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Item 7. Management’s Discussion and Analysis

2025-12-23 compared with 2024-12-27 · 247 added, 153 removed, 87 unchanged (82% of the section changed)

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The following discussion and analysis of our

financial condition and results of operations should be read together with our audited financial statements for the years ended September

30, 2024 and 2023 and related notes included elsewhere in this annual report.

The following discussion contains “forward-looking

statements” that reflect our future plans, estimates, beliefs and expected performance.

Our actual results may differ materially

from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors.

We caution that

assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the

differences can be material.

Please see “Cautionary Note Regarding Forward-Looking Statements” as well as “Risk Factors-

Risks Related to the Company’s Business and Our Industry.”

financial condition and results of operations should be read together with our financial statements and related notes included elsewhere

in this annual report on Form 10-K.

Management’s discussion and analysis contains forward-looking statements, such as statements

of our plans, objectives, expectations, and intentions.

Any statements that are not statements of historical fact are forward-looking

When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,”

“estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,”

“could,” “should,” etc.), or similar expressions, identify these forward-looking statements.

These forward-looking

statements are subject to risks and uncertainties including those under “Risk Factors” in Item 1A in this Form 10-K that could

cause actual results or events to differ materially from those expressed or implied by the forward-looking statements.

Our actual results

and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors.

We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the filing

date of this report.

Citius Oncology is a specialty biopharmaceutical

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LYMPHIR was approved by the FDA in August 2024

and commercially launched in the U.S.

in December 2025.

We were incorporated in the Cayman Islands on

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SpinCo began operations in April 2022.

Since inception, the Company has devoted substantially

all of our efforts to business planning, research and development, and recruiting management and technical staff.

The Company 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 the Company or our competitors of research and development stage products, market acceptance of our approved products, 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 inception, we have devoted substantially

all of our efforts to business planning, research and development, recruiting management and technical staff and commercially launching

We are subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, our ability

to obtain additional financing, risks related to the development by us or our competitors of research and development stage products,

market acceptance of our approved products, competition from larger companies, dependence on key personnel, dependence on key suppliers

and strategic partners, and our compliance with governmental and other regulations.

License Agreement with Eisai

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an asset purchase agreement with Dr.

Reddy’s and a license agreement with Eisai to acquire an exclusive license for E7777 (denileukin

diftitox), a late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma.

Citius Pharma assigned

these agreements to us effective April 1, 2022.

Citius Pharma renamed E7777 as I/ONTAK and also obtained the trade name LYMPHIR TM

for the product.

Denileukin diftitox is referred to in this annual report as E7777, I/ONTAK or LYMPHIR, depending on the period of time

and context that is being discussed.

Under the terms of the

Reddy’s and a license agreement with Eisai to acquire an exclusive license of E7777 (denileukin

diftitox), an oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma.

Citius Pharma assigned these agreements

to us effective April 1, 2022.

Citius Pharma renamed E7777 as I/ONTAK and also obtained the trade name LYMPHIR TM for the product.

Denileukin diftitox is referred to in this annual report as E7777, I/ONTAK or LYMPHIR, depending on the period of time and context that

is being discussed.

Under the terms of these

agreements, Citius Pharma acquired Dr.

Reddy’s exclusive license for E7777 from Eisai and other related assets owned by Dr.

Reddy’s exclusive license of E7777 from Eisai and other related assets owned by Dr.

The exclusive license includes rights to develop and commercialize E7777 in all markets except for Japan and certain parts of Asia.

Additionally,

we retain 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, China, Korea, Taiwan, Hong Kong, Macau, Indonesia, Thailand, Malaysia, Brunei, Singapore, India (subject to the

India option), Pakistan, Sri Lanka, Philippines, Vietnam, Myanmar, Cambodia, Laos, Afghanistan, Bangladesh, Bhutan, Nepal, Mongolia, and

Papua New Guinea.

Citius Pharma paid $40 million upfront payment which represents the acquisition date fair value of the in-process research

and development acquired from 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.

We also must pay on a fiscal quarter basis tiered royalties equal to low double-digit percentages

of net product sales (within a range of 10% to 15%).

The royalties will end on the earlier of (i) the 15-year anniversary of the first

commercial sale of the latest indication that received regulatory approval in the applicable country and (ii) the date on which a biosimilar

product results in the reduction of net sales in the applicable product by 50% in two consecutive quarters, as compared to the four quarters

prior to the first commercial sale of the biosimilar product.

We will also pay to Dr.

Reddy’s an amount equal to a low-thirties

percentage of any sublicense upfront consideration or milestone payments (or the like) received by us and the greater of (i) a low-thirties

percentage of any sublicensee sales-based royalties or (ii) a mid-single digit percentage of such licensee’s net sales.

retains exclusive development and marketing rights for the agent in Japan, China, Korea, Taiwan, Hong Kong, Macau, Indonesia, Thailand,

Malaysia, Brunei, Singapore, India, Pakistan, Sri Lanka, Philippines, Vietnam, Myanmar, Cambodia, Laos, Afghanistan, Bangladesh, Bhutan,

Nepal, Mongolia, and Papua New Guinea.

