CITIUS ONCOLOGY, INC.

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Business

Citius Oncology, Inc. (“Citius Oncology,” the “Company” “we” or “us”) is a specialty pharmaceutical company dedicated to the development and commercialization of critical care products targeting unmet needs with a focus on oncology products. We have developed E7777 (denileukin diftitox), an approved oncology immunotherapy for the treatment of cutaneous T-cell lymphoma (“CTCL”), a rare form of non-Hodgkin lymphoma. We have obtained the trade name of LYMPHIR for E7777.

Since our inception, the Company has devoted substantially all of its efforts to business planning, research and development, and recruiting management and technical staff. We are subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related to the development by the Company or its competitors of research and development stage products, market acceptance of any of its products approved for marketing, competition from larger companies, dependence on key personnel, dependence on key suppliers and strategic partners, the Company’s ability to obtain additional financing and the Company’s compliance with governmental and other regulations.

Since our inception, Citius Pharmaceuticals, Inc. (“Citius Pharma”) (Nasdaq: CTXR) has funded and continues to partially fund the Company. Citius Pharma and the Company are party to an amended and restated shared services agreement (the “A&R Shared Services Agreement”), which governs certain management and scientific services that Citius Pharma provides the Company.

Merger

On August 23, 2021, Citius Pharma formed Citius Acquisition Corp. (“SpinCo”) as a wholly-owned subsidiary in conjunction with the acquisition of LYMPHIR, which began operations in April 2022, when Citius Pharma transferred the assets related to LYMPHIR to SpinCo, including the related license agreement and asset purchase agreement (see Note 4).

On October 23, 2023, Citius Pharma and SpinCo entered into an agreement and plan of merger and reorganization (the “Merger Agreement”) with TenX Keane Acquisition, a Cayman Islands exempted company (“TenX”), and TenX Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of TenX (“Merger Sub”).

On August 12, 2024, pursuant to the terms and conditions of the Merger Agreement, Merger Sub merged with and into SpinCo, with SpinCo surviving as a wholly owned subsidiary of TenX (the “Merger”) which was subsequently renamed Citius Oncology Sub, Inc. Prior to closing of the Merger, TenX migrated to and domesticated as a Delaware corporation in accordance with Section 388 of the General Corporation Law of the State of Delaware and the Cayman Islands Companies Act (As Revised) (the “Domestication”). As part of the Domestication, TenX changed its name to “Citius Oncology, Inc.” (Nasdaq: CTOR). Immediately after the closing of the Merger, Citius Pharma owned approximately 92% of our outstanding shares of common stock. As of September 30, 2025, Citius Pharma owned approximately 79% of our outstanding shares of common stock.

While the Merger Sub was the legal acquirer of the Company, for accounting purposes, the Company was deemed to be the accounting acquirer. Accordingly, for accounting purposes, the Merger was treated as the equivalent of the Company issuing stock for the assets and liabilities of the Merger Sub, accompanied by a recapitalization. Total shares outstanding of the Company after the Merger and recapitalization increased to 71,552,402. The net assets of the merged entities are stated at historical cost, with no goodwill or other intangible assets recorded. Additionally, the historical financial statements of the Company became the historical financial statements of the Registrant.

The Merger, net amount of $2,753,795 charged to additional paid in capital consists of $395,015 of net liabilities of TenX on the date of the Merger (cash of $163,500 less liabilities of $559,015) plus directly related transaction costs of $2,358,780.

As part of the Merger, Citius Pharma made capital investments in the Company through cash contributions of $3,827,944 to fund transactions related to the Merger and by reclassifying to additional paid in capital intercompany receivables of $33,180,961 that were due from the Company to Citius Pharma. Simultaneously, Citius Pharma advanced an additional $3,800,111 to the Company under the terms of a note payable (see Note 6).

