Cover
Cover - shares | 3 Months Ended | |
Nov. 30, 2021 | Jan. 10, 2022 | |
Cover [Abstract] | ||
Entity Registrant Name | ARTELO BIOSCIENCES, INC. | |
Entity Central Index Key | 0001621221 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --08-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Nov. 30, 2021 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2022 | |
Entity Common Stock Shares Outstanding | 42,301,013 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 001-38951 | |
Entity Tax Identification Number | 33-1220924 | |
Entity Address Address Line 1 | 505 Lomas Santa Fe | |
Entity Address Address Line 2 | Suite 160 | |
Entity Address City Or Town | Solana Beach | |
Entity Address State Or Province | CA | |
Entity Address Country | US | |
Entity Address Postal Zip Code | 92075 | |
City Area Code | 858 | |
Local Phone Number | 925-7049 | |
Security 12b Title | Common Stock, $0.001 par value per share | |
Trading Symbol | ARTL | |
Security Exchange Name | NASDAQ | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Code | NV |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Nov. 30, 2021 | Aug. 31, 2021 |
Current Assets | ||
Cash and cash equivalents | $ 14,047,000 | $ 6,629,000 |
Marketable securities | 10,794,000 | 3,436,000 |
Prepaid expenses and other current assets | 514,000 | 252,000 |
Total Current Assets | 25,355,000 | 10,317,000 |
Intangible asset | 2,039,000 | 2,039,000 |
Marketable securities - non-current | 1,524,000 | 0 |
Operating lease right-of-use asset | 83,000 | 90,000 |
Prepaid expenses and deposit | 3,000 | 189,000 |
TOTAL ASSETS | 29,004,000 | 12,635,000 |
Current Liabilities | ||
Accounts payable and accrued liabilities | 590,000 | 471,000 |
Due to related parties | 38,000 | 27,000 |
Operating lease liability - current portion | 31,000 | 28,000 |
Total Current Liabilities | 659,000 | 526,000 |
Operating lease liability | 59,000 | 67,000 |
TOTAL LIABILITIES | 718,000 | 593,000 |
STOCKHOLDERS' EQUITY | ||
Preferred Stock, par value $0.001, 6,250,000 shares authorized,0 shares issued and outstanding | 0 | 0 |
Common Stock, par value $0.001, 750,000,000 shares authorized, 42,301,013 and 24,526,703 shares issued and outstanding, respectively | 42,000 | 25,000 |
Additional paid-in capital | 47,718,000 | 28,902,000 |
Accumulated deficit | (19,451,000) | (16,903,000) |
Accumulated other comprehensive (loss) income | (23,000) | 18,000 |
Total Stockholders' Equity | 28,286,000 | 12,042,000 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 29,004,000 | $ 12,635,000 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - $ / shares | Nov. 30, 2021 | Aug. 31, 2021 |
Consolidated Balance Sheets | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 6,250,000 | 6,250,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 750,000,000 | 750,000,000 |
Common stock, shares issued | 42,301,013 | 24,526,703 |
Common stock, shares outstanding | 42,301,013 | 24,526,703 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) shares in Thousands | 3 Months Ended | |
Nov. 30, 2021 | Nov. 30, 2020 | |
OPERATING EXPENSES | ||
General and administrative | $ 1,279,000 | $ 841,000 |
Research and development | 1,273,000 | 595,000 |
Total Operating Expenses | 2,552,000 | 1,436,000 |
Loss from Operations | (2,552,000) | (1,436,000) |
OTHER INCOME | ||
Interest income | 1,000 | 1,000 |
Net change in fair value of marketable securities | 3,000 | 0 |
Total other income | 4,000 | 1,000 |
Provision for income taxes | 0 | 0 |
NET LOSS | (2,548,000) | (1,435,000) |
OTHER COMPREHENSIVE LOSS | ||
Foreign currency translation adjustments | (41,000) | (16,000) |
Total Other Comprehensive Loss | (41,000) | (16,000) |
TOTAL COMPREHENSIVE LOSS | $ (2,589,000) | $ (1,451,000) |
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 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) shares in Thousands | Total | Common Stock | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Accumulated other comprehensive loss |
Balance, shares at Aug. 31, 2020 | 4,991 | ||||
Balance, amount at Aug. 31, 2020 | $ 3,875,000 | $ 5,000 | $ 13,272,000 | $ (9,466,000) | $ 64,000 |
Common shares issued for cash, net of share issuance costs, shares | 10,120 | ||||
Common shares issued for cash, net of share issuance costs, amount | 6,578,000 | $ 10,000 | 6,568,000 | 0 | 0 |
