Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of Artelo Biosciences, Inc.'s ("Artelo" or the "Company") condensed consolidated results of operations and financial condition. The discussion should be read together with the condensed consolidated financial statements and the accompanying notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements for the year ended December 31, 2024, and the related notes included in our Annual Report on Form 10-K filed with the SEC on March 3, 2025. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Artelo's actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" in Part II, Item 1A as set forth in this Quarterly Report on Form 10-Q.

General Overview

We are a clinical stage biopharmaceutical company focused on the development and commercialization of therapeutics that target lipid-signaling modulation pathways, including the endocannabinoid system (the "ECS"), a network of receptors and neurotransmitters that form a biochemical communication system throughout the body.

Our product candidate pipeline broadly leverages leading scientific methodologies and balances risk across mechanisms of action and stages of development. Our programs represent a comprehensive approach in utilizing the power and promise of lipid signaling to develop pharmaceuticals for patients with unmet healthcare needs. We are currently developing a dual cannabinoid (CB) agonist that targets both the CB₁ and CB₂ receptors. This synthetic small molecule program is a G protein-coupled receptor ("GPCR") designated ART27.13. We are developing ART27.13 as a potential treatment for cancer-related anorexia in a Phase 1b/2a trial, titled the Cancer Appetite Recovery Study ("CAReS").

Our second program, ART26.12 is a small molecule and the lead product candidate from our chemical library of inhibitors of fatty acid binding proteins, notably Fatty Acid Binding Protein 5 ("FABP5"). We received U.S. Food & Drug Administration (the "FDA") clearance for our Investigational New Drug ("IND") application for ART26.12 in July 2024 and have completed enrollment to a Phase 1 clinical trial in healthy subjects to support the development towards an agent intended to treat chemotherapy-induced peripheral neuropathy. In addition, ART26.12 may have broad applications as a cancer therapeutic, as a treatment for dermatologic conditions, such as psoriasis, as a treatment for pain and inflammation, and potential use in anxiety-related disorders, including post-traumatic stress disorder.

We are also developing our own invention ART12.11 (the "CBD cocrystal"). ART12.11 is our patented solid-state composition of cannabidiol ("CBD") and tetramethylpyrazine ("TMP"). TMP serves as the coformer in the CBD cocrystal. ART12.11 may be considered by the regulatory authorities as a fixed drug combination instead of a new chemical entity ("NCE").

We obtained two of our patent protected product candidates through our in-licensing activities. Our first in-licensed program, ART27.13, is being developed for cancer-related anorexia. ART27.13 is a peripherally-selective high-potency dual CB₁ and CB₂ full-receptor agonist, which was originally invented at AstraZeneca plc ("AstraZeneca"). We exercised our option to exclusively license this product candidate through the NEOMED Institute ("NEOMED"), a Canadian not-for-profit corporation, renamed adMare Bioinnovations ("adMare") in June 2019, which had obtained rights to ART27.13 from AstraZeneca.

We commenced enrollment and dosed the first patient in CAReS, our Phase 1b/2a clinical study of cancer-related anorexia with ART27.13, in April 2021 and completed enrolling patients in the Phase 1b during the first quarter of 2023. We initiated the Phase 2a portion of CAReS during April 2023. As of June 20, 2025, 15 clinical sites across five countries were open to enrollment. We are on track to report initial data from the Phase 2 CAReS study of ART27.13, its peripherally acting cannabinoid receptor agonist, in Q3 2025.

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Our second in-licensed patented program is being advanced from our platform of small-molecule inhibitors of fatty acid binding proteins, notably FABP5. FABP5 is believed to specifically target and regulate one of the body's endogenous cannabinoids, anandamide ("AEA"). We licensed the rights to world-wide intellectual property in all fields and certain know-how to these inhibitors from Stony Brook University ("SBU").

We are developing our product candidates in accordance with traditional regulated drug development standards and expect to make them available to patients via prescription or physician orders only after obtaining marketing authorization from a country's regulatory authority, such as the FDA. Our management team has experience developing, commercializing, and partnering ethical pharmaceutical products, including several first-in-class therapeutics. Based upon our current management's capabilities and the future talent we may attract, we plan to retain rights to internally develop and commercialize products; however, we may seek collaborations with partners in the biopharmaceutical industry when a partnering strategy serves to maximize value for our stockholders.