Basis of Presentation

The accompanying consolidated financial statements include the operations of Citius Oncology, Inc., and its wholly-owned subsidiary, Citius Oncology Sub, Inc., which was formed in connection with Merger. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

2. GOING CONCERN UNCERTAINTY AND MANAGEMENT’S PLAN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We had a net loss of $24,761,369 and $21,148,747 for the years ended September 30, 2025 and 2024, respectively. We have no revenue and have relied on funding from Citius Pharma to finance our operations. At September 30, 2025, we had $3,924,908 in cash and a negative working capital of $21,948,698. Citius Pharma and Citius Oncology have sufficient capital to fund Citius Oncology through March 2026 which raises substantial doubt about our ability to continue as a going concern within one year after the date that the accompanying financial statements are issued.

During the three months ended September 30, 2025, we raised net proceeds of $15,166,842 from the sale of common stock.

We plan to continue to rely on funding from Citius Pharma, to raise capital through equity financings from outside investors and to generate revenue from the future sales of LYMPHIR. Both the Company and Citius Pharma are actively engaged in capital raising efforts to extend the cash runway. We retained Jeffries LLC as our exclusive financial advisor in evaluating strategic alternatives aimed at maximizing shareholder value. There is no assurance, however, that Citius Pharma will have the resources to continue funding us, that we will be successful in raising the needed capital and, if funding is available, that it will be available on terms acceptable to us, or that the we will find strategic partners, or generate substantial revenue from the sale of LYMPHIR. The accompanying financial statements do not include any adjustments that might result from the outcome of the above uncertainty.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies followed by the Company in the preparation of the consolidated financial statements is as follows:

Use of Estimates

The process of preparing financial statements in conformity U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates having relatively higher significance include the accounting for in-process research and development, stock-based compensation and income taxes. Actual results could differ from those estimates and changes in estimates may occur.

Cash and Cash Equivalents

We consider all highly liquid instruments with maturities of less than three months at the time of purchase to be cash equivalents. From time to time, we may have cash balances in financial institutions in excess of insurance limits. We have never experienced any losses related to these balances.

Prepaid Expenses

Prepaid expenses at September 30, 2025 and 2024 consist of $1,331,280 and $2,700,000 of advance payments made for the preparation of long-lead time drug substance and product costs, respectively, which will be utilized in research and development activities or in the manufacturing of LYMPHIR for sales.

Inventory

Inventory is stated at the lower of actual accumulated costs or net realizable value as of September 30, 2025 and 2024 related to the manufacturing of LYMPHIR commercial products, which were available for sale commencing in December 2025. No reserves against inventory were deemed necessary based on an evaluation of the product expiration dating.

During 2024 and 2025, $6,134,895 and $1,368,720, respectively, of prepaid manufacturing costs were transferred to inventory upon product approval and production commencement at our third-party manufacturers.

Research and Development

Research and development costs, including upfront fees and milestones paid to collaborators who are performing research and development activities under contractual agreements with us, are expensed as incurred. We defer and capitalize our nonrefundable advance payments that are for research and development activities until the related goods are delivered or the related services are performed. When we are reimbursed by a collaboration partner for work we perform, we record the costs incurred as research and development expenses and the related reimbursement as a reduction to research and development expenses in our statement of operations. Research and development expenses primarily consist of clinical and non-clinical studies, materials and supplies, third-party costs for contracted services, and payments related to external collaborations and other research and development related costs.

In-process Research and Development and License Payable

We capitalize intangible assets purchased from others for use in research and development activities as In Process Research & Development (IPR&D) when the assets acquired have an alternative future use, we anticipate future economic benefit from that use and the assets acquired are not dependent on future development. Milestone payments upon regulatory approval that meet the same criteria are capitalized when the payments are considered recoverable based on expected future cash flows. Amortization of IPR&D over the exclusive regulatory period of the acquired asset commences upon revenue generation.

In-process research and development of $73,400,000 consists of an initial $40,000,000 payment to Dr. Reddy’s Laboratories (“DRL”) in September 2021, and $27,500,000 and $5,900,000 for approval milestone amounts payable to DRL and Eisai, respectively, that became due during 2024. Of these amounts $22,650,000 and $28,400,000 are included in license payable at September 30, 2025 and 2024, respectively. The value of our September 2021 acquisition of an exclusive license for LYMPHIR (denileukin diftitox), an oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma, is expected to be amortized on a straight-line basis over a period oftwelve years, (the FDA exclusivity period), commencing upon revenue generation which is expected to commence in December 2025. Included in the IPR&D is the historical know-how, formula protocols, designs, and procedures which were used in the completion of the Phase 3. In addition, the contracts acquired in connection with Dr. Reddy’s transaction with the clinical research and manufacturing organization are at market rates and could be provided by multiple vendors in the marketplace. Therefore, there is no fair value associated with the contracts acquired.

