ARTL US Equity☆

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

The following summary of our results of operations, for the year ended August 31, 2021 and 2020, should be read in conjunction with our audited financial statements, as included in this Form 10-K.

Our Company currently has no revenue. We classify our operating expenses into research and development, professional fees, and selling, general and administrative expenses. Research and development expense consists of expenses incurred while performing research and development activities to discover and develop our product candidates. This includes conducting preclinical studies and clinical trials, development efforts and activities related to regulatory filings for product candidates. We recognize research and development expenses as they are incurred.

The Company has incurred losses for the past several years and a net loss of $7.4 million during the year ended August 31, 2021. Subsequent to August 31, 2021, we completed an offering for net proceeds of approximately $18.3 million, which substantially increased our cash and cash equivalents and improved our working capital position (Note 9). Consequently, our existing cash resources and cash received from the public offering are expected to provide sufficient funds to carry out our planned operations for at least 12 months from the date that our consolidated financial statements are issued.

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The following table provides selected financial data about the Company as of August 31, 2021 and 2020.

Balance Sheet Data

August 31, August 31,

(In thousands)

The increase in cash was primarily due to a public offering in October 2020 and proceeds from exercise of warrants during the year ended August 31, 2021.

For the Year ended August 31, 2021 Compared to the Year ended August 31, 2020

Years ended

Operating Expenses

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Our operating expenses, for the year ended August 31, 2021, were $7.4 million compared to $4.7 million for the same period in 2020. The increase in operating expenses was primarily due to an increase in research and development, including the initiation and ongoing expenses related to the CAReS trial, and general and administrative expense related to payroll and director compensation including stock-based compensation.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis.

We incurred a net loss of $7.4 million and $4.7 million for the years ended August 31, 2021 and 2020, respectively. As of August 31, 2021, we had cash and cash equivalents of $6.6 million. We anticipate that operating losses and net cash used in operating activities will increase over the next few years as we advance our programs under development.

As of August 31, 2021, the Company had an accumulated deficit of $16.9 million and working capital of $9.8 million. As of August 31, 2021, we had cash and cash equivalents of $6.6 million. During the year ended August 31, 2021, 1,393,591 shares were sold in connection with the Company’s at-the-market equity program for proceeds net of offering costs of $1.5 million. In October 2020 we raised $6.6 million in net proceeds through a public offering. In addition, in the first quarter of fiscal 2022 we raised an additional $18.3 million in net proceeds through the Company’s at-the-market equity program. We anticipate that operating losses and net cash used in operating activities will increase over the next few years as we advance our programs under development. We believe our cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months following the filing date of this Annual Report on Form 10-K.

Working Capital

August 31, August 31,

Cash Flows

Years ended

Cash Flows used in operating activities $ (6,141 ) $ (4,347 ) $ (1,794 )

Cash Flows used in investing activities (3,439 ) - (3,439 )

Effect of exchange rate changes on cash (45 ) 84 (129 )

Our total current assets as of August 31, 2021, were $10.3 million as compared to total current assets of $2.3 million as of August 31, 2020. The increase in current assets is primarily due to an increase in cash from our public offering in October 2020, common stock sold in connection with the Company’s at-the-market equity program and proceeds from the exercise of warrants.

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Our total current liabilities as of August 31, 2021 were $0.5 million as compared to total current liabilities of $0.5 million as of August 31, 2020.

Cash Flows from Operating Activities

During the year ended August 31, 2021, cash used in operating activities was $6.1 million compared to cash used in operating activities of $4.3 million during the year ended August 31, 2020. The cash used in operating activities was primarily attributed to a net loss of $7.4 million, increases in operating assets and liabilities of $0.2 million and offset by stock-based compensation of $1.5 million for the year ended August 31, 2021. The cash used in operating activities during the year ended August 31, 2020, was primarily attributed to a net loss of $4.7 million offset by stock-based compensation of $0.4 million.

Cash Flows from Investing Activities

During the year ended August 31, 2021, the Company’s cash used in investment activities of $3.4 million was comprised entirely of an investment in marketable securities. The Company did not have any cash from or used in investing activities during the year ended August 31, 2020.

Cash Flows from Financing Activities

During the year ended August 31, 2021, cash provided by financing activities of $14.1 million was the result of net proceeds from the issuance of common stock of $8.1 million, proceeds from the exercise of warrants of $6.0 million. During the year ended August 31, 2020, cash provided by financing activities of $2.0 million was the result of gross proceeds from the issuance of common stock of $2.1 million less share issuance costs of $0.1 million.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

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Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

Recent Accounting Pronouncements

The Company has considered all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations or cash flows of the Company.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company”, we are not required to provide the information required by this Item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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ARTELO BIOSCIENCES, INC.

INDEX TO AUDITED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets at August 31, 2021 and 2020 F-3

Notes to the Consolidated Financial Statements F-7

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Artelo Biosciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Artelo Biosciences, Inc. and its subsidiaries (collectively, the “Company”) as of August 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ MaloneBailey, LLP

www.malonebailey.com

We have served as the Company's auditor since 2015.

Houston, Texas

November 24, 2021

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ARTELO BIOSCIENCES, INC.

Consolidated Balance Sheets

(In thousands, except share data)

August 31, August 31,

ASSETS

Current Assets

Cash and cash equivalents $ 6,629 $ 2,142

Marketable securities 3,436 -

Prepaid expenses and other current assets 252 195

Operating lease right-of-use asset 90 -

Prepaid expenses – long-term 189 -

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Accounts payable and accrued liabilities $ 493 $ 489

Due to related party 5 12

Operating lease liability - current portion 28 -

Total Current Liabilities 526 501

Operating lease liability 67 -

STOCKHOLDERS' EQUITY

Preferred Stock, par value $0.001, 6,250,000 shares authorized,

0 shares issued and outstanding - -

Accumulated other comprehensive income 18 64

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,635 $ 4,376

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

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ARTELO BIOSCIENCES, INC.

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

Years ended

OPERATING EXPENSES

General and administrative $ 3,521 $ 1,789

OTHER INCOME

Interest income 2 1

Net change in fair value of marketable securities 2 -

Change in fair value of derivative liabilities - 30

Total other income 4 31

Provision for income taxes - -

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustments (46 ) 74

Total Other Comprehensive Income (Loss) (46 ) 74

TOTAL COMPREHENSIVE LOSS $ (7,483 ) $ (4,581 )

Basic and Diluted Loss per Common Share $ (0.40 ) $ (1.26 )

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

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ARTELO BIOSCIENCES, INC.

Consolidated Statements of Stockholders’ Equity

(In thousands)

Additional Accumulated Other

Common stock paid-in Accumulated Comprehensive

Shares Amount capital Deficit Income (loss) Total

Additional common shares issued 7 - - - - -

Common shares issued for cash, net of issuance costs 1,564 2 1,976 - - 1,978

Common shares issued for services - officers - - 45 - - 45

Common shares issued for acquisition of license 61 - 539 - - 539

Common shares issued for settlement of debt 11 - 100 - - 100

Cancellation of common shares (6 ) - (2 ) - - (2 )

Stock option expense - - 336 - - 336

Net loss for the period - - - (4,655 ) - (4,655 )

Other comprehensive income - - - - 74 74

Common shares issued for cash, net of issuance costs 11,514 12 8,091 - - 8,103

Common shares issued for services - officers - - 34 - - 34

Common shares issued for exercise of warrants 8,022 8 6,008 - - 6,016

Net loss for the period - - - (7,437 ) - (7,437 )

Other comprehensive loss - - - - (46 ) (46 )

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

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ARTELO BIOSCIENCES, INC.

