain (loss)		2			(3	)
Accumulated deficit		(39,610	)		(23,089	)
Total shareholders' equity		17,795			33,794
Total liabilities and shareholders' equity	$	44,322		$	52,024

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

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ARCTURUS THERAPEUTICS LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

In thousands (except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Revenue in conjunction with strategic alliances    and collaborations	$	2,386		$	3,761		$	4,753		$	7,682
Operating expenses:
Research and development, net		4,225			3,769			8,166			8,002
General and administrative		8,233			1,058			13,331			2,092
Total operating expenses		12,458			4,827			21,497			10,094
Loss from operations		(10,072	)		(1,066	)		(16,744	)		(2,412	)
Finance (expense) income, net		122			(33	)		223			(33	)
Net loss	$	(9,950	)	$	(1,099	)	$	(16,521	)	$	(2,445	)
Net loss per share, basic and diluted	$	(0.99	)	$	(0.54	)	$	(1.65	)	$	(1.20	)
Weighted average shares outstanding-basic and diluted		10,057,048			2,031,599			10,042,522			2,031,599
Comprehensive loss:
Net loss	$	(9,950	)	$	(1,099	)	$	(16,521	)	$	(2,445	)
Unrealized gain on short-term investments		7			-			5			-
Comprehensive loss	$	(9,943	)	$	(1,099	)	$	(16,516	)	$	(2,445	)

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

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ARCTURUS THERAPEUTICS LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(unaudited)

In thousands

					Additional		Accumulated Other						Total
	Ordinary Shares				Paid-In		Comprehensive			Accumulated			Shareholders’
	Shares		Amount		Capital		Gain (Loss)			Deficit			Equity
BALANCE - December 31, 2017		10,699	$	212	$	56,674	$	(3	)	$	(23,089	)	$	33,794
Net loss											(16,521	)		(16,521	)
Unrealized gain on short-term investments		-		-		-	5				-			5
Share-based compensation		-		-	166			-			-			166
Shares issued in conjunction with share    option exercise		84		2	349			-			-			351
BALANCE – June 30, 2018		10,783	$	214	$	57,189	$	2		$	(39,610	)	$	17,795

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

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ARCTURUS THERAPEUTICS LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

In thousands

	Six Months Ended June 30,
	2018			2017
OPERATING ACTIVITIES:
Net loss	$	(16,521	)	$	(2,445	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		256			199
Share-based compensation expense		166			41
Interest expense on convertible promissory notes		-			3
Changes in operating assets and liabilities
Accounts receivable		(891	)		1,887
Prepaid expense and other assets		644			135
Accounts payable		838			(1,149	)
Accrued liabilities		1,764			(116	)
Deferred revenue		5,542			(2,286	)
Net cash used in operating activities		(8,202	)		(3,731	)
INVESTING ACTIVITIES:
Proceeds from maturities of short-term investments		22,253			-
Purchases of short-term investments		(9,211	)		-
Acquisition of property and equipment		(1,000	)		(16	)
Net cash provided by (used in) investing activities		12,042			(16	)
FINANCING ACTIVITIES
Proceeds from issuance of convertible promissory notes		-			5,489
Proceeds from exercise of share options		351			-
Net cash provided by financing activities		351			5,489
NET INCREASE IN CASH, CASH EQUIVALENTS AND    RESTRICTED CASH		4,191			1,742
Cash and cash equivalents at beginning of the period		25,238			8,345
Cash and cash equivalents at end of the period	$	29,429		$	10,087

	Six Months Ended June 30,
	2018		2017
Supplemental disclosure of cash flow information
Cash paid for interest	$	—	$	—
Cash paid for income taxes	$	—	$	—
Non-cash investing and financing activities
Sale of intangible assets for equity investment	$	590	$	—
Release of repurchase liability for restricted shares	$	37	$	—
Purchase of property and equipment in accounts payable	$	150	$	81

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

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ARCTURUS THERAPEUTICS LTD. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

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

Interim financial results are not necessarily indicative of results anticipated for the full year. These unaudited financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2017.

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

Unless the context otherwise requires, references to the “Company,” “Arcturus,” “we,” “us” and “our” refer to Arcturus Therapeutics Ltd. And its subsidiaries.

Organizational Update

On May 29, 2018, the Company filed with the Securities and Exchange Commission a Report on Form 6-K containing an Agreement and Release entered into by and among the Company as well as current officers: Joe Payne (CEO) and Pad Chivukula (COO and CSO), former employees: Mark Herbert and Rebecque Laba, and former board members: Craig Willett, Daniel Geffken, David Shapiro and Stuart Collinson (referred to as the “Agreement and Release”).

As part of a settlement agreement, the Company has appointed four new independent directors, Dr. Peter Farrell, Mr. Andrew Sassine, Mr. James Barlow and Dr. Magda Marquet, to its Board, effective as of May 27, 2018. In connection with these appointments, Dr. Stuart Collinson, Mr. Daniel Geffken, Dr. David Shapiro, and Mr. Craig Willett have resigned from the Board. Further, the Company agreed to, and accrued as of June 30, 2018 the purchase of a director “tail” policy and the reimbursement professional fees incurred by certain officers (Note 5).

Reverse Merger

On November 15, 2017, Alcobra Ltd. acquired Arcturus Therapeutics, Inc. pursuant to a merger between the companies (the “merger”). Prior to the merger, Alcobra Ltd.’s net assets consisted of cash, investments and nominal non-operating assets. Upon consummation of the merger, Alcobra Ltd. adopted the business plan of Arcturus Therapeutics, Inc. In connection with the merger, Alcobra Ltd. agreed to acquire all of the outstanding common stock of Arcturus Therapeutics, Inc. in exchange for the issuance of an aggregate 6,631,712 of Alcobra Ltd.’s Ordinary Shares, par value 0.07 NIS per share (the “Ordinary Shares”), after giving effect to a 1-for-7 reverse split effected immediately prior to the merger. As a result of the merger, Arcturus Therapeutics, Inc. became a wholly-owned subsidiary of Alcobra Ltd. While Alcobra Ltd. was the legal acquirer in the transaction, Arcturus Therapeutics, Inc. was deemed the accounting acquirer. Immediately after giving effect to the merger, on November 15, 2017, Alcobra Ltd. changed its name to Arcturus Therapeutics Ltd. On November 16, 2017, the Company commenced trading on the Nasdaq Global Market under the symbol “ARCT.” The Company’s principal executive offices are located in San Diego, California.

In accordance with the authoritative literature, a transaction where a private company merges into a public company with no operations and nominal net assets should be accounted for as a capital transaction rather than a business combination. Consequently, the reverse merger was accounted for as an issuance of shares by the Company for the net assets of Alcobra Ltd., accompanied by a recapitalization. Excess of considerations paid over net assets acquired and other merger-related costs were recorded as a charge to

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additional paid-in capital during the fourth quarter of 2017. As a result, the financial statements of the Company prior to the merger date are the historical financial statements of Arcturus whereas the financial statements of the Company after the merger date reflect the results of the operations of Arcturus and Alcobra Ltd. on a combined basis. All historical information presented herein has been retroactively restated to reflect the effect of the merger shares exchange ratio, reverse stock split and change to the authorized number of Ordinary Shares in accordance with Accounting Standards Codification Topic 260, “Earnings Per Share”.

Liquidity

The Company’s activities since inception have consisted principally of performing research and development 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.

Historically, the Company’s primary source of financing has been throughissuance of its equity securities, through issuance of convertible promissory notes and through collaboration agreements. Research and development activities have required significant capital investment since the Company’s inception. The Company expects that the operations will continue to require cash investment to pursue the Company’s research and development activities, including preclinical studies, formulation development, clinical trials and related drug manufacturing. The Company has a limited operating history and is preclinical with no revenues from sales of its products, and the sales and income potential of the Company’s business and market are unproven. The Company has experienced net losses since its inception and as of June 30, 2018 has an accumulated deficit of $39.6 million. The Company also added to its historical financing by acquiring $36.4 million in cash, cash equivalents and short-term investments in conjunction with the merger of Alcobra, however, the Company expects to continue to incur additional losses for the foreseeable future. Over that period the Company is preparing to raise additional debt and equity financing and enter into additional partnerships to fund its development. The ability of the Company to transition to profitability is dependent on developing products and product revenues to support the level of expenses. If the Company is not able to achieve its planned revenue growth or incurs costs in excess of its forecasts, it may be required to reduce discretionary spending, may not be able to continue the development of all of its products or may be required to delay part of its development programs, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. There can be no assurances that additional financing will be secured or, if secured, will be on favorable terms. The Company's management and board of directors are of the opinion that its current financial resources will be sufficient to continue the development of the Company's products for at least twelve months from the filing of this Report in Form 6-K.

In order to support our long-term plans, the Company intends to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements with partners or through other sources of financing. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations.If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected. There can be no assurance that the Company will be able to obtain the needed financing on acceptable terms or at all.

Intangible Assets Held for Sale and Equity Investment

As the end of the second quarter of 2018, the Company completed the sale of its intangible assets related to the ADAIR technology, which was accounted for as an intangible asset held for sale as of December 31, 2017. Pursuant to the asset purchase agreement for ADAIR, the Company received 30% ownership interest in the common stock of a privately held company in consideration for the sale of the ADAIR technology. As this ownership interest is greater than 20%, it is presumed that the Company may have the ability to exercise significant influence over the operating and financial policies of this investee; therefore, the Company concluded that this investment represents an equity investment and accounts for it as such. The Company has no requirement to invest further in this private company and the ownership percentage may be diluted in the future. The Company will account for this investment as an equity method investment until the investment no longer meets the definition of an equity method investment.

The Company will account for its share of the earnings or losses of the investee with a reporting lag of three months beginning the fourth quarter of 2018 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.  As a result, the Company’s results of operations for the six months ended June 30, 2018 do not contain any losses of the equity investee.

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

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operating segment, which is the research and development of medical applications for the Company’s nucleic acid-focused technology.

Revenue Recognition

The Company enters into arrangements with pharmaceutical and biotechnology partners that may involve multiple deliverables. The Company’s arrangements may contain upfront payments, license fees for research and development arrangements, research and development funding or reimbursement, milestone payments, option fees, exclusivity fees and royalties on future sales of our products. Each deliverable in the arrangement is evaluated at the inception of the arrangement to determine whether it meets the criteria to be accounted for as a separate unit of accounting or whether it should be combined with other deliverables. When deliverables are separable, consideration received is allocated to the separate units of accounting based on the relative selling price method and the appropriate revenue recognition principles are applied to each unit. Revenue is recognized separately for each unit of accounting when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. Deliverables in an arrangement that do not meet this separation criteria are treated as a single unit of accounting, generally applying applicable revenue recognition guidance for the final deliverable to the combined unit of accounting. In the instances in which the Company has received payment from customers in advance of recognizing revenue, the Company records the amounts as deferred revenue on the consolidated balance sheet. Amounts not expected to be recognized within the next 12 months are classified as deferred revenue, net of current portion.  

Funded Research. Some of the Company’s research and development costs are funded or reimbursed by partners in accordance with collaboration agreements. Amounts received as compensation related to the Company’s research and development efforts are recognized as revenue when the above criteria have been met.

Upfront Fees. When the Company determines that deliverables in an arrangement do not meet the separation criteria discussed above, the deliverables are treated as a single unit of accounting. In such cases, upfront fees received for collaborative agreements are recognized on a straight-line basis, unless evidence suggests that the revenue is earned or obligations are fulfilled in a different pattern, over the expected performance period under each respective arrangement. When the performance period is not specified, the Company makes its best estimate of the period over which the Company expects to fulfill its performance obligations under an arrangement. Any amounts received under the arrangement in advance of performance are recorded as deferred revenue and recognized as revenue as the Company completes its performance obligations.

Milestones. The Company applies the milestone method of accounting to recognize revenue from milestone payments when earned, as evidenced by written acknowledgement from the collaborator or other persuasive evidence that the milestone has been achieved and the payment is non-refundable, provided that the milestone event is substantive. A milestone event is defined as an event (i) that can only be achieved based in whole or in part on either the Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance; (ii) for which there is substantive uncertainty at the inception of the arrangement that the event will be achieved; and (iii) that would result in additional payments being due to the Company. Events for which the occurrence is either contingent solely upon the passage of time or the result of a counterparty’s performance are not considered to be milestone events. A milestone event is substantive if all of the following conditions are met: (i) the consideration is commensurate with either the Company’s performance to achieve the milestone, or the enhancement of the value to the delivered item(s) as a result of a specific outcome resulting from the Company’s performance to achieve the milestone; (ii) the consideration relates solely to past performance; and (iii) the consideration is reasonable relative to all the deliverables and payment terms (including other potential milestone consideration) within the arrangement.

The Company assesses whether a milestone is substantive at the inception of each arrangement. If a milestone is deemed non-substantive, the Company will account for that milestone payment using a method consistent with the related units of accounting for the arrangement over the estimated performance period.

Research and Development Costs, net

Research and development costs are expensed as incurred. Non-refundable advance payments are expensed when services are initiated. These expenses result from the Company's independent research and development efforts as well as efforts associated with collaboration arrangements. Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract research and manufacturing services, the costs of laboratory supplies, equipment and facilities and other external costs are shown net of any royalty bearing grants.

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Statement of cash flows

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

(in thousands)	June 30, 2018		June 30, 2017
Cash and cash equivalents	$	29,322	$	10,087
Restricted cash (included in other assets)		107		—
Total cash, cash equivalents and restricted cash shown in the    statement of cash flows	$	29,429	$	10,087

Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of Ordinary Shares outstanding for the period, without consideration for ordinary share equivalents. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of Ordinary Shares and dilutive ordinary share equivalents outstanding for the period determined using the treasury-stock method. Dilutive Ordinary Shares are comprised of convertible preferred stock, convertible notes, share options and warrants. Dilutive securities at June 30, 2018 that were not included in the calculation of diluted net loss per share for the three and six months ended June 30, 2018 as they were anti-dilutive totaled 81,056 and 87,028, respectively.  Additionally, dilutive securities at June 30, 2017 that were not included in the calculation of diluted net loss per share for the three and six months ended June 30, 2017 as they were anti-dilutive totaled 3,127,673 and 2,956,263, respectively.

 The calculation of the weighted-average number of shares outstanding excludes shares held in treasury totaling 43,000 for the three and six months ended June 30, 2018.  

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) amended the existing Accounting Standards Update (ASU) for revenue recognition No. 2014-09, Revenue from Contracts with Customers, which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. ASU 2014-09 outlines a five-step process for revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards, and also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Major provisions include determining which goods and services are distinct and require separate accounting (performance obligations), how variable consideration (which may include change orders and claims) is recognized, whether revenue should be recognized at a point in time or over time and ensuring the time value of money is considered in the transaction price.

The FASB subsequently issued amendments to ASU No. 2014-09 that have the same effective date and transition date. Due to the Company’s emerging growth company status, these new standards will become effective for the Company on January 1, 2019. The Company plans to implement the new revenue recognition standard upon the required effective date using the modified retrospective approach and not restate comparative periods in the financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new accounting standard requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than twelve months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new accounting standard must be adopted using the modified retrospective approach and is effective for entities for annual reporting periods beginning after December 15, 2018, with early adoption permitted. This standard will become effective for the Company on January 1, 2019. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements and related disclosures.

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Note 2. Strategic Alliances and Collaboration Agreements

The Company has entered into license agreements and collaborative research and development arrangements with pharmaceutical and biotechnology companies. Under these arrangements, the Company is entitled to receive license fees, upfront payments, milestone payments when and if certain research or technology transfer milestones are achieved, development milestones and reimbursement for research and development activities. The Company's costs of performing these services are included within research and development expense. 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 model(s), lead candidate identification, and completion of IND-enabling studies. Clinical milestones may include successful enrollment of the first patient in or completion of Phase I, II, and III clinical trials, and commercial revenue is often tiered based on net or aggregate sale amounts. The Company cannot guarantee the achievement of these milestones due to risks associated with preclinical and clinical activities required for development of nucleic acid medicine-based therapeutics.

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

Collaboration Partner A

In 2015 the Company entered into two agreements with Collaboration Partner A. The Company analyzed the form and substance of both of the agreements and concluded they should be evaluated as a single arrangement for accounting purposes.

Under the 2015 agreement, the Company recognized revenue of $1.7 million and $3.6 million for the three and six months ended June 30, 2017, respectively. The revenue recognized included labor and expense reimbursements of $1.6 million and $3.4 million for the three and six months ended June 30, 2017, respectively, with the remaining revenue representing the amortized portion of the upfront fee and milestone payment of the arrangement. During the quarter ended September 30, 2017, the 2015 agreement was terminated.

In late-2017, the Company and Collaboration Partner A entered into a new agreement. The Company reviewed the timing and nature of the arrangement upon the signing of the new agreement and determined that it was not linked to the prior agreements and should be considered as a standalone agreement.