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. Our net loss was $5.6 million for the six months ended June 30, 2025. As of June 30, 2025, we had cash and cash equivalents of $2.1 million. In order to continue operations, we will be required to raise additional funds by completing additional equity or debt offerings or licensing our product candidates. We are currently pursuing various financing strategies. There can be no assurance that we will be successful in acquiring additional funding, that our projections of our future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The accompanying consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if we are unable to continue as a going concern.

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Recent Developments

	·	DAT Strategy. We have adopted a Digital Asset Treasury strategy whereby we will purchase the digital currency known as Solana ("SOL"). As of August 6, 2025, the Company has expended $250,000 to purchase SOL.
	·	August 2025 Private Placement. On August 4, 2025, we entered into a securities purchase agreement for an at-the market PIPE (private investment in public equity) for the purchase and sale of securities at a price of $10.45 per security, consisting of: (a) 906,687 shares of common stock (or pre-funded warrants in lieu thereof); (b) three-year warrants to purchase 906,687 shares of common stock at an exercise price of $10.20 per share; and (c) three-year warrants to purchase 906,687 shares of common stock at an exercise price of $50.00 per share, for expected aggregate gross proceeds of approximately $9.475 million. We agreed that the net proceeds of the sale will be used to purchase Solana ("SOL").
	·	ATM Sales Agreement. On July 18, 2025, we entered into an At-The-Market Offering Agreement (the "Sales Agreement") with R.F. Lafferty & Co., Inc. ("R.F. Lafferty") under which we may offer and sell up to $6.5 million of shares of our common stock from time to time through an "at the market" offering program under which R.F. Lafferty will act as sales agent. Under the Sales Agreement, we will set the parameters for the sale of shares, including the number or dollar amount of shares to be issued, the time period during which sales are requested to be made, limitations on the number or dollar amount of shares that may be sold in any one trading day and any minimum price below which sales may not be made. Subject to the terms and conditions of the Sales Agreement, R.F. Lafferty may sell the shares by methods deemed to be an "at the market" offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. We have no obligation to sell any shares under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement. The shares will be issued pursuant to our shelf registration statement on Form S-3, including the prospectus supplement contained therein, which was declared effective by the SEC on July 14, 2023. As of August 11, 2025, 4,580 common stock shares have been sold under the ATM for net proceeds of $47,000.
	·	June 2025 Private Placement. On June 26, 2025, we completed a private placement (the "Private Placement") of (i) 136,843 shares (the "Shares") of our common stock, par value $0.001 per share (the "Common Stock"), at $5.82 per share, (ii) pre-funded warrants to purchase 93,180 shares of Common Stock at an exercise price of $0.001 per Share (the "Pre-Funded Warrants") at $5.819 per Pre-Funded Warrant, (iii) warrants to purchase 460,046 shares of Common Stock at an exercise price of $5.82 per share (the "$5.82 Warrants"), and (iv) warrants to purchase 230,023 shares of Common Stock at an exercise price of $10.00 per share (the "$10.00 Warrants"). The Pre-Funded Warrants, the $5.82 Warrants and the $10.00 Warrants are collectively referred to herein as the "Warrants" and the shares issuable upon such Warrants, the "Warrant Shares." Gross proceeds were $1.425 million.
	·	Reverse Stock Split. On June 12, 2025, we filed with the Secretary of State of the State of Nevada a Certificate of Change (the "Certificate of Change"), pursuant to Nevada Revised Statutes 78.209, to effect a one-for-six (1-for-6) reverse stock split (the "Reverse Split") of our issued and outstanding common stock, par value $0.001 per share (the "Common Stock"). The Reverse Split was effective as of 12:01 a.m. Eastern Time on June 13, 2025 (the "Effective Time"). Pursuant to the Nevada Revised Statutes 78.207, our board of directors has the authority to effect a reverse stock split without stockholder approval if the number of authorized shares of common stock and the number of outstanding shares of common stock are proportionally reduced.

Digital Asset Treasury Strategy - Solana (SOL)

Background

Since June 2025, we have entered into two private placement transactions that expressly require the purchase of Solana's native token, SOL. Under the June 2025 private placement offering, we committed to use $250,000 of consideration received in connection with a private placement of equity securities to acquire SOL. Under the August 2025 private placement offering, we committed to apply the net cash proceeds of that $9.4 million offering to purchase additional SOL. To date, these two private placement offering-related resolutions, together with the related delegation of authority to management to execute the purchases, constitute the full extent of Board authorization with respect to digital-asset activity. No comprehensive digital-asset treasury policy has yet been adopted, and no authorization has been given to stake, lend, pledge, rehypothecate, or otherwise deploy our SOL for yield. Management plans to prepare a fulsome policy for future Board consideration; any expansion of the strategy (including, without limitation, staking or other yield-generating uses) will be presented to, and will require the express approval of, the Board before implementation.

Current Parameters (as approved through the date of this filing)

	·	Asset. SOL only.
	·	Source of funds. (i) $250,000 of proceeds from the June 2025 private placement offering of equity securities and (ii) all net cash proceeds from the $9.4 million August 2025 private placement offering.
	·	Execution. Spot purchases for cash on U.S. venues that are registered or chartered, and subject to BSA/AML obligations. No leverage, margin, or derivatives are permitted.
	·	Custody. The initial $250,000 in SOL acquired pursuant to the June 2025 private placement offering is held in custody with BitGo, a U.S.-regulated, qualified digital-asset custodian. Certain amounts of SOL acquired with proceeds from the August 2025 private placement offering, are held with CUBE, a U.S.-regulated, qualified digital-asset custodian that provides segregated, cold-storage accounts, multi-signature authorization, SOC-2 reporting, and a limited insurance program.
	·	Private keys are maintained exclusively with BitGo and CUBE; we do not self-custody.
	·	Use of SOL. Our holdings are maintained as a long-term, non-core treasury reserve asset. No SOL has been loaned, staked, pledged, or otherwise encumbered.
	·	Reporting. Our holdings are measured at fair value pursuant to ASU 2023-08. Changes in fair value flow through net income each reporting period. The Audit Committee will receive reports covering holdings, valuation, counter-party exposure, and compliance with Board resolutions on a quarterly or more frequent basis.
	·	Liquidity & Working-Capital Treatment. Although SOL is not treated as cash, cash equivalents, or a financial asset for Nasdaq continued-listing standards, the private placements described above increased shareholder equity. We will attempt to establish and maintain a separate reserve of liquid cash resources sufficient to fund at least twelve months of projected operating expenses to support ongoing biopharmaceutical development activities, without relying on the sale of digital assets. Seeking to maintain this twelve-month operating runway will support regulatory compliance, mitigate liquidity risk, and provide assurance to auditors and stakeholders that our core biopharmaceutical operations remain fully funded.

Potential Future Enhancements (subject to separate Board approval)

We are evaluating, and may present for Board consideration and approval, additional treasury initiatives that could include: (i) staking SOL directly or via delegation to earn protocol rewards; (ii) potentially further diversifying custody across multiple qualified custodians in addition to CUBE and BitGo; (iii) using SOL as collateral for non-recourse financing; and (iv) other permissible yield-generating strategies consistent with applicable law. No such activities will commence unless and until specifically authorized by the Board.

Description of Solana (SOL) and Rationale for Acquisition

SOL is the native digital asset of the Solana blockchain, an open-source, high-performance blockchain designed for speed and scalability. Solana employs a unique hybrid consensus mechanism that combines proof-of-history (PoH) with proof-of-stake (PoS), enabling high throughput and low transaction costs. SOL is primarily used to pay transaction fees (as the network's "gas" token) and as a means of staking to support the network's consensus and security, with validators and delegators earning rewards for their participation.

The Solana blockchain supports a wide range of decentralized applications (dApps), including decentralized finance (DeFi) protocols, non-fungible token (NFT) marketplaces, and other Web3 projects. As of the date of this filing, Solana has a robust and growing ecosystem, with significant developer activity and adoption across multiple sectors.

From a tokenomics perspective, Solana was launched with an initial supply of 500 million SOL, with new tokens created through inflationary rewards distributed to validators and delegators. The inflation rate is designed to decrease over time, providing a long-term supply schedule that supports both network security and economic sustainability.

The Board determined that acquiring SOL as a treasury asset is supported by several factors: (i) exposure to SOL offers potential long-term appreciation and may help preserve the purchasing power of our excess liquidity; (ii) SOL is highly liquid relative to many other digital assets, with deep spot markets on multiple U.S.-regulated trading venues; (iii) the Solana ecosystem continues to expand, particularly in DeFi, NFT infrastructure, and other Web3 use cases, which may drive further demand and utility for SOL. The Board also considered the technical maturity of the Solana network, its institutional-grade custody solutions, and the optionality for future yield generation through staking, subject to further Board approval.

Governance and Controls

At present, our digital asset activity is limited to converting USD into SOL within our accounts at BitGo and CUBE, U.S.-regulated, qualified digital-asset custodians. We have not yet adopted formal internal controls or protocols governing the movement or custody of SOL beyond the standard procedures provided by BitGo and CUBE. No SOL has been transferred out of BitGo or CUBE custody to date, and we do not self-custody any digital assets. We are in the process of developing and implementing additional internal controls and protocols to govern the movement, authorization, and custody of SOL, which we expect to present to the Board for review and approval.

A written transaction record is maintained for every SOL purchase or custodial movement and is reconciled daily to custodial statements. Digital-asset treasury disclosures (including this description) will be included in our annual and quarterly reports on Forms 10-K and 10-Q, so that the full Board, the Audit Committee, and outside auditors and advisors can review and comment prior to filing.

Advisory and Technical Support

To supplement internal resources, we have engaged a consulting firm as a strategic advisor for digital-asset treasury matters. The advisor is expected to review and comment on draft policy materials and external disclosures.

In addition, we benefit from the technical expertise and support of CUBE, one of our digital-asset custodians. CUBE provides ongoing technical guidance and operational support in connection with our digital asset custody and treasury management. CUBE's involvement ensures that our custody arrangements and related protocols reflect current best practices in digital asset security, compliance, and risk management.

Together, these advisory relationships help ensure that our digital asset treasury strategy is informed by up-to-date industry knowledge and that our internal policies and disclosures are robust, accurate, and aligned with evolving regulatory and technical standards.

Risk Management Considerations

We recognize that SOL is volatile, that the regulatory landscape remains unsettled, and that custodial, cybersecurity, market-liquidity, tax, and accounting risks could materially impact our results of operations. These risks, along with continued compliance with Nasdaq listing standards, will be reassessed at each Board meeting and re-evaluated before any expansion of the strategy. See "Risk Factors - Risks relating to SOL" for a description of the material risks that apply to our holdings of SOL.

Forward Look

We will continue to update and implement our Digital Asset Treasury (or "DAT") strategy, incorporating the parameters above, feedback from our technical and strategic advisors, and any additional safeguards as needed. Until additional capital resources are secured and/or a comprehensive DAT policy is adopted, especially related to staking SOL, our authority is limited to fulfilling the current private placement offering-related SOL purchase obligations described in this report.

Key Trends and Factors Affecting Comparability Between Periods

	·	Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future from holding or selling significant amounts of SOL. The prices of digital assets have historically been subject to dramatic price fluctuations and are highly volatile. In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets ("ASU 2023-08"), which we are required to adopt under GAAP. ASU 2023-08 requires us to measure our SOL holdings at fair value in our statement of financial position, and to recognize gains and losses from changes in the fair value of our SOL in net income each reporting period. ASU 2023-08 also requires us to provide certain interim and annual disclosures with respect to our SOL holdings. As a result, volatility in our earnings may be significantly more than what we experienced in prior periods.
	·	We expect to continue to incur future R&D expenses associated with the continued development of our drug candidates. The level of expenses will be highly dependent upon the scope of pre-clinical and clinical development activities and strategies, and will also be directly dependent upon the level of our available funding for R&D activities.
	·	We expect to continue to incur general and administrative expenses in the future, which are expected, in the near-term, to be broadly comparable to the level of general and administrative expenses incurred year-to-date.

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Components of Our Results of Operations

Revenue

To date, we have not generated any revenue and we may not generate any revenue from the sale of products or from other sources in the near future.

Operating Expenses

We classify our operating expenses into research and development, and 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. Our research and development expense primarily consists of costs incurred in research and development partnerships, preliminary studies, development of potential intellectual property, and research initiatives. General and administrative expense consists of professional fees, stock-based compensation, executive and director compensation and other administrative costs.

Other Income

Our other income consists of interest income and changes in fair value of our trading marketable securities.

Three months ended June 30, 2025, compared to the three months ended June 30, 2024

		Three months ended
		June 30,
(In thousands)		2025				2024				Change
Operating Expenses
General and administrative		$	1,279			$	827			$	452
Research and development			1,871				1,685				186
Total Operating Expenses			3,150				2,512				638
Loss from Operations			(3,150	)			(2,512	)			(638	)
Other income			(71	)			79				(150	)
Net Loss		$	(3,221	)		$	(2,433	)		$	(788	)

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Our operating expenses for the three months ended June 30, 2025, were $3.2 million compared to $2.5 million for the same period in 2024. The increase in operating expenses for the three months ended June 30, 2025, was primarily the result of increases in professional fees associated with our capital raising efforts and increases in research and development expenditures related to our clinical programs. Offsetting the increased research and development expenditures were tax credits of $704 received from the UK Government during the current period compared to the credits in the prior year which were received subsequent to June 30, 2024.

Six months ended June 30, 2025, compared to the six months ended June 30, 2024

		Six months ended
		June 30,
(In thousands)		2025				2024				Change
Operating Expenses
General and administrative		$	2,274			$	1,909			$	365
Research and development			3,255				3,192				63
Total Operating Expenses			5,529				5,101				428
Loss from Operations			(5,529	)			(5,101	)			(428	)
Other income (expense)			(64	)			185				(249	)
Net Loss		$	(5,593	)		$	(4,916	)		$	(677	)

Our operating expenses for the six months ended June 30, 2025, were $5.5 million compared to $5.1 million for the same period in 2024. The increase in operating expenses for the six months ended June 30, 2025, was primarily the result of increases in professional fees associated with our capital raising efforts and increases in research and development expenditures related to our clinical programs. Offsetting the increased research and development expenditures were tax credits of $704 received from the UK Government during the current period compared to the credits in the prior year which were received subsequent to June 30, 2024.

Liquidity and Capital Resources

Sources of Liquidity

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.

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. Our net loss was $5.6 million for the six months ended June 30, 2025. As of June 30, 2025, we had cash and cash equivalents of $2.1 million. In May 2022, we entered into a purchase agreement and a registration rights agreement (the "Equity Line") with an institutional investor, providing for the sale of up to $20.0 million worth of our Common Stock over the thirty-six (36) month term of the purchase agreement, which has now expired. As of June 30, 2025, in accordance with the Equity Line we have issued a total of 74,153 shares of our Common Stock under the purchase agreement with aggregate proceeds of $679.

In July 2023 we filed a $75.0 million shelf registration statement on Form S-3 which became effective on July 14, 2023. The shelf registration statement is effective for three years, and permits us to sell, from time to time, up to $75.0 million in aggregate value of our Common Stock, preferred stock, debt securities, warrants and/or units subject to a limit of one-third (1/3) of our public float within a twelve (12) month period if our public float is less than $75,000 as of relevant measurement dates under applicable securities laws. The shelf registration statement was intended to provide us with flexibility to access additional capital when market conditions are appropriate.

On May 1, 2025, we issued at-market, unsecured convertible notes with gross proceeds of $900. The convertible notes bear interest at 12.0% and have a maturity of 180 days. The convertible notes are subject to voluntary and automatic provisions for conversion into our common stock, as well as conversion into warrants to purchase our common stock for a five-year period at a price of $6.24. Certain members of our board of directors, an officer and consultants to the Company acquired $350 of the convertible notes.

