Artelo Biosciences(ARTL) - 2025 Q2 - Quarterly Report

Report Overview This section provides an overview of the company's filing details, status, and key corporate information as of the report date Filing Information This is a Quarterly Report on Form 10-Q for Artelo Biosciences, Inc., covering the period ended June 30, 2025 - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] - Artelo Biosciences, Inc. is incorporated in Nevada with Commission File Number 001-38951[3] Company Filing Status | Status | Indication | | :---------------------- | :--------- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Smaller reporting company | ☒ | | Emerging growth company | ☐ | | Non-accelerated filer | ☒ | Company Details Artelo Biosciences, Inc. is headquartered in Solana Beach, CA, with common stock traded on Nasdaq under the symbol ARTL - The company's principal executive offices are located in Solana Beach, CA[3] Securities Registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, $0.001 par value per share | ARTL | The Nasdaq Stock Market, LLC | - As of August 12, 2025, 1,321,552 shares of common stock were issued and outstanding[6] PART I - FINANCIAL INFORMATION This section presents the company's consolidated financial statements, management's analysis, market risk disclosures, and internal controls Item 1. Financial Statements Artelo Biosciences reported a net loss of $5.593 million for the six months ended June 30, 2025, resulting in a stockholders' deficit of $1.406 million due to increased liabilities Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total Assets | $4,357 | $4,698 | | Total Liabilities | $5,763 | $1,841 | | Total Stockholders' (Deficit) Equity | $(1,406) | $2,857 | | Cash and cash equivalents | $2,066 | $2,338 | Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Operating Expenses | $3,150 | $2,512 | $5,529 | $5,101 | | Net Loss | $(3,221) | $(2,433) | $(5,593) | $(4,916) | | Basic and Diluted Loss per Common Share | $(5.61) | $(4.52) | $(9.80) | $(9.17) | Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(2,111) | $(5,005) | | Net cash provided by investing activities | $0 | $3,019 | | Net cash provided by financing activities | $1,816 | $55 | | Cash and cash equivalents - end of period | $2,066 | $881 | Consolidated Balance Sheets This section presents the company's consolidated balance sheets as of June 30, 2025, and December 31, 2024 Consolidated Statements of Operations and Comprehensive Loss This section details the company's consolidated statements of operations and comprehensive loss for the periods presented Consolidated Statements of Stockholders' (Deficit) Equity This section outlines changes in the company's consolidated stockholders' (deficit) equity for the periods presented Consolidated Statements of Cash Flows This section provides the company's consolidated statements of cash flows for the periods presented Notes to the Consolidated Financial Statements This section provides detailed notes explaining the significant accounting policies and financial statement items NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS Artelo Biosciences is a clinical-stage biopharmaceutical company focused on lipid-signaling pathways, facing substantial doubt about its going concern ability due to losses and recent financing activities - The Company is a clinical-stage biopharmaceutical company focused on developing therapeutics targeting lipid-signaling pathways and the endocannabinoid system (ECS)[23] - The Company incurred a net loss of $5,593 thousand for the six months ended June 30, 2025, with cash and cash equivalents of $2,066 thousand, raising substantial doubt about its ability to continue as a going concern[24][30] - Key financing activities include $900 thousand in convertible notes issued on May 1, 2025, a private placement yielding $1,079 thousand net proceeds on June 24, 2025, and a subsequent at-the-market PIPE offering on August 4, 2025, for approximately $9,475 thousand, with net proceeds designated for Solana (SOL) purchases[26][27][29] - A one-for-six (1-for-6) reverse stock split was effective on June 13, 2025, reducing authorized common stock from 50,000,000 to 8,333,333 shares and outstanding shares from 3,280,000 to approximately 546,667[32][34] NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The company prepares its financial statements in accordance with GAAP and SEC regulations, consolidating its wholly-owned subsidiaries and recognizing R&D expenses as incurred - The Company's financial statements adhere to GAAP and SEC rules, consolidating wholly-owned subsidiaries including Trinity Reliant Ventures Limited, Artelo Biosciences Limited, and Artelo Biosciences Corporation[35][37] - Research and development expenses are recognized as incurred, with $704 thousand in UK R&D tax credits received during the six months ended June 30, 2025[38][39] Cash and Cash Equivalents (in thousands) | Date | Amount | | :---------------- | :----- | | June 30, 2025 | $2,066 | | December 31, 2024 | $2,338 | - The company operates as a single life science segment, and 1,028,720 common stock equivalents were excluded from diluted net loss per share computation for the six months ended June 30, 2025, as they were anti-dilutive[55][56][58] NOTE 3 – SEGMENT REPORTING Artelo Biosciences operates as a single life science segment, has not generated revenue since inception, and expects continued losses, with increased general and administrative and R&D expenses - The Company operates as a single life science segment, focused on developing therapeutics targeting lipid-signaling modulation pathways[58] - The Company has generated no revenue since inception and anticipates continued losses into the foreseeable future[60] Operating Expenses (in thousands) | Expense Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :----------------------------- | :----------------------------- | | General and administrative | $2,274 | $1,909 | | Research and development | $3,255 | $3,192 | - The increase in general and administrative expenses for the six months ended June 30, 2025, was primarily