CITIUS ONCOLOGY, INC. 10-K

Item 9A. Controls and Procedures Disclosure Controls and Procedures We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure. Our Chief Executive Officer (who is our principal executive officer) and Chief Financial Officer (who is our principal financial officer and principal accounting officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of September 30, 2024, the end of our fiscal year. In designing and evaluating disclosure controls and procedures, we recognize that any disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective. As of September 30, 2024, based on the evaluation of these disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Under the supervision of our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2024 using the criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013 Framework). Based on this evaluation, management has concluded that our internal controls were effective and that we maintained effective controls over our financial reporting as of September 30, 2024. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Controls over Financial Reporting There were no changes in our internal controls over financial reporting during the fourth quarter of fiscal 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Attestation Report of Registered Public Accounting Firm Our independent registered public accounting firm has not assessed the effectiveness of our internal control over financial reporting and, under SEC rules, will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as a “non-accelerated filer”. Item 9B. Other Information. None . Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 51 PART III Item 10. Directors, Executive Officers and Corporate Governance We have adopted a written Code of Ethics and Business Conduct that applies to our directors, officers, and all employees. We intend to disclose any amendments to, or waivers from, our code of ethics and business conduct that are required to be publicly disclosed pursuant to rules of the SEC by filing such amendment or waiver with the SEC. This code of ethics and business conduct can be found in the “Governance – Governance Documents” section of our website, www.citiusonc.com . The other information required by this Item concerning our directors and executive officers is incorporated by reference to the section captioned “Proposal No. 1—Election of Directors” and “Corporate Governance” to be contained in our proxy statement related to the 2025 Annual Meeting of Stockholders (the “Proxy Statement”), which information is expected to be filed with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K or as otherwise provided by amendment to this Form 10-K. The information required by this Item concerning compliance with Section 16(a) of the Exchange Act by our directors, executive officers and persons who own more than 10% of our outstanding common stock is incorporated by reference from the section captioned “Section 16(a) Beneficial Ownership Reporting Compliance” to be contained in the Proxy Statement or as otherwise provided by amendment to this Form 10-K. Item 11. Executive Compensation The information required by this Item concerning directors and executive compensation is incorporated by reference from the sections captioned “Director Compensation” and “Executive Compensation”, respectively, to be contained in the Proxy Statement or as otherwise provided by amendment to the Form 10-K. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth the indicated information as of September 30, 2024 with respect to our equity compensation plans: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted- average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders 2023 Omnibus Stock Inventive Plan 12,750,000 $ 2.15 2,250,000 2024 Omnibus Stock Incentive Plan - n/a 15,000,000 Total 12,750,000 n/a 17,250,000 Our equity compensation plan consists of the Citius Oncology, Inc. 2023 Omnibus Stock Option Plan which was approved by shareholders of Citius Oncology, Inc. on April 29, 2023, and the Citius Oncology, Inc. 2024 Omnibus Stock Incentive Plan, which was approved by the securityholders of TenX on August 2, 2024, in anticipation of the Merger. We do not have any equity compensation plans or arrangements that have not been approved by stockholders. The other information required by this Item is incorporated by reference to the information under the section captioned “Security Ownership of Certain Beneficial Owners and Management” to be contained in the Proxy Statement or as otherwise provided by amendment to this Form 10-K. