Citius Pharmaceuticals, Inc.

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Business

Citius Pharmaceuticals, Inc. (“Citius Pharma,” the “Company,” “we,” or “us”) is a late-stage biopharmaceutical company dedicated to the development and commercialization of critical care products with a focus on oncology, anti-infectives in adjunct cancer care, unique prescription products and stem cell therapies.

On March 30, 2016, we acquired Leonard-Meron Biosciences, Inc. (“LMB”) as a wholly-owned subsidiary. We acquired all the outstanding stock of LMB by issuing shares of our common stock. The net assets acquired included identifiable intangible assets of $19,400,000 related to in-process research and development. We recorded goodwill of $9,346,796 for the excess of the purchase price over the net assets acquired.

On September 11, 2020, we formed NoveCite, Inc. (“NoveCite”), a Delaware corporation, of which we own 75% of the issued and outstanding capital stock.

On August 23, 2021, we formed Citius Oncology, Inc. (“Citius Oncology”), as a wholly-owned subsidiary in conjunction with the acquisition of LYMPHIR, which began operations in April 2022. On August 12, 2024, Citius Pharma and Citius Oncology entered into a merger agreement with TenX Keane Acquisition, and its wholly owned subsidiary, TenX Merger Sub Inc (“Merger Sub”), whereby Merger Sub merged with and into Citius Oncology. After the merger and recapitalization (the “Merger”), the newly combined publicly traded company was owned 92.3% by Citius Pharma, and is named Citius Oncology, Inc. (see Note 10).

Since our inception, we have devoted substantially all our efforts to business planning, research and development, recruiting management and technical staff, and raising capital. 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 us or our competitors of research and development stage products, regulatory approval and market acceptance of its products, competition from larger companies, dependence on key personnel, dependence on key suppliers and strategic partners, our ability to obtain additional financing and our compliance with governmental and other regulations.

Basis of Presentation

The accompanying consolidated financial statements include the operations of Citius Pharmaceuticals, Inc., and its wholly-owned subsidiary LMB and its majority-owned subsidiaries NoveCite and Citius Oncology. On August 12, 2024, Citius Oncology, previously a wholly-owned subsidiary, became a majority-owned subsidiary. As of September 30, 2025, Citius Oncology was a 79.1% majority-owned subsidiary.

The operations of NoveCite and Citius Oncology are included in the consolidated results. The portion of equity that is not attributable to the Company, is presented as a non-controlling interest within stockholders’ equity. Unless excluded by shareholder agreements, the portion of net loss attributable to non-controlling interests is included in the statement of operations.

All significant inter-company balances and transactions have been eliminated in consolidation.

All share amounts and per share data reflect a 1-for-25 reverse stock split which became effective on November 25, 2024.

2. GOING CONCERN UNCERTAINTY AND MANAGEMENT’S PLAN

The accompanying consolidated 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 experienced negative cash flows from operations of $26,552,738 and $28,201,375, for the years ended September 30, 2025 and 2024, respectively. We had a negative working capital of approximately $17 million at September 30, 2025. We estimate that our available cash resources will be sufficient to fund its operations 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 consolidated financial statements are issued.

We have generated no operating revenue to date and have principally raised capital through the issuance of debt and equity instruments to finance our operations. However, our continued operations beyond March 2026, including our development plans for Mino-Lok, Halo-Lido and NoveCite, will depend on our ability to obtain regulatory approval for Mino-Lok and generate substantial revenue from the sale of LYMPHIR and on our ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships, or out-licensing of our product candidates. We can provide no assurances on regulatory approval, commercialization, or future sales of LYMPHIR or that financing or strategic relationships will be available on acceptable terms, or at all. If we are unable to raise sufficient capital, find strategic partners or generate substantial revenue from the sale of LYMPHIR, there would be a material adverse effect on our business. Further, we expect in the future to incur additional expenses as we continue to develop our product candidates, including seeking regulatory approval, and protecting our intellectual property. 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 us in the preparation of the consolidated financial statements is as follows:

Use of Estimates

The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America (“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, goodwill, 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 $64,210 and $0 in prepaid annual service fees, respectively, and $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 to be sold commencing in 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 consolidated 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

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 includes $19,400,000 representing the value of LMB’s drug candidate, Mino-Lok, an antibiotic lock solution in Phase 3 clinical development, which if approved, would be used to treat catheter-related bloodstream infections, and is expected to be amortized on a straight-line basis over a period ofeight years commencing upon revenue generation. In-process research and development also includes $73,400,000 representing the value of Citius Oncology’s exclusive license for LYMPHIR (denileukin diftitox), a late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma and is expected to be amortized on a straight-line basis over a period oftwelve years commencing upon revenue generation. Citius Oncology’s In-process research and development consists of $40,000,000 paid to Dr. Reddy’s from the asset purchase agreement and approval milestone fees of $27,500,000 to Dr. Reddy’s and $5,900,000 to Eisai. Included in the IPR&D is the historical know-how, formula protocols, designs, and procedures that were needed to complete 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.

