ARTL 10-K & 10-Q changes, risk factors and insider trading

As of December 31, 2024,2025, we had approximately $2.3$0.6 million in cash and cash equivalents and restricted cash, and working capital of $785negative thousand,$3.3 million, and we have incurred and expect to continue to incur significant costs in pursuit of our drug candidates. For the year ended December 31, 2024,2025, we recorded a net loss of approximately $9.8$12.9 million and used cash in operations of approximately $8.4$8.5 million. Our financial statements for the year ended December 31, 20242025 have been prepared assuming that we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. To date, we have not generated substantial product revenues from our activities and have incurred substantial operating losses. We expect that we will continue to generate substantial operating losses for the foreseeable future until we complete development and approval of one of our product candidates. We expect to continue to fund our operations primarily through utilization of our current financial resources and additional raises of capital.

These conditions raise substantial doubt about our ability to continue as a going concern. The Company has evaluated the significance of the uncertainty regarding the Company’s financial condition in relation to its ability to meet its obligations, which has raised substantial doubt about the Company’s ability to continue as a going concern. While it is very difficult to estimate the Company’s future liquidity requirements, theThe Company believes if it is unable to obtain additional financing, existing cash resources will not be sufficient to enable it to fund the anticipated level of operations through one year from the date the accompanying financial statements are issued. There can be no assurances that the Company will be able to secure additional financing on acceptable terms. In the event the Company does not secure additional financing, the Company will be forced to delay, reduce, or eliminate some or all of its discretionary spending, which could adversely affect the Company’s business prospects, ability to meet long-term liquidity needs and the ability to continue operations.

As described in Part II, Item 7 of this Annual Report on Form 10-K, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in January 2026 the Company entered into the Equity Line with an institutional investor which provides, among other things, for the sale by us to the institutional investor of up to $20.0$25.0 million in shares of our Common Stock, which at the Company’s sole discretion can be increased by an additional $25.0 million once the initial $25.0 million is exhausted, subject to the terms of the Equity Line. Though the Company has the right, but not the obligation, to sell to the institutional investor shares of our Common Stock under the Equity Line, market conditions may not be favorable for us to sell shares of our Common Stock to the institutional investor.

Under the terms of the Equity Line, the Company is prohibited from effecting or entering into an agreement to effect any issuance by us or our subsidiaries of shares of our Common Stock involving the issuance of any floating conversionvariable rate orsecurities variable(as priceddefined equity-liketherein) securities,during certain standstill periods (as defined therein), not including the prohibition of the issuance and sale of shares of our Common Stock pursuant to an “at-the-market offering” by us exclusively through a registered broker-dealer acting as our agent pursuant to a written agreement between us and such registered broker-dealer.

The UK government grants R&D tax credits to companies conducting preclinical research and clinical trials in the UK, as the Company is currently doing. The credits are paid in cash to loss makingloss-generating companies, which effectively reduces the costs, and the cash the Company uses, for our current trials. The value of R&D tax credits has decreased for all companies due to legislative changes affecting expenditure incurred after 1stApril April1, 2023. As a result of this and because of the increase in R&D activities in the USAU.S. the company will likely no longer meet the definition of a “R&D intensive” company in the UK and will therefore only be eligible for payable credits at the lower rate of 10%. Furthermore, increased compliance activity by the UK tax authorities over the last year has resulted in a significantly higher number of claims being selected for enquiry. In the event of an inquiry the payment of the R&D credit would be delayed by 6 – 12 months.

The Company may experience delays in providing sufficient product for future testing of our candidates due to prior and any future supply chain limitations caused by COVID-19 or other pandemics.

Due to prior and any future supply chain disruptions caused by COVID-19 or other pandemics, our contract manufacturing organizations may experience an inability to manufacture and produce sufficient quantities of our drug candidates as the Company progresses through our regulatory testing and/or approval. Should this happen, the Company may not be able to provide sufficient quantities of our drug candidates to complete our testing as currently planned which could delay our ability to bring an approved drug to market. Such a delay may cause us to use more capital than currently planned which may have a material adverse effect on our projected timing of product approval and financials.

