artl_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

	For the quarterly period ended: June 30, 2026

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

	For the transition period from ___________ to ___________

Commission File Number: 001-38951

ARTELO BIOSCIENCES, INC.

(Exact name of registrant as specified in its charter)

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)

(858) 925-7049

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

The registrant had 4,595,068 shares of common stock issued and outstanding as of August 11, 2026.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Mine Safety Disclosures	18
Item 5.	Other Information	18
Item 6.	Exhibits	19

SIGNATURES		20

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Artelo Biosciences, Inc.

Unaudited Consolidated Financial Statements

		Page
Consolidated Balance Sheets as of June 30, 2026 (unaudited) and December 31, 2025		F-1
Consolidated Statements of Operations and Comprehensive Loss (unaudited)		F-2
Consolidated Statements of Stockholders’ Equity (Deficit) (unaudited)		F-3
Consolidated Statements of Cash Flows (unaudited)		F-4
Notes to the Consolidated Financial Statements (unaudited)		F-5

Table of Contents

ARTELO BIOSCIENCES, INC.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

	June 30,			December 31,
	2026			2025

ASSETS
Current Assets
Cash and cash equivalents	$	4,198		$	600
Prepaid expenses and other current assets		173			95
Total Current Assets		4,371			695
Operating lease right-of-use assets		46			64
Intangible asset		2,039			2,039
Other assets		3			3
TOTAL ASSETS	$	6,459		$	2,801

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities	$	1,302		$	3,035
Due to related parties		111			345
Operating lease liabilities - current portion		42			40
Accrued interest - convertible notes		-			11
Accrued interest - convertible notes - related party		-			4
Convertible notes		-			437
Convertible notes - related party		-			172
Total Current Liabilities		1,455			4,044

Operating lease liabilities		7			29
TOTAL LIABILITIES		1,462			4,073

STOCKHOLDERS’ EQUITY
Preferred Stock, par value $0.001, 23,148 shares authorized, 0 shares issued and outstanding as of June 30, 2026, and December 31, 2025		-			-
Common Stock, par value $0.001, 166,666,667 shares authorized and 4,188,400 and 673,008 shares issued and outstanding as of June 30, 2026, and December 31, 2025, respectively		4			1
Additional paid-in capital		73,635			62,014
Accumulated deficit		(68,400	)		(63,015	)
Accumulated other comprehensive loss		(242	)		(272	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		4,997			(1,272	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,459		$	2,801

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

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ARTELO BIOSCIENCES, INC.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except per share data)

	Three months ended						Six months ended
	June 30,						June 30,
	2026			2025			2026			2025

OPERATING EXPENSES
General and administrative	$	1,629		$	1,279		$	3,545		$	2,274
Research and development		876			1,871			1,649			3,255
Total Operating Expenses		2,505			3,150			5,194			5,529

Loss from Operations		(2,505	)		(3,150	)		(5,194	)		(5,529	)

OTHER INCOME (EXPENSE)
Interest income		42			1			43			8
Interest expense		(6	)		(72	)		(106	)		(72	)
Interest expense - related party		-			-			(24	)		-
Net change in fair value of derivative liability		-			-			(146	)		-
Gain on extinguishment of debt		42			-			42			-
Total other income (expense)		78			(71	)		(191	)		(64	)

Provision for income taxes		-			-			-			-

NET LOSS	$	(2,427	)	$	(3,221	)	$	(5,385	)	$	(5,593	)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments		4			(68	)		30			(93	)
Total Other Comprehensive Income (Loss)		4			(68	)		30			(93	)

TOTAL COMPREHENSIVE LOSS	$	(2,423	)	$	(3,289	)	$	(5,355	)	$	(5,686	)

Basic and Diluted Loss per Common Share	$	(0.89	)	$	(16.86	)	$	(3.11	)	$	(29.44	)

Basic and Diluted Weighted Average Common Shares Outstanding		2,712			191			1,731			190

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

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ARTELO BIOSCIENCES, INC.

Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

(In thousands)

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

Balance, December 31, 2025		673	$	1	$	62,014	$	(63,015	)	$	(272	)	$	(1,272	)
Reverse split adjustment		28		-		-		-			-			-
Common shares issued as a fee in equity purchase agreement		35		-		145		-			-			145
Common shares issued for cash, net of issuance costs		81		-		10,033		-			-			10,033
Warrants exercised		39		-		234		-			-			234
Conversion of convertible notes to common stock		20		-		208		-			-			208
Stock based compensation		-		-		256		-			-			256
Net loss for the period		-		-		-		(2,958	)		-			(2,958	)
Other comprehensive loss		-		-		-		-			26			26
Balance, March 31, 2026		876	$	1	$	72,890	$	(65,973	)	$	(246	)	$	6,672

Common shares issued as a fee in an equity purchase agreement		62		-		355		-			-			355
Common shares issued for cash, net of issuance costs		143		-		174		-			-			174
Warrants exercised		3,107		3		-		-			-			3
Stock based compensation		-		-		216		-			-			216
Net loss for the period		-		-		-		(2,427	)		-			(2,427	)
Other comprehensive loss		-		-		-		-			4			4
Balance, June 30, 2026		4,188	$	4	$	73,635	$	(68,400	)	$	(242	)	$	4,997

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

Balance, December 31, 2024		189	$	1	$	53,194	$	(50,136	)	$	(202	)	$	2,857
Stock based compensation		-		-		192		-			-			192
Net loss for the period		-		-		-		(2,372	)		-			(2,372	)
Other comprehensive loss		-		-		-		-			(25	)		(25	)
Balance, March 31, 2025		189	$	1	$	53,386	$	(52,508	)	$	(227	)	$	652

Common shares issued for cash, net of issuance costs		46		-		1,081		-			-			1,081
Stock based compensation		-		-		150		-			-			150
Net loss for the period		-		-		-		(3,221	)		-			(3,221	)
Other comprehensive loss		-		-		-		-			(68	)		(68	)
Balance, June 30, 2025		235	$	1	$	54,617	$	(55,729	)	$	(295	)	$	(1,406	)

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

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ARTELO BIOSCIENCES, INC.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Six months ended
	June 30,
	2026			2025

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,385	)	$	(5,593	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		971			342
Net change in fair value of derivative liabilities		146			-
Non-cash lease expense		18			17
Gain on extinguishment of debt		(42	)		-
Amortization of debt discounts and debt issuance costs		84			54
Amortization of debt discounts and debt issuance costs - related party		24			-
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(79	)		58
Accounts payable and accrued liabilities		(1,731	)		3,046
Accounts payable - related parties		(234	)		(36	)
Accrued interest		15			10
Accrued interest - related party		8			8
Fixed cash payments related to operating leases		(19	)		(17	)
Net cash used in operating activities		(6,224	)		(2,111	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common shares for cash, net		10,208			1,079
Proceeds from issuance of convertible notes, net		593			737
Proceeds from exercise of warrants		237			-
Repayment of convertible notes		(1,035	)		-
Repayment of convertible notes - related parties		(207	)		-
Net cash provided by financing activities		9,796			1,816

Effect of exchange rate changes on cash		26			23

Net change in cash and cash equivalents		3,598			(272	)
Cash and cash equivalents - beginning of period		600			2,338
Cash and cash equivalents - end of period	$	4,198		$	2,066

Supplemental Cash Flow Information
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	-

NON-CASH FINANCING AND INVESTING ACTIVITIES:
Conversion of convertible notes to common stock	$	208		$	-
Common shares issued as commitment fee	$	500		$	-

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

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ARTELO BIOSCIENCES, INC.

Notes to the Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share data)

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 Solana Beach, 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 December 31.

The Company has registered wholly owned subsidiaries in Ireland (Trinity Reliant Ventures Limited), in the United Kingdom (Artelo Biosciences Ltd), and in Canada (Artelo Biosciences Corporation). On January 8, 2020, Trinity Research and Development Limited changed its name to Artelo Biosciences Limited. Operations in the subsidiaries have been consolidated in the financial statements.

The Company is a clinical stage biopharmaceutical company focused on developing therapeutics that target lipid-signaling pathways, including treatments intended to modulate the endocannabinoid system (the “ECS”), a family of receptors and neurotransmitters that form a biochemical communication network throughout the body.

Going Concern

The Company has incurred losses since inception and incurred a net loss of $5,385 during the six months ended June 30, 2026. As of June 30, 2026, we had cash and cash equivalents of $4,198.