The Company reviews 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, the Company writes 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.

Goodwill

Goodwill represents the value of LMB’s industry relationships and its assembled workforce. Goodwill is not amortized but it is tested at least annually for impairment.

The Company evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances indicate that the carrying value of an asset might be impaired, in accordance with Accounting Standard Update (“ASU”) 2017-04,Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment issued by the Financial Accounting Standards Bureau (“FASB”). Goodwill is first qualitatively assessed to determine whether further impairment testing is necessary. Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy and changes in the composition or carrying amount of net assets. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a one-step test is then performed in accordance with ASU 2017-04. Under the simplified model, a goodwill impairment is calculated as the difference between the carrying amount of the reporting unit and its fair value.

For its 2025 goodwill analysis, the Company performed a quantitative assessment as of September 30, 2025. Based on this analysis, management concluded that the estimated fair value of the reporting unit exceeded its carrying amount. Accordingly, no impairment charge was recorded, and goodwill continues to be carried at its current value.

Stock-Based Compensation

We recognize compensation costs resulting from the issuance of stock-based awards to employees and directors as an expense in the consolidated statement 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. We estimate volatility using the trading activity of our common stock. 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 consolidated statement of operations over the service period based on the measurement of fair value for each stock award and record forfeitures as they occur.

Income Taxes

We follow accounting guidance regarding the recognition, measurement, presentation, and disclosure of uncertain tax positions in the consolidated 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 consolidated 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, the Company did not recognize any interest and penalties. Tax years subsequent to September 30, 2021 are subject to examination by federal and state authorities.

The Company recognizes 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. The Company provides a valuation allowance, if necessary, for deferred tax assets for which it does 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 applicable to common stockholders 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 and warrants were not included in the calculation of the diluted loss per share because they were anti-dilutive.

Segment Reporting

The Company operates through a single 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 hasone 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. We are currently evaluating the impact of adoption of the standard on our 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 expenses 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 on ours financial statement disclosures.

4. PATENT AND TECHNOLOGY LICENSE AGREEMENTS

Patent and Technology License Agreement – Mino-Lok

LMB has a patent and technology license agreement with Novel Anti-Infective Therapeutics, Inc. (“NAT”) to develop and commercialize Mino-Lok® on an exclusive, worldwide sub licensable basis, as amended. LMB pays an annual maintenance fee each June until commercial sales of a product subject to the license commence. We recorded an annual maintenance fee expense of $90,000 in both 2025 and 2024.

LMB will also pay annual royalties on net sales of licensed products, with royalties ranging from the mid-single digits to the low double digits. In limited circumstances in which the licensed product is not subject to a valid patent claim and a competitor is selling a competing product, the royalty rate is in the low- to mid-single digits. After a commercial sale is obtained, LMB must pay minimum aggregate annual royalties of $100,000 in the first commercial year which is prorated for a less than 12-month period, increasing $25,000 per year to a maximum of $150,000 annually. LMB must also pay NAT up to $1,100,000 upon achieving specified regulatory and sales milestones. Finally, LMB must pay NAT a specified percentage of payments received from any sub-licensees.

Unless earlier terminated by NAT, based on the failure to achieve certain development and commercial milestones, the license agreement remains in effect until the date that all patents licensed under the agreement have expired and all patent applications within the licensed patent rights have been cancelled, withdrawn, or expressly abandoned.

License Agreement with Eterna

On October 6, 2020, NoveCite, entered into a license agreement with Novellus Therapeutics Limited (“Novellus”), whereby NoveCite acquired an exclusive, worldwide license, with the right to sublicense, develop and commercialize a stem cell therapy based on the Novellus’s patented technology for the treatment of acute pneumonitis of any etiology in which inflammation is a major agent in humans. Upon execution of the license agreement, NoveCite, paid an upfront payment of $5,000,000 to Novellus, which was charged to research and development expense during the year ended September 30, 2021, and issued to Novellus shares of NoveCite’s common stock representing 25% of the outstanding equity. We own the other 75% of NoveCite’s outstanding equity. Pursuant to the terms of the original stock subscription agreement, if NoveCite issued additional equity, subject to certain exceptions, NoveCite had to maintain Novellus’s ownership at 25% by issuing additional shares to Novellus.