The Company will need to rely on third parties to conduct our preclinical research and clinical trialstrials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such research or trials.

The Company currently has no marketing and sales organization and havehas no experience in marketing products. If the Company is unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, if approved in the future, the Company may not be able to generate product revenue.

The Company has entered into an agreementagreements with a third partyparties to handle the manufacturing supply chain for our product candidatecandidates ART27.13.ART27.13 and ART26.12. If thisthese manufacturermanufacturers isare unable or unwilling to provide us with sufficient quantities of our product candidatecandidates to meet its demands or fails to meet its standards of quality or other specification or to achieve drug cGMP compliance, the Company may not be able to locate any alternative suppliers or enter into commercially reasonable agreements with substitute suppliers in a timely manner or at all.

Schedule I controlled substances once approved for medical use in the United States may be placed in Schedules II-V, since marketing approval by the FDA satisfies the “accepted medical use” requirement. If and when any of our product candidates receive FDA approval, the DEA will make a scheduling determination within ninety days, taking into account recommendations from the FDA controlled substances staff, in order to place the product in a schedule other than Schedule I so that it may be prescribed to patients in the US Furthermore, if the FDA, DEA, or any foreign regulatory authority subsequently determines that any approved and commercialized cannabinoid-based products may have potential for abuse, it may require us to generate more clinical or other data to establish whether or to what extent the substance has an abuse potential, which could result in a re-scheduling of the product and increase the costs associated with marketing that product. The Company has received guidance from the DEA that if a product does not contain any quantity of synthetically produced tetrahydrocannabinol (“THC”) (or any other controlled substance), it is not controlled under the CSA. Additionally, the Company has obtained laboratory certifications that its synthetic CBD product candidate, ART12.11 does not contain any levels of THC. Prior to June 2018, GW Pharmaceuticals was developing a phytocannabinoid CBD product designated as Schedule I. Since the FDA approval in June 2018 of Epidiolex® in the US, the DEA has removed it from the list of Schedule I chemicals and from the list of controlled substances.

The Company is substantiallypartially dependent on initial and continued market acceptance and proliferation of cannabinoid-derived therapeutic treatments, and specifically ART12.11, our CBD cocrystal. The Company believes that as cannabinoid-derived products become more widely accepted by the medical and scientific communities and the public at large, stigma associated with cannabinoid-derived products and treatments will moderate and, as a result, consumer demand is likely to continue to grow. However, the Company cannot predict the future growth rate and size of the market, assuming that the regulatory framework is favorable of which there can be no assurance. Any negative outlook on cannabinoid-derived products and treatments could adversely affect our business prospects.

To date, the FDA has only approved one plant-derived cannabinoid product as safe and effective for initial indications related to epilepsy in children. The FDA is aware that there is considerable interest in the use of cannabinoids to attempt to treat a number of medical conditions. The Company has received guidance from the DEA that if a product does not contain any quantity of synthetically produced tetrahydrocannabinol (“THC”) (or any other controlled substance), it is not controlled under the CSA. Additionally, the Company has obtained laboratory certifications that its synthetic CBD product candidate, ART12.11 does not contain any levels of THC. Before conducting testing in humans in the U.S. of a drug that has not been approved by the FDA, the Company will need to submit an IND application to the FDA. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending new drug applications (“NDAs”), warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

Our ability to compete in our highly competitive industry depends upon our ability to attract and retain highly qualified managerial, scientific, and medical personnel. The Company is highly dependent on our Chief Executive Officer, Chief Financial Officer, President, Treasurer and Secretary, Gregory D. Gorgas. The loss of the services of Mr. Gorgas, and our inability to find a suitable replacement could result in delays in research and development and product development and significantly harm our business. Additionally, although the Company has entered into an employment agreement with Mr. Gorgas, this employment agreement provides for at-will employment, which means that Mr. Gorgas could leave our employment at any time, with or without notice. The Company maintains a “key person” insurance policy on the life of Mr. Gorgas.