The 2017 collaboration allocated discovery, development, funding obligations, and ownership of related intellectual property among the Company and Collaboration Partner A, with Collaboration Partner A making an upfront payment, and potential milestone payments and royalty payments to the Company. The Company received an upfront payment and may receive preclinical, development and sales milestone payments, as well as royalty payments on any future licensed product sales. Collaboration Partner A will reimburse the Company for development costs at a future defined period upon the achievement of the first research and development milestone and all commercialization costs associated with the program upon selection of a drug target. The 2017 collaboration agreement includes potential milestone payments from the Collaboration Partner A to the Company of $56.5 million. Collaboration Partner A may also pay option exercise fees within the $1.0 million to $5.0 million range per target.  Collaboration Partner A will pay royalties on annual net sales of licensed products in the low to mid-single digits range, 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. In addition, the collaboration includes an exclusivity period.

As the license component of the contract has no stand alone value, the license and the research and development activities, exclusivity, and joint steering committee obligations under this agreement should be considered as a single unit of accounting in the arrangement.  The upfront fee of $7.7 million is being deferred and recognized as revenue using the Proportional Performance Method as the Company determined that the performance obligations are fulfilled in a pattern other than straight-line due to the structure and nature of the collaborative arrangement. Total deferred revenue as of June 30, 2018 and December 31, 2017 for Collaboration Partner A was $7.3 million and $7.6 million, respectively. The Company recognized revenue of $0.2 million and $0.3 million for the three and six months ended June 30, 2018, respectively.

Collaboration Partner B

In 2015 the Company entered into an agreement with Collaboration Partner B. During the initial phase of the collaboration, the Company will design and optimize therapeutics for certain rare disease targets. Collaboration Partner B has the option to add additional rare disease targets during the collaborative development period. Additionally, during the collaborative development period, the Company will participate with Collaboration Partner B in a joint steering committee. In addition, the collaboration includes an initial exclusivity period and an option to extend this period.

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For each program, Collaboration Partner B will reimburse the Company for all internal and external development costs incurred and if Collaboration Partner B achieves certain, clinical, regulatory and sales milestones, then the Company is eligible to receive additional payments.

As part of the agreement, Collaboration Partner B paid an upfront feeand agreed to certain research and development funding obligations. The Company is also entitled to certain additional payments upon exercise of the Collaboration Partner B expansion option and/or exclusivity extension (if any), and for costs incurred by us in conducting the activities assigned to us under each collaboration development plan. In addition, on a development target-by-development target basis during the two-year period from the effective date of contract, Collaboration Partner B will pay the Company a one-time milestone payment after the first optimized lead designation for the first product with respect of such development target. For each development target for which the Collaboration Partner B exercises its option, Collaboration Partner B will pay the Company a one-time option exercise fee based upon the total number of development targets for which option exercises have been made by Collaboration Partner B. In the second quarter of 2018, the Company signed an amendment with Collaboration Partner B, that may reduce milestone payments dependent on whetherthe Company does not incorporate a predefined chemistry methodology.

The agreement included total potential milestone payments for the initially selected targets from Collaboration Partner B to the Company of $133.0 million. Collaboration Partner B will pay royalties as a percentage of net sales on a product-by-product and country-by-country basis during the applicable royalty term up to 10%. As of June 30, 2018, the Company has not yet reached the clinical phase of the contract.

The Company concluded that the license, research and development activities, exclusivity, and joint steering committed obligations under this agreement should be considered a single unit of accounting in the arrangement, and the up-front fee of $10 million will be deferred and recognized as revenue over the same period as the research activities. As a result, the upfront fee has been deferred and was initially being recognized as revenue ratably over the expected 29-month period of the research activities with an end date of March 31, 2018. As of June 30, 2018, the amortization period is now expected to end by December 31, 2019 which increases the amortization period overall by 21 months. As such, the Company updated the amortization period of the remaining deferred revenue.

The Company also determined that the milestone payments as defined in the agreement were not substantive as it will not have any outstanding performance obligations under the agreement when such payments may become due, and, therefore, do not meet the requirements for application of the Milestone Method of revenue recognition. Instead, revenue from the contingent milestone payments will be recognized if and when such payments become due, subject to satisfaction of all of the criteria necessary to recognize revenue at that time.

During 2017, the Company entered into an amendment with Collaboration Partner B to add one year to the exclusivity period for the two initial targets, in consideration for a one-time payment of $2.0 million. The extension of the exclusivity period did not change the length of the research and development period. Further, the amendment added language to allow Collaboration Partner B the opportunity to review and comment on its filings and prosecution efforts of pending Company patents that relate to Collaboration Partner B chemistry. Since the Company's performance obligations under the agreement are considered a single unit of accounting, the payment consideration was added to the unamortized portion of the upfront signing fee and will be recognized systematically, on a straight-line basis, over the remainder of the period that the research and development services are expected to occur.  Total deferred revenue as of June 30, 2018 and December 31, 2017 for Collaboration Partner B was $4.5 million and $5.8 million, respectively.

The Company recognized revenue for Collaboration Partner B of$1.2 million and $2.7 million during the three and six months ended June 30, 2018, respectively, and $1.5 million and $2.8 million for the three and six months ended June 30, 2017. The revenue recognized included labor and expense reimbursements of$0.6 million and $1.4 million for the three and six months ended June 30, 2018, respectively, and $1.1 million and $1.8 million for the three and six months ended June 30, 2017, with the remaining revenue representing the amortized portion of the upfront fee on the arrangement.

Collaboration Partner C

In 2016 the Company entered into a contract with Collaboration Partner C to perform certain discovery and development of RNA medicines for treatment of a disease. The agreement provides a non-exclusive license of the Company’s technology to Collaboration Partner C for the 18 month research program term, and the Company will not engage in similar research or development activities for two years after the end of the research term. In 2017 the Company and Collaboration Partner C amended the agreement to extend the agreement research program scope and term of 18 months from the Original Agreement effective date to 12 months from the Amendment Date (through September 2018). Under the Agreement, results which are specifically related to improvements to Company products are owned by the Company, while all other Research Program results are owned by Collaboration Partner C.

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The Collaboration Partner C Agreement remains in effect until Collaboration Partner C no longer has payment obligations.  Collaboration Partner C may terminate the Agreement upon sixty days written notice. As part of the agreement, Collaboration Partner C paid an upfront fee of $0.1 million upon contract execution and agreed to provide the Company with funding for the discovery and development costs.  The agreement included immaterial milestone payments that were met during 2017. The agreement provides for $3.7 million in regularly scheduled research funding payments through 2018. In addition, Collaboration Partner C has an option to negotiate with the Company to obtain a non-exclusive, sub-licensable worldwide license to use the Company’s background technology and its owned collaboration results. The Option may be exercised by Collaboration Partner C with written notice to the Company any time for a period commencing on the Effective Date and ending on one hundred and eighty (180) days after the date of Collaboration C receipt of the Final Report. The terms and conditions of any such license shall be negotiated in good faith and agreed upon in writing between the parties within twelve 12 months after the exercise of the option by Collaboration Partner C.

The Company concluded that the research funding, exclusivity and license fees were to be accounted for as a single unit of accounting and the upfront license fees were deferred and recognized as revenue over the same period as the research activities. Total deferred revenue for Collaboration Partner C was $2.4 million as of June 30, 2018 with a negligible amount as of December 31, 2017. The Company recognized revenue from Collaboration Partner C of $0.3 million and $0.6 million for the three and six months ended June 30, 2018, respectively, and $0.4 million and $0.6 million for the three and six months ended June 30, 2017, respectively. The revenue recognized includes expense reimbursements that are recognized as revenue when incurred as per the terms of the agreement and milestone payments.

Collaboration Partner D

On January 1, 2018, the Company entered into a Development and Option Agreement with Collaboration Partner D, (the “Development Agreement”). Under the terms of the Development Agreement, the parties have agreed to conduct joint preclinical development programs on the basis of which Collaboration Partner D is granted an option for taking several licenses on pre-agreed license terms to develop and commercialize certain products incorporating the Company’s patents and know-how related to delivery systems based on or incorporating lipid-mediated delivery systems (including the LUNAR^® platform) (the “Arcturus LMD Technology”), and Collaboration Partner D patents and know-how related to mRNA technology. In addition, the Company granted to Collaboration Partner D a worldwide, non-exclusive license to use the Arcturus LMD Technology, including the right to grant sublicenses, for the purpose of conducting research and preclinical development activities, subject to certain limitations, and Collaboration Partner D granted to the Company a worldwide, non-exclusive license under its mRNA technology, solely to the extent necessary to execute the activities contemplated by the Development Agreement. Subject to certain restrictions, the parties will have an undivided one-half interest in the patents and know-how developed jointly by the parties during the course of the Development Agreement.  Pursuant to the terms of the Development Agreement, Collaboration Partner D will have a number of target options to co-develop from a reserved target list to enter into licenses under the Arcturus LMD Technology with respect to the development, manufacture and commercialization of licensed products (which can include products identified for development by the Company unless the Company is permitted by the terms of the Development and Option Agreement to place such products on a restricted list). A separate notice and fee will be required for each license agreement. If the target to which the license agreement relates is chosen by the parties for co-development under the Co-Development Agreement (which is defined below and discussed in the following paragraph) the license agreement will terminate as such programs will be covered under the Co-Development Agreement, and therefore Collaboration Partner D will be given a credit of the Exercise Fee, the Milestone Payments already paid and all other payments made in relation to the license agreement towards future such payments incurred with respect to future licenses under the Arcturus LMD Technology. Pursuant to a May 3, 2018 amendment to the Development Agreement, the Company granted Collaboration Partner D a security interest in certain of its intellectual property. The Company is in discussions with Collaboration Partner D to revise the terms of the amendment, among other things, to eliminate the security interest grant in its entirety.

Concurrently with the Partner D Collaboration Agreement, the Company entered into a Co-Development and Co-Commercialization Agreement (the “Co-Development Agreement”). Under the terms of such agreement, the parties will collaborate to develop and commercialize mRNA-based products for treating ornithine transcarbamylase (“OTC”) deficiency, incorporating Collaboration Partner D’s mRNA technology, the Company’s mRNA technology and the Arcturus LMD Technology. The overall collaboration with Partner D will be managed by a joint steering committee. The parties also have the option to co-develop two mRNA programs for Collaboration Partner D and one mRNA program for the Company, including targets for such programs selected from the reserved target list established under the Development Agreement.

The Company concluded that the research and development activities, exclusivity, license fees, governance and reserve target rights were to be accounted for as a single unit of accounting and the upfront license fees were deferred and recognized as revenue over the eight year research program period.  Further, the Company concluded that the options granted to Collaboration Partner D along with the related milestones are to be evaluated as a separate arrangement and not a deliverable of the original arrangement.  Total deferred revenue as of June 30, 2018 was comprised of $4.7 million for Collaboration Partner D. The Company recognized revenue from Collaboration Partner D of $0.3 million and $0.5 million for the three and six months ended June 30, 2018,

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respectively.  The revenue recognized included labor and expense reimbursements of$0.1 million for both the three and six months ended June 30, 2018, with the remaining revenue representing the amortized portion of the upfront fee on the arrangement.

Other Collaboration Agreements

In 2016 and 2017 the Company entered into several other smaller agreements and recorded revenue and deferred revenue consistent with the revenue recognition practices described in the significant accounting policies footnote. Additionally, see Note 10 Related Party for the related party collaboration agreement.

Note 3. Short-term Investments

The Company’s short-term investments consist of short-term bank deposits and marketable securities. As of June 30, 2018 and December 31, 2017 total short-term investments were $10.5 million and $23.6 million, respectively. The balance of investments as of December 31, 2017 included short-term bank deposits of $15.0 million with maturities of more than three months but less than one year, and were short-term deposits stated at cost and approximated market value. As of December 31, 2017, the Company's short-term bank depositsbore interest at a weighted average annual interest rate of1.6%.  As of June 30, 2018, all short-term bank deposits were liquidated.

The following is a summary of short-term investments at June 30, 2018:

	June 30, 2018
(Dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Certificates of deposit	$	200	$	—	$	—	$	200
Corporate debt securities		10,253		2		—		10,255
Total	$	10,453	$	2	$	—	$	10,455

The following is a summary of short-term investments at December 31, 2017:

	December 31, 2017
(Dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Certificates of deposit	$	1,462	$	—	$	—		$	1,462
Corporate debt securities		7,149		—		(3	)		7,146
Total	$	8,611	$	—	$	(3	)	$	8,608

All short-term investments are held as available-for-sale and mature within twelve months of June 30, 2018 and December 31, 2017. Management reviews unrealized losses individually and in the aggregate at each reporting period and has determined that none of the balances are other than temporarily impaired based upon the brief duration of time that the investments have been at a loss position as of June 30, 2018 and December 31, 2017.

Note 4. Fair Value Measurements

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

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

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

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

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

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

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The following table presents the fair value hierarchy for assets measured at fair value on a recurring basis as of June 30, 2018 (in thousands):

	June 30, 2018
	Fair value measurements using input type
	Level 1		Level 2		Level 3		Total
Cash equivalents	$	25,413	$	—	$	—	$	25,413
Certificates of deposit		—		200		—		200
Corporate debt securities		—		10,255		—		10,255
Total financial assets	$	25,413	$	10,455	$	—	$	35,868

The following table presents the fair value hierarchy for assets measured at fair value on a recurring basis as of December 31, 2017 (in thousands):

	December 31, 2017
	Fair value measurements using input type
	Level 1		Level 2		Level 3		Total
Cash equivalents	$	2,024	$	—	$	—	$	2,024
Certificates of deposit		—		1,462		—		1,462
Corporate debt securities		—		7,146		—		7,146
Total financial assets	$	2,024	$	8,608	$	—	$	10,632

The fair value of certain financial instruments was measured and classified within Level 1 of the fair value hierarchy based on quoted prices. Certain financial instruments classified within Level 2 of the fair value hierarchy include the types of instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Note 5. Balance sheet details

Prepaid expenses and other current assets consisted of the following as of June 30, 2018 and December 31, 2017:

(in thousands)	June 30, 2018		December 31, 2017
Prepaid expenses	$	322	$	704
Other current assets		212		355
Total	$	534	$	1,059

Property and equipment, net consisted of the following:

(in thousands)	June 30, 2018			December 31, 2017
Research equipment	$	2,387		$	1,620
Computers and software		208			97
Office equipment and furniture		517			255
Leasehold improvements		54			44
Total		3,166			2,016
Less accumulated depreciation and amortization		(1,223	)		(967	)
Property and equipment, net	$	1,943		$	1,049

Depreciation and amortization expense was $0.1 millionfor each of the three months ended June 30, 2018 and 2017, and $0.3 million and $0.2 million for six months ended June 30, 2018 and 2017, respectively.

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Accrued liabilities consisted of the following as of June 30, 2018 and December 31, 2017:

(in thousands)	June 30, 2018		December 31, 2017
Accrued compensation	$	1,573	$	1,812
Accrued Director “tail” insurance policy (Note 1)		1,178		—
Accrued Officer disbursements related to proxy (Note 1)		1,397		—
Other accrued liabilities		156		981
Total	$	4,304	$	2,793

Note 6. Shareholders’ Equity

         Ordinary Shares

Merger and reverse stock split

The Company completed the merger with Alcobra Ltd. on November 15, 2017. In connection with the merger, all outstanding shares of Arcturus Therapeutics, Inc. were exchanged for the Company’s Ordinary Shares at a rate of .293 Ordinary Shares of the Company’s stock for each share of Arcturus Therapeutics, Inc. common stock.

Also on November 15, 2017 and prior to and in connection with the merger, Alcobra Ltd. effected a 1-for-7 reverse stock split of Ordinary Shares and changed Ordinary Shares authorized to 30,000,000 shares. All historical information presented herein has been retroactively restated to reflect the effect of the merger exchange ratio, reverse stock split and change to the authorized number of Ordinary Shares in accordance with Accounting Standards Codification Topic 260, “Earnings Per Share.”

Restricted Ordinary Shares

In March 2013, the founders of the Company purchased 2,783,686 Ordinary Shares of stock for $0.0068 per share. Of the shares purchased, 1,538,353 were subject to a repurchase option whereby the Company has an option for two months after date of termination of service to repurchase any or all of the unvested shares at the original purchase price per share. The repurchase option shall be deemed to be automatically exercised by the Company as of the end of the two-month period unless the Company notifies the purchaser that it does not intend to exercise its option. The shares will be vested (1) 25% after obtaining suitable siRNA license; (2) 25% after in vivo proof-of-concept achieved; (3) 25% after a regulatory agency new drug application (such as an Investigational New Drug application) is filed and accepted by the applicable regulatory agency; and (4) 25% after human biological proof-of-concept is achieved. The Company met the first two milestones during 2013 and 2014. During the third quarter 2017, the purchase agreements were amended to clarify vesting conditions resulting in a modification expense being recorded related to one of the awards totaling $1,495,000 (Note 10). As of June 30, 2018, 622,667 unvested Ordinary Shares remain subject to the repurchase option.