On March 27, 2026, the Company entered into a securities purchase agreement with certain accredited investors (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a private placement offering: (i) 81,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share, at $3.45 per share, (ii) pre-funded warrants to purchase 3,107,407 shares of common stock at an exercise price of $0.001 per share (the “Pre-Funded Warrants”), and (iii) warrants to purchase 6,376,814 shares of common stock at an exercise price of $3.20 per share (the “Common Warrants”). The Pre-Funded Warrants and the Common Warrants are collectively referred to herein as the “Warrants” and the shares issuable upon such Warrants, the “Warrant Shares.” Each Share or, at the election of the Purchaser in lieu of Shares, each Pre-Funded Warrant was issued and sold along with two Common Warrants. The combined purchase price for the securities was (i) $3.45 per Share and two Common Warrants, and (ii) $3.449 per Pre-Funded Warrant and two Common Warrants. The offering closed on March 30, 2026. The Pre-Funded Warrants are exercisable immediately and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full, subject to the Beneficial Ownership Limitation described below. The Common Warrants are exercisable immediately and have a term of five and one-half years from the effective date of the initial registration statement registering the Warrant Shares, subject to the Beneficial Ownership Limitation described below. The exclusive placement agent (the “Placement Agent”) in connection with the offering received a cash fee equal to 8.0% of the aggregate gross proceeds and reimbursement of certain expenses. Upon the exercise for cash of the Warrants, the Company shall pay the Placement Agent a cash fee of 8.0% of the aggregate gross exercise price paid in cash with respect thereto. In addition, the Company issued to designees of the Placement Agent warrants to purchase 255,073 shares of common stock at an exercise price of $4.3125 per share, which have the same terms as the Common Warrants other than the exercise price. The gross proceeds from the offering, before deducting Placement Agent fees and other offering expenses payable by the Company, were $10,997 (or up to approximately $31,400 in gross proceeds if the Warrants are fully exercised for cash). The net proceeds of $10,033 from the offering will be used for working capital, general corporate purposes and the repayment of certain bridge debt. The Common Warrants may only be exercised on a cashless basis if, after six months from the issuance date of the Common Warrants, there is no registration statement registering, or the prospectus contained therein is not available for, the resale of the shares of common stock underlying the Common Warrants to the holder. A holder of a Warrant may not exercise any such Warrant to the extent that such exercise would result in the number of shares of common stock beneficially owned by such holder and its affiliates exceeding 4.99% or 9.99% (at the election of the holder) of the total number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage may be increased or decreased at the holder’s election not to exceed 9.99% (the “Beneficial Ownership Limitation”).

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In May 2026, the Company filed a $75,000 in aggregate value shelf registration statement on Form S-3 which became effective on May 19, 2026. The shelf registration statement is effective for three years and permits the Company to sell, from time to time, up to $75,000 of the Company’s common stock, preferred stock, debt securities, warrants, and/or units subject to a limit of one-third (1/3) of the Company’s public float within a twelve (12) month period if the public float of the Company is less than $75,000 as of relevant measurement dates under applicable securities laws.

On May 26, 2026, the Company entered into an At The Market Offering Agreement (the “Sales Agreement”) with H.C. Wainwright & Co., LLC (the “Sales Agent”) to create an at-the-market equity program under which it may sell up to an aggregate of $6,530 of shares of the Company’s common stock, par value $0.001 per share (the “Shares”), from time to time through the Sales Agent, subject to any applicable limits when using Form S-3 (the “ATM Offering”). The Company will pay the Sales Agent commissions, in cash, for its services in acting as agent in the sale of the Shares. The Sales Agent will be entitled to compensation at a commission rate of 3.0% of the gross sales price per share of common stock sold. The Company will also reimburse the Sales Agent for certain specified expenses in connection with the Sales Agreement. The Sales Agreement contains customary representations, warranties and agreements by the Company, indemnification obligations of the Company and the Sales Agent, other obligations of the parties and termination provisions. The Company has no obligation to sell any of the Shares and may at any time suspend offers under the Sales Agreement. The ATM Offering will terminate upon the earlier of (i) the sale of all shares of the Company’s common stock subject to the Sales Agreement or (ii) termination of the Sales Agreement as permitted therein. The Company may terminate the Sales Agreement at any time upon ten (10) business days’ prior written notice to the Sales Agent. The Sales Agent may terminate the Sales Agreement at any time upon prior written notice to the Company. As of June 30, 2026, in accordance with the Sales Agreement we have issued a total of 142,860 shares of our common stock with aggregate proceeds of $174.