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item is incorporated by reference to the information under the section captioned “Certain Relationships and Related Transactions” and “Proposal No. 1—Election of Directors” to be contained in the Proxy Statement or as otherwise provided by amendment to this Form 10-K. Item 14. Principal Accountant Fees and Services The information required by this Item is incorporated by reference to the information under the section captioned “Auditor and Audit Committee Matters” to be contained in the Proxy Statement or as otherwise provided by amendment to this Form 10-K. 52 PART IV Item 15. Exhibits and Financial Statement Schedules Exhibit Number Description of Document Registrant’s Form Dated Exhibit Number Filed Herewith 2.1* Agreement and Plan of Merger and Reorganization, dated as of October 23, 2023, by and among Citius Pharmaceuticals, Inc., Citius Oncology, Inc., TenX Keane Acquisition and TenX Merger Sub, Inc. 8-K 10/24/2023 2.1 3.1 Certificate of Incorporation of Citius Oncology, Inc. 8-K 08/16/2024 3.1 3.2 Bylaws of Citius Oncology, Inc. 8-K 08/16/2024 3.2 4.1 Specimen Common Stock Certificate of Citius Oncology, Inc. S-4 07/11/2024 4.5 4.2 Description of Common Stock. X 10.1 Amended and Restated Registration Rights Agreement, dated as of August 12, 2024 by and between Citius Oncology, Inc. and the signatories thereto. 8-K 08/16/2024 10.1 10.2 Amended and Restated Shared Services Agreement, dated as of August 12, 2024, by and among Citius Oncology, Inc. and Citius Pharmaceuticals, Inc. 8-K 08/16/2024 10.2 10.3† 2023 Omnibus Stock Incentive Plan. X 10.4† 2024 Omnibus Stock Incentive Plan. 8-K 8/5/2024 10.5 10.5* Asset Purchase Agreement, dated as of September 1, 2021, between Dr. Reddy’s Laboratories S.A. and Citius Pharmaceuticals, Inc. S-4 11/13/2023 10.15 10.6* Amended and Restated License, Development and Commercialization Agreement, dated as of February 26, 2018, between Eisai, Ltd. and Dr. Reddy’s Laboratories S.A. S-4 11/13/2023 10.16 10.7* Amendment No. 1 to Amended and Restated License, Development and Commercialization Agreement, dated as of August 9, 2018, between Eisai, Ltd. and Dr. Reddy’s Laboratories S.A. S-4 11/13/2023 10.17 10.8* Amendment No. 2 to Amended and Restated License, Development and Commercialization Agreement, dated as of August 31, 2021, between Eisai, Ltd. and Dr. Reddy’s Laboratories S.A. S-4 11/13/2023 10.18 53 Exhibit Number Description of Document Registrant’s Form Dated Exhibit Number Filed Herewith 10.9 Side Letter Agreement, dated August 12, 2024, by and by and among Citius Pharmaceuticals, Inc., Citius Oncology, Inc., TenX Keane Acquisition and TenX Merger Sub, Inc. 8-K 08/16/2024 10.8 10.10 Promissory Note, dated July 18, 2023, issued by TenX Keane Acquisition to 10XYZ Holdings LP. 8-K 07/18/2023 10.1 10.11 Promissory Note, dated October 18, 2023, issued by TenX Keane Acquisition to 10XYZ Holdings LP. 8-K 10/18/2023 10.1 10.12 Promissory Note, dated August 16, 2024, by and between Citius Oncology, Inc. and Citius Pharmaceuticals, Inc. 8-K 08/16/2024 10.9 16.1 Letter from Marcum LLP to the Securities and Exchange Commission, dated August 16, 2024. 8-K 08/16/2024 16.1 19.1 Insider Trading Policy. -- -- -- X 31.1 Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a). -- -- -- X 31.2 Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a). -- -- -- X 32.1 Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. -- -- -- X EX-101.INS INLINE XBRL INSTANCE DOCUMENT -- -- -- X EX-101.SCH INLINE XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT -- -- -- X EX-101.CAL INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE EX-101.DEF INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE -- -- -- X EX-101.LAB INLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE -- -- -- X EX-101.PRE INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE -- -- -- X 104 Cover Page Interactive Data File, formed in Inline Extensible Business Reporting Language (iXBRL) -- -- -- X * Certain portions, schedules and exhibits to this Exhibit have been omitted pursuant to Item 601(a)(5) or Item 601(b)(10)(iv), as applicable, of Regulation S-K. The Registrant agrees to furnish supplemental copies of all omitted portions, exhibits and schedules to the Securities and Exchange Commission upon its request. † Indicates management contract or compensatory plan. Item 16. Form 10-K Summary. Not applicable. 