Consolidated Statements of Cash Flows

(In thousands)

Years ended

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net loss to net cash used in operating activities:

Net change in fair value of marketable securities 2 -

Change in fair value of derivative liabilities - (30 )

Non-cash lease expenses 7 -

Changes in operating assets and liabilities:

Prepaid expenses and other current assets (239 ) (171 )

Accounts payable and accrued liabilities (3 ) 128

Cash payment on operating lease (2 ) -

Net cash used in operating activities (6,141 ) (4,347 )

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in trading marketable securities (3,439 ) -

Net cash used in investing activities (3,439 ) -

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of common shares for cash, net 8,103 1,978

Proceeds from exercise of warrants 6,016 -

Advance from related parties 1 8

Repayments to related parties (8 ) (5 )

Net cash provided by financing activities 14,112 1,981

Effect of exchange rate changes on cash (45 ) 84

Net change in cash and cash equivalents 4,487 (2,282 )

Cash and cash equivalents - beginning of period 2,142 4,424

Cash and cash equivalents - end of period $ 6,629 $ 2,142

Supplemental Cash Flow Information

Cash paid for interest $ - $ -

Cash paid for income taxes $ - $ -

NON-CASH FINANCING AND INVESTING ACTIVITIES:

Common shares issued for settlement of stock payable $ - $ 100

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

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ARTELO BIOSCIENCES, INC.

Notes to the Consolidated Financial Statements

For the years ended August 31, 2021 and 2020

(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 San Diego County, California. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is August 31.

The Company registered fully 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.

The Company is a clinical stage biopharmaceutical company focused on developing and commercializing treatments intended to modulate the endocannabinoid system.

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 material adverse impact to our business.

Liquidity

The Company has incurred losses for the past several years and a net loss of $7,437 during the year ended August 31, 2021. Subsequent to August 31, 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 (Note 9). Consequently, our existing cash resources and cash received from the public offering are expected to provide sufficient funds to carry out our planned operations for at least 12 months from the date that our consolidated financial statements are issued.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.

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.

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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.

Property and equipment

Property and equipment are stated at cost. Depreciation is computed on the straight-line method.

Maintenance and repairs are charged to expense as incurred. Improvements of a major nature are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected in income.

The long-lived assets of the Company are reviewed for impairment in accordance with ASC No. 360, “Property, Plant and Equipment” (“ASC No. 360”), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment losses were recorded during the years ended August 31, 2021, and 2020.

Research and Development (“R&D”)

R&D expenses consist primarily of costs related to clinical studies and outside services, personnel expenses, and other R&D expenses. Clinical studies and outside services costs relate primarily to services performed by clinical research organizations and related clinical or development 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.

The Company recognizes R&D tax credits receivable from the United Kingdom government for spending on R&D as an offset of R&D expenses.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

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. The Company had $6,629 and $2,142 in cash and cash equivalents at August 31, 2021 and 2020, respectively.

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 August 31, 2021 was approximately $6100. 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 $3,436 as of August 31, 2021.

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.

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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.

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 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 August 31, 2021:

Level 1 Level 2 Level 3 Total

Marketable securities

Asset-backed securities - 409 - 409

Corporate debt securities - 303 - 303

The Company did not have any financial instruments that were required to be measured at fair value on a recurring basis as of August 31, 2020.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in consolidated the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

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Concentrations of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

Share-based Expenses

ASC 718 “Compensation – Stock Compensation” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company has recently adopted the guidance included under ASU 2018-07, stock-based compensation issued to non-employees and consultants. Equity-based payments to non-employees are measured at grant-date fair value of the equity instruments that the Company is obligated to issue when the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Equity-classified nonemployee share based payment awards are measured at the grant date

Share-based expenses were $1,531 and $381 for the years ended August 31, 2021, and 2020, respectively.

Deferred Income Taxes and Valuation Allowance

The Company accounts for income taxes under ASC 740 “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

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 years ended August 31, 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.

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Related Parties

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.

Commitments and Contingencies

The Company follows ASC 450-20, “Loss Contingencies,” to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Recent Accounting Pronouncements

The Company has considered all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations or cash flows of the Company.

NOTE 3 - RELATED PARTY TRANSACTIONS

During the years ended August 31, 2021, and 2020, Blackrock Ventures, Ltd., an entity owned by the Senior Vice President, European Operations, who is a major stockholder of the Company, provided $60 and $64 worth of consulting services to the Company, of which, $5 and $5 was outstanding, as of August 31, 2021 and 2020, respectively.

Lease

On May 12, 2021, the Company entered into a lease arrangement for office space with Beckman/Lomas LLC, an entity controlled by a close family member of a director (see Note 7)

Employment

The Company has an employment contract with a key employee, Mr. Gregory Gorgas, who is an officer of the Company. As of August 31, 2021, and 2020, the Company recorded accrued bonuses of $0 and $150, respectively. During the years ended August 31, 2021, and 2020, the Company recorded salary and bonus of $626 and $581 to Mr. Gorgas, respectively. During the years ended August 31, 2021 and 2020, Mr. Gorgas paid expenses on behalf of the Company of $1 and $1, respectively and received reimbursements of $6 and $0, respectively. Amounts payable to Mr. Gorgas as of August 31, 2021 and 2020 were $0 and $5, respectively.

The Company has an employment contract with a key employee, Mr. Randy Schreckhise, Vice President, Finance and Operations. As of August 31, 2021, and 2020, the Company recorded accrued bonuses of $47 and $23, respectively. During the years ended August 31, 2021, and 2020, the Company recorded salary and bonus of $236 and $125 to Mr. Schreckhise, respectively. During the years ended August 31, 2021 and 2020, Mr. Schreckhise paid expenses on behalf of the Company of $1 and $1, respectively and received reimbursements of $2 and $0, respectively. Amounts payable to Mr. Schreckhise as of August 31, 2021 and 2020 were $0 and $1 respectively.

The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.

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Restricted stock awards

The Company recorded stock-based compensation expense for members of our Board of Directors totaling $34 and $42 during the years ended August 31, 2021, and 2020, respectively. The stock-based compensation is related to restricted stock awards issued in 2017. The stock-based compensation was fully amortized as of August 31, 2021.

NOTE 4 - EQUITY

Preferred shares

The Company has authorized 6,250,000 shares of preferred stock with a par value of $0.001.

During the years ended August 31, 2021 and 2020, there were no shares of preferred stock issued or outstanding.

Common Shares

Amendment to Articles of Incorporation or Bylaws

On December 3, 2020, the Company held a special meeting of stockholders and approved an amendment of the Company’s articles of incorporation to increase the number of authorized shares of the Company’s common stock, par value $0.001, (“Common Stock”) from 18,750,000 to 750,000,000.

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 year ended August 31, 2021, the Company issued 19,535,116 shares of common stock as follows:

During the year ended August 31, 2020, the Company issued 1,644,221 shares of common stock as follows:

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On December 2, 2019, 6,250 shares of common stock previously issued to a director of the Company were cancelled upon the resignation of the director from the Company. During the year ended August 31, 2020, the Company reversed an expense of $2 which was recorded during previous periods as the shares vested over time.

Warrants

A summary of activity of the warrants during the years ended August 31, 2021 and 2020 follows:

Weighted

Number of Weighted Average Average

shares Exercise Price Life (years)

Granted - - -

Forfeited - - -

Exercised - - -

Forfeited - - -

The intrinsic value of the warrants as of August 31, 2021, and 2020 is $338 and $0, respectively. All of the outstanding warrants are exercisable as of August 31, 2021.