We review our intangible assets annually to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life of any intangible asset. If the carrying value of an asset exceeds its undiscounted cash flows, we write down the carrying value of the intangible asset to its fair value in the period identified. No impairment has occurred since the acquisitions through September 30, 2025.

Patents and Trademarks

Certain costs of outside legal counsel related to obtaining trademarks for the Company are capitalized. Patent costs are amortized over the legal life of the patents, generally twenty years, starting at the patent issuance date. There are no capitalized patents and trademarks as of September 30, 2025.

The costs of unsuccessful and abandoned applications are expensed when abandoned. The costs of maintaining existing patents are expensed as incurred.

Stock-Based Compensation

We recognize compensation costs resulting from the issuance of stock-based awards to employees and directors as an expense in the statements of operations over the requisite service period based on the fair value for each stock award on the grant date. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option pricing model. Because our stock options have characteristics significantly different from those of traded options, and because changes in the input assumptions can materially affect the fair value estimate, the existing model may not necessarily provide a reliable single measure of fair value of our stock options.

We recognize compensation costs resulting from the issuance of stock-based awards to non-employees as an expense in the statements of operations over the service period based on the measurement of fair value for each stock award and records forfeitures as they occur.

Income Taxes

We file consolidated income tax returns with Citius Pharma. We follow accounting guidance regarding the recognition, measurement, presentation, and disclosure of uncertain tax positions in the financial statements. Tax positions taken or expected to be taken in the course of preparing our tax returns are required to be evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authorities. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded in the financial statements. There are no uncertain tax positions that require accrual or disclosure as of September 30, 2025. Any interest or penalties are charged to expense. During the years ended September 30, 2025 and 2024, we did not recognize any interest and penalties. We are subject to examination by federal and state tax authorities for all tax years since inception.

We recognize deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities, and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. We provide a valuation allowance, if necessary, for deferred tax assets for which we do not consider realization of such assets to be “more-likely-than-not.” The deferred tax benefit or expense for the period represents the change in the deferred tax asset or liability from the beginning to the end of the period.

**Basic and Diluted Net Loss per Common Share **

Basic and diluted net loss per common share applicable to common stockholders is computed by dividing net loss in each period by the weighted average number of shares of common stock outstanding during such period. For the periods presented, common stock equivalents, consisting of options were not included in the calculation of the diluted loss per share because they were anti-dilutive.

Segment Reporting

The Company operates through asingle operating and reportable segment which is focused on developing and commercializing innovative targeted oncology therapies. The Company’s lead product candidate is LYMPHIR, an engineered IL-2 diphtheria toxin fusion protein, for the treatment of patients with persistent or recurrent CTCL, a rare form of non-Hodgkin lymphoma. LYMPHIR was approved by the FDA in August 2024. The Company manages all business activities on a consolidated basis. The Company’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer.

The accounting policies of the operating segment are as described in Note 3. The CODM evaluates the performance of the operating segment and allocates resources based on amounts as reported on the consolidated statements of operations and cash flows. Segment expenses are presented on the Company’s consolidated statements of operations. The operating segment assets are reported on the consolidated balance sheet as total assets.

Concentrations of Credit Risk

We have no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other hedging arrangements.

Recently Adopted Accounting Standards

Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The change in the standard improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The changes improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The guidance will be effective for annual reporting periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. Early adoption is permitted. The standard will be applied retrospectively. Since the Company has one reportable segment, adoption of this new standard did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards

Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The standard enhances the transparency, decision usefulness and effectiveness of income tax disclosures by requiring consistent categories and greater disaggregation of information in the reconciliation of income taxes computed using the enacted statutory income tax rate to the actual income tax provision and effective income tax rate, as well as the disaggregation of income taxes paid (refunded) by jurisdiction. The standard also requires disclosure of income (loss) before provision for income taxes and income tax expense (benefit) in accordance with U.S. Securities and Exchange Commission (SEC) Regulation S-X 210.4-08(h), Rules of General Application – General Notes to Financial Statements: Income Tax Expense, and the removal of disclosures no longer considered cost beneficial or relevant. The guidance will be effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted. The standard will be applied on a prospective basis, with retrospective application permitted. The Company is currently evaluating the impact of adoption of the standard on its financial statement disclosures.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting–Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses. The standard update improves the disclosures about a public business entity’s expense by requiring more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) included within income statement expense captions. The guidance will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The standard updates are to be applied prospectively with the option for retrospective application. We are currently evaluating the impact of adoption of the standard update on our financial statement disclosures.

4. PATENT AND TECHNOLOGY LICENSE AGREEMENTS

In September 2021, Citius Pharma entered into an asset purchase agreement with Dr. Reddy’s Laboratories SA, a subsidiary of Dr. Reddy’s Laboratories, Ltd. (collectively, “Dr. Reddy’s”) and a license agreement with Eisai Co., Ltd. (“Eisai”) to acquire an exclusive license of E7777 (denileukin diftitox), an oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma. Citius Pharma assigned these agreements to us effective April 1, 2022. Citius Pharma renamed E7777 as I/ONTAK and also obtained the trade name of LYMPHIRTM for the product. Denileukin diftitox is referred to as E7777, I/ONTAK or LYMPHIR, depending on the period of time and context that is being discussed.

Under the terms of these agreements, Citius Pharma acquired Dr. Reddy’s exclusive license for E7777 from Eisai and other related assets owned by Dr. Reddy’s. The exclusive license includes rights to develop and commercialize E7777 in all markets except for Japan and certain parts of Asia. Eisai retains exclusive development and marketing rights for the agent in Japan, China, Korea, Taiwan, Hong Kong, Macau, Indonesia, Thailand, Malaysia, Brunei, Singapore, India, Pakistan, Sri Lanka, Philippines, Vietnam, Myanmar, Cambodia, Laos, Afghanistan, Bangladesh, Bhutan, Nepal, Mongolia, and Papua New Guinea. Citius Pharma paid a $40,000,000 upfront payment which represents the acquisition date fair value of the in-process research and development acquired from Dr. Reddy’s. Dr. Reddy’s is entitled to up to $40,000,000 in development milestone payments related to CTCL approvals in the U.S. and other markets, up to $70,000,000 in development milestones for additional indications, as well as commercial milestone payments and low double-digit tiered royalties on net product sales(within a range of 10% to 15%), and up to $300,000,000 for commercial sales milestones. We also must pay on a fiscal quarter basis tiered royalties equal to low double-digit percentages of net product sales(within a range of 10% to 15%). The royalties will end on the earlier of (i) the 15-year anniversary of the first commercial sale of the latest indication that received regulatory approval in the applicable country and (ii) the date on which a biosimilar product results in the reduction of net sales in the applicable product by 50% in two consecutive quarters, as compared to the four quarters prior to the first commercial sale of the biosimilar product. We will also pay to Dr. Reddy’s an amount equal to a low-thirties percentage of any sublicense upfront consideration or milestone payments (or the like) received by us and the greater of (i) a low-thirties percentage of any sublicensee sales-based royalties or (ii) a mid-single digit percentage of such licensee’s net sales. Citius Pharma is a guarantor of our obligations under these agreements.

At the time of the FDA approval for LYMPHIR, a $27,500,000 milestone payment became payable to Dr. Reddy’s under the terms of the asset purchase agreement for which a balance of $19,750,000 remains due as of September 30, 2025. Dr. Reddy’s agreed to a partial deferral without penalty of this milestone payment.

Under the license agreement, Eisai was due a $5,900,000 milestone payment upon FDA approval, of which $2,900,000 remains payable at September 30, 2025, and additional commercial milestone payments related to the achievement of net product sales thresholds and an aggregate of up to $22,000,000 related to the achievement of net product sales thresholds. Citius Pharma was also required to reimburse Eisai for up to $2,650,000 of its costs to complete the Phase 3 pivotal clinical trial for LYMPHIR for the CTCL indication and reimburse Eisai for all reasonable costs associated with the preparation of a Biologics License Application, (the “BLA”) for LYMPHIR. Eisai was responsible for completing the CTCL clinical trial, and chemistry, manufacturing and controls (CMC) activities through the filing of a BLA for LYMPHIR with the FDA. The BLA was approved by the FDA on August 8, 2024. We are responsible for development costs associated with potential additional indications.