To continue operations, the Company will be required to raise additional funds by completing additional equity or debt offerings or licensing our product candidates within the next twelve months. There can be no assurance that the Company will be successful in acquiring additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The accompanying consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern.

Negative Global or National Events

Businesses have been and will continue to be impacted by a number of challenging global and national events and circumstances that continue to evolve, including conflicts in Eastern Europe, the Middle East and in other areas, tariffs, trade disputes, extreme weather conditions, increased economic uncertainty, inflation, interest rate fluctuation, and any potential future financial institution failures. The extent of the impact of these events and circumstances on our business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration and scope of the events and their impact on our development activities, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. We have been and continue to actively monitor the potential impacts that these various events and circumstances may have on our business, and we take steps, where warranted, to minimize any potential negative impacts on our business resulting from these events and circumstances. The ultimate impact of these global and national events and circumstances, either individually or in aggregate, is highly uncertain and subject to change.

Reverse Stock Splits

On June 12, 2025, the Company filed with the Secretary of State of the State of Nevada a Certificate of Change, pursuant to Nevada Revised Statutes 78.209, to effect a one-for-six (1-for-6) reverse stock split of the Company’s issued and outstanding common stock, par value $0.001 per share. The reverse stock split was effective as of 12:01 a.m. Eastern Time on June 13, 2025. Pursuant to the Nevada Revised Statutes 78.207, the Company’s board of directors has the authority to effect a reverse stock split without stockholder approval if the number of authorized shares of common stock and the number of outstanding shares of common stock are proportionally reduced.

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As a result of the reverse stock split occurring on June 12, 2025, each six (6) pre-split shares of common stock outstanding were automatically combined into one (1) new share of common stock without any action on the part of the holders, and the number of outstanding shares of common stock was reduced from 3,280,000 to approximately 546,667. The number of authorized shares of common stock was reduced from 50,000,000 to 8,333,333, while the number of authorized shares of preferred stock was reduced from 416,667 to 69,444. On August 28, 2025, the Company held a special meeting of stockholders in which the shareholders voted to increase the authorized number of shares of common stock from 8,333,333 shares to 500,000,000 shares.

On March 10, 2026, the Company executed a one-for-three (1-for-3) reverse stock split affecting both the authorized and issued and outstanding amounts of its common stock and preferred stock. These consolidated financial statements reflect the impact of this reverse stock split. As a result of the reverse stock split occurring on March 10, 2026, each three (3) pre-split shares of common stock outstanding were automatically combined into one (1) new share of common stock without any action on the part of the holders, and the number of outstanding shares of common stock was reduced from 2,018,746 to approximately 673,008. The number of authorized shares of common stock was reduced from 500,000,000 to 166,666,667, while the number of authorized shares of preferred stock was reduced from 69,444 to 23,148. On July 17, 2026, the Company held its annual meeting at which the shareholders voted to increase the authorized number of shares of common stock from 166,666,667 shares to 500,000,000 shares.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company prepares its financial statements in accordance with rules and regulations of the U.S. 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 and six months ended June 30, 2026, 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 December 31, 2025, contained in the Company’s Form 10-K filed with the SEC on February 24, 2026, as updated on Form 8-K filed with the SEC on March 17, 2026.

All amounts in these financial statements, notes and tables have been rounded to the nearest thousand dollars, except share and per share amounts, unless otherwise indicated.

Basis of Consolidation

The financial statements have been prepared on a consolidated basis, including 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.

Research and Development (“R&D”)

R&D expenses consist primarily of costs related to clinical studies and outside services, personnel expenses, and R&D consultants. Clinical studies and outside services costs relate primarily to services performed by clinical research organizations associated with clinical trials and related clinical or development activities, manufacturing costs, materials, and supplies, filing fees, regulatory support, and other third-party fees. Personnel expenses relate primarily to salaries and benefits. R&D expenditures are charged to operations as incurred.

