ARTELO BIOSCIENCES INC

Previous wording

You should consider carefully the following information about the risks described below, together with the other information contained in this Annual Report on Form 10-K and in our other public filings, in evaluating our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our Common Stock would likely decline. The Company has organized the description of these risks into groupings in an effort to enhance readability, but many of the risks interrelate or could be grouped or ordered in other ways, so no special significance should be attributed to the groupings or order below.

Current wording

You should consider carefully the following information about the risks described below, together with the other information contained in this Annual Report on Form 10-K and in our other public filings, in evaluating our business. If any of the following risks actually occur, our business, financial condition, results of operations, and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our Common Stock would likely decline. The Company has organized the description of these risks into groupings in an effort to enhance readability, but many of the risks interrelate or could be grouped or ordered in other ways, so no special significance should be attributed to the groupings or order below.

Previous wording

Since our inception, the Company has used substantial amounts of cash to fund our research and operations and expect our expenses to increase substantially in the foreseeable future as developing our product candidates and conducting and completing clinical trials will require substantial amounts of capital. The Company will also require a significant additional amount of capital to commercialize any products that are approved in the future.

Current wording

Since our inception, the Company has used substantial amounts of cash to fund our research and operations and we expect our expenses to increase substantially in the foreseeable future as developing our product candidates and conducting and completing clinical trials will require substantial amounts of capital. The Company will also require a significant additional amount of capital to commercialize any products that may be approved in the future.

Previous wording

Changes in regulatory requirements and guidance may occur, and the Company may need to amend clinical trial protocols or our development plan to reflect these changes. Amendments may require resubmitting clinical trial protocols to the FDA or other similar authorities in other jurisdictions and institutional review boards (“IRBs”) for re-examination, which may impact the costs, timing or successful completion of our clinical trials. If the Company experiences delays in completion of, or if the Company terminates any planned clinical trials, the commercial prospects for product candidates may be harmed, and the ability to generate product revenues will be delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of product candidates. Further, changes in regulatory requirements and policies can impact our clinical trials, including due to public health concerns, such as the COVID-19 pandemic. For example, stresses on healthcare systems and our clinical trial sites may have a material impact on our ability to recruit participants for our clinical trials and the Company may not be able to commence or complete our clinical trials as currently planned. The Company may also be required to significantly modify our study protocol, policies and procedures in order to address or accommodate patients and study site needs. Such changes can include modification to protocol inclusion and exclusion criteria, extending the time for patient follow up visits, using telemedicine, phone interviews and other technology to monitor patient safety, all of which will need to be approved by applicable IRBs, ethics committees, and regulatory authorities. In addition, if the Supreme Court reverses or curtails theChevrondoctrine, which gives deference to regulatory agencies in litigation against FDA and other agencies, more companies may bring lawsuits against FDA to challenge longstanding decisions and policies of FDA, which could undermine FDA’s authority, lead to uncertainties in the industry, and disrupt FDA’s normal operations, which could delay FDA’s review of our marketing applications.

Current wording

Changes in regulatory requirements and guidance may occur, and the Company may need to amend clinical trial protocols or our development plan to reflect these changes. Amendments may require resubmitting clinical trial protocols to the FDA or other similar authorities in other jurisdictions and institutional review boards (“IRBs”) for re-examination, which may impact the costs, timing or successful completion of our clinical trials. If the Company experiences delays in completion of, or if the Company terminates any planned clinical trials, the commercial prospects for product candidates may be harmed, and the ability to generate product revenues will be delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of product candidates. Further, changes in regulatory requirements and policies can impact our clinical trials, including due to public health concerns, such as the COVID-19 pandemic. For example, stresses on healthcare systems and our clinical trial sites may have a material impact on our ability to recruit participants for our clinical trials and the Company may not be able to commence or complete our clinical trials as currently planned. The Company may also be required to significantly modify our study protocol, policies and procedures in order to address or accommodate patients and study site needs. Such changes can include modification to protocol inclusion and exclusion criteria, extending the time for patient follow up visits, using telemedicine, phone interviews and other technology to monitor patient safety, all of which will need to be approved by applicable IRBs, ethics committees, and regulatory authorities. Recently, the U.S. Supreme Court overruled theChevron doctrine, which gives deference to regulatory agencies’ statutory interpretations in litigation against federal government agencies, such as the FDA, where the law is ambiguous. This landmark Supreme Court decision may invite more companies and other stakeholders to bring lawsuits against the FDA to challenge longstanding decisions and policies of the FDA, including FDA’s statutory interpretations of market exclusivities and the “substantial evidence” requirements for drug approvals, which could undermine the FDA’s authority, lead to uncertainties in the industry, and disrupt the FDA’s normal operations, any of which could delay the FDA’s review of our regulatory submissions. We cannot predict the full impact of this decision, future judicial challenges brought against the FDA, or the nature or extent of government regulation that may arise from future legislation or administrative action.