On March 28, 2025, Citius Oncology and Eisai entered into a letter agreement that amended the license agreement to provide for a payment schedule to Eisai for the milestone payment and certain unpaid invoices. We agreed to pay Eisai on or before July 15, 2025, an aggregate amount of $2,535,318 and thereafter on the 15 th of each of the next four months to pay Eisai $2,350,000 and make a final payment of $2,197,892 to Eisai on or before December 15, 2025, in each case with interest on each obligation from its original due date through the date of actual payment under the letter agreement at the rate of 2% per annum. During the year ended September 30, 2025, we recorded $218,032 in interest expense under the agreement. The parties released each other from any and all claims, losses, damages, costs and expenses that arise from or related to our failure to pay the milestone payment or the other incurred costs under the license agreement except for any claims arising out of a breach of the letter agreement. All other terms of the license agreement remain in full force and effect. During the year ended September 30, 2025 we paid $3,000,000 of the development milestone and the balance of $2,900,000 is included in license fee payable at September 30, 2025. On July 21, 2025, we made a payment to Eisai of $1,616,522 for other invoices and accumulated interest associated with the letter agreement.

The term of the license agreement will continue until (i) March 30, 2026, if there has not been a commercial sale of a licensed product in the territory, or (ii) if there has been a first commercial sale of a licensed product in the territory by March 30, 2026, the 10-year anniversary of the first commercial sale on a country-by-country basis. We expect the first commercial sale to occur in the first quarter of 2026. The term of the license may be extended for additional 10-year periods for all countries in the territory by notifying Eisai and paying an extension fee equal to $10,000,000. Either party may terminate the license agreement upon written notice if the other party is in material breach of the agreement, subject to cure within the designated time periods. Either party also may terminate the license agreement immediately upon written notice if the other party files for bankruptcy or takes related actions or is unable to pay its debts as they become due. Additionally, either party will have the right to terminate the agreement if the other party directly or indirectly challenges the patentability, enforceability or validity of any licensed patent.

Under the purchase agreement with Dr. Reddy’s, we are required to (i) use commercially reasonable efforts to make commercially available products in the CTCL indication, peripheral T-cell lymphoma indication and immuno-oncology indication, (ii) initiate two investigator initiated immuno-oncology trials (both of which have been initiated), (iii) use commercially reasonable efforts to achieve each of the approval milestones, and (iv) to complete each specified immuno-oncology investigator trial on or before the four-year anniversary of the effective date of the definitive agreement. Additionally, we are required to commercially launch a product in a territory within six months of receiving regulatory approval for such product in each such jurisdiction; the launch of LYMPHIR in December 2025 satisfied this requirement in the U.S.

As part of the definitive agreement with Dr. Reddy’s, Citius Pharma acquired method of use patents in which LYMPHIR is administered in combination with the programmed cell death protein 1 (“PD-1”) pathway inhibitor drug class. PD-1 plays a vital role in inhibiting immune responses and promoting self-tolerance through modulating the activity of T-cells, activating apoptosis of antigen-specific T cells and inhibiting apoptosis of regulatory T cells.

The following patents were acquired and subsequently transferred to us:

US Provisional Application No. 63/070,645, which was filed on August 26, 2020, and subsequently published as US 2022/0062390 A1 on March 3, 2022, entitled Methods of Treating Cancer.

International Patent Application Number: PCT/IB2021/0576733, which was filed with the World Intellectual Property Organization on August 23, 2021, and subsequently published as WO 2022/043863 A1 on March 3, 2022, entitled, Combination for Use in Methods of Treating Cancer.