2018 Equity Incentive Plan

On August 17, 2018, the Board of Directors of the Company approved the Equity Incentive Plan (the “2018 Plan”). The 2018 Plan permits the Company to issue up to 375,000 shares of common stock upon exercise of options granted to selected employees, officers, directors, consultants and advisers. The options may be either “incentive stock options” (as such term is defined in the Internal Revenue Code of 1986) or non-statutory stock options that are not intended to qualify as “incentive stock options”. Incentive stock options may be granted only to employees. The 2018 Plan is administered by the Board or, at the discretion of the Board, a Board committee. The administrator determines who will receive options and the terms of the options, including the exercise price, expiration date, vesting and the number of shares. The exercise price of each stock option may not be less than the fair market value of the Common Stock on the date of grant, although the exercise price of any incentive stock option granted to a 10% stockholder may not be less than 110% of the fair market value on the grant date. Options may be exercisable (“vest”) immediately or in increments based on time and/or performance criteria as determined by the administrator. The term of any option may not exceed 10 years (five years for any incentive stock option granted to a 10% stockholder), and unless otherwise determined by the administrator, each option must terminate no later than three months after the termination of the optionee’s employment (one year in the event of death or disability). Subject to a few minor exceptions, options may not be transferred other than by will or by the laws of descent and distribution. The 2018 Plan will expire on August 17, 2028.

The plan was increased to permit the issuance of 425,000 and 748,738 shares of common stock on June 19, 2020, and September 1, 2020, respectively.

On December 3, 2020, the Company held a special meeting of stockholders and approved an amendment to increase the number of shares of Common Stock reserved for issuance by 2,000,000 shares and to extend the term of the Plan. As of August 31, 2021, the Plan permits the Company to issue up to 3,548,738 shares of common stock awards of which 689,554 is available to be issued.

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Options granted in fiscal year 2021

On November 30, 2020, the Company appointed a new director and granted 120,000 options of the Company’s common stock vesting monthly over a four-year period for his service on the Board at exercise price of $0.6035, expiring ten years after grant date. The director will be eligible for equity award grants on the same terms as other non-employee members of the Board.

On February 12, 2021, the Company granted an option to the Company’s president to purchase 834,500 shares of the Company’s common stock with an exercise price of $2.66 and vesting as follows: 50% shall vest on the one-year anniversary of the grant date and 50% shall vest on the two-year anniversary of the grant date, subject to our president’s continued service to the Company.

On February 12, 2021, the Company granted an option to the Company’s directors to purchase a total of 705,500 shares of the Company’s common stock with an exercise price of $2.66 and vesting as follows: 50% shall vest on the one-year anniversary of the grant date and 50% shall vest on the two-year anniversary of the grant date, subject to our directors’ continued service to the Company.

On February 12, 2021, the Company granted an option to the Company’s employees to purchase a total of 420,000 shares of the Company’s common stock with an exercise price of $2.66 and vesting as follows: 25% shall vest on the one-year anniversary of the vesting commencement date, and 1/48th of the shares subject to the option shall vest each month thereafter on the same day of the month as the vesting commencement date.

On March 5, 2021, the Company granted an option to the Company’s president to purchase a total of 575,100 shares of the Company’s common stock with an exercise price of $1.52 and vesting as follows: 25% shall vest on the one-year anniversary of the vesting commencement date, and 1/48th of the shares subject to the option shall vest each month thereafter on the same day of the month as the vesting commencement date.

On March 5, 2021, the Company granted an option to a director of the Company to purchase 30,000 shares of the Company’s common stock with an exercise price of $1.52 and vesting as follows: one third shall vest on the one-year anniversary of the vesting commencement date, one third shall vest on the two-year anniversary of the vesting commencement date and one third shall vest on the three-year anniversary of the vesting commencement date, subject to this director’s continued service to the Company.

On July 16, 2021, the Company granted options to certain directors of the Company to purchase a total of 70,000 shares of the Company’s common stock with an exercise price of $1.00 and vesting on the earlier of the one year anniversary of the vesting commencement date or the date prior to the date of the Company’s annual meeting following the vesting commencement date. The vesting commencement date is July 16, 2021.

Option granted in fiscal year 2020

On December 2, 2019, 22,250 shares of common stock previously granted to a director of the Company in the form of a stock option were cancelled upon the resignation of the director from the board of directors.

On December 6, 2019, the Company granted 10,000 shares of common stock to a director of the Company in the form of a stock option valued at $24. The exercise price per share is $2.65 and the stock options expire on December 6, 2029. The shares vest 1/24th monthly over a period of two years from the grant date.

On December 6, 2019, the Company granted 40,000 shares of common stock to a director of the Company in the form of a stock option valued at $98. The exercise price per share is $2.65 and the stock options expire on December 6, 2029. The shares vest 1/48th monthly over a period of four years from the grant date.

On January 1, 2020, the Company granted 24,000 shares of common stock to a consultant in the form of a stock option valued at $68 in connection with the Company further amending and restating the consultant’s prior amended and restated Consulting Agreement dated as of August 17, 2018. The exercise price per share is $2.12 and the stock options expire on December 13, 2029. The shares vest 1/48th monthly over a period of four years, beginning on January 31, 2020 and on the last day of each month thereafter.

Option forfeited in fiscal year 2021

On July 20, 2021, a member of the Company’s Board of Directors (the “Participant”) ceased to be a service provider to the Company upon his death. Effective immediately, the Participant forfeited 177,750 unvested stock options. In accordance with the Company’s stock option plan, the Participant’s estate may exercise up to 23,750 vested stock options prior to July 20, 2022, at which time all unexercised options will be forfeited.

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Valuation

The Company utilizes the Black-Scholes model to value its stock options. The Company utilized the following assumptions:

Year Ended Year Ended

August 31, August 31,

Expected term 5 years 5 years

Expected dividend yield - -

During the year ended August 31, 2021, the Company granted 2,755,100 options valued at $5,760. During the year ended August 31, 2021, the Company recognized stock option expense of $1,497, of which $1,340 was to related parties, and as of August 31, 2021, $4,263 remains unamortized, of which $3,664 is with related parties. The intrinsic value of the 2,859,184 options outstanding as of August 31, 2021 is $37.

During the year ended August 31, 2020, the Company granted 74,000 options valued at $190. During the year ended August 31, 2020, $336 was expensed, of which $289 was to related parties, and as of August 31, 2020, $409 remained unamortized, of which $318 is with related parties. The intrinsic value of the 281,834 options outstanding as of August 31, 2020, is $0.

The following is a summary of stock option activity during the years ended August 31, 2021, and 2020:

Options Outstanding Weighted Average

Number of Weighted Average Remaining life

Options Exercise Price (years)

Exercised - - -

Exercised - - -

NOTE 5 - INCOME TAXES

The Company has not made provision for income taxes for the years ended August 31, 2021, and 2020, since the Company has the benefit of net operating losses in these periods.

Due to uncertainties surrounding the Company’s ability to generate future taxable income to realize deferred income tax assets arising as a result of net operating losses carried forward, the Company has not recorded any deferred income tax assets as of August 31, 2021. The Company has incurred a net operating loss of $14,465, the net operating loss carry forwards will begin to expire in varying amounts from year 2034 subject to its eligibility as determined by respective tax regulating authorities. The Company’s net operating loss carry forwards may be subject to annual limitations, which could eliminate, reduce or defer the utilization of the losses because of an ownership change as defined in Section 382 of the Internal Revenue Code U.S. federal tax returns are closed by statute for years through 2013. The status of state and non-U.S. tax examinations varies due to the numerous legal entities and jurisdictions in which the Company operates.

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On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law. The Tax Act includes numerous changes to tax laws impacting business, the most significant being a permanent reduction in the federal corporate income tax rate from 34% to 21%. The rate reduction took effect on January 1, 2018.