Citius Pharma paid Dr.

Reddy’s a $40 million upfront payment which represents the acquisition

date fair value of the in-process research and development acquired.

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.

We also must pay on a fiscal quarter basis tiered royalties equal to

low double-digit percentages of net product sales (within a range of 10% to 15%).

The royalties will end on the earlier of (i) the 15-year

anniversary of the first commercial sale of the latest indication that received regulatory approval in the applicable country and (ii)

the date on which a biosimilar product results in the reduction of net sales in the applicable product by 50% in two consecutive quarters,

as compared to the four quarters prior to the first commercial sale of the biosimilar product.

We will also pay 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

Citius Pharma is a guarantor of our obligations under these agreements.

At the time of the FDA approval for LYMPHIR, a

$27.5 million milestone payment became payable under the terms of the asset purchase agreement for which a balance of $22.5 million remains

due as of September 30, 2024.

Pending further discussions with Dr.

Reddy’s agreed to a partial deferral without

penalty of this milestone payment.

Under the license agreement, Eisai is to

receive a $5.9 million milestone payment, upon FDA approval which is included in license payable at September 30, 2024, and

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 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 BLA for LYMPHIR.

Eisai was responsible for completing the CTCL

clinical trial, and CMC activities through the filing of the BLA for LYMPHIR with the FDA.

The Company will 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

$27.5 million milestone payment became payable to Dr.

Reddy’s under the terms of the asset purchase agreement for which a balance

of $19.75 million remains due as of September 30, 2025.

Reddy’s agreed to a partial deferral without penalty of this milestone

Under the license agreement, Eisai was due a $5.9

million milestone payment, upon FDA approval, of which $2.9 million remains payable at September 30, 2025, and additional commercial milestone

payments related to the achievement of net product sales thresholds and an aggregate of up to $22 million related to the achievement of

net product sales thresholds.

We were 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 BLA

Eisai was responsible for completing the CTCL clinical trial, and CMC activities through the filing of the BLA for LYMPHIR

with the FDA.

We are responsible for development costs associated with potential additional indications.

On March 28, 2025, Citius Oncology and Eisai entered

into a letter agreement that amended the license agreement to provide for a payment schedule to Eisai for the milestone payment and certain

unpaid invoices.

We agreed to pay Eisai on or before July 15, 2025, an aggregate amount of $2,535,318 and thereafter on the 15 th of

each of the next four months to pay Eisai $2.35 million 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.

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 million of the development milestone and the balance of $2.9 million 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

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

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

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

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approval for such product in each such jurisdiction ;

the launch of LYMPHIR in December 2025 satisfied

this requirement in the U.S .

Specialty Distribution

In 2025, the Company

executed three service agreements with pharmaceutical wholesalers to provide distribution of its LYMPHIR product to healthcare organizations

which include academic centers, community oncology practices, as well as infusion centers.

RESULTS OF OPERATIONS

Results of Operations for Year Ended September

30, 2024 compared to Year Ended September 30, 2023

Year Ended September 30,

Year ended September 30, 2025 compared with

the year ended September 30, 2024

September 30,

Operating expenses:

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Total operating expenses

Operating loss

(23,522,750 )

(20,572,747 )

Interest income

Interest expense

Loss before income taxes

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For the year ended September 30, 2025, research

and development expenses were $4,925,001 as compared to $4,240,451 for the year ended September 30, 2023, an increase of $684,550 due

to development activities completed for the resubmission of the BLA of LYMPHIR in January 2024 which were associated with CRL remediation.

and development expenses were $6,418,334 as compared to $4,925,001 for the year ended September 30, 2024, an increase of $1,493,333 primarily

related to costs associated with the expense of a drug substance batch needed for the pre-license inspection of the manufacturer.

General and Administrative Expenses

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compensation expense was $8,320,419 as compared to $7,498,817 for the year ended September 30, 2024.

The primary reason for the $5,533,317

increase in stock-based compensation expense was the amounts were realized over 12 months in the year ended September 30, 2024 as compared

to three months post-plan adoption in the year ended September 30, 2023.

The Company recorded deferred income tax expense

of $576,000 in 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 primary reasons for the $821,602

increase in stock-based compensation expense were the new options granted in December 2024 and the restricted stock awards granted in

September 2025.

Other Income (Expense)

Interest income for the year ended September 30,

2025 was $36,373 as we invested some of the proceeds from our July 2025 and September 2025 equity offerings in a money market account.

There was no interest income for the year ended September 30, 2024.