54 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CITIUS ONCOLOGY, INC. Date: December 27, 2024 By: /s/ Leonard Mazur Leonard Mazur Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Leonard Mazur Chief Executive Officer and Director December 27, 2024 Leonard Mazur (Principal Executive Officer) /s/ Myron Holubiak Secretary and Director December 27, 2024 Myron Holubiak /s/ Jaimie Bartushak Chief Financial Officer and Treasurer December 27, 2024 Jaime Bartushak (Principal Financial Officer and Principal Accounting Officer) /s/ Suren Dutia Director December 27, 2024 Suren Dutia /s/ Eugene Holuka Director December 27, 2024 Eugene Holuka /s/ Joel Mayersohm Director December 27, 2024 Joel Mayersohm /s/ Dennis McGrath Director December 27, 2024 Dennis McGrath /s/ Robert Smith Director December 27, 2024 Robert Smith /s/ Carol Webb Director December 27, 2024 Carol Webb 55 CITIUS ONCOLOGY, INC. CONSOLIDATED FINANCIAL STATEMENTS INDEX Page Report of Independent Registered Public Accounting Firm (PCAOB ID # 392 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Changes in Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 F- 1 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Citius Oncology, Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Citius Oncology, Inc. (the Company) as of September 30, 2024 and 2023, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Emphasis of a Matter Regarding Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses and has a working capital deficit as of September 30, 2024. The Company is a majority-owned subsidiary of Citius Pharmaceuticals, Inc. Citius Pharmaceuticals, Inc. funds the majority of the Company’s operations; therefore, the Company is economically dependent on the continued financial support of Citius Pharmaceuticals, Inc. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Wolf & Company, P.C. We have served as the Company’s auditor since 2022. Boston, Massachusetts December 27, 2024 F- 2 CITIUS ONCOLOGY, INC. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2024 AND 2023 2024 2023 Current Assets: Cash and cash equivalents $ 112 $ — Inventory 8,268,766 — Prepaid expenses 2,700,000 7,734,895 Total Current Assets 10,968,878 7,734,895 Other Assets: In-process research and development 73,400,000 40,000,000 Total Other Assets 73,400,000 40,000,000 Total Assets $ 84,368,878 $ 47,734,895 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 3,711,622 $ 1,289,045 License payable 28,400,000 — Accrued expenses — 259,071 Due to related party 588,806 19,499,119 Total Current Liabilities 32,700,429 21,047,235 Deferred tax liability 1,728,000 1,152,000 Note payable to related party 3,800,111 — Total Liabilities 38,228,540 22,199,235 Stockholders’ Equity: Preferred stock - $ 0.0001 par value; 10,000,000 shares authorized: no shares issued and outstanding — — Common stock - $ 0.0001 par value; 100,000,000 ; 71,552,402 and 67,500,000 shares issued and outstanding at September 30, 2024 and 2023, respectively 7,155 6,750 Additional paid-in capital 85,411,771 43,658,750 Accumulated deficit ( 39,278,587 ) ( 18,129,840 ) Total Stockholders’ Equity 46,140,339 25,535,660 Total Liabilities and Stockholders’ Equity $ 84,368,878 $ 47,734,895 See accompanying report of independent registered public accounting firm and notes to the financial statements. Reflects a 675,000-for-1 stock split effective July 5, 2023. F- 3 CITIUS ONCOLOGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 2024 AND 2023 2024 2023 Revenues $ — $ — Operating Expenses: Research and development 4,925,001 4,240,451 General and administrative 8,148,929 5,915,290 Stock-based compensation – general and administrative 7,498,817 1,965,500 Total Operating Expenses 20,572,747 12,121,241 Loss before Income Taxes ( 20,572,747 ) ( 12,121,241 ) Income tax expense 576,000 576,000 Net Loss $ ( 21,148,747 ) $ ( 12,697,241 ) Net Loss Per Share – Basic and Diluted $ ( 0.31 ) $ ( 0.19 ) Weighted Average Common Shares Outstanding – Basic and Diluted 68,053,607 67,500,000 See accompanying report of independent registered public accounting firm and notes to the financial statements. Reflects a 675,000-for-1 stock split effective July 5, 2023. F- 4 CITIUS ONCOLOGY, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 2024 AND 2023 Preferred Stock Common Stock Additional Paid-In Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Deficit Equity Balance, 30-Sep-22 - - 67,500,000 6,750 41,693,250 ( 5,432,599 ) 36,267,401 Stock-based compensation expense - - - - 1,965,500 - 1,965,500 Net loss - - - - - ( 12,697,241 ) ( 12,697,241 ) Balance, 30-Sep-23 - - 67,500,000 6,750 43,658,750 ( 18,129,840 ) 25,535,660 Capital contributions by parent - - - - 37,008,905 37,008,905 Stock-based compensation expense - - - - 7,498,817 7,498,817 Merger, net of transaction costs of $ 2,358,780 - - 4,052,402 405 ( 2,754,701 ) ( 2,754,296 ) Net loss ( 21,148,747 ) ( 21,148,747 ) Balance, 30-Sep-24 - - 71,552,402 7,155 85,411,771 ( 39,278,587 ) 46,140,339 See accompanying report of independent registered public accounting firm and notes to the financial statements. Reflects a 675,000-for-1 stock split effective July 5, 2023. F- 5 CITIUS ONCOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2024 AND 2023 