5. COMMON STOCK, STOCK OPTIONS, RESTRICTED STOCK AWARDS AND WARRANTS

Authorized Capital Stock

The certificate of incorporation adopted on August 5, 2024, in connection with the Merger, authorized 110,000,000 shares, of which 100,000,000 shares are common stock with a par value of $0.0001, and 10,000,000 shares are preferred stock with a par value of $0.0001. On April 7, 2025, pursuant to Board and stockholder approval, we amended our certificate of incorporation to increase the authorized shares of common stock from 100,000,000 shares to 400,000,000 shares.

Common Stock Offerings

On July 17, 2025, we completed an offering of 6,818,182 shares of common stock and warrants to purchase 6,818,182 shares of common stock. The shares and warrants were sold at a per unit price of $1.32. The immediately exercisable five-year warrants have an exercise price of $1.32 per share. Gross proceeds from the offering were approximately $9.0 million and net proceeds were $7,546,988, after deducting placement agent fees and other offering expenses. The estimated fair value of the warrants issued to the investors was approximately $8,197,000.

We paid the placement agent a fee of 7.0% of the gross proceeds and expenses of $125,000. Additionally, we issued the placement agent warrants to purchase up to 272,727 shares of common stock at an exercise price of $1.65 per share. The warrants are exercisable commencing on January 17, 2026 and expire on July 17, 2030. We also paid an additional 7.0% fee to a prior placement agent and issued to the prior placement agent warrants to purchase up to 477,273 shares of common stock at an exercise price of $1.65 per share. The placement agent warrants are exercisable commencing on August 17, 2025 and expire on July 17, 2030. The estimated fair value of the warrants issued to the placement agents was approximately $905,000.

On September 10, 2025, we completed an offering of 5,142,858 shares of common stock and warrants to purchase 5,142,858 shares of common stock. The shares and warrants were sold at a per unit price of $1.75. The warrants are exercisable beginning on March 10, 2026 and expire on March 10, 2031 at an exercise price of $1.84 per share. Gross proceeds from the offering were approximately $9.0 million and net proceeds were $7,619,854, after deducting placement agent fees and other offering expenses. The estimated fair value of the warrants issued to the investors was approximately $6,995,000.

We paid the placement agent a fee of 7.0% of the gross proceeds and expenses of $125,000. Additionally, we issued the placement agent warrants to purchase up to 205,714 shares of common stock at an exercise price of $1.92 per share. The warrants are exercisable commencing on March 10, 2026 and expire on March 10, 2031. We also paid an additional 7.0% fee to a prior placement agent and issued the prior placement agent warrants to purchase up to 360,000 shares of common stock at an exercise price of $2.1875 per share. The placement agent warrants are exercisable commencing on March 10, 2026 and expire on March 10, 2031. The estimated fair value of the warrants issued to the placement agents was approximately $717,000.

Stock Plans

Under the Citius Oncology 2023 Stock Plan, adopted on April 29, 2023, we reserved 15,000,000 common shares for issuance. Under the Citius Oncology 2024 Stock Plan, adopted on August 2, 2024, we reserved 15,000,000 common shares for issuance. The stock plans provide incentives to employees, directors, and consultants through grants of options, SARs, dividend equivalent rights, restricted stock, restricted stock units, or other rights.

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Volatility is estimated using the trading activity of Citius Pharma common stock until such time as we have sufficient history. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The expected term of stock options granted to employees and directors, all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the expected term is the contractual term.

The following assumptions were used in determining the fair value of stock option grants for the year ended September 30, 2025 and 2024:

A summary of option activity under the plan is presented below:

On December 2, 2024, the Board of Directors granted options to purchase 200,000 common shares at an exercise price of $1.02 per share. On December 12, 2024, the Board of Directors granted options to purchase 5,550,000 common shares at an exercise price of $1.07 per share.

The weighted average grant date fair value of the options granted during the year ended September 30, 2025 was estimated at $0.80 per share. All these options vest over terms of 12 to 36 months and have a term of 10 years.

Stock-based compensation expense for stock options for the years ended September 30, 2025 and 2024 was $8,116,678 and $7,498,817, respectively.

At September 30, 2025, unrecognized total compensation cost related to unvested stock options under the stock plans of $7,814,682 is expected to be recognized over a weighted average period of 1.23 years.