Net deferred tax assets consist of the following components as of:

August 31, August 31,

Net deferred tax asset $ - $ -

NOTE 6 – INTANGIBLE ASSET

The Company has capitalized the costs associated with acquiring the exclusive worldwide license to develop and commercialize products comprising or containing the compound NEO1940 as an intangible asset at a value of $2,039 as of August 31, 2021 and 2020.

The amount capitalized consisted of a $1,500 payment and the fair value of 61,297 shares of common stock of $539. During the year ended August 31, 2021, no additional costs met the criteria for capitalization as an intangible asset.

NOTE 7 - LEASE

The following summarizes right-of use asset and lease information about the Company’s operating lease as of August 31, 2021:

Lease costs

Operating lease costs $ 7

Other information

Cash paid for operating cash flows from operating leases $ 2

Right-of-use assets obtained in exchange for new operating lease liability $ 97

Weighted-average remaining lease term — operating lease (year) 3.00

Weighted-average discount rate — operating lease 3.00 %

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Future minimum lease payments under the operating lease liability has non-cancelable lease payments at August 31, 2021 as follows:

Total

Year Ended August 31,

Thereafter -

Less: Imputed interest (4 )

Operating lease liabilities 95

Operating lease liability - current 28

Operating lease liability - non-current $ 67

NOTE 8 – COMMITMENTS AND CONTENGENCIES

The Company has certain financial commitments in relation to Research and Development contracts as of August 31, 2021 as follows:

NOTE 9 – SUBSEQUENT EVENTS

Subsequent to August 31, 2021, the Company issued an aggregate of 17,774,310 shares of common stock under the ATM offering at an average price of $1.06 per common share for net proceeds of $18,262.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no disagreements related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and interim periods.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our senior management, including our Chief Executive and Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”). Based on this evaluation, our Chief Executive and Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to us required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. With the participation of our Chief Executive and Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of August 31, 2021, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) 2013 Framework in Internal Control – Integrated Framework. Based upon such evaluation, our management concluded that we did maintain effective internal control over financial reporting as of August 31, 2021, based on the COSO framework criteria, as more fully described below.

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers from the internal control audit requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during the quarter ended August 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations in the Effectiveness of Controls

Management recognizes that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors (“Board”) and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:

Name Position Held with the Company Date first appointed Age

Connie Matsui(1)(3) Director, Chairperson of the Board May 2, 2017 67

Douglas Blayney, M.D.(2) Director July 31, 2017 71

R. Martin Emanuele, Ph D.(2) Director September 20, 2017 67

Greg Reyes, M.D., Ph D.(3) Director November 30, 2020 57

Tamara A. Seymour(1) Director March 3, 2021 63

_______________

(1) Member of the audit committee

(2) Member of the corporate governance and nominating committee

(3) Member of the compensation committee

(4) Director and member of the audit committee through July 20, 2021

(5) Mr. Beck passed away unexpectedly on July 20, 2021

Business Experience

The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

Directors

Gregory D. Gorgas was appointed president, chief executive officer, chief financial officer, treasurer, secretary and director of our Company on April 3, 2017. Prior to joining our Company, Mr. Gorgas was Senior Vice President, Commercial, and Corporate Officer at Mast Therapeutics from July 2011 to January 2017 with commercial leadership accountability and business development responsibilities for the hematology, oncology and cardiovascular development programs. In addition, he performed a key role in helping Mast Therapeutics raise over $50M in new capital. From November 2009 to July 2011, Mr. Gorgas was Managing Director at Theragence, Inc., a privately-held company he co-founded, that applies proprietary computational intelligence to mine and analyze clinical data. From November 2008 to July 2011, Mr. Gorgas also served as an independent consultant, providing commercial and business development consulting services to pharmaceutical, biotechnology and medical device companies. From 1997 to October 2008, Mr. Gorgas held several positions with Biogen Idec Inc., most recently, from March 2006 to October 2008, as Senior Director, Global and U.S. Marketing with responsibility for the strategic vision and operational commercialization of the company’s worldwide cancer business. In this role, he hired and led the team in marketing, operations, project management, and business development in Europe and the US. Before such time, he had increasing responsibilities in marketing, sales, commercial operations, and project team and alliance management. Mr. Gorgas currently serves on the advisory board at Klotho Therapeutics. He holds an MBA from the University of Phoenix and a BA in economics from California State University, Northridge.

We believe that Mr. Gorgas’ professional background and experience in the biotechnology industry and assisting companies in financing efforts give him the qualifications and skills necessary to serve as an officer and director of our Company.

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Connie Matsui has served as our Chair of the Board of Directors since May 2017. She brings to her role over 16 years of general management experience in the biotechnology industry. Ms. Matsui retired from Biogen Idec in January 2009 as Executive Vice President, Knowledge and Innovation Networks. She served as an Executive Committee member at both Biogen Idec and IDEC Pharmaceuticals, a predecessor of Biogen Idec. Among the major roles she held after joining IDEC in November 1992 were: Senior Vice President, overseeing investor relations, corporate communications, human resources, project management and strategic planning; Collaboration Chair for the late stage development and commercialization of rituximab (tradenames: Rituxan®, MabThera®) in partnership with Roche and Genentech; and Project Leader for Zevalin®, the first radioimmunotherapy approved by the FDA. Prior to entering the biotechnology industry, Ms. Matsui worked for Wells Fargo Bank in general management, marketing and human resources. Ms. Matsui currently serves as the Chair of the Board at Halozyme and has been active on a number of not-for-profit boards. She was National President/Board Chair of the Girl Scouts of the USA from 1999 to 2002. Ms. Matsui earned BA and MBA degrees from Stanford University.

We believe that Ms. Matsui’s professional background experience gives her the qualifications and skills necessary to serve as a director of our Company and chairperson of the Board.

Steven Kelly was elected to our Board on May 2, 2017. Mr. Kelly brings nearly thirty years of experience in Pharma/Biotech at all phases of the business across multiple therapeutic categories. Mr. Kelly is currently CEO at Carisma Therapeutics, a venture backed biotech pioneering the development of CAR macrophages, a disruptive approach to immunotherapy in cancer. From 2012 to 2018, Mr. Kelly was the principal of Kelly BioConsulting, LLC, and served as an independent consultant providing strategic direction and guidance to a variety of life sciences companies. Previously, Mr. Kelly was the founding CEO of Pinteon Therapeutics, an early stage oncology and CNS development company. Prior to this he held a number of leadership positions in the biotechnology industry including: CEO, Theracrine; CCO, BioVex; CEO, Innovive Pharmaceuticals; as well as various commercial and manufacturing roles at Sanofi, IDEC Pharmaceuticals and Amgen. Mr. Kelly holds a BS from University of Oregon and an MBA from Cornell University.

We believe that Mr. Kelly’s professional background experience gives him the qualifications and skills necessary to serve as a director of our Company.

Douglas Blayney,M.D.was elected to our Board on July 31, 2017. Dr. Blayney is a Professor of Medicine at Stanford University and former Medical Director of Stanford Cancer Center. Dr. Blayney is a past president of the American Society of Clinical Oncology (ASCO) and a founder of the ASCO Quality Symposium. He was previously a Professor of Internal Medicine and Medical Director of the Comprehensive Cancer Center at the University of Michigan, and prior to that practiced and led Wilshire Oncology Medical Group, Inc. a physician owned multidisciplinary oncology practice in southern California. Dr. Blayney served on the Food and Drug Administration’s Oncologic Drugs Advisory Committee and is Founding Editor-in-Chief and Editor-in-Chief Emeritus of ASCO’s Journal of Oncology Practice. He has over 70 scientific publications with expertise on clinical trial development, use of oncology drugs in clinical practice, and information technology use. Dr. Blayney earned a degree in electrical engineering from Stanford, is a graduate of the University of California, San Diego School of Medicine, and received post graduate training at UCSD and at the National Cancer Institute in Bethesda, Maryland.

We believe that Dr. Blayney’s professional background experience gives him the qualifications and skills necessary to serve as a director of our Company.

R. Martin Emanuele,Ph.D. was elected to our Board on September 20, 2017. Dr. Emanuele is currently co-founder and Chief Operating Officer of Visgenx. Inc, a private bio-pharmaceutical company. From May 2011 to October 2016, he served as Senior Vice President, Development at Mast Therapeutics Inc. From April 2010 to April 2011, Dr. Emanuele was Vice President, Pharmaceutical Strategy at DaVita, Inc., and leading provider of dialysis and other healthcare services in the United States. Prior to DaVita, from June 2008 to April 2010, Dr. Emanuele was a co-founder and CEO of SynthRx, Inc. a private bio-pharmaceutical company that was acquired by Mast Therapeutics (Savara, Inc) in April 2011. From November 2006 to May 2008, Dr. Emanuele was Senior Vice President, Business Development at Kemia, Inc., a venture-backed privately-held company focused on discovering and developing small molecule therapeutics. From 2002 to 2006, Dr. Emanuele held various senior-level positions with Avanir Pharmaceuticals, Inc., most recently as Vice President, Corporate Development and Portfolio Management, and from 1988 to 2002, Dr. Emanuele held positions of increasing responsibility at CytRx Corporation, most recently as Vice President, Research and Development and Business Development. He earned a Ph.D. in pharmacology and experimental therapeutics from Loyola University of Chicago, Stritch School of Medicine and a BS in biology from Colorado State University. He also holds an MBA with an emphasis in healthcare and pharmaceutical management from the University of Colorado.

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We believe that Dr. Emanuele’s professional background experience gives him the qualifications and skills necessary to serve as a director of our Company.

Gregory Reyes, M.D., Ph.D., was elected to our Board on November 30, 2020. Dr. Reyes has served as a Pharmaceutical and Biotech Industry Advisor and Consultant to various companies from June 2016 to present. Dr. Reyes has also served as the Co-Founder of OROX Biosciences, Inc. from June 2017 to present. Prior to that, Dr. Reyes served as the Senior Vice President, Drug Discovery & San Diego Site Head, overseeing drug discovery at Celgene from June 2011 to June 2016. Prior to that, Dr. Reyes served as Senior Vice President & San Diego Site Head, leading the oncology franchise at Biogen Idec from October 2008 to June 2011. Dr. Reyes currently serves as advisor to Cancer Research UK’s New Agents Committee and previously served on NIH’s National Advisory General Medical Sciences Council, and the Standing Review Committee for the Research Centers in Minority Institutions, National Center for Research Resources. Dr. Reyes obtained his M.D. and Ph.D. at The Johns Hopkins School of Medicine and trained in medicine at Stanford University Hospital. Dr. Reyes received his bachelor’s degree in Biology from the University of California, Santa Cruz.

We believe that Dr. Reyes’ professional background experience gives him the qualifications and skills necessary to serve as a director of our Company.

Tamara A. Seymour was elected to our Board on March 5, 2021. Ms. Seymour serves as a member of the board of directors and audit committee chair of Kintara Therapeutics, Inc. and KemPharm, Inc. She served as Interim Chief Financial Officer of Immunic, Inc., clinical-stage drug development company in 2019. She was Chief Financial Officer of Signal Genetics, Inc., a publicly traded molecular diagnostics company, from 2014 to 2017. She served as Chief Financial Officer of HemaQuest Pharmaceuticals, Inc., a venture-backed clinical-stage drug development company, from 2010 to 2014. From 2001 to 2009, she served as Chief Financial Officer of Favrille, Inc., a publicly traded clinical-stage drug development company. Ms. Seymour has also served as consulting chief financial officer for a number of biotechnology companies, served as Director of Finance and Controller of Agouron Pharmaceuticals, Inc. (now Pfizer, Inc.) and spent eight years in public accounting with Deloitte & Touche LLP and PricewaterhouseCoopers LLP, including three years as audit manager. Ms. Seymour is a Certified Public Accountant (inactive). She received an MBA, emphasis in Finance, from Georgia State University, and a bachelor’s degree in Business Administration, emphasis in Accounting, from Valdosta State University. Ms. Seymour also participated in an executive management program at Kellogg Graduate School of Management at Northwestern University.

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We believe that Ms. Seymour’s professional background and experience gives her the qualifications and skills necessary to serve as a director of our Company.

John W. Beck was elected to our Board on December 6, 2019. Mr. Beck, age 60, and served as a board member until his passing in July 2020. He served as the Senior Vice President and Chief Financial Officer at Ritter Pharmaceuticals, Inc., a publicly traded pharmaceutical company, since May 2018 until its acquisition by Qualigen Pharmaceuticals Inc in May 2020. From 2008 until its acquisition by AstraZeneca in 2012, Mr. Beck, served first as a board member and later as Chief Financial Officer and Senior Vice President of finance & operations of Ardea Biosciences Inc. (“Ardea”). Before joining Ardea, Mr. Beck spent 10 years with Metabasis Therapeutics Inc., as a Co-Founder and its Chief Financial Officer. Mr. Beck also serves as a board member and advisor to August Therapeutics, Inc., a San Diego California-based company developing non-systemic therapeutics to treat disordered eating and obesity, and Pinnacle Medical Holdings, LLC, a Denver Colorado-based physician-led network of health-care providers, which was acquired by OnPoint Medical Group, LLC in August 2017.

Executive Officers

Gregory D. Gorgas. Please see biography in “Directors” section above.

Board Meetings

Since August 31, 2020, our Board has met five times on September 18, 2020, December 4, 2020, March 5, 2021, June 4, 2021, and September 17, 2021, of which all directors attended a minimum of 75% of the meetings.

Audit Committee

Our audit committee is currently comprised of Tamara A. Seymour, Steven Kelly, and Connie Matsui. Ms. Seymour, serves as the chairperson of our audit committee. Our Board has determined that each member of our audit committee meets the requirements for independence and financial literacy under the applicable rules and regulations of the SEC and the listing standards of The Nasdaq Stock Market, LLC (“Nasdaq”). Our Board has also determined that Ms. Seymour is an “audit committee financial expert” as defined in the rules of the SEC and has the requisite financial sophistication as defined under the listing standards of Nasdaq. The responsibilities of our audit committee will include, among other things:

· overseeing our policies on risk assessment and risk management;

· reviewing related party transactions; and

Our audit committee operates under a written charter which satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq, a copy of which can be found on our website at www.artelobio.com.

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Compensation Committee

Our compensation committee is currently comprised of Steven Kelly and Dr. Greg Reyes. Mr. Kelly serves as the chairperson of our compensation committee. Our Board has determined that each member of our compensation committee meets the requirements for independence under the applicable rules and regulations of the SEC and listing standards of Nasdaq. Each member of the compensation committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act. The purpose of our compensation committee will be to oversee our compensation policies, plans and benefit programs and to discharge the responsibilities of our Board relating to compensation of our executive officers. The responsibilities of our compensation committee will include, among other things:

· administering our equity compensation plans.

Our compensation committee operates under a written charter, which satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq, a copy of which can be found on our website at www.artelobio.com.

