Anebulo Pharmaceuticals(ANEB) - 2025 Q3 - Quarterly Report

Special Note Regarding Forward-Looking Statements This section cautions readers that forward-looking statements are subject to risks and uncertainties, advising against undue reliance and referring to risk factors Forward-Looking Statements Disclosure This disclosure details the nature of forward-looking statements, their inherent risks, and the company's policy of not updating them, urging review of risk factors - The report contains forward-looking statements regarding future financial condition, business strategy, and operational objectives, identifiable by terms like 'believe,' 'may,' 'could,' 'will,' 'estimate,' 'continue,' 'anticipate,' 'intend,' 'seek,' 'plan,' 'expect,' 'should,' 'would,' 'potentially' or their negatives[9] - Key areas covered by forward-looking statements include 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, competitive ability, economic/political impacts, and governmental regulations[12] - Readers are cautioned not to place undue reliance on these statements, as actual results may differ materially due to various factors, including those detailed in the 'Risk Factors' section[9][11] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows Condensed Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Balance Sheet Highlights | Metric | March 31, 2025 | June 30, 2024 | | :-------------------------- | :------------- | :------------ | | Cash and cash equivalents | $13,279,901 | $3,094,200 | | Total current assets | $13,807,935 | $3,507,990 | | Total assets | $14,008,484 | $4,073,114 | | Total liabilities | $546,032 | $260,583 | | Total stockholders' equity | $13,462,452 | $3,812,531 | - Cash and cash equivalents significantly increased to $13.3 million as of March 31, 2025, from $3.1 million as of June 30, 2024, primarily due to financing activities[14] - Total assets grew from $4.1 million to $14.0 million, while total liabilities increased from $0.3 million to $0.5 million over the same period[14] - Stockholders' equity saw a substantial increase from $3.8 million to $13.5 million, reflecting new capital infusions[14] Condensed Statements of Operations This section presents the company's financial performance over specific periods, detailing revenues, expenses, and net loss Condensed Statements of Operations Highlights | Metric | 3 Months Ended Mar 31, 2025 | 3 Months Ended Mar 31, 2024 | 9 Months Ended Mar 31, 2025 | 9 Months Ended Mar 31, 2024 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $638,324 | $748,339 | $3,173,718 | $3,081,231 | | General and administrative | $1,253,998 | $915,912 | $3,718,879 | $3,887,157 | | Total operating expenses | $1,892,322 | $1,664,251 | $6,892,597 | $6,968,388 | | Net loss | $(1,676,169) | $(1,653,542) | $(6,339,935) | $(6,851,734) | | Net loss per share (basic & diluted) | $(0.04) | $(0.06) | $(0.20) | $(0.27) | - Net loss for the three months ended March 31, 2025, was $(1.7) million, a slight increase from $(1.7) million in the prior-year period[17] - For the nine months, net loss improved to $(6.3) million from $(6.9) million[17] - Research and development expenses decreased by $0.11 million for the three months ended March 31, 2025, but increased by $0.09 million for the nine months ended March 31, 2025, compared to the respective prior periods[17] - Grant income of $0.36 million and $0.78 million was recognized for the three and nine months ended March 31, 2025, respectively, with no comparable income in the prior year[17] Condensed Statements of Stockholders' Equity This section outlines changes in the company's equity accounts, reflecting capital transactions and net income or loss over time Stockholders' Equity Changes (Nine Months Ended March 31, 2025) | Item | Change in Shares | Change in Amount (Common Stock) | Change in Additional Paid-in Capital | Change in Accumulated Deficit | Change in Total Stockholders' Equity | | :---------------------------------- | :--------------- | :------------------------------ | :----------------------------------- | :---------------------------- | :----------------------------------- | | Balance at June 30, 2024 | 25,933,217 | $25,934 | $69,190,341 | $(65,403,744) | $3,812,531 | | Stock-based compensation expense | - | - | $1,106,520 | - | $1,106,520 | | Issuance of common stock, net | 15,151,514 | $15,152 | $14,947,251 | - | $14,962,403 | | Common stock offering costs | - | - | $(79,067) | - | $(79,067) | | Net loss | - | - | - | $(6,339,935) | $(6,339,935) | | Balance at March 31, 2025 | 41,084,731 | $41,086 | $85,165,045 | $(71,743,679) | $13,462,452 | - Total stockholders' equity increased from $3.8 million at June 30, 2024, to $13.5 million at March 31, 2025[20] - The increase was primarily driven by the issuance of 15,151,514 shares of common stock, resulting in net proceeds of approximately $14.9 million, and stock-based compensation expense of $1.1 million, partially offset by a net loss of $6.3 million[20] - The accumulated