2024 2023 Cash Flows From Operating Activities: Net loss $ ( 21,148,747 ) $ ( 12,697,241 ) Adjustments to reconcile net loss to net cash provided by operating activities: Stock-based compensation expense 7,498,817 1,965,500 Deferred income tax expense 576,000 576,000 Changes in operating assets and liabilities: Inventory ( 2,133,871 ) - Prepaid expenses ( 1,100,000 ) ( 5,044,713 ) Accounts payable 2,422,577 1,196,734 Accrued expenses ( 259,071 ) ( 801,754 ) Due to related party 14,270,648 14,805,474 Net Cash Provided By Operating Activities 126,353 - Cash Flows From Investing Activities: License payment ( 5,000,000 ) - Net Cash Used In Investing Activities ( 5,000,000 ) - Cash Flows From Financing Activities: Cash contributed by parent 3,827,944 - Merger, net ( 2,754,296 ) - Proceeds from issuance of note payable to related party 3,800,111 - Net Cash Provided By Financing Activities 4,873,759 - Net Change in Cash and Cash Equivalents 112 - Cash and Cash Equivalents – Beginning of Year - - Cash and Cash Equivalents – End of Year $ 112 $ - Supplemental Disclosures of Cash Flow Information and Non-cash Activities: IPR&D Milestones included in License Payable $ 28,400,000 $ - Capital Contribution of due to related party by parent $ 33,180,961 $ - Prepaid Manufacturing transferred to Inventory $ 6,134,895 $ - See accompanying report of independent registered public accounting firm and notes to the financial statements. F- 6 CITIUS ONCOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2024 AND 2023 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION Business Citius Oncology, Inc. (formerly Citius Acquisition Corp.) (“Citius Oncology,” the “Company” or “we”) 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 are developing E7777 (denileukin diftitox), a late-stage 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 its inception, the Company has devoted substantially all of its efforts to business planning, research and development, and recruiting management and technical staff. Citius Oncology is subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related to the development by Citius Oncology 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 its inception, Citius Pharmaceuticals, Inc. (“Citius Pharma”) has funded and continues to 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 92.3 % of the outstanding shares of common stock of the Company. 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. F- 7 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). Stock Split On July 5, 2023, the Company executed a stock split of its shares of common stock at a ratio of 675,000-for-1 (the “Stock Split”). All of the Company’s historical share and per share information related to issued and outstanding common stock in these financial statements have been adjusted, on a retroactive basis, to reflect this 675,000-for-1 stock split. 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. The Company had a net loss of $ 21,148,747 and $ 12,697,241 for the years ended September 30, 2024 and 2023, respectively. The Company has no revenue and has relied on funding from Citius Pharma to finance its operations. At September 30, 2024, the Company had $ 112 in cash and a negative working capital of $ 21,731,551 . Citius Pharma has sufficient capital to fund Citius Oncology through February 2025 which raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the accompanying financial statements are issued. The Company plans 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. There is no assurance, however, that Citius Pharmaceuticals will have the resources to continue funding the Company, that the Company will be successful in raising the needed capital and, if funding is available, that it will be available on terms acceptable to the Company or that the Company 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 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, stock-based compensation and income taxes. Actual results could differ from those estimates and changes in estimates may occur. F- 8 Cash and Cash Equivalents The Company considers all highly liquid instruments with maturities of less than three months at the time of purchase to be cash equivalents. From time to time, the Company may have cash balances in financial institutions in excess of insurance limits. The Company has never experienced any losses related to these balances. Prepaid Expenses Prepaid expenses at September 30, 2024 and 2023 consist of $ 2,700,000 and $ 7,734,895 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, 2024 consisting of finished goods of $ 6,134,895 , and work in process of $ 2,133,862 related to the manufacturing of LYMPHIR commercial products to be sold in 2025. No reserves against inventory were deemed necessary based on an evaluation of the product expiration dating. During 2024, $ 6,134,895 of prepaid manufacturing costs were transferred to inventory upon product approval and production commencement at our third-party manufacturers. The Company has not yet selected a specific inventory costing methodology (e.g., FIFO or weighted average). Management plans to implement an appropriate inventory costing method prior to the commencement of sales activities. The selection of this method may impact future financial statements once sales begin. 