Note 7. Share-Based Compensation

Arcturus Therapeutics, Inc. had one stock compensation plan prior to the merger, the 2013 Equity Incentive Plan (the “2013 Plan”) which provides for the granting of options, warrants, restricted stock awards, restricted stock units, and other equity-based compensation to the Company’s directors, employees and consultants. In connection with the merger and as required in the 2013 Plan, all outstanding options in the 2013 Plan converted into options to purchase Alcobra Ltd.’s Ordinary Shares, as renamed Arcturus Therapeutics Ltd., and the applicable share amounts and exercise prices were adjusted to reflect the exchange ratio. The 2013 Plan has been extinguished and no additional grants shall be made from the 2013 Plan. Options granted under the 2013 Plan generally expire ten years from the date of grant. There are 23,199 shares available for future issuance under the 2013 Plan at June 30, 2018.

Prior to the merger, Alcobra Ltd. granted options to officers, directors, advisors, management and other key employees through the 2010 Incentive Option Plan (the “2010 Plan"). Substantially all options that were outstanding under the 2010 Plan became fully vested upon the closing of the merger. The value of these options was included as a component of the purchase price recorded in conjunction with the merger. The number of shares subject to and the exercise prices applicable to these outstanding options were adjusted in connection with the 1- for- 7 reverse stock split. Options granted under the 2010 Plan generally expire ten years from the date of grant. Upon merger, the 2013 Plan was assumed by the 2010 Plan. The Company generally issues new shares upon option exercise.

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The Company did not grant any options during the six months ended June 30, 2018. As of June 30, 2018, there were 209,545 options outstanding with the weighted average exercise price of $4.38 per share. There were 472,502 shares available for future issuance under the 2010 Plan as of June 30, 2018.In July 2018, the Company issued options to purchase 416,931 of its Ordinary Sharesto a group of employees. Subsequent to the July 2018 grant, the Company elected to adopt a new equity incentive plan as discussed in the following paragraph and does not intend to issue additional share based awards under the 2010 Plan in the foreseeable future.

In August 2018, the Company adopted the 2018 Omnibus Equity Incentive Plan (“2018 Plan”). Under the 2018 Plan, the Company is authorized to issue up to a maximum of1,100,000 ordinary shares pursuant to the exercise of incentive share options or other awards provided for therein. In August 2018, the Company issued options to purchase a total of 232,500 Ordinary Shares to its executives. The Company also issued options to purchase a total of 130,000 Ordinary Shares to the non-executive members of the Company’s board of directors and a total of 160,000 Ordinary Shares to a group of employees.

Note 8. Income Taxes

As of December 31, 2017, the Company’s deferred tax assets for net operating losses included foreign losses of pre-acquisition Alcobra Ltd of $20.7 million (“Israeli NOL”). A full valuation allowance was provided for such deferred tax assets as the Company believes that it is more likely than not that the deferred assets will not be utilized. 

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the "Act"). The Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Act reduces the corporate tax rate from a maximum of 35% to a flat 21% rate. The rate reduction is effective on January 1, 2018. As a result of the rate reduction, the Company was required to reduce its deferred tax asset balance as of December 31, 2017 by $2.4 million. Due to the company's full valuation allowance position, the company reduced the valuation allowance by the same amount.  As a result of the Act, the SEC issued guidance under Staff Accounting Bulletin No. 118 ("SAB 118") that allows for a measurement period up to one year after the enactment date of the Act to finalize the recording of the related tax impacts. The Company has not made any provision adjustments during the six months ended June 30, 2018.  The Company is the process of assessing the final impact of the guidance which we expect to complete within the one-year time frame provided by SAB 118.

Note 9. Commitments and Contingencies

Cystic Fibrosis Foundation Therapeutics, Inc. Funding agreement

The Company has received royalty bearing grants sponsored by Cystic Fibrosis Foundation Therapeutics, Inc. (“CFFT”). Should the awards result in a successful product, the Company will pay CFFT a specified payment amount in installments following commercialization based on a formula that is six times the total award amount, plus a payment equal to the awarded payments, within sixty days after aggregate net sales of the product exceed certain thresholds. Further, in the event of a license, sale or other transfer of the product or the Company’s development program technology (including a change of control transaction), the Company will pay CFFT a percentage of such transfer payments actually received by the Company or the Company’s shareholders (subject to a royalty cap). As of June 30, 2018, the Companyhas not had a successful product utilizing CFFT grants.  

Operating Leases

    For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as rent expense on a straight-line basis over the lease term. Leasehold improvement incentives paid to the Company by the landlord are recorded as a deferred rent and amortized as a reduction of rent expense over the lease term. Rent expense totaled $318,000 and 85,000 for three months ended June 30, 2018 and 2017, respectively, and $459,000 and $167,500 for six months ended June 30, 2018 and 2017, respectively.

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Future minimum payments under leases and lease commitments with initial terms greater than one year were as follows at December 31, 2017:

(in thousands)
2018 (remainder of the year)	$	556
2019		1,234
2020		1,271
2021		1,310
2022		1,349
Thereafter		3,138
Total	$	8,858

Note 10. Related Party Transactions

During 2016, the Company entered into a Research Collaboration and License Agreement with a related party, Providence Therapeutics, Inc. (“Providence”) whose CEO and President is also a stockholder of the Company, to identify and optimize microRNA modulators and/or mimetics for the treatment of neoplastic diseases. In April 2017, the Providence Agreement was amended to include mRNA for the treatment of neoplastic disease. In July 2018, the Providence Agreement was amended and restated to cover brain neoplasms, breast neoplasms and ovarian neoplasms.  Each party is responsible for their own research costs under the agreement, and Providence is responsible for all of the development costs through the completion of Phase 2 clinical trials. The Company is entitled to share in future product revenue of each product provided the Company shares in the product’s post Phase 2 costs. Separately, Providence has agreed to pay a specified rate for the use of the Company’s employees. For the six months ended June 30, 2018 and 2017, the Company has recognized $0.1 million and $0.8 million, respectively, in revenue related to the amortization of the upfront payment and revenue related to the use of Company employees and expense reimbursements. For the three months ended June 30, 2018 and 2017, the Company has recognized a negligible amount and $0.2 million, respectively, in revenue related to the amortization of the upfront payment and revenue related to the use of Company employees and expense reimbursements. There were no outstanding accounts receivable related to this agreement as of June 30, 2018 and December 31, 2017. During the third quarter of 2017, the Company stock agreement for the President and CEO of Providence was modified to remove the vesting conditions of the original grant and the Company recognized $1.5 million in related stock compensation expense. As of June 30, 2018, the President and CEO of Providence held a 6.4% ownership interest in the Company.

Note 11. Litigation

Previously Disclosed Litigation in Israel and California and California Arbitration

The Company, executive officers Joe Payne (CEO) and Pad Chivukula (COO and CSO) and certain former and current members of the Company’s board of directors were party to now terminated lawsuits filed in Israel and California and an arbitration in California.  These lawsuits and the arbitration emanated from disputes among certain of these parties in connection with actions taken by former board members to terminate the employment of Mr. Payne and Dr. Chivukula and lawsuits filed by Mr. Payne in response to these terminations.  

As described in Note 1, Mr. Payne and Dr. Chivukula have been reappointed to their roles as CEO (Payne) and COO and CSO (Chivukula) with the Company and the Company entered into an Agreement and Release with its current officers and certain former directors and officers to terminate all of the then ongoing litigation in Israel and the Unites States and the arbitration that arose in connection with the terminations of Mr. Payne and Dr. Chivukula.  Accordingly, all of the previously described lawsuits and the arbitration have been dismissed with prejudice.  

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Note 12. Selected Financial Data

The following table includes selected financial data for each of the quarters in 2017 and for each of the quarters ended March 31, 2018 and June 30, 2018.

	For the quarter ended
(in thousands, except per share and share data)	June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
	(Unaudited)
Revenue in conjunction with strategic alliances and    collaborations	$	2,386		$	2,367		$	2,020		$	3,296		$	3,761		$	3,921
Research and development expenses, net		4,225			3,941			3,030			4,886			3,769			4,233
General and administrative expenses		8,233			5,098			3,957			1,523			1,058			1,034
Net loss from operations		(10,072	)		(6,672	)		(4,967	)		(3,113	)		(1,066	)		(1,346	)
Net loss		(9,950	)		(6,571	)		(5,280	)		(3,177	)		(1,099	)		(1,346	)
Net loss per share, basic and diluted	$	(0.99	)	$	(0.66	)	$	(0.86	)	$	(1.51	)	$	(0.54	)	$	(0.66	)
Weighted average shares outstanding, basic and    diluted		10,057,048			10,027,834			6,151,580			2,099,318			2,031,599			2,031,599
	As of
	June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
	(Unaudited)
Working capital	$	23,429		$	37,383		$	39,828		$	5,144		$	6,432		$	1,706
Total assets	$	44,322		$	52,483		$	52,024		$	12,221		$	13,354		$	9,678
Shareholders' equity (deficit)	$	17,795		$	27,543		$	33,794		$	(1,999	)	$	(826	)	$	253

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EX-99

Exhibit 99.2

ARCTURUS THERAPEUTICS LTD. AND ITS SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the financial condition and results of operations of Arcturus Therapeutics Ltd. for the three and six-month periods ended June 30, 2018. Unless otherwise specified herein, references to the “Company,” “we,” “us” or “our” shall include Arcturus Therapeutics Ltd. and its subsidiaries. You should read the following discussion and analysis together with the unaudited interim condensed consolidated financial statements and related notes included elsewhere herein. For additional information relating to our management’s discussion and analysis of financial conditions and results of operations, please see our Annual Report on Form 20‑F for the year ended December 31, 2017 (the “2017 Annual Report”), which was filed with the U.S. Securities and Exchange Commission (the “Commission”) on May 14, 2018 and amended on July 10, 2018. Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2017 Annual Report.

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

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

Overview

Arcturus is an emerging RNA medicines company focused on the development and commercialization of therapeutics directed towards rare, infectious, fibrotic, and respiratory diseases with significant unmet medical need. The genetic medicines industry is constantly struggling to identify non-viral delivery solutions for large RNA molecules to different cell types. Arcturus’ LUNAR® Delivery technology is lipid mediated – and non-viral.  LUNAR is versatile, compatible with various types of RNA -- and has been shown to deliver large RNA to different cell types including Liver hepatocytes, Liver stellate cells, Muscle cells (myocytes), and Lung cells (including bronchial epithelial cells).

Our activities since inception have consisted principally of performing research and development activities and raising capital to fund those efforts. Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before we achieve sustainable revenues and profit from operations. As of June 30, 2018, we had an accumulated deficit of $39.6 million. 

Organizational Update

On May 29, 2018, the Company filed with the Commission a Report on Form 6-K containing an Agreement and Release by and among Arcturus Therapeutics Ltd and subsidiaries as well as current officers: Joe Payne (CEO) and Pad Chivukula (COO and CSO), former employees: Mark Herbert and Rebecque Laba, and former board members: Craig Willett, Daniel Geffken, David Shapiro and Stuart Collinson (referred to as the “Agreement and Release”).

Pursuant to the terms of the Agreement and Release, among other things, the Company agreed to maintain in effect the Company’s existing directors’ and officers’ insurance policies for the period of at least six years and the Company agreed to purchase a directors and officers “tail” insurance policy covering all current and former directors and officers for any acts or events occurring prior to the effective date of the Agreement and Release for a period of at least six years. The Company agreed that such existing directors and officers liability coverage and the “tail policy” to be purchased shall be on the same terms, conditions, and amounts as the Company’s existing directors and officers liability policy in effect as of the effective date of the Agreement and Release.  The total insurance costs for the aforesaid directors and officers liability policy amounted to approximately $1.2 million, which was accrued in full as of June 30, 2018.

The Company also agreed to reimburse each of Joe Payne and Pad Chivukula for their respective fees and expenses incurred in connection with the related litigation and the entry into the Agreement and Release.  Mr. Payne and Dr. Chivukula have returned to work for the Company in their respective officer roles. The Company reimbursed Mr. Payne and Dr. Chivukula their combined aforesaid fees and expenses of approximately $1.4 million, which was accrued in full as of June 30, 2018.

The Company incurred proxy costs and expenses of $5.6 million in connection with the litigation leading up to the Agreement and Release, which was accrued in full as of June 30, 2018. Costs were comprised of legal fees and the purchase of the “tail policy.”

Board of Directors and Management Team

The members of the Company’s Board of Directors are Peter Farrell, Ph.D. (Chairman), Joseph Payne, MSc, Andy Sassine, MBA, Magda Marquet, Ph.D. and James Barlow, MA. The management team includes Joseph Payne, MSc (President & CEO) and Pad Chivukula, Ph.D. (CSO & COO).

Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Report and our audited financial statements and related notes for the year ended December 31, 2017. Our historical results of operations and the year-to-year comparisons of our results of operations that follow are not necessarily indicative of future results. As noted in the 2017 Annual Report, from an accounting perspective, the merger which closed on November 15, 2017 has been reflected in our financial statements as a recapitalization, whereby Arcturus Therapeutics, Inc. was the deemed accounting acquirer. Accordingly, our results of operations described below reflect Arcturus Therapeutics, Inc.’s results, not Alcobra Ltd.’s results, for the three and six-month periods as of June 30, 2017.

Revenues

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

	Three Months Ended June 30,				2017 to 2018
(Dollars in thousands)	2018		2017		$ change			% change
Revenue in conjunction with strategic alliances    and collaborations	$	2,386	$	3,761	$	(1,375	)		-36.6	%

Revenue under strategic alliances and collaborations decreased by $1.4 million during the three months ended June 30, 2018 as compared to the three months ended June 30, 2017. The Company completed its initial collaboration agreement with one collaboration partner during the third quarter of 2017 and subsequently began a new collaboration agreement with the same partner during the fourth quarter of 2017 causing a net decrease in collaboration revenue of $1.5 million. Furthermore, a decrease in revenue of $0.6 million resulted from lower revenue recognition for research and development funding and upfront payments. Total decreases were offset by higher revenue of $0.7 million from one new collaboration agreement signed during the fourth quarter of 2017 as well as one during the first quarter of 2018.    

	Six Months Ended June 30,				2017 to 2018
(Dollars in thousands)	2018		2017		$ change			% change
Revenue in conjunction with strategic alliances    and collaborations	$	4,753	$	7,682	$	(2,929	)		-38.1	%

Revenue under strategic alliances and collaborations decreased by $2.9 million during the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. The Company completed its initial collaboration agreement with one collaboration partner during the third quarter of 2017 and subsequently began a new collaboration agreement with the same partner during the fourth quarter of 2017 causing a net decrease in collaboration revenue of $3.2 million.  Furthermore, a decrease in revenue of $0.7 million resulted from lower revenue recognition for research and development funding. Total decreases were offset by higher revenue of $1.0 million from one new collaboration agreement signed during the fourth quarter of 2017 as well as one during the first quarter of 2018.    

Operating Expenses

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

	Three Months Ended June 30,				2017 to 2018					Six Months Ended June 30,				2017 to 2018
(Dollars in thousands)	2018		2017		$ change		% change			2018		2017		$ change		% change
Operating expenses:
Research and development, net	$	4,225	$	3,769	$	456		12.1	%	$	8,166	$	8,002	$	164		2.0	%
General and administrative		8,233		1,058		7,175	*				13,331		2,092		11,239	*
Total	$	12,458	$	4,827	$	7,631	*			$	21,497	$	10,094	$	11,403	*

* Greater than 100%

Research and Development Expenses, net

Our research and development expenses consist primarily of payments for salaries and related personnel expenses, third-party clinical consultants, and laboratory supplies related to conducting research and development activities in conjunction with collaborative agreements and our internal research and development activities and are reflected net of any royalty bearing grants.

The increase of $0.5 million in research and development expenses for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017 resulted primarily from an increase of $0.3 million in compensation related costs as well as increases in general facility costs of $0.2 million.    

The increase of $0.2 million in research and development expenses for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 resulted primarily from an increase in compensation related costs of $0.5 million, and $0.4 million of general facility costs, offset by lower research and development costs due to the reduced expenditures related to collaboration agreements.

General and Administrative Expenses

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

The increase in general and administrative expenses of $7.2 million for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017 was due to proxy and related costs of $4.9 million, which included legal fees of $2.9 million, a $1.2 million increase in insurance costs from a director “tail” insurance policy that was purchased pursuant to the terms of the Agreement and Release entered into by and among the Company as well as the current officers: Joe Payne (CEO) and Pad Chivukula (COO and CSO), former employees: Mark Herbert and Rebecque Laba, and the former board members: Craig Willett, Daniel Geffken, David Shapiro and Stuart Collinson, additional professional fees of $0.4 million, and other personnel costs of $0.4 million.  The remaining increase of $2.3 million was due primarily to public company costs which include $0.6 million of higher compensation related costs due to an increase in personnel, $1.4 million of professional services, and $0.3 million of facility and other costs.  

The increase in general and administrative expenses of $11.2 million for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 was due to proxy and related costs of $7.3 million, which included legal fees of $4.4 million, $1.2 million increase in insurance cost from a director “tail” insurance policy that was purchased pursuant to the terms of the Agreement and Release, additional professional fees of $0.9 million, and other personnel costs of $0.8 million. The remaining increase of $3.9 million was due primarily to public company costs including $1.1 million of higher compensation related costs due to an increase in personnel, $2.3 million of professional services and $0.5 million of other facility related costs.  

