Anebulo Pharmaceuticals(ANEB) - 2025 Q2 - Quarterly Report

Special Note Regarding Forward-Looking Statements This section highlights forward-looking statements in the report, subject to risks and uncertainties that could cause actual results to differ materially - This section highlights that the Quarterly Report contains forward-looking statements subject to 'safe harbor' provisions, which involve substantial risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these statements and to review the 'Risk Factors' section[9][10][11] - Forward-looking statements include expectations regarding capital requirements, regulatory submissions, clinical trial timing and conduct, clinical utility and approval likelihood of selonabant, future growth, intellectual property, licensing arrangements, commercial potential, supplier performance, competition, economic/political impacts, and governmental regulations[12] PART I. FINANCIAL INFORMATION This part presents the unaudited condensed financial statements and management's discussion and analysis for the reported periods Item 1. Financial Statements (Unaudited) This section presents Anebulo Pharmaceuticals, Inc.'s unaudited condensed financial statements for periods ended December 31, 2024, and June 30, 2024 Condensed Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Condensed Balance Sheets Data | Metric | December 31, 2024 ($) | June 30, 2024 ($) | Change ($) | % Change | | :-------------------------- | :------------------ | :---------------- | :------- | :------- | | Cash and cash equivalents | $14,998,467 | $3,094,200 | $11,904,267 | 384.7% | | Total current assets | $15,395,489 | $3,507,990 | $11,887,499 | 338.9% | | Total assets | $15,841,220 | $4,073,114 | $11,768,106 | 289.0% | | Total liabilities | $878,799 | $260,583 | $618,216 | 237.2% | | Total stockholders' equity | $14,962,421 | $3,812,531 | $11,149,890 | 292.4% | - The significant increase in cash and cash equivalents, total assets, and total stockholders' equity is primarily due to net proceeds of approximately $15.0 million from a private placement offering in December 2024[14][27][95] Condensed Statements of Operations This statement reports the company's revenues, expenses, and net loss over specific reporting periods, reflecting operational performance Condensed Statements of Operations Data | Metric | Three Months Ended Dec 31, 2024 ($) | Three Months Ended Dec 31, 2023 ($) | Change (YoY) ($) | Six Months Ended Dec 31, 2024 ($) | Six Months Ended Dec 31, 2023 ($) | Change (YoY) ($) | | :-------------------------- | :------------------------------ | :------------------------------ | :----------- | :---------------------------- | :---------------------------- | :----------- | | Research and development | $1,220,535 | $1,062,672 | $157,863 | $2,535,394 | $2,332,892 | $202,502 | | General and administrative | $1,367,616 | $1,697,787 | $(330,171) | $2,464,881 | $2,971,245 | $(506,364) | | Total operating expenses | $2,588,151 | $2,760,459 | $(172,308) | $5,000,275 | $5,304,137 | $(303,862) | | Net loss | $(2,463,030) | $(2,717,369) | $254,339 | $(4,663,766) | $(5,198,192) | $534,426 | | Net loss per share (basic & diluted) | $(0.09) | $(0.11) | $0.02 | $(0.17) | $(0.20) | $0.03 | | Grant income | $(177,703) | $- | $(177,703) | $(423,065) | $- | $(423,065) | - Net loss decreased by $254,339 for the three months and $534,426 for the six months ended December 31, 2024, primarily due to a decrease in general and administrative expenses and the recognition of grant income, partially offset by increased research and development expenses[17][86][91][94] Condensed Statements of Stockholders' Equity This statement details changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit, over the reporting period Condensed Statements of Stockholders' Equity Data | Metric | Balance at June 30, 2024 ($) | Balance at December 31, 2024 ($) | Change ($) | | :-------------------------- | :----------------------- | :--------------------------- | :----- | | Common Stock Shares | 25,933,217 | 41,084,731 | 15,151,514 | | Common Stock Amount | $25,934 | $41,086 | $15,152 | | Additional Paid-in Capital | $69,190,341 | $84,988,845 | $15,798,504 | | Accumulated Deficit | $(65,403,744) | $(70,067,510) | $(4,663,766) | | Total Stockholders' Equity | $3,812,531 | $14,962,421 | $11,149,890 | - The significant increase in common stock shares and additional paid-in capital is primarily due to the issuance of 15,151,514 shares in a private placement in December 2024, generating approximately $15.0 million in gross proceeds[20][47] - Stock-based compensation expense recognized during the six months ended December 31, 2024, was $851,253, contributing to the increase in additional paid-in capital[20][54] Condensed