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 the Company, are expensed as incurred. The Company defers and capitalizes its nonrefundable advance payments that are for research and development activities until the related goods are delivered or the related services are performed. When the Company is reimbursed by a collaboration partner for work the Company performs, it records the costs incurred as research and development expenses and the related reimbursement as a reduction to research and development expenses in its 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 The Company capitalizes 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, the Company anticipates 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 came due during 2024. Of these amounts $ 28,400,000 is included in license payable at September 30, 2024. The value of our September 2021 acquisition of an exclusive license for LYMPHIR (denileukin diftitox), a late-stage 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 of twelve years , (the FDA exclusivity period), commencing upon revenue generation which is expected in the first half of 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. F- 9 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, 2024. 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, 2024. The costs of unsuccessful and abandoned applications are expensed when abandoned. The costs of maintaining existing patents are expensed as incurred. Stock-Based Compensation The Company recognizes 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 the Company’s 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 the Company’s stock options. The Company recognizes 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 The Company files consolidated income tax returns with Citius Pharmaceuticals. The Company follows 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 the Company’s 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, 2024. Any interest or penalties are charged to expense. During the years ended September 30, 2024 and 2023, the Company did not recognize any interest and penalties. The Company is subject to examination by federal and state tax authorities for all tax years since inception. 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 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. F- 10 Segment Reporting The Company currently operates as a single segment. Concentrations of Credit Risk The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other hedging arrangements. Recently Issued 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. The Company is currently evaluating the impact of adoption of the standard on its financial statement disclosures. 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 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. The Company is currently evaluating the impact of adoption of the standard update on its financial statement disclosures. F- 11 4. PATENT AND TECHNOLOGY LICENSE AGREEMENTS In September 2021, Citius Pharmaceuticals entered into and transferred to the Company 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 its exclusive license for E7777 (denileukin diftitox), a late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma. Citius Pharmaceuticals assigned these agreements to us effective April 1, 2022. We have obtained the trade name of LYMPHIR for E7777. Under the terms of these agreements, Citius Pharmaceuticals acquired Dr. Reddy’s exclusive license for LYMPHIR from Eisai and other related assets owned by Dr. Reddy’s. The exclusive license includes rights to develop and commercialize LYMPHIR in all markets except for Japan and certain parts of Asia. Additionally, we retained an option on the right to develop and market the product in India. Eisai retains exclusive development and marketing rights for the agent in Japan and Asia. Citius Pharmaceuticals paid $ 40 million 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 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, and up to $ 300 million 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. 