Common shares issued for services - officers | 11,000 | 0 | 11,000 | 0 | 0 |
Stock option expense | 41,000 | 0 | 41,000 | 0 | 0 |
Net loss for the period | (1,435,000) | 0 | 0 | (1,435,000) | 0 |
Foreign currency translation adjustments | (16,000) | $ 0 | 0 | 0 | (16,000) |
Balance, shares at Nov. 30, 2020 | 15,111 | ||||
Balance, amount at Nov. 30, 2020 | 9,054,000 | $ 15,000 | 19,892,000 | (10,901,000) | 48,000 |
Balance, shares at Aug. 31, 2021 | 24,527 | ||||
Balance, amount at Aug. 31, 2021 | 12,042,000 | $ 25,000 | 28,902,000 | (16,903,000) | 18,000 |
Common shares issued for cash, net of share issuance costs, shares | 17,774 | ||||
Common shares issued for cash, net of share issuance costs, amount | 18,262,000 | $ 17,000 | 18,245,000 | 0 | 0 |
Stock option expense | 571,000 | 0 | 571,000 | 0 | 0 |
Net loss for the period | (2,548,000) | 0 | 0 | (2,548,000) | 0 |
Foreign currency translation adjustments | (41,000) | $ 0 | 0 | 0 | (41,000) |
Balance, shares at Nov. 30, 2021 | 42,301 | ||||
Balance, amount at Nov. 30, 2021 | $ 28,286,000 | $ 42,000 | $ 47,718,000 | $ (19,451,000) | $ (23,000) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Nov. 30, 2021 | Nov. 30, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (2,548,000) | $ (1,435,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock based compensation | 571,000 | 51,000 |
Net change in fair value of marketable securities | (3,000) | 0 |
Non-cash lease expenses | 7,000 | 0 |
Changes in operating assets and liabilities: | ||
Prepaid expenses and other current assets | (91,000) | 82,000 |
Accounts payable and accrued liabilities | 132,000 | (32,000) |
Due to related parties | 11,000 | 14,000 |
Fixed cash payments related to operating lease | (5,000) | 0 |
Net cash used in operating activities | (1,926,000) | (1,320,000) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Proceeds from disposition of marketable securities | 1,880,000 | 0 |
Investment in trading marketable securities, net | (10,758,000) | 0 |
Net cash used in investing activities | (8,878,000) | 0 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from issuance of common shares for cash, net | 18,262,000 | 6,579,000 |
Advance from related parties | 0 | 1,000 |
Repayments to related parties | 0 | (1,000) |
Net cash provided by financing activities | 18,262,000 | 6,579,000 |
Effect of exchange rate changes on cash | (40,000) | (12,000) |
Net change in cash and cash equivalents | 7,418,000 | 5,247,000 |
Cash and cash equivalents - beginning of period | 6,629,000 | 2,142,000 |
Cash and cash equivalents - end of period | $ 14,047,000 | $ 7,389,000 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 3 Months Ended |
Nov. 30, 2021 | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS | NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS ARTELO BIOSCIENCES, INC. (“we”, “us”, “our”, the “Company”) is a Nevada corporation incorporated on May 2, 2011, and based in San Diego County, California. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”), and the Company’s fiscal year end is August 31. The Company registered wholly-owned subsidiaries in Ireland, Trinity Reliant Ventures Limited, on November 11, 2016, and in the UK, Trinity Research & Development Limited, on June 2, 2017. On January 8, 2020, Trinity Research and Development Limited changed its name to Artelo Biosciences Limited. The Company incorporated a wholly-owned subsidiary in Canada, Artelo Biosciences Corporation, on March 18, 2020. Operations in the subsidiaries have been consolidated in the financial statements. We are a clinical-stage biopharmaceutical company focused on the development of therapeutics that target lipid-signaling pathways, including the endocannabinoid system (the “ECS”), a family of receptors and neurotransmitters that form a biochemical communication network throughout the body. Change in fiscal year On September 17, 2021, the Company’s Board of Directors approved a change to the Company’s fiscal year end from August 31 to December 31. The Company’s next fiscal year will begin on January 1, 2022, and end on December 31, 2022. The Company expects to file a transition report under Rules 13a-10 or 15d-10 promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”) in early 2022. COVID-19 As the