In July 2021, Novellus was acquired by Brooklyn ImmunoTherapeutics, Inc. (“Brooklyn”). In this transaction, the NoveCite license was assumed by Brooklyn with all original terms and conditions. The stock subscription agreement was amended to assign to Brooklyn all of Novellus’s rights and delete the anti-dilution protection and replace it with a right of first refusal whereby Brooklyn will have the right to purchase all or a portion of the securities that NoveCite intends to sell or in the alternative, at the option of NoveCite, Brooklyn may purchase that amount of the securities proposed to be sold by NoveCite to allow Brooklyn to maintain its then percentage ownership. In October 2022, Brooklyn changed its name to Eterna Therapeutics Inc. (“Eterna”).

We are responsible for the operational activities of NoveCite and bear all costs necessary to operate NoveCite. Our officers are also the officers of NoveCite and oversee the business strategy and operations of NoveCite. As such, NoveCite is accounted for as a consolidated subsidiary with a noncontrolling interest.

Eterna has no contractual rights in the profits or obligations to share in the losses of NoveCite, and we have not allocated any losses to the noncontrolling interest.

Under the license agreement, NoveCite is obligated to pay Eterna up to an aggregate of $51,000,000 in regulatory and developmental milestone payments. NoveCite also must pay a royalty equal to a mid-teens percentage of net sales, commencing upon the first commercial sale of a licensed product. This royalty is subject to downward adjustment on a product-by-product and country-by-country basis to a mid-single digit percentage (within a range of 4% to 8%) of net sales in any country in the event of the expiration of the last valid patent claim or if no valid patent claim exists in that country. The royalty will end on the earlier of (i) date on which a biosimilar product is first marketed, sold, or distributed by Eterna or any third party in the applicable country or (ii) the 10-year anniversary of the date of expiration of the last-to-expire valid patent claim in that country. In the case of a country where no licensed patent ever exists, the royalty will end on the later of (i) the date of expiry of such licensed product’s regulatory exclusivity and (ii) the 10-year anniversary of the date of the first commercial sale of the licensed product in the applicable country. In addition, NoveCite will pay to Eterna an amount equal to a mid-twenties percentage of any sublicensee fees it receives.

Under the terms of the license agreement, in the event that Eterna receives any revenue involving the original cell line included in the licensed technology, then Eterna shall remit to NoveCite 50% of such revenue.

The term of the license agreement continue on a country-by-country and licensed product-by-licensed product basis until the expiration of the last-to-expire royalty term. Either party may terminate the license agreement upon written notice if the other party is in material default. NoveCite may terminate the license agreement at any time without cause upon 90 days prior written notice.

Eterna will be responsible for preparing, filing, prosecuting, and maintaining all patent applications and patents included in the licensed patents in the territory, provided however, that if Eterna decides that it is not interested in maintaining a particular licensed patent or in preparing, filing, or prosecuting a licensed patent, NoveCite will have the right, but not the obligation, to assume such responsibilities in the territory at NoveCite’s sole cost and expense.

License Agreement with Eisai

In September 2021, we 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. We renamed E7777 as I/ONTAK and also obtained the trade name of LYMPHIR for the product. We assigned these agreements to Citius Oncology effective April 1, 2022 and received a BLA approval from the FDA for LYMPHIR in August 2024.

Under the terms of these agreements, we acquired Dr. Reddy’s exclusive license for E7777 from Eisai and other related assets (which are now owned by Citius Oncology). The exclusive license rights, through Citius Oncology, include 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. We paid Dr. Reddy’s a $40 million upfront payment, which represents the acquisition date fair value of the in-process research and development acquired. Dr. Reddy’s is entitled to up to $40 million in development milestone payments related to CTCL approvals in the U.S. and other markets, up to $70 million 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 million for commercial sales milestones. Citius Oncology 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. Citius Oncology 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 Citius Oncology’s payment obligations under these agreements.