Finance (expense) income, net

	Three Months Ended June 30,						2017 to 2018					Six Months Ended June 30,						2017 to 2018
(Dollars in thousands)	2018			2017			$ change		% change			2018			2017			$ change		% change
Finance (expense) income, net:
Interest income	$	131		$	7		$	124	*			$	230		$	9		$	221	*
Interest expense		(9	)		(40	)		31		-77.5	%		(7	)		(42	)		35		-83.3	%
Total	$	122		$	(33	)	$	155	*			$	223		$	(33	)	$	256	*

* Greater than 100%

Interest income is generated on cash and cash equivalents and our short-term investments. For the three and six months ended June 30, 2018, the increase in interest income over the three and six months ended June 30, 2017 resulted from increased balances including cash and investments obtained in conjunction with our merger.

Interest expense was incurred primarily in conjunction with our convertible notes which were converted to Ordinary Shares in November 2017 in conjunction with our merger.

Unrealized gain (loss) on available-for-sale marketable securities

We recognized an immaterial unrealized gain (loss) on available-for-sale marketable securities for the three and six months ended June 30, 2018 based upon changes in market prices for our marketable securities.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States, or U.S. GAAP. As such, we make certain estimates, judgements and assumptions that we believe are reasonable, based upon information available to us. These judgements involve making estimates about the effect of matters that are inherently uncertain and may significantly impact our results of operations and financial condition. We describe our significant accounting policies more fully in Note 2 to our consolidated financial statements for the year ended December 31, 2017. In the following paragraphs, we describe the specific risks associated with these critical accounting policies and we caution that future events exactly as one may expect, and that best estimates may require adjustment.

The following are our significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results.

Revenue Recognition

We enter into arrangements with pharmaceutical and biotechnology partners that may involve multiple deliverables. These arrangements may contain upfront payments, license fees for research and development arrangements, research and development funding, milestone payments, option exercise fees and royalties on future sales. Each deliverable in the arrangement is evaluated at the inception of the arrangement to determine whether it meets the criteria to be accounted for as a separate unit of accounting or whether it should be combined with other deliverables. When deliverables are separable, consideration received is allocated to the separate units of accounting based on the relative selling price method and the appropriate revenue recognition principles are applied to each unit.  Revenue is recognized separately for each unit of accounting when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. Amounts received as compensation related to funded research and development efforts are recognized as revenue when the above criteria have been met. When management determines we have a single unit of accounting under our collaborative arrangements, upfront fees received for collaborative agreements are deferred and recognized on a straight-line basis, unless evidence suggests that the revenue is earned or obligations are fulfilled in a different pattern, over the expected performance period under each respective arrangement. As a result, we make our best estimate of the period over which we expect to fulfill its performance obligations under an arrangement. Any amounts received under the arrangement in advance of performance are recorded as deferred revenue and recognized as revenue as we complete the performance obligations. We apply the milestone method of accounting to recognize revenue from milestone payments when earned.

Deferred Taxes

In accordance with ASC 740, Income Taxes, we recognize deferred tax assets and liabilities for the expected future tax consequences or events that have been included in our financial statements and/or tax returns. Deferred tax assets and liabilities are based upon the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Ordinary Share Valuations

Since our inception date until May 2017, the estimated fair value of the ordinary shares underlying our share options was determined at the grant date of each option by our board of directors with input from management and with the assistance of independent third-party valuations. For awards granted after May 2017 until the merger date, the fair value as determined by the merger agreement was used in the Ordinary Share valuation. The valuations of our ordinary shares prior to May 2017 were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”). The methodology used by the third-party

valuation specialists to assist in determining the fair value of our Ordinary Shares included estimating the fair value of the equity and then allocating this value to all of the equity interests using the option pricing method. The assumptions used in the valuation model to determine the estimated fair value of our ordinary shares as of the grant date of each option are based on numerous objective and subjective factors, combined with management judgment, including the following:

• Our operating and financial performance, including our levels of available capital resources;

• The valuation of publicly-traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of peer companies;

• Rights and preferences of our ordinary shares compared to the rights and preferences of its other outstanding equity securities;

• Equity market conditions affecting comparable public companies, as reflected in comparable companies’ market multiples, initial public offering valuations and other metrics;

• The achievement of enterprise milestones, including our development, intellectual property and regulatory progress;

• The likelihood of achieving a liquidity event for our ordinary shares, such as an initial public offering or an acquisition of its company given prevailing market and biotechnology sector conditions;

• Sales of our preferred shares in arms-length transactions;

• The illiquidity of our securities while we were a private company;  

• Business risks; and

• The fair value determined by our merger agreement.  

Emerging Growth Company

Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we elected to rely on other exemptions, including without limitation, (i) providing an auditor’s attestation report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). These exemptions will apply for a period of five years following the completion of our initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.

Under the JOBS Act, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of new or revised accounting standards that have different transition dates for public and private companies until those standards would otherwise apply to private companies. We have elected to use this extended transition period. As a result of this election, our timeline to comply with these standards will in many cases be delayed as compared to other public companies that are not eligible to take advantage of this election or have not made this election. Therefore, our financial statements may not be comparable to those of companies that comply with the public company effective dates for these standards.

Liquidity and Capital Resources

Overview

Since our inception, we have funded our operations principally with proceeds from the sale of capital stock, convertible notes and revenues earned through collaborative agreements. In November 2017, we obtained $36.4 million in cash and short-term investments from our merger with Alcobra Ltd. At June 30, 2018, we had$39.8 million in unrestricted cash, cash equivalents and short-term investments.

To support our long-term plans, the Company intends to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements with partners or through other sources of financing. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations. 

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

• the achievement of milestones under our strategic alliance agreements;  

• the terms and timing of any other strategic alliance, licensing and other arrangements that we may establish;  

• the initiation, progress, timing and completion of preclinical studies and clinical trials for our product candidates;  

• the number and characteristics of product candidates that we pursue;  

• the outcome, timing and cost of regulatory approvals;  

• delays that may be caused by changing regulatory requirements;  

• the cost and timing of hiring new employees to support our continued growth;  

• the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;  

• the costs and timing of procuring clinical and commercial supplies of our product candidates;  

• the costs and timing of establishing sales, marketing and distribution capabilities;

• the costs associated with legal proceedings, including our proxy contest;

• the costs associated with potential litigation related to collaboration agreements; and

• the extent to which we acquire or invest in businesses, products or technologies.

The following table shows a summary of our cash flows for the six months ended December 31, 2018 and 2017 (in thousands):

	Six Months Ended June 30,
(Dollars in thousands)	2018			2017
Cash provided by (used in):
Operating activities	$	(8,202	)	$	(3,731	)
Investing activities		12,042			(16	)
Financing activities		351			5,489
Net increase in cash and restricted cash	$	4,191		$	1,742

Operating Activities

Our primary use of cash is to fund operating expenses, which consist mainly of research and development expenditures. We have incurred significant losses which have been partially offset by cash collected through our collaboration agreements and acquired through our recent merger. Cash collections under the collaboration agreements can vary from year to year depending on the terms of agreement and work performed. These changes on cash flows primarily relate to the timing of cash receipts for upfront payments, reimbursable expenses and achievement of milestones under these collaborative agreements.

Net cash used in operating activities was $8.2million on a net loss of $16.5 million for the six months ended June 30, 2018, compared to net cash used of $3.7 million on a net loss of $2.4 million for the six months ended June 30, 2017.  Adjustments for non-cash charges, including stock-based compensation and depreciation and amortization were $0.4 million and $0.2 million for the six months ended June 30, 2018 and 2017, respectively. Changes in operating assets and liabilities resulted in adjustments to operating net cash inflows and outflows of $7.9 million and ($1.5) million for the six months ended June 30, 2018 and 2017, respectively.

Investing Activities

Net cash provided by investing activities of $12.0 million for the six months ended June 30, 2018 reflected proceeds of the maturities of our short-term investments of $22.3 million, offset by purchases of short-term investments of $9.2 million, and cash used to purchase property and equipment of $1.0 million. Net cash used in investing activities for the six months ended June 30, 2017 reflected the purchase of a nominal amount of property and equipment.

Financing Activities

Net cash provided by financing activities of $351,000 for the six months ended June 30, 2018 consisted of net proceeds from the exercise of stock options. Net cash provided by financing activities of $5.5 million for the six months ended June 30, 2017 consisted of proceeds from issuance of convertible promissory notes in 2017.

Capital Expenditures

For the six months ended June 30, 2018 and 2017, our capital expenditures amounted to $1.2 million and $0.1 million, respectively, which related to the purchase of property and equipment primarily for research and development activities.

Funding Requirements

We anticipate that we will continue to generate annual net losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin commercialization of our products. As a result, we will require additional capital to fund our operations. In order to support our long-term plans, the Company intends to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements with partners or through other sources of financing. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations.  

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

• the achievement of milestones under our strategic alliance agreements;  

• the terms and timing of any other strategic alliance, licensing and other arrangements that we may establish;  

• the initiation, progress, timing and completion of preclinical studies and clinical trials for our product candidates;  

• the number and characteristics of product candidates that we pursue;  

• the outcome, timing and cost of regulatory approvals;  

• delays that may be caused by changing regulatory requirements;  

• the cost and timing of hiring new employees to support our continued growth;  

• the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;  

• the costs and timing of procuring clinical and commercial supplies of our product candidates;  

• the costs and timing of establishing sales, marketing and distribution capabilities;

• the costs associated with legal proceedings, including our proxy contest;

• the costs associated with potential litigation related to collaboration agreements; and

• the extent to which we acquire or invest in businesses, products or technologies.

Current Financing Outlook

We have financed our operations to date primarily through proceeds from sales of capital stock and other equity and debt securities, proceeds from the reverse merger and payments received in conjunction with our collaboration efforts. We have incurred losses and generated negative cash flows from operations since inception. To date, we have not generated any revenue from the sale of products and we do not expect to generate revenues from sale of our products in the near term. We believe that our existing capital resources will be sufficient to fund our operations for at least twelve months from the filing of this Form 6-K. However, we will need to raise additional funds before we have positive cash flow from operations.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	Arcturus Therapeutics Ltd.
Document Type	6-K
Trading Symbol	ARCT
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Entity Central Index Key	0001566049
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 29,322	$ 24,965
Restricted cash		166
Short-term investments	10,455	23,608
Accounts receivable	1,371	480
Prepaid expenses and other current assets	534	1,059
Intangible asset held for sale		590
Total current assets	41,682	50,868
Property and equipment, net (Note 5)	1,943	1,049
Equity investment	590
Other assets	107	107
Total assets	44,322	52,024
Current liabilities:
Accounts payable	2,781	1,790
Accrued liabilities	4,304	2,793
Deferred revenue	11,168	6,457
Total current liabilities	18,253	11,040
Deferred revenue, net of current portion	8,021	7,190
Other liabilities	253
Total liabilities	26,527	18,230
Commitments and Contingencies (Note 9)
Shareholders' equity
Ordinary shares: NIS 0.07 par value; 30,000 shares authorized, 10,783 issued, 10,740 outstanding and 43 held in treasury at June 30, 2018; NIS 0.07 par value; 30,000 shares authorized, 10,699 issued, 10,656 outstanding and 43 held in treasury at December 31, 2017	214	212
Additional paid-in capital	57,189	56,674
Accumulated other comprehensive gain (loss)	2	(3)
Accumulated deficit	(39,610)	(23,089)
Total shareholders' equity	17,795	33,794
Total liabilities and shareholders' equity	$ 44,322	$ 52,024

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - ₪ / shares	Jun. 30, 2018	Dec. 31, 2017
Statement Of Financial Position [Abstract]
Common stock, par value	₪ 0.07	₪ 0.07
Common stock, shares authorized	30,000,000	30,000,000
Treasury shares	43,000	43,000
Common stock, shares issued	10,783,000	10,699,000
Common stock, shares outstanding	10,740,000	10,656,000

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Statement Of Income And Comprehensive Income [Abstract]
Revenue in conjunction with strategic alliances and collaborations	$ 2,386	$ 3,761	$ 4,753	$ 7,682
Operating expenses:
Research and development, net	4,225	3,769	8,166	8,002
General and administrative	8,233	1,058	13,331	2,092
Total operating expenses	12,458	4,827	21,497	10,094
Loss from operations	(10,072)	(1,066)	(16,744)	(2,412)
Finance (expense) income, net	122	(33)	223	(33)
Net loss	$ (9,950)	$ (1,099)	$ (16,521)	$ (2,445)
Net loss per share, basic and diluted	$ (0.99)	$ (0.54)	$ (1.65)	$ (1.20)
Weighted average shares outstanding-basic and diluted	10,057,048	2,031,599	10,042,522	2,031,599
Comprehensive loss:
Net loss	$ (9,950)	$ (1,099)	$ (16,521)	$ (2,445)
Unrealized gain on short-term investments	7	0	5	0
Comprehensive loss	$ (9,943)	$ (1,099)	$ (16,516)	$ (2,445)

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Ordinary Shares [Member]	Additional Paid-In Capital [Member]	Accumulated Other Comprehensive Gain (Loss) [Member]	Accumulated Deficit [Member]
Balance at Mar. 31, 2017	$ 253
Net loss	(1,099)
Unrealized gain on short-term investments	0
Balance at Jun. 30, 2017	(826)
Net loss	(3,177)
Balance at Sep. 30, 2017	(1,999)
Net loss	(5,280)
Balance at Dec. 31, 2017	33,794	$ 212	$ 56,674	$ (3)	$ (23,089)
Balance (in shares) at Dec. 31, 2017		10,699
Net loss	(6,571)
Balance at Mar. 31, 2018	27,543
Balance at Dec. 31, 2017	33,794	$ 212	56,674	(3)	(23,089)
Balance (in shares) at Dec. 31, 2017		10,699
Net loss	(16,521)	$ 0	0	0	(16,521)
Unrealized gain on short-term investments	5	0	0	5	0
Share-based compensation	166	0	166	0	0
Shares issued in conjunction with share option exercise	351	$ 2	349	0	0
Shares issued in conjunction with share option exercise (in shares)		84
Balance at Jun. 30, 2018	17,795	$ 214	57,189	2	(39,610)
Balance (in shares) at Jun. 30, 2018		10,783
Balance at Mar. 31, 2018	27,543
Net loss	(9,950)
Unrealized gain on short-term investments	7
Balance at Jun. 30, 2018	$ 17,795	$ 214	$ 57,189	$ 2	$ (39,610)
Balance (in shares) at Jun. 30, 2018		10,783

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
OPERATING ACTIVITIES:
Net loss	$ (16,521)	$ (2,445)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	256	199
Share-based compensation expense	166	41
Interest expense on convertible promissory notes	0	3
Changes in operating assets and liabilities
Accounts receivable	(891)	1,887
Prepaid expense and other assets	644	135
Accounts payable	838	(1,149)
Accrued liabilities	1,764	(116)
Deferred revenue	5,542	(2,286)
Net cash used in operating activities	(8,202)	(3,731)
INVESTING ACTIVITIES:
Proceeds from maturities of short-term investments	22,253	0
Purchases of short-term investments	(9,211)	0
Acquisition of property and equipment	(1,000)	(16)
Net cash provided by (used in) investing activities	12,042	(16)
FINANCING ACTIVITIES
Proceeds from issuance of convertible promissory notes	0	5,489
Proceeds from exercise of share options	351	0
Net cash provided by financing activities	351	5,489
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	4,191	1,742
Cash and cash equivalents at beginning of the period	25,238	8,345
Cash and cash equivalents at end of the period	29,429	10,087
Supplemental disclosure of cash flow information
Cash paid for interest	0	0
Cash paid for income taxes	0	0
Non-cash investing and financing activities
Sale of intangible assets for equity investment	590	0
Release of repurchase liability for restricted shares	37	0
Purchase of property and equipment in accounts payable	$ 150	$ 81

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Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

Note 1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

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

Interim financial results are not necessarily indicative of results anticipated for the full year. These unaudited financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2017.

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

Unless the context otherwise requires, references to the “Company,” “Arcturus,” “we,” “us” and “our” refer to Arcturus Therapeutics Ltd. And its subsidiaries.

Organizational Update

On May 29, 2018, the Company filed with the Securities and Exchange Commission a Report on Form 6-K containing an Agreement and Release entered into by and among the Company as well as current officers: Joe Payne (CEO) and Pad Chivukula (COO and CSO), former employees: Mark Herbert and Rebecque Laba, and former board members: Craig Willett, Daniel Geffken, David Shapiro and Stuart Collinson (referred to as the “Agreement and Release”).

As part of a settlement agreement, the Company has appointed four new independent directors, Dr. Peter Farrell, Mr. Andrew Sassine, Mr. James Barlow and Dr. Magda Marquet, to its Board, effective as of May 27, 2018. In connection with these appointments, Dr. Stuart Collinson, Mr. Daniel Geffken, Dr. David Shapiro, and Mr. Craig Willett have resigned from the Board. Further, the Company agreed to, and accrued as of June 30, 2018 the purchase of a director “tail” policy and the reimbursement professional fees incurred by certain officers (Note 5).