Previous wording

Geopolitical tensions, including the war in Ukraine and the Israel-Hamas war or other regional conflicts may disrupt investment in our business, supply chains carrying required materials and the movement of people globally. Such disruptions may adversely affect our clinical trials, scope of potential partners and our business generally. In particular, there is currently significant uncertainty about the future relationship between the United States and various other countries, most significantly China, with respect to trade policies, treaties, tariffs, taxes, and other limitations on cross-border operations. The U.S. government has made and continues to make significant additional changes in U.S. trade policy and may continue to take future actions that could negatively impact U.S. trade. For example, legislation has been introduced in Congress to limit certain U.S. biotechnology companies from using equipment or services produced or provided by select Chinese biotechnology companies, and others in Congress have advocated for the use of existing executive branch authorities to limit those Chinese service providers’ ability to engage in business in the U.S. We cannot predict what actions may ultimately be taken with respect to trade relations between the United States and China or other countries, what products and services may be subject to such actions or what actions may be taken by the other countries in retaliation. If we are unable to obtain or use services from existing service providers or become unable to export or sell our products to any of our customers or service providers, our business, liquidity, financial condition, and/or results of operations would be materially and adversely affected.

Current wording

Geopolitical tensions, including the war in Ukraine and the Israel-Hamas war or other regional conflicts may disrupt investment in our business, supply chains carrying required materials and the movement of people globally. Such disruptions may adversely affect our clinical trials, scope of potential partners and our business generally. In particular, there is currently significant uncertainty about the future relationship between the United States and various other countries, most significantly China, with respect to trade policies, treaties, tariffs, taxes, and other limitations on cross-border operations. The U.S. government has made and continues to make significant additional changes in U.S. trade policy and may continue to take future actions that could negatively impact U.S. trade. We cannot predict what actions may ultimately be taken with respect to trade relations between the United States and China or other countries, what products and services may be subject to such actions or what actions may be taken by the other countries in retaliation. If we are unable to obtain or use services from existing service providers or become unable to export or sell our products to any of our customers or service providers, our business, liquidity, financial condition, and/or results of operations would be materially and adversely affected.

Previous wording

The Company does not have any therapeutic products that are approved for commercial sale. Our ability to generate revenue from product sales and become profitable depends significantly on our success in a number of factors.

Current wording

The Company does not have any therapeutic products that are approved for commercial sale. Our ability to generate revenue from product sales and become profitable depends significantly on our success in a number of areas.

Previous wording

The Company currently does not have any therapeutic products that are approved for commercial sale. The Company has not received, and do not expect to receive for at least the next several years, if at all, any revenues from the commercialization of our product candidates, if approved in the future. To obtain revenues from sales of our product candidates that are significant or large enough to achieve profitability, the Company must succeed, either alone or with third parties, in developing, obtaining regulatory approval for, manufacturing and marketing therapies with commercial potential. Our ability to generate revenue and achieve profitability depends significantly on our success in many areas, including:

Current wording

The Company currently does not have any therapeutic products that are approved for commercial sale. The Company has not received and does not expect to receive for at least the next several years, if at all, any revenues from the commercialization of our product candidates, if approved in the future. To obtain revenues from sales of our product candidates that are significant or large enough to achieve profitability, the Company must succeed, either alone or with third parties, in developing, obtaining regulatory approval for, manufacturing and marketing therapies with commercial potential. Our ability to generate revenue and achieve profitability depends significantly on our success in many areas, including:

Previous wording

The Company expects our financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. The Company will need to transition from a company with a research and development focus to a company capable of undertaking commercial activities. The Company may encounter unforeseen expenses, difficulties, complications and delays and may not be successful in such a transition.