If the Company is unable to maintain compliance with Nasdaq’s continued listing requirements in the future,requirements, delisting from theThe Nasdaq Capital Market or any Nasdaq market could make trading our Common Stock more difficult for investors, potentially leading to declines in our share price and liquidity. In addition, without a Nasdaq market listing, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock would likely be made more difficult and the trading volume and liquidity of our stock could decline. Delisting from Nasdaq could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our Common Stock as currency or the value accorded by other parties. Further, if the Company is delisted, the Company would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our Common Stock and the ability of our stockholders to sell our Common Stock in the secondary market. If our Common Stock is delisted by Nasdaq, our Common Stock may be eligible to trade on an over-the-counter quotation system, such as the OTCQB market, where an investor may find it more difficult to sell our stock or obtain accurate quotations as to the market value of our Common Stock. The Company cannot assure you that our Common Stock, if delisted from Nasdaq, will be listed on another national securities exchange or quoted on an over-the counter quotation system. If our Common Stock is delisted, it may come within the definition of “penny stock” as defined in the Securities Exchange Act of 19341934, as amended (the “Exchange Act”) and would be covered by Rule 15g-9 of the Exchange Act. That Rule imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors. For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, Rule 15g-9, if it were to become applicable, would affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.

The Company may from time to timetime-to-time issue additional shares of Common Stock at a discount from the current market price of our Common Stock, including potential sales of our equity to an institutional investor as described above. As a result, our stockholders would experience immediate dilution upon the purchase of any of our securities sold at such discount. In addition, as opportunities present themselves, the Company may enter into financing or similar arrangements in the future, including the issuance of debt securities, preferred stock or Common Stock. If the Company issues Common Stock or securities convertible into Common Stock, our common stockholders could experience additional dilution and, as a result, our stock price may decline.

ManyCertain of the outstanding shares of Common Stock aremay be “restricted securities” within the meaning of Rule 144. As restricted securities, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides, in part, that a non-affiliate who has held restricted securities for a period of at least six months may sell their shares of Common Stock. Under Rule 144, affiliates who have held restricted securities for a period of at least six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of Common Stock or the average weekly trading volume during the four calendar weeks prior to the sale. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of Common Stock, may have a depressive effect upon the price of our shares of Common Stock.

The Company incurs significant costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, the Company will continue to incur significant legal, accounting, and other expenses. The Company is subject to the reporting requirements of the Exchange Act, which will require, among other things, that the Company files with the SEC, annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and the Nasdaq to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which the Company operates our business in ways the Company cannot currently anticipate.

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 novel, benzimidazole 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.ART27.13 and was initially developed by AstraZeneca plc. We are developing ART27.13 as a potential treatment for cancer-related anorexia and it is currently in a Phase 1b/2a trial, titled the Cancer Appetite Recovery Study (“CAReS”). OurIn secondan program,interim ART26.12analysis of the on-going Phase 2a CAReS trial, patients with cancer anorexia receiving ART27.13 demonstrated a mean weight gain of over 6% compared to a 5% loss in the placebo group, while maintaining a safety profile similar to the Phase 1b despite doses up to twice the previous maximum. Currently there is ano smallFDA 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 earlier this year and initiated a Phase 1 clinical trial in Q4 of 2024. In addition, ART26.12 may have broad applications as a cancer therapeutic, a dermatologic treatment, such as psoriasis, as aapproved treatment for paincancer andanorexia inflammation,cachexia 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 co-former 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”).syndrome.

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”).agonist. 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.AstraZeneca plc. In Phase 1, single dose studies in healthy volunteers and a multiple ascending dose study in individuals with chronic low back pain conducted by AstraZeneca,AstraZeneca plc, ART27.13 exhibited an attractive pharmacokinetic and absorption, distribution, metabolism, and excretion profile and was well tolerated within the target exposure range. It also exhibited dose-dependent and potentially clinically meaningful increases in body weight. Importantly, the changes in body weight were not associated with fluid retention or other adverse effects and occurred at exposures without central nervous system (“CNS”) side effects. Discussions with United Kingdom (“UK”), U.S. and Canadian regulators indicate there is a potential pathway for development of ART27.13 for the treatment of cancer-related anorexia, which affects approximately 60% of advanced stage cancer patients.

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 2021,2021 and completed enrolling patients in the Phase 1b during the first quarter of 2023. Data from the Phase 1b stage was used to determine the most effective and safe dose selected as the starting dose for the Phase 2a portion of CAReS. We received approval from the regulatory authorities in the UK, Ireland and Norway to increase the daily dose from the starting dose of 650 micrograms to 1,000 micrograms after 4 weeks and up to 1,300 micrograms initiated at 8eight weeks in patients for whom intra-patient dose escalation is expected to be well tolerated. We also received approval from the regulatory authorities to enroll 40 evaluable patients tointo the Phase 2a stage with a 3:1 randomization of ART27.13 to placebo. We initiated the Phase 2a portion of CAReS during April 2023.2023 As of February 2025,with 18 clinical sites areacross openfive and full enrollment is projected during the first half of 2025.countries.

Our second in-licensed patented program is being advanced from our platform of small-molecule inhibitors of fatty acid binding proteins,FABPs, notably FABP5. Fatty acid binding proteins (“FABPs”) are attractive therapeutic targets, however, the high degree of sequence and structural similarities among members of the patent family havemembers made the creation of drugs targeting specific FABPs challenging. FABP5 is believed to specifically target and regulate one of the body’s endogenous cannabinoids, anandamide (“AEA”). While searching for a FABP5 inhibitor to regulate AEA, researchers at Stony Brook University (“SBU”) discovered the chemistry for creating a large library of compounds which we believe to be highly specific and potent small molecule inhibitors of FABP5 and other isoforms. SBUWe had received approximately $8.0 million in funding fromlicensed the National Institutes of Health to develop FABP5 inhibitor candidates including a $4.2 million grant in 2020 to advance research of FABP5 inhibition in prostate cancer. Licensesrights to world-wide intellectual property in all fields and certain know-how to these inhibitors were acquired from SBU.

Our lead FABP5 inhibitor program is designated ART26.12. Preclinical research with ART26.12 showed evidence of activity in multiple pain models including osteoarthritis, cancer bone pain, and neuropathic pain. Based upon positive pre-clinicalpreclinical evidence from five separate studies showing promising activity and a differentiated mechanism-of-action for the prevention and treatment of painful neuropathies, including diabetic neuropathy and Chemotherapy Induced Peripheral Neuropathy (“CIPN”),CIPN, we have prioritized CIPN as the initial indication for development of our lead product candidate among our library of FABP5 inhibitor compounds, ART26.12. Treatment and/or prevention of CIPN is a significant unmet need, often resulting in anti-cancer treatment delays or discontinuations, and there are currently no approved treatments for CIPN by the regulatory authorities in the U.S., UK or EU. We submitted an IND application for ART26.12 to the FDA on June 10, 2024,2024 and received a study may proceed notice from the FDA on July 8, 2024. First-in-human studies for ART26.12 began in Q4 of 2024.2024 and we successfully completed dosing all 48 healthy volunteers planned for the Phase 1 Single Ascending Dose study at the end of April 2025. In addition to its potential as a synthetic endocannabinoid modulator with development targeting pain, inflammation, dermatologic conditions such as psoriasis, FABP5 is understood to play an important role in lipid signaling and is believed to be an attractive strategy for drug development,development includingin cancer.oncology. Large amounts of human biomarker and animal model data support FABP5 as an oncology target, including triple negative breast cancer, ovarian cancer, cervical cancer, and castration-resistant prostate cancer. Through our sponsored research we have also subsequently identified a potential role for FABP5 inhibition to treat anxiety disorders, such as Post Traumatic Stress Disorder (“PTSD”). We have been awarded a research grant in Canada to expand on our earlier research at the University of Western Ontario in this new development area.

In addition to our in-licensed programs, we have internal discovery research initiatives which resulted in ART12.11, a proprietary cocrystal composition of CBD.CBD and TMP. The crystal structure of CBD is known to exhibit solid polymorphism, or the ability to manifest in different forms. Polymorphism can adversely affect stability, dissolution, and bioavailability of a drug product and thus may affect its quality, safety, and efficacy. Based upon our research, we believe our CBD cocrystal exists as a single crystal form and as such is anticipated to have advantages over other solid forms of CBD that exhibit polymorphism. Emerging data demonstrates potential advantages of this single crystal structure, including improved stability, solubility, and a more consistent absorption profile. We believe these features have contributed to a more consistent and improved bioavailability and pharmacokinetic profile andwhich may ultimately lead to improved safety and efficacy in human therapeutics, as already demonstrated in animal studies.

Our other income (expense) consists of gain on investment, interest incomeexpense, interest expense – related party, loss on extinguishment of debt, loss on extinguishment of debt – related party, net change in fair value of digital assets and changes in fair value of the Company’s trading marketable securities.

Our operating expenses for the year ended December 31, 2024,2025, were $10.1$11.4 million compared to $9.9$10.1 million for the same period in 2023.2024. The increase in operating expenses for the year ended December 31, 2024,2025, was primarily the result of increased expendituresprofessional on the Company’s clinical trials partially offset by an increase of research and development expense tax credits received from the U.K. government of approximately $1.3 million compared to $1.2 millionfees during the prior year. The Company also realized a decrease in general and administrative expenses, mainlyyear related to aour decreasefinancing activities and increases in the service cost of stock-based compensation,compensation offset by a non-cashdecrease expense.in research and development activities compared to the prior year, due to the timing and level of the research being conducted.

In July 20232023, we filed a $75.0$75,000 millionin aggregate value 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$75,000 of our Commoncommon Stock,stock, preferred stock, debt securities, warrantswarrants, and/or units subject to a limit of one-third (1/3) of our public float within a twelve (12) month period if theour public float of the Company is less than $75,000.$75,000 Theas shelfof registrationrelevant statementmeasurement wasdates intendedunder toapplicable providesecurities us with flexibility to access additional capital when market conditions are appropriate.laws.

In order toTo continue operations, the Companywe will be required to raise additional funds by completing additional equity or debt offerings or licensing our product candidates. There can be no assurance that the Companywe will be successful in acquiring additional funding, that the Company’sour projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years. These conditions,conditions raise substantial doubt about the Company’sour 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 thewe Company isare unable to continue as a going concern.

Our total current liabilities as of December 31, 2024,2025, were $1.8$4.0 million as compared to total current liabilities of $1.3$1.8 million as of December 31, 2023.2024. The increase in current liabilities was primarily due to slower payments to the Company’s vendors due to cash constraints as well as the issuance of convertible notes of $0.6 million outstanding at December 31, 2025, for which there was no comparable outstanding balance in the prior year.

During the year ended December 31, 2024,2025, cash used in operating activities was $8.4$8.5 million compared to $8.2$8.4 million during the year ended December 31, 2023.2024. Cash used in operating activities during the year ended December 31, 2025, was attributed to a net loss of $12.9 million, a non-cash loss of $1.2 million associated with the extinguishment of the convertible notes offset by decreases in operating assets and liabilities of $1.7 million and non-cash stock-based compensation of $1.1 million, and non-cash amortization of debt discounts and debt issuance costs of $0.3 million. Cash used in operating activities during the year ended December 31, 2024, was attributed to a net loss of $9.8 million and a non-cash gain of $0.3 million associated with our trading of marketable securities offset by decreases in operating assets and liabilities of $0.9 million and non-cash stock-based compensation of $0.8 million. Cash used in operating activities during the year ended December 31, 2023, was attributed to a net loss of $9.3 million and a non-cash gain of $0.6 million associated with the Company’s trading of marketable securities offset by increases in operating assets and liabilities of $0.7 million and non-cash stock-based compensation of $1.0 million.

During the year ended December 31, 2024,2025, cash used in investing activities was $0.1 million compared to cash provided by investing activities wasof $7.8 million compared to $3.5 million during the year ended December 31, 2023.2024. Cash flows used in investing activities in 2025 of $0.1 million were the result of $0.3 million from the purchase of Solana crypto currency offset by $0.2 million from its subsequent sale. Cash flows provided by investing activities in 2024 of $7.8 million were the result of $8.3 million received from dispositions of trading marketable securities offset by $0.5 million from purchases of trading marketable securities. During the year ended December 31, 2023, cash flows provided by investing activities of $3.5 million were the result of $15.7 million received from dispositions of trading marketable securities and $1.5 million received from the maturity of available-for-sale securities, offset by $13.7 million from purchases of trading marketable securities.