At the time of the FDA approval for LYMPHIR, a $27.5 million milestone became payable to Dr. Reddy’s, of which a balance of $19.75 million included in license fee payable, remained due as of September 30, 2025. After discussions, Dr. Reddy’s agreed to a partial deferral without penalty of this milestone payment. During the years ended September 30, 2025 and 2024, we paid $2,750,000 and $5,000,000, respectively, against the outstanding milestone fee.

At the time of the FDA approval for LYMPHIR, a $5.9 million milestone became payable to Eisai, of which a balance of $2.9 million included in license fee payable, remained due as of September 30, 2025. During the year ended September 30, 2025, we paid $3,000,000 against the outstanding milestone fee. Eisai is to receive additional commercial milestone payments related to the achievement of net product sales thresholds and an aggregate of up to $22 million related to the achievement of net product sales thresholds. Citius Oncology was o required to reimburse Eisai for up to $2.65 million of its costs to complete the Phase 3 pivotal clinical trial for the CTCL indication and reimburse Eisai for all reasonable costs associated with the preparation of a Biologics License Application (“BLA”) for LYMPHIR. Eisai was responsible for completing the CTCL clinical trial, and chemistry, manufacturing, and controls (“CMC”) activities through the filing of the BLA 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 15th 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 million. 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, we 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 Citius Oncology:

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. NOTE PAYABLE AND ADVANCE FROM EMPLOYEE

On June 2, 2025, The Company borrowed $1,000,000 from an unrelated lender. The note payable is due in full on December 2, 2025 with interest at 15% compounded monthly. Leonard Mazur (Chairman and Chief Executive Officer of the Company) personally guaranteed repayment of the note. Interest expense for the year ended September 30, 2025 was $49,750.

On May 28, 2025, an employee provided a $300,000 non-interest-bearing advance to the Company. On June 5, 2025, the Company repaid the employee in full.

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

Authorized Common Stock and Reverse Stock Split

We filed a Certificate of Change with the Secretary of State of the State of Nevada to (i) effect a 1-for-25 reverse stock split of our issued and outstanding shares of common stock, and (ii) decrease the number of total authorized shares of common stock from 400,000,000 shares to 16,000,000 shares. The reverse stock split was intended to regain compliance with the minimum bid price requirement of $1.00 per share of common stock for continued listing on the Nasdaq Capital Market. The reverse stock split became effective on November 25, 2024, and our common stock began trading on a reverse stock split-adjusted basis on the Nasdaq Capital Market on November 26, 2024. All share amounts have been retroactively adjusted to reflect the split.

Series A Preferred Stock and Authorized Common Stock

On April 17, 2025, we entered into an agreement with Leonard Mazur (Chairman and Chief Executive Officer of the Company), pursuant to which we soldone share of Series A Preferred Stock, par value $0.001 per share for $100 to Mr. Mazur. The Series A Preferred Stock was sold in connection with the June 9, 2025 special meeting of the stockholders for the purpose of approving an amendment to our Articles of Incorporation, as amended, to increase the number of shares of our authorized common stock from 16,000,000 to 250,000,000. Our stockholders approved the authorized share increase on June 9, 2025.

On April 17, 2025, we filed a certificate of designation with the Nevada Secretary of State, designating the powers, rights, privileges and restrictions of the Series A Preferred Stock. The certificate provides that each share of Series A Preferred Stock will have 1,000,000,000 votes and will vote together with the outstanding shares of common stock as a single class, exclusively with respect to the authorized share increase proposal and shall not be entitled to vote on any other matter. The Series A Preferred Stock will be voted on the authorized share increase in the same proportion as the aggregate votes cast by holders of common stock “for” and “against” the proposal. The Series A Preferred Stock otherwise has no other voting rights, including in respect of any other proposal. The voting power attributable to the Series A Preferred Stock will be disregarded for purposes of determining whether a quorum is present at the special meeting, and the establishment of a quorum at the special meeting will be determined only with reference to the common stock.

Pursuant to its terms, on June 9, 2025, the outstanding share of Series A Preferred Stock was redeemed automatically for $100 after we published the final results of the stockholder vote on the authorized stock increase.

Common Stock Issued for Services

On October 10, 2023, we issued 4,351 shares of common stock for media, and public and investor relations services and expensed the $76,146 fair value of the common stock issued.

On January 17, 2024, we issued 5,128 shares of common stock for general and business development advisory services and expensed the $98,079 fair value of the common stock issued.

On April 25, 2024, we issued 6,000 shares of common stock for financial, general and business development advisory services and expensed the $109,950 fair value of the common stock issued.

