Artelo Biosciences, Inc 10-Q for FY2021 Q3

Artelo Biosciences, Inc. (ARTL)

10-Q 2022-01-12 For: 2021-11-30

Added on April 10, 2026

About this 10-Q

Artelo Biosciences, Inc filed this 10-Q on January 12, 2022, covering the quarter ended November 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended November 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net loss: $2.55M; compared with a net loss of $1.44M a year earlier

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Nevada		33-1220924
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

505 Lomas Santa Fe, Suite 160, Solana Beach, CA USA		92075
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	47

SIGNATURES		48

	November 30,			August 31,
	2021			2021

ASSETS
Current Assets
Cash and cash equivalents	$	14,047		$	6,629
Marketable securities		10,794			3,436
Prepaid expenses and other current assets		514			252
Total Current Assets		25,355			10,317
Intangible asset		2,039			2,039
Marketable securities – non-current		1,524			-
Operating lease right-of-use asset		83			90
Prepaid expenses and deposit		3			189
TOTAL ASSETS	$	29,004		$	12,635

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities	$	590		$	471
Due to related parties		38			27
Operating lease liability - current portion		31			28
Total Current Liabilities		659			526

Operating lease liability		59			67
TOTAL LIABILITIES		718			593

STOCKHOLDERS’ EQUITY
Preferred Stock, par value $0.001, 6,250,000 shares authorized,
0 shares issued and outstanding		-			-
Common Stock, par value $0.001, 750,000,000 shares authorized,
42,301,013 and 24,526,703 shares issued and outstanding, respectively		42			25
Additional paid-in capital		47,718			28,902
Accumulated deficit		(19,451	)		(16,903	)
Accumulated other comprehensive (loss) income		(23	)		18
Total Stockholders’ Equity		28,286			12,042

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	29,004		$	12,635

	Three months ended
	November 30,
	2021			2020

OPERATING EXPENSES
General and administrative	$	1,279		$	841
Research and development		1,273			595
Total Operating Expenses		2,552			1,436

Loss from Operations		(2,552	)		(1,436	)

OTHER INCOME
Interest income		1			1
Net change in fair value of marketable securities		3			-
Total other income		4			1

Provision for income taxes		-			-

NET LOSS	$	(2,548	)	$	(1,435	)

OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments		(41	)		(16	)
Total Other Comprehensive Loss		(41	)		(16	)

TOTAL COMPREHENSIVE LOSS	$	(2,589	)	$	(1,451	)

Basic and Diluted Loss per Common Share	$	(0.08	)	$	(0.14	)

Basic and Diluted Weighted Average Common Shares Outstanding		30,440,665			10,218,400

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended: November 30, 2021

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ___________ to ___________

	Common stock				Additional Paid-in		Accumulated			Accumulated Other Comprehensive Income
	Shares		Amount		Capital		Deficit			(loss)			Total

Balance, August 31, 2021		24,527	$	25	$	28,902	$	(16,903	)	$	18		$	12,042

Common shares issued for cash, net of share issuance costs		17,774		17		18,245		-			-			18,262
Stock option expense		-		-		571		-			-			571
Net loss for the period		-		-		-		(2,548	)		-			(2,548	)
Foreign currency translation adjustments		-		-		-		-			(41	)		(41	)
Balance, November 30, 2021		42,301	$	42	$	47,718	$	(19,451	)	$	(23	)	$	28,286

	November 30, 2021
	Level 1		Level 2		Level 3		Total
Marketable securities
Commercial paper	$	-	$	10,087	$	-	$	10,087
Asset-backed securities		-		406		-		406
Corporate debt securities		-		301		-		301
US treasury		-		1,524		-		1,524
		-		12,318		-		12,318

	August 31, 2021
	Level 1		Level 2		Level 3		Total
Marketable securities
Commercial paper	$	-	$	2,724	$	-	$	2,724
Asset-backed securities		-		409		-		409
Corporate debt securities		-		303		-		303
		-		3,436		-		3,436

					Weighted
	Number of		Weighted Average		Average
	shares		Exercise Price		Life (years)
Outstanding, August 31, 2021		4,433,412	$	4.63		3.16
Forfeited		-		-		-
Exercised		-		-		-
Outstanding, November 30, 2021		4,433,412	$	4.63		2.92

	Number of		Weighted Average		Remaining life
	Options		Exercise Price		(years)

Outstanding, August 31, 2021		2,859,184	$	2.39		9.27
Granted		-		-		-
Exercised		-		-		-
Forfeited/canceled		-		-		-
Outstanding, November 30, 2021		2,859,184	$	2.39		9.02