COVID-19 pandemic is still evolving at this time and much of its impact remains unknown, the Company is not able to predict the impact it may have on the development of its product candidates and business. The severity of the COVID-19 pandemic could also negatively impact the Company’s access to its existing supply chain by delaying the delivery of key raw materials used in its product candidates and therefore delay the delivery of such products for use in its clinical trials. Any of these results could have a materially adverse impact to our business. Liquidity The Company has incurred losses for the past several years and a net loss of $2,548 during the three months ended November 30, 2021. During the three months ended November 30, 2021, we completed an offering for net proceeds of approximately $18,262, which substantially increased our cash and cash equivalents and improved our working capital position. Consequently, our existing cash resources and cash received from the public offering are expected to provide sufficient funds to carry out our planned operations into the second half of 2023. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Nov. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Company prepares its financial statements in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) and GAAP in the United States of America. The accompanying interim financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended November 30, 2021, are not necessarily indicative of the results for the full year. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited financial statements and the footnotes thereto for the year ended August 31, 2021, contained in the Company’s Form 10-K filed on November 29, 2021. Reclassifications For the three months ended November 30, 2020, the Company has reclassified professional fees of $445 to general and administrative expenses to conform with current period presentation. As of August 31, 2021, the Company has reclassified accounts payable and accrued liabilities of $22 due to related parties to conform with current period presentation. Basis of Consolidation The financial statements have been prepared on a consolidated basis, with the Company’s wholly-owned subsidiaries, Trinity Reliant Ventures Limited, Artelo Biosciences Limited and Artelo Biosciences Corporation. All intercompany transactions and balances have been eliminated. Loss per Share Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method and as if converted method. Dilutive potential common shares include outstanding stock options and warrants. For the three months ended November 30, 2021, and 2020, respectively, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result was anti-dilutive. November 30, 2021 2020 Stock options 2,859,184 401,834 Warrants 4,433,412 12,454,937 7,292,596 12,856,771 Cash and Cash Equivalents Cash and cash equivalents include cash in banks, money market funds, commercial paper, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250 per institution. The amount in excess of the FDIC insurance as of November 30, 2021, was approximately $13,547. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. Marketable Securities Our investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading debt securities as well as realized gains and losses on available-for-sale debt securities are included in net income. The marketable securities held by the Company, classified as trading securities, had an outstanding balance of $12,318 and $3,436 as of November 30, 2021, and August 31, 2021, respectively. Financial Instruments The Company follows ASC 820, “Fair Value Measurements and Disclosures”, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The carrying amounts shown of the Company’s financial instruments including cash and cash equivalents and accounts payable approximate fair value due to the short-term maturities of these instruments. Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis in the fair value hierarchy as of November 30, 2021, and August 31, 2021: 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 Recent Accounting Pronouncement In November 2021, the FASB issued ASU 2021-10, “ Government Assistance (Topic 832) |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Nov. 30, 2021 | |