Current wording

The Company expects our financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Upon the approval of any of our product candidates, the Company will need to transition from a company with a research and development focus to a company capable of undertaking commercial activities. The Company may encounter unforeseen expenses, difficulties, complications and delays and may not be successful in such a transition.

Previous wording

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.

Current wording

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.

Previous wording

Due to prior and any future supply chain disruptions caused by COVID-19, 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.

Current wording

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.

Previous wording

The Company currently does not have sales, marketing or distribution capabilities and do not have experience as a company in commercializing products. If the Company develops internal sales, marketing, and distribution organization, this would require significant capital expenditures, management resources and time, and the Company would have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.

Current wording

The Company currently does not have sales, marketing or distribution capabilities and does not have experience as a company in commercializing products. If the Company develops internal sales, marketing, and distribution organization, this would require significant capital expenditures, management resources and time, and the Company would have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.

Previous wording

If the Company is unable or decide not to establish internal sales, marketing, and distribution capabilities, the Company expects to pursue collaborative arrangements regarding the sales, marketing, and distribution of our future products. However, the Company may not be able to establish or maintain such collaborative arrangements, or if the Company is able to do so, their sales forces may not be successful in marketing our future products. Any revenue the Company receives would depend upon the efforts of such third parties, which may not be successful. The Company may have little or no control over the sales, marketing, and distribution efforts of such third parties and our revenue from product sales may be lower than if the Company had commercialized our product candidates ourselves. The Company also faces competition in our search for third parties to assist us with the sales, marketing, and distribution efforts of our product candidates, if approved. There can be no assurance that the Company will be able to develop internal sales, marketing distribution capabilities or establish or maintain relationships with third-party collaborators to commercialize any product in the United States or overseas.

Current wording

If the Company is unable or decides not to establish internal sales, marketing, and distribution capabilities, the Company expects to pursue collaborative arrangements regarding the sales, marketing, and distribution of our future products. However, the Company may not be able to establish or maintain such collaborative arrangements, or if the Company is able to do so, their sales forces may not be successful in marketing our future products. Any revenue the Company receives would depend upon the efforts of such third parties, which may not be successful. The Company may have little or no control over the sales, marketing, and distribution efforts of such third parties and our revenue from product sales may be lower than if the Company had commercialized our product candidates ourselves. The Company also faces competition in our search for third parties to assist us with the sales, marketing, and distribution efforts of our product candidates, if approved. There can be no assurance that the Company will be able to develop internal sales, marketing distribution capabilities or establish or maintain relationships with third-party collaborators to commercialize any product in the United States or overseas.

Previous wording

Our commercial success is significantly dependent on intellectual property related to any product candidates and technologies the Company may either acquire, license, or develop internally. The Company is currently the licensee of multiple issued patents and pending patent applications and the Company intends to license additional technologies from pharmaceutical and biotechnology companies, and research institutions. In addition, the Company has one US patent, one US patent application, and two foreign patent applications directed to a solid-state CBD composition.

Current wording

Our commercial success is significantly dependent on intellectual property related to any product candidates and technologies the Company may either acquire, license, or develop internally. The Company is currently the licensee of multiple issued patents and pending patent applications and the Company intends to license additional technologies from pharmaceutical and biotechnology companies, and research institutions. In addition, the Company has one U.S. patent, one U.S. patent application, and two foreign patent applications directed to a solid-state CBD composition.