Corporate Governance and Nominating Committee

Our corporate governance and nominating committee is currently comprised of Douglas Blayney, M.D., and R. Martin Emanuele, Ph.D and Connie Matsui. Dr. Blayney serves as chairperson of our corporate governance and nominating committee. Our Board has determined that all members of our nominating and corporate governance committee meet the requirements for independence under the applicable rules and regulations of Nasdaq listing standards. The responsibilities of our nominating and corporate governance committee will include, among other things:

· evaluating the performance of our Board and of individual directors;

Our nominating and corporate governance committee operates under a written charter, which satisfies the listing standards of Nasdaq, a copy of which can be found on our website at www.artelobio.com.

Code of Ethics

The Board has adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and agents and representatives, including consultants. A copy of the Code of Business Conduct and Ethics is available on our website at www.artelobio.com. We intend to disclose future amendments to such code, or any waivers of its requirements, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions or our directors on our website identified above.

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Family Relationships

There are no family relationships between any of our directors or executive officers.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our shares of common stock and other equity securities, on Forms 3, 4 and 5, respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file.

Based solely on our review of the copies of such forms received by our company, or written representations from certain reporting persons that no Form 5s were required for those persons, we believe that, during the fiscal year ended August 31, 2021, all filing requirements applicable to our officers, directors and greater than 10% beneficial owners as well as our officers, directors and greater than 10% beneficial owners of our subsidiaries were complied with except for the late filings of a Form 4 on July 26, 2021 for each outside director that received an automatic grant of options upon being re-elected to the board at the annual meeting on July 16, 2021 due to an administrative oversight.

ITEM 11. EXECUTIVE COMPENSATION

The particulars of the compensation paid to the following persons:

SUMMARY COMPENSATION TABLE

Gregory D. Gorgas

*Bonus was paid in October 2020.

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Outstanding Equity Awards at Fiscal Year-End

As of August 31, 2021, there was an option to purchase 1,484,600 shares of our common stock held by our named executive officer.

Option Awards Stock Awards

Executive Employment Agreements

On April 3, 2017, our Company entered into an employment agreement with Gregory D. Gorgas. On March 15, 2019, the compensation committee of the Board increased Mr. Gorgas’ salary by $10,000 per month, effective immediately.

On August 30, 2019, and effective as of June 20, 2019, the Company and Mr. Gorgas entered into an amended and restated employment agreement (the “Employment Agreement”).

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Pursuant to the Employment Agreement, Mr. Gorgas will receive a base salary of $425,000 per year, less applicable withholdings, and he will be eligible to earn an annual target bonus of up to 50% of his base salary upon achievement of performance objectives to be determined by the Company’s board of directors or its compensation committee. Mr. Gorgas is also eligible to participate in any employee benefit plans sponsored by us.

In addition, in connection with his employment, we have granted Mr. Gorgas an option to purchase 75,000 shares of our common stock at $1.99 per share pursuant to our 2018 Equity Incentive Plan. The shares subject to this option award will vest, subject to Mr. Gorgas’ continued service through the applicable vesting date, rateably over 48 months starting on August 29, 2019, such that the option will be fully vested on August 29, 2023. The vesting of the option is also subject to certain vesting acceleration provisions pursuant to the Employment Agreement.

On February 12, 2021, the Company granted an option to the Company’s president to purchase 834,500 shares of the Company’s common stock with an exercise price of $2.66 and vesting as follows: 50% shall vest on the one-year anniversary of the grant date and 50% shall vest on the two-year anniversary of the grant date, subject to our president’s continued service to the Company.

On March 5, 2021, the Company granted an option to the Company’s president to purchase a total of 575,100 shares of the Company’s common stock with an exercise price of $1.52 and vesting as follows: 25% shall vest on the one-year anniversary of the vesting commencement date, and 1/48th of the shares subject to the option shall vest each month thereafter on the same day of the month as the vesting commencement date, subject to our president’s continued services to the Company.

The Employment Agreement also provides that Company shall pay the premiums for a life insurance policy for Mr. Gorgas for coverage of up to $1,000,000, and Mr. Gorgas shall be entitled to select personal beneficiaries for 100% of the proceeds of such policy. Mr. Gorgas may also choose to pay any additional premiums to increase the coverage of this life insurance policy.

The Employment Agreement also provides benefits in connection with a termination of employment under specified circumstances. Under the terms of the Employment Agreement, if we terminate Mr. Gorgas’ employment other than for cause, death, or disability, or Mr. Gorgas terminates his employment for good reason, Mr. Gorgas will be entitled to receive, subject to his timely execution and non-revocation of a release of claims, non-disparagement and his continued adherence to the non-solicitation provision of the Employment Agreement the following benefits: (A) if his termination of service occurs within the period 3 months prior to and 12 months after a change of control of the Company, (i) a lump sum severance payment equal to (x) 12 months of his then-current base salary and (y) his prorated annual bonus at the target level of achievement for the year in which the termination occurs, (ii) reimbursements for Mr. Gorgas and his eligible dependents’ COBRA premiums for up to 12 months; and (iii) accelerated vesting as to 100% of Mr. Gorgas’ then-outstanding time-based and performance-based equity awards; or (B) if his termination of service occurs outside of the period 3 months prior to and 12 months after a change of control of the Company, (i) continuing monthly payments of his then-current base salary for 12 months, (ii) a lump sum payment equal to a pro-rata portion of his then-current year target bonus, (iii) reimbursements for Mr. Gorgas and his eligible dependents’ COBRA premiums for up to 12 months; and (iv) accelerated vesting as to (x) 100% of Mr. Gorgas’ then-outstanding time-based equity awards and (y) that portion of Mr. Gorgas’ then-outstanding performance based equity awards for the performance goals that had been satisfied at the time of termination or are expected to be satisfied.

If any of the severance and other benefits provided for in the Employment Agreement or otherwise payable to Mr. Gorgas constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and could be subject to excise tax under Section 4999 of the Internal Revenue Code, then such payments will be delivered in full or delivered as to such lesser extent which would result in no portion of such benefits being subject to excise tax, whichever results in the greater amount of after-tax benefits to Mr. Gorgas.

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Director Compensation

The following table shows the compensation earned by persons who served on our Board of Directors during the fiscal year ended August 31, 2021, who are not one of our Named Executive Officers.

We granted stock options to purchase a total of 925,500 shares of common stock to our directors during the year ended August 31, 2021

Fees

Earned Non-Equity Nonqualified All

or Paid Option Incentive Plan Deferred Other

in Cash Stock Awards Compensation Compensation Compensation Total

Name ($) Awards ($) ($)(1) ($) Earnings ($) ($) ($)

(1) In accordance with SEC rules, the amounts shown reflect the aggregate grant date fair value of stock awards granted to Non-Employee Directors during 2021, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC 718”). The grant date fair value for stock options is measured based on the Black-Scholes Model. Refer to Note 4 – Equity in the Company’s consolidated financial statements for the year ended August 31, 2021.

Non-Employee Director Compensation Policy

Effective February 12, 2021, after reviewing data provided by F.W. Cook, an independent compensation consultant, the Company adopted an Outside Director Compensation Policy which provides that each outside director is entitled to receive the following cash compensation for their services:

• $30,000 per year for service as a member of the board of directors;

• $25,000 per year additionally for service as chairperson of the board;

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• $7,500 per year additionally for service as an audit committee member;

• $4,000 per year additionally for service as a compensation committee member;

All cash payments to non-employee directors are paid quarterly in arrears on a prorated basis.

In addition, the Outside Director Compensation Policy provides that new non-employee directors receive, upon becoming a non-employee director, an initial award of stock options to purchase 30,000 shares of our common stock at a per-share exercise price equal to the fair market value of a share of our common stock on the first trading date on or after the date on which such individual first becomes a non-employee director. The initial award shall vest in three (3) equal installments on each anniversary of the date the applicable non-employee director’s service commenced, in each case subject to the non-employee director continuing to be a service provider through the applicable vesting date.