due to higher professional fees associated with capital raising efforts[62] NOTE 4 – RELATED PARTY TRANSACTIONS The company engaged in various related party transactions, including consulting and professional services from entities owned or influenced by its Senior Vice President and subsidiary directors - A company owned by the Senior Vice President, European Operations, provided consulting services totaling $11 thousand during the six months ended June 30, 2025[64] - Professional services totaling $55 thousand and $38 thousand were provided by companies influenced or controlled by subsidiary directors during the six months ended June 30, 2025[65][66] Outstanding Related Party Balances (in thousands) | Related Party | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Company owned by SVP, European Operations | $1 | $1 | | Company influenced by subsidiary director | $19 | $36 | | Company controlled by subsidiary director | $6 | $24 | | Total Due to related parties (Balance Sheet) | $26 | $61 | NOTE 5 – CONVERTIBLE NOTES In May 2025, Artelo Biosciences issued $900 thousand in convertible notes with a 12% annual interest rate and a 180-day maturity, convertible into common stock or warrants - Between April 27, 2025, and May 1, 2025, the Company issued convertible notes with an aggregate principal amount of $900 thousand[67] - The notes accrue interest at 12% per annum (20% upon default), mature in 180 days, and are convertible into common stock at $7.74 per share or warrants at $6.24 per share[68][69] Convertible Notes Summary (in thousands) | Metric | Amount | | :--------------------------------- | :----- | | Aggregate Principal Amount Issued | $900 | | Net Carrying Value (June 30, 2025) | $791 | | Interest Expense (H1 2025) | $72 | NOTE 6 - EQUITY As of June 30, 2025, Artelo Biosciences had 704,425 common shares outstanding, with a private placement generating $1.079 million net proceeds from stock and warrant issuances Common Stock and Preferred Stock (as of June 30, 2025) | Stock Type | Authorized Shares | Issued and Outstanding Shares | | :---------------- | :---------------- | :---------------------------- | | Preferred Stock | 69,445 | 0 | | Common Stock | 8,333,333 | 704,425 | - A private placement on June 26, 2025, issued 136,843 common shares, 93,180 pre-funded warrants, and 690,069 other warrants, generating $1,079 thousand in net proceeds[74][75] Warrants and Stock Options (as of June 30, 2025) | Instrument | Number Outstanding | Weighted Average Exercise Price | Intrinsic Value (in thousands) | | :---------------- | :----------------- | :------------------------------ | :----------------------------- | | Warrants | 806,564 | $8.12 | $5,416 | | Stock Options | 128,976 | $11.02 | $526 | NOTE 7– INTANGIBLE ASSET Artelo Biosciences capitalized $2.039 million for the exclusive worldwide license to develop and commercialize ART27.13, with no additional capitalization costs incurred during the period - The Company capitalized $2,039 thousand for the exclusive worldwide license to develop and commercialize products containing ART27.13 as an intangible asset[81] - No additional costs were capitalized as an intangible asset during the six months ended June 30, 2025[82] NOTE 8 - LEASE The company's U.S. office lease was extended until August 2027, with operating lease costs of $17 thousand and total liabilities of $88 thousand as of June 30, 2025 - The U.S. office lease was extended until August 2027 via an amendment on March 6, 2024[84] Operating Lease Information (as of June 30, 2025, in thousands) | Metric | Amount/Value | | :------------------------------------------ | :----------- | | Operating lease cost (six months ended) | $17 | | Weighted-average remaining lease term (year) | 2.08 | | Weighted-average discount rate | 7.50% | | Total Operating lease liabilities | $88 | | Operating lease liability - current | $38 | | Operating lease liability - non-current | $50 | NOTE 9 – COMMITMENTS AND CONTINGENCIES Artelo Biosciences has financial commitments for R&D contracts and office leases, with $250 thousand from recent financing committed to purchasing SOL - The Company has financial commitments for research and development contracts, including monthly/quarterly invoices and potential milestone payments[86][87] - The principal executive office lease in Solana Beach, CA, extends through August 2027, while a Manchester, UK, office operates on a month-to-month lease[87] - $250 thousand from the June 26, 2025, financing proceeds is committed to purchasing SOL[87] NOTE 10 – SUBSEQUENT EVENTS Subsequent to the reporting period, on August 4, 2025, Artelo Biosciences entered an at-the-market PIPE offering for approximately $9.475 million, with net proceeds designated for SOL purchases - On August 4, 2025, the Company entered an at-the-market PIPE agreement for expected gross proceeds of approximately $9,475 thousand[86] - The net proceeds from this PIPE offering are designated for SOL purchases[86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The company, a clinical-stage biopharmaceutical firm, faces significant operating losses and negative cash flows, adopting a new Digital Asset Treasury strategy while developing its product pipeline - Artelo Biosciences is a clinical-stage biopharmaceutical company focused on therapeutics targeting lipid-signaling modulation pathways, including the endocannabinoid system (ECS)[96] - The company's pipeline includes ART27.13 (Phase 1b/2a), ART26.12 (Phase 1), and ART12.11 (patented CBD cocrystal) for various therapeutic indications[97][98][99] - The company adopted a Digital Asset Treasury (DAT) strategy to purchase Solana (SOL) using recent financing proceeds, with $250 thousand already expended and further PIPE proceeds designated for SOL[105][106][107] - Artelo Biosciences has incurred significant operating losses and negative cash flows since inception, with a net loss of $5.6 million for the six months ended June 30, 2025, raising substantial doubt about its ability to continue as a going concern[104][137][143] General Overview This section provides a general overview