Reverse Merger

On November 15, 2017, Alcobra Ltd. acquired Arcturus Therapeutics, Inc. pursuant to a merger between the companies (the “merger”). Prior to the merger, Alcobra Ltd.’s net assets consisted of cash, investments and nominal non-operating assets. Upon consummation of the merger, Alcobra Ltd. adopted the business plan of Arcturus Therapeutics, Inc. In connection with the merger, Alcobra Ltd. agreed to acquire all of the outstanding common stock of Arcturus Therapeutics, Inc. in exchange for the issuance of an aggregate 6,631,712 of Alcobra Ltd.’s Ordinary Shares, par value 0.07 NIS per share (the “Ordinary Shares”), after giving effect to a 1-for-7 reverse split effected immediately prior to the merger. As a result of the merger, Arcturus Therapeutics, Inc. became a wholly-owned subsidiary of Alcobra Ltd. While Alcobra Ltd. was the legal acquirer in the transaction, Arcturus Therapeutics, Inc. was deemed the accounting acquirer. Immediately after giving effect to the merger, on November 15, 2017, Alcobra Ltd. changed its name to Arcturus Therapeutics Ltd. On November 16, 2017, the Company commenced trading on the Nasdaq Global Market under the symbol “ARCT.” The Company’s principal executive offices are located in San Diego, California.

In accordance with the authoritative literature, a transaction where a private company merges into a public company with no operations and nominal net assets should be accounted for as a capital transaction rather than a business combination. Consequently, the reverse merger was accounted for as an issuance of shares by the Company for the net assets of Alcobra Ltd., accompanied by a recapitalization. Excess of considerations paid over net assets acquired and other merger-related costs were recorded as a charge to additional paid-in capital during the fourth quarter of 2017. As a result, the financial statements of the Company prior to the merger date are the historical financial statements of Arcturus whereas the financial statements of the Company after the merger date reflect the results of the operations of Arcturus and Alcobra Ltd. on a combined basis. All historical information presented herein has been retroactively restated to reflect the effect of the merger shares exchange ratio, reverse stock split and change to the authorized number of Ordinary Shares in accordance with Accounting Standards Codification Topic 260, “Earnings Per Share”.

Liquidity

The Company’s activities since inception have consisted principally of performing research and development 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.

Historically, the Company’s primary source of financing has been throughissuance of its equity securities, through issuance of convertible promissory notes and through collaboration agreements. Research and development activities have required significant capital investment since the Company’s inception. The Company expects that the operations will continue to require cash investment to pursue the Company’s research and development activities, including preclinical studies, formulation development, clinical trials and related drug manufacturing. The Company has a limited operating history and is preclinical with no revenues from sales of its products, and the sales and income potential of the Company’s business and market are unproven. The Company has experienced net losses since its inception and as of June 30, 2018 has an accumulated deficit of $39.6 million. The Company also added to its historical financing by acquiring $36.4 million in cash, cash equivalents and short-term investments in conjunction with the merger of Alcobra, however, the Company expects to continue to incur additional losses for the foreseeable future. Over that period the Company is preparing to raise additional debt and equity financing and enter into additional partnerships to fund its development. The ability of the Company to transition to profitability is dependent on developing products and product revenues to support the level of expenses. If the Company is not able to achieve its planned revenue growth or incurs costs in excess of its forecasts, it may be required to reduce discretionary spending, may not be able to continue the development of all of its products or may be required to delay part of its development programs, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. There can be no assurances that additional financing will be secured or, if secured, will be on favorable terms. The Company's management and board of directors are of the opinion that its current financial resources will be sufficient to continue the development of the Company's products for at least twelve months from the filing of this Report in Form 6-K.

In order to support our long-term plans, the Company intends to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements with partners or through other sources of financing. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations.If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected. There can be no assurance that the Company will be able to obtain the needed financing on acceptable terms or at all.

Intangible Assets Held for Sale and Equity Investment

As the end of the second quarter of 2018, the Company completed the sale of its intangible assets related to the ADAIR technology, which was accounted for as an intangible asset held for sale as of December 31, 2017. Pursuant to the asset purchase agreement for ADAIR, the Company received 30% ownership interest in the common stock of a privately held company in consideration for the sale of the ADAIR technology. As this ownership interest is greater than 20%, it is presumed that the Company may have the ability to exercise significant influence over the operating and financial policies of this investee; therefore, the Company concluded that this investment represents an equity investment and accounts for it as such. The Company has no requirement to invest further in this private company and the ownership percentage may be diluted in the future. The Company will account for this investment as an equity method investment until the investment no longer meets the definition of an equity method investment.

The Company will account for its share of the earnings or losses of the investee with a reporting lag of three months beginning the fourth quarter of 2018 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.  As a result, the Company’s results of operations for the six months ended June 30, 2018 do not contain any losses of the equity investee.

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

The Company enters into arrangements with pharmaceutical and biotechnology partners that may involve multiple deliverables. The Company’s arrangements may contain upfront payments, license fees for research and development arrangements, research and development funding or reimbursement, milestone payments, option fees, exclusivity fees and royalties on future sales of our products. Each deliverable in the arrangement is evaluated at the inception of the arrangement to determine whether it meets the criteria to be accounted for as a separate unit of accounting or whether it should be combined with other deliverables. When deliverables are separable, consideration received is allocated to the separate units of accounting based on the relative selling price method and the appropriate revenue recognition principles are applied to each unit. Revenue is recognized separately for each unit of accounting when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. Deliverables in an arrangement that do not meet this separation criteria are treated as a single unit of accounting, generally applying applicable revenue recognition guidance for the final deliverable to the combined unit of accounting. In the instances in which the Company has received payment from customers in advance of recognizing revenue, the Company records the amounts as deferred revenue on the consolidated balance sheet. Amounts not expected to be recognized within the next 12 months are classified as deferred revenue, net of current portion.  

Funded Research. Some of the Company’s research and development costs are funded or reimbursed by partners in accordance with collaboration agreements. Amounts received as compensation related to the Company’s research and development efforts are recognized as revenue when the above criteria have been met.

Upfront Fees. When the Company determines that deliverables in an arrangement do not meet the separation criteria discussed above, the deliverables are treated as a single unit of accounting. In such cases, upfront fees received for collaborative agreements are recognized on a straight-line basis, unless evidence suggests that the revenue is earned or obligations are fulfilled in a different pattern, over the expected performance period under each respective arrangement. When the performance period is not specified, the Company makes its best estimate of the period over which the Company expects to fulfill its performance obligations under an arrangement. Any amounts received under the arrangement in advance of performance are recorded as deferred revenue and recognized as revenue as the Company completes its performance obligations.

Milestones. The Company applies the milestone method of accounting to recognize revenue from milestone payments when earned, as evidenced by written acknowledgement from the collaborator or other persuasive evidence that the milestone has been achieved and the payment is non-refundable, provided that the milestone event is substantive. A milestone event is defined as an event (i) that can only be achieved based in whole or in part on either the Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance; (ii) for which there is substantive uncertainty at the inception of the arrangement that the event will be achieved; and (iii) that would result in additional payments being due to the Company. Events for which the occurrence is either contingent solely upon the passage of time or the result of a counterparty’s performance are not considered to be milestone events. A milestone event is substantive if all of the following conditions are met: (i) the consideration is commensurate with either the Company’s performance to achieve the milestone, or the enhancement of the value to the delivered item(s) as a result of a specific outcome resulting from the Company’s performance to achieve the milestone; (ii) the consideration relates solely to past performance; and (iii) the consideration is reasonable relative to all the deliverables and payment terms (including other potential milestone consideration) within the arrangement.

The Company assesses whether a milestone is substantive at the inception of each arrangement. If a milestone is deemed non-substantive, the Company will account for that milestone payment using a method consistent with the related units of accounting for the arrangement over the estimated performance period.

Research and Development Costs, net

Research and development costs are expensed as incurred. Non-refundable advance payments are expensed when services are initiated. These expenses result from the Company's independent research and development efforts as well as efforts associated with collaboration arrangements. Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract research and manufacturing services, the costs of laboratory supplies, equipment and facilities and other external costs are shown net of any royalty bearing grants.

Statement of cash flows

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

(in thousands)	June 30, 2018		June 30, 2017
Cash and cash equivalents	$	29,322	$	10,087
Restricted cash (included in other assets)		107		—
Total cash, cash equivalents and restricted cash shown in the    statement of cash flows	$	29,429	$	10,087

Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of Ordinary Shares outstanding for the period, without consideration for ordinary share equivalents. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of Ordinary Shares and dilutive ordinary share equivalents outstanding for the period determined using the treasury-stock method. Dilutive Ordinary Shares are comprised of convertible preferred stock, convertible notes, share options and warrants. Dilutive securities at June 30, 2018 that were not included in the calculation of diluted net loss per share for the three and six months ended June 30, 2018 as they were anti-dilutive totaled 81,056 and 87,028, respectively.  Additionally, dilutive securities at June 30, 2017 that were not included in the calculation of diluted net loss per share for the three and six months ended June 30, 2017 as they were anti-dilutive totaled 3,127,673 and 2,956,263, respectively.

 The calculation of the weighted-average number of shares outstanding excludes shares held in treasury totaling 43,000 for the three and six months ended June 30, 2018.  

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) amended the existing Accounting Standards Update (ASU) for revenue recognition No. 2014-09, Revenue from Contracts with Customers, which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. ASU 2014-09 outlines a five-step process for revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards, and also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Major provisions include determining which goods and services are distinct and require separate accounting (performance obligations), how variable consideration (which may include change orders and claims) is recognized, whether revenue should be recognized at a point in time or over time and ensuring the time value of money is considered in the transaction price.

The FASB subsequently issued amendments to ASU No. 2014-09 that have the same effective date and transition date. Due to the Company’s emerging growth company status, these new standards will become effective for the Company on January 1, 2019. The Company plans to implement the new revenue recognition standard upon the required effective date using the modified retrospective approach and not restate comparative periods in the financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new accounting standard requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than twelve months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new accounting standard must be adopted using the modified retrospective approach and is effective for entities for annual reporting periods beginning after December 15, 2018, with early adoption permitted. This standard will become effective for the Company on January 1, 2019. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements and related disclosures.

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Strategic Alliances and Collaboration Agreements

6 Months Ended

Jun. 30, 2018

Collaboration Agreements [Abstract]

Strategic Alliances and Collaboration Agreements

Note 2. Strategic Alliances and Collaboration Agreements

The Company has entered into license agreements and collaborative research and development arrangements with pharmaceutical and biotechnology companies. Under these arrangements, the Company is entitled to receive license fees, upfront payments, milestone payments when and if certain research or technology transfer milestones are achieved, development milestones and reimbursement for research and development activities. The Company's costs of performing these services are included within research and development expense. 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 model(s), lead candidate identification, and completion of IND-enabling studies. Clinical milestones may include successful enrollment of the first patient in or completion of Phase I, II, and III clinical trials, and commercial revenue is often tiered based on net or aggregate sale amounts. The Company cannot guarantee the achievement of these milestones due to risks associated with preclinical and clinical activities required for development of nucleic acid medicine-based therapeutics.

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

Collaboration Partner A

In 2015 the Company entered into two agreements with Collaboration Partner A. The Company analyzed the form and substance of both of the agreements and concluded they should be evaluated as a single arrangement for accounting purposes.

Under the 2015 agreement, the Company recognized revenue of $1.7 million and $3.6 million for the three and six months ended June 30, 2017, respectively. The revenue recognized included labor and expense reimbursements of $1.6 million and $3.4 million for the three and six months ended June 30, 2017, respectively, with the remaining revenue representing the amortized portion of the upfront fee and milestone payment of the arrangement. During the quarter ended September 30, 2017, the 2015 agreement was terminated.

In late-2017, the Company and Collaboration Partner A entered into a new agreement. The Company reviewed the timing and nature of the arrangement upon the signing of the new agreement and determined that it was not linked to the prior agreements and should be considered as a standalone agreement.

The 2017 collaboration allocated discovery, development, funding obligations, and ownership of related intellectual property among the Company and Collaboration Partner A, with Collaboration Partner A making an upfront payment, and potential milestone payments and royalty payments to the Company. The Company received an upfront payment and may receive preclinical, development and sales milestone payments, as well as royalty payments on any future licensed product sales. Collaboration Partner A will reimburse the Company for development costs at a future defined period upon the achievement of the first research and development milestone and all commercialization costs associated with the program upon selection of a drug target. The 2017 collaboration agreement includes potential milestone payments from the Collaboration Partner A to the Company of $56.5 million. Collaboration Partner A may also pay option exercise fees within the $1.0 million to $5.0 million range per target.  Collaboration Partner A will pay royalties on annual net sales of licensed products in the low to mid-single digits range, 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. In addition, the collaboration includes an exclusivity period.

As the license component of the contract has no stand alone value, the license and the research and development activities, exclusivity, and joint steering committee obligations under this agreement should be considered as a single unit of accounting in the arrangement.  The upfront fee of $7.7 million is being deferred and recognized as revenue using the Proportional Performance Method as the Company determined that the performance obligations are fulfilled in a pattern other than straight-line due to the structure and nature of the collaborative arrangement. Total deferred revenue as of June 30, 2018 and December 31, 2017 for Collaboration Partner A was $7.3 million and $7.6 million, respectively. The Company recognized revenue of $0.2 million and $0.3 million for the three and six months ended June 30, 2018, respectively.

Collaboration Partner B

In 2015 the Company entered into an agreement with Collaboration Partner B. During the initial phase of the collaboration, the Company will design and optimize therapeutics for certain rare disease targets. Collaboration Partner B has the option to add additional rare disease targets during the collaborative development period. Additionally, during the collaborative development period, the Company will participate with Collaboration Partner B in a joint steering committee. In addition, the collaboration includes an initial exclusivity period and an option to extend this period.

For each program, Collaboration Partner B will reimburse the Company for all internal and external development costs incurred and if Collaboration Partner B achieves certain, clinical, regulatory and sales milestones, then the Company is eligible to receive additional payments.

As part of the agreement, Collaboration Partner B paid an upfront feeand agreed to certain research and development funding obligations. The Company is also entitled to certain additional payments upon exercise of the Collaboration Partner B expansion option and/or exclusivity extension (if any), and for costs incurred by us in conducting the activities assigned to us under each collaboration development plan. In addition, on a development target-by-development target basis during the two-year period from the effective date of contract, Collaboration Partner B will pay the Company a one-time milestone payment after the first optimized lead designation for the first product with respect of such development target. For each development target for which the Collaboration Partner B exercises its option, Collaboration Partner B will pay the Company a one-time option exercise fee based upon the total number of development targets for which option exercises have been made by Collaboration Partner B. In the second quarter of 2018, the Company signed an amendment with Collaboration Partner B, that may reduce milestone payments dependent on whetherthe Company does not incorporate a predefined chemistry methodology.

The agreement included total potential milestone payments for the initially selected targets from Collaboration Partner B to the Company of $133.0 million. Collaboration Partner B will pay royalties as a percentage of net sales on a product-by-product and country-by-country basis during the applicable royalty term up to 10%. As of June 30, 2018, the Company has not yet reached the clinical phase of the contract.

The Company concluded that the license, research and development activities, exclusivity, and joint steering committed obligations under this agreement should be considered a single unit of accounting in the arrangement, and the up-front fee of $10 million will be deferred and recognized as revenue over the same period as the research activities. As a result, the upfront fee has been deferred and was initially being recognized as revenue ratably over the expected 29-month period of the research activities with an end date of March 31, 2018. As of June 30, 2018, the amortization period is now expected to end by December 31, 2019 which increases the amortization period overall by 21 months. As such, the Company updated the amortization period of the remaining deferred revenue.

The Company also determined that the milestone payments as defined in the agreement were not substantive as it will not have any outstanding performance obligations under the agreement when such payments may become due, and, therefore, do not meet the requirements for application of the Milestone Method of revenue recognition. Instead, revenue from the contingent milestone payments will be recognized if and when such payments become due, subject to satisfaction of all of the criteria necessary to recognize revenue at that time.

During 2017, the Company entered into an amendment with Collaboration Partner B to add one year to the exclusivity period for the two initial targets, in consideration for a one-time payment of $2.0 million. The extension of the exclusivity period did not change the length of the research and development period. Further, the amendment added language to allow Collaboration Partner B the opportunity to review and comment on its filings and prosecution efforts of pending Company patents that relate to Collaboration Partner B chemistry. Since the Company's performance obligations under the agreement are considered a single unit of accounting, the payment consideration was added to the unamortized portion of the upfront signing fee and will be recognized systematically, on a straight-line basis, over the remainder of the period that the research and development services are expected to occur.  Total deferred revenue as of June 30, 2018 and December 31, 2017 for Collaboration Partner B was $4.5 million and $5.8 million, respectively.

The Company recognized revenue for Collaboration Partner B of$1.2 million and $2.7 million during the three and six months ended June 30, 2018, respectively, and $1.5 million and $2.8 million for the three and six months ended June 30, 2017. The revenue recognized included labor and expense reimbursements of$0.6 million and $1.4 million for the three and six months ended June 30, 2018, respectively, and $1.1 million and $1.8 million for the three and six months ended June 30, 2017, with the remaining revenue representing the amortized portion of the upfront fee on the arrangement.