On July 1, 2025, we issued 20,000 shares of common stock for media, and public and investor relations services and expensed the $26,600 fair value of the common stock issued.

Common Stock Offerings

On April 30, 2024, Citius Pharma sold 857,143 shares of common stock and warrants to purchase 857,143 shares of common stock, at a purchase price of $17.50 per share and accompanying warrant for gross proceeds of $15,000,002. The warrants have an exercise price of $18.75 per share, are exercisable six months after issuance, and expire on October 30, 2029. The estimated fair value of the warrants issued to the investors was approximately $11,206,000.

Net proceeds were $13,718,951 after deducting the placement agent fee of $1,050,000, placement agent expenses of $135,000, legal fees of $80,101, and other offering expenses of $15,950. We also issued 60,000 warrants to the placement agent at an exercise price of $21.875 per share, that are exercisable six months from the date of issuance and expire on April 25, 2029. The estimated fair value of the warrants issued to the placement agent was approximately $756,000.

On November 15, 2024, Citius Pharma sold 480,000 shares of common stock and warrants to purchase 480,000 shares of common stock. Gross proceeds were $3,000,000 and net proceeds were $2,574,051 after deducting fees and expenses. The shares and warrants were sold at a combined offering price of $6.25. The immediately exercisable warrants have an exercise price of $6.25 per share and expire on November 19, 2029. The estimated fair value of the warrants issued to the investors was approximately $1,575,000.

We paid the placement agent 7% of the gross proceeds and granted the placement agent immediately exercisable warrants to purchase 33,600 shares of common stock at an exercise price is $7.8125 per share which expire on November 15, 2029. The estimated fair value of the warrants issued to the placement agent was approximately $104,000.

On January 7, 2025, Citius Pharma sold 743,496 shares of common stock and warrants to purchase 743,496 shares of common stock. Gross proceeds were approximately $3,000,000 and net proceeds were $2,657,167 after deducting fees and expenses. The shares and warrants were sold at a combined offering price of $4.035. The immediately exercisable warrants have an exercise price of $3.91 per share and expire on January 8, 2030. The estimated fair value of the warrants issued to the investors was approximately $2,091,000.

We paid the placement agent 7% of the gross proceeds and granted the placement agent immediately exercisable warrants, to purchase 52,045 shares of common stock at $5.0438 per share which expire on January 7, 2030. The estimated fair value of the warrants issued to the placement agent was approximately $138,000.

On April 1, 2025, Citius Pharma sold 465,000 shares of common stock, and pre-funded warrants to purchase 1,274,131 shares of common stock at an offering price of $1.15 and $1.1499. Gross proceeds were $1,999,873 and net proceeds were $1,743,757 after deducting fees and expenses. The immediately exercisable pre-funded warrants have an exercise price of $0.0001 per share and do not expire. All 1,274,131 of the pre-funded warrants were exercised during the year ended September 30, 2025.

We paid the placement agent 7% of the gross proceeds and granted the placement agent warrants to purchase 121,739 shares of common stock at $1.4375 per share which are exercisable commencing on October 2, 2025 and expire on April 1, 2030. The estimated fair value of the warrants issued to the placement agent was approximately $100,000.

On June 11, 2025, Citius Pharma sold 540,000 shares of common stock, and pre-funded warrants to purchase 4,380,000 shares of common stock at offering prices of $1.22 and $1.2199, respectively, along with immediately exercisable two-year warrants to purchase 9,840,000 shares of common stock at $1.00 per share. Gross proceeds were $6,001,962 and net proceeds of the offering were $5,430,836 after deducting fees and expenses. The pre-funded warrants are exercisable immediately at $0.0001 per share and do not expire. During the year ended September 30, 2025 all 4,380,000 of the pre-funded warrants were exercised. The estimated fair value of the 9,840,000 warrants issued to the investors was approximately $4,867,000.

We paid the placement agent a fee of $420,168 and other fees and expenses were $150,958. In addition, we granted placement agent warrants to purchase 344,400 shares of common stock at an exercise price equal to $1.525 per share. The warrants are exercisable six months after issuance and expire after five years. On the expiration date, any warrants outstanding will be exercised via cashless exercise. The estimated fair value of the warrants issued to the placement agent was approximately $222,000.

On July 17, 2025, Citius Oncology sold 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.

Citius Oncology paid the placement agent a fee of 7.0% of the gross proceeds and expenses of $125,000, and 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. Citius Oncology also paid an additional 7.0% fee to a prior placement agent and issued 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, Citius Oncology sold 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.