Previous wording

Legal, filing costs, periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or patent applications will come due for payment periodically throughout the lifecycle of patent applications and issued patents. In order to help ensure that the Company complies with any required fee payment, documentary and/or procedural requirements as they might relate to any patents for which the Company is an assignee or co-assignee, the Company employs legal help and related professionals as needed to comply with those requirements. Failure to meet a required fee payment, document production or procedural requirement can result in the abandonment of a pending patent application or the lapse of an issued patent. In some instances, the defect can be cured through late compliance, but there are situations where the failure to meet the required deadline cannot be cured. Such an occurrence could compromise the intellectual property protection around a preclinical or clinical product candidate and possibly weaken or eliminate our ability to protect our eventual market share for that product candidate.

Current wording

Legal fees, filing costs, periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or patent applications will come due for payment periodically throughout the lifecycle of patent applications and issued patents. In order to help ensure that the Company complies with any required fee payment, documentary and/or procedural requirements as they might relate to any patents for which the Company is an assignee or co-assignee, the Company employs legal help and related professionals as needed to comply with those requirements. Failure to meet a required fee payment, document production or procedural requirement can result in the abandonment of a pending patent application or the lapse of an issued patent. In some instances, the defect can be cured through late compliance, but there are situations where the failure to meet the required deadline cannot be cured. Such an occurrence could compromise the intellectual property protection around a preclinical or clinical product candidate and possibly weaken or eliminate our ability to protect our eventual market share for that product candidate.

Previous wording

In the United States, the DEA regulates the use of chemicals for medical research and/or commercial development, including the requirement of annual registrations to manufacture or distribute cannabinoid-based pharmaceuticals. The Company does not currently conduct manufacturing or repackaging/relabeling of any product candidates in the United States, however the Company intends to conduct research on cannabinoids, including naturally-occurring cannabinoids, which are currently considered Schedule 1 controlled substances. The Company plans to obtain the required licenses in the territories regulating the possession and supply of cannabinoids and to utilize third party contractors to conduct research who have the required registrations, however there is no assurance that the Company will be successful in obtaining the required licenses or that the Company will be successful identifying or engaging third party contractors who have the required registrations.

Current wording

In the United States, the DEA regulates the use of chemicals for medical research and/or commercial development, including the requirement of annual registrations to manufacture or distribute cannabinoid-based pharmaceuticals. The Company does not currently conduct manufacturing or repackaging/relabeling of any product candidates in the United States, however the Company intends to conduct research on its synthetic cannabidiol (“CBD”) cocrystal drug candidate. Cannabinoids, including naturally-occurring cannabinoids, are currently considered Schedule 1 controlled substances under the Controlled Substance Act of 1970 (“CSA”) by the DEA. 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. The Company plans to obtain the required licenses in the territories regulating the possession and supply of cannabinoids and to utilize third party contractors to conduct research who have the required registrations, however there is no assurance that the Company will be successful in obtaining the required licenses or that the Company will be successful identifying or engaging third party contractors who have the required registrations.

Previous wording

The Company is conducting a significant portion of our research in the United Kingdom, where licenses to cultivate, possess and supply certain cannabinoids for medical research are granted by the Home Office on an annual basis. The Company currently possesses the required licenses to do our research in the United Kingdom. Our research must be conducted within research institutions that also possess required licenses. If the Company is unable to conduct research at institutions that possess required licenses, or if those licenses are not obtained or renewed in the future, the Company may not be in a position to engage in or carry out research and development programs in the United Kingdom. In order to carry out research in countries other than the United States and the United Kingdom, similar licenses to those outlined above may be required to be issued by the relevant authority in each country. In addition, the Company will be required to obtain licenses to export from the US or the UK, and to import into the recipient country. The Company may also conduct a portion of our research in Canada, where the Company is currently collaborating on certain research at the University of Western Ontario, and in Ireland, where the Company currently has multiple research collaborations with Trinity College Dublin.

Current wording

The Company is conducting a significant portion of our research in the United Kingdom, where licenses to cultivate, possess and supply certain cannabinoids for medical research are granted by the Home Office on an annual basis. The Company currently possesses the required licenses to do our research in the United Kingdom. Our research must be conducted within research institutions that also possess required licenses. If the Company is unable to conduct research at institutions that possess required licenses, or if those licenses are not obtained or renewed in the future, the Company may not be in a position to engage in or carry out research and development programs in the United Kingdom. In order to carry out research in countries other than the United States and the United Kingdom, similar licenses to those outlined above may be required to be issued by the relevant authority in each country. In addition, the Company will be required to obtain licenses to export from the U.S. or the UK, and to import into the recipient country. The Company may also conduct a portion of our research in Canada, where the Company is currently collaborating on certain research at the University of Western Ontario, and in Ireland, where the Company currently has multiple research collaborations with Trinity College Dublin.