Collaboration Partner C

In 2016 the Company entered into a contract with Collaboration Partner C to perform certain discovery and development of RNA medicines for treatment of a disease. The agreement provides a non-exclusive license of the Company’s technology to Collaboration Partner C for the 18 month research program term, and the Company will not engage in similar research or development activities for two years after the end of the research term. In 2017 the Company and Collaboration Partner C amended the agreement to extend the agreement research program scope and term of 18 months from the Original Agreement effective date to 12 months from the Amendment Date (through September 2018). Under the Agreement, results which are specifically related to improvements to Company products are owned by the Company, while all other Research Program results are owned by Collaboration Partner C.

The Collaboration Partner C Agreement remains in effect until Collaboration Partner C no longer has payment obligations.  Collaboration Partner C may terminate the Agreement upon sixty days written notice. As part of the agreement, Collaboration Partner C paid an upfront fee of $0.1 million upon contract execution and agreed to provide the Company with funding for the discovery and development costs.  The agreement included immaterial milestone payments that were met during 2017. The agreement provides for $3.7 million in regularly scheduled research funding payments through 2018. In addition, Collaboration Partner C has an option to negotiate with the Company to obtain a non-exclusive, sub-licensable worldwide license to use the Company’s background technology and its owned collaboration results. The Option may be exercised by Collaboration Partner C with written notice to the Company any time for a period commencing on the Effective Date and ending on one hundred and eighty (180) days after the date of Collaboration C receipt of the Final Report. The terms and conditions of any such license shall be negotiated in good faith and agreed upon in writing between the parties within twelve 12 months after the exercise of the option by Collaboration Partner C.

The Company concluded that the research funding, exclusivity and license fees were to be accounted for as a single unit of accounting and the upfront license fees were deferred and recognized as revenue over the same period as the research activities. Total deferred revenue for Collaboration Partner C was $2.4 million as of June 30, 2018 with a negligible amount as of December 31, 2017. The Company recognized revenue from Collaboration Partner C of $0.3 million and $0.6 million for the three and six months ended June 30, 2018, respectively, and $0.4 million and $0.6 million for the three and six months ended June 30, 2017, respectively. The revenue recognized includes expense reimbursements that are recognized as revenue when incurred as per the terms of the agreement and milestone payments.

Collaboration Partner D

On January 1, 2018, the Company entered into a Development and Option Agreement with Collaboration Partner D, (the “Development Agreement”). Under the terms of the Development Agreement, the parties have agreed to conduct joint preclinical development programs on the basis of which Collaboration Partner D is granted an option for taking several licenses on pre-agreed license terms to develop and commercialize certain products incorporating the Company’s patents and know-how related to delivery systems based on or incorporating lipid-mediated delivery systems (including the LUNAR^® platform) (the “Arcturus LMD Technology”), and Collaboration Partner D patents and know-how related to mRNA technology. In addition, the Company granted to Collaboration Partner D a worldwide, non-exclusive license to use the Arcturus LMD Technology, including the right to grant sublicenses, for the purpose of conducting research and preclinical development activities, subject to certain limitations, and Collaboration Partner D granted to the Company a worldwide, non-exclusive license under its mRNA technology, solely to the extent necessary to execute the activities contemplated by the Development Agreement. Subject to certain restrictions, the parties will have an undivided one-half interest in the patents and know-how developed jointly by the parties during the course of the Development Agreement.  Pursuant to the terms of the Development Agreement, Collaboration Partner D will have a number of target options to co-develop from a reserved target list to enter into licenses under the Arcturus LMD Technology with respect to the development, manufacture and commercialization of licensed products (which can include products identified for development by the Company unless the Company is permitted by the terms of the Development and Option Agreement to place such products on a restricted list). A separate notice and fee will be required for each license agreement. If the target to which the license agreement relates is chosen by the parties for co-development under the Co-Development Agreement (which is defined below and discussed in the following paragraph) the license agreement will terminate as such programs will be covered under the Co-Development Agreement, and therefore Collaboration Partner D will be given a credit of the Exercise Fee, the Milestone Payments already paid and all other payments made in relation to the license agreement towards future such payments incurred with respect to future licenses under the Arcturus LMD Technology. Pursuant to a May 3, 2018 amendment to the Development Agreement, the Company granted Collaboration Partner D a security interest in certain of its intellectual property. The Company is in discussions with Collaboration Partner D to revise the terms of the amendment, among other things, to eliminate the security interest grant in its entirety.

Concurrently with the Partner D Collaboration Agreement, the Company entered into a Co-Development and Co-Commercialization Agreement (the “Co-Development Agreement”). Under the terms of such agreement, the parties will collaborate to develop and commercialize mRNA-based products for treating ornithine transcarbamylase (“OTC”) deficiency, incorporating Collaboration Partner D’s mRNA technology, the Company’s mRNA technology and the Arcturus LMD Technology. The overall collaboration with Partner D will be managed by a joint steering committee. The parties also have the option to co-develop two mRNA programs for Collaboration Partner D and one mRNA program for the Company, including targets for such programs selected from the reserved target list established under the Development Agreement.

The Company concluded that the research and development activities, exclusivity, license fees, governance and reserve target rights were to be accounted for as a single unit of accounting and the upfront license fees were deferred and recognized as revenue over the eight year research program period.  Further, the Company concluded that the options granted to Collaboration Partner D along with the related milestones are to be evaluated as a separate arrangement and not a deliverable of the original arrangement.  Total deferred revenue as of June 30, 2018 was comprised of $4.7 million for Collaboration Partner D. The Company recognized revenue from Collaboration Partner D of $0.3 million and $0.5 million for the three and six months ended June 30, 2018, respectively.  The revenue recognized included labor and expense reimbursements of$0.1 million for both the three and six months ended June 30, 2018, with the remaining revenue representing the amortized portion of the upfront fee on the arrangement.

Other Collaboration Agreements

In 2016 and 2017 the Company entered into several other smaller agreements and recorded revenue and deferred revenue consistent with the revenue recognition practices described in the significant accounting policies footnote. Additionally, see Note 10 Related Party for the related party collaboration agreement.

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Short-term Investments

6 Months Ended

Jun. 30, 2018

Investments Debt And Equity Securities [Abstract]

Short-term Investments

Note 3. Short-term Investments

The Company’s short-term investments consist of short-term bank deposits and marketable securities. As of June 30, 2018 and December 31, 2017 total short-term investments were $10.5 million and $23.6 million, respectively. The balance of investments as of December 31, 2017 included short-term bank deposits of $15.0 million with maturities of more than three months but less than one year, and were short-term deposits stated at cost and approximated market value. As of December 31, 2017, the Company's short-term bank depositsbore interest at a weighted average annual interest rate of1.6%.  As of June 30, 2018, all short-term bank deposits were liquidated.

The following is a summary of short-term investments at June 30, 2018:

	June 30, 2018
(Dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Certificates of deposit	$	200	$	—	$	—	$	200
Corporate debt securities		10,253		2		—		10,255
Total	$	10,453	$	2	$	—	$	10,455

The following is a summary of short-term investments at December 31, 2017:

	December 31, 2017
(Dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Certificates of deposit	$	1,462	$	—	$	—		$	1,462
Corporate debt securities		7,149		—		(3	)		7,146
Total	$	8,611	$	—	$	(3	)	$	8,608

All short-term investments are held as available-for-sale and mature within twelve months of June 30, 2018 and December 31, 2017. Management reviews unrealized losses individually and in the aggregate at each reporting period and has determined that none of the balances are other than temporarily impaired based upon the brief duration of time that the investments have been at a loss position as of June 30, 2018 and December 31, 2017.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 4. Fair Value Measurements

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

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

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

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

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

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

The following table presents the fair value hierarchy for assets measured at fair value on a recurring basis as of June 30, 2018 (in thousands):

	June 30, 2018
	Fair value measurements using input type
	Level 1		Level 2		Level 3		Total
Cash equivalents	$	25,413	$	—	$	—	$	25,413
Certificates of deposit		—		200		—		200
Corporate debt securities		—		10,255		—		10,255
Total financial assets	$	25,413	$	10,455	$	—	$	35,868

The following table presents the fair value hierarchy for assets measured at fair value on a recurring basis as of December 31, 2017 (in thousands):

	December 31, 2017
	Fair value measurements using input type
	Level 1		Level 2		Level 3		Total
Cash equivalents	$	2,024	$	—	$	—	$	2,024
Certificates of deposit		—		1,462		—		1,462
Corporate debt securities		—		7,146		—		7,146
Total financial assets	$	2,024	$	8,608	$	—	$	10,632

The fair value of certain financial instruments was measured and classified within Level 1 of the fair value hierarchy based on quoted prices. Certain financial instruments classified within Level 2 of the fair value hierarchy include the types of instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

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Balance sheet details

6 Months Ended

Jun. 30, 2018

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Details

Note 5. Balance sheet details

Prepaid expenses and other current assets consisted of the following as of June 30, 2018 and December 31, 2017:

(in thousands)	June 30, 2018		December 31, 2017
Prepaid expenses	$	322	$	704
Other current assets		212		355
Total	$	534	$	1,059

Property and equipment, net consisted of the following:

(in thousands)	June 30, 2018			December 31, 2017
Research equipment	$	2,387		$	1,620
Computers and software		208			97
Office equipment and furniture		517			255
Leasehold improvements		54			44
Total		3,166			2,016
Less accumulated depreciation and amortization		(1,223	)		(967	)
Property and equipment, net	$	1,943		$	1,049

Depreciation and amortization expense was $0.1 millionfor each of the three months ended June 30, 2018 and 2017, and $0.3 million and $0.2 million for six months ended June 30, 2018 and 2017, respectively.

Accrued liabilities consisted of the following as of June 30, 2018 and December 31, 2017:

(in thousands)	June 30, 2018		December 31, 2017
Accrued compensation	$	1,573	$	1,812
Accrued Director “tail” insurance policy (Note 1)		1,178		—
Accrued Officer disbursements related to proxy (Note 1)		1,397		—
Other accrued liabilities		156		981
Total	$	4,304	$	2,793

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Shareholders’ Equity

6 Months Ended

Jun. 30, 2018

Stockholders Equity Note [Abstract]

Shareholders’ Equity

Note 6. Shareholders’ Equity

         Ordinary Shares

Merger and reverse stock split

The Company completed the merger with Alcobra Ltd. on November 15, 2017. In connection with the merger, all outstanding shares of Arcturus Therapeutics, Inc. were exchanged for the Company’s Ordinary Shares at a rate of .293 Ordinary Shares of the Company’s stock for each share of Arcturus Therapeutics, Inc. common stock.

Also on November 15, 2017 and prior to and in connection with the merger, Alcobra Ltd. effected a 1-for-7 reverse stock split of Ordinary Shares and changed Ordinary Shares authorized to 30,000,000 shares. All historical information presented herein has been retroactively restated to reflect the effect of the merger exchange ratio, reverse stock split and change to the authorized number of Ordinary Shares in accordance with Accounting Standards Codification Topic 260, “Earnings Per Share.”

Restricted Ordinary Shares

In March 2013, the founders of the Company purchased 2,783,686 Ordinary Shares of stock for $0.0068 per share. Of the shares purchased, 1,538,353 were subject to a repurchase option whereby the Company has an option for two months after date of termination of service to repurchase any or all of the unvested shares at the original purchase price per share. The repurchase option shall be deemed to be automatically exercised by the Company as of the end of the two-month period unless the Company notifies the purchaser that it does not intend to exercise its option. The shares will be vested (1) 25% after obtaining suitable siRNA license; (2) 25% after in vivo proof-of-concept achieved; (3) 25% after a regulatory agency new drug application (such as an Investigational New Drug application) is filed and accepted by the applicable regulatory agency; and (4) 25% after human biological proof-of-concept is achieved. The Company met the first two milestones during 2013 and 2014. During the third quarter 2017, the purchase agreements were amended to clarify vesting conditions resulting in a modification expense being recorded related to one of the awards totaling $1,495,000 (Note 10). As of June 30, 2018, 622,667 unvested Ordinary Shares remain subject to the repurchase option.

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Share-Based Compensation

6 Months Ended

Jun. 30, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-Based Compensation

Note 7. Share-Based Compensation

Arcturus Therapeutics, Inc. had one stock compensation plan prior to the merger, the 2013 Equity Incentive Plan (the “2013 Plan”) which provides for the granting of options, warrants, restricted stock awards, restricted stock units, and other equity-based compensation to the Company’s directors, employees and consultants. In connection with the merger and as required in the 2013 Plan, all outstanding options in the 2013 Plan converted into options to purchase Alcobra Ltd.’s Ordinary Shares, as renamed Arcturus Therapeutics Ltd., and the applicable share amounts and exercise prices were adjusted to reflect the exchange ratio. The 2013 Plan has been extinguished and no additional grants shall be made from the 2013 Plan. Options granted under the 2013 Plan generally expire ten years from the date of grant. There are 23,199 shares available for future issuance under the 2013 Plan at June 30, 2018.

Prior to the merger, Alcobra Ltd. granted options to officers, directors, advisors, management and other key employees through the 2010 Incentive Option Plan (the “2010 Plan"). Substantially all options that were outstanding under the 2010 Plan became fully vested upon the closing of the merger. The value of these options was included as a component of the purchase price recorded in conjunction with the merger. The number of shares subject to and the exercise prices applicable to these outstanding options were adjusted in connection with the 1- for- 7 reverse stock split. Options granted under the 2010 Plan generally expire ten years from the date of grant. Upon merger, the 2013 Plan was assumed by the 2010 Plan. The Company generally issues new shares upon option exercise.

The Company did not grant any options during the six months ended June 30, 2018. As of June 30, 2018, there were 209,545 options outstanding with the weighted average exercise price of $4.38 per share. There were 472,502 shares available for future issuance under the 2010 Plan as of June 30, 2018.In July 2018, the Company issued options to purchase 416,931 of its Ordinary Shares to a group of employees.  Subsequent to the July 2018 grant, the Company elected to adopt a new equity incentive plan as discussed in the following paragraph and does not intend to issue additional share based awards under the 2010 Plan in the foreseeable future.

In August 2018, the Company adopted the 2018 Omnibus Equity Incentive Plan (“2018 Plan”). Under the 2018 Plan, the Company is authorized to issue up to a maximum of1,100,000 ordinary shares pursuant to the exercise of incentive share options or other awards provided for therein. In August 2018, the Company issued options to purchase a total of 232,500 Ordinary Shares to its executives. The Company also issued options to purchase a total of 130,000 Ordinary Shares to the non-executive members of the Company’s board of directors and a total of 160,000 Ordinary Shares to a group of employees.

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Income Taxes

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Note 8. Income Taxes

As of December 31, 2017, the Company’s deferred tax assets for net operating losses included foreign losses of pre-acquisition Alcobra Ltd of $20.7 million (“Israeli NOL”). A full valuation allowance was provided for such deferred tax assets as the Company believes that it is more likely than not that the deferred assets will not be utilized. 

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the "Act"). The Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Act reduces the corporate tax rate from a maximum of 35% to a flat 21% rate. The rate reduction is effective on January 1, 2018. As a result of the rate reduction, the Company was required to reduce its deferred tax asset balance as of December 31, 2017 by $2.4 million. Due to the company's full valuation allowance position, the company reduced the valuation allowance by the same amount.  As a result of the Act, the SEC issued guidance under Staff Accounting Bulletin No. 118 ("SAB 118") that allows for a measurement period up to one year after the enactment date of the Act to finalize the recording of the related tax impacts. The Company has not made any provision adjustments during the six months ended June 30, 2018.  The Company is the process of assessing the final impact of the guidance which we expect to complete within the one-year time frame provided by SAB 118.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 9. Commitments and Contingencies

Cystic Fibrosis Foundation Therapeutics, Inc. Funding agreement

The Company has received royalty bearing grants sponsored by Cystic Fibrosis Foundation Therapeutics, Inc. (“CFFT”). Should the awards result in a successful product, the Company will pay CFFT a specified payment amount in installments following commercialization based on a formula that is six times the total award amount, plus a payment equal to the awarded payments, within sixty days after aggregate net sales of the product exceed certain thresholds. Further, in the event of a license, sale or other transfer of the product or the Company’s development program technology (including a change of control transaction), the Company will pay CFFT a percentage of such transfer payments actually received by the Company or the Company’s shareholders (subject to a royalty cap). As of June 30, 2018, the Companyhas not had a successful product utilizing CFFT grants.  

Operating Leases

    For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as rent expense on a straight-line basis over the lease term. Leasehold improvement incentives paid to the Company by the landlord are recorded as a deferred rent and amortized as a reduction of rent expense over the lease term. Rent expense totaled $318,000 and 85,000 for three months ended June 30, 2018 and 2017, respectively, and $459,000 and $167,500 for six months ended June 30, 2018 and 2017, respectively.