Restricted stock awards

On September 19, 2025, the Board of Directors granted restricted stock awards of 11,600,000 shares of common stock to employees and directors. The restricted stock awards vest on September 19, 2028. The fair value of the common stock on the date of grant was $20,300,000 ($1.75 per share).

Stock-based compensation expense for restricted stock awards for the year ended September 30, 2025 was $203,741.

At September 30, 2025, unrecognized total compensation cost related to unvested restricted stock awards under the stock plans of $20,096,259 is expected to be recognized over a weighted average period of 2.97 years.

Warrants

We have reserved 13,276,754 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at September 30, 2025:

At September 30, 2025, the weighted average remaining life of the outstanding warrants is 5.08 years, all warrants are exercisable except for the September 2025 Offering warrants which become exercisable on March 10, 2026, and the aggregate intrinsic value of the warrants outstanding was $6,125,681.

Common Stock Reserved

A summary of common stock reserved for future issuances by the Company as of September 30, 2025 is as follows:

6. RELATED PARTY TRANSACTIONS

Our officers and directors also serve as officers of Citius Pharma. As of September 30, 2025, we do not have any employees. The Company and Citius Pharma have entered into the A&R Shared Services Agreement and under the terms of the agreement, Citius Pharma provides management and scientific services to us. During the year ended September 30, 2025, Citius Pharma charged us $2,201,742 for reimbursement of general and administrative payroll, $1,920,000 for reimbursement of research and development payroll, and $114,185 for the use of shared office space. During the year ended September 30, 2024, Citius Pharma charged us $1,846,202 for reimbursement of general and administrative payroll, $1,963,630 for reimbursement of research and development payroll, and $121,570 for the use of shared office space.

We have had limited cash, therefore most of our expenditures have been paid by Citius Pharma and reflected in the due to related party account. At September 30, 2025 and 2024, the net amount due to Citius Pharma was $9,513,771 and $588,806, respectively.

In connection with closing of the Merger, Citius Pharma made a contribution to our capital in the amount of $33,180,961 representing the balance of the due to/due from related party account on the date of the Merger. Citius Pharma also made cash contributions to our capital, pursuant to the terms of the Merger Agreement, in the amount of $3,827,944.

Also, in connection with the Merger, Citius Pharma advanced cash to the Company for a non-interest bearing, unsecured promissory note issued by the Company, dated August 16, 2024, as amended September 10, 2025, in the principal amount of $3,800,111. The note is repayable in full upon a financing of at least $30,000,000 by the Company, per the terms of the promissory note. Management does not anticipate such repayment within the next twelve months. As a result, this note payable is classified as non-current on the balance sheet.

7. INCOME TAXES

We file consolidated income tax returns with Citius Pharma. We recorded deferred income tax expense of $1,056,960 and $576,000 for the years ended September 30, 2025 and 2024 related to the amortization for taxable purposes of our in-process research and development asset.

The income tax expense differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the years ended September 30, 2025 and 2024 due to the following:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

The Company has recorded a valuation allowance against deferred tax assets as the utilization of the net operating loss carryforward and other deferred tax assets is uncertain. During the years ended September 30, 2025 and 2024, the valuation allowance increased by $7,682,000 and $4,928,000, respectively. The increase in the valuation allowance during the years ended September 30, 2025 and 2024 was primarily due to the Company’s net operating losses and capitalized research and development expenses. At September 30, 2025, the Company has a federal net operating loss carryforward of approximately $47,153,000. Federal net operating loss carryforwards generated in tax years beginning after 2017 may be carried forward indefinitely. Use of federal net operating losses may be limited under Section 382 of the Internal Revenue Code due to changes in ownership.

As of September 30, 2025, the Company also has estimated federal research and development credits of $1,581,000 to offset future income taxes. The tax credit carryforwards will begin to expire in 2042.

We account for uncertain tax positions in accordance with the guidance provided in ASC 740, “Accounting for Income Taxes.” This guidance describes a recognition threshold and measurement attribute for the financial statement disclosure of tax positions taken or expected to be taken in a tax return and requires recognition of tax benefits that satisfy a more-likely-than-not threshold. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure. There have been no reserves for uncertain tax positions recorded by the Company to date.