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On June 24, 2025, we entered into a securities purchase agreement (the "Purchase Agreement") with the purchasers named therein (the "Purchasers"), for the private placement (the "Private Placement") of (i) 136,843 shares (the "Shares") of tour common stock, par value $0.001 per share (the "Common Stock"), at $5.82 per share, (ii) pre-funded warrants to purchase 93,180 shares of Common Stock at an exercise price of $0.001 per Share (the "Pre-Funded Warrants") at $5.819 per Pre-Funded Warrant, (iii) warrants to purchase 460,046 shares of Common Stock at an exercise price of $5.82 per share (the "$5.82 Warrants"), and (iv) warrants to purchase 230,023 shares of Common Stock at an exercise price of $10.00 per share (the "$10.00 Warrants"). The Pre-Funded Warrants, the $5.82 Warrants and the $10.00 Warrants are collectively referred to herein as the "Warrants" and the shares issuable upon such Warrants, the "Warrant Shares." Gross proceeds were $1.4 million.

On July 18, 2025, we entered into an At-The-Market Offering Agreement (the "Sales Agreement") with R.F. Lafferty & Co., Inc. ("R.F. Lafferty") under which we may offer and sell up to $6.5 million of shares of our common stock from time to time through an "at the market" offering program under which R.F. Lafferty will act as sales agent. Under the Sales Agreement, we will set the parameters for the sale of shares, including the number or dollar amount of shares to be issued, the time period during which sales are requested to be made, limitations on the number or dollar amount of shares that may be sold in any one trading day and any minimum price below which sales may not be made. Subject to the terms and conditions of the Sales Agreement, R.F. Lafferty may sell the shares by methods deemed to be an "at the market" offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. We have no obligation to sell any shares under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement. The shares will be issued pursuant to our shelf registration statement on Form S-3, including the prospectus supplement contained therein, which was declared effective by the SEC on July 14, 2023. As of August 11, 2025, 4,580 common stock shares have been sold under the ATM for net proceeds of $47,000.].

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

Funding Requirements

To date, we have not generated any revenue and we may not generate any revenue from the sale of products or from other sources in the near future. We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities as we:

	·	continue our research and development activities;
	·	maintain, protect and expand our intellectual property portfolio, including patents, trade secrets and know how;
	·	implement operational, financial and management information systems;
	·	attract, hire and retain additional management, scientific and administrative personnel; and
	·	operate as a public company.

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We continue to face challenges and uncertainties and, as a result, our available capital resources may be consumed more rapidly than currently expected due to: delays in execution of our product development plans; the scope and timing of our investment in our research and development activities and capabilities; changes we may make to the business that affect ongoing operating expenses; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; changes we may make in our business strategy; the scope and timing of our investment in sales, marketing and distribution capabilities; our need to implement additional infrastructure and internal systems; the impact of the conflicts in Eastern Europe, the Middle East and in other countries; and other items affecting our forecasted level of expenditures and use of cash resources including potential acquisitions.

Until such time as we can generate significant revenue, if ever, we will continue to require substantial additional capital to fund operations for the foreseeable future. We intend to obtain such capital through public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these funding sources. We may also seek additional financing opportunistically. We may be unable to raise additional funds on favorable terms or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and, recent and any potential future financial institution failures, the conflicts in Eastern Europe, the Middle East and in other countries, and otherwise. Our failure to raise additional capital, if needed, would have a negative impact on our financial condition and our ability to execute our business plan.

Our expected future capital requirements depend on many factors including expansion of our product portfolio and the timing and extent of spending on research and development activities and sales and marketing. If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any debt or additional equity financings that we complete may contain terms that are not favorable to us or our stockholders.

Working Capital

		June 30,				December 31,
(In thousands)		2025				2024				Change
Current Assets		$	2,233			$	2,557			$	(324	)
Current Liabilities			5,712				1,772				3,940
Working Capital		$	(3,479	)		$	785			$	(4,264	)

Our total current assets as of June 30, 2025, were $2.2 million as compared to total current assets of $2.6 million as of December 31, 2024. The decrease in current assets was primarily due to the funding of our operating activities.

Our total current liabilities as of June 30, 2025, were $5.7 million as compared to total current liabilities of $1.8 million as of December 31, 2024, the result of our deferring payment on certain payables as a result of our cash preservation strategy.