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The Company recognizes R&D tax credits when received from the United Kingdom government for spending on R&D as an offset of R&D expenses. The Company received R&D tax credits of $0 and $704 during the six months ended June 30, 2026, and 2025, respectively.

Cash and Cash Equivalents

Cash and cash equivalents may 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. The Company had $4,198 and $600 in cash and cash equivalents as of June 30, 2026, and December 31, 2025, respectively.

Periodically, the Company may carry cash balances at financial institutions more than the federally insured limit of $250 per institution. The amount in excess of the Federal Deposit Insurance Corporation insurance as of June 30, 2026, was approximately $3,698. 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

Investments in debt securities are carried at fair value. 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 are charged to income and unrealized gains and losses on available-for-sale debt securities are included in other comprehensive income or loss. The Company did not hold any marketable securities as of June 30, 2026, and December 31, 2025.

Intangible Assets

The Company capitalizes certain costs related to the acquisition of intangible assets. If such assets are determined to have a finite useful life they are amortized on a straight-line basis over the estimated useful life.

The Company tests its intangible assets for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others and without limitation: a significant decline in the Company’s expected future cash flows; a sustained, significant decline in the Company’s stock price and market capitalization; a significant adverse change in legal factors or in the business climate of the Company’s segments; unanticipated competition; and slower growth rates. The Company determined that there was no impairment of its intangible assets at June 30, 2026, and December 31, 2025.

Foreign Currency Transactions

The Company has operations outside of the United States, which results in exposure to market risks from changes in foreign currency rates. The financial risk arises from the fluctuations in foreign exchange rates and the degrees of volatility in these rates. Currently the Company does not use derivative instruments to reduce its exposure to foreign currency risk. Nonmonetary assets and liabilities are translated at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenues and expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements into U.S. dollars are included as other comprehensive income.

Financial Instruments

The Company follows ASU 2022-03, ASC Subtopic “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASC 820”), 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:

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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.

Stock-Based Compensation

The Company utilizes the Black-Scholes option pricing model to estimate the fair value of stock option awards at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external data and other assumptions may be derived from our historical experience with stock-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances. The Company accounts for forfeitures of stock options as they occur.

Net Loss per Share of Common Stock

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 six months ended June 30, 2026, and 2025, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result was anti-dilutive.

	June 30,		June 30,
	2026		2025
Stock options		205,518		42,978
Warrants		7,059,620		299,915
		7,265,138		342,893

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Segment Reporting

Operating segments are defined as components of an enterprise about which separate and discrete information is available for evaluation by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM is its chief executive officer. The Company’s CODM evaluates the Company’s operations and manages its business as a single operating segment. All of the Company’s long-lived assets are held in the United States. Refer to Note 3 for the Company’s disclosure on its single operating segment.

New Accounting Standards Adopted

There were no new accounting standards adopted during the three and six months ended June 30, 2026.

New Accounting Standards Issued Not Yet Adopted

In November 2024, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires public business entities to disclose, in the notes to the financial statements, disaggregated information about specified categories of expenses—including (i) purchases of inventory, (ii) employee compensation, (iii) depreciation, (iv) intangible asset amortization, and (v) depletion—that are included within each relevant expense caption presented on the face of the income statement. The amendments also require disclosure of the total amount of selling expenses and, in annual reporting periods, the Company’s definition of selling expenses. In January 2025, the FASB issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified that ASU 2024-03 is effective for the Company for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied prospectively to financial statements issued for reporting periods after the effective date or retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on the disclosures within its condensed consolidated financial statements but does not believe the impact will be significant as employee compensation is the only expense that will need to be disaggregated.

NOTE 3 – SEGMENT REPORTING

Operating segments are comprised of the components of an entity in which separate information is available for evaluation by the Company’s CODM, or group of decision makers, in determining how to allocate resources in evaluating performance. The Company consists of a single reporting segment: life science. The life science segment is comprised of the Company’s development of therapeutics that target lipid-signaling modulation pathways, including the ECS, a network of receptors and neurotransmitters that form a biochemical communication system throughout the body. The Company’s CODM is its chief executive officer.

The accounting policies of the life science segment are as described in the summary of significant accounting policies. The CODM evaluates the performance of the life science segment based on the Company’s net loss as reported on the income statement as consolidated net loss. The Company’s segment assets are reported on the balance sheet as its total consolidated assets.

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The Company has not generated any revenue since its inception and expects to continue to incur losses into the foreseeable future as it continues to conduct research and development related activities through all stages of product development and clinical trials and subsequently seek approval from the respective regulatory authorities. The Company’s CODM utilizes cash forecast models to determine the Company’s investment in the life sciences segment. These models of segment expenses are reviewed by the CODM regularly to monitor the Company’s operating results and performance and compared to the Company’s cash-based forecasts.

	Three months ended
	June 30,
	2026		2025

General and administrative
Employee and director compensation	$	316	$	232
Stock-based compensation		131		86
Professional fees		866		712
Other general and administrative ^(a)		316		249
Total general and administrative	$	1,629	$	1,279

	Six months ended
	June 30,
	2026		2025

General and administrative
Employee and director compensation	$	636	$	471
Stock-based compensation		287		200
Professional fees		2,012		1,037
Other general and administrative ^(a)		610		566
Total general and administrative	$	3,545	$	2,274

	Three months ended
	June 30,
	2026		2025

Research and development
Employee compensation	$	272	$	243
Stock-based compensation		83		65
Professional fees		209		2,194
Other research and development ^(b)		312		(631	)
Total research and development	$	876	$	1,871

	Six months ended
	June 30,
	2026		2025

Research and development
Employee compensation	$	556	$	476
Stock-based compensation		184		143
Professional fees		480		3,204
Other research and development ^(b)		429		(568	)
Total research and development	$	1,649	$	3,255

(a)	Consists of investor relations, travel and other office expenses.
(b)	Consists of supplies, other items used in research and development activities, and U.K. government tax credits.

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NOTE 4 – RELATED PARTY TRANSACTIONS

During the six months ended June 30, 2026, and 2025, a company owned by the Senior Vice President, European Operations, provided consulting services totaling $10 and $11, respectively. As of June 30, 2026, and December 31, 2025, there was $4 and $3, outstanding, respectively.

During the six months ended June 30, 2026, and 2025, a company significantly influenced by a director of a subsidiary of the Company provided professional services totaling $81 and $55, respectively. As of June 30, 2026, and December 31, 2025, there was $15 and $8 outstanding, respectively.

During the six months ended June 30, 2026, and 2025, a company controlled by a director of a subsidiary of the Company provided professional services totaling $45 and $38, respectively. As of June 30, 2026, and December 31, 2025, there was $8 and $0 outstanding, respectively.

As of June 30, 2026, and December 31, 2025, there was $84 and $333, respectively, payable to directors of the Company for unpaid board compensation.

NOTE 5 – CONVERTIBLE NOTES

March 2026 Notes

During March 2026, the Company issued three unsecured promissory notes to third-party lenders, two having one-time interest charges of 12% and the other bearing interest at 10% per annum and containing variable-rate embedded conversion features. The notes were issued for aggregate gross proceeds of $610 against aggregate face amounts of $665, resulting in aggregate original issue discount (“OID”) of $55. Under ASC 815-15, the embedded conversion features of all three notes were bifurcated as derivative liabilities at inception (see Note 7). Set out below are the terms of each note:

Boot Capital LLC Note

	·	The note had a one-time interest charge of 12%.
	·	Interest and principal were payable in monthly installments commencing September 15, 2026 (first scheduled payment date), with $63 due on such date followed by four payments of $16 due on the 15^th of each month through January 2027.
	·	The Holder may have elected to convert any or all amounts outstanding upon an Event of Default. The conversion price equals 75% of the lowest closing bid price of the Company’s common stock during the 10 Trading Days preceding the conversion date, subject to a floor of $0.125 per share.
	·	Upon an Event of Default, the outstanding balance would become 150% of the then-outstanding principal plus accrued interest, and default interest accrued at 22% per annum.

Vanquish Funding Group Inc. Note

	·	The note had a one-time interest charge of 12%.
	·	Interest and principal were payable in monthly installments commencing September 15, 2026 (first scheduled payment date), with $133 due on such date followed by four payments of $33 due on the 15^th of each month through January 2027.
	·	The Holder may have elected to convert upon an Event of Default. Conversion price equals 75% of the lowest closing bid price in the 10-Trading-Day lookback window, subject to a $0.125 floor.
	·	Upon an Event of Default, the outstanding balance would become 150% of the then-outstanding principal plus accrued interest, and default interest accrues at 22% per annum.

