Citius Pharmaceuticals, Inc.

Current report

Our majority-owned subsidiary, Citius Oncology, has substantial indebtedness and debt service obligations, which could adversely affect our financial condition.

Current report

Citius Oncology has incurred significant indebtedness under the Loan Agreement, which features a tiered tranche structure with a floating interest rate subject to a floor of 12.75% per annum. During the interest-only period, Citius Oncology will not reduce the outstanding principal balance of the loan, and upon expiration of such period, it will be required to make amortizing payments of principal and interest. In addition, Citius Oncology is obligated to make a final payment of $1,062,500 at maturity, which creates a balloon-type obligation that Citius Oncology may be unable to satisfy from available cash flows or other sources. There can be no assurance that its business will generate sufficient cash flow from operations or that future borrowings or other sources of capital will be available to it in an amount sufficient to enable it to pay its indebtedness or to fund its other liquidity needs. If Citius Oncology is unable to generate sufficient cash flow to service its debt and meet its other obligations, it may need to refinance or restructure its debt, sell assets, reduce or delay capital expenditures, or seek additional equity capital, any of which could have a material adverse effect on its business, financial condition, and results of operations which would directly impact Citius Pharma.

Current report

Additional funding tranches under the Loan Agreement are conditioned upon the achievement of specified milestones, and there can be no assurance that such milestones will be achieved.

Current report

The availability of Tranche 2 and Tranche 3 under the Loan Agreement is conditioned upon Citius Oncology’s achievement of specified net revenue and liquidity milestones. If it fails to achieve the required milestones within the applicable time periods, Tranche 2 and/or Tranche 3 will not become available to it, and Citius Oncology will not have access to the additional committed capital contemplated by the Loan Agreement.

Current report

Citius Oncology’s failure to access these additional tranches could significantly impair its ability to fund ongoing operations, pursue growth initiatives, or meet its working capital requirements. In such event, Citius Oncology may be required to seek alternative sources of financing, which may not be available on terms acceptable to it, or at all, or Citius Oncology may be required to curtail its operations or delay or abandon planned expenditures. Any of these outcomes could have a material adverse effect on its business, financial condition, results of operations, and prospects, which would directly impact Citius Pharma.

Current report

The Loan Agreement is secured by a lien on substantially all of Citius Oncology’s assets, including its intellectual property, and the Lenders could foreclose on such assets upon an event of default.

Current report

Citius Oncology’s obligations under the Loan Agreement are secured by a first-priority lien on substantially all of its assets, including its intellectual property, accounts receivable, inventory, equipment, and general intangibles. If an event of default occurs and is not cured within any applicable cure period, the Lenders would have the right to foreclose on the collateral securing Citius Oncology’s obligations.

Current report

The foreclosure on, or loss of, substantially all of Citius Oncology’s assets, including its intellectual property, could result in a complete loss of its ability to operate its business and would likely render it unable to continue as a going concern. Citius Oncology’s intellectual property, including patents, trademarks, trade secrets, and proprietary technology, constitutes a critical component of its competitive position and revenue-generating capabilities. The loss of such assets to the Lenders in a foreclosure action would have a material adverse effect on its business and could result in a total loss of its stockholder value, which would directly impact Citius Pharma.

Current report

The conversion of loan principal into shares of Citius Oncology’s common stock and the exercise of Lender Warrants could result in significant dilution to its existing stockholders and may adversely affect the market price of its common stock.

Current report

Under the terms of the Loan Agreement, the Lenders have the right to convert up to $4.0 million of outstanding principal into shares of Citius Oncology’s common stock at a $1.08 per share conversion price. In addition, Citius Oncology has issued warrants to the Lenders equal to 10% of the portion of the loans actually funded that are exercisable at $0.90 per share. The conversion of loan principal and/or the exercise of these warrants would result in the issuance of additional shares of its common stock and would dilute the ownership interest of its existing stockholders, including Citius Pharma. Such anticipated dilution could depress the market price of its common stock, even before any actual conversion or exercise occurs. Furthermore, the Lenders may sell any shares acquired upon conversion or exercise into the market, which could create downward pressure on its stock price. Any or all of these factors could materially adversely affect the market price of its common stock and the value of an investment in its securities, including the shares held by Citius Pharma.