Exercisable options, November 30, 2021		317,257	$	3.23		7.59

	·	The Company is invoiced monthly and quarterly in connection with several research and development contracts.
	·	The Company may be obligated to make additional payments related to research and development contracts entered into, dependent on the progress and milestones achieved through the programs.
	·	The Company’s principal executive office is currently located at 505 Lomas Santa Fe Drive, Suite 160, Solana Beach, CA, US. Additionally, we have offices in Dublin, Ireland and outside Manchester, UK, which serve as administrative spaces for managing our subsidiaries Trinity Reliant Ventures, Ltd (Ireland) and Artelo Biosciences Limited (UK). We do not currently own any properties, laboratories, or manufacturing facilities. All leases for our office space, other than for the principal executive office, are month-to-month.

	·	our plans to obtain funding for our operations, including funding necessary to develop, manufacture and commercialize our product candidates;
	·	the ability of any current and future funding to meet our capital requirements;
	·	the expected timing of the initiation and completion of our clinical studies;
	·	the size and growth of the markets for our product candidates;
	·	our commercialization, marketing, and manufacturing capabilities and strategies;
	·	any impact of the global COVID‑19 pandemic, or responses to the pandemic, on our business, clinical trials or personnel;
	·	our ability to compete with companies currently producing alternative treatment methods;
	·	the cost, timing and outcomes of any potential litigation involving our product candidates;
	·	regulatory developments in the US and in non-US countries;
	·	the development, regulatory approval, efficacy and commercialization of competing product candidates;
	·	our ability to retain key scientific or management personnel;
	·	the scope of protection we are able to establish and maintain for intellectual property rights covering our products and technology;
	·	the terms and conditions of licenses granted to us and our ability to license additional intellectual property related to our product candidates, as appropriate;
	·	our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;
	·	potential claims related to our intellectual property;
	·	the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
	·	our ability to regain compliance with applicable stock exchange listing requirements;
	·	our ability to develop and maintain our corporate infrastructure, including our internal controls;
	·	our ability to develop innovative new product candidates; and
	·	our financial performance.

Product Candidate	Target Indications	Development Phase	Market Size
ART27.13 – Synthetic Cannabinoid Agonist	Anorexia associated with cancer	Clinical	Cancer anorexia cachexia syndrome: >$2 billion
ART26.12 – FABP5 inhibitors	Prostate cancer and Breast cancer and Post-Traumatic Stress Disorder (PTSD)	Pre-clinical	Prostate cancer: $9 billion Breast cancer: $18 billion PTSD: $7 billion
ART12.11 – Synthetic CBD Cocrystal	Inflammatory Bowel Disease (IBD), Post-Traumatic Stress Disorder (PTSD), and other potential indications including cancer	Pre-clinical	IBD: $7 billion PTSD: $7 billion

	Three months ended
	November 30,
(In thousands)	2021			2020			Change
Operating Expenses
General and administrative expense	$	1,279		$	841		$	438
Research and development		1,273			595			678
Total Operating Expenses		2,552			1,436			1,116
Loss from Operations		(2,552	)		(1,436	)		(1,116	)
Other income		4			1			3
Net Loss	$	(2,548	)	$	(1,435	)	$	(1,113	)

	·	We will need to raise additional financing to support our business objectives. We cannot be sure we will be able to obtain additional financing on terms favorable to us when needed, or at all. If we are unable to obtain additional financing to meet our needs, our operations may be adversely affected or terminated.
	·	We are currently receiving Research and Development, or R&D, tax credits from the United Kingdom (“UK”) in connection with our clinical trials being conducted in the UK. If the UK government discontinues these tax credits, or we decide to conduct our clinical trials somewhere else, our costs to develop our product candidates would increase significantly.
	·	If we fail to comply with our obligations under our patent licenses with third parties, we could lose license rights that are vital to our business.
	·	Changes in regulatory requirements or other unforeseen circumstances may impact the timing of the initiation or completion of our clinical trials.
	·	We face many of the risks and difficulties frequently encountered by relatively new companies with respect to our operations.
	·	We have no mature product candidates and may not be successful in licensing any.
	·	Even if we are successful in licensing lead product candidates, resource limitations may limit our ability to successfully develop them.