Our outside director compensation policy also provides for an annual award to continuing non-employee directors who have served as a non-employee director for at least six (6) months on the date of each annual meeting of stockholders, provided that the board may make exceptions to this requirement, of stock options to purchase 10,000 shares of our common stock at a per-share exercise price equal to the fair market value of a share of our common stock on the date of each annual meeting. The annual award shall vest on the earlier of the one-year anniversary of the date the annual award is granted, or the day prior to the date of the annual meeting next following the date the annual award is granted, in each case, subject to the non-employee director continuing to be a service provider through the applicable vesting date.

We also reimburse our directors for expenses associated with attending meetings of our board of directors and committees of our board of directors. Directors who are also our employees receive no additional compensation for their service as a director.

Our outside director compensation policy further provides that in any given fiscal year, a non-employee director may not receive cash compensation and equity awards with an aggregate value greater than $750,000 (determined in accordance with accounting principles generally accepted in the United States of America). Any cash compensation paid or awards granted to an individual for his or her services as an employee or a consultant (other than as a non-employee director) will not count for purposes of this limitation.

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Equity grants to our non-employee directors provide that in the event of a merger or change in control, each outstanding equity award granted held by a non-employee director will fully vest, all restrictions on the shares subject to such award will lapse, and with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels, and all of the shares subject to such award will become fully exercisable, if applicable.

On November 30, 2020, the Company appointed a new director and granted 120,000 options of the Company’s common stock vesting monthly over a four-year period for his service on the Board at exercise price of $0.6035, expiring ten years after grant date. The director will be eligible for equity award grants on the same terms as other non-employee members of the Board.

On February 12, 2021, the Company granted options to certain directors of the Company directors to purchase a total of 705,500 shares of the Company’s common stock with an exercise price of $2.66 and vesting as follows: 50% shall vest on the one-year anniversary of the grant date and 50% shall vest on the two-year anniversary of the grant date, subject to our directors’ continued service to the Company.

On March 5, 2021, the Company granted an option to a director of the Company to purchase 30,000 shares of the Company’s common stock with an exercise price of $1.52 and vesting as follows: one third shall vest on the one-year anniversary of the vesting commencement date, one third shall vest on the two-year anniversary of the vesting commencement date and one third shall vest on the three-year anniversary of the vesting commencement date, subject to this director’s continued service to the Company.

On July 16, 2021, the Company granted options to certain directors of the Company to purchase a total of 70,000 shares of the Company’s common stock with an exercise price of $1.00 and vesting on the earlier of the vesting commencement date or the date prior to the date of the Company’s annual meeting following the vesting commencement date. The vesting commencement date is July 16, 2021.

Employee Stock Plan

2018 Equity Incentive Plan

Our Board has adopted a 2018 Equity Incentive Plan (the “2018 Plan”), and our stockholders have approved it. Our 2018 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to our employees and any parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, and stock appreciation rights to our employees, directors and consultants and our parent and subsidiary corporations’ employees and consultants.

Authorized Shares. A total of 3,548,738 shares of our common stock have been reserved for issuance pursuant to the 2018 Plan, of which options to purchase 2,859,184 shares of common stock are issued and outstanding August 31, 2021.

Plan Administration. Our board of directors or one or more committees appointed by our board of directors will administer the 2018 Plan. Our compensation committee of our board of directors currently administers our 2018 Plan. In addition, if we determine it is desirable to qualify transactions under the 2018 Plan as exempt under Rule 16b-3 of the Exchange Act, or Rule 16b-3, such transactions will be structured to satisfy the requirements for exemption under Rule 16b-3. Subject to the provisions of our 2018 Plan, the administrator has the power to administer the plan, including but not limited to, the power to determine the fair market value of our common stock, select the service providers to whom awards may be granted, determine the number of shares covered by each award, approve forms of award agreements for use under the 2018 Plan, determine the terms and conditions of awards (including, but not limited to, the exercise price, the time or times at which awards may be exercised, any vesting acceleration or waiver or forfeiture restrictions and any restriction or limitation regarding any award or the shares relating thereto), construe and interpret the terms of our 2018 Plan and awards granted under it, prescribe, amend and rescind rules relating to our 2018 Plan, including creating sub-plans, modify or amend each award, including but not limited to the discretionary authority to extend the post-termination exercisability period of awards (except no option or stock appreciation right will be extended past its original maximum term) and allow a participant to defer the receipt of payment of cash or the delivery of shares that would otherwise be due to such participant under an award). The administrator also has the authority to allow participants the opportunity to transfer outstanding awards to a financial institution or other person or entity selected by the administrator and to institute an exchange program by which outstanding awards may be surrendered or cancelled in exchange for awards of the same type, which may have a higher or lower exercise price and/or different terms, awards of a different type and/or cash or by which the exercise price of an outstanding award is increased or reduced. The administrator’s decisions, interpretations and other actions are final and binding on all participants.

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Stock Options. We may grant stock options under the 2018 Plan. The exercise price of options granted under our 2018 Plan will at least be equal to 100% of the fair market value of our common stock on the date of grant. The term of an option may not exceed 10 years. With respect to any participant who owns more than 10% of the voting power of all classes of our outstanding stock, the term of an incentive stock option granted to such participant must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date. The administrator will determine the methods of payment of the exercise price of an option, which may include cash, shares or other property acceptable to the administrator, as well as other types of consideration permitted by applicable law. After the termination of service of an employee, director or consultant, he or she may exercise his or her option, to the extent vested as of the termination date, for the period of time stated in his or her option agreement. Generally, if termination is due to death or disability, the option will remain exercisable for 6 months. In all other cases, in the absence of a specified time in an award agreement, the option will generally remain exercisable for 30 days following the termination of service. However, in no event may an option be exercised later than the expiration of its term. Subject to the provisions of our 2018 Plan, the administrator determines the other terms of options.

Stock Appreciation Rights. We may grant stock appreciation rights under our 2018 Plan. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our common stock between the exercise date and the date of grant. Stock appreciation rights may not have a term exceeding 10 years. After the termination of service of an employee, director or consultant, he or she may exercise his or her stock appreciation right for the period of time stated in his or her option agreement. In the absence of a specified time in an award agreement, if termination is due to death or disability, the stock appreciation rights will remain exercisable for 6 months. In all other cases, in the absence of a specified time in an award agreement, the stock appreciation rights will remain exercisable for 30 days following the termination of service. However, in no event may a stock appreciation right be exercised later than the expiration of its term. Subject to the provisions of our 2018 Plan, the administrator determines the other terms of stock appreciation rights, including when such rights become exercisable and whether to pay any increased appreciation in cash or with shares of our common stock, or a combination thereof, except that the per share exercise price for the shares to be issued pursuant to the exercise of a stock appreciation right will be no less than 100% of the fair market value per share on the date of grant.

Restricted Stock. We may grant restricted stock under our 2018 Plan. Restricted stock awards are grants of shares of our common stock that vest in accordance with terms and conditions established by the administrator. The administrator will determine the number of shares of restricted stock granted to any employee, director or consultant and, subject to the provisions of our 2018 Plan, will determine the terms and conditions of such awards. The administrator may impose whatever vesting conditions it determines to be appropriate (for example, the administrator may set restrictions based on the achievement of specific performance goals or continued service to us), except the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. Recipients of restricted stock awards generally will have voting and dividend rights with respect to such shares upon grant without regard to vesting, unless the administrator provides otherwise. Shares of restricted stock that do not vest are subject to our right of repurchase or forfeiture.