Interest expense of $218,032 for the year ended

September 30, 2025 consists of $218,032 in interest under the payment agreement with Eisai.

We recorded deferred income tax expense of $1,056,960

in the year ended September 30, 2025 as compared to $576,000 in the year ended September 30, 2024 related to the amortization for taxable

purposes of our in-process research and development asset.

For the year ended September 30, 2025, we incurred

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The $3,612,622 increase in the

net loss was primarily due to the increase in our operating expenses.

net loss was primarily due to the increases of $1,493,333 in research and development, $635,068 in general and administrative expenses

and the increase in stock-based compensation expense of $821,602.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Working Capital

Citius Oncology has incurred operating losses

since inception and incurred net losses of $21,148,747 and $12,697,241 for the years ended September 30, 2024 and 2023, respectively.

At September 30, 2024, Citius Oncology had an accumulated deficit of $39,278,587.

Citius Oncology’s net cash provided by operations

during the years ended September 30, 2024 and 2023 was $126,353 and $-0-, respectively.

We have incurred operating losses since inception

and incurred a net loss of $24,761,369 for the year ended September 30, 2025.

At September 30, 2025, we had an accumulated deficit of

We have had no revenue and have historically relied on funding from Citius Pharma to finance our operations.

30, 2025, we had $3,924,908 in cash and a negative working capital of approximately $21.9 million.

During the year ended September 30, 2025, Citius

Oncology received aggregate net proceeds of approximately $15 million from equity offerings in July 2025 and September 2025 and Citius

Pharma received net proceeds of approximately $32 million from their equity offerings and $1 million from the issuance of a note payable.

Additionally, on October 21, 2025, Citius Pharma

sold 3,973,510 shares of common stock (or pre-funded warrants in lieu thereof) and accompanying warrants to purchase 3,973,510 shares

of common stock, at a combined per unit price of $1.51 for gross proceeds of approximately $6 million.

The immediately exercisable five-year

warrants have an exercise price of $1.40 per share.

We need to obtain substantial additional financing

in order to satisfy our outstanding milestone payment obligations, as well as meet minimum purchase commitments under our agreements for

the manufacture and supply of our drug product, and cannot be sure that any additional funding will be available on terms favorable to

us, or at all.

As of September 30, 2025, our outstanding milestone payments and purchase commitments for 2025 include:

On March 28, 2025, we entered into a letter agreement to pay Eisai on or before July 15, 2025, $2,535,318 and thereafter on the 15 th of each of the next four months $2.35 million 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 at the rate of 2% per annum.

As of September 30, 2025, we owe a balance of $2.9 million for the milestone approval fee and $6,697,892 for certain other invoices.

At the time of the FDA approval for LYMPHIR, a $27.5 million milestone payment became payable to Dr.

Reddy’s of which a balance of $19.75 million remains due as of September 30, 2025.

Reddy’s has agreed to a partial deferral without penalty of this milestone payment.

We entered into an agreement with a contract manufacturing organization for the manufacture and supply of drug substance.

Under this agreement, we are obligated to purchase minimum annual quantities of batches at a set price per batch, subject to annual increases.

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 calendar years 2025 and 2026, respectively and $2.4 million for 2026 pass-throughs and consumable manufacturing components.

As of September 30, 2025, 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 are approximately $4.9 million, consisting of purchase commitment obligations of $1.2 million in calendar years 2025 and $1.9 million in 2026 and $1.8 million in 2027.

We plan to continue to rely on funding from Citius

Pharma, to raise capital through equity financings from outside investors, and to generate revenue from the future sales of LYMPHIR.

also have retained Jefferies LLC as our exclusive financial advisor in evaluating strategic alternatives aimed at maximizing shareholder

There is no assurance, however, that Citius Pharma will have the resources to continue funding us, that we will be successful in

raising the needed capital and, if funding is available, that it will be available on terms acceptable to us or that we will find strategic

partners or generate substantial revenue from the sale of LYMPHIR.

After giving effect to the Citius Pharma equity

offerings during the year ended September 30, 2025, our equity offerings during the year ended September 30, 2025, Citius Pharma’s

October equity offering, and our December 2025 equity offering, we expect that we and Citius Pharma collectively will have sufficient

funds to continue our operations through March 2026.

We will need to raise additional capital in the future to support our operations

beyond March 2026, including to successfully commercialize of LYMPHIR.

There is no assurance, however, that we will be successful in raising

the needed capital or that the proceeds will be received in an amount or in a timely manner to support our operations.

Investing Activities

During 2024, the Company paid $5,000,000 in connection

with a partial milestone payments due under its asset purchase agreement with Dr.

During the year ended September 30, 2025, we paid

$3 million to Eisai in connection with partial milestone payments and paid $2.75 million in connection with partial milestone payments

During the year ended September 30, 2024, the

Company paid $5 million in connection with a partial milestone payment due under its asset purchase agreement with Dr.