Future minimum payments under leases and lease commitments with initial terms greater than one year were as follows at December 31, 2017:

(in thousands)
2018 (remainder of the year)	$	556
2019		1,234
2020		1,271
2021		1,310
2022		1,349
Thereafter		3,138
Total	$	8,858

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Related Party Transactions

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

Note 10. Related Party Transactions

During 2016, the Company entered into a Research Collaboration and License Agreement with a related party, Providence Therapeutics, Inc. (“Providence”) whose CEO and President is also a stockholder of the Company, to identify and optimize microRNA modulators and/or mimetics for the treatment of neoplastic diseases. In April 2017, the Providence Agreement was amended to include mRNA for the treatment of neoplastic disease. In July 2018, the Providence Agreement was amended and restated to cover brain neoplasms, breast neoplasms and ovarian neoplasms.  Each party is responsible for their own research costs under the agreement, and Providence is responsible for all of the development costs through the completion of Phase 2 clinical trials. The Company is entitled to share in future product revenue of each product provided the Company shares in the product’s post Phase 2 costs. Separately, Providence has agreed to pay a specified rate for the use of the Company’s employees. For the six months ended June 30, 2018 and 2017, the Company has recognized $0.1 million and $0.8 million, respectively, in revenue related to the amortization of the upfront payment and revenue related to the use of Company employees and expense reimbursements. For the three months ended June 30, 2018 and 2017, the Company has recognized a negligible amount and $0.2 million, respectively, in revenue related to the amortization of the upfront payment and revenue related to the use of Company employees and expense reimbursements. There were no outstanding accounts receivable related to this agreement as of June 30, 2018 and December 31, 2017. During the third quarter of 2017, the Company stock agreement for the President and CEO of Providence was modified to remove the vesting conditions of the original grant and the Company recognized $1.5 million in related stock compensation expense. As of June 30, 2018, the President and CEO of Providence held a 6.4% ownership interest in the Company.

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Litigation

6 Months Ended

Jun. 30, 2018

Loss Contingency Information About Litigation Matters [Abstract]

Litigation

Note 11. Litigation

Previously Disclosed Litigation in Israel and California and California Arbitration

The Company, executive officers Joe Payne (CEO) and Pad Chivukula (COO and CSO) and certain former and current members of the Company’s board of directors were party to now terminated lawsuits filed in Israel and California and an arbitration in California.  These lawsuits and the arbitration emanated from disputes among certain of these parties in connection with actions taken by former board members to terminate the employment of Mr. Payne and Dr. Chivukula and lawsuits filed by Mr. Payne in response to these terminations.  

As described in Note 1, Mr. Payne and Dr. Chivukula have been reappointed to their roles as CEO (Payne) and COO and CSO (Chivukula) with the Company and the Company entered into an Agreement and Release with its current officers and certain former directors and officers to terminate all of the then ongoing litigation in Israel and the Unites States and the arbitration that arose in connection with the terminations of Mr. Payne and Dr. Chivukula.  Accordingly, all of the previously described lawsuits and the arbitration have been dismissed with prejudice.  

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Selected Financial Data

6 Months Ended

Jun. 30, 2018

Quarterly Financial Information Disclosure [Abstract]

Selected Financial Data

Note 12. Selected Financial Data

The following table includes selected financial data for each of the quarters in 2017 and for each of the quarters ended March 31, 2018 and June 30, 2018.

	For the quarter ended
(in thousands, except per share and share data)	June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
	(Unaudited)
Revenue in conjunction with strategic alliances and    collaborations	$	2,386		$	2,367		$	2,020		$	3,296		$	3,761		$	3,921
Research and development expenses, net		4,225			3,941			3,030			4,886			3,769			4,233
General and administrative expenses		8,233			5,098			3,957			1,523			1,058			1,034
Net loss from operations		(10,072	)		(6,672	)		(4,967	)		(3,113	)		(1,066	)		(1,346	)
Net loss		(9,950	)		(6,571	)		(5,280	)		(3,177	)		(1,099	)		(1,346	)
Net loss per share, basic and diluted	$	(0.99	)	$	(0.66	)	$	(0.86	)	$	(1.51	)	$	(0.54	)	$	(0.66	)
Weighted average shares outstanding, basic and    diluted		10,057,048			10,027,834			6,151,580			2,099,318			2,031,599			2,031,599
	As of
	June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
	(Unaudited)
Working capital	$	23,429		$	37,383		$	39,828		$	5,144		$	6,432		$	1,706
Total assets	$	44,322		$	52,483		$	52,024		$	12,221		$	13,354		$	9,678
Shareholders' equity (deficit)	$	17,795		$	27,543		$	33,794		$	(1,999	)	$	(826	)	$	253

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

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

Interim financial results are not necessarily indicative of results anticipated for the full year. These unaudited financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2017.

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

Unless the context otherwise requires, references to the “Company,” “Arcturus,” “we,” “us” and “our” refer to Arcturus Therapeutics Ltd. And its subsidiaries.

Organizational Update

Organizational Update

On May 29, 2018, the Company filed with the Securities and Exchange Commission a Report on Form 6-K containing an Agreement and Release entered into by and among the Company as well as current officers: Joe Payne (CEO) and Pad Chivukula (COO and CSO), former employees: Mark Herbert and Rebecque Laba, and former board members: Craig Willett, Daniel Geffken, David Shapiro and Stuart Collinson (referred to as the “Agreement and Release”).

As part of a settlement agreement, the Company has appointed four new independent directors, Dr. Peter Farrell, Mr. Andrew Sassine, Mr. James Barlow and Dr. Magda Marquet, to its Board, effective as of May 27, 2018. In connection with these appointments, Dr. Stuart Collinson, Mr. Daniel Geffken, Dr. David Shapiro, and Mr. Craig Willett have resigned from the Board. Further, the Company agreed to, and accrued as of June 30, 2018 the purchase of a director “tail” policy and the reimbursement professional fees incurred by certain officers (Note 5).

Reverse Merger

Reverse Merger

On November 15, 2017, Alcobra Ltd. acquired Arcturus Therapeutics, Inc. pursuant to a merger between the companies (the “merger”). Prior to the merger, Alcobra Ltd.’s net assets consisted of cash, investments and nominal non-operating assets. Upon consummation of the merger, Alcobra Ltd. adopted the business plan of Arcturus Therapeutics, Inc. In connection with the merger, Alcobra Ltd. agreed to acquire all of the outstanding common stock of Arcturus Therapeutics, Inc. in exchange for the issuance of an aggregate 6,631,712 of Alcobra Ltd.’s Ordinary Shares, par value 0.07 NIS per share (the “Ordinary Shares”), after giving effect to a 1-for-7 reverse split effected immediately prior to the merger. As a result of the merger, Arcturus Therapeutics, Inc. became a wholly-owned subsidiary of Alcobra Ltd. While Alcobra Ltd. was the legal acquirer in the transaction, Arcturus Therapeutics, Inc. was deemed the accounting acquirer. Immediately after giving effect to the merger, on November 15, 2017, Alcobra Ltd. changed its name to Arcturus Therapeutics Ltd. On November 16, 2017, the Company commenced trading on the Nasdaq Global Market under the symbol “ARCT.” The Company’s principal executive offices are located in San Diego, California.

In accordance with the authoritative literature, a transaction where a private company merges into a public company with no operations and nominal net assets should be accounted for as a capital transaction rather than a business combination. Consequently, the reverse merger was accounted for as an issuance of shares by the Company for the net assets of Alcobra Ltd., accompanied by a recapitalization. Excess of considerations paid over net assets acquired and other merger-related costs were recorded as a charge to additional paid-in capital during the fourth quarter of 2017. As a result, the financial statements of the Company prior to the merger date are the historical financial statements of Arcturus whereas the financial statements of the Company after the merger date reflect the results of the operations of Arcturus and Alcobra Ltd. on a combined basis. All historical information presented herein has been retroactively restated to reflect the effect of the merger shares exchange ratio, reverse stock split and change to the authorized number of Ordinary Shares in accordance with Accounting Standards Codification Topic 260, “Earnings Per Share”.

Liquidity

Liquidity

The Company’s activities since inception have consisted principally of performing research and development 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.

Historically, the Company’s primary source of financing has been throughissuance of its equity securities, through issuance of convertible promissory notes and through collaboration agreements. Research and development activities have required significant capital investment since the Company’s inception. The Company expects that the operations will continue to require cash investment to pursue the Company’s research and development activities, including preclinical studies, formulation development, clinical trials and related drug manufacturing. The Company has a limited operating history and is preclinical with no revenues from sales of its products, and the sales and income potential of the Company’s business and market are unproven. The Company has experienced net losses since its inception and as of June 30, 2018 has an accumulated deficit of $39.6 million. The Company also added to its historical financing by acquiring $36.4 million in cash, cash equivalents and short-term investments in conjunction with the merger of Alcobra, however, the Company expects to continue to incur additional losses for the foreseeable future. Over that period the Company is preparing to raise additional debt and equity financing and enter into additional partnerships to fund its development. The ability of the Company to transition to profitability is dependent on developing products and product revenues to support the level of expenses. If the Company is not able to achieve its planned revenue growth or incurs costs in excess of its forecasts, it may be required to reduce discretionary spending, may not be able to continue the development of all of its products or may be required to delay part of its development programs, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. There can be no assurances that additional financing will be secured or, if secured, will be on favorable terms. The Company's management and board of directors are of the opinion that its current financial resources will be sufficient to continue the development of the Company's products for at least twelve months from the filing of this Report in Form 6-K.

In order to support our long-term plans, the Company intends to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements with partners or through other sources of financing. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations.If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected. There can be no assurance that the Company will be able to obtain the needed financing on acceptable terms or at all.

Intangible Assets Held for Sale and Equity Investment

Intangible Assets Held for Sale and Equity Investment

As the end of the second quarter of 2018, the Company completed the sale of its intangible assets related to the ADAIR technology, which was accounted for as an intangible asset held for sale as of December 31, 2017. Pursuant to the asset purchase agreement for ADAIR, the Company received 30% ownership interest in the common stock of a privately held company in consideration for the sale of the ADAIR technology. As this ownership interest is greater than 20%, it is presumed that the Company may have the ability to exercise significant influence over the operating and financial policies of this investee; therefore, the Company concluded that this investment represents an equity investment and accounts for it as such. The Company has no requirement to invest further in this private company and the ownership percentage may be diluted in the future. The Company will account for this investment as an equity method investment until the investment no longer meets the definition of an equity method investment.

The Company will account for its share of the earnings or losses of the investee with a reporting lag of three months beginning the fourth quarter of 2018 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.  As a result, the Company’s results of operations for the six months ended June 30, 2018 do not contain any losses of the equity investee.

Segment Information

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

Revenue Recognition

The Company enters into arrangements with pharmaceutical and biotechnology partners that may involve multiple deliverables. The Company’s arrangements may contain upfront payments, license fees for research and development arrangements, research and development funding or reimbursement, milestone payments, option fees, exclusivity fees and royalties on future sales of our products. Each deliverable in the arrangement is evaluated at the inception of the arrangement to determine whether it meets the criteria to be accounted for as a separate unit of accounting or whether it should be combined with other deliverables. When deliverables are separable, consideration received is allocated to the separate units of accounting based on the relative selling price method and the appropriate revenue recognition principles are applied to each unit. Revenue is recognized separately for each unit of accounting when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. Deliverables in an arrangement that do not meet this separation criteria are treated as a single unit of accounting, generally applying applicable revenue recognition guidance for the final deliverable to the combined unit of accounting. In the instances in which the Company has received payment from customers in advance of recognizing revenue, the Company records the amounts as deferred revenue on the consolidated balance sheet. Amounts not expected to be recognized within the next 12 months are classified as deferred revenue, net of current portion.  

Funded Research. Some of the Company’s research and development costs are funded or reimbursed by partners in accordance with collaboration agreements. Amounts received as compensation related to the Company’s research and development efforts are recognized as revenue when the above criteria have been met.

Upfront Fees. When the Company determines that deliverables in an arrangement do not meet the separation criteria discussed above, the deliverables are treated as a single unit of accounting. In such cases, upfront fees received for collaborative agreements are recognized on a straight-line basis, unless evidence suggests that the revenue is earned or obligations are fulfilled in a different pattern, over the expected performance period under each respective arrangement. When the performance period is not specified, the Company makes its best estimate of the period over which the Company expects to fulfill its performance obligations under an arrangement. Any amounts received under the arrangement in advance of performance are recorded as deferred revenue and recognized as revenue as the Company completes its performance obligations.

Milestones. The Company applies the milestone method of accounting to recognize revenue from milestone payments when earned, as evidenced by written acknowledgement from the collaborator or other persuasive evidence that the milestone has been achieved and the payment is non-refundable, provided that the milestone event is substantive. A milestone event is defined as an event (i) that can only be achieved based in whole or in part on either the Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance; (ii) for which there is substantive uncertainty at the inception of the arrangement that the event will be achieved; and (iii) that would result in additional payments being due to the Company. Events for which the occurrence is either contingent solely upon the passage of time or the result of a counterparty’s performance are not considered to be milestone events. A milestone event is substantive if all of the following conditions are met: (i) the consideration is commensurate with either the Company’s performance to achieve the milestone, or the enhancement of the value to the delivered item(s) as a result of a specific outcome resulting from the Company’s performance to achieve the milestone; (ii) the consideration relates solely to past performance; and (iii) the consideration is reasonable relative to all the deliverables and payment terms (including other potential milestone consideration) within the arrangement.

The Company assesses whether a milestone is substantive at the inception of each arrangement. If a milestone is deemed non-substantive, the Company will account for that milestone payment using a method consistent with the related units of accounting for the arrangement over the estimated performance period.

Research and Development Costs, net

Research and Development Costs, net

Research and development costs are expensed as incurred. Non-refundable advance payments are expensed when services are initiated. These expenses result from the Company's independent research and development efforts as well as efforts associated with collaboration arrangements. Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract research and manufacturing services, the costs of laboratory supplies, equipment and facilities and other external costs are shown net of any royalty bearing grants.

Statement of cash flows

Statement of cash flows

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

(in thousands)	June 30, 2018		June 30, 2017
Cash and cash equivalents	$	29,322	$	10,087
Restricted cash (included in other assets)		107		—
Total cash, cash equivalents and restricted cash shown in the    statement of cash flows	$	29,429	$	10,087

Net Loss per Share

Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of Ordinary Shares outstanding for the period, without consideration for ordinary share equivalents. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of Ordinary Shares and dilutive ordinary share equivalents outstanding for the period determined using the treasury-stock method. Dilutive Ordinary Shares are comprised of convertible preferred stock, convertible notes, share options and warrants. Dilutive securities at June 30, 2018 that were not included in the calculation of diluted net loss per share for the three and six months ended June 30, 2018 as they were anti-dilutive totaled 81,056 and 87,028, respectively.  Additionally, dilutive securities at June 30, 2017 that were not included in the calculation of diluted net loss per share for the three and six months ended June 30, 2017 as they were anti-dilutive totaled 3,127,673 and 2,956,263, respectively.

 The calculation of the weighted-average number of shares outstanding excludes shares held in treasury totaling 43,000 for the three and six months ended June 30, 2018.  

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) amended the existing Accounting Standards Update (ASU) for revenue recognition No. 2014-09, Revenue from Contracts with Customers, which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. ASU 2014-09 outlines a five-step process for revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards, and also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Major provisions include determining which goods and services are distinct and require separate accounting (performance obligations), how variable consideration (which may include change orders and claims) is recognized, whether revenue should be recognized at a point in time or over time and ensuring the time value of money is considered in the transaction price.

The FASB subsequently issued amendments to ASU No. 2014-09 that have the same effective date and transition date. Due to the Company’s emerging growth company status, these new standards will become effective for the Company on January 1, 2019. The Company plans to implement the new revenue recognition standard upon the required effective date using the modified retrospective approach and not restate comparative periods in the financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new accounting standard requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than twelve months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new accounting standard must be adopted using the modified retrospective approach and is effective for entities for annual reporting periods beginning after December 15, 2018, with early adoption permitted. This standard will become effective for the Company on January 1, 2019. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements and related disclosures.