Statements of Cash Flows This statement summarizes cash inflows and outflows from operating, investing, and financing activities for the reporting periods Condensed Statements of Cash Flows Data | Cash Flow Activity ($) | Six Months Ended Dec 31, 2024 ($) | Six Months Ended Dec 31, 2023 ($) | Change ($) | | :-------------------------- | :---------------------------- | :---------------------------- | :----- | | Net cash used in operating activities | $(3,095,733) | $(4,540,532) | $1,444,799 | | Net cash provided by (used in) financing activities | $15,000,000 | $(62,354) | $15,062,354 | | Net increase (decrease) in cash | $11,904,267 | $(4,602,886) | $16,507,153 | | Cash, end of the period | $14,998,467 | $6,644,517 | $8,353,950 | - The company experienced a significant net increase in cash during the six months ended December 31, 2024, primarily driven by $15.0 million in proceeds from the issuance of common stock through a private placement[23][100] - Net cash used in operating activities decreased by approximately $1.4 million compared to the prior year period, mainly due to a lower net loss and favorable changes in operating assets and liabilities[23][100][101] Notes to Unaudited Condensed Financial Statements These notes provide essential context for the condensed financial statements, covering business nature, liquidity, accounting policies, and specific financial line items - Anebulo Pharmaceuticals, Inc. is a clinical-stage pharmaceutical company developing treatments for cannabis-induced toxicity, with its principal operations in Lakeway, Texas[26] - The company has incurred an accumulated deficit of $70.1 million as of December 31, 2024, and expects to continue generating operating losses, necessitating additional funding for its development and commercialization objectives[27][29][127] - In December 2024, the company completed a private placement, issuing 15,151,514 shares of common stock for approximately $15.0 million in gross proceeds, significantly boosting its cash and cash equivalents[47][79] - The company was awarded a two-year cooperative grant of up to $1.9 million from NIDA in July 2024 to support the development of intravenous selonabant for pediatric cannabis-induced toxicities, recognizing $0.4 million in grant income for the six months ended December 31, 2024[59][61][78][94] - The Loan and Security Agreement (LSA) with 22NW, LP and JFL Capital Management LLC, initially allowing up to $10 million, was modified in February 2025 to reduce the maximum advance to $3 million, remove securitization provisions, and assign 22NW's interest to 22NW Fund, LP. No balance was outstanding as of December 31, 2024, or February 14, 2025[56][62][63][77][96][97] - Stock-based compensation expense for the six months ended December 31, 2024, was approximately $0.9 million, an increase from $0.4 million in the prior year, due to grants of options with immediate vesting terms in June and December 2024[54][91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition, results of operations, business developments, liquidity, and critical accounting estimates Overview This overview introduces Anebulo Pharmaceuticals, Inc.'s focus on developing selonabant for cannabis-induced toxicity, prioritizing an intravenous formulation for pediatric patients - Anebulo is a clinical-stage pharmaceutical company focused on developing selonabant (formerly ANEB-001) to rapidly reverse cannabis-induced toxicity, including unintentional poisoning in children and acute cannabinoid intoxication (ACI) in adults[65][73] - The company is prioritizing the advancement of an intravenous (IV) selonabant formulation for pediatric patients with cannabis-induced CNS depression, believing it offers a faster path to approval compared to the adult oral product[70][71][89] - The FDA has acknowledged the unmet need for pediatric cannabis toxicity treatment and proposed close collaboration. A Phase I single ascending dose (SAD) study of IV selonabant in healthy adults is planned for 1H25[70] - The company holds U.S. Patent No. 11,795,146 for crystalline forms of selonabant and methods of use, providing patent protection through 2042[75][76] Components of Results of Operations This section describes primary components influencing financial performance, including R&D, G&A expenses, and the absence of revenue - The company has not generated any revenue since inception and expects to continue generating operating losses and negative cash flows as it advances clinical development[80] - Research and development expenses, which are expensed as incurred, are expected to significantly increase as the company develops selonabant and conducts clinical trials, particularly for the IV formulation[82][83][84][89] - General