Financing Activities

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

In connection with closing of the Merger on August

12, 2024, Citius Pharma, made a contribution to our capital in the amount of $33,180,961 representing the balance of the due to/due from

related party account on the date of the Merger.

Citius Pharma also made cash contributions to 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 an unsecured promissory note issued by the Company in the principal amount of $3,800,111.

Our management believes that inflation

has not had a material effect on our results of operations.

Citius Pharma also made cash contributions to our capital, pursuant to the terms of the

Merger Agreement, in the amount of $3,827,944.

Also in connection with the closing of the Merger,

Citius Pharma made a loan to the Company, evidenced by an unsecured promissory note issued by the Company to Citius Pharma, dated August

16, 2024, as amended September 10, 2025, in the principal amount of $3,800,111.

The promissory note bears no interest and is repayable

in full upon the date at which the Company has closed a series of capital raises that in the aggregate provide gross proceeds of at least

$30 million through the issuance of debt or equity securities or the royalty-backed monetization of LYMPHIR™.

To date the Company

has raised $18 million in capital raises and the likelihood of raising an additional $12 million to trigger the repayment obligation is

uncertain at this time.

On July 17, 2025, we sold 6,818,182 shares of

common stock and warrants to purchase 6,818,182 shares of common stock, at a combined per unit price of $1.32.

The immediately exercisable

five-year warrants have an exercise price of $1.32 per share.

Net proceeds were approximately $7.4 million, after deducting placement

agent fees and other expenses.

On September 10, 2025, we sold 5,142,858 shares

of common stock and warrants to purchase 5,142,858 shares of common stock, at a combined per unit price of $1.75.

The warrants have an

exercise price of $1.84 per share, are exercisable six months after the date of issuance for one share of common stock and will expire

five and a half years following the date of issuance.

Gross proceeds were approximately $7.5 million, after deducting placement agent

fees and other expenses.

Our management believes that inflation has not

had a material effect on our results of operations.

Off Balance Sheet Arrangements

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In-process Research and Development

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

In-process research and development of $73,400,000

represents 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 and is expected to be amortized on a straight-line basis

over a period of 12 years commencing upon revenue generation.

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.

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 $73.4 million

represents the value of our September 2021 acquisition of an exclusive license for LYMPHIR (denileukin diftitox), an oncology immunotherapy

for the treatment of CTCL, a rare form of non-Hodgkin lymphoma and is expected to be amortized on a straight-line basis over a period

of 12 years commencing upon revenue generation.

In-process research and development consists of $40 million paid to Dr.

from the asset purchase agreement and approval milestone fees of $27.5 million to Dr.

Reddy’s and $5.9 million to Eisai.

Incremental costs incurred on IPR&D after

the acquisition date are expensed as incurred, unless there is an alternative future use.

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 for the period identified.

No impairments have occurred since the acquisitions

of our intangible assets through September 30, 2024.

We review intangible assets annually to determine

if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining

useful life of any intangible asset.

If the carrying value of an asset exceeds its undiscounted cash flows, we write down the carrying

value of the intangible asset to its fair value for the period identified.

No impairments have occurred since the acquisitions of our

intangible assets through September 30, 2025.

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 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.

The Company estimates volatility using the trading activity of its common stock.

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 consolidated statement of operations over the service period based on the

measurement of fair value for each stock award and records forfeitures as they occur.

We follow accounting guidance regarding the recognition, measurement,

presentation, and disclosure of uncertain tax positions in the financial statements.

Tax positions taken or expected to be taken in the

course of preparing our tax returns are required to be evaluated to determine whether the tax positions are “more-likely-than-not”

We recognize compensation costs resulting from

the issuance of stock-based awards to employees and directors as an expense in our 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 using

the Black-Scholes option pricing model.

Volatility is estimated using the trading activity of Citius Pharma common stock until such time

as we have sufficient history.

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 measure of the fair value of our stock options.

The Company recognizes 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 fair value for each stock award and records forfeitures as they occur.

We follow accounting guidance regarding the recognition,

measurement, presentation, and disclosure of uncertain tax positions in the financial statements.

Tax positions taken or expected to be

taken in the course of preparing our tax returns are required to be evaluated to determine whether the tax positions are “more-likely-than-not”

of being sustained by the applicable tax authorities.

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in the financial statements.

We recognize deferred tax assets and liabilities based on differences

between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in

effect when the differences are expected to reverse.

We provide a valuation allowance for deferred tax assets for which we do not consider

realization of such assets to be more likely than not.

We recognize deferred tax assets and liabilities

based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that

are expected to be in effect when the differences are expected to reverse.

We provide a valuation allowance for deferred tax assets for

which we do not consider realization of such assets to be more likely than not.

Quantitative and Qualitative Disclosures

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis