Artelo Biosciences, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended August 31, 2021; filed November 29, 2021. This is an annual report, not a calendar fourth-quarter report. Artelo is a clinical-stage biopharmaceutical company developing therapies targeting lipid-signaling pathways, including the endocannabinoid system.
Financial and operating performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $2.839 million | $1.919 million |
| General and administrative expense | $3.521 million | $1.789 million |
| Professional fees | $1.081 million | $0.978 million |
| Total operating expenses / operating loss | $7.441 million | $4.686 million |
| Net loss | $7.437 million | $4.655 million |
| Basic and diluted loss per share | $0.40 | $1.26 |
| Cash and cash equivalents at year-end | $6.629 million | $2.142 million |
| Marketable securities at year-end | $3.436 million | None reported |
| Total assets / total liabilities | $12.635 million / $0.593 million | $4.376 million / $0.501 million |
| Working capital | $9.791 million | $1.836 million |
| Cash used in operating activities | $6.141 million | $4.347 million |
| Cash used in investing activities | $3.439 million | None |
| Cash provided by financing activities | $14.112 million | $1.981 million |
Expenses and net loss increased year over year, mainly reflecting CAReS trial costs and higher general and administrative costs, including payroll, director compensation, and stock-based compensation. Operating cash use also increased. The company reported no revenue and no income-tax provision. Liabilities were primarily accounts payable, accrued liabilities, and lease obligations; the filing does not report material conventional debt.
Financing during FY2021 included approximately $8.1 million net proceeds from common-stock issuance and $6.0 million from warrant exercises. After year-end, Artelo issued 17,774,310 shares through its at-the-market program for approximately $18.3 million net proceeds. Management said available cash, including this subsequent financing, was expected to fund planned operations for at least 12 months from issuance of the financial statements.
Programs, outlook, and material risks
- ART27.13: The company began enrolling and dosing patients in its Phase 1b/2a CAReS study for cancer-related anorexia in April 2021. It expected to report results from the first phase in Q1 2022. Prior sponsor studies dosed 205 subjects; the filing describes generally acceptable tolerability and dose-dependent weight gain, but no convincing analgesic efficacy in acute pain models.
- ART26.12: Preclinical FABP5-inhibitor program, with cancer as the near-term focus and potential applications including prostate and breast cancer and anxiety disorders. The company anticipated possible cancer clinical studies in early 2023, subject to regulatory-enabling work, funding, and research-provider availability.
- ART12.11: Preclinical proprietary CBD cocrystal program. Management believes its solid-state properties may improve stability, solubility, and consistency of absorption; these are prospective claims, not demonstrated clinical outcomes.
- Funding and dilution: Artelo expects operating losses and cash use to rise as development advances and says additional capital will be needed. Financing may dilute shareholders or require less favorable partnerships, licensing, or debt terms. The post-year-end ATM raised substantial cash but also materially increased shares outstanding.
- Clinical, regulatory, and supply risks: Candidates remain unapproved and may fail in trials or face delays, adverse effects, regulatory hurdles, or manufacturing and CRO disruptions. COVID-19 and supply-chain constraints could affect enrollment, timelines, and costs.
- Other risks: The business depends on licensed intellectual property, third-party research and manufacturing, and adequate controlled-substance permissions where applicable. The company also disclosed Nasdaq minimum-bid-price noncompliance notice received September 13, 2021, with a March 14, 2022 deadline to regain compliance; a reverse split could be required. No material legal proceeding was reported.
- Audit and controls: The auditor issued an unqualified opinion on the financial statements and reported no critical audit matters. Management assessed disclosure controls and internal control over financial reporting as effective; the auditor did not attest to internal-control effectiveness because of the company’s filer exemption.
Most important facts for investors to verify
- Whether CAReS produced the expected Q1 2022 data, and the results, safety profile, enrollment, and subsequent trial plans.
- Cash, marketable securities, quarterly operating cash burn, and the actual runway after the approximately $18.3 million post-year-end ATM proceeds.
- Share count and dilution from the FY2021 financing, post-year-end ATM issuance, warrants, and outstanding options; 42,301,013 common shares were outstanding as of November 5, 2021.
- Progress and funding needs for ART26.12 regulatory-enabling studies and ART12.11 development, including whether expected timelines remain achievable.
- Nasdaq listing compliance and any reverse split or further capital raise, as well as continued compliance with license, patent, and supply obligations.