and administrative expenses primarily consist of professional fees, insurance, personnel costs (including stock-based compensation), and rent[85] Results of Operations This section analyzes the company's financial performance for the reported periods, focusing on changes in operating expenses, grant income, and net loss Results of Operations Data | Metric | Three Months Ended Dec 31, 2024 ($) | Three Months Ended Dec 31, 2023 ($) | Change (YoY) ($) | Six Months Ended Dec 31, 2024 ($) | Six Months Ended Dec 31, 2023 ($) | Change (YoY) ($) | | :-------------------------- | :------------------------------ | :------------------------------ | :----------- | :---------------------------- | :---------------------------- | :----------- | | Research and development | $1,220,535 | $1,062,672 | $157,863 | $2,535,394 | $2,332,892 | $202,502 | | General and administrative | $1,367,616 | $1,697,787 | $(330,171) | $2,464,881 | $2,971,245 | $(506,364) | | Net loss | $(2,463,030) | $(2,717,369) | $254,339 | $(4,663,766) | $(5,198,192) | $534,426 | | Grant income | $(177,703) | $- | $(177,703) | $(423,065) | $- | $(423,065) | - Research and development expenses increased by $0.2 million for the six months ended December 31, 2024, driven by increased pre-clinical, nonclinical, and clinical studies expenses as the company prioritizes the IV selonabant formulation[89] - General and administrative expenses decreased by $0.5 million for the six months ended December 31, 2024, primarily due to reduced compensation and professional/consultant fees, partially offset by higher stock-based compensation[91] - The company recognized $0.4 million in grant income for the six months ended December 31, 2024, from the NIDA grant, with no comparable income in the prior year[94] Liquidity and Capital Resources This section discusses the company's ability to meet financial obligations, detailing cash position, funding sources, and future capital requirements - As of December 31, 2024, the company had $15.0 million in cash and cash equivalents, significantly bolstered by a $15.0 million private placement offering in December 2024[95] - The company expects its current cash and available funding under the Loan Agreement to fund operations and capital expenditures for at least the next 12 months from the filing date[102] - Future funding will be required through equity/debt financings or collaboration agreements, with potential risks of dilution for existing stockholders and restrictions from debt financing[103][130][132][133] Liquidity and Capital Resources Data | Cash Flow Activity ($) | Six Months Ended Dec 31, 2024 ($) | Six Months Ended Dec 31, 2023 ($) | Change ($) | | :-------------------------- | :---------------------------- | :---------------------------- | :----- | | Net cash used in operating activities | $(3,095,733) | $(4,540,532) | $1,444,799 | | Net cash provided by (used in) financing activities | $15,000,000 | $(62,354) | $15,062,354 | | Net increase (decrease) in cash | $11,904,267 | $(4,602,886) | $16,507,153 | Contractual Obligations and Commitments This section outlines the company's significant contractual obligations, including licensing agreements and manufacturing commitments, and their potential financial impact - The company has an exclusive worldwide royalty-bearing license agreement with Vernalis Development Limited for selonabant, involving potential development milestone payments up to $29.9 million (of which $0.4 million paid) and sales milestone payments up to $35.0 million, plus single-digit royalties[106] - A manufacturing agreement with a third-party CMO for approximately $3.0 million was substantially completed as of June 30, 2024, with the stability study aspect expected to be incurred during calendar 2026[109] Critical Accounting Estimates This section describes accounting policies requiring management's most difficult judgments and estimates, such as accrued R&D and stock-based compensation - Key accounting estimates include accrued research and development expenses, which involve estimating services performed by CROs, investigative sites, and vendors when invoices are not yet received[113][114][115] - Stock-based compensation expense is estimated using the Black-Scholes option pricing model, relying on subjective assumptions such as expected stock price volatility, expected term, risk-free rate, and expected dividends[117] - The company, as an 'emerging growth company' under the JOBS Act, elects to use extended transition periods for new or revised accounting standards, which may affect comparability with other public companies[119] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not required for smaller reporting companies, thus no disclosures regarding quantitative and