Previous wording

Any product candidates the Company develops may be subject to US controlled substance laws and regulations and similar controls in territories outside the US where the Company is conducting research. Failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, both during clinical development and post approval, and our financial condition.

Current wording

Any product candidates the Company develops may be subject to U.S. controlled substance laws and regulations and similar controls in territories outside the U.S. where the Company is conducting research. Failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, both during clinical development and post approval, and our financial condition.

Previous wording

Some of our product candidates may contain controlled substances as defined in the federal Controlled Substances Act of 1970 (the “CSA”) in the US Controlled substances are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements that are administered and enforced by the DEA. The DEA classifies controlled substances into five schedules: Schedule I, II, III, IV or V substances. Schedule I substances by definition have a high potential for abuse, have no currently “accepted medical use” in the United States, lack accepted safety for use under medical supervision, and may not be prescribed, marketed or sold in the US Pharmaceutical products approved for use in the United States that comprise or contain a controlled substance are listed as Schedule II, III, IV or V, with Schedule II substances presenting the highest potential for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances. Schedule I and II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security requirements and criteria for importation. In addition, dispensing of Schedule II drugs by licensed and DEA-registered health care providers is further restricted. For example, they may not be refilled without a new prescription.

Current wording

Some of our product candidates may contain controlled substances as defined in the federal CSA in the U.S. Controlled substances are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements that are administered and enforced by the DEA. The DEA classifies controlled substances into five schedules: Schedule I, II, III, IV or V substances. Schedule I substances by definition have a high potential for abuse, have no currently “accepted medical use” in the United States, lack accepted safety for use under medical supervision, and may not be prescribed, marketed or sold in the US Pharmaceutical products approved for use in the United States that comprise or contain a controlled substance are listed as Schedule II, III, IV or V, with Schedule II substances presenting the highest potential for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances. Schedule I and II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security requirements and criteria for importation. In addition, dispensing of Schedule II drugs by licensed and DEA-registered health care providers is further restricted. For example, they may not be refilled without a new prescription.

Previous wording

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. 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 Ò in the US, the DEA has removed it from the list of Schedule I chemicals and from the list of controlled substances.

Current wording

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.

Previous wording

Clinical trials of cannabinoid-based product candidates and lipid-signaling modulators are novel with very limited or non-existing history; the Company faces a significant risk that the trials will not result in commercially viable products and treatments.

Current wording

Clinical trials of lipid-signaling modulators and cannabinoid-based product candidates are novel with very limited or non-existing history; the Company faces a significant risk that the trials will not result in commercially viable products and treatments.

Previous wording

At present, there is only a very limited documented clinical trial history related to cannabinoids and lipid-signaling modulators from which the Company can derive any scientific conclusions or prove that our present assumptions for the current and planned research are scientifically compelling. While the Company is encouraged by the limited results of clinical trials by others, there can be no assurance that any clinical trial will result in commercially viable products or treatments.

Current wording

At present, there is only a very limited documented clinical trial history related to lipid-signaling modulators and cannabinoids from which the Company can derive any scientific conclusions or prove that our present assumptions for the current and planned research are scientifically compelling. While the Company is encouraged by the limited results of clinical trials by others, there can be no assurance that any clinical trial will result in commercially viable products or treatments.

Previous wording

In addition, while some may believe that large, well-funded pharmaceutical and other related businesses and industries may have material economic reasons to be in strong opposition to cannabinoid-based products, the Company does not believe that it is accurate. Despite the fact that several large pharmaceutical companies are already marketing FDA approved cannabinoid-based or ECS targeting therapies, it remains relatively uncommon among the global pharmaceutical giants. The pharmaceutical industry is also well-funded with a strong and experienced lobby presence at both the federal and state levels in the US as well as internationally, that surpasses financial resources of the current group of research and development companies working on product candidates that modulate the endocannabinoid system. Any effort the pharmaceutical lobby could or might undertake to halt or delay the development of cannabinoid-based products could have a detrimental impact on our business.