	·	If we are unable to obtain and maintain patent protection for our products, our competitors could develop and commercialize products and technology similar or identical to our product candidates, and our ability to successfully commercialize any product candidates we may develop, and our science may be adversely affected.
	·	Obtaining and maintaining our patent protection depends on compliance with various procedural measures, document submissions, fee payments and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
	·	We may be subject to claims challenging the inventorship of our patents and other intellectual property.
	·	Intellectual property rights do not necessarily address all potential threats.
	·	Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

	·	The price of our securities may be volatile, and you could lose all or part of your investment. Further, we do not know whether an active, liquid and orderly trading market will sustain for our securities or what the market price of our securities will be and as a result it may be difficult for you to sell your shares of our securities.
	·	Shares of our common stock that have not been registered under federal securities laws are subject to resale restrictions imposed by Rule 144, including those set forth in Rule 144(I) which apply to a former “shell company.”
	·	Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and sales of such shares may have a depressive effect on the share price of our common stock.

	·	the costs related to initiation, progress, timing, costs and results of preclinical studies and clinical trials for our product candidates;

	·	any change in the clinical development plans for these product candidates;

	·	the number and characteristics of product candidates that we develop or acquire;

	·	our ability to establish and maintain strategic collaborations, licensing or other commercialization arrangements and the terms and timing of such arrangements;

	·	the emergence, approval, availability, perceived advantages, relative cost, relative safety and relative efficacy of other products or treatments;

	·	the events related to the outcome, timing and cost of meeting regulatory requirements established by the US Drug Enforcement Agency (the “DEA”), the FDA or other comparable foreign regulatory authorities;

	·	the potential costs of filing, prosecuting, defending and enforcing our patent claims and other intellectual property;

	·	the expenses needed to attract and retain skilled personnel;

	·	the costs associated with being a public company;

	·	the cost of defending intellectual property disputes; and

	·	the cost of marketing and generating revenues for any of our product candidates.

	·	our research and development efforts, including preclinical studies and clinical trials of our product candidates;

	·	developing sustainable, scalable, reliable and cost-effective manufacturing and distribution processes for our product candidates, including establishing and maintaining commercially viable supply relationships with third parties and establishing our own current good manufacturing processes (cGMPs), manufacturing facilities and processes;

	·	addressing any competing technological and industry developments;

	·	identifying, assessing, acquiring and/or developing new technology platforms and product candidates across numerous therapeutic areas;

	·	obtaining regulatory approvals and marketing authorizations for product candidates;

	·	launching and commercializing any approved products, either directly or with a collaborator or distributor;

	·	obtaining market acceptance of and acceptable reimbursement for any approved products;

	·	completing collaborations, licenses and other strategic transactions on favorable terms, if at all;

	·	maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and

	·	attracting, hiring and retaining qualified personnel.

	·	Identifying, licensing and obtaining development programs and lead candidates;

	·	Conducting initial research required to identify a lead candidate as the result of intellectual property we have licensed;

	·	Initiating preclinical, clinical or other required studies for future product candidates;

	·	Adding manufacturers and suppliers required to advance our programs;

	·	Obtaining regulatory and marketing approvals for our product candidates that successfully complete clinical studies;

	·	Making milestone or other payments under any license agreements;

	·	Expanding, maintaining and protecting our intellectual property portfolio;

	·	Attracting and retaining skilled personnel; and

	·	Creating and maintaining an infrastructure required to support our operations as a public company.

	·	generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials;

	·	obtain regulatory approval, or feedback on clinical trial design, to commence a clinical trial;

	·	identify, recruit and train suitable clinical investigators;

	·	reach agreement on acceptable terms with prospective clinical research organizations (“CROs”) and clinical trial sites;

	·	obtain and maintain IRB, approval at each clinical trial site;

	·	identify, recruit and enroll suitable patients to participate in a clinical trial;

	·	have a sufficient number of patients complete a clinical trial or return for post-treatment follow-up;

	·	ensure clinical investigators observe clinical trial protocol or continue to participate in a clinical trial;

	·	address any patient safety concerns that arise during the course of a clinical trial;

	·	address any conflicts with new or existing laws or regulations;

	·	add a sufficient number of clinical trial sites;

	·	timely manufacture sufficient quantities of a product candidate for use in clinical trials; or

	·	raise sufficient capital to fund a clinical trial.

	•	discovery of serious or unexpected toxicities or side effects experienced by trial participants or other safety issues;

	•	slower than expected rates of subject recruitment and enrollment rates in clinical trials;

	•	delays or inability in manufacturing or obtaining sufficient quantities of materials for use in clinical trials due to regulatory and manufacturing constraints;

	•	delays in obtaining regulatory authorization to commence a trial, including IRB approvals, licenses required for obtaining and using cannabinoids for research, either before or after a trial is commenced;

	•	unfavorable results from ongoing pre-clinical studies and clinical trials;

	•	patients or investigators failing to comply with study protocols;

	•	patients failing to return for post-treatment follow-up at the expected rate;

	•	sites participating in an ongoing clinical study withdraw, requiring us to engage new sites;

	•	third-party clinical investigators decline to participate in our clinical studies, do not perform the clinical studies on the anticipated schedule, or act in ways inconsistent with the established investigator agreement, clinical study protocol, good clinical practices, and other IRB requirements;

	•	third-party entities do not perform data collection and analysis in a timely or accurate manner or at all; or

	•	regulatory inspections of our clinical studies require us to undertake corrective action or suspend or terminate our clinical studies.