qualitative market risk are provided - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[120] Item 4. Controls and Procedures This section details management's evaluation of disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section presents management's conclusion on the effectiveness of the company's disclosure controls and procedures as of the reporting period - As of December 31, 2024, management, including the CEO and CFO, concluded that the design and operation of the company's disclosure controls and procedures were effective at a reasonable assurance level[121][122] Changes in Internal Control over Financial Reporting This section reports on any material changes in the company's internal control over financial reporting during the most recent fiscal quarter - There were no changes in internal control over financial reporting during the three months ended December 31, 2024, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[123] PART II. OTHER INFORMATION This part provides additional non-financial information, including legal proceedings, risk factors, equity sales, and other material disclosures Item 1. Legal Proceedings This section confirms the company is not currently a party to any material legal proceedings that could adversely affect its financial condition - The company is not currently a party to any material legal proceedings, and management believes there are no claims or actions pending that could have a material adverse effect on its results of operations or financial condition[125] Item 1A. Risk Factors This section outlines various risks that could materially impact the company's financial position, results of operations, or cash flows - The company has not generated any revenue since inception and has an accumulated deficit of $70.1 million as of December 31, 2024, expecting to incur significant future operating losses and negative cash flows[127] - The company will need to raise additional capital to fund operations and development, which may not be available on acceptable terms or at all, potentially leading to substantial dilution for existing stockholders through equity issuances[130][131][132] - Changes in U.S. government policies, including potential limits on NIH research funding for 'indirect costs' and trade policies, could adversely affect the company's ability to realize grant benefits and obtain future funding[135][136][137] - The future success of the business is uncertain, with challenges including inadequate financial resources, inability to manufacture commercially, delays in clinical testing, and difficulties in obtaining regulatory approval and market acceptance for its product candidates[128][129] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the company's unregistered sales of equity securities and any issuer purchases or repurchases during the quarter - The company did not sell any equity securities in unregistered transactions during the quarter ended December 31, 2024, other than previously disclosed filings[138] - There were no issuer purchases or repurchases of equity securities during the reported period[139][140] Item 3. Defaults Upon Senior Securities This item confirms that the company has not defaulted on any senior securities during the reported period - The company reported no defaults upon senior securities[141] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable to the company[142] Item 5. Other Information This section discloses material events not otherwise reported, specifically a modification to the Loan and Security Agreement and insider trading arrangements - On February 10, 2025, the Loan and Security Agreement (LSA) was modified, reducing the maximum loan advance to $3 million, removing all securitization provisions, and assigning 22NW's interest to 22NW Fund, LP. The loan will accrue interest at 0.25% per annum and is due February 10, 2028[143] - As of December 31, 2024, and February 14, 2025, there was no balance outstanding under the LSA or the amended Loan Agreement[143] - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended December 31, 2024[144] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, material agreements, and certifications - The exhibits include corporate documents (e.g., Certificate of Incorporation, Bylaws), material agreements (e.g., Securities Purchase Agreement, Amended and Restated Loan Agreement), and certifications pursuant to Sarbanes-Oxley Act[146] Signatures This section contains the required signatures of the registrant's authorized officers, certifying the filing of the report - The report is signed by Richard Anthony Cunningham, Chief Executive Officer, and Daniel George, Chief Financial Officer, on February 14, 2025, certifying its submission[149][150]