RELATED PARTY TRANSACTIONS | |
NOTE 3 - RELATED PARTY TRANSACTIONS | NOTE 3 - RELATED PARTY TRANSACTIONS During the three months ended November 30, 2021, and 2020, a company owned by the Senior Vice President, European Operations, provided consulting services totaling $15, of which $5 was outstanding, as of November 30, 2021, and August 31, 2021. During the three months ended November 30, 2021, a company significantly influenced by a director of a subsidiary of the Company provided professional services totaling $35, of which $13 was outstanding as of November 30, 2021. During the three months ended November 30, 2021, a company controlled by a director of a subsidiary of the Company provided professional services totaling $26, of which $20 was outstanding as of November 30, 2021. |
INTANGIBLE ASSET
INTANGIBLE ASSET | 3 Months Ended |
Nov. 30, 2021 | |
INTANGIBLE ASSET | |
NOTE 4 - INTANGIBLE ASSET | NOTE 4 – INTANGIBLE ASSET The Company has capitalized the costs associated with acquiring the exclusive worldwide license to develop and commercialize products comprising or containing the proprietary therapeutic compound ART27.13, formerly known as NEO1940 as an intangible asset at a value of $2,039 as of November 30, 2021, and August 31, 2021. The amount capitalized consisted of a $1,500 payment and the fair value of 61,297 shares of common stock of $539. During the three months ended November 30, 2021, no additional costs met the criteria for capitalization as an intangible asset. |
EQUITY
EQUITY | 3 Months Ended |
Nov. 30, 2021 | |
EQUITY | |
NOTE 5 - EQUITY | NOTE 5 - EQUITY Preferred shares The Company has authorized 6,250,000 shares of preferred stock with a par value of $0.001 per share. During the three months ended November 30, 2021, there were no issuances of preferred stock. Common Shares The Company has authorized 750,000,000 shares of common stock with a par value of $0.001 per share. Each share of common stock entitles the holder to one vote, in person or proxy, on any matter on which an action of the stockholders of the Company is sought. During the three months ended November 30, 2021, the Company issued 17,774,310 shares of common stock at an average price of $1.06 per share in connection with the Company’s at-the-market equity program for proceeds, net of commission and fees, of $18,262. The agent of the program was entitled to compensation at a commission rate of 3.0% of the gross sales price per sold share of common stock. Warrants A summary of activity during the three months ended November 30, 2021, follows: 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 The intrinsic value of the warrants as of November 30, 2021, is $0. All of the outstanding warrants are exercisable as of November 30, 2021. Stock Options Amended and Restated 2018 Equity Incentive Plan On September 1, 2021, the Amended and Restated 2018 Equity Plan (the “Plan”) was increased to permit the issuance of an additional 3,674,097 shares of common stock. As of November 30, 2021, the Plan permits the Company to issue up to 7,222,835 shares of common stock awards of which 4,363,651 is available to be issued. During the three months ended November 30, 2021, the Company recognized stock option expense of $571, of which $525 was to related parties, and as of November 30, 2021, $3,682 remains unamortized, of which $3,131 is with related parties. The intrinsic value of the 2,859,184 options outstanding as of November 30, 2021, is $3. The following is a summary of stock option activity during the three months ended November 30, 2021: 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 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Aug. 31, 2021 | |
COMMITMENTS AND CONTINGENCIES | |
NOTE 6 - COMMITMENTS AND CONTENGENCIES | NOTE 6 – COMMITMENTS AND CONTINGENCIES The Company has certain financial commitments relating to research and development contracts as of November 30, 2021, as follows: · 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. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Nov. 30, 2021 | |
SUBSEQUENT EVENTS | |