For a discussion of our contractual obligations and commitments, refer to Part II, Item 8, Note 8,[11], “Commitments and Contingencies” to the financial statements in this Annual Report on Form 10-K.

Presently, we have twothree U.S. patents, one pending U.S. patent application, sevensix issued foreign patents (Australia, Brazil, China, Mexico, Japan, Taiwan, and Europe, including validation in 15 countries) and twothree pending foreign patent applications (Brazil, Canada and South Korea) directed to our cocrystal composition of CBD. Composition claims are generally known in the pharmaceutical industry as the most desired type of intellectual property and should provide for long lasting market exclusivity for our synthetic CBD cocrystal drug product candidate. In addition, due to the reasons outlined above, we believe that our synthetic CBD cocrystal will continue to demonstrate a superior set of pharmaceutical properties compared to non-cocrystal CBD compositions. We plan to develop ART12.11 for multiple potential indications where CBD has shown activity of such anxiety disorders, including PTSD, depression, and other possible uses such as epilepsy and insomnia.

Our other income (expense) consists of interest income, interest expense, gain on the extinguishment of debt, and changes in fair value of our derivative liabilities.

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 $3.0$5.4 million for the threesix months ended MarchJune 31,30, 2026. As of MarchJune 31,30, 2026, we had cash, cash equivalents and investments of $10.3$4.2 million.

On January 30, 2026, we entered into an equity purchase agreement with Squarean Gateinvestment Capital Master Fund, LLC – Series 5fund (“Square GateFund”), pursuant to which we have the right, but not the obligation, to direct Squarethe GateFund to purchase up to $25.0 million in shares of common stock (the “Initial Commitment Amount”), which at our sole discretion can be increased by an additional $25.0 million once the Initial Commitment Amount has been exhausted, subject to the terms and conditions contained in the equity purchase agreement (the “Equity Line”). As consideration, we issued 35,342 shares of common stock to Squarethe GateFund and pre-funded warrants to purchase up to 62,124 shares of Common Stock at an exercise price of $0.001 per share. We filed a registration statement with the SEC on March 24, 2026, to register under the Securities Act of 1933, as amended (the “Securities Act”), the offer and resale by Squarethe GateFund of up to 4,273,519 shares of common stock, which was declared effective by the SEC on March 30, 2026. As of MarchAugust 31,11, 2026, we have not issued any20,000 shares of common stock in accordance with the Equity Line, exceptin foraddition to the shares or pre-funded warrants we issued to Squarethe GateFund as consideration.

On March 27, 2026, we entered into a securities purchase agreement with Intracoastal Capital LLC (“Intracoastal”) and Armistice Capital Master Fund Ltd. (“Master Fund”), pursuant to which we agreed to issue and sell, in a private placement offering: (i) 81,000 shares of common stock, (ii) pre-funded warrants to purchase 3,107,407 shares of common stock at an exercise price of $0.001 per share, and (iii) common warrants to purchase 6,376,814 shares of common stock at an exercise price of $3.20 per share. Each share of common Stockstock or pre-funded warrant was issued and sold along with two common warrants. The combined purchase price for the securities was (i) $3.45 per share of common stock and two common warrants, and (ii) $3.449 per pre-funded warrant and two common warrants. H.C.The Wainwrightinvestment &bank Co., LLC (“HCW”)that acted as exclusive placement agent in connection with the offering and received a cash fee equal to 8.0% of the aggregate gross proceeds and reimbursement of certain expenses. Upon the exercise for cash of the warrants, we will pay HCWthe investment bank a cash fee of 8.0% of the aggregate gross exercise price paid in cash with respect thereto. In addition, we issued to HCW’sthe investment bank’s designees placement agent warrants to purchase up to 255,073 shares of common stock at an exercise price of $4.3125 per share, which have substantially the same terms as the common warrants, other than the exercise price. The gross proceeds from the offering, before deducting HCWthe investment bank’s fees and other offering expenses payable by the Company,us, were $10,996,902.70 (or up to approximately $31.4 million in gross proceeds if the warrants are fully exercised for cash). We filed a registration statement with the SEC on April 7, 2026, to register under the Securities Act the offer and resale by Intracoastal, Master Fund, and HCW’sinvestment bank’s designees of up to 9,820,294 shares of common stock, which was declared effective by the SEC on April 15, 2026.