Citius Oncology paid the placement agent a fee of 7.0% of the gross proceeds and expenses of $125,000. Additionally, Citius Oncology 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.

Citius Pharma At the Market Offering Agreement

On August 12, 2024, we entered into a sales agreement, to sell, from time to time during the term of the agreement our shares of common stock.

During the year ended September 30, 2024, Citius Pharma sold 18,168 shares for gross proceeds of $252,140. Net proceeds after deducting broker fees and other offering expenses were $84,735.

During the three months ended March 31, 2025, Citius Pharma sold 289,910 shares for gross proceeds of $839,468. Net proceeds after deducting broker fees and other offering expenses were $808,640.

During the three months ended June 30, 2025, Citius Pharma sold 2,185,249 shares for gross proceeds of $3,471,866. Net proceeds after deducting broker fees and other offering expenses were $3,294,446.

During the three months ended September 30, 2025, Citius Pharma sold 442,715 shares for gross proceeds of $657,284. Net proceeds after deducting broker fees and other offering expenses were $626,843.

Citius Pharma Stock Option Plans

Under our 2014 Stock Plan, we reserved 34,667 shares of common stock. As of September 30, 2025, there were options to purchase 16,910 shares outstanding and no shares were available for future grants.

Under our 2018 Stock Plan, we reserved 80,000 shares of common stock. As of September 30, 2025, there were options to purchase 67,200 shares outstanding and no shares were available for future grants.

Under our 2020 Stock Plan, we reserved 124,400 shares of common stock. As of September 30, 2025, there were options to purchase 66,000 shares outstanding and no shares available for future grants.

Under our 2021 Stock Plan, we reserved 349,600 shares of common stock. As of September 30, 2025, options to purchase 330,000 shares were outstanding and no shares reserved for future grants

Under our 2023 Stock Plan, we reserved for issuance 481,400 shares of common stock. As of September 30, 2025, options to purchase 359,400 shares were outstanding, and 118,000 shares remain available for future grants.

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 our common stock. 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 years ended September 30, 2025 and 2024:

A summary of option activity under our plans (excluding the NoveCite and Citius Oncology Stock Plans) is presented below:

The weighted average grant date fair value of the options granted during the year ended September 30, 2025 was estimated at $7.15 per share. All these options vest over terms of 12 to 36 months and have a term of 10 years.

At September 30, 2025, unrecognized total compensation cost related to unvested awards under the Citius Pharma stock plans of $1,485,612 is expected to be recognized over a weighted average period of 1.55 years.

NoveCite Stock Plan – Under the NoveCite Stock Plan, we reserved 2,000,000 shares of common stock of NoveCite. As of September 30, 2025, there were options outstanding to purchase 1,911,500 shares and 88,500 shares of common stock available for future grants.

During the year ended September 30, 2021, NoveCite granted options to purchase 2,000,000 shares of common stock to employees at an exercise price of $0.24 per share,88,500 shares were forfeited, and options to purchase 1,911,500 shares were exercisable as of September 30, 2025. These options vested over 36 months and have a term of 10 years. The weighted average remaining contractual term of options outstanding under the NoveCite Stock Plan is 5.39 years. No options were issued in fiscal years 2025 and 2024. At September 30, 2025, there is no remaining unrecognized total compensation cost related to awards under the plan.

Citius Oncology Stock Plan - Under the 2023 Citius Oncology Stock Plan, we reserved 15,000,000 shares of common stock of Citius Oncology. On August 2, 2024, Citius Oncology reserved 15,000,000 shares under the Citius Oncology 2024 Stock plan The Citius Oncology 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. As of September 30, 2025, options to purchase 18,100,000 shares were outstanding, restricted stock awards of 11,600,000 have not vested and 300,000 shares remain available for future grants.

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

Volatility is estimated using the trading activity of Citius Pharmaceuticals common stock. until such time as Citius Oncology has 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.

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

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

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

Citius Oncology 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 30, 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.

Stock-based compensation expense - under all plans for the years ended September 30, 2025 and 2024 was $10,836,291 (including $8,116,678 for Citius Oncology options and $203,741 for Citius Oncology restricted stock awards) and $11,839,678 (including $47,574 for the NoveCite plan and $7,498,817 for the Citius Oncology plan). respectively.