NOTE 7 - SUBSEQUENT EVENTS | NOTE 7 – SUBSEQUENT EVENTS On December 1, 2021, the Company granted 794,800 options with an exercise price of $0.63, with a term of ten (10) years to exercise from grant date, to employees, directors and consultants of the Company, of which 257,800 were issued to related parties. Options issued to non-employees vest 33% of shares on the one-year anniversary of vesting commencement date, and the balance of the unvested shares shall vest ratably each month thereafter for a 24-month period, on the first day of each such month. Commencing on the grant date, options issued to employees vest 25% of shares on December 1, 2022, and the balance of the unvested shares shall vest ratably each month thereafter for a 36-month period, on the first day of each such month. On December 3, 2021, the Company granted an option to the Company’s principal executive officer to purchase 1,355,000 shares of the Company’s common stock, with an exercise price of $0.63, with a term of ten (10) years to exercise from grant date, under the Company’s 2018 Equity Incentive Plan. Commencing on the grant date, options issued and vest as follows: 25% of the shares subject to the option shall vest on December 3, 2022, and the balance of the unvested shares shall vest ratably each month thereafter for a 36-month period, on the third day of each such month. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Nov. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | The Company prepares its financial statements in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) and GAAP in the United States of America. The accompanying interim financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended November 30, 2021, are not necessarily indicative of the results for the full year. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited financial statements and the footnotes thereto for the year ended August 31, 2021, contained in the Company’s Form 10-K filed on November 29, 2021. |
Reclassification | For the three months ended November 30, 2020, the Company has reclassified professional fees of $445 to general and administrative expenses to conform with current period presentation. As of August 31, 2021, the Company has reclassified accounts payable and accrued liabilities of $22 due to related parties to conform with current period presentation. |
Basis of Consolidation | The financial statements have been prepared on a consolidated basis, with the Company’s wholly-owned subsidiaries, Trinity Reliant Ventures Limited, Artelo Biosciences Limited and Artelo Biosciences Corporation. All intercompany transactions and balances have been eliminated. |
Loss per Share | Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method and as if converted method. Dilutive potential common shares include outstanding stock options and warrants. For the three months ended November 30, 2021, and 2020, respectively, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result was anti-dilutive. November 30, 2021 2020 Stock options 2,859,184 401,834 Warrants 4,433,412 12,454,937 7,292,596 12,856,771 |
Cash and Cash Equivalents | Cash and cash equivalents include cash in banks, money market funds, commercial paper, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250 per institution. The amount in excess of the FDIC insurance as of November 30, 2021, was approximately $13,547. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. |
Marketable Securities | Our investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading debt securities as well as realized gains and losses on available-for-sale debt securities are included in net income. The marketable securities held by the Company, classified as trading securities, had an outstanding balance of $12,318 and $3,436 as of November 30, 2021, and August 31, 2021, respectively. |
Financial Instruments | The Company follows ASC 820, “Fair Value Measurements and Disclosures”, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The carrying amounts shown of the Company’s financial instruments including cash and cash equivalents and accounts payable approximate fair value due to the short-term maturities of these instruments. Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis in the fair value hierarchy as of November 30, 2021, and August 31, 2021: 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 |
Recent Accounting Pronouncements | In November 2021, the FASB issued ASU 2021-10, “ Government Assistance (Topic 832) |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Nov. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of computation of diluted net loss per share | November 30, 2021 2020 Stock options 2,859,184 401,834 Warrants 4,433,412 12,454,937 7,292,596 12,856,771 |
Schedule of fair value on measured on recurring basis | 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 |
EQUITY (Tables)
EQUITY (Tables) | 3 Months Ended |
Nov. 30, 2021 | |
EQUITY | |
Schedule of activity warrants outstanding | 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 |
Schedule of stock option activity | 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 |
ORGANIZATION AND DESCRIPTION _2
ORGANIZATION AND DESCRIPTION OF BUSINESS (Detail Narrative) $ in Thousands | 3 Months Ended |
Nov. 30, 2021USD ($) | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
Net loss | $ 2,548 |
Net proceeds from issuance initial public offering | $ 18,262 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares shares in Thousands | 3 Months Ended | |
Nov. 30, 2021 | Nov. 30, 2020 | |
Dilutive instruments | 7,292,596 | 12,856,771 |
Warrant [Member] | ||
Dilutive instruments | 4,433,412 | 12,454,937 |
Stock Option [Member] | ||
Dilutive instruments | 2,859,184 | 401,834 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | Nov. 30, 2021 | Aug. 31, 2021 |
Marketable securities | $ 12,318,000 | $ 3,436,000 |
Fair Value, Inputs, Level 2 [Member] | ||
Marketable securities | 12,318,000 | 3,436,000 |
Totals marketable securities | 12,318,000 | 3,436,000 |
Fair Value, Inputs, Level 3 [Member] | ||
Marketable securities | 0 | 0 |
Fair Value, Inputs, Level 1 [Member] | ||
Marketable securities | 0 | 0 |
Commercial Paper [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Marketable securities | 10,087,000 | 2,724,000 |
Totals marketable securities | 10,087,000 | 2,724,000 |
Commercial Paper [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Marketable securities | 0 | 0 |
Commercial Paper [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Marketable securities | 0 | 0 |
Asset Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Marketable securities | 406,000 | 409,000 |
Totals marketable securities | 406,000 | 409,000 |
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Marketable securities | 301,000 | 303,000 |
Totals marketable securities | 301,000 | 303,000 |
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Marketable securities | 0 | 0 |
UStreasury [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Marketable securities | 1,524,000 | 0 |
Totals marketable securities | 1,524,000 | 0 |
Asset-backed securitie [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Marketable securities | 0 | 0 |
Corporate debt securities [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Marketable securities | 0 | 0 |
Asset-backed securities [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Marketable securities | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Detail Narrative) - USD ($) $ in Thousands | 3 Months Ended | |
Nov. 30, 2021 | Aug. 31, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Federally insured limit amount | $ 250 | |
Amount in excess of FDIC insurance amount | 13,547 | |
Marketable securities outstanding balance | 12,318 | $ 3,436 |
Professional fees | 445 | |
Accounts payable and accrued expenses | $ 22 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Detail Narrative) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Nov. 30, 2021 | Aug. 31, 2021 | |
professional services | $ 445 | |
Executive Vice President [Member] | ||
Consulting services | 15 | $ 5 |
Influenced by a director [Member] | ||
professional services | 35 | 13 |
Controlled by a director [Member] | ||
professional services | $ 26 | $ 20 |
INTANGIBLE ASSET (Detail Narrat
INTANGIBLE ASSET (Detail Narrative) - USD ($) shares in Thousands | 3 Months Ended | |
Nov. 30, 2021 | Aug. 31, 2021 | |
Intangible asset | $ 2,039,000 | $ 2,039,000 |
Represents information of Worldwide License Neo 1940. | ||
Payments to acquire intangible assets | $ 1,500,000 | |
Number of common stock payable recorded | 61,297 | |
Amount of stock options exercise to develop product | $ 539,000 | |
Intangible asset | $ 2,039,000 | $ 2,039,000 |
EQUITY (Details)
EQUITY (Details) | 3 Months Ended |
Nov. 30, 2021$ / sharesshares | |