of Artelo Biosciences' business, strategic focus, and financial performance Recent Developments This section outlines recent key developments impacting the company's operations and financial position Digital Asset Treasury Strategy — Solana (SOL) This section details the company's new strategy to invest in Solana (SOL) as part of its treasury management Governance and Controls This section discusses the company's governance structure and internal control environment Key Trends and Factors Affecting Comparability Between Periods This section identifies significant trends and factors influencing the comparability of financial results across reporting periods Components of Our Results of Operations This section breaks down the key components contributing to the company's financial results Liquidity and Capital Resources This section analyzes the company's ability to meet its short-term and long-term financial obligations and funding sources Contractual Obligations and Commitments This section details the company's significant contractual obligations and financial commitments Off-Balance Sheet Arrangements This section describes any off-balance sheet arrangements that could impact the company's financial condition Critical Accounting Policies and Estimates This section outlines the critical accounting policies and estimates that require significant management judgment New Accounting Standard Adopted This section discusses any new accounting standards adopted by the company and their impact Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Artelo Biosciences, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a 'smaller reporting company,' Artelo Biosciences, Inc. is not required to provide quantitative and qualitative disclosures about market risk[169] Item 4. Controls and Procedures Management, including the CEO, concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Management, with CEO participation, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[170][171] - No material changes in internal control over financial reporting occurred during the period[172] - The company acknowledges that control systems provide reasonable, but not absolute, assurance due to inherent limitations[173] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures Item 1. Legal Proceedings Artelo Biosciences is not currently a party to any legal proceedings that management believes would have a material adverse effect on its business, though litigation can incur costs and divert resources - The Company is not currently a party to any legal proceedings likely to have a material adverse effect on its business or financial condition[175] - Litigation, regardless of outcome, can adversely impact the company through defense and settlement costs and diversion of management resources[175] Item 1A. Risk Factors The company faces significant risks including going concern doubts, high volatility from its Digital Asset Treasury strategy, and uncertainties in clinical development and intellectual property protection - The company's financial condition raises substantial doubt about its ability to continue as a going concern, requiring additional financing[178][185][187] - The Digital Asset Treasury (DAT) strategy involving Solana (SOL) introduces significant risks due to high volatility, regulatory uncertainty, and potential resource diversion[180][184][299][303][311] - Clinical drug development is lengthy, expensive, and uncertain, facing risks from adverse side effects, unpredictable trial outcomes, and regulatory or supply chain delays[217][218][227][233] - Intellectual property protection is crucial but uncertain, facing challenges from patent law changes, compliance requirements, and potential litigation[182][353][357][358][361] Risk Factor Summary This section provides a concise summary of the primary risks facing Artelo Biosciences Risks Related to our Business and Product Candidates This section details risks associated with the company's core biopharmaceutical business and product development pipeline Risk Factors Related to our DAT Strategy This section outlines specific risks arising from the company's Digital Asset Treasury (DAT) strategy, particularly concerning Solana (SOL) Risks Related to our Intellectual Property This section addresses risks concerning the protection, enforcement, and potential infringement of the company's intellectual property Risks Related to our Securities This section covers risks pertinent to the company's common stock and other securities Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities by Artelo Biosciences during the second quarter of 2025 that had not been previously reported - No sales of unregistered securities occurred during the second quarter of 2025 that were not previously reported in Form 10-Q and Form 8-K filings[402] Item 3. Defaults Upon Senior Securities Artelo Biosciences reported no defaults upon senior securities during the period - There were no defaults upon senior securities[403] Item 4. Mine Safety Disclosures Mine Safety Disclosures are not applicable to Artelo Biosciences, Inc - Mine Safety Disclosures are not applicable to the Company[404] Item 5. Other Information During the last fiscal quarter, none of Artelo Biosciences' directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - During the last fiscal quarter, no directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[405] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, various agreements related to recent financings, and certifications - Exhibits include Articles of Incorporation, Bylaws, and agreements for At-The-Market Offering, Securities Purchase Agreement, Subscription Agreement, and various warrants and convertible notes[407] - Section 302 and Section 906 Certifications are included as exhibits[407] SIGNATURES The report is duly signed on behalf of Artelo Biosciences, Inc. by Gregory D. Gorgas, who serves as President, Chief Executive Officer, Chief Financial Officer, Treasurer, and Director - The report is signed by Gregory D. Gorgas, serving as President, CEO, CFO, Treasurer, and Director[410]