On July 4, 2025, the “One Big Beautiful Bill Act” (“OBBBA”) was signed into law in the United States. The OBBBA includes a broad range of tax reform provisions for businesses, including extensions of key Tax Cuts and Jobs Act provisions, modifications to the international tax framework, and restoration of favorable tax treatment for certain business provisions. Certain provisions of the legislation will become effective in 2025, while others are effective in 2026. The OBBBA was enacted during our fourth fiscal quarter of 2025, and we have considered its potential effects and reflected the impact of the OBBBA on our financial position, results of operations, and cash flows. We are in the process of evaluating the impact of these provisions on future periods, but we do not expect the OBBBA to have a material impact on our consolidated financial statements.

8. COMMITMENTS AND CONTINGENCIES

Commercial Manufacturing Contracts

We entered into an agreement with a Contract Manufacturing Organization for the manufacture and supply of drug substance. The agreement runs through calendar 2026, with an automatic renewal for a subsequent 4-year term. Under this agreement, we are obligated to purchase minimum annual quantities of batches at a set price per batch, subject to annual increases.

Additionally, we are required to pay an annual service fee of $250,000. The agreement also includes provisions for potential price increases based on increases in the manufacturer’s operating expenses or industry indices, as well as significant termination fees and obligations. As of September 30, 2025, the total minimum purchase commitment under this agreement was approximately $16.2 million consisting of payments of approximately $8.5 million and $5.3 million for 2025 and 2026 respectively and approximately$2.4 million for 2026 pass-throughs and consumable manufacturing components.

As of September 30, 2025, we have commercial supply agreements with two other vendors for the completion and packaging of finished drug products. Minimum purchase commitments under these two agreements amount to approximately $4.9 million consisting of purchase commitment obligations of approximately $1.2 million in 2025, $1.9 million in 2026 and $1.8 million in 2027.

Legal Proceedings

We are not involved in any litigation that we believe could have a material adverse effect on our financial position or results of operations. There is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers, threatened against or affecting the Company or its officers or directors in their capacities as such.

9. SUBSEQUENT EVENTS

On October 27, 2025, we held our 2025 annual meeting of stockholders. At the meeting, our stockholders approved an amendment to the Company’s 2024 Omnibus Stock Incentive Plan increasing the number of shares of our common stock authorized for issuance under the plan from 15,000,000 to 30,000,000 shares.

On December 8, 2025, the Company entered into a securities purchase agreement (the “RD Purchase Agreement”) with a certain institutional investor in a registered direct offering for the purchase and sale of 1,284,404 shares of our common stock at an offering price of $1.09 per share of common stock (the “Shares”). In a concurrent private placement, the Company also agreed to sell such institutional investor warrants to purchase up to 1,284,404 shares of common stock (the “Common Warrants”), with an exercise price of $1.09 per share of our common stock, which are exercisable upon Stockholder Approval (as defined in the Common Warrant), and have a term offive years from the date of Stockholder Approval. The aggregate gross proceeds to the Company from the offering were approximately $18.0 million. Net proceeds were approximately $15.2 million, after deducting placement agent fees and other offering expenses payable by the Company.

On December 8, 2025, the Company also entered into a securities purchase agreement (the “PIPE Purchase Agreement”, together with the RD Purchase Agreement, the “Purchase Agreements”) with such institutional investor to issue in a concurrent private placement pre-funded warrants to purchase up to 15,229,358 shares of common stock (the “Pre-funded Warrants”) and 15,229,358 Common Warrants, at a combined price of $1.0899 per Pre-funded Warrant and accompanying Common Warrant. The Pre-funded Warrants are exercisable immediately, at an exercise price of $0.0001 per share, and will remain valid and exercisable until all the Pre-funded Warrants are exercised in full.

In connection with the offering, the Company agreed to pay the placement agent a cash fee of 7.0% of the aggregate gross proceeds the Company received in the offering. In addition, the Company granted placement agent warrants to the placement agent, or its designees, to purchase up to 1,155,963 shares of common stock (the “Placement Agent Warrants”). The terms of the Placement Agent Warrants are substantially the same as the terms of the Common Warrants, except that the exercise price is $1.3625 per share and expire five years from the commencement of sales in the offering.