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Basis of Presentation and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Schedule of Cash and Cash Equivalents and Restricted Cash

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

(in thousands)	June 30, 2018		June 30, 2017
Cash and cash equivalents	$	29,322	$	10,087
Restricted cash (included in other assets)		107		—
Total cash, cash equivalents and restricted cash shown in the    statement of cash flows	$	29,429	$	10,087

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Short-term Investments (Tables)

6 Months Ended

Jun. 30, 2018

Investments Debt And Equity Securities [Abstract]

Summary of Short-term Investments

The following is a summary of short-term investments at June 30, 2018:

	June 30, 2018
(Dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Certificates of deposit	$	200	$	—	$	—	$	200
Corporate debt securities		10,253		2		—		10,255
Total	$	10,453	$	2	$	—	$	10,455

The following is a summary of short-term investments at December 31, 2017:

	December 31, 2017
(Dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Certificates of deposit	$	1,462	$	—	$	—		$	1,462
Corporate debt securities		7,149		—		(3	)		7,146
Total	$	8,611	$	—	$	(3	)	$	8,608

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of Financial Assets Measured at Fair Value on a Recurring Basis

The following table presents the fair value hierarchy for assets measured at fair value on a recurring basis as of June 30, 2018 (in thousands):

	June 30, 2018
	Fair value measurements using input type
	Level 1		Level 2		Level 3		Total
Cash equivalents	$	25,413	$	—	$	—	$	25,413
Certificates of deposit		—		200		—		200
Corporate debt securities		—		10,255		—		10,255
Total financial assets	$	25,413	$	10,455	$	—	$	35,868

The following table presents the fair value hierarchy for assets measured at fair value on a recurring basis as of December 31, 2017 (in thousands):

	December 31, 2017
	Fair value measurements using input type
	Level 1		Level 2		Level 3		Total
Cash equivalents	$	2,024	$	—	$	—	$	2,024
Certificates of deposit		—		1,462		—		1,462
Corporate debt securities		—		7,146		—		7,146
Total financial assets	$	2,024	$	8,608	$	—	$	10,632

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Balance Sheet Details (Tables)

6 Months Ended

Jun. 30, 2018

Balance Sheet Related Disclosures [Abstract]

Schedule of Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of June 30, 2018 and December 31, 2017:

(in thousands)	June 30, 2018		December 31, 2017
Prepaid expenses	$	322	$	704
Other current assets		212		355
Total	$	534	$	1,059

Summary of Components of Property and Equipment

Property and equipment, net consisted of the following:

(in thousands)	June 30, 2018			December 31, 2017
Research equipment	$	2,387		$	1,620
Computers and software		208			97
Office equipment and furniture		517			255
Leasehold improvements		54			44
Total		3,166			2,016
Less accumulated depreciation and amortization		(1,223	)		(967	)
Property and equipment, net	$	1,943		$	1,049

Schedule of Accrued Liabilities

Accrued liabilities consisted of the following as of June 30, 2018 and December 31, 2017:

(in thousands)	June 30, 2018		December 31, 2017
Accrued compensation	$	1,573	$	1,812
Accrued Director “tail” insurance policy (Note 1)		1,178		—
Accrued Officer disbursements related to proxy (Note 1)		1,397		—
Other accrued liabilities		156		981
Total	$	4,304	$	2,793

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Schedule of Future Minimum Payments Under Leases and Lease Commitments

Future minimum payments under leases and lease commitments with initial terms greater than one year were as follows at December 31, 2017:

(in thousands)
2018 (remainder of the year)	$	556
2019		1,234
2020		1,271
2021		1,310
2022		1,349
Thereafter		3,138
Total	$	8,858

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Selected Financial Data (Tables)

6 Months Ended

Jun. 30, 2018

Quarterly Financial Data [Abstract]

Summary of Selected Financial Data

The following table includes selected financial data for each of the quarters in 2017 and for each of the quarters ended March 31, 2018 and June 30, 2018.

	For the quarter ended
(in thousands, except per share and share data)	June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
	(Unaudited)
Revenue in conjunction with strategic alliances and    collaborations	$	2,386		$	2,367		$	2,020		$	3,296		$	3,761		$	3,921
Research and development expenses, net		4,225			3,941			3,030			4,886			3,769			4,233
General and administrative expenses		8,233			5,098			3,957			1,523			1,058			1,034
Net loss from operations		(10,072	)		(6,672	)		(4,967	)		(3,113	)		(1,066	)		(1,346	)
Net loss		(9,950	)		(6,571	)		(5,280	)		(3,177	)		(1,099	)		(1,346	)
Net loss per share, basic and diluted	$	(0.99	)	$	(0.66	)	$	(0.86	)	$	(1.51	)	$	(0.54	)	$	(0.66	)
Weighted average shares outstanding, basic and    diluted		10,057,048			10,027,834			6,151,580			2,099,318			2,031,599			2,031,599
	As of
	June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
	(Unaudited)
Working capital	$	23,429		$	37,383		$	39,828		$	5,144		$	6,432		$	1,706
Total assets	$	44,322		$	52,483		$	52,024		$	12,221		$	13,354		$	9,678
Shareholders' equity (deficit)	$	17,795		$	27,543		$	33,794		$	(1,999	)	$	(826	)	$	253

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Basis of Presentation and Summary of Significant Accounting Policies (Details Textual) $ in Thousands		3 Months Ended		6 Months Ended
	Nov. 15, 2017 ₪ / shares shares	Jun. 30, 2018 USD ($) shares	Jun. 30, 2017 shares	Jun. 30, 2018 USD ($) shares	Jun. 30, 2017 shares	Jun. 30, 2018 ₪ / shares	Dec. 31, 2017 USD ($) shares	Dec. 31, 2017 ₪ / shares
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Business merger date	Nov. 15, 2017
Common stock, par value | ₪ / shares						₪ 0.07		₪ 0.07
Reverse split of ordinary shares	1-for-7			1- for- 7
Reverse split of ordinary shares, ratio	0.1429			0.1429
Accumulated deficit | $		$ (39,610)		$ (39,610)			$ (23,089)
Cash equivalents and short-term investments acquired | $		$ 36,400		$ 36,400
Ownership percentage		30.00%		30.00%
Antidilutive securities excluded from computation of earnings per share		81,056	3,127,673	87,028	2,956,263
Treasury shares		43,000		43,000			43,000
Minimum [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Equity method ownership percentage		20.00%		20.00%
Alocobra Limited [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Stock issued during period, shares, acquisitions	6,631,712
Common stock, par value | ₪ / shares	₪ 0.07

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Schedule of Cash and Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Accounting Policies [Abstract]
Cash and cash equivalents	$ 29,322	$ 24,965	$ 10,087
Restricted cash (included in other assets)	107
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$ 29,429	$ 25,238	$ 10,087	$ 8,345

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Strategic Alliances and Collaboration Agreements (Details Textual) $ in Thousands	3 Months Ended						6 Months Ended		12 Months Ended
	Jun. 30, 2018 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Sep. 30, 2017 USD ($)	Jun. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 Agreement
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Revenue in conjunction with strategic alliances and collaborations	$ 2,386	$ 2,367	$ 2,020	$ 3,296	$ 3,761	$ 3,921	$ 4,753	$ 7,682
Collaboration Partner A [Member] | Research Collaboration and Exclusive License Agreement [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Number of collaboration agreements | Agreement											2
Revenue in conjunction with strategic alliances and collaborations	200				1,700		300	3,600
Labor and expense reimbursements revenue					1,600			3,400
Revenue recognition potential milestone revenue recognized									$ 56,500
Upfront fee received							7,700
Deferred revenue	7,300		7,600				7,300		7,600
Collaboration Partner A [Member] | Research Collaboration and Exclusive License Agreement [Member] | Minimum [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Option exercise revenue range per target									1,000
Collaboration Partner A [Member] | Research Collaboration and Exclusive License Agreement [Member] | Maximum [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Option exercise revenue range per target									5,000
Collaboration Partner B [Member] | Research Collaboration and Exclusive License Agreement [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Revenue in conjunction with strategic alliances and collaborations	1,200				1,500		2,700	2,800
Labor and expense reimbursements revenue	600				1,100		1,400	1,800
Revenue recognition potential milestone revenue recognized									133,000
Deferred revenue	4,500		$ 5,800				$ 4,500		5,800
Revenue recognition, milestone							Collaboration Partner B will pay the Company a one-time milestone payment after the first optimized lead designation for the first product with respect of such development target.
Amortization period							21 months
Revenue recognized as one time payment									$ 2,000
Collaboration Partner B [Member] | Research Collaboration and Exclusive License Agreement [Member] | Up-Front Fee [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Up-front fee deferred and recognized							$ 10,000
Collaboration Partner B [Member] | Research Collaboration and Exclusive License Agreement [Member] | Maximum [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Royalty payment percentage									10.00%
Collaboration Partner C [Member] | Research Collaboration and Exclusive License Agreement [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Revenue in conjunction with strategic alliances and collaborations	300				$ 400		600	$ 600
Upfront fee received										$ 100
Deferred revenue	2,400						2,400
Revenue recognition research activities period										18 months
License additional extension period										18 months
Regularly scheduled research funding payments										$ 3,700
Collaboration Partner D [Member] | mRNA Technology [Member]
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Revenue in conjunction with strategic alliances and collaborations	300						500
Labor and expense reimbursements revenue	100						100
Deferred revenue	$ 4,700						$ 4,700
Development and option agreement date							Jan. 01, 2018
Collaborative agreement description							In addition, the Company granted to Collaboration Partner D a worldwide, non-exclusive license to use the Arcturus LMD Technology, including the right to grant sublicenses, for the purpose of conducting research and preclinical development activities, subject to certain limitations, and Collaboration Partner D granted to the Company a worldwide, non-exclusive license under its mRNA technology, solely to the extent necessary to execute the activities contemplated by the Development Agreement. Subject to certain restrictions, the parties will have an undivided one-half interest in the patents and know-how developed jointly by the parties during the course of the Development Agreement.

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Short-term Investments - (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Jun. 30, 2018
Schedule Of Available For Sale Securities [Line Items]
Short-term investments	$ 23,608	$ 10,455
Short Term Deposit Weighted Average Interest Rate	1.60%
Bank Deposits
Schedule Of Available For Sale Securities [Line Items]
Short-term investments	$ 15,000

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Summary of Short-term Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Schedule Of Available For Sale Securities [Line Items]
Amortized cost	$ 10,453	$ 8,611
Gross unrealized gains	2
Gross unrealized losses		(3)
Fair value	10,455	8,608
Certificates of Deposit [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized cost	200	1,462
Fair value	200	1,462
Corporate Debt Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized cost	10,253	7,149
Gross unrealized gains	2
Gross unrealized losses		(3)
Fair value	$ 10,255	$ 7,146

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Schedule of Financial Assets Measured at Fair Value on a Recurring Basis (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets, Fair Value Disclosure [Abstract]
Cash equivalents	$ 25,413	$ 2,024
Certificates of deposit	200	1,462
Corporate debt securities	10,255	7,146
Total financial assets	35,868	10,632
Fair Value, Inputs, Level 1 [Member]
Assets, Fair Value Disclosure [Abstract]
Cash equivalents	25,413	2,024
Total financial assets	25,413	2,024
Fair Value, Inputs, Level 2 [Member]
Assets, Fair Value Disclosure [Abstract]
Certificates of deposit	200	1,462
Corporate debt securities	10,255	7,146
Total financial assets	$ 10,455	$ 8,608

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Balance Sheet Details - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Prepaid Expenses And Other Current Assets [Abstract]
Prepaid expenses	$ 322	$ 704
Other current assets	212	355
Total	$ 534	$ 1,059

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Balance Sheet Details - Summary of Components of Property and Equipment, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 3,166	$ 2,016
Less accumulated depreciation and amortization	(1,223)	(967)
Property and equipment, net	1,943	1,049
Research equipment [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	2,387	1,620
Computer and software [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	208	97
Office equipment and furniture [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	517	255
Leasehold improvements [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 54	$ 44

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Balance Sheet Details (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Balance Sheet Related Disclosures [Abstract]
Depreciation and amortization	$ 100	$ 100	$ 256	$ 199

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Balance Sheet Details - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Accrued Liabilities Current [Abstract]
Accrued compensation	$ 1,573	$ 1,812
Accrued Director “tail” insurance policy	1,178
Accrued Officer disbursements related to proxy	1,397
Other accrued liabilities	156	981
Total	$ 4,304	$ 2,793

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Shareholders' Equity (Details Textual)		1 Months Ended	3 Months Ended	6 Months Ended
	Nov. 15, 2017 shares	Mar. 31, 2013 $ / shares shares	Sep. 30, 2017 USD ($)	Jun. 30, 2018 shares	Dec. 31, 2017 Milestone shares	Dec. 31, 2016 Milestone
Class Of Stock [Line Items]
Reverse split of ordinary shares	1-for-7			1- for- 7
Reverse split of ordinary shares, ratio	0.1429			0.1429
Common stock, shares authorized	30,000,000			30,000,000	30,000,000
Restricted Common Stock [Member]
Class Of Stock [Line Items]
Stock issued during period		2,783,686
Share price of stock issued | $ / shares		$ 0.0068
Shares subject to repurchase option		1,538,353
Share based compensation arrangement by share based payment award period from termination date of employee or consultant for repurchase of shares		2 months
Number of milestones achieved | Milestone					2	2
Common shares, unvested				622,667
Share based compensation expense | $			$ 1,495,000
Vested After Obtaining Suitable siRNA License [Member] | Restricted Common Stock [Member]
Class Of Stock [Line Items]
Shares vesting percentage		25.00%
Vested After in Vivo Proof-of-concept Achieved [Member] | Restricted Common Stock [Member]
Class Of Stock [Line Items]
Shares vesting percentage		25.00%
Vested After IND Application Completed [Member] | Restricted Common Stock [Member]
Class Of Stock [Line Items]
Shares vesting percentage		25.00%
Vested After in Human Efficacy Achieved [Member] | Restricted Common Stock [Member]
Class Of Stock [Line Items]
Shares vesting percentage		25.00%
Ordinary Shares [Member] | Arcturus Therapeutics Inc [Member]
Class Of Stock [Line Items]
Stock conversion ratio	0.293

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Share-Based Compensation (Details Textual)		1 Months Ended		6 Months Ended
	Nov. 15, 2017	Aug. 31, 2018 shares	Jul. 31, 2018 shares	Jun. 30, 2018 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Reverse split of ordinary shares	1-for-7			1- for- 7
Reverse split of ordinary shares, ratio	0.1429			0.1429
2013 Equity Incentive Plan [Member] | Stock Option [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares authorized for grant				0
Share options expiration period				10 years
Common stock reserved for future issuance				23,199
2010 Equity Incentive Plan [Member] | Stock Option [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share options expiration period				10 years
Common stock reserved for future issuance				472,502
Options granted				0
Options outstanding, number				209,545
Options outstanding, weighted average exercise price | $ / shares				$ 4.38
2010 Equity Incentive Plan [Member] | Stock Option [Member] | Subsequent Event [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock option issued			416,931
2018 Omnibus Equity Incentive Plan [Member] | Subsequent Event [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares authorized for grant		1,100,000
Shares issued in period		232,500
2018 Omnibus Equity Incentive Plan [Member] | Subsequent Event [Member] | Non-Executive Officer [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares issued in period		130,000
2018 Omnibus Equity Incentive Plan [Member] | Subsequent Event [Member] | Employees [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares issued in period		160,000

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Income Taxes (Details Textual) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Deferred tax assets pre acquisition, foreign		$ 20,700
Federal statutory income tax rate	21.00%	35.00%
Reduction in deferred tax assets		$ 2,400
Income tax provision	$ 0

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Commitments and Contingencies (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Commitments And Contingencies Disclosure [Abstract]
Operating lease rent expense	$ 318,000	$ 85,000	$ 459,000	$ 167,500

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Commitments and Contingencies (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2018 (remainder of the year)	$ 556
2019	1,234
2020	1,271
2021	1,310
2022	1,349
Thereafter	3,138
Total	$ 8,858

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Related Party Transactions (Details Textual) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2018	Sep. 30, 2017	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Related Party Transaction [Line Items]
Stock compensation expense recognized				$ 166,000	$ 41,000
Ownership interest	30.00%			30.00%
Providence Therapeutics, Inc [Member] | Research Collaboration and License Agreement [Member]
Related Party Transaction [Line Items]
Revenue related to amortization of upfront payment	$ 200,000		$ 200,000	$ 100,000	$ 800,000
Accounts receivable, outstanding	$ 0			$ 0		$ 0
Stock compensation expense recognized		$ 1,500,000
Providence Therapeutics, Inc [Member] | Research Collaboration and License Agreement [Member] | President and Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Ownership interest	6.40%			6.40%

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Selected Financial Data - Summary of Selected Financial Data (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						6 Months Ended
	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2018	Jun. 30, 2017
Quarterly Financial Information Disclosure [Abstract]
Revenue in conjunction with strategic alliances and collaborations	$ 2,386	$ 2,367	$ 2,020	$ 3,296	$ 3,761	$ 3,921	$ 4,753	$ 7,682
Research and development, net	4,225	3,941	3,030	4,886	3,769	4,233	8,166	8,002
General and administrative	8,233	5,098	3,957	1,523	1,058	1,034	13,331	2,092
Net loss from operations	(10,072)	(6,672)	(4,967)	(3,113)	(1,066)	(1,346)	(16,744)	(2,412)
Net loss	$ (9,950)	$ (6,571)	$ (5,280)	$ (3,177)	$ (1,099)	$ (1,346)	$ (16,521)	$ (2,445)
Net loss per share, basic and diluted	$ (0.99)	$ (0.66)	$ (0.86)	$ (1.51)	$ (0.54)	$ (0.66)	$ (1.65)	$ (1.20)
Weighted average shares outstanding-basic and diluted	10,057,048	10,027,834	6,151,580	2,099,318	2,031,599	2,031,599	10,042,522	2,031,599
Working capital	$ 23,429	$ 37,383	$ 39,828	$ 5,144	$ 6,432	$ 1,706	$ 23,429	$ 6,432
Total assets	44,322	52,483	52,024	12,221	13,354	9,678	44,322	13,354
Shareholders' equity (deficit)	$ 17,795	$ 27,543	$ 33,794	$ (1,999)	$ (826)	$ 253	$ 17,795	$ (826)