Current wording

In addition, while some may believe that large, well-funded pharmaceutical and other related businesses and industries may have material economic reasons to be in strong opposition to cannabinoid-based products, the Company does not believe that it is accurate. Despite the fact that several large pharmaceutical companies are already marketing FDA approved cannabinoid-based or ECS targeting therapies, it remains relatively uncommon among the global pharmaceutical giants. The pharmaceutical industry is also well-funded with a strong and experienced lobby presence at both the federal and state levels in the U.S. as well as internationally, that surpasses financial resources of the current group of research and development companies working on product candidates that modulate the endocannabinoid system. Any effort the pharmaceutical lobby could or might undertake to halt or delay the development of cannabinoid-based products could have a detrimental impact on our business.

Previous wording

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. Before conducting testing in humans in the US 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 US 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.

Current wording

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.

Previous wording

Our ability to successfully commercialize our products may depend on how the US and other governments and/or health administrations provide coverage and/or reimbursements for our products. The ongoing efforts of governments, insurance companies, and other participants in the health care services industry to reduce health care costs may adversely affect our ability to achieve profitability. For example, in August 2022, Congress passed the Inflation Reduction Act (IRA), which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single-source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes. Various industry stakeholders, including pharmaceutical companies, the U.S. Chamber of Commerce, the Global Colon Cancer Association, and the Pharmaceutical Research and Manufacturers of America, have initiated lawsuits against the federal government asserting that the price negotiation provisions of the IRA are unconstitutional. The impact of these judicial challenges as well as future legislative, executive, and administrative actions and agency rules implemented by the government on us and the pharmaceutical industry as a whole is unclear. Further, uncertainties created by the IRA and additional government constraints on drug pricing could reduce valuation of companies and decrease funding in new drug development, which can have a material impact on our business. In addition, individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, restrictions on certain product access and marketing cost disclosure and transparency measures. A number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products. Further, FDA recently authorized the state of Florida to import certain prescription drugs from Canada for a period of two years to help reduce drug costs, provided that Florida’s Agency for Health Care Administration meets the requirements set forth by the FDA. Other states may follow Florida. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercializ…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Our ability to successfully commercialize our products may depend on how the U.S. and other governments and/or health administrations provide coverage and/or reimbursements for our products. The ongoing efforts of governments, insurance companies, and other participants in the health care services industry to reduce health care costs may adversely affect our ability to achieve profitability. For example, in August 2022, Congress passed the IRA, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single-source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes. Various industry stakeholders, including pharmaceutical companies, the U.S. Chamber of Commerce, the Global Colon Cancer Association, and the Pharmaceutical Research and Manufacturers of America, have initiated lawsuits against the federal government asserting that the price negotiation provisions of the IRA are unconstitutional. The impact of these judicial challenges as well as future litigation in view of the Supreme Court’s overturn of theChevrondoctrine, legislative, executive, and administrative actions and agency rules implemented by the government on us and the pharmaceutical industry as a whole is unclear. Further, uncertainties created by the IRA and additional government constraints on drug pricing could reduce valuation of companies and decrease funding in new drug development, which can have a material impact on our business. In addition, individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, restrictions on certain product access and marketing cost disclosure and transparency measures. A number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products. Further, FDA recently authorized the state of Florida to import certain prescription drugs from Canada for a period of two years to help reduce drug costs, provided that Florida’s Agency for Health Care Administration meets the requirements set forth by the FDA. Other states may follow Florida. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to gene…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