deficit grew to $(71.7) million as of March 31, 2025, from $(65.4) million at June 30, 2024[20] Condensed Statements of Cash Flows This section details the sources and uses of cash across operating, investing, and financing activities over specific periods Condensed Statements of Cash Flows Highlights (Nine Months Ended March 31) | Cash Flow Activity | 2025 | 2024 | | :----------------- | :------------ | :------------ | | Operating | $(4,697,635) | $(6,037,910) | | Financing | $14,883,336 | $(62,354) | | Net increase (decrease) in cash | $10,185,701 | $(6,100,264) | | Cash, end of period | $13,279,901 | $5,147,139 | - Net cash used in operating activities decreased to $4.7 million for the nine months ended March 31, 2025, from $6.0 million in the prior-year period[23][106][107] - Net cash provided by financing activities was $14.9 million for the nine months ended March 31, 2025, primarily from the issuance of common stock, a significant increase from net cash used of $62,354 in the prior-year period[23][106] - The company experienced a net increase in cash of $10.2 million for the nine months ended March 31, 2025, compared to a net decrease of $6.1 million in the prior-year period, resulting in cash and cash equivalents of $13.3 million at period end[23][106] Notes to Unaudited Condensed Financial Statements This section provides detailed explanations and additional information supporting the unaudited condensed financial statements Note 1. Nature of business and basis of presentation This note describes the company's core business, its focus on drug development, and the basis for preparing the financial statements - Anebulo Pharmaceuticals, Inc. is a clinical-stage pharmaceutical company focused on developing treatments for cannabis-induced toxicity, including acute cannabis-induced toxicity in children and acute cannabinoid intoxication (ACI) in adults[26] - The company has incurred significant losses since inception, with a net loss of approximately $6.3 million for the nine-month period ended March 31, 2025, and an accumulated deficit of $71.7 million[27] - Management expects current cash and cash equivalents, along with available funding from the Loan Agreement, to be sufficient for operating expenses and capital expenditures for at least 12 months from the financial statements' issuance date[28] Note 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements, including recent pronouncements - The company's significant accounting policies remain largely unchanged from the June 30, 2024, Annual Report on Form 10-K, except for the policy on accounting for research and development grants[35] - New accounting pronouncements include ASU No. 2023-07 (Segment Reporting), effective July 1, 2024, requiring incremental qualitative segment disclosures, and ASU 2023-09 (Income Taxes), effective for fiscal 2026, which is expected to be disclosure-only[36][37] - ASU No. 2024-03 (Disaggregation of Income Statement Expenses), effective for annual periods beginning after December 15, 2026, is currently being evaluated for its impact[38] Note 3. Prepaid Expenses This note details the composition and changes in the company's prepaid expenses, including insurance and research and development Prepaid Expenses Breakdown | Category | March 31, 2025 | June 30, 2024 | | :------------------------ | :------------- | :------------ | | Prepaid insurance | $54,197 | $95,871 | | Prepaid research and development | $332,899 | $274,879 | | Prepaid other | $140,938 | $43,040 | | Total prepaid expenses | $528,034 | $413,790 | - Total prepaid expenses increased to $528,034 as of March 31, 2025, from $413,790 as of June 30, 2024[39] - The increase was primarily driven by higher prepaid research and development ($332,899 vs $274,879) and prepaid other expenses ($140,938 vs $43,040), partially offset by a decrease in prepaid insurance[39] Note 4. Accrued Expenses This note provides a breakdown of accrued expenses, including payroll, research and development, and professional fees Accrued Expenses Breakdown | Category | March 31, 2025 | June 30, 2024 | | :------------------------ | :------------- | :------------ | | Accrued payroll related expenses | $18,658 | $29,512 | | Accrued research and development | $45,445 | $47,554 | | Accrued professional fees | $54,351 | $27,091 | | Total accrued expenses | $118,454 | $104,157 | - Total accrued expenses increased to $118,454 as of March 31, 2025, from $104,157 as of June 30, 2024[40] - This increase was mainly due to a rise in accrued professional fees ($54,351 vs $27,091), partially offset by decreases in accrued payroll-related expenses and accrued research and development[40] Note 5. Other Assets This note explains the nature of other assets, primarily loan commitment fees, and their amortization - Other assets primarily consist of loan commitment fees, which decreased from $0.6 million at June 30, 2024, to $0.2 million at March 31, 2025[41] - In connection with the refinancing of the