Labrys Fund II, L.P. Note

	·	The note bore interest at 10%.
	·	Principal and accrued interest of $347 were payable in a single payment at maturity on March 20, 2027. There were no scheduled interim payments.
	·	Beginning on September 16, 2026 (Day 181 from issuance), and regardless of whether any Event of Default has occurred, the Holder may have elected at any time to convert any portion of the outstanding balance into shares of the Company’s common stock. This time-based conversion right represented a fundamental difference from the Boot Capital and Vanquish notes, in which the conversion right is contingent upon an Event of Default.
	·	Conversion price was equal to 75% of the average of the two (2) lowest closing bid prices of the Company’s common stock during the 10 Trading Days preceding the conversion date. The Holder may have deducted $2 per conversion notice from the conversion amount.
	·	Upon an Event of Default, the outstanding balance would become 150% of the then-outstanding principal plus accrued interest, and default interest accrues at 22% per annum. A default would not expand the conversion right, which would already be fully available after Day 181.

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At inception, each note was recorded at its face amount as a liability, with a corresponding contra-liability debt discount comprising (i) the OID and (ii) the fair value of the bifurcated embedded derivative allocated from the proceeds. The debt discount is amortized to interest expense over the term of each note using the effective interest method (“EIM”) for the Boot Capital and Vanquish notes, and the straight-line method for the Labrys Fund II note (see Note 7).

The following represents the movement of the value of the March 2026 notes during the six months ended June 30, 2026:

	Boot Capital LLC			Vanquish Funding Group Inc.			Labrys Fund II, L.P.			Total
Face amount	$	113		$	237		$	315		$	665
Less: Debt discount at inception
OID Discount		(13	)		(27	)		(15	)		(55	)
Derivative allocation		(46	)		(98	)		(293	)		(437	)
Debt issuance costs		-			(10	)		(8	)		(18	)
Initial carrying value		54			102			(1	)		155
Amortization		5			10			9			24
Settlement		(59	)		(112	)		(8	)		(179	)
Carrying value, June 30, 2026	$	-		$	-		$	-		$	-

On April 2, 2026, the March 2026 Notes were settled in full for consideration of $720; a gain on the extinguishment of debt of $42 was recorded in the quarter ended June 30, 2026.

May 2025 Notes

Between April 27, 2025, and May 1, 2025, the Company entered into subscription agreements with various investors, pursuant to which the Company issued convertible notes (the “Notes”) to the investors in an aggregate principal amount of $900 (collectively, the “Notes Offering”). A portion of the Notes was convertible into shares of the Company’s common stock, at the election of each investor, pursuant to the Voluntary Conversion (defined below) and the remaining portion of each Note was to be converted into warrants to purchase shares of the Company’s common stock. The sale and issuance of the Notes closed on May 1, 2025.

At the Maturity Date (defined below), the investor had the ability (at the investor’s sole option) to convert all of that certain unpaid portion of principal and accrued interest of the investor’s Note into shares of common stock (the “Voluntary Conversion”), specifically into that number of shares of common stock (the “Converted Shares”) equal to the unpaid principal balance and any accrued interest of each Note divided by $23.22. The amount of principal balance and any accrued interest of each Note convertible pursuant to the Voluntary Conversion was equal to the number of Converted Shares multiplied by $18.72. Should the investor not elect Voluntary Conversion, such portion of the unpaid principal balance and any accrued interest of each Note subject to Voluntary Conversion would become immediately due and payable in cash.

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The Notes accrued interest at a rate of 12% per annum, which would have adjusted to 20% upon an Event of Default (as defined in the Notes). All unpaid principal, together with any then unpaid and accrued interest and other amounts payable thereunder, became due and payable 180 days after the closing of the Notes Offering (the “Maturity Date”). Upon the closing of the Notes, the Company recorded deferred debt costs of $163 associated with transaction costs of the Notes.