Number of shares Outstanding, Beginning | shares | 2,859,184 |
Number of warrant exercised | shares | 0 |
Number of shares Outstanding, Ending | shares | 2,859,184 |
Weighted Average Exercise Price Exercised | $ / shares | $ 0 |
Warrant [Member] | |
Number of shares Outstanding, Beginning | shares | 4,433,412 |
Number of shares Outstanding, Ending | shares | 4,433,412 |
Weighted Average Exercie price, Beginning | $ / shares | $ 4.63 |
Weighted Average Exercise Price Forfeited | $ / shares | 0 |
Weighted Average Exercise Price Exercised | $ / shares | 0 |
Weighted Average Exercise Price, Ending | $ / shares | $ 4.63 |
Weighted Average Life (years), Beginning | 3 years 1 month 28 days |
Weighted Average Life (years), Ending | 2.92 |
EQUITY (Details 1)
EQUITY (Details 1) | 3 Months Ended |
Nov. 30, 2021$ / sharesshares | |
EQUITY | |
Number of shares Outstanding, Beginning | shares | 2,859,184 |
Number of shares granted during period | shares | 0 |
Number of Options Exercised | shares | 0 |
Number of Options Forfeited/canceled | shares | 0 |
Number of shares Outstanding, Ending | shares | 2,859,184 |
Number of Options Outstanding, Exercisable | shares | 317,257 |
Weighted Average Exercise Price, Outstanding | $ / shares | $ 2.39 |
Weighted Average Exercise Price, Granted | $ / shares | 0 |
Weighted Average Exercise Price, Exercised | $ / shares | 0 |
Weighted Average Exercise Price, Forfeited/canceled | $ / shares | 0 |
Weighted Average Exercise Price, Outstanding | $ / shares | 2.39 |
Weighted Average Exercise Price, Exercisable | $ / shares | $ 3.23 |
Weighted Average Remaining Contractual life (in years), Beginning | 9 years 3 months 7 days |
Weighted Average Remaining Contractual life (in years), Ending | 9 years 7 days |
Weighted Average Remaining Contractual life (in years), Exercisable options | 7 years 7 months 2 days |
EQUITY (Detail Narrative)
EQUITY (Detail Narrative) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Nov. 30, 2021 | Nov. 30, 2020 | Aug. 31, 2021 | |
Unamortized expense | $ 3,682 | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | |
Stock based compensation | $ 571 | $ 51 | |
Common stock, shares authorized | 750,000,000 | 750,000,000 | |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | |
Preferred stock, shares authorized | 6,250,000 | 6,250,000 | |
Preferred stock, shares outstanding | 0 | 0 | |
Number of options Outstanding | 2,859,184 | 2,859,184 | |
Intrinsic value of stock options outstanding | $ 3 | ||
Preferred stock, shares issued | 0 | 0 | |
2018 Equity Incentive Plan | |||
Common stock reserved for future issuance | 3,674,097 | ||
Common stock, shares issuable | 7,222,835 | ||
Common stock, shares available to be issued | 4,363,651 | ||
Common Stock [Member] | |||
Average price | $ 1.06 | ||
Commission fee | $ 18,262 | ||
Commission rate | 3.00% | ||
Common shares issued for cash (in shares) | 17,774,310 | ||
Warrant [Member] | |||
Number of options Outstanding | 4,433,412 | 4,433,412 | |
Intrinsic value of stock options outstanding | $ 0 | ||
Related Parties [Member] | |||
Unamortized expense | 3,131 | ||
Stock based compensation | $ 525 |
SUBSEQUENT EVENTS (Detail Narra
SUBSEQUENT EVENTS (Detail Narrative) | 3 Months Ended |
Nov. 30, 2021$ / sharesshares | |
December 1, 2021 [Member] | |
Exercise price | $ / shares | $ 0.63 |
Terms of vesting period | 33% of shares on the one-year anniversary of vesting commencement date, and the balance of the unvested shares shall vest ratably each month thereafter for a 24-month period, on the first day of each such month. Commencing on the grant date, options issued to employees vest 25% of shares on December 1, 2022, and the balance of the unvested shares shall vest ratably each month thereafter for a 36-month period, on the first day of each such month. |
Stock option granted shares | 794,800 |
Stock option issued to shares related parties | 257,800 |
December 3, 2021 [Member] | Principal Executive Officer [Member] | |
Exercise price | $ / shares | $ 0.63 |
Terms of vesting period | 25% of the shares subject to the option shall vest on December 3, 2022, and the balance of the unvested shares shall vest ratably each month thereafter for a 36-month period, on the third day of each such month. |
Stock option granted shares | 1,355,000 |