Loan Agreement, approximately $0.2 million of unamortized loan commitment fees were written off and recognized as incremental interest expense[41] - Interest expense related to the amortization of loan commitment fees was $36 thousand for the three months and $0.2 million for the nine months ended March 31, 2025[41] Note 6. License Agreement This note describes the company's licensing agreement for selonabant, including milestone payments and royalty obligations - In May 2020, the Company licensed intellectual property, know-how, and clinical trial data from Vernalis Development Limited for selonabant, with initial consideration of $0.15 million recorded as R&D expense[42] - The agreement includes potential development milestone payments up to $29.9 million and sales milestone payments of $10.0 million and $25.0 million, plus annual single-digit royalties on net product sales[42] - As of March 31, 2025, no further milestone payments are considered probable, and no liability has been recorded, partly due to the issuance of 192,857 common shares to Vernalis in lieu of future milestone payments of approximately $1.4 million during the IPO[43] Note 7. Stockholders' Equity This note details changes in stockholders' equity, including authorized shares, stock issuances, and private placement activities - On November 20, 2023, the Company increased its authorized common stock from 40,000,000 to 50,000,000 shares[44] - On December 22, 2024, the Company completed a private placement, issuing 15,151,514 shares of common stock at $0.99 per share, generating approximately $15.0 million in gross proceeds (net $14.9 million after offering expenses)[47] - The private placement involved 22NW Fund, LP, a greater than 5% stockholder controlled by a director, and other institutional accredited investors[47] Note 8. Stock-Based Compensation This note explains the company's stock incentive plan, stock option activity, and the related compensation expense recognized - The 2020 Stock Incentive Plan, as amended, authorizes the grant of up to 3,650,000 shares (increased to 6,150,000 post-March 31, 2025) for stock options and other awards to employees, officers, directors, advisors, and consultants[48][65] - Stock-based compensation expense was approximately $0.3 million for the three months and $1.1 million for the nine months ended March 31, 2025, compared to $0.2 million and $0.6 million for the respective prior-year periods[55] Stock Option Activity (Nine Months Ended March 31, 2025) | Metric | Number of Shares | Weighted Average Exercise Price | | :------------------------ | :--------------- | :------------------------------ | | Outstanding at June 30, 2024 | 2,319,048 | $3.00 | | Granted | 254,433 | $1.56 | | Outstanding at March 31, 2025 | 2,573,481 | $2.85 | | Options exercisable at March 31, 2025 | 1,369,960 | $2.83 | - As of March 31, 2025, unrecognized stock-based compensation expense related to unvested stock options totaled approximately $1.6 million, to be recognized over a weighted average period of 2.1 years[53] Note 9. Net Loss Per Share Attributable to Common Stockholders This note details the calculation of net loss per share and identifies anti-dilutive common stock equivalents Anti-Dilutive Common Stock Equivalents | Item | March 31, 2025 | March 31, 2024 | | :------------------------ | :------------- | :------------- | | Stock options outstanding | 2,573,481 | 2,008,185 | | Warrants outstanding | 2,264,650 | 2,264,650 | | Total | 4,838,131 | 4,272,835 | - Stock options and warrants totaling 4,838,131 shares as of March 31, 2025, were excluded from the net loss per share calculation due to their anti-dilutive effect[56] Note 10. Loan Agreement This note describes the company's loan and security agreement, including its terms, modifications, and outstanding balance - On November 13, 2023, the Company entered into a Loan and Security Agreement (LSA) with 22NW and JFL Capital Management LLC, allowing it to draw up to $10 million[57] - The LSA was modified on February 10, 2025, reducing the maximum loan advance to $3 million, removing securitization provisions, and assigning 22NW's rights to 22NW Fund, LP[59] - The Loan Agreement accrues interest at 0.25% per annum, terminates on February 10, 2028, and requires the issuance of 0.03 shares of common stock per dollar loaned, up to a maximum of 90,000 shares[59] - No balance was outstanding under the Loan Agreement as of March 31, 2025, or under the LSA as of June 30, 2024[59] Note 11. Research and Development Grant This note details the NIDA cooperative grant awarded to the company and the recognition of grant income for R&D activities - On July 16, 2024, the Company was awarded the first tranche of $0.9 million from a two-year cooperative grant of up to $1.9 million from the National Institute on Drug Abuse (NIDA) to support the development of intravenous selonabant for acute cannabis-induced toxicities in children[61] - The grant income is recognized as other