Restricted Stock Units. We may grant restricted stock units under our 2018 Plan. Restricted stock units are bookkeeping entries representing an amount equal to the fair market value of one share of our common stock. Subject to the provisions of our 2018 Plan, the administrator determines the terms and conditions of restricted stock units, including the vesting criteria and the form and timing of payment. The administrator may set vesting criteria based upon the achievement of company-wide, divisional, business unit or individual goals (including, but not limited to, continued employment or service) or any other basis determined by the administrator in its discretion. The administrator, in its sole discretion, may pay earned restricted stock units in the form of cash, in shares or in some combination thereof. Notwithstanding the foregoing, the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed.

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Non-Transferability of Awards. Unless the administrator provides otherwise, our 2018 Plan generally does not allow for the transfer of awards and only the recipient of an award may exercise an award during his or her lifetime. If the administrator makes an award transferrable, such award will contain such additional terms and conditions as the administrator deems appropriate.

Certain Adjustments. In the event of any dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of our shares or other securities, or other change in our corporate structure affecting our shares, to prevent diminution or enlargement of the benefits or potential benefits available under our 2018 Plan, the administrator will adjust the number and class of shares that may be delivered under our 2018 Plan and/or the number, class and price of shares covered by each outstanding award and the numerical share limits set forth in our 2018 Plan.

Dissolution or Liquidation. In the event of our proposed liquidation or dissolution, the administrator will notify participants as soon as practicable and, to the extent not exercised, all awards will terminate immediately prior to the consummation of such proposed transaction.

Merger or Change in Control. Our 2018 Plan provides that in the event of a merger or change in control, as defined under our 2018 Plan, each outstanding award will be treated as the administrator determines, without a participant’s consent. The administrator is not required to treat all awards, all awards held by a participant or all awards of the same type, similarly.

If a successor corporation does not assume or substitute for any outstanding award, then the participant will fully vest in and have the right to exercise all of his or her outstanding options and stock appreciation rights, all restrictions on restricted stock and restricted stock units will lapse, and for awards with performance-based vesting, unless specifically provided for otherwise under the applicable award agreement or other agreement or policy applicable to the participant, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions met. If an option or stock appreciation right is not assumed or substituted, the administrator will notify the participant in writing or electronically that such option or stock appreciation right will be exercisable for a period of time determined by the administrator in its sole discretion and the option or stock appreciation right will terminate upon the expiration of such period.

Clawback. Awards will be subject to any clawback policy of ours, and the administrator also may specify in an award agreement that the participant’s rights, payments, and/or benefits with respect to an award will be subject to reduction, cancellation, forfeiture, and/or recoupment upon the occurrence of certain specified events. Our board of directors may require a participant to forfeit, return, or reimburse us all or a portion of the award and/or shares issued under the award, any amounts paid under the award, and any payments or proceeds paid or provided upon disposition of the shares issued under the award in order to comply with such clawback policy or applicable laws.

Amendment; Termination. The administrator has the authority to amend, alter, suspend or terminate our 2018 Plan, provided such action does not materially impair the rights of any participant. Our 2018 Plan automatically will terminate in 2028, unless we terminate it sooner.

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Grants of Plan-Based Awards

During the fiscal year ended August 31, 2021, we granted stock options to purchase a total of 2,755,100 shares of common stock.

Option Exercises and Stock Vested

During our fiscal year ended August 31, 2021, there were no options exercised by our named officers.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.

Indebtedness of Directors, Senior Officers, Executive Officers and Other Management

None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years, is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of November 5, 2021, certain information with respect to the beneficial ownership of our common and preferred shares by each shareholder known by us to be the beneficial owner of more than 5% of our common and preferred shares, as well as by each of our current directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of common and preferred stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common and preferred stock, except as otherwise indicated.

Except as otherwise noted below, the address of each of the individuals and entities named in the table below is c/o Artelo Biosciences, Inc., 505 Lomas Santa Fe, Suite 160, Solana Beach, California 92075. Beneficial ownership representing less than 1% is denoted with an asterisk (*).

Number of Shares

Subject to Total Shares

Number of Options Exercisable Beneficially Owned

Name and Address of Beneficial Owner Shares Held within 60 Days Number %

Directors and Named Executive Officers

Tamara A. Seymour - - -

5% Stockholders

None

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* Less than 1%

Equity Compensation Plan Information

The following table summarizes information about our equity compensation plans as of August 31, 2021. All outstanding option awards relate to our common stock.

(a) (b) (c)

Equity compensation plans approved by security holders:

Equity compensation plans not approved by security holders - -

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Changes in Control

We are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of our company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended August 31, 2020, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last three completed fiscal years:

On May 12, 2021, the Company entered into a lease arrangement for office space with Beckman/Lomas LLC, an entity controlled by a close family member of a director (see Note 7 in the consolidated financial statements for the year ended August 31, 2021). During the term of the thirty-nine (39) month lease, the Company will make $102,511 in payments, in thirty-six (36) monthly installments.

Director Independence

Our Board has undertaken a review of the independence of the directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board has determined that Ms. Matsui, Dr. Blayney, Mr. Kelly, Dr. Emanuele, Dr. Reyes and Ms. Seymour representing six of our seven directors, are “independent directors” as defined under the rules of the Nasdaq Capital Market. Mr. Gorgas is not considered independent due to his service as an executive officer of the Company.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate fees billed for the most recently completed fiscal year ended August 31, 2021, and for fiscal year ended August 31, 2020, for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

Fee Category Year Ended August 31, 2021 Year Ended August 31, 2020

All Other Fees - -

Our audit committee pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the audit committee either before or after the respective services were rendered.

Our Board has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements

(b) Exhibits

Exhibit Number Description Form File No. Filing Date Filed Herewith

3.4 Certificate of Change. *

3.6 Amendment to the Bylaws *

31.1 Section 302 Certification *

31.2 ** Section 906 Certification *

101 INS XBRL Instance Document

101 SCH XBRL Taxonomy Extension Schema Document

101 CAL XBRL Taxonomy Extension Calculation Linkbase Document

101 DEF XBRL Taxonomy Extension Definition Linkbase Document

101 LAB XBRL Taxonomy Extension Label Linkbase Document

101 PRE XBRL Taxonomy Extension Presentation Linkbase Document

___________

# Management contracts or compensatory plans, contracts or arrangements.

+ Certain portions of this exhibit have been omitted.

ITEM 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

ARTELO BIOSCIENCES, INC.

Dated: November 29, 2021 By: /s/ Gregory D. Gorgas

Gregory D. Gorgas

President, Chief Executive Officer,

Chief Financial Officer, Treasurer and Director

(Principal Executive Officer,

Principal Financial Officer and Principal Accounting Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Gregory D. Gorgas, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Dated: November 29, 2021 /s/ Gregory D. Gorgas

Gregory D. Gorgas

President, Chief Executive Officer,

Chief Financial Officer, Treasurer and Director

(Principal Executive Officer,

Principal Financial Officer and Principal Accounting Officer)

Dated: November 29, 2021 /s/ Connie Matsui

Connie Matsui

Director

Dated: November 29, 2021 /s/ Steven Kelly

Steven Kelly

Director

Dated: November 29, 2021 /s/ Douglas Blayney

Douglas Blayney

Director

Dated: November 29, 2021 /s/ R. Martin Emanuele

R. Martin Emanuele

Director

Dated: November 29, 2021 /s/ Greg Reyes

Greg Reyes

Director

Dated: November 29, 2021 /s/ Tamara A. Seymour

Tamara A. Seymour

Director