Our total current assets as of MarchJune 31,30, 2026, were $10.4$4.4 million as compared to total current assets of $0.7 million as of December 31, 2025. The increase in current assets was primarily due to the financing completed during the currentsix-month quarter.period.

During the threesix months ended MarchJune 31,30, 2026, cash used in operating activities was $1.2$6.2 million compared to $1.6$2.1 million during the threesix months ended MarchJune 31,30, 2025. Cash used in operating activities during the threesix months ended MarchJune 31,30, 2026, was attributed to a net loss of $3.0$5.4 million, offset by non-cash losses of $0.6$1.0 million associated with stock-based compensation, net change in fair value of derivative liability, non-cash lease expenses, and amortization of debt discounts as well as working capital adjustments for accounts payable and accrued liabilities (including related parties) of $1.2$2.0 million. Cash used in operating activities of $2.1 million during the threesix months ended MarchJune 31,30, 2025, was attributed primarily to a net loss of $2.4$5.6 million offset by decreasesincreases in operatingaccounts assetspayable and accrued expenses of liabilities of $0.6$3.0 million and non-cash stock-based compensation of $0.2$0.3 million.

We did not have cash flows from investing activities during the threesix months ended MarchJune 31,30, 2026,2026 and 2025.

During the threesix months ended MarchJune 31,30, 2026, cash flows provided by financing activities was $10.9$9.8 million compared to $0.0$1.8 million during the threesix months ended MarchJune 31,30, 2025. During the threesix months ended MarchJune 31,30, 2026, cash flows provided by financing activities were the result of the net proceeds from the issuance of common shares of $10.0$10.2 million, net proceeds from the issuance of convertible notes of $0.6 million and proceeds from the exercise of warrants of $0.2 million, offset by $1.2 million in repayments to holders of convertible notes. 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.

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 7 to our unaudited consolidated financial statements included elsewhere in this Quarterly 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 threesix months ended MarchJune 31,30, 2026, and 2025.

Determining the fair value of the embedded conversion feature requires the use of a Black-Scholes model and is classified within Level 3 of the fair value hierarchy under ASC 820, Fair Value Measurement, because it relies on significant unobservable inputs. Key inputs and assumptions used in the valuation include our stock price, expected stock price volatility (estimated by reference to the historical volatility of the Company’sour common shares and/or a peer group), the risk-free interest rate derived from the U.S. Treasury yield curve over a term commensurate with the remaining life of the instrument, the expected term to maturity, the probability and timing of conversion, and a credit-adjusted discount rate reflective of our non-performance risk. The estimated fair value of the derivative liability is most sensitive to changes in our stock price and expected volatility; a significant increase (decrease) in either input, in isolation, would generally result in a significantly higher (lower) fair value measurement and a corresponding non-cash loss (gain) in the period of change. We reassess the inputs and the appropriateness of the valuation methodology each reporting period.

There were no new accounting standards adopted during the threesix months ended MarchJune 31,30, 2026.

In November 2024, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires public business entities to disclose, in the notes to the financial statements, disaggregated information about specified categories of expenses—including (i) purchases of inventory, (ii) employee compensation, (iii) depreciation, (iv) intangible asset amortization, and (v) depletion—that are included within each relevant expense caption presented on the face of the income statement. The amendments also require disclosure of the total amount of selling expenses and, in annual reporting periods, the Company’s definition of selling expenses. In January 2025, the FASB issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified that ASU 2024-03 is effective for the Company for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied prospectively to financial statements issued for reporting periods after the effective date or retrospectively to all prior periods presented in the financial statements. TheWe Company isare currently evaluating the impact that the adoption of ASU 2024-03 will have on the disclosures within itsour condensed consolidated financial statements.