income in the condensed statements of operations, derived from reimbursement of direct out-of-pocket expenses, salaries, fringe benefits, and direct materials costs[62][63] - The Company recognized $0.4 million and $0.8 million in grant income for the three and nine months ended March 31, 2025, respectively, with no comparable income in the prior year[64] Note 12. Subsequent Events This note discloses significant events that occurred after the balance sheet date, such as changes in authorized shares - On April 4, 2025, stockholders approved an amendment to increase authorized common stock from 50,000,000 to 75,000,000 shares[65] - Stockholders also approved an amendment to the 2020 Stock Incentive Plan, increasing shares available for awards from 3,650,000 to 6,150,000 shares[65] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, and liquidity, highlighting the strategic focus on IV selonabant and recent financing Overview This section provides a high-level summary of the company's business, drug development focus, and strategic priorities for selonabant - Anebulo is a clinical-stage pharmaceutical company developing selonabant (formerly ANEB-001) to rapidly reverse cannabis-induced toxicity, including acute cannabis-induced toxicity in children and acute cannabinoid intoxication (ACI) in adults[67] - 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 timeline to approval compared to the adult oral product[71][72] - The decision to prioritize the pediatric IV formulation is driven by the recent development of a suitable IV formulation, prior discussions with the FDA highlighting the unmet need in a vulnerable population, and the potential for initial pediatric approval to facilitate adult ACI treatment approval[72] - The company was awarded a $1.9 million cooperative grant from NIDA to support the development of IV selonabant and plans to initiate a single ascending dose (SAD) study in healthy adults in Q3 calendar 2025[61][79] Components of Results of Operations This section explains the key elements contributing to the company's financial performance, including revenue, R&D, and G&A expenses - The company has not generated any revenue since inception and expects to incur significant operating losses and negative cash flows in the future[84] - Research and development expenses are expected to remain significant and increase as the company advances selonabant's clinical development, including direct third-party costs, consultant fees, and manufacturing costs[86][87][88] - General and administrative expenses primarily consist of professional fees, insurance, personnel costs (including stock-based compensation), and rent[89] Results of Operations This section analyzes the company's financial performance over specific periods, comparing operating expenses and net loss Operating Expenses and Net Loss Comparison | Metric | 3 Months Ended Mar 31, 2025 | 3 Months Ended Mar 31, 2024 | Period to Period Change | 9 Months Ended Mar 31, 2025 | 9 Months Ended Mar 31, 2024 | Period to Period Change | | :-------------------------- | :-------------------------- | :-------------------------- | :---------------------- | :-------------------------- | :-------------------------- | :---------------------- | | Research and development | $638,324 | $748,339 | $(110,015) | $3,173,718 | $3,081,231 | $92,487 | | General and administrative | $1,253,998 | $915,912 | $338,086 | $3,718,879 | $3,887,157 | $(168,278) | | Total operating expenses | $1,892,322 | $1,664,251 | $228,071 | $6,892,597 | $6,968,388 | $(75,791) | | Net loss | $(1,676,169) | $(1,653,542) | $(22,627) | $(6,339,935) | $(6,851,734) | $511,799 | - Research and development expenses decreased by $0.1 million for the three months ended March 31, 2025, primarily due to timing of clinical studies, but increased by $0.1 million for the nine months, driven by contract manufacturing for the IV selonabant Phase I SAD study[93][94] - General and administrative expenses increased by $0.3 million for the three months ended March 31, 2025, due to higher professional fees (debt refinancing, registration statement, proxy filing) and stock-based compensation[96] - For the nine months, G&A decreased by $0.2 million due to strategic cost reductions and lower compensation, partially offset by increased stock-based compensation[97] - Grant income of $0.4 million and $0.8 million was recognized for the three and nine months ended March 31, 2025, respectively, from the NIDA grant, with no comparable income in the prior year[100] Liquidity and Capital Resources This section assesses the company's ability to meet its financial obligations and fund future operations, including cash position and financing needs - As of March 31, 2025, the company had $13.3 million in cash and cash equivalents, expecting this, along with the Loan Agreement, to fund operations for at least the next 12 months[101] - The company received net proceeds of approximately $14.9 million from a private placement