To execute our business plan, the Company will need to rapidly add other management, accounting, regulatory, and scientific staff. The Company currently has five employees and utilizes approximately twenty-five consultants and contractors. The Company will need to attract, retain and motivate a significant number of new additional managerial, operational, sales, marketing, financial, and other personnel, as well as highly skilled scientific and medical personnel, and to expand our capabilities to successfully pursue our research, development, manufacturing and commercialization efforts and secure collaborations to market and distribute our products. This growth may strain our existing managerial, operational, financial and other resources. The Company also intends to add personnel in our research and development and regulatory departments as the Company expands our clinical trial and research capabilities. Moreover, the Company will need to hire additional accounting and other personnel and augment our infrastructure as the Company continues to grow. Any inability to attract and retain qualified employees to enable our planned growth and establish additional capabilities or our failure to manage our growth effectively could delay or curtail our product development and commercialization efforts and harm our business.

Current wording

To execute our business plan, the Company will need to add other management, accounting, regulatory, and scientific staff. The Company currently has five employees and utilizes approximately twenty-five consultants and contractors. The Company will need to attract, retain and motivate a significant number of new additional managerial, operational, sales, marketing, financial, and other personnel, as well as highly skilled scientific and medical personnel, and to expand our capabilities to successfully pursue our research, development, manufacturing and commercialization efforts and secure collaborations to market and distribute our products. This growth may strain our existing managerial, operational, financial and other resources. The Company also intends to add personnel in our research and development and regulatory departments as the Company expands our clinical trial and research capabilities. Moreover, the Company will need to hire additional accounting and other personnel and augment our infrastructure as the Company continues to grow. Any inability to attract and retain qualified employees to enable our planned growth and establish additional capabilities or our failure to manage our growth effectively could delay or curtail our product development and commercialization efforts and harm our business.

Previous wording

The Company has incurred losses since inception. The Company expects to continue to incur significant expenses and increasing operating and net losses for the foreseeable future. To date, the Company has financed our operations primarily through the sale of equity securities. To date our primary activities have been limited to, and our limited resources have been dedicated to, raising capital, non-clinical research on our programs, recruiting service providers, negotiating with business partners and licensors of intellectual property, filing patent applications, and complying with public reporting requirements.

Current wording

The Company has incurred losses since inception. The Company expects to continue to incur significant expenses and increasing operating and net losses for the foreseeable future. To date, the Company has financed our operations primarily through the sale of equity securities. To date our primary activities have been limited to, and our limited resources have been dedicated to, raising capital, non-clinical and clinical research on our programs, recruiting service providers, negotiating with business partners and licensors of intellectual property, filing patent applications, and complying with public reporting requirements.

Previous wording

The Company has never been profitable and do not expect to be profitable in the foreseeable future. The Company expects our expenses to increase significantly as the Company pursues our objectives. The extent of our future operating losses and the timing of profitability are highly uncertain, and the Company expects to continue to incur significant expenses and operating losses over the next several years. Our prior and continuing losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. The Company cannot assure that the Company will ever be able to achieve profitability. Even if the Company achieves profitability, the Company may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, license additional programs, establish or maintain development efforts, obtain regulatory approvals, or continue operations.

Current wording

The Company has never been profitable and does not expect to be profitable in the foreseeable future. The Company expects our expenses to increase significantly as the Company pursues our objectives. The extent of our future operating losses and the timing of profitability are highly uncertain, and the Company expects to continue to incur significant expenses and operating losses over the next several years. Our prior and continuing losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. The Company cannot assure that the Company will ever be able to achieve profitability. Even if the Company achieves profitability, the Company may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, license additional programs, establish or maintain development efforts, obtain regulatory approvals, or continue operations.

Previous wording

Compliance with data privacy and security obligations, including data breach notification laws in the US and other jurisdictions, may necessitate notifying relevant stakeholders about security incidents. Such disclosures come at a significant cost, and failure to comply with these requirements could have adverse consequences. If we (or a third party on whom we rely) encounter a security incident or are perceived to have experienced one, we may face various negative outcomes. These include government enforcement actions (such as investigations, fines, penalties, audits, and inspections), additional reporting obligations, restrictions on processing sensitive information (including personal data), litigation (including class-action claims), financial liabilities to third parties, indemnification responsibilities, negative publicity, reputational damage, diversion of monetary funds, operational disruptions (including data availability), financial losses, and other similar harms. Security incidents and their associated consequences may disrupt our operations significantly and potentially lead to material program disruptions. For instance, the loss of clinical trial or nonclinical study data for our product candidates could cause delays in regulatory approval efforts and substantially increase costs due to the additional time and resources required for data recovery, verification, or potential reproduction.