	•	others may be able to make products that are similar to our product candidates or utilize similar science or technology but that are not covered by the claims of the patents that we may own or license from our licensors or that incorporate certain research in our product candidates that is in the public domain;

	•	we, or our licensors or collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we or our licensors own now or in the future;

	•	we, or our licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions;

	•	others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

	•	it is possible that our or our licensors’ current or future pending patent applications will not lead to issued patents;

	•	issued patents that we or our licensors hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties;

	•	our competitors or other third parties might conduct research and development activities in countries where we or our licensors do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

	•	we may not develop additional proprietary product candidates that are patentable;

	•	the patents of others may harm our business if, for example, we or our licensors are found to have infringed those patents or if those patents serve as prior art to our or our licensors’ patents which could potentially invalidate our or our licensors’ patents; and

	•	we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property, which could ultimately result in public disclosure of the intellectual property if the third party’s patent application is published or issues to a patent.

	•	providing for a single class of directors where each member of the Board shall serve for a one-year term and may be elected to successive terms;

	•	authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock;

	•	limiting the liability of, and providing indemnification to, our directors, including provisions that require the company to advance payment for defending pending or threatened claims;

	•	limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

	•	requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our Board;

	•	controlling the procedures for the conduct and scheduling of board and stockholder meetings;

	•	limiting the determination of the number of directors on our board and the filling of vacancies or newly created seats on the board to our Board then in office; and

	•	providing that directors may be removed by stockholders at any time.

Exhibit Number	Description	Form	File No.	Filing Date	Filed Herewith
3.1	Articles of Incorporation	S-1	333-199213	10/8/2014
3.2	Certificate of Amendment filed with the Nevada Secretary of State on February 2, 2017 with an effective date of February 10, 2017.	8-K	333-199213	2/9/2017
3.3	Certificate of Change.	8-K	333-199213	4/17/2017
3.4	Certificate of Change.	10-K	001-38951	11/29/2021
3.5	Bylaws	S-1	333-199213	10/8/2014
3.6	Amendment to the Bylaws	10-K	001-38951	11/29/2021
10.1#	Amended and Restated Employment Agreement by and between the Company and Gregory D. Gorgas dated August 30, 2019.	10-K	001-38951	11/25/2019
10.2	Securities Purchase Agreement by and between the Company and Gregory D. Gorgas dated April 3, 2017.	8-K	333-199213	4/7/2017
10.3#	Form of Indemnification Agreement	8-K	333-199213	5/8/2017
10.4	Stock Purchase Agreement dated May 4, 2017	8-K	333-199213	5/8/2017
10.5	Form of Private Placement Subscription Agreement	8-K	333-199213	8/4/2017
10.6	Form of Registration Rights Agreement	8-K	333-199213	8/4/2017
10.7	Stock Purchase Agreement dated as of August 1, 2017	8-K	333-199213	8/4/2017
10.8	Material and Data Transfer, Option and License Agreement dated as of December 20, 2017 by and between the Company and NEOMED Institute+	10-Q	333-199213	1/16/2018
10.9+	First Amendment to Material and Data Transfer, Option and License Agreement by and between the Company and NEOMED Institute, dated as of January 4, 2019	10-Q	333-199213	4/15/2019
10.10#	2018 Equity Incentive Plan	S-1	333-227571	9/27/2018
10.11#	Form of Stock Option Agreement—2018 Equity Incentive Plan	S-1	333-227571	9/27/2018
10.12+	License Agreement with Stony Brook University, by and between the Company and Stony Brook University, dated January 18, 2018	S-1/A	333-222756	4/17/2018
31.1	Section 302 Certification				*
31.2 **	Section 906 Certification				*
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 LAB	XBRL Taxonomy Extension Label Linkbase Document
101 PRE	XBRL Taxonomy Extension Presentation Linkbase Document

		Artelo Biosciences, Inc.
		(Registrant)

Dated: January 12, 2022		/s/ Gregory D. Gorgas
		Gregory D. Gorgas
		President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director
		(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)