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 are also required 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. Under the license agreement, Eisai is to receive a $ 5.9 million development milestone payment upon initial approval and additional commercial milestone payments related to the achievement of net product sales thresholds (which increases to $ 7 million in the event we have exercised our option to add India to the licensed territory prior to FDA approval) and an aggregate of up to $ 22 million related to the achievement of net product sales thresholds. Citius Pharma was also required to reimburse Eisai for up to $ 2.65 million 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 filed with the FDA on September 27, 2022. We will also be responsible for development costs associated with potential additional indications. The term of the license agreement will continue until (i) if there has not been a commercial sale of a licensed product in the territory, the 10-year anniversary of the original license effective date, March 30, 2016, or (ii) if there has been a first commercial sale of a licensed product in the territory within the 10-year anniversary of the original license effective date, the 10-year anniversary of the first commercial sale on a country-by-country basis. 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. Also 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. F- 12 On July 29, 2023, we received a Complete Response Letter, (“CRL”) from the FDA regarding the BLA seeking approval for LYMPHIR. The FDA has required that we incorporate enhanced product testing, and additional controls agreed to with the FDA during the market application review. The FDA raised no concerns relating to the safety and efficacy clinical data package. On September 8, 2023, we announced that the FDA agreed with our plans to address the requirements outlined in the CRL. The guidance from the FDA provides a path for completing the necessary activities to support the resubmission of the BLA. No additional clinical efficacy or safety trials have been requested by FDA for the resubmission. The Company remediated the issues raised in the CRL by the FDA and received a BLA approval in August 2024. As part of the definitive agreement with Dr. Reddy’s, Citius Pharmaceuticals 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, Inc.: 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. Upon approval of the product in August 2024, the Company was subject to milestone payments totaling $ 33.4 million. The Company paid $ 5.0 million prior to year end and the remaining balance is reflected as a License Payable on the balance sheet. The $ 33.4 million was recorded as in-process research and development asset and will be subject to amortization as further discussed in Note 3. 5. STOCKHOLDER’S EQUITY Authorized Capital Stock and Stock Split On April 29, 2023, the Company amended its certificate of incorporation, (the “Prior Charter”) to authorize an increase in the total number of shares of capital stock to 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 July 5, 2023, the Board of Directors approved a 675,000-for-1 stock split of the outstanding 100 shares of common stock. The certificate of incorporation adopted on August 5, 2024, in connection with the Merger, also authorizes 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 . All share and per share amounts in these financial statements have been retroactively restated to reflect the amendment to the certificate of incorporation and the stock split. Stock Plan Under the Citius Oncology Stock Plan, adopted on April 29, 2023, we reserved 15,000,000 common shares for issuance. The stock plan provides 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 Pharmaceuticals 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. F- 13 The following assumptions were used in determining the fair value of stock option grants for the year ended September 30, 2024 and 2023: 2024 2023 Risk-free interest rate 4.66 % 4.11 % Expected dividend yield 0.00 % 0.00 % Expected term 6.50 years 5.96 years Expected volatility 87 % 91 % A summary of option activity under the plan is presented below: Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at September 30, 2023 12,600,000 $ 2.15 9.77 years $ — Granted 150,000 2.15 Forfeited - Outstanding at September 30, 2024 12,750,000 $ 2.15 8.78 years $ — Exercisable at September 30, 2024 3,937,500 $ 2.15 8.77 years $ — The weighted average grant date fair value of the options granted during the year ended September 30, 2024 was estimated at $ 1.66 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 the year ended September 30, 2024 was $ 7,498,817 . At September 30, 2024, unrecognized total compensation cost related to unvested awards under the stock plan of $ 11,592,383 is expected to be recognized over a weighted average period of 1.77 years. On August 5, 2024, the Board of Directors granted options to purchase 150,000 common shares at an exercise price of $ 2.15 per share. 