Historical Cash Flows

The following table summarizes our cash flows for the periods indicated:

		Six months ended
		June 30,
(In thousands)		2025				2024				Change
Cash Flows used in operating activities		$	(2,111	)		$	(5,005	)		$	2,895
Cash Flows provided by investing activities			-				3,019				(3,019	)
Cash Flows provided by financing activities			1,816				55				1,761
Effect of exchange rate changes on cash			23				(3	)			25
Net change in cash and cash equivalent during period		$	(272	)		$	(1,934	)		$	1,662

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Cash Flows from Operating Activities

During the six months ended June 30, 2025, cash used in operating activities was $2.1 million compared to $5.0 million during the six months ended June 30, 2024. Cash used in operating activities during the six months ended June 30, 2025, was attributed to a net loss of $5.6 million offset by decreases in operating assets and increases in liabilities of $3.1 million and non-cash stock-based compensation of $0.3 million. Cash used in operating activities during the six months ended June 30, 2024, was attributed to a net loss of $4.9 million and a non-cash gain of $0.2 million associated with our trading of marketable securities and decreases in operating assets and liabilities of $0.3 million offset by stock-based compensation of $0.4 million.

Cash Flows from Investing Activities

During the six months ended June 30, 2025, cash provided by investing activities was $0.0 million compared to $3.0 million during the six months ended June 30, 2024 . During the six months ended June 30, 2024, cash flows provided by investing activities of $3.0 million was the result of $3.5 million received from dispositions of trading marketable securities offset by $0.5 million from purchases of trading marketable securities.

Cash Flows from Financing Activities

During the six months ended June 30, 2025, cash flows provided by financing activities was $1.8 million compared to $0.1 million during the six months ended June 30, 2024. During the six months ended June 30, 2025, cash flows provided by financing activities were the result of the net proceeds from the issuance of common shares of $1.1 million and net proceeds from the issuance of convertible notes of $0.7 million. During the six months ended June 30, 2024, cash flows provided by financing activities were comprised of proceeds from the issuance of common stock of $0.1 million.

Contractual Obligations and Commitments

For a discussion of our contractual obligations and commitments, refer to Part II, Item 8, Note 8, "Commitments and Contingencies" to the financial statements in this Quarterly Report on Form 10-Q.

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.

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Critical Accounting Policies and Estimates

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. We evaluate our estimates and assumptions on an ongoing basis and base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for the judgments we make about the carrying value of assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and statement of cash flows.

Long-Lived Assets

We evaluate long-lived assets, including indefinite life intangible assets and operating lease right-of-use (ROU) assets, for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. We group assets at the lowest level for which cash flows are separately identified in order to measure an impairment. Events or circumstances that would result in an impairment review include a significant change in the use of an asset, the planned sale or disposal of an asset, or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future undiscounted cash flows expected to be generated by the asset or asset group. If the asset or asset group is determined to be impaired, the impairment recognized is measured by the amount by which the carrying value of the asset or asset group exceeds its fair value.

Assumptions and estimates used to determine cash flows in the evaluation of impairment and fair values used to determine the impairment are subject to a degree of judgment and complexity. Any future changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in additional impairment charges, and such changes could be material.

Accrued Clinical Trial and Research and Development Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses as of each consolidated balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We make estimates of our accrued expenses as of each consolidated balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. The significant estimates in our accrued clinical trial and research and development expenses include the costs incurred for services performed by our vendors in connection with clinical trial and research and development activities for which we have not yet been invoiced.

We base our expenses related to clinical trial and research and development activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct clinical trials and research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical trial and research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly. Advance payments for goods and services that will be used in future clinical trial or research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Stock-Based Compensation Expense

Stock-based compensation expense represents the cost of the grant date fair value of equity awards recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis. We estimate the fair value of equity awards using the Black-Scholes option pricing model and recognize forfeitures as they occur. Estimating the fair value of equity awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, is affected by assumptions regarding a number of variables, including the risk-free interest rate, the expected stock price volatility, the expected term of stock options, the expected dividend yield and the fair value of the underlying common stock on the date of grant. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized. These inputs are subjective and generally require significant analysis and judgment to develop. See Note 6 to our unaudited consolidated financial statements included elsewhere in this Interim Report on Form 10-Q for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted, if any, during the three months ended June 30, 2025, and 2024.

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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.

New Accounting Standard Adopted

There were no new accounting standards adopted during the six months ended June 30, 2025 .