Citius Pharmaceuticals Warrants

We reserved 14,479,372 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at September 30, 2025:

On April 2, 2024, we extended the term to April 5, 2025, for 51,780 warrants with an exercise price of $35.50 per share and extended the term to April 5, 2025, for 9,605 warrants with an exercise price of $48.28 per share. We recorded a deemed dividend of $321,559 based on the excess of the fair value of the modified warrants over the fair value of the warrants before the modification which increased the net loss attributable to common shareholders for the year ended September 30, 2024.

On August 7, 2024, we extended the term to August 14, 2025, for 156,863 warrants with an exercise price of $28.75 per share and extended the term to August 8, 2025, for 7,576 warrants with an exercise price of $39.84 per share. We recorded a deemed dividend of $375,511 based on the excess of the fair value of the modified warrants over the fair value of the warrants before the modification which increased the net loss attributable to common shareholders for the year ended September 30, 2024.

On September 25, 2024, we extended the term to September 27, 2025, for 111,732 warrants with an exercise price of $19.25 per share and extended the term to September 27, 2025, for 7,774 warrants with an exercise price of $27.97 per share. We recorded a deemed dividend of $350,241 based on the excess of the fair value of the modified warrants over the fair value of the warrants before the modification which increased the net loss attributable to common shareholders for the year ended September 30, 2024.

On August 7, 2025, we extended the term to August 14, 2026 for 156,863 warrants with an exercise price of $28.75 per share and extended the term to August 8, 2026 for 7,577 warrants with an exercise price of $39.84 per share. On August 7, 2025, we also extended the term to September 27, 2026 for 111,732 warrants with an exercise price of $19.25 per share and 7,774 warrants with an exercise price of $27.97 per share. We did not record a deemed dividend for the year ended September 30, 2025, as there was no increase in the fair value of the modified warrants over the fair value of the warrants before the modification.

At September 30, 2025, the weighted average remaining life of the outstanding warrants is 2.02 years, all warrants are exercisable, and the aggregate intrinsic value of the warrants outstanding was $2,361,600.

Citius Oncology 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.

Citius Pharma Common Stock Reserved

A summary of common stock reserved for future issuances by Citius Pharma excluding our subsidiaries as of September 30, 2025 is as follows:

Citius Oncology Common Stock Reserved

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

7. RELATED PARTY TRANSACTIONS

During the year ended September 30, 2024, Citius Pharma extended warrants held by our Chairman and Executive Vice Chairman (see Note 6) for 51,780 warrants on April 5, 2024,156,863 warrants on August 7, 2024 and 111,732 warrants on September 25, 2024. During the year ended September 30, 2025, Citius Pharma extended warrants held by our Chairman and Executive Vice Chairman (see Note 6) for 156,863 warrants and 111,732 warrants on August 7, 2025.

See also Note 10 for Merger transaction and transactions consummated with our subsidiary to facilitate the Merger.

Citius Pharma is a party to a Shared Services Agreement with Citius Oncology. Under the terms of the agreement, the Citius Pharma provides all executive, operational, financial, and administrative support to Citius Oncology for a period of up to two (2) years. The quarterly allocated expense to Citius Oncology by Citius Pharma is currently approximately $1,006,000.

8. EMPLOYMENT AGREEMENTS

On October 19, 2017, the Company and its Chairman of the Board, Leonard Mazur, entered into an employment agreement with a three-year term. Upon expiration, the agreement automatically renews for successive periods of one-year unless terminated. Under the terms of the agreement, we are required to pay base compensation plus incentives over the employment term plus severance benefits upon the occurrence of certain events as described in the agreement.

On November 27, 2017, we entered into an employment agreement with Jaime Bartushak to serve as our Chief Financial Officer and Principal Financial Officer.. The agreement requires us to pay base compensation plus incentives over the employment term plus severance benefits upon the occurrence of certain events as described in the agreement.

On April 12, 2022, we entered into an employment agreement with Myron Holubiak to serve as Executive Vice Chairman. Upon expiration, the agreement automatically renews for successive periods of one-year unless terminated. The agreement requires us to pay base compensation plus incentives over the employment term plus severance benefits upon the occurrence of certain events as described in the agreement.

On July 13, 2020, we entered into an employment agreement with Myron Czuczman, M.D. to serve as Executive Vice President, Chief Medical Officer. The agreement requires us to pay base compensation plus incentives over the employment term plus severance benefits upon the occurrence of certain events as described in the agreement.

The Company has employment agreements with certain other employees that require us to pay base compensation plus incentives over the employment term plus severance benefits upon the occurrence of certain events as described in the agreement.