6. RELATED PARTY TRANSACTIONS The Company’s officers and directors also serve as officers of Citius Pharma. As of September 30, 2024, the Company does not have any employees. The Company and Citius Pharma entered into the A&R Shared Services Agreement. Under the terms of the agreement, Citius Pharma provides management and scientific services to the Company. During the year ended September 30, 2024, Citius Pharma charged the Company $ 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. During the year ended September 30, 2023, Citius charged the Company $ 1,727,595 for reimbursement of general and administrative payroll, $ 1,496,401 for reimbursement of research and development payroll, and $ 121,470 for the use of shared office space. F- 14 The Company has limited cash, therefore all the Company’s expenditures are paid by Citius Pharma and reflected in the due to related party account. During the years ended September 30, 2024 and September 30, 2023 these amounts due to Citius Pharma were $ 14,270,648 and $ 14,805,474 respectively. In connection with closing of the Merger, Citius Pharma made a contribution to the Company’s 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 the Company’s 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, in the principal amount of $ 3,800,111 . The note is repayable in full upon a financing of at least $ 10 million 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 The Company files consolidated income tax returns with Citius Pharma. The Company recorded deferred income tax expense of $ 576,000 for each of the years ended September 30, 2024 and 2023 related to the amortization for taxable purposes of its 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, 2023 and 2022 due to the following: 2024 2023 Computed “expected” tax benefit ( 21 )% ( 21 )% Increase (decrease) in income taxes resulting from: State taxes, net of federal benefit ( 7.1 ) ( 7.1 ) Permanent differences 6.1 2.6 Increase in the valuation reserve 24.8 30.3 2.8 % 4.8 % F- 15 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: September 30, 2024 September 30, 2023 Deferred tax assets: Net operating loss carryforward $ 7,530,000 $ 4,646,000 Capitalized research and development expense 2,080,000 1,073,000 Stock-based compensation 1,091,000 239,000 Research tax credit 1,035,000 850,000 Valuation allowance on deferred tax assets ( 11,736,000 ) ( 6,808,000 ) Total deferred tax assets Deferred tax liabilities: In-process research and development ( 1,728,000 ) ( 1,152,000 ) Total deferred tax liability ( 1,728,000 ) ( 1,152,000 ) Net deferred tax liability $ ( 1,728,000 ) $ ( 1,152,000 ) 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, 2024 and 2023, the valuation allowance increased by $ 4,928,000 and $ 4,043,000 , respectively. The increase in the valuation allowance during the years ended September 30, 2024 and 2023 was primarily due to the Company’s net operating losses and capitalized research and development expenses. At September 30, 2024, the Company has a federal net operating loss carryforward of approximately $ 28,700,000 . Federal net operating loss carryforwards generated in tax years beginning after 2017 may be carried forward indefinitely. As of September 30, 2024, the Company also has estimated federal research and development credits of $ 1,035,000 to offset future income taxes. The tax credit carryforwards will begin to expire in 2042. The Company accounts 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. F- 16 8. COMMITMENTS AND CONTINGENCIES Commercial Manufacturing Contracts The Company has 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, the Company is obligated to purchase minimum annual quantities of batches at a set price per batch, subject to annual increases. Additionally, the Company is 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, 2024, the total minimum purchase commitment under this agreement was approximately $ 17.3 million consisting of payments of $ 11.9 million and $ 5.4 million for 2025 and 2026 respectively. As of September 30, 2024, the Company also has 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 $ 4.5 million consisting of purchase commitment obligations of $ 2.9 million in 2025 and $ 1.6 million in 2026. Legal Proceedings The Company is not involved in any litigation that it believes could have a material adverse effect on its 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 the Company’s executive officers, threatened against or affecting the Company or its officers or directors in their capacities as such. F- 17