offering on December 23, 2024[101] - Net cash used in operating activities was $4.7 million for the nine months ended March 31, 2025, a decrease from $6.0 million in the prior-year period[106] - The company will need to raise additional funding in the future through equity, debt, or collaboration agreements to support its development and commercialization objectives[102][109] Critical Accounting Estimates This section discusses accounting estimates that require significant judgment and could materially impact the financial statements - Critical accounting estimates include accrued research and development expenses, which involve estimating services performed by CROs, investigative sites, vendors, and manufacturers when invoices are not yet received[119] - 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[122] - The company, as an 'emerging growth company' under the JOBS Act, takes advantage of extended transition periods for new accounting standards, which may affect comparability with other public companies[124] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not required for smaller reporting companies, and therefore, no disclosures are provided - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[125] Item 4. Controls and Procedures Management, with the participation of the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2025, concluding they were effective at a reasonable assurance level. No material changes in internal control over financial reporting occurred during the quarter - As of March 31, 2025, 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[126][127] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the three months ended March 31, 2025[128] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings, and management believes no pending claims could have a material adverse effect on its operations or financial condition - The company is not currently a party to any material legal proceedings[130] - Management believes there are no claims or actions pending that could have a material adverse effect on the company's results of operations or financial condition[130] Item 1A. Risk Factors This section details various risks that could materially impact the company's financial position, including lack of revenue, capital needs, and policy changes - The company has not generated any revenue since inception, has an accumulated deficit of $71.7 million as of March 31, 2025, and expects to incur future losses, with no assurance of profitability[132] - The company will need to raise additional capital beyond its current resources and the Loan Agreement, which may result in substantial dilution for existing stockholders through equity issuances or involve restrictive covenants if debt financing is obtained[135][137][138] - Changes in U.S. government policies, such as limitations on NIH grant funding or trade policies, could adversely affect the company's business, reputation, financial condition, and results of operations[140][141] - The company faces risks related to maintaining its Nasdaq Capital Market listing standards, as evidenced by a recent non-compliance issue regarding a private placement, which was subsequently resolved[142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or issuer purchases/repurchases of equity securities during the quarter ended March 31, 2025, that were not previously disclosed - No unregistered sales of equity securities occurred during the quarter ended March 31, 2025, that were not previously disclosed[143] - There were no issuer purchases or repurchases of equity securities during the quarter[144][145] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[146] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine safety disclosures are not applicable to the company[147] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended March 31, 2025 - 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 March 31, 2025[148] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents and certifications - Exhibits include various amendments to the company's Certificate of Incorporation and Amended and Restated Bylaws, reflecting changes such as the increase in authorized common stock and board declassification[150][152] - A Lock-Up Agreement and Irrevocable Instruction Letter, both dated February 24, 2025, related to 22NW Fund, LP, are filed as exhibits[152] - Certifications from the Principal Executive Officer and Principal Financial Officer, pursuant to the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002, are included[152] Signatures Report Signatures The report is duly signed on behalf of Anebulo Pharmaceuticals, Inc. by Richard Anthony Cunningham, Chief Executive Officer, and Daniel George, Chief Financial Officer, on May 13, 2025 - The report was signed by Richard Anthony Cunningham, Chief Executive Officer (Principal Executive Officer), and Daniel George, Chief Financial Officer (Principal Financial and Accounting Officer), on May 13, 2025[155]