9. COMMITMENTS AND CONTINGENCIES

Operating Lease

Effective July 1, 2019, we entered into a 76-month lease for office space in Cranford, NJ. On February 28, 2025 we extended the lease to February 28, 2030. A right-of-use asset of $786,697 was recognized as a non-cash asset and liability on the amendment date. We pay our proportionate share of real estate taxes and operating expenses in excess of the base year expenses. These costs are variable lease payments and are not included in the determination of the lease’s right-of-use asset or lease liability.

We identified and assessed the following significant assumptions in recognizing our right-of-use assets and corresponding lease liabilities:

The elements of lease expense are as follows:

Maturities of lease liabilities due under the Company’s non-cancellable leases are as follows:

Interest expense on the lease liability was $39,054 and $30,644 for the years ended September 30, 2025 and 2024, respectively. This amount is classified within general & administrative expense.

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 $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 also 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 $1.2 million in 2025 and $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 us or our officers or directors in their capacities as such.

10. MERGER AGRFEEMENT

On October 23, 2023, the Company and its then wholly owned subsidiary Citius Oncology 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 Citius Oncology, with Citius Oncology surviving as a wholly owned subsidiary of TenX (the “Merger”) which was subsequently renamed Citius Oncology Sub. Prior to the 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 92.3% of the outstanding shares of common stock of Citius Oncology.

The Merger, net amount of $3,831,357 charged to additional paid in capital consists of $395,515 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 $2,358,780 and the cost of public rights in the amount of $1,077,062.

As part of the Merger, we made capital investments in Citius Oncology 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 Citius Oncology to us. Simultaneously, we advanced an additional $3,800,111 to Citius Oncology under the terms of a non-interest bearing note payable. The note is repayable upon a capital raise by Citius Oncology of at least $10,000,000 through the issuance of debt, equity or royalty financing. The Merger resulted in an initial 92.3% ownership interest by Citius Pharma in Citius Oncology.

11. GAIN ON SALE OF NEW JERSEY NET OPERATING LOSSES

We recognized a gain of $2,387,842 for the year ended September 30, 2024, in connection with the sale of certain New Jersey income tax net operating losses to a third party under the New Jersey Technology Business Tax Certificate Transfer Program.

12. INCOME TAXES

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 its in-process research and development asset.

The income tax expense (benefit) 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 our deferred tax assets and liabilities are as follows:

We recorded a valuation allowance against deferred tax assets as the utilization of the net operating loss carry-forward and other deferred tax assets is uncertain. During the years ended September 30, 2025 and 2024, the valuation allowance increased by $12,321,000 and $8,911,000, respectively. The increase in the valuation allowance during the years ended September 30, 2025 and 2024 was primarily due to our net operating loss. At September 30, 2025, we have a federal net operating loss carryforward of approximately $181,000,000. Federal net operating loss carryforwards of approximately $29,000,000 begin expiring in 2034 and carryforwards of approximately $152,000,000 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, we also have estimated federal research and development credits of $5,297,000 to offset future income taxes. The tax credit carryforwards will begin to expire in 2036.

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.

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 us to date.

13. SUBSEQUENT EVENTS

On October 20, 2025, Citius Pharmaceuticals, Inc. entered into a securities purchase agreement with a certain institutional investor for the issuance and sale, in a registered direct offering by the Company , of 1,460,000 shares of the Company’s common stock, par value $0.001 per share , and pre-funded warrants to purchase up to 2,513,510 shares of common stock at an offering price of $1.51 and $1.5099, respectively. The Company also issued to the investor warrants to purchase up to 3,973,510 shares of common stock. The offering closed on October 21, 2025. Gross proceeds were approximately $6.0 million, before deducting placement agent fees and other expenses.

On December 8, 2025, Citius Oncology entered into a securities 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. 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, with an exercise price of $1.09 per share of our common stock, which are exercisable upon the requisite stockholder approval, and have a term offive years from the date of the 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, Citius Oncology also entered into a securities purchase agreement 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 and 15,229,358 warrants, at a combined price of $1.0899 per pre-funded warrant and accompanying 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, Citius Oncology agreed to pay the placement agent a cash fee of 7.0% of the aggregate gross proceeds Citius Oncology received in the offering. In addition, the Company granted warrants to the placement agent, or its designees, to purchase up to 1,155,963 shares of common stock. The terms of the placement agent warrants are substantially the same as the terms of the warrants, except that the exercise price is $1.3625 per share and expire five years from the commencement of sales in the offering.