Current wording

Compliance with data privacy and security obligations, including data breach notification laws in the U.S. and other jurisdictions, may necessitate notifying relevant stakeholders about security incidents. Such disclosures come at a significant cost, and failure to comply with these requirements could have adverse consequences. If we (or a third party on whom we rely) encounter a security incident or are perceived to have experienced one, we may face various negative outcomes. These include government enforcement actions (such as investigations, fines, penalties, audits, and inspections), additional reporting obligations, restrictions on processing sensitive information (including personal data), litigation (including class-action claims), financial liabilities to third parties, indemnification responsibilities, negative publicity, reputational damage, diversion of monetary funds, operational disruptions (including data availability), financial losses, and other similar harms. Security incidents and their associated consequences may disrupt our operations significantly and potentially lead to material program disruptions. For instance, the loss of clinical trial or nonclinical study data for our product candidates could cause delays in regulatory approval efforts and substantially increase costs due to the additional time and resources required for data recovery, verification, or potential reproduction.

Previous wording

Changes in either the patent laws or their interpretation in the US and other countries may diminish our ability to protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our issued patents. Additionally, the Company cannot predict whether the patent applications the Company or our licensors are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors or other third parties.

Current wording

Changes in either the patent laws or their interpretation in the U.S. and other countries may diminish our ability to protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our issued patents. Additionally, the Company cannot predict whether the patent applications the Company or our licensors are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors or other third parties.

Previous wording

Periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and applications will be due to be paid to the United States Patent and Trademark Office (the “USPTO”) and various government patent agencies outside of the US over the lifetime of our and our licensors’ patents and applications. The USPTO and various non-US government agencies require compliance with several procedural, documentary, fee payment and other similar provisions during the patent application process and after patent issuance. In some cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market in that jurisdiction with similar or identical products or technology, which could have a material adverse effect on our business, financial condition, and results of operations.

Current wording

Periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and applications will be due to be paid to the United States Patent and Trademark Office (the “USPTO”) and various government patent agencies outside of the U.S. over the lifetime of our and our licensors’ patents and applications. The USPTO and various non-U.S. government agencies require compliance with several procedural, documentary, fee payment and other similar provisions during the patent application process and after patent issuance. In some cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market in that jurisdiction with similar or identical products or technology, which could have a material adverse effect on our business, financial condition, and results of operations.

Previous wording

Because our Common Stock and our public warrants are publicly traded, the Company is subject to certain rules and regulations of federal, state, and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the SEC and Nasdaq, have issued requirements and regulations and continue to develop additional regulations and requirements in response to corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. Our efforts to comply with these regulations have resulted in, and are likely to continue resulting in, increased general and administrative expenses and diversion of management time and attention from revenue-generating activities to compliance activities. Because new and modified laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices.

Current wording

Because our Common Stock and our public warrants (which expired June 17, 2024) have been and are publicly traded, the Company is subject to certain rules and regulations of federal, state, and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the SEC and Nasdaq, have issued requirements and regulations and continue to develop additional regulations and requirements in response to corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. Our efforts to comply with these regulations have resulted in, and are likely to continue resulting in, increased general and administrative expenses and diversion of management time and attention from product development activities to compliance activities. Because new and modified laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices.

Previous wording

The trading market for our securities will depend on the research and reports that securities or industry analysts publish about us or our business. The Company does not have any control over these analysts. There can be no assurance that analysts will cover us or provide favorable or fair-balanced coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, the Company could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Current wording

The trading market for our securities will depend in part on the research and reports that securities or industry analysts publish about us or our business. The Company does not have any control over these analysts. There can be no assurance that analysts will cover us or provide favorable or fair-balanced coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, the Company could lose visibility in the financial markets, which could cause our share price or trading volume to decline.