Effective October 28, 2025, the Company entered into an agreement pursuant to which it issued and sold to certain investors, and the investors purchased (by converting all or a portion of the unconverted portion of unpaid principal balance and accrued interest due to such investors upon the maturity of the convertible promissory notes issued to the investors on May 1, 2025): (i) convertible notes in an aggregate principal amount of $692, of which $195 was for related parties; (ii) warrants to purchase an aggregate of 146,067 shares of the Company’s common stock, par value $0.001 per share, at an exercise price of $10.20 per share; and (iii) warrants to purchase an aggregate of 82,170 shares of the Company’s common stock, par value $0.001 per share, at an exercise price of $18.72 per share. The notes will accrue interest at a rate of 12% per annum. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable thereunder, shall be due and payable 180 days after the effective date. At any time prior to the Maturity Date, all or any portion of the outstanding principal amount of the Notes, together with the accrued and unpaid interest, shall be convertible, in whole or in part, into shares of common stock, at a conversion price of $10.20. Each warrant is immediately exercisable after issuance for five (5) years. The Company accounted for this transaction as an extinguishment of debt in accordance with ASC 470, Debt, and realized a loss on the extinguishment of debt of $1,158 during the year ended December 31, 2025, of which $333 was from related parties.

The Company utilizes the Black-Scholes model to value its warrants. During the year ended December 31, 2025, the Company utilized the following assumptions to value the warrants associated with the May 2025 Notes:

	Year Ended December 31,
	2025
Expected term	2.50 years
Expected average volatility		105	%
Expected dividend yield		-
Risk-free interest rate		3.50	%

During the six months ended June 30, 2026, and 2025, the Company recorded interest expense of $108 and $72, respectively, of which $31 and $0, respectively, was to related parties, associated with the accretion of accrued interest of $25 and $18, respectively, of which $7 and $0, respectively was to related parties, and $83 and $54, respectively of amortization of deferred debt costs, of which $24 and $0, respectively was to related parties. During the six months ended June 30, 2026, the Company issued 20,375 shares of common stock associated with the conversion of debt with a carrying value of $208 and the remaining notes were extinguished for cash consideration of $522.

NOTE 6 – DERIVATIVE LIABILITIES

The variable-rate conversion features embedded in each of the three convertible notes described in Note 5 were determined not to be clearly and closely related to the debt host instruments under ASC 815-15-25. Each conversion price is reset at the time of each future conversion based on a lookback formula applied to then-current market prices, causing the conversion price to vary with changes in the Company’s stock price. As a result, the embedded conversion features do not satisfy the fixed-for-fixed criterion of ASC 815-40-15 and were bifurcated from the host debt instruments and recorded as derivative liabilities at fair value at inception, with subsequent changes in fair value recognized in the statements of operations.

The derivative liabilities are classified within Level 3 of the fair value hierarchy because their valuation requires unobservable inputs, principally the variable future conversion price (which is path-dependent on future stock prices) and management’s estimate of historical volatility.

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The conversion right under the Boot Capital and Vanquish notes was contingent on the occurrence of an Event of Default. Accordingly, the probability that the conversion feature would ever be exercised depended, in part, on the probability that an Event of Default would occur. The fair value of these embedded derivatives was estimated using a Black-Scholes option pricing model adjusted by management’s estimate of the probability of default (“PD”). At inception (March 12, 2026), management estimated the PD at 40%, reflecting the Company’s then-current liquidity position, history of going concern disclosures, and clinical-stage operating profile. Subsequent to the closing of an offering on March 30, 2026, the PD was revised to 7.5%, reflecting the substantially improved liquidity position. The conversion right under the Labrys Fund II note was available to the Holder as a routine contractual right beginning on Day 181 (September 16, 2026), regardless of whether any Event of Default has occurred. No probability-of-default adjustment was applied to the Labrys Fund II derivative; the full Black-Scholes value was used.

The fair value of each embedded derivative liability was estimated using the Black-Scholes option pricing model. This model was selected as a practical and widely-accepted approach for valuing variable-rate convertible features on short-term promissory notes. Management acknowledges the following simplifications inherent in this approach:

Fixed strike price assumption: The Black-Scholes model assumes a fixed exercise price. The actual conversion price under each note is path-dependent, determined at the time of each future conversion based on a lookback formula applied to then-current closing bid prices. Using t